Chapter 1 GENERAL BUSINESS CORPORATIONS
Part 1. General Provisions
Sec.
Part 2. Incorporation
Part 3. Purposes and Powers
Part 4. Name
Part 5. Office and Agent
Part 6. Shares and Distributions
Part 7. Shareholders
Part 8. Directors and Officers
Part 9. Domestication
Part 10. Amendment of Articles of Incorporation and Bylaws
Part 11. Merger and Share Exchange
Part 12. Disposition of Assets
Part 13. Appraisal Rights
Part 14. Dissolution
Part 15. Foreign Corporations
Part 16. Records and Reports
Part 17. Transition Provisions
Part 1 General Provisions
§ 30-1-101 — 30-1-141. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-101 et seq.
STATUTORY NOTES
Prior Laws.
A former Title 30, Chapter 1, consisting of sections 30-101 — 30-166, was repealed as follows:
30-1-19A. Assessment and sale of shares. I.C., § 30-1-19A, as added by 1979, ch. 105, § 2, p. 251; am. 1980, ch. 197, § 3, p. 433.
30-1-129A. Corporation defined. [Repealed.] This section, which comprised I.C.,§ 30-1-129A, as added by 1980, ch. 197, § 15, p. 433, was repealed by S.L. 1982, ch. 203, § 3, effective July 1, 1983.
Compiler’s Notes.
Title 30, Chapter 1, Part 1, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 2 Incorporation
§ 30-1-201 — 30-1-207. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-201 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 2, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 3 Purposes and Powers
§ 30-1-301 — 30-1-304. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-301 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 3, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 4 Name
§ 30-1-401 — 30-1-403. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-301 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 4, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 5 Office and Agent
§ 30-1-501 — 30-1-504. [Repealed.]
Repealed by S.L. 2007, ch. 314, § 7, effective July 1, 2007.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 5, which comprised the following sections, was repealed by S.L. 2007, ch. 314, § 7, effective July 1, 2007.
Part 6 Shares and Distributions
§ 30-1-601 — 30-1-640. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-601 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 6, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 7 Shareholders
§ 30-1-701 — 30-1-747. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-701 et seq.
STATUTORY NOTES
Prior Laws.
Another former§ 30-1-740, which comprised I.C.,§ 30-1-740, as added by 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 1998, ch. 223, § 1
Compiler’s Notes.
Title 30, Chapter 1, Part 7, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 8 Directors and Officers
§ 30-1-801 — 30-1-863. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-801 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 8, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 9 Domestication
§ 30-1-901 — 30-1-924. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
The following sections were previously repealed:
Part 10 Amendment of Articles of Incorporation and Bylaws
§ 30-1-1001 — 30-1-1022. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1001 et seq.
STATUTORY NOTES
Prior Laws.
Another former§ 30-1-1021, as added by 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 2004, ch. 324, § 40.
Compiler’s Notes.
Title 30, Chapter 1, Part 10, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 11 Merger and Share Exchange
§ 30-1-1100 — 30-1-1108. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1101 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 11, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Another former§ 30-1-1101 was amended and redesignated as§ 30-1-1102 in 2004.
Part 12 Disposition of Assets
§ 30-1-1201, 30-1-1202. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1201 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 12, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 13 Appraisal Rights
§ 30-1-1301 — 30-1-1331. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1301 et seq.
STATUTORY NOTES
Prior Laws.
Another former§ 30-1-1324, as added by S.L. 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 2004, ch. 324, § 62.
Another former§ 30-1-1326, as added by S.L. 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 2004, ch. 324, § 64.
Compiler’s Notes.
Title 30, Chapter 1, Part 13, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 14 Dissolution
§ 30-1-1401 — 30-1-1440. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1401 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 14, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 15 Foreign Corporations
§ 30-1-1501 — 30-1-1532. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-501 et seq.
STATUTORY NOTES
Prior Laws.
Former§ 30-1-1507, which comprised I.C.,§ 30-1-1507, as added by 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 2007, ch. 314, § 21. For present comparable provisions, see§ 30-21-401 et seq
Former§ 30-1-1508, which comprised I.C.,§ 30-1-1508, as added by 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 2007, ch. 314, § 21. For present comparable provisions, see§ 30-21-401 et seq.
Former§ 30-1-1509, which comprised I.C.,§ 30-1-1509, as added by 1997, ch. 366, § 2, p. 1080, was repealed by S.L. 2007, ch. 314, § 21. For present comparable provisions, see§ 30-21-401 et seq.
Compiler’s Notes.
Title 30, Chapter 1, Part 15, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 16 Records and Reports
§ 30-1-1601 — 30-1-1622. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1601 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 16, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Part 17 Transition Provisions
§ 30-1-1701 — 30-1-1704. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-29-1701 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 1, Part 17, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 1, effective July 1, 2015.
Chapter 2 SALE OF FRANCHISE ON EXECUTION
Sec.
§ 30-201. Franchise may be levied upon.
For the satisfaction of any judgment against a person, firm, association, company, or corporation authorized to receive tolls, its franchise and all the rights and privileges thereof, may be levied upon and sold under execution in the same manner and with like effect as any other property.
History.
R.S., § 2642; reen. R.C. & C.L., § 2778; C.S., § 4761; I.C.A.,§ 29-201; am. 1941, ch. 102, § 1, p. 183.
STATUTORY NOTES
Cross References.
Levy and sale under execution,§ 11-301 et seq.
§ 30-202. Purchaser to conduct business.
The purchaser at the sale must receive a certificate of purchase of the franchise, and be immediately let into possession of all property necessary for the exercise of the powers and the receipt of the proceeds thereof, and must thereafter conduct the business of such person, firm, association, company or corporation, with all its powers and privileges, and subject to all its liabilities, until the redemption of the same as hereinafter provided.
History.
R.S., § 2643; reen. R.C. & C.L., § 2779; C.S., § 4762; I.C.A.,§ 29-202; am. 1941, ch. 102, § 2, p. 183.
§ 30-203. Actions by purchaser.
The purchaser or his assignee is entitled to recover any penalties imposed by law and recoverable by the person, firm, association, company or corporation for an injury to the franchise or property thereof, or for any damages or other cause, occurring during the time he holds the same and may use the name of the person, firm, association, company, or corporation for the purpose of any action necessary to recover the same. A recovery for damages or any penalties thus had, is a bar to any subsequent action by or on behalf of the person, firm, association, company, or corporation for the same.
History.
R.S., § 2644; reen. R.C. & C.L., § 2780; C.S., § 4763; I.C.A.,§ 29-203; am. 1941, ch. 102, § 3, p. 183.
§ 30-204. Effect of sale.
The person, firm, association, company, or corporation whose franchise is sold, as in this chapter provided, in all other respects retains the same powers, is bound to discharge the same duties, and is liable to the same penalties and forfeitures as before such sale.
History.
R.S., § 2645; reen. R.C. & C.L., § 2781; C.S., § 4764; I.C.A.,§ 29-204; am. 1941, ch. 102, § 4, p. 183.
§ 30-205. Redemption from sale.
The person, firm, association, company, or corporation may, at any time within one (1) year after such sale, redeem the franchise by paying or tendering to the purchaser thereof the sum paid therefor, with ten per cent (10%) interest thereon, but without any allowance for the toll which he may in the meantime have received; and upon such payment or tender, the franchise and all the rights and privileges thereof revert and belong to the person, firm, association, company, or corporation, as if no such sale had been made.
History.
R.S., § 2646; reen. R.C. & C.L., § 2782; C.S., § 4765; I.C.A.,§ 29-205; am. 1941, ch. 102, § 5, p. 183.
§ 30-206. Place of sale.
The sale of any franchise under execution must be made in the county in which the person, firm, association, company, or corporation has its principal place of business.
History.
R.S., § 2647; reen. R.C. & C.L., § 2783; C.S., § 4766; I.C.A.,§ 29-206; am. 1941, ch. 102, § 6, p. 183.
Chapter 3 IDAHO NONPROFIT CORPORATION ACT
Sec.
§ 30-3-1 — 30-3-145. [Repealed.]
Repealed by S.L. 2015, ch. 337, § 3, effective July 1, 2015. For present comparable provisions, see§ 30-30-101 et seq.
STATUTORY NOTES
Prior Laws.
The following former sections were repealed by S.L. 1993, ch. 220, § 1, effective July 1, 1993:
30-301. (I.C.,§ 30-301, as added by 1979, ch. 159, § 3, p. 486.)
30-302. (I.C.,§ 30-302, as added by 1979, ch. 159, § 3, p. 486.)
30-303. (I.C.,§ 30-303, as added by 1979, ch. 159, § 3, p. 486.)
30-304. (I.C.,§ 30-304, as added by 1979, ch. 159, § 3, p. 486.)
30-305. (I.C.,§ 30-305, as added by 1979, ch. 159, § 3, p. 486.)
30-306. (I.C.,§ 30-306, as added by 1979, ch. 159, § 3, p. 486; am. 1989, ch. 240, § 1, p. 586.)
30-307. (I.C.,§ 30-307, as added by 1979, ch. 159, § 3, p. 486.)
30-308. (I.C.,§ 30-308, as added by 1979, ch. 159, § 3, p. 486; am. 1980, ch. 197, § 16, p. 433.)
30-308A. (I.C.,§ 30-308A, as added by 1980, ch. 197, § 23, p. 433.)
30-309. (I.C.,§ 30-309, as added by 1979, ch. 159, § 3, p. 486.)
30-310. (I.C.,§ 30-310, as added by 1979, ch. 159, § 3, p. 486; am. 1980, ch. 197, § 33, p. 433.)
30-311. (I.C.,§ 30-311, as added by 1979, ch. 159, § 3, p. 486.)
30-312. (I.C.,§ 30-312, as added by 1979, ch. 159, § 3, p. 486.)
30-313. (I.C.,§ 30-313, as added by 1979, ch. 159, § 3, p. 486; am. 1982, ch. 233, § 2, p. 614.)
30-314. (I.C.,§ 30-314, as added by 1979, ch. 159, § 3, p. 486; am. 1980, ch. 197, § 17, p. 433; am. 1981, ch. 226, § 5, p. 443; am. 1982, ch. 233, § 3, p. 614.)
30-315. (I.C.,§ 30-315, as added by 1979, ch. 159, § 3, p. 486.)
30-316. (I.C.,§ 30-316, as added by 1979, ch. 159, § 3, p. 486; am. 1986, ch. 178, § 1, p. 468.)
30-317. (I.C.,§ 30-317, as added by 1979, ch. 159, § 3, p. 486.)
30-318. (I.C.,§ 30-318, as added by 1979, ch. 159, § 3, p. 486; am. 1980, ch. 197, § 18, p. 433.)
30-319. (I.C.,§ 30-319, as added by 1979, ch. 159, § 3, p. 486.)
30-320. (I.C.,§ 30-320, as added by 1979, ch. 159, § 3, p. 486.)
30-321. (I.C.,§ 30-321, as added by 1979, ch. 159, § 3, p. 486.)
30-322. (I.C.,§ 30-322, as added by 1979, ch. 159, § 3, p. 486.)
30-323. (I.C.,§ 30-323, as added by 1979, ch. 159, § 3, p. 486; am. 1980, ch. 197, § 19, p. 433; am. 1981, ch. 226, § 6, p. 433; am. 1982, ch. 233, § 4, p. 614.)
30-324. (I.C.,§ 30-324, as added by 1979, ch. 159, § 3, p. 486.) 30-325. (I.C.,§ 30-325, as added by 1979, ch. 159, § 3, p. 486.)
30-326. (I.C.,§ 30-326, as added by 1979, ch. 159, § 3, p. 486.)
30-327. (I.C.,§ 30-327, as added by 1979, ch. 159, § 3, p. 486.)
30-328. (I.C.,§ 30-328, as added by 1979, ch. 159, § 3, p. 486.)
30-329. (I.C.,§ 30-329, as added by 1979, ch. 159, § 3, p. 486; am. 1981, ch. 49, § 3, p. 72; am. 1993, ch. 338, § 2.)
30-330. (I.C.,§ 30-330, as added by 1979, ch. 159, § 3, p. 486.)
30-331. (I.C.,§ 30-331, as added by 1979, ch. 159, § 3, p. 486.)
30-332. (I.C.,§ 30-332, as added by 1979, ch. 159, § 3, p. 486.)
A former version of§§ 30-301 to 30-307, which comprised C.C.P. 1881, §§ 844to 850, R.S., R.C. & C.L., §§ 5185 to 5191; C.S., §§ 7397 to 7403; I.C.A.,§§ 29-301 to 29-307; am. 1945, ch. 31, §§ 1, 2, p. 38; am. 1977, ch. 252, § 6, p. 738, were repealed by S.L. 1978, ch. 60, § 1.
Another former version of§§ 30-301 to 30-306, which comprised I.C.,§§ 30-301 to 30-306, as added by 1978, ch. 60, § 2, p. 118, were repealed by S.L. 1979, ch. 105, § 1.
Another former version of§ 30-3-127, as added by 1993, ch. 220, § 2, was repealed by S.L. 1998, ch. 267, § 9.
Compiler’s Notes.
Chapter 3 of Title 30, which comprised the following sections, was repealed by S.L. 2015, ch. 337, § 3, effective July 1, 2015.
30-3-100. Approval of plan of merger. [I.C.,§ 30-3-100, as added by 1993, ch. 220, § 2, p. 685.]
30-3-100A. Applicability of Idaho entity transactions act. [I.C.,§ 30-3-100A, as added by 2007, ch. 116, § 5, p. 333.]
30-3-101. Action on plan by board, members and third persons. [I.C.,§ 30-3-101, as added by 1993, ch. 220, § 2, p. 685.]
30-3-102. Articles of merger. [I.C.,§ 30-3-102, as added by 1993, ch. 220, § 2, p. 685.]
30-3-103. Effect of merger. [I.C.,§ 30-3-102, as added by 1993, ch. 220, § 2, p. 685.]
30-3-104. Merger with foreign corporation. [I.C.,§ 30-3-104, as added by 1993, ch. 220, § 2, p. 685; am. 2007, ch. 314, § 35, p. 887.]
30-3-105. Bequests, devises and gifts. [I.C.,§ 30-3-105, as added by 1993, ch. 220, § 2, p. 685.]
30-3-106. Sale of assets in regular course of activities and mortgage of assets. [I.C.,§ 30-3-106, as added by 1993, ch. 220, § 2, p. 685.]
30-3-107. Sale of assets other than in regular course of activities. [I.C.,§ 30-3-107, as added by 1993, ch. 220, § 2, p. 685.]
30-3-108. Prohibited distributions. [I.C.,§ 30-3-108, as added by 1993, ch. 220, § 2, p. 685.]
30-3-109. Authorized distributions. [I.C.,§ 30-3-109, as added by 1993, ch. 220, § 2, p. 685.]
30-3-110. Dissolution by incorporators or directors and third persons. [I.C.,§ 30-3-110, as added by 1993, ch. 220, § 2, p. 685.]
30-3-111. Dissolution by directors, members and third persons. [I.C.,§ 30-3-111, as added by 1993, ch. 220, § 2, p. 685.]
30-3-112. Articles of dissolution. [I.C.,§ 30-3-112, as added by 1993, ch. 220, § 2, p. 685.]
30-3-113. Effect of dissolution. [I.C.,§ 30-3-113, as added by 1993, ch. 220, § 2, p. 685.]
30-3-114. Known claims against dissolved corporation. [I.C.,§ 30-3-114, as added by 1993, ch. 220, § 2, p. 685.]
30-3-115. Unknown claims against dissolved corporation. [I.C.,§ 30-3-115, as added by 1993, ch. 220, § 2, p. 685; am. 2007, ch. 314, § 36, p. 887.]
30-3-115A. Grounds for administrative dissolution. [I.C.,§ 30-3-115A, as added by 1998, ch. 267, § 5, p. 878; am. 2007, ch. 314, § 37, p. 887.]
30-3-115B. Procedure for and effect of administrative dissolution. [I.C.,§ 30-3-115B, as added by 1998, ch. 267, § 6, p. 878; am. 2007, ch. 314, § 38, p. 887.]
30-3-115C. Reinstatement following administrative dissolution. [I.C.,§ 30-3-115C, as added by 1998, ch. 267, § 7, p. 878; am. 2007, ch. 314, § 39, p. 887.]
30-3-115D. Appeal from denial of reinstatement. [I.C.,§ 30-3-115D, as added by 1998, ch. 267, § 8, p. 878.]
30-3-116. Authority to transact business required by foreign corporation. [I.C.,§ 30-3-116, as added by 1993, ch. 220, § 2, p. 685.]
30-3-117. Consequences to foreign corporation of transacting business without authority. [I.C.,§ 30-3-117, as added by 1993, ch. 220, § 2, p. 685.] 30-3-118. Application of foreign corporation for certificate of authority. [I.C.,§ 30-3-118, as added by 1993, ch. 220, § 2, p. 685; am. 2000, ch. 124, § 2, p. 291; am. 2007, ch. 314, § 40, p. 887.]
30-3-119. Foreign corporation amended certificate of authority. [I.C.,§ 30-3-119, as added by 1993, ch. 220, § 2, p. 685; am. 2007, ch. 314, § 41, p. 887.]
30-3-120. Effect of issuance of certificate of authority to foreign corporation. [I.C.,§ 30-3-120, as added by 1993, ch. 220, § 2, p. 685.]
30-3-121. Corporate name of foreign corporation. [I.C.,§ 30-3-121, as added by 1993, ch. 220, § 2, p. 685; am. 2000, ch. 325, § 3, p. 1095.]
30-3-126. Withdrawal of foreign corporation. [I.C.,§ 30-3-126, as added by 1993, ch. 220, § 2, p. 685; am. 2007, ch. 314, § 43, p. 887.]
30-3-127. Grounds for revocation of certificate of authority. [I.C.,§ 30-3-127, as added by 1998, ch. 267, § 10, p. 878; am. 2007, ch. 314, § 44, p. 887.]
30-3-128. Procedure and effect of revocation of authority of foreign corporation. [I.C.,§ 30-3-128, as added by 1993, ch. 220, § 2, p. 685; am. 1998, ch. 267, § 11, p. 878; am. 2007, ch. 314, § 45, p. 887.]
30-3-129. Appeal from revocation of certificate of authority of foreign corporation. [I.C.,§ 30-3-129, as added by 1993, ch. 220, § 2, p. 685; am. 1998, ch. 267, § 12, p. 878.]
30-3-130. Corporate records. [I.C.,§ 30-3-130, as added by 1993, ch. 220, § 2, p. 685.]
30-3-131. Inspection of records by members. [I.C.,§ 30-3-131, as added by 1993, ch. 220, § 2, p. 685.]
30-3-132. Scope of inspection rights. [I.C.,§ 30-3-132, as added by 1993, ch. 220, § 2, p. 685.]
30-3-133. Limitations on use of membership list. [I.C.,§ 30-3-133, as added by 1993, ch. 220, § 2, p. 685.]
30-3-134. Financial statements for members. [I.C.,§ 30-3-134, as added by 1993, ch. 220, § 2, p. 685.]
30-3-135. Report of indemnification to members. [I.C.,§ 30-3-135, as added by 1993, ch. 220, § 2, p. 685.]
30-3-136. Annual report for secretary of state. [I.C.,§ 30-3-136, as added by 1993, ch. 220, § 2, p. 685; am. 1998, ch. 267, § 13, p. 878; am. 1999, ch. 210, § 2, p. 559; am. 2003, ch. 207, § 2, p. 550; am. 2005, ch. 274, § 2, p. 842.]
30-3-142. Application to existing domestic corporations. [I.C.,§ 30-3-142, as added by 1993, ch. 220, § 2, p. 685.]
30-3-143. Application to qualified foreign corporation. [I.C.,§ 30-3-143, as added by 1993, ch. 220, § 2, p. 685.]
30-3-143A. Application to canal companies and carey act companies. [I.C.,§ 30-3-143A, as added by 1997, ch. 282, § 8, p. 854.]
30-3-144. Saving provisions. [I.C.,§ 30-3-144, as added by 1993, ch. 220, § 2, p. 685.]
30-3-145. Severability. [I.C.,§ 30-3-145, as added by 1993, ch. 220, § 2, p. 685.]
The following sections were previously repealed:
30-3-30. Registered office and registered agent. [I.C.,§ 30-3-30, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 31.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-31. Change of registered office or registered agent. [I.C.,§ 30-3-31, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 31.] For present comparable provisions, see§ 30-21-401 et seq. 30-3-32. Resignation of registered agent. [I.C.,§ 30-3-32, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 31.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-33. Service on corporation. [I.C.,§ 30-3-33, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 31.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-122. Registered office and registered agent of foreign corporation. [I.C.,§ 30-3-122, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 42.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-123. Change of registered office or registered agent of foreign corporation. [I.C.,§ 30-3-123, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 42.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-124. Resignation of registered agent of foreign corporation [I.C.,§ 30-3-124, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 42.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-125. Service on foreign corporation. [I.C.,§ 30-3-125, as added by 1993, ch. 220, § 2, p. 685, was repealed by S.L. 2007, ch. 314, § 42.] For present comparable provisions, see§ 30-21-401 et seq.
30-3-137 to 30-3-141. Forfeiture of corporations — Reinstatement. [I.C., §§ 30-3-137 to 30-3-141, as added by 1993, ch. 220, § 2, p. 685, were repealed by S.L. 1998, ch. 267, § 14.]
Chapter 4 IDAHO REGISTERED AGENTS ACT
Sec.
§ 30-401. Short title. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015.
History.
I.C.,§ 30-401, as added by 2007, ch. 314, § 1, p. 887.
STATUTORY NOTES
Prior Laws.
Former Chapter 4 of Title 30, (§§ 30-401 to 30-426), the uniform stock transfer law, which comprised S.L. 1927, ch. 88, §§ 1 to 23, 25 to 27, p. 107; I.C.A.,§§ 29-401 to 29-426 was repealed by S.L. 1967, ch. 161,§ 10-102. For present comparable provisions, see§ 28-8-101 et seq.
Compiler’s Notes.
Chapter 4 of Title 30, which comprised the following sections, was repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-401 et seq.
30-401. Short title. [I.C.,§ 30-401, as added by 2007, ch. 314, § 1, p. 887.]
30-402. Definitions. [I.C.,§ 30-402, as added by 2007, ch. 314, § 1, p. 887.]
30-403. Fees. [I.C.,§ 30-403, as added by 2007, ch. 314, § 1, p. 887.]
30-404. Addresses in filings. [I.C.,§ 30-404, as added by 2007, ch. 314, § 1, p. 887.]
30-405. Appointment of registered agent. [I.C.,§ 30-405, as added by 2007, ch. 314, § 1, p. 887.]
30-406. Listing of commercial registered agent. [I.C.,§ 30-406, as added by 2007, ch. 314, § 1, p. 887.]
30-407. Termination of listing of commercial registered agent. [I.C.,§ 30-407, as added by 2007, ch. 314, § 1, p. 887.]
30-408. Change of registered agent by entity. [I.C.,§ 30-407, as added by 2007, ch. 314, § 1, p. 887.]
30-409. Change of name or address by noncommercial registered agent. [I.C.,§ 30-409, as added by 2007, ch. 314, § 1, p. 887.]
30-410. Change of name, address, or type of organization by commercial registered agent. [I.C.,§ 30-410, as added by 2007, ch. 314, § 1, p. 887.]
30-411. Resignation of registered agent. [I.C.,§ 30-411, as added by 2007, ch. 314, § 1, p. 887.]
30-412. Appointment of agent by nonfiling or nonqualified foreign entity. [I.C.,§ 30-412, as added by 2007, ch. 314, § 1, p. 887.]
30-413. Service of process on entities. [I.C.,§ 30-413, as added by 2007, ch. 314, § 1, p. 887.]
30-414. Duties of registered agent. [I.C.,§ 30-414, as added by 2007, ch. 314, § 1, p. 887.] 30-415. Jurisdiction and venue. [I.C.,§ 30-415, as added by 2007, ch. 314, § 1, p. 887.]
30-416. Consistency of application. [I.C.,§ 30-416, as added by 2007, ch. 314, § 1, p. 887.]
30-417. Relation to electronic signatures in global and national commerce act. [I.C.,§ 30-417, as added by 2007, ch. 314, § 1, p. 887.]
30-418. Savings clause. [I.C.,§ 30-418, as added by 2007, ch. 314, § 1, p. 887.]
§ 30-402. Definitions. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-401.
History.
I.C.,§ 30-402, as added by 2007, ch. 314, § 1, p. 887.
§ 30-403. Fees. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-214.
History.
I.C.,§ 30-403, as added by 2007, ch. 314, § 1, p. 887.
§ 30-404. Addresses in filings. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-403.
History.
I.C.,§ 30-404, as added by 2007, ch. 314, § 1, p. 887.
§ 30-405. Appointment of registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-404.
History.
I.C.,§ 30-405, as added by 2007, ch. 314, § 1, p. 887.
§ 30-406. Listing of commercial registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-405.
History.
I.C.,§ 30-406, as added by 2007, ch. 314, § 1, p. 887.
§ 30-407. Termination of listing of commercial registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-406.
History.
I.C.,§ 30-407, as added by 2007, ch. 314, § 1, p. 887.
§ 30-408. Change of registered agent by entity. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-407.
History.
I.C.,§ 30-408, as added by 2007, ch. 314, § 1, p. 887.
§ 30-409. Change of name or address by noncommercial registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-408.
History.
I.C.,§ 30-409, as added by 2007, ch. 314, § 1, p. 887.
§ 30-410. Change of name, address, or type of organization by commercial registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-409.
History.
I.C.,§ 30-410, as added by 2007, ch. 314, § 1, p. 887.
§ 30-411. Resignation of registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-410.
History.
I.C.,§ 30-411, as added by 2007, ch. 314, § 1, p. 887.
§ 30-412. Appointment of agent by nonfiling or nonqualified foreign entity. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-411.
History.
I.C.,§ 30-412, as added by 2007, ch. 314, § 1, p. 887.
§ 30-413. Service of process on entities. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-412.
History.
I.C.,§ 30-413, as added by 2007, ch. 314, § 1, p. 887.
§ 30-414. Duties of registered agent. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-413.
History.
I.C.,§ 30-414, as added by 2007, ch. 314, § 1, p. 887.
§ 30-415. Jurisdiction and venue. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-414.
History.
I.C.,§ 30-415, as added by 2007, ch. 314, § 1, p. 887.
§ 30-416. Consistency of application. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-703.
History.
I.C.,§ 30-416, as added by 2007, ch. 314, § 1, p. 887.
§ 30-417. Relation to electronic signatures in global and national commerce act. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 1, effective July 1, 2015. For present comparable provisions, see§ 30-21-704.
History.
I.C.,§ 30-417, as added by 2007, ch. 314, § 1, p. 887.
Chapter 5 CORPORATIONS
Sec.
§ 30-501. Corporations — Constitution of the state of Idaho.
Every corporation organized for any lawful purpose or purposes, whether a general business corporation or a designated class of corporation, shall, by the act of filing incorporation documents with the state of Idaho, acknowledge and accept the provisions of the constitution of the state of Idaho as binding upon that corporation.
History.
I.C.,§ 30-501, as added by 1996, ch. 354, § 1, p. 1182.
STATUTORY NOTES
Prior Laws.
Former§ 30-501, which comprised R.S., § 2653; am. 1903, p. 49, § 1; am. R.C., § 2792; reen. 1915, ch. 124, § 1, p. 270; reen. C.L., § 2792a; C.S., § 4772; am. 1925, ch. 82, § 1, p. 116; am. 1929, ch. 282, § 1, p. 678; I.C.A.,§ 29-501; am. 1947, ch. 43, § 1, p. 48; am. 1955, ch. 2, § 1, p. 4; am. 1965, ch. 100, § 1, p. 186; am. 1978, ch. 308, § 11, p. 771, was repealed by S.L. 1979, ch. 105, § 1.
§ 30-502 — 30-515. Foreign corporations — Filing requirements, liability, etc. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
These sections, which comprised 1879, p. 3, § 5; R.S., § 2653; am. 1903, p. 49, § 1; am. R.C., § 2792; reen. 1915, ch. 124, § 1, p. 270; reen. C.L., §§ 2792b to 2792h; C.S., §§ 4772 to 4779; 1923, ch. 44, §§ 1, 2, p. 48; am. 1929, ch. 282, §§ 2, 3, p. 678; I.C.A.,§§ 29-502 to 29-510; 1937, ch. 66, §§ 1, 2, p. 88; 1937, ch. 133, §§ 1, 2, p. 214; 1939, ch. 121, § 1, p. 218; am. 1959, ch. 173, § 3, p. 394; am. 1959, ch. 175, § 1, p. 407; am. 1971, ch. 111, §§ 24, 25, p. 233; am. 1977, ch. 252, §§ 7, 8, p. 738, were repealed by S.L. 1979, ch. 105, § 1.
§ 30-516, 30-517. Mortgage or deed of trust on real property. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
These sections, which comprised S.L. 1957, ch. 163, §§ 1, 2, p. 296, were repealed by S.L. 1959, ch. 173, § 4, p. 394.
§ 30-518 — 30-521. Purpose of act — Doing business — Mergers. [Repealed.]
Chapter 6 IDAHO UNIFORM LIMITED LIABILITY COMPANY ACT
Part 1. General Provisions
Sec.
Part 2. Formation — Certificate of Organization and Other Filings
Part 3. Relations of Members and Managers to Persons Dealing with Limited Liability Company
Part 4. Relations of Members to Each Other and to Limited Liability Company
Part 5. Transferable Interests and Rights of Transferees and Creditors
Part 6. Member’s Dissociation
Part 7. Dissolution and Winding Up
Part 8. Foreign Limited Liability Companies
Part 9. Actions By Members
Part 10. Merger, Interest Exchange, Conversion and Domestication
30-6-1001, 1002. [Repealed.]
Part 11. Miscellaneous Provisions
__________
STATUTORY NOTES
Prior Laws.
Former Chapter 6, relating to the annual statement and license fees, was made up of the following:
Former§§ 30-601 to 30-604, which comprised S.L. 1907, p. 235, §§ 1, 2; reen. R.C. §§ 2784, 2785; am. 1909, p. 8, H.B. 15; am. 1912, ch. 6, §§ 1 to 4, p. 14 to 16; reen. C.L. 207:1 to 207:4; C.S. §§ 4780 to 4783; am. 1925, ch. 36, § 1, p. 49; I.C.A.,§§ 29-601 to 29-604; am. 1939, ch. 180, § 1, p. 336; am. 1945, ch. 35, § 1, p. 46; am. 1945, ch. 150, § 1, p. 227; am. 1951, ch. 251, § 5, p. 540; am. 1955, ch. 104, § 1, p. 228; am. 1955, ch. 169, § 1, p. 342; am. 1959, ch. 72, § 5, p. 157; 1971, ch. 18, § 1, p. 31; am. 1972, ch. 244, § 1, p. 634; am. 1972, ch. 394, § 1, p. 1138; am. 1977, ch. 252, §§ 10 to 12, p. 738; am. 1978, ch. 308, § 13, p. 771, were repealed by S.L. 1979, ch. 105, § 7, effective July 1, 1981.
Former§§ 30-605 and 30-606, comprising 1912, ch. 6, §§ 5, 6, pp. 16, 17; reen. C.L. 207:5. 207:6; C.S., §§ 4784. 4785; I.C.A.,§§ 29-605, 29-606; am. 1947, ch. 173, § 1, p. 430; am. 1951, ch. 17, § 1, p. 26, were repealed by S.L. 1972, ch. 244, § 2.
Former§§ 30-607 to 30-614, which comprised 1907, p. 235, § 3; reen. R.C. § 2786; 1912, ch. 6, §§ 7 to 11, p. 17 to 19; reen. C.L. 207:7 to 207:13; C.S., §§ 4786 to 4792; am. 1925, ch. 37, § 1, p. 150; am. 1929, ch. 60, § 1, p. 86; I.C.A.,§§ 29-607 to 29-613; am. 1947, ch. 173, § 2, p. 430; am. 1947, ch. 205, § 1, p. 481; am. 1967, ch. 2, § 1, p. 4; am. 1978, ch. 14, §§ 1, 2, p. 26, were repealed by S.L. 1979, ch. 105, § 7, effective July 1, 1981.
__________
Part 1 General Provisions
§ 30-6-101 — 30-6-114. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-101 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 1, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 2 Formation — Certificate of Organization and Other Filings
§ 30-6-201 — 30-6-210. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-201 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 2, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
30-6-201A. Professional company. [I.C.,§ 30-6-201A, as added by 2008, ch. 176, § 1, p. 488.]
Part 3 Relations of Members and Managers to Persons Dealing with Limited Liability Company
§ 30-6-301 — 30-6-304. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-301 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 3, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 4 Relations of Members to Each Other and to Limited Liability Company
§ 30-6-401 — 30-6-410. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-401 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 4, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 5 Transferable Interests and Rights of Transferees and Creditors
§ 30-6-501 — 30-6-504. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-501 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 5, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 6 Member’s Dissociation
§ 30-6-601 — 30-6-603. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-601 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 6, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 7 Dissolution and Winding Up
§ 30-6-701 — 36-6-708. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-701 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 7, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 8 Foreign Limited Liability Companies
§ 30-6-801 — 30-6-809. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-501 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 8, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 9 Actions By Members
§ 30-6-901 — 36-9-906. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-25-801 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 9, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 10 Merger, Interest Exchange, Conversion and Domestication
§ 30-6-1001, 1002. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-22-101 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 10, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Part 11 Miscellaneous Provisions
§ 30-6-1101 — 30-6-1104. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017. For present comparable provisions, see§ 30-21-701 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 6, Part 11, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 2, as amended by S.L. 2015, ch. 337, § 4, effective July 1, 2017.
Chapter 7 BRIDGE, FERRY, FLUME, AND BOOM CORPORATIONS
Sec.
§ 30-701. License to take tolls.
When a corporation is formed for the construction and maintenance of a bridge, ferry, flume or boom, or for two (2) or more of said purposes, it must not take tolls on or for the same until authority is granted therefor by the boards of county commissioners of the county or counties where its flume or abutments, landings or anchorages are situate. But after such authority is granted it may demand and receive such tolls as it is so authorized to take, and may, when necessary, secure the right of way for its flume, and the necessary chutes, raceways, landings, abutments and anchorages under the provisions of the Code of Civil Procedure.
History.
R.S. § 2694; reen. R.C. & C.L., § 2830; C.S., § 4829; I.C.A.,§ 29-701.
STATUTORY NOTES
Compiler’s Notes.
The Code of Civil Procedure, referred to at the end of the section, is an archaic division of the Idaho Code, consisting of Titles 1 through 13.
CASE NOTES
Cited
Falls Creek Timber Co. v. Day, 39 Idaho 495, 228 P. 313 (1924).
§ 30-702. When franchise ceases.
Every such corporation hereafter organized ceases to be a body corporate:
- If, within two (2) years from filing its articles of incorporation it has not commenced the construction of its bridge, flume or boom, as the case may be, and if within three (3) years from such filing its bridge or boom is not completed.
- If, when the bridge or boom of such corporation is destroyed, it is not reconstructed and ready for use within two (2) years thereafter.
- If the ferry of any such corporation is not in running order within four (4) months after authority to take tolls thereon is obtained, or if at any time thereafter it ceases, for a like term consecutively, to perform the duties imposed by law.
History.
R.S., § 2695; reen. R.C. & C.L., § 2831; C.S., § 4830; am. 1925, ch. 165, § 1, p. 302; I.C.A.,§ 29-702.
§ 30-703. Application to individuals.
When a bridge, ferry, flume or boom is operated or owned by a natural person, this chapter is applicable to such person in like manner as it is applicable to corporations.
History.
R.S., § 2696; reen. R.C. & C.L., § 2832; C.S., § 4831; I.C.A.,§ 29-703.
Chapter 8 WATER AND CANAL CORPORATIONS AND WATER USERS’ ASSOCIATIONS
Sec.
§ 30-801. Contracts for municipal water supply.
No corporation formed to supply any city or town with water must do so unless previously authorized by an ordinance of the authorities thereof, or unless it is done in conformity with a contract entered into between the city or town and the corporation. Contracts so made are valid and binding in law, but an exclusive right must not be granted. No contract or grant must be made for a term exceeding fifty (50) years.
History.
R.S., § 2710; reen. R.C., § 2838; compiled and reen. C.L., § 2838; C.S., § 4842; I.C.A.,§ 29-801.
STATUTORY NOTES
CASE NOTES
Application to Corporations Only.
This law applies only to corporations furnishing water to cities, etc., and has no application to contract between individual and city for furnishing such water. Jack v. Village of Grangeville, 9 Idaho 291, 74 P. 969 (1903).
Grant for Indefinite Term.
Municipal grant to individuals, for indefinite term, of the right to lay pipes in city streets and to repair pipes of a water distributing system, if affected at all by this section, is not rendered thereby ineffective, but at most is limited to a term of fifty years. Boise Artesian Hot & Cold Water Co. v. Boise City, 230 U.S. 84, 33 S. Ct. 997, 57 L. Ed. 1400 (1913).
Irrigation.
Pleading.
This law, applicable to water corporations, furnishing water to cities and towns, was not intended to apply to corporations furnishing water for irrigation purposes. MacCammelly v. Pioneer Irrigation Dist., 17 Idaho 415, 105 P. 1076 (1909). Pleading.
In action to compel water company to furnish city with free water in case of fire, complaint must set forth the ordinance and contract by which company is authorized to supply water to city. City of Boise City v. Artesian Hot & Cold Water Co., 4 Idaho 351, 39 P. 562 (1895).
Cited
Cox v. City of Pocatello, 77 Idaho 225, 291 P.2d 282 (1955).
§ 30-802. Right of way granted.
Any corporation created under the provisions of this title for the purposes named in this chapter, subject to the reasonable rules and directions of the city or town authorities as to the mode or manner of using such right of way within the city or town, and subject to the reasonable rules and directions of the board of county commissioners as to the mode and manner of using any right of way outside the corporate limits of such city or town, may use so much of the streets, alleys and ways in any city or town, or the public roads and highways within the county, as may be necessary for the laying of pipes for conducting water to its consumers, or the building and maintaining of ditches, canals, pipes, flumes and aqueducts in conducting water from outside points to the corporate limits of said city or town.
History.
R.S., § 2712; am. 1905, p. 192, § 2; reen. R.C. & C.L., § 2840; C.S., § 4843; I.C.A.,§ 29-802.
CASE NOTES
Compensation.
Rights of way under this section are granted without requiring any compensation whatever. City of Pocatello v. Murray, 21 Idaho 180, 120 P. 812, aff’d, 226 U.S. 318, 33 S. Ct. 107, 57 L. Ed. 239 (1912).
Nature of Grant.
Municipal grant of right to occupy city streets with pipes of a water distributing system is, when accepted by grantee, not a mere revocable license, but a substantial property right. Boise Artesian Hot & Cold Water Co. v. Boise City, 230 U.S. 84, 33 S. Ct. 997, 57 L. Ed. 1400 (1913).
Pipes in Street.
All the mains and laterals of a water system within the franchise limit belong to the company owning the franchise, and it is the duty of company to construct same at its own expense and connect with the pipes of a property owner at the line of his property and the limit of its franchise. Bothwell v. Consumers’ Co., 13 Idaho 568, 92 P. 533 (1907).
Rental for Use of Streets.
It is the duty of water company to supply and lay the laterals from its main pipeline to line of consumer’s property abutting on the street, and such laterals are the property of company. Hatch v. Consumers’ Co., 17 Idaho 204, 104 P. 670 (1909), aff’d, 224 U.S. 148, 32 S. Ct. 465, 56 L. Ed. 703 (1912). Rental for Use of Streets.
Obligation of municipal ordinance granting an irrevocable easement to lay pipes in city streets and repair pipes of a water distributing system is unconstitutionally impaired by a subsequent ordinance requiring payment to city of a monthly rental for such use and occupation of streets. Boise Artesian Hot & Cold Water Co. v. Boise City, 230 U.S. 84, 33 S. Ct. 997, 57 L. Ed. 1400 (1913).
Cited
City of Boise City v. Artesian Hot & Cold Water Co., 4 Idaho 351, 39 P. 562 (1895); Jack v. Village of Grangeville, 9 Idaho 291, 74 P. 969 (1905); MacCammelly v. Pioneer Irrigation Dist., 17 Idaho 415, 105 P. 1076 (1909).
§ 30-803. Works not to obstruct highways.
All waterworks must be so laid and constructed as not to obstruct public highways.
History.
R.S., § 2713; am. R.C. & C.L., § 2841; C.S., § 4844; I.C.A.,§ 29-803.
STATUTORY NOTES
Cross References.
Bridges over ditches and canals,§§ 42-1205, 43-906.
CASE NOTES
Cited
Jack v. Village of Grangeville, 9 Idaho 291, 74 P. 969 (1903); MacCammelly v. Pioneer Irrigation Dist., 17 Idaho 415, 105 P. 1076 (1909); Nampa v. Nampa & Meridian Irrigation Dist., 23 Idaho 422, 131 P. 8 (1913).
§ 30-804. Water users’ associations — Exemptions from taxes.
Any water users’ association which is organized in conformity with the requirements of the United States under the Reclamation Act of June 17, 1902, and which, under its articles of incorporation, is authorized to furnish water only to its stockholders, shall be governed by the provisions of the Idaho Nonprofit Corporation Act.
History.
1905, p. 373, § 3; reen. R.C. & C.L., § 2842; C.S., § 4845; I.C.A.,§ 29-804; am. 1979, ch. 159, § 4, p. 486.
STATUTORY NOTES
Cross References.
Lateral ditch water users’ associations,§ 42-1301 et seq.
Federal References.
The Reclamation Act of June 17, 1902, ch. 1093, 32 Stat. 388, is generally compiled as 43 USCS § 371 et seq.
Compiler’s Notes.
The Idaho Nonprofit Corporation Act, referred to in this section, is compiled as chapter 30, title 30, Idaho Code.
§ 30-805. Water users’ associations
Record of articles and subscriptions. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
This section, which comprised S.L. 1905, p. 373, § 4; reen. R.C. & C.L. § 2843; C.S. § 4846; I.C.A.,§ 29-805, was repealed by S.L. 1979, ch. 159, § 5.
§ 30-806. Annual report of irrigation companies. [Repealed.]
Repealed by S.L. 2019, ch. 190, § 9, effective July 1, 2019.
History.
1899, p. 380, § 35; reen. R.C. & C.L., § 2844; C.S., § 4847; I.C.A.,§ 29-806.
Chapter 9 IDAHO ESCROW ACT
Sec.
§ 30-901. Short title.
- This chapter shall be known and may be cited as the “Idaho Escrow Act.”
- It is the intent of the legislature that the escrow industry be supervised and regulated by the department of finance in order to protect the citizens of the state and to provide that the business practices of the escrow industry are fair and orderly, with due regard to the ultimate consumers in this important area of property protection.
History.
I.C.,§ 30-901, as added by 2005, ch. 236, § 2, p. 717.
§ 30-902. Definitions.
As used in this chapter and in rules promulgated pursuant to this chapter:
- “Act” means the “Idaho Escrow Act,” chapter 9, title 30, Idaho Code.
- “Department” means the Idaho department of finance.
- “Director” means the director of the Idaho department of finance.
- “Escrow” means any transaction in which any person, for the purpose of effecting the sale, transfer, encumbrance, or lease of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by that third person until the happening of a specified event or the performance of a prescribed condition, when the instrument, money, evidence of title or thing of value is then to be delivered by the third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter, pursuant to written instructions.
- “Escrow agency” means any person engaged in the business of accepting or receiving escrows for deposit or delivery by any means, including over the internet, or by any other electronic means.
- “Escrow agent” means any person engaged in the business of accepting or receiving escrows for deposit or delivery on behalf of an escrow agency.
- “License” means a license issued pursuant to this chapter.
- “Licensee” means a person holding a valid license as an escrow agency under this chapter.
- “Person” means an individual, cooperative, association, company, firm, partnership, corporation, limited liability company, or other legal entity, or the plural thereof, whether or not resident, nonresident or citizen.
History.
I.C.,§ 30-902, as added by 2005, ch. 236, § 2, p. 717.
§ 30-903. License required.
- It shall be unlawful for any person to directly or indirectly engage in or carry on, or purport to engage in or carry on, the business of, or act in the capacity of, an escrow agency in or from Idaho without first obtaining a license under this chapter.
- The requirements of this chapter shall also apply to any escrow transaction effecting the sale, transfer, encumbrance or lease to another person of any real or personal property located in Idaho.
History.
I.C.,§ 30-903, as added by 2005, ch. 236, § 2, p. 717.
§ 30-904. Place of business.
No licensee under this chapter shall engage in the escrow business at any place of business for which it does not hold a license, nor shall it engage in business under any other name than that on the license. Every escrow agency licensed under this chapter shall maintain a home office as its principal location for the transaction of escrow business. The director may, on application, issue additional branch licenses to the same escrow agency licensee upon compliance with all the provisions of this chapter governing the issuance of a single escrow agency license.
History.
I.C.,§ 30-904, as added by 2005, ch. 236, § 2, p. 717.
STATUTORY NOTES
Cross References.
Director of department of finance,§ 67-2701.
§ 30-905. Exempt persons and transactions.
The requirements of this chapter do not apply to:
- Any person licensed to practice law in this state while engaged in the performance of his professional duties, except an attorney or law firm actively engaging in a separate business as an escrow agency;
- Any person licensed or chartered under the laws of any state or of the United States as a bank, savings and loan association, credit union or industrial loan company as well as wholly-owned subsidiaries and affiliates of such organizations;
- Title insurance companies having a valid certificate of authority, and title insurance agents having a valid license as a title insurance agent, issued by the Idaho department of insurance;
- Any real estate company, broker or salesperson licensed by and subject to the jurisdiction of the Idaho real estate commission, while performing acts in the course of or incidental to sales or purchases of real or personal property handled or negotiated by such real estate company, broker or salesperson;
- Any receiver, trustee in bankruptcy, executor, administrator, guardian or other person acting under the supervision or order of any court of this state or of any federal court;
- A person licensed in this state as a certified public accountant while engaged in the performance of his professional duties who is not actively engaged in a separate business as an escrow agency;
- Any state or federally chartered nondepository financial institution;
- Regulated lenders subject to the requirements of the Idaho credit code, chapters 41 through 46, title 28, Idaho Code, to the extent not engaged in a separate business as an escrow agency;
- Agencies of the United States and agencies of this state and their political subdivisions;
- Mortgage brokers and mortgage lenders subject to the requirements of the Idaho residential mortgage practices act, chapter 31, title 26, Idaho Code, to the extent not engaged in a separate business as an escrow agency; or
- A mortgage company to the extent that such mortgage company is regularly engaged in the business of a mortgage company as defined in the mortgage company act, chapter 28, title 26, Idaho Code.
History.
I.C.,§ 30-905, as added by 2005, ch. 236, § 2, p. 717.
§ 30-906. Exemption — Burden of proof.
In any proceeding or action under this chapter, the burden of proving an exemption from the requirements of this chapter is upon the person claiming the exemption.
History.
I.C.,§ 30-906, as added by 2005, ch. 236, § 2, p. 717.
§ 30-907. Director’s issuance or denial of license.
- The director shall receive and act upon all applications for licenses to engage in business as an escrow agency under this chapter. If the director finds that all requirements of statute and rule have been met and all applicable fees paid, and the applicant is not otherwise unqualified for licensure, the director shall issue a license to the applicant.
- An application for a license as an escrow agency shall be in writing and filed with the director in such form as is prescribed by the director, shall include such information as the director may reasonably require, and shall be verified on oath by the applicant. Such information shall be updated and filed with the director as necessary to keep the information current. The application for licensure shall be accompanied by an application fee of three hundred fifty dollars ($350). When an application for licensure is denied or withdrawn, the director shall retain all fees paid by the applicant.
-
An application for an escrow agency license under this chapter may be denied if the director finds that:
- The escrow agency’s business was or will be formed for any business other than legitimate escrow services, or proposes to use a name that is misleading or in conflict with the name of an existing licensee;
- Any incorporator, officer, director, member, general partner, employee, or agent of the escrow agency applicant has been convicted of, or received a withheld judgment for any crime or act involving dishonesty, fraud or deceit, which crime or act is substantially related to the qualifications, functions, or duties of a person engaged in an escrow business or which crime is otherwise deemed relevant in accordance with section 67-9411(1), Idaho Code;
- There is no natural person possessing a minimum of three (3) years of supervisory experience in relation to an escrow business supervising each escrow agency office;
- The applicant or any officer, director, member, general partner, employee or agent of the applicant has demonstrated lack of fitness to transact escrow business;
- The applicant has made any false statement of a material fact in the application for a license; or
- The applicant, any officer, director, member, general partner or any person owning or controlling, directly or indirectly, ten percent (10%) or more of the outstanding equity securities of the applicant has violated any provision of this chapter or rules promulgated thereunder, or any similar regulatory scheme in this state or in any foreign jurisdiction.
History.
I.C.,§ 30-907, as added by 2005, ch. 236, § 2, p. 717; am. 2008, ch. 311, § 1, p. 858; am. 2020, ch. 175, § 3, p. 500.
STATUTORY NOTES
Prior Laws.
Former§ 30-907, which comprised 1901, p. 26, § 5; reen. R.C. & C.L., § 2966; C.S., § 4863; I.C.A.,§ 29-906, was repealed by S.L. 2005, ch. 236, § 1.
Amendments.
The 2008 amendment, by ch. 311, in paragraph (3)(b)(i), deleted “or a misdemeanor involving dishonesty or moral turpitude” from the end; added paragraph (3)(b)(ii) and redesignated former paragraph (3)(b)(ii) as paragraph (3)(b)(iii).
The 2020 amendment, by ch. 175, rewrote paragraph (3)(b), which formerly read: “Any incorporator, officer, director, member, general partner, employee or agent of the escrow agency applicant has been: (i) Convicted of, or received a withheld judgment for, any felony; or (ii) Convicted of, or received a withheld judgment for, a misdemeanor involving dishonesty or moral turpitude; or (iii) Committed any crime or act involving dishonesty, fraud or deceit, which crime or act is substantially related to the qualifications, functions or duties of a person engaged in an escrow business.”
§ 30-908. Renewal of license.
- On or before April 30 of each year, every licensee under this chapter shall pay an annual license renewal fee of one hundred fifty dollars ($150), and shall file with the director a renewal form containing such information as the director may require.
- As a condition of renewal, each licensee shall file with the director a statement of its financial condition and status of its escrow transactions as of the preceding December 31. The financial statement must be in a form and contain the information prescribed by the director.
- Each license under this chapter shall remain in full force and effect unless the licensee fails to timely satisfy the renewal requirements of this section, or the license is relinquished, suspended or revoked; provided however, branch licenses shall be terminated upon the relinquishment or revocation of a home office license. Any licensee may relinquish the license by notifying the director of its relinquishment, but this relinquishment shall not affect the licensee’s liability for acts previously committed, and may not occur after the filing of a complaint for revocation or suspension of the license.
- Following the failure of a licensee to satisfy the renewal requirements of this section, a person previously licensed as an escrow agency may, for an additional nonrefundable fee of two hundred dollars ($200), apply for the reinstatement of its previous license provided that he satisfies the renewal requirements of this section no later than the last business day of May immediately following expiration of such license.
History.
I.C.,§ 30-908, as added by 2005, ch. 236, § 2, p. 717.
§ 30-909. Financial responsibility — Fidelity bond — Errors and omissions policy — Surety bond.
At the time of filing an application for an escrow agency license, and at the time of any renewal or reinstatement of such license, the applicant or licensee shall provide satisfactory evidence to the director of having obtained the following as evidence of financial responsibility:
- A fidelity bond providing coverage in the aggregate amount of two hundred thousand dollars ($200,000) with a deductible no greater than ten thousand dollars ($10,000) covering the applicant or licensee, as well as each corporate officer, partner, managing member, escrow agent and employee of the applicant or licensee;
- An errors and omissions policy issued to the escrow agency providing coverage in the minimum aggregate amount of fifty thousand dollars ($50,000) or, alternatively, cash or securities in such amount deposited in a depository approved by the director on condition that they be available for payment of any claim payable under an equivalent errors and omissions policy in such amount; and
-
A surety bond in an amount as set forth in paragraphs (a) through (f) of this subsection. The surety bond shall be in a form provided by the director and the applicant shall be named as principal. The bond shall be executed by the applicant as obligor and by a company authorized to do a surety business in Idaho. The bond shall be conditioned that the obligor as licensee will faithfully conform to and abide by this chapter and all rules adopted thereunder, and shall be liable for reimbursement to all persons who suffer loss by reason of a violation of this chapter or rules adopted thereunder. The surety bond provided shall be in an amount based upon the average month-end balance of the escrow trust accounts of the applicant or licensee for the preceding calendar year, in increments as described in the following subsections [paragraphs]:
- For average month-end escrow trust account balances of fifty thousand dollars ($50,000) or less, a surety bond in the amount of twenty thousand dollars ($20,000) is required;
- For average month-end escrow trust account balances of more than fifty thousand dollars ($50,000) but not more than two hundred fifty thousand dollars ($250,000), a surety bond in the amount of fifty thousand dollars ($50,000) is required;
- For average month-end escrow trust account balances of more than two hundred fifty thousand dollars ($250,000) but not more than five hundred thousand dollars ($500,000), a surety bond in the amount of one hundred thousand dollars ($100,000) is required;
- For average month-end escrow trust account balances of more than five hundred thousand dollars ($500,000) but not more than seven hundred fifty thousand dollars ($750,000), a surety bond in the amount of one hundred fifty thousand dollars ($150,000) is required;
- For average month-end escrow trust account balances of more than seven hundred fifty thousand dollars ($750,000) but not more than one million dollars ($1,000,000), a surety bond in the amount of two hundred thousand dollars ($200,000) is required;
- For average month-end escrow trust account balances of more than one million dollars ($1,000,000), a surety bond in the amount of two hundred fifty thousand dollars ($250,000) is required.
- The escrow agency licensee shall place on file with the director the surety bond and proof of its errors and omissions coverage and its fidelity bond, which bonds and insurance coverage shall be continuous during the period of licensure of the licensee whether or not the bond is renewed, continued, reinstated, reissued, or otherwise extended, replaced or modified, including increases or decreases in the penal sum. The surety upon the bond shall not be liable in an aggregate amount exceeding the penal sum set forth on the face of the bond. (5) The surety bond shall name as beneficiaries:
-
The surety bond shall name as beneficiaries:
- The state, for payment of any costs incurred and charges made in connection with any escrow agency’s insolvency or default, including costs and charges relating to an examination and receivership of any escrow agency; and
- Any person who has a claim against the surety on the bonds based on any default or violation of any duty or obligation of the escrow agency.
- In lieu of the bonds required by this section, a certificate of deposit issued by a financial institution authorized to conduct business in Idaho and made payable to the director may be provided to the director in the same principal amount as required for the bonds. The interest on the certificate of deposit shall be payable to the escrow agency licensee. The certificate of deposit shall be maintained at all times during which the licensee is authorized to engage in business as an escrow agency under this chapter, and must provide that it will remain in effect for at least three (3) years following discontinuance of operations unless released earlier by the director.
- The director may, in the public interest and for good cause shown, waive or modify any requirements of this section.
History.
I.C.,§ 30-909, as added by 2005, ch. 236, § 2, p. 717.
STATUTORY NOTES
Prior Laws.
Former§ 30-909, which comprised I.C.,§ 30-909, as added by 1973, ch. 135, § 11, p. 252, was repealed by S.L. 2005, ch. 236, § 1.
Compiler’s Notes.
The bracketed insertion at the end of the introductory paragraph in subsection (3) was added by the compiler to correct the enacting legislation.
§ 30-910. Cancellation of fidelity bond, surety bond, or both — New bond required.
Prior to cancellation of either the fidelity bond or the surety bond required by section 30-909, Idaho Code, or both, the escrow agency licensee shall file with the director satisfactory evidence of a new bond in the appropriate amount with no lapse in coverage from the canceled bond. Failure to do so shall be grounds for the suspension or revocation of the escrow agency’s license.
History.
I.C.,§ 30-910, as added by 2005, ch. 236, § 2, p. 717.
§ 30-911. Limitation of actions on bond.
No action may be brought on an escrow agency licensee’s bond by any person after the expiration of three (3) years from the time when the act or default complained of becomes known or should have become known.
History.
I.C.,§ 30-911, as added by 2005, ch. 236, § 2, p. 717.
§ 30-912. Transferability.
A license issued under this chapter is not transferable or assignable, and control of a license shall not be acquired through stock purchase or other device without the prior written consent of the director.
History.
I.C.,§ 30-912, as added by 2005, ch. 236, § 2, p. 717.
§ 30-913. Unlawful acts.
Any person, except a person exempt under section 30-905, Idaho Code, who engages in activity as an escrow agency without first obtaining a license in accordance with this chapter, shall be guilty of a felony. Such person is also subject to a civil penalty in an amount no greater than five thousand dollars ($5,000) for each violation of this chapter or rule or order thereunder, in addition to other sanctions allowed by law.
History.
I.C.,§ 30-913, as added by 2005, ch. 236, § 2, p. 717.
STATUTORY NOTES
Cross References.
Penalty for felony when not otherwise provided,§ 18-112.
§ 30-914. Accounts to be maintained — Records open to inspection — Retention of records — Trust account — Interest on escrow accounts.
- Each licensee shall maintain sufficient books, accounts and records readily accessible to the department for the department to determine at any time the licensee’s financial condition, what duties and responsibilities the licensee has undertaken to perform and whether it is properly performing all such duties, and any other information considered necessary by the director to determine whether the licensee is operating in a safe, competent and lawful manner. The books, records and accounts shall be maintained in accordance with generally accepted accounting principles and sound business practice.
- For each individual escrow account, the licensee shall maintain the escrow agreement and all amendments, all instructions affecting the agreement, all related correspondence, and an individual ledger reflecting all activity pertinent to that account.
-
Each licensee shall continuously maintain the following general accounts:
- A general ledger reflecting assets, liabilities, income, expenses and equity accounts;
- An escrow liability control ledger for all escrow accounts;
- A cash receipts and disbursements journal; and
- Copies of all receipts and disbursements used as a medium of posting to individual escrow accounts.
-
- Every licensee shall keep a separate escrow trust fund account established at a financial institution approved by the director, in which shall be kept separate, distinct and apart and segregated from the licensee’s own funds, all funds or moneys of clients which are being held in trust by the licensee pending the closing of an escrow transaction or the full performance of the escrow agreement. All trust funds shall be deposited not later than the first banking day following receipt thereof. Such funds, when deposited, shall be designated as “escrow accounts” or given some other appropriate designation indicating that the funds are not the funds of the licensee. (4)(a) Every licensee shall keep a separate escrow trust fund account established at a financial institution approved by the director, in which shall be kept separate, distinct and apart and segregated from the licensee’s own funds, all funds or moneys of clients which are being held in trust by the licensee pending the closing of an escrow transaction or the full performance of the escrow agreement. All trust funds shall be deposited not later than the first banking day following receipt thereof. Such funds, when deposited, shall be designated as “escrow accounts” or given some other appropriate designation indicating that the funds are not the funds of the licensee.
- Every licensee shall maintain all other assets or property received pursuant to an escrow in accordance with a written escrow agreement in a manner which will reasonably preserve and protect the property from loss, theft or damage, and which will otherwise comply with all duties and responsibilities of a fiduciary or bailee generally.
- The records referenced in this section shall be reconciled at least monthly.
- All records referenced in this section shall be maintained by the licensee for seven (7) years following the close of each account.
- Any interest received on funds deposited with an escrow agency in connection with an escrow must be paid over to the depositing party to the escrow and may not be transferred to an account of the escrow agency. This section shall not limit the right of the escrow agency to contract with the depositing party with respect to the interest received on the deposits by independent agreement.
History.
I.C.,§ 30-914, as added by 2005, ch. 236, § 2, p. 717; am. 2008, ch. 311, § 2, p. 859. STATUTORY NOTES
Amendments.
The 2008 amendment, by ch. 311, substituted “financial institution approved by the director” for “financial institution located in Idaho” in the first sentence in paragraph (4)(a).
§ 30-915. Notice of conflict of interest — Closing statement.
- An escrow agency licensee shall act without partiality to any of the parties to the escrow. An escrow agency may not close a transaction where it has, directly or indirectly, a monetary interest in the subject property either as buyer or seller. If an escrow agency has a business interest in the escrow transaction other than as the escrow agency licensee, the relationship or interest must be disclosed in the written escrow instructions. After noting such interest, an additional statement shall appear as follows: “We call this interest to your attention for disclosure purposes. This interest will not, in our opinion, prevent us from being a fair and impartial escrow agency in this transaction, but you are, nevertheless, free to request the transaction be handled by some other escrow agency.”
- On completion of an escrow transaction, the escrow agency licensee shall deliver to each principal a signed written closing statement. The closing statement shall show all receipts and disbursements relating to the escrow transaction. Any charges by, or disbursements to, the escrow agency shall be clearly noted.
History.
I.C.,§ 30-915, as added by 2005, ch. 236, § 2, p. 717.
§ 30-916. Attachment.
Funds or other value received by a licensee under this chapter pursuant to an escrow or trust funds are not subject to execution or attachment in any claim against the licensee.
History.
I.C.,§ 30-916, as added by 2005, ch. 236, § 2, p. 717.
§ 30-917. Examination and investigations.
- The director shall examine the books, records and accounts of each licensee, within or without the state of Idaho, at intervals he deems necessary for the protection of the public. The licensee so examined shall pay a fee for the examination at the rate fixed annually by the director, not to exceed fifty dollars ($50.00) per examination hour. If it is necessary for the examination to be conducted outside of Idaho, the actual cost of travel for the examiners shall be reimbursed to the department of finance by the licensee so examined. The director, upon his prior written approval, may accept an equivalent examination of a licensee by another state or federal agency as a substitute for the examination pursuant to this section.
- The director may make necessary public or private investigations within or outside of Idaho to determine whether any person has violated or is about to violate this chapter or any rule or order under this chapter.
- For the purpose of any investigation or other proceeding under this chapter, the director or any officer designated by the director may administer oaths or affirmations, and upon his own motion or upon request of any party, may subpoena witnesses, compel their attendance, and require the production of any matter which is relevant to the investigation or other proceeding, including the existence, description, nature, custody, condition and location of any books, documents or other tangible things and the identity and location of persons having knowledge or relevant facts, or any other matter reasonably calculated to lead to the discovery of material evidence. Upon failure to obey a subpoena or to answer questions proposed by the investigating officer and upon reasonable notice to all persons affected thereby, the director may apply to any district court for an order compelling compliance.
- Except as otherwise provided in this chapter, all proceedings under this chapter shall be conducted in accordance with the administrative procedure act, chapter 52, title 67, Idaho Code.
History.
I.C.,§ 30-917, as added by 2005, ch. 236, § 2, p. 717.
STATUTORY NOTES
Cross References.
Department of finance,§ 67-2701 et seq.
§ 30-918. Powers and duties of the director.
- In addition to any other powers and duties of the director authorized by law, the director may issue orders and promulgate rules that, in the opinion of the director, are necessary to execute, enforce and effectuate the purposes of this chapter.
-
The director shall also:
- Administer and enforce the provisions and requirements of this chapter; and
- Require that all funds collected by the department under this chapter be deposited into the finance administrative account pursuant to section 67-2702, Idaho Code.
History.
I.C.,§ 30-918, as added by 2005, ch. 236, § 2, p. 717.
§ 30-919. Prohibited practices.
No escrow agency licensee or person required to be licensed under this chapter, or any of its officers, directors, members, general partners, employees or agents shall:
- Issue, circulate, make use of, publish or advertise, by any means of communication, that a person is engaged in accepting or receiving escrows if that person is not licensed under this chapter;
- Solicit or accept an escrow instruction or amended or supplemental escrow instruction containing any blank to be filled in after signing or initialing of the escrow instruction or permitting any person to make any addition to, deletion from, or alteration of an escrow instruction or amended or supplemental escrow instruction unless the addition, deletion or alteration is signed or initialed by any affected party who signed or initialed the escrow instruction or amended or supplemental escrow instruction prior to the addition, deletion or alteration;
- Fail to carry out an escrow transaction pursuant to the written escrow instructions unless amended by the written agreement of all parties to the escrow agreement or their assigns;
- Accept funds or papers in escrow without a dated, written instruction signed by the parties, or their authorized representatives, adequate to administer the escrow account and to provide for sufficient funds and documents to carry out the terms of the escrow instructions. Funds and documents deposited shall be used only in accordance with such written instruction; provided that if additional specific instructions are needed, the escrow agency shall obtain the consent of both parties or such representatives to the escrow or an order of a court of competent jurisdiction at the expense of the escrow parties;
- Fail to promptly distribute funds, deeds or other personal property or instruments pursuant to escrow instructions;
- Fail to submit to an examination by the department of its books, records and accounts, or refuse to provide to the department, within a reasonable time, all information requested by the department pursuant to this chapter;
- Fail to deliver, without reasonable cause, within a reasonable time after the close of an escrow, to the respective parties of an escrow transaction, any money, documents or other properties held in escrow in violation of the provisions of the escrow instructions;
- Directly or indirectly employ any scheme, device or artifice to defraud or mislead any person or engage in any unfair or deceptive practice toward any person;
- Fail to supervise diligently and control the escrow-related activities of its agents, employees and independent contractors;
- Engage in fraudulent or dishonest abstraction or misappropriation or embezzlement of funds or other property held in trust;
- Pay a fee or give any portion of its fees or charges, including fees for escrow services or other consideration, to any person as an inducement or as compensation for the referral of any escrow business; or
History.
(12) Disburse funds or deliver documents from an escrow for recording or otherwise unless the escrow contains a credit balance consisting of collected funds, other than funds of the escrow agency or its affiliates, sufficient to discharge all monetary conditions of the escrow. This requirement does not apply to escrows established for the purpose of receiving two (2) or more periodic payments over a total period of time after establishment in excess of thirty (30) days. History.
I.C.,§ 30-919, as added by 2005, ch. 236, § 2, p. 717.
§ 30-920. Remedies.
-
Whenever it appears to the director that any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order thereunder, is conducting its business in an unsafe and injurious manner, or that its capital or assets are impaired, the director may in his discretion:
- Order the person to cease and desist from the violation of any provision of this chapter, rule or order thereunder;
- Issue an order revoking or suspending the licensee’s escrow agency license;
- After notice and the opportunity for a hearing, except as otherwise provided in this chapter, issue an order imposing a civil penalty not to exceed five thousand dollars ($5,000) for each violation of this chapter or any rule or order thereunder;
- After notice and the opportunity for a hearing, issue an order of restitution to any person for loss of money or property resulting from a violation of this chapter; and
- Issue an order, pursuant to section 67-5247, Idaho Code, impounding the accounts, including all operating and trust accounts, of any licensee or person required to be licensed under this chapter.
-
In addition to such remedies, the director may bring an action in the fourth district court in and for Ada county or in such other court as the director deems appropriate. Upon a proper showing, the court may:
- Issue a permanent or temporary injunction, restraining order, or declaratory judgment;
-
Order other appropriate or ancillary relief, which may include:
- An asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator, that may be the director, for the defendant or the defendant’s assets;
- Ordering the director to take charge and control of a defendant’s property, including investment accounts and accounts in a financial institution, rents and profits; to collect debts; and to acquire and dispose of property;
- A morris plan bank; or
- An industrial loan company.
- Issue an order of restitution to any person for loss of money or property resulting from a violation of this chapter; and
- Except as otherwise provided by this chapter, impose a civil penalty not to exceed five thousand dollars ($5,000) for each violation.
- The court may not require the director to post a bond.
History.
I.C.,§ 30-920, as added by 2005, ch. 236, § 2, p. 717; am. 2008, ch. 311, § 3, p. 860.
STATUTORY NOTES
Amendments.
The 2008 amendment, by ch. 311, added paragraphs (1)(d) and (1)(e); rewrote paragraph (2)(a), which formerly read: “Grant a temporary restraining order, followed by a preliminary injunction and a permanent injunction for the department or receiver to exercise control of, operate or liquidate an escrow agency’s business in this state, or such other injunctive relief as appropriate; and”; and added paragraphs (2)(b) and (2)(c), and redesignated former paragraph (2)(b) as paragraph (2)(d).
§ 30-921 — 30-930. [Reserved.]
Nothing in this chapter shall be construed so as to impair or affect any statutory or common law right of any person to bring an action in any court having jurisdiction for any act involved in the transaction of an escrow business or the right of the state of Idaho to sanction any person for any violation of any provision of this chapter.
History.
I.C.,§ 30-931, as added by 2005, ch. 236, § 2, p. 717.
§ 30-932. Continuing jurisdiction.
If a license under this chapter is surrendered, suspended or revoked, the former licensee shall continue to be subject to the provisions of this chapter and to the duties previously undertaken for so long as it acts as a fiduciary with respect to any escrow previously undertaken.
History.
I.C.,§ 30-932, as added by 2005, ch. 236, § 2, p. 717.
§ 30-933. Status of preexisting escrows.
Nothing contained in this chapter shall be so construed as to impair or affect the obligation of any escrow agreement that was lawfully entered into prior to the effective date of this act.
History.
I.C.,§ 30-933, as added by 2005, ch. 236, § 2, p. 717.
STATUTORY NOTES
Compiler’s Notes.
The phrase “effective date of this act” in this section refers to the effective date of S.L. 2005, Chapter 236, which was effective July 1, 2005.
§ 30-934. Severability.
The provisions of this act are hereby declared to be severable, and if any provision of this act or the application of such provision to any person or circumstance is declared invalid for any reason, such declaration shall not affect the validity of the remaining portions of this act.
History.
I.C.,§ 30-934, as added by 2005, ch. 236, § 2, p. 717.
STATUTORY NOTES
Compiler’s Notes.
The term “this act”, referred to in this section, means S.L. 2005, chapter 236, which is codified as§§ 30-901 to 30-934 and 45-1504.
§ 30-935. Initial licensing and compliance. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
This section, which comprised I.C.,§ 30-935, as added by 2005, ch. 236, § 2, p. 717, was repealed by S.L. 2008, ch. 311, § 4.
§ 30-931. No impairment of other remedies.
Chapter 10 GENERAL NONPROFIT CORPORATIONS
Sec.
§ 30-1001. Nonprofit corporations authorized. [Repealed.]
STATUTORY NOTES
Prior Laws.
A former§ 30-1000, which comprised S.L. 1913, ch. 54, § 1, p. 164; reen. C.L. 214:1; C.S., § 4865; I.C.A.,§ 29-100,1 was repealed by S.L. 1978, ch. 308, § 14.
Compiler’s Notes.
This section, which was compiled from I.C.,§ 30-1001 as added by 1978, ch. 308, § 15, was repealed by S.L. 1979, ch. 159, § 1. For present comparable provisions, see 30-30-101 et seq.
§ 30-1002, 30-1003. Application of corporation law — Membership. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
These sections, which comprised S.L. 1913, ch. 54, §§ 2, 3, p. 164; C.L., §§ 214:2, 214:3; C.S., §§ 4866, 4867; I.C.A.,§§ 29-1002, 29-1003; am. 1977, ch. 252, § 13, p. 738; am. 1978, ch. 308, §§ 16, 17, p. 771, were repealed by S.L. 1979, ch. 159, § 1. For present comparable provisions, see 30-30-101 et seq.
§ 30-1004. Organization
Shares of stock or membership certificates. [Repealed.]
STATUTORY NOTES
Prior Laws.
A former§ 30-1004, which comprised 1913, ch. 54, § 4, p. 164; reen. C.L., 214:4; C.S., § 4868; I.C.A.,§ 29-1004, was repealed by S.L. 1977, ch. 252, § 14.
Compiler’s Notes.
This section, which comprised I.C.,§ 30-1004 as added by 1977, ch. 252, § 15, p. 738; am. 1978, ch. 308, § 18, 771, was repealed by S.L. 1979, ch. 159, § 1. For present comparable provisions, see 30-30-101 et seq.
§ 30-1005, 30-1006. Bylaws — Amendment, alteration. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
These sections, which comprised S.L. 1913, ch. 54, §§ 5, 6, p. 164; reen. C.L. § 214:5; C.S., § 4869; I.C.A.,§ 29-1005; I.C.,§ 30-1006 as added by 1951, ch. 51, § 1, p. 74; am. 1978, ch. 308, §§ 19, 20, p. 771, were repealed by S.L. 1979, ch. 159, § 1. For present comparable provisions, see 30-30-101 et seq.
Chapter 11 RELIGIOUS, SOCIAL, AND BENEVOLENT ASSOCIATIONS
Sec.
§ 30-1101 — 30-1110. Formation, articles, bylaws, etc. of religious, social and benevolent associations. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
These sections, which comprised R.S. §§ 2760 to 2763, 2765, 2766; R.C. §§ 3011 to 3014, 3016, 3017; S.L. 1911, ch. 74, §§ 1, 2, p. 227; 1911, ch. 164, § 1, p. 561; 1911, ch. 165, §§ 1, 2, p. 562; S.L. 1913, ch. 40, §§ 1, 2, p. 143; C.L. §§ 3011 to 3014, 3016 to 3017a; S.L. 1919, ch. 131, p. 426; C.S. §§ 4870 to 4878; S.L. 1921, ch. 257, § 1, p. 570; am. 1925, ch. 196, §§ 1, 2, p. 364; am. 1929, ch. 57, § 1, p. 83; am. 1929, ch. 129, § 1, p. 211; I.C.A.,§§ 29-1101 to 29-1109; am. 1939, ch. 49, § 1, p. 90; am. 1943, ch. 8, § 1, p. 10; am. 1945, ch. 6, § 1, p. 8; am. 1957, ch. 52, § 1, p. 89, were repealed by S.L. 1979, ch. 159, § 1.
Chapter 12 CORPORATIONS SOLE
Sec.
§ 30-1201 — 30-1209. Articles, powers, etc. of corporations sole. [Repealed.]
STATUTORY NOTES
Compiler’s Notes.
These sections, which comprised S.L. 1895, §§ 1 to 7; reen. 1899, §§ 1 to 9; S.L. 1903, §§ 1 to 5; reen. R.C. & C.L. §§ 3018 to 3026; C.S. §§ 4879 to 4887; I.C.A.§§ 29-1201 to 29-1209, were repealed by S.L. 1979, ch. 159, § 1.
Chapter 13 PROFESSIONAL SERVICE CORPORATIONS
Sec.
§ 30-1301 Intent of legislature. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 1, p. 725; am. 1979, ch. 108, § 1, p. 343.
STATUTORY NOTES
Compiler’s Notes.
Chapter 13 of Title 30, which comprised the following sections, was repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
30-1301. Intent of legislature. [1963, ch. 282, § 1, p. 725; am. 1979, ch. 108, § 1, p. 343.]
30-1302. Short title. [1963, ch. 282, § 2, p. 725.]
30-1303. Definitions. [1963, ch. 282, § 3, p. 725; am. 1979, ch. 108, § 2, p. 343; am. 1979, ch. 176, § 2, p. 526; am. 1982, ch. 233, § 5, p. 614; am. 1989, ch. 20, § 1, p. 23.]
30-1304. Who may incorporate. [1963, ch. 282, § 4, p. 725; am. 1979, ch. 108, § 3, p. 343.]
30-1305. Rendition of professional services. [1963, ch. 282, § 5, p. 725.]
30-1306. Professional relationship unaffected — Personal and corporate liability. [1963, ch. 282, § 6, p. 725.]
30-1307. Type of business limited — Investments. [1963, ch. 282, § 7, p. 725.]
30-1308. Shareholder qualifications — Voting. [1963, ch. 282, § 8, p. 725; am. 1981, ch. 226, § 7, p. 443.]
30-1309. Disqualification to render professional service — Severance of relationship with corporation — Effect of violation. [1963, ch. 282, § 9, p. 725; am. 1978, ch. 308, § 21, p. 771.]
30-1309A. Death or disqualification of sole shareholder. [I.C.,§ 30-1309A, as added by 1979, ch. 108, § 4, p. 343; am. 1987, ch. 191, § 1, p. 389; am. 2003, ch. 62, § 1, p. 209; am. 2007, ch. 116, § 6, p. 333.]
30-1310. Limitation on transfer of shares. [1963, ch. 282, § 10, p. 725.] Annotations
30-1311. Corporate name. [1963, ch. 282, § 11, p. 725; am. 1965, ch. 102, § 1, p. 188; am. 1978, ch. 308, § 22, p. 771; am. 1995, ch. 126, § 16, p. 542.]
30-1312. Application of corporation laws — Merger. [1963, ch. 282, § 12, p. 725; am. 1979, ch. 108, § 5, p. 343; am. 2007, ch. 116, § 7, p. 333.]
30-1313. Laws regulating professions unaffected. [1963, ch. 282, § 13, p. 725.]
30-1314. Admission of foreign corporations — Revocation of certificate of authority. [I.C.,§ 30-1314, as added by 1979, ch. 108, § 6, p. 343.]
30-1315. Officers, directors and shareholders. [I.C.,§ 30-1315, as added by 1981, ch. 226, § 9, p. 443.]
§ 30-1302. Short title. [Repealed.
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015.
History.
1963, ch. 282, § 2, p. 725.
§ 30-1303. Definitions. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§§ 30-21-102 and 30-21-901.
History.
1963, ch. 282, § 3, p. 725; am. 1979, ch. 108, § 2, p. 343; am. 1979, ch. 176, § 2, p. 526; am. 1982, ch. 233, § 5, p. 614; am. 1989, ch. 20, § 1, p. 23.
§ 30-1304. Who may incorporate. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 4, p. 725; am. 1979, ch. 108, § 3, p. 343.
§ 30-1305. Rendition of professional services. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 5, p. 725.
§ 30-1306. Professional relationship unaffected
Personal and corporate liability. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 6, p. 725.
§ 30-1307. Type of business limited
Investments. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 7, p. 725.
§ 30-1308. Shareholder qualifications
Voting. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 8, p. 725; am. 1981, ch. 226, § 7, p. 443.
§ 30-1309. Disqualification to render professional service — Severance of relationship with corporation
Effect of violation. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 9, p. 725; am. 1978, ch. 308, § 21, p. 771.
§ 30-1309A. Death or disqualification of sole shareholder. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
I.C.,§ 30-1309A, as added by 1979, ch. 108, § 4, p. 343; am. 1987, ch. 191, § 1, p. 389; am. 2003, ch. 62, § 1, p. 209; am. 2007, ch. 116, § 6, p. 333.
§ 30-1310. Limitation on transfer of shares. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 10, p. 725.
§ 30-1311. Corporate name. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-301 et seq.
History.
1963, ch. 282, § 11, p. 725; am. 1965, ch. 102, § 1, p. 188; am. 1978, ch. 308, § 22, p. 771; am. 1995, ch. 126, § 16, p. 542.
§ 30-1312. Application of corporation laws
Merger. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 12, p. 725; am. 1979, ch. 108, § 5, p. 343; am. 2007, ch. 116, § 7, p. 333.
§ 30-1313. Laws regulating professions unaffected. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
1963, ch. 282, § 13, p. 725.
§ 30-1314. Admission of foreign corporations
Revocation of certificate of authority. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-501 et seq.
History.
I.C.,§ 30-1314, as added by 1979, ch. 108, § 6, p. 343.
STATUTORY NOTES
Prior Laws.
Former§ 30-1314, which comprised S.L. 1963, ch. 282, § 14, was repealed by S.L. 1978, ch. 308, § 23.
§ 30-1315. Officers, directors and shareholders. [Repealed.]
Repealed by S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-901.
History.
I.C.,§ 30-1315, as added by 1981, ch. 226, § 9, p. 443.
Chapter 14 UNIFORM SECURITIES ACT (2004)
Part 1. General Provisions
Sec.
Part 2. Exemptions From Registration of Securities
30-14-202A. Fairness hearing.
Part 3. Registration of Securities and Notice Filing of Federal Covered Securities
Part 4. Broker-Dealers, Agents, Investment Advisers, Investment Adviser Representatives, and Federal Covered Investment Advisers
Part 5. Fraud and Liabilities
Part 6. Administration and Judicial Review
Part 7. Transition
Part 1 General Provisions
§ 30-14-101. Short title.
This chapter shall be known and may be cited as the “Uniform Securities Act (2004).”
History.
I.C.,§ 30-14-101, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
This revision of chapter 14 of title 30 was enacted by § 2 of S.L. 2004, ch. 45, effective September 1, 2004. The previous version of chapter 14 of title 30, as enacted in 1967 and amended through 2003 and comprising§§ 30-1401 to 30-1462, was repealed by § 1 of S.L. 2004, ch. 45, effective September 1, 2004, or by an earlier act.
CASE NOTES
Attorney’s Fees.
In investors’ action against their brokers for securities violations where they received an arbitration award, the trial court correctly ruled the investors were not entitled to pursue fees in the award confirmation proceedings, as there was no independent cause of action for attorney’s fees. Barbee v. WMA Securities, Inc., 143 Idaho 391, 146 P.3d 657 (2006).
Purpose and Validity.
State law regulating the sale of securities is not merely a revenue measure, but its real purpose is to protect public from unsubstantial securities. Ashley & Rumelin v. Brady, 41 Idaho 160, 238 P. 314 (1925); McKinlay v. Javan Mines Co., 42 Idaho 770, 248 P. 473 (1926).
Passage of provisions of an act regulating the sale of securities is within the police power of the state. Ashley & Rumelin v. Brady, 41 Idaho 160, 238 P. 314 (1925).
§ 30-14-102. Definitions.
In this chapter, unless the context otherwise requires:
- “Administrator” means the director of the Idaho department of finance or his designee.
- “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 who represents an issuer in effecting or attempting to effect purchases or sales of the issuer’s securities. 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. The term does not include an individual excluded by a rule adopted or an order issued under this chapter.
-
“Bank” means:
- A banking institution organized under the laws of the United States;
- A member bank of the federal reserve system;
- Any other banking institution, whether incorporated or not, doing business under 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 under the authority of the comptroller of the currency pursuant to section 1 of public law 87-722 (12 U.S.C. 92a), and which is supervised and examined by a state or federal agency having supervision over banks, and which is not operated for the purpose of evading this chapter; and
- A receiver, conservator, or other liquidating agent of any institution or firm included in subparagraph (a), (b) or (c) of this subsection.
-
“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. The term does not include:
- An agent;
- An issuer;
- A bank, a trust company organized or chartered under the laws of this state, or a savings institution 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 securities exchange act of 1934 (15 U.S.C. 78c(a)(4) and (5)) or a bank that satisfies the conditions described in subsection 3(a)(4)(E) of the securities exchange act of 1934 (15 U.S.C. 78c(a)(4));
- An international banking institution; or
- A person excluded by a rule adopted or an order issued under this chapter.
-
“Depository institution” means:
- A bank; or
- A savings institution, trust company, credit union or similar institution that is organized or chartered under the laws of a state or of the United States that is authorized to receive deposits, and that is 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. The term does not include: (i) An insurance company or other organization primarily engaged in the business of insurance;
- “Federal covered investment adviser” means a person registered under the investment advisers act of 1940, as cited in section 30-14-103, Idaho Code.
- “Federal covered security” means a security that is, or upon completion of a transaction will be, a covered security under section 18(b) of the securities act of 1933 (15 U.S.C. 77r(b)) or rules or regulations adopted pursuant to that provision.
- “Filing” means the receipt under this chapter of a record by the administrator or a designee of the administrator.
- “Fraud,” “deceit,” and “defraud” are not limited to common law deceit.
- “Guaranteed” means guaranteed as to payment of all principal and all interest.
-
“Institutional investor” means any of the following, whether acting for itself or for others in a fiduciary capacity:
- A depository institution, a trust company organized or chartered under the laws of this state, or an international banking institution;
- An insurance company;
- A separate account of an insurance company;
- An investment company as defined in the investment company act of 1940, as cited in section 30-14-103, Idaho Code;
- A broker-dealer registered under the securities exchange act of 1934, as cited in section 30-14-103, Idaho Code;
- 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 employee retirement income security act of 1974, that is a broker-dealer registered under the securities exchange act of 1934, an investment adviser registered or exempt from registration under the investment advisers act of 1940, an investment adviser registered under this chapter, a depository institution, or an insurance company;
- 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 employee retirement income security act of 1974, that is a broker-dealer registered under the securities exchange act of 1934, an investment adviser registered or exempt from registration under the investment advisers act of 1940, an investment adviser registered under this chapter, a depository institution, or an insurance company;
- 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 (f) or (g) 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;
- An organization described in section 501(c)(3) of the Internal Revenue Code (26 U.S.C. 501(c)(3)), a corporation, a Massachusetts trust or similar business trust, a limited liability company, or a partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of ten million dollars ($10,000,000);
- A small business investment company licensed by the small business administration under section 301(c) of the small business investment act of 1958 (15 U.S.C. 681(c)) with total assets in excess of ten million dollars ($10,000,000); (k) A private business development company as defined in section 202(a)(22) of the investment advisers act of 1940 (15 U.S.C. 80b-2(a)(22)) with total assets in excess of ten million dollars ($10,000,000);
- “Insurance company” means a company organized as an insurance company whose primary business is writing insurance or reinsuring risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a state.
- “Insured” means insured as to payment of all principal and all interest.
- “International banking institution” means an international financial institution of which the United States is a member and whose securities are exempt from registration under the securities act of 1933.
-
“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. The term 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. The term does not include:
- An investment adviser representative;
- A lawyer, accountant, engineer or teacher whose performance of investment advice is solely incidental to the practice of the person’s profession;
- 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;
- A publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation;
- A federal covered investment adviser;
- A bank, a trust company organized or chartered under the laws of this state, or a savings institution;
- Any other person that is excluded by the investment advisers act of 1940 from the definition of investment adviser;
- Any person who offers accountancy services to the public and who holds a valid, unrevoked and unsuspended license under the provisions of chapter 2, title 54, Idaho Code, designating said person as a certified public accountant or a licensed public accountant; or (i) Any other person excluded by a rule adopted or an order issued under this chapter.
- Any other person excluded by a rule adopted or an order issued under this chapter.
-
“Investment adviser representative” means an individual employed by or associated with an investment adviser or federal covered investment adviser 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. The term does not include an individual who:
- Performs only clerical or ministerial acts;
- 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;
-
Is employed by or associated with a federal covered investment adviser, unless the individual has a “place of business” in this state as that term is defined by rule adopted under section 203A of the investment advisers act of 1940 (15 U.S.C. 80b-3a) and is:
- An “investment adviser representative” as that term is defined by rule adopted under section 203A of the investment advisers act of 1940 (15 U.S.C. 80b-3a); or
- Not a “supervised person” as that term is defined in section 202(a)(25) of the investment advisers act of 1940 (15 U.S.C. 80b-2(a)(25)); or
- Is excluded by a rule adopted or an order issued under this chapter.
-
“Issuer” means a person that issues or proposes to issue a security, subject to the following:
- 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.
- 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.
- The issuer of a fractional undivided interest in an oil, gas or other mineral lease or in payments out of production under a lease, right or royalty is the owner of an interest in the lease or in payments out of production under a lease, right or royalty, whether whole or fractional, that creates fractional interests for the purpose of sale.
- “Nonissuer transaction” or “nonissuer distribution” means a transaction or distribution not directly or indirectly for the benefit of the issuer.
- “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. The term does not include a tender offer that is subject to section 14(d) of the securities exchange act of 1934 (15 U.S.C. 78n(d)).
- “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.
- “Place of business” of a broker-dealer, an investment adviser, or a federal covered investment adviser means: (a) 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
- “Predecessor act” means the act repealed by section 30-14-702, Idaho Code.
- “Price amendment” means the amendment to a registration statement filed under the securities act of 1933 or, if an amendment is not filed, the prospectus or prospectus supplement filed under the securities act of 1933 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.
- “Principal place of business” of a broker-dealer or an investment adviser means the executive office of the broker-dealer or investment adviser from which the officers, partners or managers of the broker-dealer or investment adviser direct, control and coordinate the activities of the broker-dealer or investment adviser.
- “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.
-
“Sale” includes every contract of sale, contract to sell, or disposition of, a security or interest in a security for value. “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 “sale” and “offer to sell” include:
- 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;
- A gift of assessable stock involving an offer and sale; and
- 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.
- “Securities and exchange commission” means the United States securities and exchange commission.
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“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”:
- Includes both a certificated and an uncertificated security;
- Does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or other specified period;
- Does not include an interest in a contributory or noncontributory pension or welfare plan subject to the employee retirement income security act of 1974;
- Includes as an “investment contract” 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. “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; and
- Includes as an “investment contract,” among other contracts, an interest in a limited partnership and a limited liability company and an investment in a viatical settlement, life settlement or senior settlement or similar agreement.
- “Self-regulatory organization” means a national securities exchange registered under the securities exchange act of 1934, a national securities association of broker-dealers registered under the securities exchange act of 1934, a clearing agency registered under the securities exchange act of 1934, or the municipal securities rulemaking board established under the securities exchange act of 1934.
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“Sign” means, with present intent to authenticate or adopt a record:
- To execute or adopt a tangible symbol; or
- To attach or logically associate with the record an electronic symbol, sound or process.
- “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.
(l) A federal covered investment adviser acting for its own account;
(m) A “qualified institutional buyer” as defined in rule 144A(a)(1), other than rule 144A(a)(1)(i)(H), adopted under the securities act of 1933 (17 CFR 230.144A);
(n) A “major U.S. institutional investor” as defined in rule 15a-6(b)(4)(i) adopted under the securities exchange act of 1934 (17 CFR 240.15a-6);
(o) 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 this chapter; or
(p) Any other person specified by a rule adopted or an order issued under this chapter.
(b) Any other 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.
History.
I.C.,§ 30-14-102, as added by 2004, ch. 45, § 2, p. 169; am. 2012, ch. 65, § 1, p. 171.
STATUTORY NOTES
Cross References.
Director of department of finance,§ 67-2701.
Director of department of insurance,§ 41-202.
Amendments.
The 2012 amendment, by ch. 65, substituted “subsections (3)(a)(4)(B)((i) through (vi)” for “subsections (3)(a)((4)(b)(i) through (vi)” in paragraph (4)(c).
Federal References.
The references, in subsection (4)(c), to “subsections 3(a)(4)(B)(i) through (vi), (viii) through (x), and (xi)” and “3(a)(5)(B)” and “3(a)(5)(C)” are all to 15 USCS § 78c (a)(4) and (a)(5) in the securities exchange act of 1934, which section was enacted by § 3 of chapter 404 of an act of June 6, 1934.
The investment advisers act of 1940, referred to in this section, is codified as 15 USCS § 80b-1 et seq.
The investment company act of 1940, referred to in this section, is codified as 15 USCS § 80a-1 et seq. The securities exchange act of 1934, referred to in this section, is codified as 15 USCS § 78a et seq.
The employee retirement income security act of 1974, referred to in this section, is codified as 29 USCS § 1001 et seq.
The securities act of 1933, referred to in this section, is codified as 15 USCS § 77a et seq.
Compiler’s Notes.
For more on the federal deposit insurance corporation, see http://www.fdic.gov .
For national credit union share insurance fund, see https://www.ncua.gov/Pages/default.aspx .
For more on morris plan banks, see https://eh.net/encyclopedia/morris-plan-banks/ .
The words enclosed in parentheses so appeared in the law as enacted.
CASE NOTES
Investment Adviser.
To the extent that the definition contained in an administrative rule from the department of finance, with regard to an investment adviser transacting business, conflicts with a statutory definition in this section, this section governs. Kinsela v. State, Dep’t of Fin., 117 Idaho 632, 790 P.2d 1388 (1990).
Loan.
Transactions between purported creditors and debtor were intended by parties to be loans not investments, because it did not appear that creditors could expect capital appreciation or participation in earnings generated by debtor. They expected to receive interest payments of 16% per annum, along with repayment of their principal after three years. In re Gables Mgmt., LLC, 473 B.R. 352 (Bankr. D. Idaho 2012).
Security.
Solicitation of fees from customers to enter their names in a bureau of land management lottery for gas and oil leases did not constitute marketing an investment security under Idaho law. The economic realities of the transactions did not amount to investing. State, Dep’t of Fin. v. Resource Serv. Co., 130 Idaho 877, 950 P.2d 249 (1997).
Cited
In re Tolman, 491 B.R. 138 (Bankr. D. Idaho 2013).
Official Comment
Prior Provisions:
- Under Section 605(a) the administrator has the power to define by rule any term, whether or not used in this Act, as long as the definitions are not inconsistent with the Act.
- All definitions include corresponding meanings. For example, “filing” would include “file” or “filed”; “sale” would include “sell.” 3. Prefatory Phrase: “In this [Act], unless the context otherwise requires”: Prior Provisions: 1956 Act Section 401 Preface; RUSA Section 101 Preface. This prefatory phrase which is in the counterpart provisions of the federal securities statutes, see, e.g., Securities Act of 1933 Section 2(a), provides the basis for the courts to take into account the statutory and factual context of each definition, see, e.g., Reves v. Ernst & Young , 494 U.S. 56 (1990); 2 Louis Loss & Joel Seligman, Securities Regulation 927-929 (3d ed. rev. 1999), and will allow the courts to harmonize this Act’s definitions with the counterpart federal securities definitions to the extent appropriate. Cf. Akin v. Q-L Inv., Inc. , 959 F.2d 521, 532 (5th Cir. 1992) (“Texas courts generally look to decisions of the federal courts to interpret the Texas Securities Act because of obvious similarities between the state and federal laws”); Koch v Koch Indus., Inc. , 203 F.3d 1202, 1235 (10th Cir. 2000) (following federal definition of materiality); Biales v. Young , 432 S.E.2d 482, 484 (S.C. 1993) (“Section 35-1-1490(2) is substantially similar to Section 12(1) of the Federal Securities Act”).
4. Section 102(2): Agent: Prior Provisions: 1956 Act Section 401(b); RUSA Section 101(14). Section (102)(2), in part, follows the 1956 Act definition. The 1956 Act used the term “agent” while the RUSA Section 101(14) used the term “sales representative.” Given the broader enactment of the 1956 Act, this Act also uses the term “agent.” Certain exclusions from the 1956 Act are exemptions in this Act. See Section 402(b).
Whether a particular individual who represents a broker-dealer or issuer is an “agent” depends upon much the same factors that create an agency relationship at common law. See, e.g., Norwest Bank Hastings v. Clapp , 394 N.W.2d 176, 179 (Minn. Ct. App. 1986) (following Official Comment that establishing agency under the Uniform Securities Act “depends upon much the same factors which create an agency relationship at common law”); Shaughnessy & Co., Inc. v. Commissioner of Sec. , 1971-1978 Blue Sky L. Rep. (CCH) ¶ 71,348 (Wis. Cir. Ct. 1977) (unlicensed person who took information relevant to securities transactions and turned it over to securities agents was himself an agent).
An individual can be an agent for a broker-dealer or issuer for a purpose other than effecting or attempting to effect purchases or sales of securities and not be a statutory agent under this Act. See, e.g., Baker, Watts & Co. v. Miles & Stockridge , 620 A.2d 356, 367 (Md. Ct. App. 1993) (attorney-client relationship is generally one of agency, but that alone does not bring an attorney within securities act definition of agent). An individual will not be an agent under Section 102(2) because of the person’s status as a partner, officer, or director of a broker-dealer or issuer if such an individual does not effect or attempt to effect purchases or sales of securities. See, e.g., Abell v. Potomac Ins. Co. , 858 F.2d 1104 (5th Cir. 1988).
Section 102(2) is intended to include any individual who acts as an agent, whether or not the individual is an employee or independent contractor. Cf. Hollinger v. Titan Capital Corp. , 914 F.2d 1564 (9th Cir. en banc 1990), cert. denied, 499 U.S. 976 (1991).
The word “individual” in the definition of the term “agent” is limited to human beings and does not include a juridical “person” such as a corporation. Cf. definition of “person” in Section 102(20). The 1956 Act Section 401(b) similarly was limited to individuals and did not include juridical persons. See, e.g., Connecticut Nat’l Bank v. Giacomi , 699 A.2d 101, 111-112 (Conn. 1997) (“agent” only includes natural persons when it used the term individual); Schpok v. Fodale , 236 N.W.2d 97, 99 (Mich. Ct. App. 1975) (agent defined to be individual and did not include a corporation).
An individual whose acts are solely clerical or ministerial would not be an agent under Section 102(2). Cf. Section 402(b)(8). Ministerial or clerical acts might include preparing written communications or responding to inquiries. 5. Section 102(3): Bank: Prior Provision: Subsection 3(a)(6) of the Securities Exchange Act of 1934. A United States branch of a foreign bank that otherwise satisfies this definition would be a bank.
6. Section 102(4): Broker-Dealer: Prior Provisions: 1956 Act Section 401(c); RUSA Section 101(2). This definition generally follows the definition of broker-dealer in the 1956 Act and RUSA. The use of the compound term is meant to include either a broker or a dealer. The recognized distinction is that a broker acts for the benefit of another while a dealer acts for itself in buying for or selling securities from its own inventory.
The distinction between “a person engaged in the business of effecting transactions in securities” and an investor, who may buy and sell with some frequency and is outside the scope of this term, has been well developed in the case law. See 6 Louis Loss & Joel Seligman, Securities Regulation 2980-2984 (3d ed. 1990).
The 1956 Act Section 401(c) excluded from the definition of broker-dealer a person who during any 12 consecutive months did not direct more than 15 offers to buy or sell in this State. In this Act exemptions from broker-dealer registration are provided in Section 401(b).
The Gramm-Leach-Bliley Act, signed into law in November 1999, rescinded the blanket exemption of banks from the definition of broker and dealer in Sections 3(a)(4) and (5) of the Securities Exchange Act of 1934. The Gramm-Leach-Bliley Act permits a bank to avoid registration as a broker or dealer at the federal level if the bank limits its activities to those specified in the Securities Exchange Act. This Act generally adopts the activity focused exceptions for banks included in the Gramm-Leach-Bliley Act, with minor modifications relating to the private placement and de minimis brokerage activities of banks (15 U.S.C. 78c(a)(4)(B)(vii) and (xi)). This Act also reaches savings institutions.
A state may decide to adopt an exclusion in Section 102(4)(C) that fully conforms with the bank exceptions contained in the Gramm-Leach-Bliley Act. For states that choose this approach, the language of Section 102(4)(C) should read:
(C) a bank or savings institution if its activities as broker-dealer are limited to those specified in Section 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78c(a)(4) and (5)), or a bank that satisfies the conditions specified in Section 3(a)(4)(E) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)).
Section 102(4)(E) of this Act also permits a securities administrator to adopt additional exclusions that exclude banks and other depository institutions, in whole or in part, from the definition of “broker-dealer.”
States that promptly adopt this Act should consider whether it is appropriate to provide banks a transition period to comply with the Act’s new activity focused exceptions. The activity focused exceptions for banks in the Gramm-Leach-Bliley Act were originally to become effective at the federal level on May 12, 2001. However, the Securities and Exchange Commission has delayed the effective date of these activity focused exceptions and thus continued the blanket exemption for banks beyond May 12, 2001, and commenced a rulemaking designed to clarify and define the scope of the bank exceptions in the Gramm-Leach-Bliley Act. See Sec. Ex. Act Rels. 44,291, 74 SEC Dock. 2155 (2001) (proposal); 45,897, 77 SEC Dock. 1555 (2002) (proposal). To avoid disrupting the activities of banks, states should consider delaying implementation of the activity focused exceptions in this Act until these exceptions are implemented at the federal level. Section 15(h)(1) of the Securities Exchange Act of 1934, as amended by the National Securities Markets Improvement Act of 1996, preempts state law from “[establishing] capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements for brokers, dealers, municipal securities dealers, government securities brokers, or government securities dealers that differ from, or are in addition to the requirements in those areas established under [the Securities Exchange Act].” These preemptions are recognized in the substantive broker-dealer provisions in Article 4.
7. Section 102(5): Depository institution: No Prior Provision. A depository institution’s securities are addressed by the exemption in Section 201(3). A depository institution is an institutional investor in Section 102(11)(A).
8. Section 102(6): Federal covered investment adviser: No Prior Provision. This provision is necessitated by Section 203A of the Investment Advisers Act of 1940, added by Title III of the National Securities Markets Improvement Act of 1996, which allocates to primary state regulation most advisers with assets under management of less than $25 million. SEC registration is permitted, but not required, for investment advisers having between $25 and $30 million of assets under management and is required of investment advisers having at least $30 million of assets under management. Investment Advisers Act of 1940 Rule 203A-1. Most advisers with assets under management of $25 million or more register solely under Section 203 of the Investment Advisers Act of 1940 and not state law. This division of labor is intended to eliminate duplicative regulation of investment advisers.
9. Section 102(7): Federal covered security: No Prior Provision. The National Securities Markets Improvement Act of 1996, as subsequently amended, partially preempted state law in the securities offering and reporting areas. Under Section 18(a) of the Securities Act of 1933, no state statute, rule, order, or other administrative action may apply to:
- The registration of a “covered” security or a security that will be a covered security upon completion of the transaction;
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- any offering document prepared by or on behalf of the issuer of a covered security; (2)(A) any offering document prepared by or on behalf of the issuer of a covered security;
-
the merits of a covered security or a security that will be a covered security upon completion of the transaction.
- Sections 4(1) (transactions by persons other than an issuer, underwriter or dealer), and 4(3) (dealers after specified periods of time), but only if the issuer files reports with the Commission under Sections 13 or 15(d) of the Securities Exchange Act;
- Section 4(4) (unsolicited brokerage transactions);
- Securities Act exemptions in Section 3(a) with the exception of the charitable exemption in Section 3(a)(4), the exchange exemption in Section 3(a)(10), the intrastate exemption in Section 3(a)(11), and the municipal securities exemption in Section 3(a)(2) but only with “respect to the offer or sale of such [municipal] security in the State in which the issuer of such security is located”; and
- securities issued in compliance with SEC rules under Section 4(2) (private placements).
(2)(B) any proxy statement, report to shareholders, or other disclosure document relating to a covered security or its issuer that is required to be filed with the SEC or any national securities association registered under Section 15A of the Securities Exchange Act such as the National Association of Securities Dealers (NASD); or
Section 18(b) of the Securities Act of 1933 applies to four types of “covered securities”:
(1) Securities listed or authorized for listing on the New York Stock Exchange (NYSE), the American Stock Exchange (Amex); the National Market System of the Nasdaq stock market; or securities exchanges registered with the Securities and Exchange Commission (SEC) (or any tier or segment of their trading) if the SEC determines by rule that their listing standards are substantially similar to those of the NYSE, Amex, or Nasdaq National Market System, which the SEC has done through Rule 146; and any security of the same issuer that is equal in seniority or senior to any security listed on the NYSE, Amex, or Nasdaq National Market System;
(2) securities issued by an investment company registered with the SEC (or one that has filed a registration statement under the Investment Company Act of 1940);
(3) securities offered or sold to “qualified purchasers.” This category of covered securities will become operational when the SEC defines the term “qualified purchaser” as used in Section 18(b)(3) of the Securities Act of 1933, by rule. To date the SEC has proposed, but not adopted, Rule 146(c) of the Securities Act of 1933; and (4) securities issued under the following specified exemptions of the Securities Act of 1933:
Section 18(c)(1) preserves state authority “to investigate and bring enforcement actions with respect to fraud or deceit, or unlawful conduct by a broker or dealer, in connection with securities or securities transactions.”
The National Securities Markets Improvement Act, in essence, preempts aspects of the securities registration and reporting processes for specified federal covered securities. The Act does not diminish state authority to investigate and bring enforcement actions generally with respect to securities transactions.
The States are authorized to require filings of any document filed with the SEC for notice purposes “together with annual or periodic reports of the value of securities sold or offered to be sold to persons located in the State (if such sales data is not included in documents filed with the Commission), solely for notice purposes and the assessment of any fee, together with a consent to service of process and any required fee.” Section 18(c)(2). However, no filing or fee may be required with respect to any listed security that is a covered security under Section 18(b)(1) (traded on specified stock markets). Section 302 of this Act addresses notice filings and fees applicable to federal covered securities.
10. Section 102(8): Filing: Prior Provision: RUSA Section 101(4). The RUSA definition was revised to recognize that records may be filed in paper form or electronically with the administrator, or designees such as the Web-CRD (Central Registration Depository) or Investment Adviser Registration Depository (IARD) or the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval System (EDGAR) or successor systems.
In the RUSA definition, the term “filed” referred to “actual delivery of a document or application.” This Act substitutes the term “record” which is defined in Section 102(25) to refer broadly to “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perishable form”. This definition requires the receipt of a record. The definition does not limit filing to any specific medium such as mail, certified mail, or a particular electronic system. The definition is intended to permit an administrator to accept filings over the Internet or through a direct modem system, both of which are now used to transmit documents to EDGAR, or through new electronic systems as they evolve.
“Receipt” refers to the actual delivery of a record to the administrator or a designee and does not refer to a subsequent examination of the record by the administrator. See, e.g., Fehrman v. Blunt , 825 S.W.2d 658 (Mo. Ct. App. 1992). If a deficient form was provided to a designee, but not provided to the administrator because of the deficiency, it would not be filed under this definition.
11. Section 102(9): Fraud, deceit and defraud: Prior Provisions: 1956 Act Section 401(d); RUSA Section 101(6). This definition, which is identical to the 1956 Act and RUSA, codifies the holdings that “fraud” as used in the federal and state securities statutes is not limited to common law deceit. See generally 7 Louis Loss & Joel Seligman, Securities Regulation 3421-3448 (3d ed. 1991).
12. Section 102(10): Guaranteed: Prior Provisions: 1956 Act Section 401(e); RUSA Section 401(a)(1). The 1956 Act definition of “guaranteed” applies generally to payment of “principal, interest, or dividends.” The RUSA definition of “guaranteed,” which was solely applicable to exempt securities, applied to the guarantee of “all or substantially all of principal and interest or dividends.”
Section 102(10) follows the 1956 Act approach and applies generally to the guarantee of “all principal and all interest.” Any method of guarantee that results in a guarantee of payment of all principal and all interest will suffice including, for example, an irrevocable letter of credit.
This definition does not address whether or not a guarantee, whether whole or partial, is itself a security. That issue is addressed by the definition of “security” in Section 102(28).
13. Section 102(11): Institutional investor: Prior Provisions: RUSA Section 101(5); Securities Act of 1933 Rules 144A and 501(a).
Sections 102(11)(A) through (K) are based on Rule 501(a) of the Securities Act of 1933, but do not include the paragraphs of Rule 501(a) that address individuals. Given the significant period of time since Rule 501(a) was adopted, this Act has used a $10 million minimum for several categories of institutional investor rather than $5 million minimum used in Rule 501(a).
Section 102(11)(H) concludes with an except clause meant to exclude self-directed plans for individuals from this definition.
With respect to the exclusion of Rule 144A(a)(1)(H) from Section 102(11)(M), the substance of Rule 144A(a)(1)(H) appears in Section 102(11)(I), but with a requirement of total assets in excess of $10,000,000.
Section 102(11)(O) is meant to reach persons similar to those listed in Sections 102(11)(A) through (N), but not otherwise listed. Under Section 503, if challenged in a proceeding, the burden of proving the availability of an exemption is on the person claiming it. An interpretive opinion may be sought from the administrator under Section 605(d).
14. Section 102(12): Insurance company: No Prior Provision. This definition is based on Securities Act of 1933 Section 2(a)(13).
15. Section 102(13): Insured: Prior Provision: RUSA Section 401(a)(2). The RUSA definition of “insured,” which was solely applicable to exempt securities, applied to the insurance of “all or substantially all of principal, interest, or dividends.” Section 102(13) is applicable generally but is limited to “payment of all principal and all interest.”
16. Section 102(14): International banking institution: No Prior Provision. Securities issued or guaranteed by the International Bank for Reconstruction and Development, 22 U.S.C. Section 286k-1(a); the Inter-American Development Bank, 22 U.S.C. Section 283h(a); the Asian Development Bank, 22 U.S.C. Section 285h(a); the African Development Bank, 22 U.S.C. Section 290i-9; and the International Finance Corporation, see 22 U.S.C. Section 282k; are treated as exempt securities under Section 3(a)(2) of the Securities Act of 1933, see generally 3 Louis Loss & Joel Seligman, Securities Regulation 1191-1194 (3d ed. rev. 1999), and are within this term. 17. Section 102(15): Investment adviser: Prior Provisions: 1956 Act Section 401(f); RUSA Section 101(7). This term generally follows the definition in Section 202(a)(11) of the Investment Advisers Act of 1940, but has been updated to take into account new media such as the Internet.
The first sentence in Section 102(15) is identical to the first sentence in the 1956 Act Section 401(f) and the counterpart language in Section 202(a)(11). The RUSA definition deleted the phrases “either directly or through publications or writings” and “regular” before business. These terms have been returned to Section 102(15) because of the intention that this definition be construed uniformly with the definition in Section 202(a)(11) of the Investment Advisers Act of 1940. This first sentence would not reach the author of a book who did not receive compensation as part of a regular business for providing investment advice.
The second sentence in the term addressing financial planners is new. The purpose of this sentence is to achieve functional regulation of financial planners who satisfy the definition of investment adviser. Cf. Investment Advisers Act Release 1092, 39 SEC Dock. 494 (1987) (similar approach in Securities and Exchange Commission interpretative Release). This reference is not intended to preclude persons who hold a formally recognized financial planning or consulting designation or certification from using this designation. The use by a person of a title, designation or certification as a financial planner or other similar title, designation, or certification alone does not require registration as an investment adviser.
Sections 102(15)(A) through (H) are exclusions from the term “investment adviser.” An excluded person can be held liable for fraud in providing investment advice, see Section 502, but would not be subject to the registration and regulatory provisions in Article 4.
Sections 102(15)(A) and (E) are new and recognize that investment adviser representatives and federal covered investment advisers are separately treated in this Act. See definitions in Sections 102(6) and 102(16); registration and exemptions in Sections 404-405.
Sections 102(15)(B), (C), and (G) are substantively identical to the 1956 Act, RUSA, and the Investment Advisers Act of 1940. The Official Comment to the 1956 Act Section 401(f) quoted an opinion of the Securities and Exchange Commission General Counsel in Investment Advisers Act Release 2 on the meaning of “special compensation” included in Section 102(15)(C):
[This clause] amounts to a recognition that brokers and dealers commonly give a certain amount of advice to their customers in the course of their regular business, and that it would be inappropriate to bring them within the scope of the Investment Advisers Act merely because of this aspect of their business. On the other hand, that portion of clause [(C)] which refers to ‘special compensation’ amounts to an equally clear recognition that a broker or dealer who is specially compensated for the rendition of advice should be considered an investment adviser and not be excluded from the purview of the Act merely because he is also engaged in effecting market transactions in securities. . . . The essential distinction to be borne in mind in considering borderline cases . . . is the distinction between compensation for advice itself and compensation for services of another character to which advice is merely incidental.
Similarly, other broker-dealer employees such as research analysts who receive no special compensation from third parties for investment advice would not be required to register as investment advisers.
The 1956 Act definition added the word “paid” in Section 401(f)(4) to the counterpart exclusion in Section 202(a)(11) of the Investment Advisers Act “to emphasize,” as the Official Comment explained, “that a person who periodically distributes a ‘tipster sheet’ free as a way to get paying clients is not excluded from the definition as a ‘publisher.’” After the 1956 Act was published, the United States Supreme Court construed the definition of investment adviser in Lowe v. SEC , 472 U.S. 181 (1985), and concluded:
Congress did not intend to exclude publications that are distributed by investment advisers as a normal part of the business of servicing their clients. The legislative history plainly demonstrates that Congress was primarily interested in regulating the business of rendering personalized investment advice, including publishing activities that are a normal incident thereto. On the other hand, Congress, plainly sensitive to First Amendment concerns, wanted to make clear that it did not seek to regulate the press through the licensing of nonpersonalized publishing activities.
Id. at 185.
Responsive to this language RUSA rewrote this exclusion to provide:
a publisher, employee, or columnist of a newspaper, news magazine, or business or financial publication, or an owner, operator, or employee of a cable, radio, or television network, station, or production facility, if, in either case, the financial or business news published or disseminated is made available to the general public and the content does not consist of rendering advice on the basis of the specific investment situation of each client.
Recent experience at the federal and state levels suggest that the 1956 Act and RUSA approaches may be too broad. The retention of the Investment Advisers Act approach provides a better balance between First Amendment concerns and protection of investors from non-“bona fide” publicizing of investment advice. The exclusion in Section 102(15)(D) is intended to exclude publishers of Internet or electronic media, but only if the Internet or electronic media publication or website satisfies the “bona fide” and “publication of general and regular circulation” requirements. Cf. SEC v. Park , 99 F. Supp. 2d 889, 895-896 (N.D. Ill. 2000) (court declined to dismiss complaint against an Internet website when there were allegations that the website was not “bona fide” or of “general and regular circulation”).
The exclusion in Section 102(15)(G) is required by the National Securities Markets Improvement Act of 1996. This exclusion will reach banks and bank holding companies as described in Investment Advisers Act Section 202(a)(11)(A) and persons whose advice solely concerns United States government securities as described in Section 202(a)(11)(E).
18. Section 102(16): Investment adviser representative: No Prior Provision. Investment adviser representatives have not been required to register under the federal Investment Advisers Act, before or after the National Securities Markets Improvement Act.
The term investment adviser representative is not intended to preclude persons who hold a formally recognized financial planning or consulting title, designation, or certification from using such a designation. The use by a person of a title, designation or certification as a financial planner, or other similar title, designation, or certification alone does not require registration as an investment adviser representative.
19. Section 102(17): Issuer: Prior Provisions: 1956 Act Section 401(g); RUSA Section 101(8). This Section generally follows the 1956 Act and RUSA.
In paragraph (B), the phrase “or that is otherwise contractually responsible for assuring payment of the certificate” is intended to address forms of payment other than leases or conditional sales contracts. It would also reach guarantors.
20. Section 102(18): Nonissuer transaction or nonissuer distribution: Prior Provisions: 1956 Act Section 401(h); RUSA Section 101(9). This definition is relevant to several exempt transactions in Section 202. In TechnoMedical Labs, Inc. v. Utah Sec. Div. , 744 P.2d 320 (Utah Ct. App. 1987), the court declined to limit the term benefit to monetary benefits and instead held a spinoff transaction could provide direct or indirect benefits to an issuer. Id. at 323-324, following SEC v. Datronics Eng’r, Inc. , 490 F.2d 250 (4th Cir. 1973), cert. denied, 416 U.S. 937; SEC v. Harwin Indus. Corp. , 326 F. Supp. 943 (S.D.N.Y. 1971). In a similar fashion, transactions by officers, directors, promoters, and other insiders of the issuer may benefit the issuer and may not qualify as nonissuer transactions.
21. Section 102(19): Offer to purchase: No Prior Provision. A rescission offer under Section 510 would be an offer to purchase with respect to a security that earlier had been sold.
22. Section 102(20): Person: Prior Provisions: 1956 Act Section 401(i); RUSA Section 101(10). This is the standard definition used by the National Conference of Commissioners for Uniform State Laws with the addition of “limited liability company” to reflect current usage. The use of the concluding phrase “or any other legal or commercial entity” is intended to be broad enough to include other forms of business entities that may be created or popularized in the future.
23. Section 102(21): Place of business: Prior Provision: Rules 203A-3(b) and 222-1 of the Investment Advisers Act of 1940.
24. Section 102(23): Price amendment: Prior Provision: RUSA Section 101(11). A price amendment may be used in a registration coordinated with the Securities and Exchange Commission procedure in Section 303(d). In the case of noncash offerings, required information concerning such matters as the offering price and underwriting arrangements is normally filed in a “price” amendment after the rest of the registration statement has been reviewed by the Securities and Exchange Commission staff. See generally 1 Louis Loss & Joel Seligman, Securities Regulation 542-550 (3d ed. rev. 1998).
25. Section 102(24): Principal place of business: Prior Provision: Rule 222-1(b) of the Investment Advisers Act of 1940.
26. Section 102(25): Record: Prior Provision: Uniform Electronic Transactions Act Section 2(13). Cf. Section 3(a)(37) of the Securities Exchange Act of 1934. The Uniform Electronic Transactions Act §2(13) defines record in nearly identical terms. The Official Comment explains:
This is a standard definition designed to embrace all means of communicating or storing information except human memory. It includes any method for storing or communicating information, including “writings.” A record need not be indestructible or permanent, but the term does not include oral or other communications which are not stored or preserved by some means.
This term is intended to embrace new forms of records that are created or popularized in the future. A record would include, but not be limited to, a registration statement, report, application, book, publication, account, paper, correspondence, memorandum, agreement, document, computer file, or disk, microfilm, photograph, or audio or visual tape.
27. Section 102(26): Sale: Prior Provisions: 1956 Act Section 401(j); RUSA Section 101(13). Both the 1956 Act and RUSA definition of “sale” are modeled on Section 2(a)(3) of the Securities Act of 1933.
Language in Section 401(j) of the 1956 Act addressed the now rescinded SEC “no sale” doctrine and has been eliminated. Merger transactions are usually sales under Section 102(26), but may be exempted from the securities registration requirements by Section 202(18).
28. Section 102(28): Security: Prior Provisions: 1956 Act Section 401(1); RUSA Section 101(16). Much of the definition in Section 102(28), like the definitions in the 1956 Act Section 401(l) and RUSA Section 101(16), is identical to the definition in Section 2(a)(1) of the Securities Act. State courts interpreting the Uniform Securities Act definition of security have often looked to interpretations of the federal definition of security. See generally 2 Louis Loss & Joel Seligman, Security Regulation 923-1138.19 (3d ed. rev. 1999). The most recent amendments to Section 2(a)(1) of the Securities Act of 1933 were added by the Commodities Futures Modernization Act of 2000 which added or revised language in the Securities Act addressing security futures and securities puts, calls, straddles, options, or privileges. Identical language has been included in Section 102(28) of this Act to harmonize interpretation of the federal and state definition of a “security.” With respect to a security futures product, Section 28(a) of the Securities Exchange Act of 1934, as amended by the Commodity Futures Modernization Act of 2000, further provides: “No provision of any State law regarding the offer, sale or distribution of securities shall apply to any transaction in a security futures product, except that this sentence shall not be construed as limiting any State antifraud law of general applicability.”
Preorganization certificates or subscriptions are included in this term, obviating the need for a separate definition as was included in RUSA Section 402(13).
Section 102(28) uses RUSA’s “fractional undivided interest in oil, gas or other mineral rights” formulation, which originated in Section 2(a)(1) of the Securities Act of 1933, rather than the 1956 Act formulation, “certificate of interest or participation in an oil, gas or mining title.” In recent years, courts interpreting Section 2(a)(1) of the Securities Act of 1933 have found certain oil, gas or mineral rights to be investment contracts (that is, securities). 2 Louis Loss & Joel Seligman, Securities Regulation 979-982 (3d ed. rev. 1999).
A new sentence was added in Section 102(28)(A) referring to certificated or uncertificated securities to indicate that the term is intended to apply whether or not a security is evidenced by a writing. Section 102(28)(A) is intended to reject Thomas v. State of Tex. , 65 S.W.3d 38 (Tex. Crim. App. 2001) (Under Texas law evidence of indebtedness requires a writing).
Insurance or endowment policies or endowment or annuity contracts, other than those on which an insurance company promises to make variable payments, are excluded from this term. Variable insurance products are also excluded in many states and are exempted from securities registration in others under provisions such as Section 201(4). When variable products are included in the definition of security and exempted from registration state securities administrators can bring enforcement actions concerning variable insurance sales practices.
The Drafting Committee recognized that the decision whether to exclude variable annuities from the definition of security will be made on a state-by-state basis. Those states which intend to exclude variable products from the definition of security should add the words “or variable” to Section 102(28)(B) so that it will read:
(B) The term does not include an insurance or endowment policy or annuity contract under 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.
In the view of the American Council of Life Insurers:
The brackets around the words “or variable” should be removed to follow the majority of jurisdictions. Thirty-seven jurisdictions [including Guam] currently exclude all insurance, endowment and annuity contracts from the definition of security. Removal of the brackets around the words “or variable,” therefore, would incorporate the approach taken in the majority of jurisdictions. The removal of these brackets also prevents a statutory conflict with [up to] 48 jurisdictions that grant the insurance commissioner exclusive jurisdiction to regulate the issuance and sale of variable contracts. Moreover, this approach recognizes that the issuance and sale of variable contracts is comprehensively regulated by the Securities and Exchange Commission, the National Association of Securities Dealers, 50 state insurance departments, and in the case of group life and annuities, the Department of Labor. Like all other financial products, this approach imposes only one, rather than two, levels of regulation in each state and reflects the philosophy of financial services modernization. In the view of the North American Securities Administrators Association variable products should be exempted from registration, not excluded from the definition of securities:
One of the goals of this Act is to align state and federal law. The United States Supreme Court ruled that a variable annuity is a security in SEC v. Variable Annuity Life Insurance Company of America, 359 U.S. 65 (1959). More recently, it has been confirmed that variable insurance products are “covered securities” as defined in the National Securities Markets Improvement Act of 1996 (NSMIA) and in the Securities Litigation Uniform Standards Act of 1998 (SLUSA), see Lander v. Hartford Life Annuity Ins., 251 F.3d 101 (2d Cir. 2001).
When variable products are included in the definition of security and exempted from registration, state securities administrators can bring enforcement actions concerning variable insurance sales practices. This approach toward functional regulation is supported by the National Association of Securities Dealers as evidenced by a February 2001 letter from Mary Schapiro, President of Regulatory Policy & Oversight: “Based on our experience, we have found that variable products’ sales-related problems parallel those of mutual funds and other securities . . . Because of the substantial similarities between variable contracts and other securities products, we believe it is incongruous for agents and sales practices involved in variable annuities not to be covered by state securities laws.”
State securities regulators support the functional regulation of agents because: 1) insurance companies are not affected since state securities regulators are preempted from requiring the registration of variable products; 2) the vast majority of broker-dealer subsidiaries of insurance companies are already registered to sell securities in most states; and 3) the vast majority of agents are already dually licensed to sell insurance and securities in most states.
Section 102(28)(C) includes the exclusion in RUSA from the 1956 definition of security for “an interest in a contributory or noncontributory pension or welfare plan subject to the Employee Retirement Income Security Act of 1974.”
The first clause in Section 102(28)(D) is derived from the leading case of SEC v. W.J. Howey Co. , 328 U.S. 293 (1946), which has been widely followed by federal and state courts. The second clause in Section 102(28)(D) is based, in part, on the leading case of SEC v. Glenn W. Turner Enter., Inc. , 474 F.2d 476, 482 n.7 (9th Cir. 1973), cert. denied, 419 U.S. 900 (1974).
The courts have divided over the interpretation of the “common enterprise” element of an investment contract. The courts generally recognize that “horizontal” commonality (for example, the pooling of an investment by two or more investors) is a common enterprise. A small minority of the federal circuits will also find a common enterprise in a “vertical” relationship when a single investor is dependent upon the expertise of a single commodities broker. Since two or more persons do not share in the profitability of an undertaking, it is difficult to argue that there is a common enterprise. Section 102(28)(D) follows a significantly larger number of federal circuits and adopts a more restrictive form of vertical commonality that occurs only when there is profit sharing between two persons even if, for example, one is a conventional investor and one is a promoter. See generally 2 Louis Loss & Joel Seligman, Securities Regulation 989-997 (3d ed. Rev. 1999). In interpreting all elements of the investment contract, the courts have emphasized substance, not form. A conventional partnership involving two individuals who actively participate in its management and who each own 50 percent interest of its profits has consistently not been viewed as an investment contract because profits do not come from the efforts of others. On the other hand, investments in limited partnership interests which are traded on stock exchanges consistently have been held to be investment securities because profits do come substantially from the efforts of others. Indeed, interests in an entity called a general partnership may be a security when the general partnership functions like a limited partnership. See, e.g., Williamson v. Tucker , 645 F.2d 404, 424 (5th Cir. 1981), cert. denied, 454 U.S. 897 (1981); see generally 2 Loss & Seligman, supra, at 1019-1033.
Section 102(28)(E) is consistent with state and federal securities laws which have recognized interests in limited liability companies and limited partnerships in some circumstances as “securities,” see 2 Louis Loss & Joel Seligman, Securities Regulation 1028-1031 (3d ed. rev. 1999), when consistent with the court decisions interpreting the investment contract concept. This Act also refers to an investment in a viatical settlement or a similar agreement to make unequivocally clear that viatical settlement and similar agreements, which otherwise satisfy the definition of an investment contract, are securities. This is intended to reject the holding of one court that a viatical contract could not be a security. See SEC v. Life Partners Inc. , 87 F.3d 536 (D.C. Cir. 1996), reh’g denied, 102 F.3d 587 (D.C. Cir. 1996). A number of states have done so by statute.
Judicial construction of the term “investment contract” has been the most frequently litigated issue concerning the term “security.” See Gabaldon, A Sense of Security: An Empirical Study, 25 J. Corp. L. 307 (2000), explaining that there had been 792 cases decided to that date in which the definition of a security played a prominent role. Id. at 308. Some 461 of the 792 cases (58 percent) concerned investment contracts. Id. at 322. A number of states, by statute, rule, or case law have also adopted the “risk capital” test to find a security when an investment is subject to the risks of an enterprise with the expectation of profit or other valuable benefit and the investor has no direct control over the management of the enterprise. See, e.g., 2 Loss & Seligman, supra, at 939-940 n.50.
29. Section 102(29): Self-regulatory organization: Prior Provision: RUSA Section 101(17). This definition was added by RUSA and is based on a counterpart provision in the American Law Institute Federal Securities Code. At the current time national securities exchanges are registered under Section 6 of the Securities Exchange Act of 1934; national securities associations under Section 15A; clearing agencies under Section 17A; and the Municipal Securities Rulemaking Board under Section 15B.
30. Section 102(30): Sign: No Prior Provision. This definition is intended to facilitate electronic signatures, to the extent permitted by Section 105.
31. Section 102(31): State: Prior Provisions: 1956 Act Section 401(m); RUSA Section 101(18). This is the standard definition used by the National Conference of Commissioners on Uniform State Laws. It does include territories and possessions of the United States, as well as the District of Columbia and Puerto Rico, but does not include foreign governments, their territories, or their possessions. In this Act “foreign” always refers to activity, a government, or person outside of the United States, not a different state within the United States.
§ 30-14-103. References to federal statutes.
“Securities act of 1933” (15 U.S.C. 77a et seq.), “securities exchange act of 1934” (15 U.S.C. 78a et seq.), “public utility holding company act of 1935” (15 U.S.C. 79 et seq.), “investment company act of 1940” (15 U.S.C. 80a-1 et seq.), “investment advisers act of 1940” (15 U.S.C. 80b-1 et seq.), “employee retirement income security act of 1974” (29 U.S.C. 1001 et seq.), “national housing act” (12 U.S.C. 1701 et seq.), “commodity exchange act” (7 U.S.C. 1 et seq.), “internal revenue code” (26 U.S.C. 1 et seq.), “securities investor protection act of 1970” (15 U.S.C. 78aaa et seq.), “securities litigation uniform standards act of 1998” (112 Stat. 3227), “small business investment act of 1958” (15 U.S.C. 661 et seq.), and “electronic signatures in global and national commerce act” (15 U.S.C. 7001 et seq.) mean those statutes and the rules and regulations adopted under those statutes, as in effect on the date of enactment of this chapter.
History.
I.C.,§ 30-14-103, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The Securities Litigation Uniform Standards Act of 1998 is P.L. 105-353, which is compiled throughout title 15, United States Code.
Compiler’s Notes.
The phrase “the date of enactment of this chapter” at the end of the section refers to the date of enactment of S.L. 2004, Chapter 45, which was effective September 1, 2004.
The words enclosed in parentheses so appeared in the law as enacted.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 401(k); RUSA Section 101(15).
- There are a large number of references to other laws in this Act, particularly to the federal securities laws identified in Section 103, and to rules adopted by the Securities and Exchange Commission under those laws. One of the main objectives of this Act is to take account of those provisions in the federal laws that are preemptive, and to coordinate with other, nonpreemptive provisions of the federal laws where coordination between federal and state securities law is in the public interest.
- Section 12(d) of the Uniform Statute and Rule Construction Act, adopted by NCCUSL in 1995, provides: “A statute or rule that incorporates by reference a statute or rule of another jurisdiction does not incorporate a later enactment or adoption or amendment of the other statute or rule.” Nevertheless, it is not uncommon for States to permit later amendments to statutes and rules referenced in enacted legislation to become automatically effective. In those states the final bracketed language in this Section should be included in the Act. 3. In those states which do not permit automatic effectiveness of later amendments and that follow Section 12(d) of the Uniform Statute and Rule Construction Act, this problem has been addressed by either giving the administrator the power to update by rule or the duty to notify the legislature when amendment is necessary. When the legislature notification approach is adopted, to prevent a gap period, the administrator might be given the power to act by rule until the legislature has acted.
4. After enactment, amendments to a preemptive federal statute, to rules adopted by a federal agency under a preemptive provision of a federal statute, or to amendments to such rules should be enforced in all states under the Supremacy Clause of the United States Constitution. A number of such references are in this Act.
§ 30-14-104. References to federal agencies.
A reference in this chapter to an agency or department of the United States is also a reference to a successor agency or department.
History.
I.C.,§ 30-14-104, as added by 2004, ch. 45, § 2, p. 169.
§ 30-14-105. Electronic records and signatures.
This chapter modifies, limits and supersedes the federal electronic signatures in global and national commerce act, but does not modify, limit or supersede section 101(c) of that act (15 U.S.C. 7001(c)) or authorize electronic delivery of any of the notices described in section 103(b) of that act (15 U.S.C. 7003(b)). This chapter authorizes the filing of records and signatures, when specified by provisions of this chapter or by a rule adopted or an order issued under this chapter, in a manner consistent with section 104(a) of that act (15 U.S.C. 7004(a)).
History.
I.C.,§ 30-14-105, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The electronic signatures in global and national commerce act, referred to in this section, is codified as 15 USCS § 7001 et seq.
Official Comment
No Prior Provision.
The purpose of this Section is to permit the filing of electronic signatures and electronic records.
Part 2 Exemptions From Registration of Securities
Official Comment
Section 201 includes exempt securities and Section 202 includes exempt transactions. Both exempt securities and exempt transactions are exempt from the securities registration, notice filing requirement of Section 302, and the filing of sales literature Section 504 of this Act. Neither Section 201 nor Section 202 provides an exemption from the Act’s antifraud provisions in Article 5, nor the broker-dealer, agent, investment adviser, or investment adviser registration requirements in Article 4.
A Section 201 exempt security retains its exemption when initially issued and in subsequent trading.
A Section 202 transaction exemption must be established for each transaction.
Neither the exempt security nor the transaction exemptions are meant to be mutually exclusive. A security or transaction may qualify for two or more exemptions.
Article 2 is not available to any security, transaction, or offer that, although in technical compliance with a specific section in Article 2, is part of an unlawful plan or scheme to evade the registration provisions of Article 3. In such cases registration is required. Cf. Prelim. Note 6 to Regulation D adopted under the Securities Act of 1933.
§ 30-14-201. Exempt securities.
The following securities are exempt from the requirements of sections 30-14-301 through 30-14-306, Idaho Code, and section 30-14-504, Idaho Code:
- A security, including a revenue obligation or a separate security as defined in rule 131 (17 CFR 230.131) adopted under the securities act of 1933, issued, insured or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one (1) or more states; by a political subdivision of one (1) or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by congress; or a certificate of deposit for any of the foregoing;
- A security issued, insured or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer or guarantor;
-
A security issued by and representing, or that will represent, an interest in or a direct obligation of, or be guaranteed by:
- An international banking institution;
- A banking institution organized under the laws of the United States; a member bank of the federal reserve system; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that 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 exercising fiduciary powers that are similar to those permitted for national banks under the authority of the comptroller of currency pursuant to section 1 of public law 87-722 (12 U.S.C. 92a); or
- Any other depository institution, or any trust company organized or chartered under the laws of this state, unless by rule or order the administrator proceeds under section 30-14-204, Idaho Code;
- A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to do business in this state;
-
A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company that is:
- Regulated in respect to its rates and charges by the United States or a state;
- Regulated in respect to the issuance or guarantee of the security by the United States, a state, Canada, or a Canadian province or territory; or
- A public utility holding company registered under the public utility holding company act of 1935 or a subsidiary of such a registered holding company within the meaning of that act;
-
A federal covered security specified in section 18(b)(1) of the securities act of 1933 (15 U.S.C. 77r(b)(1)) or by a rule adopted under that provision or a security listed or approved for listing on another securities market specified by rule under this chapter; a put or a call option contract; a warrant; a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the securities exchange act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the securities exchange act of 1934 or an offer or sale, of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; or an option or a derivative security designated by the securities and exchange commission under section 9(b) of the securities exchange act of 1934 (15 U.S.C. 78i(b));
(7) A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic or reformatory purposes, or as a chamber of commerce, and not for pecuniary profit, no part of the net earnings of which inures to the benefit of a private stockholder or other person, or a security of a company that is excluded from the definition of an investment company under section 3(c)(10)(b) of the investment company act of 1940 (15 U.S.C. 80a-3(c)(10)(B)); except that with respect to the offer or sale of a note, bond, debenture or other evidence of indebtedness issued by such a person, a rule may be adopted under this chapter limiting the availability of this exemption by classifying securities, persons and transactions, imposing different requirements for different classes, specifying with respect to paragraph (b) of this subsection the scope of the exemption and the grounds for denial or suspension, and requiring an issuer:
- To file a notice specifying the material terms of the proposed offer or sale and copies of any proposed sales and advertising literature to be used and provide that the exemption becomes effective if the administrator does not disallow the exemption within the period established by the rule;
- To file a request for exemption authorization for which a rule under this chapter may specify the scope of the exemption, the requirement of an offering statement, the filing of sales and advertising literature, the filing of consent to service of process complying with section 30-14-611, Idaho Code, and grounds for denial or suspension of the exemption; or
- To register under section 30-14-304, Idaho Code;
- At least eighty percent (80%) of the gross amount paid by the purchasers of the securities is used in actual mining operations or for actual exploration and development expenses, including legal, accounting, engineering and geological expenses; and
(8) A member’s or owner’s interest in, or a retention certificate or like security given in lieu of a cash patronage dividend issued by, a cooperative organized and operated as a nonprofit membership cooperative under the cooperative laws of a state, but not a member’s or owner’s interest, retention certificate, or like security sold to persons other than bona fide members of the cooperative;
(9) An equipment trust certificate with respect to equipment leased or conditionally sold to a person, if any security issued by the person would be exempt under this section or would be a federal covered security under section 18(b)(1) of the securities act of 1933 (15 U.S.C. 77r(b)(1)); and
(10) Any security issued by a domestic or foreign corporation, partnership, trust or association engaged in actual mining operations or the exploration and development of mining properties in this state, whether or not sold through a broker-dealer, provided the following conditions are met:
(a) The term “actual mining operations” within the meaning of this subsection does not include the development or production of gas or oil;
(b) The total amount of the securities to be offered and sold does not exceed five hundred thousand dollars ($500,000) in any twelve (12) month period;
(c) All sales brochures, pamphlets, advertisements and literature are filed with the director prior to being used;
History.
(e) The issuer shall file a report in a form prescribed by the director and at such times that the director by rule may provide, not to exceed once every three (3) months, stating the number of shares or amount of other securities sold, the number of purchasers, the amount of money obtained by the issuer from the sales, and the manner in which the moneys have been expended. History.
I.C.,§ 30-14-201, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The securities exchange act of 1934, referred to in this section, is codified as 15 USCS § 78a et seq.
The public utility holding company act of 1935, referred to in paragraph (5)(b), is codified as 15 USCS § 79 et seq.
Compiler’s Notes.
For more on the federal deposit insurance corporation, see http://www.fdic.gov .
For national credit union share insurance fund, see https://www.ncua.gov/Pages/default.aspx .
The words enclosed in parentheses so appeared in the law as enacted.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 402(a); RUSA Section 401(b).
- Section 201(1): United States government and municipal securities: Prior Provisions: 1956 Act Section 402(a)(1); RUSA Section 401(b)(1). This exemption generally follows the 1956 Act except that it adds securities “insured” by a specified government to those “issued” or “guaranteed.” RUSA, in contrast, also addressed foreign governments, which in this Act are treated separately in Section 201(2). Rule 131 issued under the Securities Act of 1933 defines separate securities issued under governmental obligations.
- Section 201(2): Foreign government securities: Prior Provisions: 1956 Act Section 402(a)(2); RUSA Section 401(b)(2). The 1956 Act, as amended, and RUSA both reached foreign governments as specified in Section 201(2) and separately treated “a security issued, insured, or guaranteed by Canada, a Canadian province or territory, a political subdivision of Canada or a Canadian province or territory, an agency or corporate or other instrumentality of one or more of the foregoing.” The separate treatment of Canadian securities is largely redundant and has been eliminated from this Section. 3. Section 201(3): Depository institution and international banking institution securities: Prior Provision: RUSA 401(b)(3). Section 402(a)(3) of the 1956 Act exempts specified bank and similar depository institutions; Section 402(a)(4) exempts specified savings and loan and similar thrift institution securities; and Section 402(a)(6) exempts specified credit union securities. RUSA Section 401(b)(3) combines the three types of depository institutions into a common definition (see RUSA Section 101(13)) which are adopted in this Act as Sections 102(3) and 102(5)) and a common exemption (see RUSA Section 401(b)(3)) which is adopted in this subsection.
A significant minority of states have excluded from the Section 201(1) exemption industrial revenue bonds. Interest on these securities is solely repayable from revenues received from a nongovernmental industrial or commercial enterprise. Typically this exclusion will not operate if (A) the payments are made or unconditionally guaranteed by a person whose securities are exempt from registration under Section 18(b)(1) of the Securities Act of 1933, or (B) in accordance with a rule under this [Act], the issuer first files a notice in a record specifying the terms of the proposed offer or sale and a copy of the offering statement and the administrator does not disallow the exemption within the time period established by the rule.
Banks specified in Section 3(a)(2) of the Securities Act of 1933 issue federal covered securities under Section 18(b)(4)(C) of the Securities Act of 1933. Section 201(3)(C) applies to securities issued by depository institutions without depository insurance. Under Section 204, the administrator will have the ability to revoke or limit this exemption.
4. Section 201(4): Insurance company securities: Prior Provisions: 1956 Act Section 402(a)(5); RUSA Section 401(b)(4). The issuance, insurance, or guarantee of securities by an insurance company is extensively regulated by state insurance commissions or other state agencies.
Under this Act insurance, endowment policies, or annuity contracts under which an insurance company promises to pay fixed sums are excluded from the definition of a security in Section 102(28)(B).
Unless brackets are removed from the words “or variable” in Section 102(28)(B), a variable annuity or other variable insurance product would be considered a security under this Act and under federal securities law. See SEC v. Variable Annuity Life Ins. Co. of Am. , 359 U.S. 65 (1959); SEC v. United Benefit Life Ins. Co. , 387 U.S. 202 (1967).
A variable annuity or other variable insurance product issued by an investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 would be a “federal covered security,” see Section 102(7). See Lander v. Hartford Life & Annuity Ins. Co. , 251 F.3d 101 (2d Cir. 2001).
A variable annuity or other variable insurance product not issued by a registered investment company would be exempted by Section 201(4), but would be subject to the antifraud provisions in Article 5.
5. Section 201(5): Common carrier and public utility securities: Prior Provisions: 1956 Act Section 401(a)(7); RUSA Section 401(b)(5). Both the 1956 Act and RUSA include references, omitted here, to the Interstate Commerce Commission, whose enabling legislation subsequently was repealed. Public utility holding companies covered by this exemption are subject both to the Public Utility Holding Company Act and to state or Canadian utility regulation.
6. Section 201(6): Certain options and rights: No Prior Provision. The 1956 Act Section 402(a)(8) provided an exemption for securities listed on the New York, American, Midwest (now Chicago), or other designated stock exchanges, senior or substantially equal securities of the same issuer listed on the exchange and any security covered by listed or approved subscription rights or warrants, or any warrant or right to purchase or subscribe to any security exempted by Section 402(a)(8).
RUSA essentially retained this exemption in Section 401(b)(7) and added securities designated for inclusion in the National Market System by the National Association of Securities Dealers in Section 401(b)(8) and specified options issued by a clearing agency registered under the Securities Exchange Act of 1934 in Section 401(b)(9). In 1996 Congress enacted the National Securities Markets Improvement Act and provided in Section 18(b)(1) that securities listed on the New York, American or Nasdaq Stock Exchange, or designated by rule of the Securities and Exchange Commission, as well as any security of the same issuer that is equal in seniority or senior to any of these securities will be a federal covered security. Under Rule 146 the SEC has designated as federal covered securities under Section 18(b)(1) Tier I of the Pacific Exchange; Tier I of the Philadelphia Stock Exchange; and The Chicago Board Options Exchange on condition that the relevant listing standards continue to be substantially similar to those of the New York, American, or Nasdaq stock markets. See Reporter’s Note to Section 102(7). A federal covered security subject to Section 18(b)(1) of the Securities Act of 1933 will not be subject to the securities registration requirements of Sections 301 and 303 through 306.
The exemption in Section 201(6) addresses specified options, warrants, and rights that are not federal covered securities under Section 18(b)(1) of the Securities Act of 1933, but generally would have been exempted under RUSA. The 1956 Act, which was narrower, was drafted before the computerized Nasdaq stock market began trading the National Market List and the development of standardized options markets.
The final clause of Section 201(6) makes clear that any offer or sale of the underlying security that occurs as a result of the offer or sale of an option or other derivative security exempted under this provision or as the result of the exercise of the option or other derivative security, is covered by the exemption if the option met the terms of the exemption at the time such derivative security was written (that is, sold) or issued. The sale of the underlying security when an option is exercised would be exempt even if the underlying security is not at that time subject to any exemption under the Act. This is consistent with existing precedent under federal law suggesting that the legality of the sale of an underlying security when an option is exercised should be determined by the status of the security at the time the option was written rather than at the time of exercise. See, e.g., H. Kook & Co., Inc. v. Scheinman, Hochstin & Trotta, Inc. , 414 F.2d 93 (2d Cir. 1969). Any transaction in an underlying security that results from the offer, sale, or exercise of any derivative security issued by a registered clearing agency and traded on a national securities exchange or association is exempt if the derivative security when written was exempt under Section 201(6).
The Securities and Exchange Commission has adopted Rule 9b-1 under Section 9(b).
7. Section 201(7): Nonprofit organization securities: Prior Provision: Section 3(a)(4) of the Securities Act of 1933. Section 402(a)(9) of the 1956 Act and Section 401(b)(10) of RUSA exempt specified nonprofit securities. Both are modeled on Section 3(a)(4) of the Securities Act, which was subsequently amended.
Securities issued under Section 3(a)(4) of the Securities Act of 1933 are not treated as federal covered securities in Section 18(b)(4)(C), although a separate Section 3(a)(13) exemption which addresses certain church plan securities are federal covered securities under Section 18(b)(4)(C).
RUSA included an optional notice and review requirement for nonprofit securities in Section 401(b)(10) “if at least ten days before a sale of the security the person has filed with the administrator a notice setting forth the material terms of the proposed sale and copies of any sales and advertising literature to be used and the administrator by order does not disallow the exemption within the next five full business days.”
The nonprofit exemption is of particular concern to state securities administrators. See, e.g., State Regulators Announce Dramatic Rise in Religious Scams; Tens of Thousands Lured, 33 Sec. Reg. & L. Rep. (BNA) 1189 (2001). Under Section 6 of the Philanthropy Protection Act, Congress preempted application of the registration provisions of state securities laws to issuance of securities covered by Section 3(c)(10) of the Investment Company Act of 1940 unless states acted within three years of enactment (December 1998) to pass special state legislation cancelling federal preemption. Ten states enacted such legislation. Those states may preserve this treatment of Section 3(c)(10) securities by deleting from Section 201(7) the phrase “or a security of a company that is excluded from the definition of an investment company under Section 3(c)(10)(B) of the Investment Company Act of 1940.”
Section 201(7) provides statutory authority for the states to adopt rules with respect to notes, bonds, debentures and other evidences of indebtedness issued by nonprofit organizations. Each state may adopt different rules tailored for various types of nonprofit debt offerings, (e.g., local church bond offerings, national church bond offerings, church extension funds, charitable gift annuities). For states that do not wish to provide an automatic exemption from registration for a particular type of nonprofit debt instrument or offering, Section 201(7) creates three categories of regulatory review that may be required by rule: (a) exemption by notice filing, (b) exemption by state authorization, and (c) registration by qualification. These categories are consistent with the manner in which many states currently review different types of nonprofit debt securities. See Horner & Makens, Securities Regulation of Religious and Other Nonprofit Organizations, 27 Stetson L. Rev. 473 (1997).
8. Section 201(8): Cooperatives: Prior Provision: RUSA Section 401(b)(13). Section 201(8) is derived from RUSA Section 401(b)(13) which was included in that act after a number of states had adopted exemptions for securities issued by cooperatives. Section 201(8) is not intended to be available if securities are offered or sold to the public generally.
The 1956 Act Section 402(a)(12) had instead provided: “insert any desired exemption for cooperatives.” The Reporter for the 1956 Act had found such sharp variation among the 18 states that then had adopted a cooperative exemption that “no common pattern can be found.” Louis Loss, Commentary on the Uniform Securities Act 118 (1976).
9. Section 201(9): Equipment trust certificates: Prior Provision: RUSA Section 401(b)(6). The Securities Act of 1933 Section 3(a)(6) includes a narrower exemption for railroad equipment trusts. Section 201(9) follows RUSA. The Official Comment to RUSA Section 401(b)(6) explained:
The new paragraph (b)(6) reflects the extensive development of equipment lease financing through leveraged leases, conditional sales, and other devices. The underlying premise is that if the securities of the person using such a financing device would be exempt under some other paragraph of Section 401, the equipment trust certificate or other security issued to acquire the property in question also is exempt.
§ 30-14-202. Exempt transactions.
The following transactions are exempt from the requirements of sections 30-14-301 through 30-14-306, Idaho Code, and section 30-14-504, Idaho Code:
- An isolated nonissuer transaction, whether or not effected by or through a broker-dealer;
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A nonissuer transaction by or through a broker-dealer registered, or exempt from registration under this chapter, and a resale transaction by a sponsor of a unit investment trust registered under the investment company act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety (90) days, if, at the date of the transaction:
- The issuer of the security is engaged in business, the issuer is not in the organizational stage or in bankruptcy or receivership, and the issuer is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
- The security is sold at a price reasonably related to its current market price;
- The security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security or a redistribution;
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A nationally recognized securities manual or its electronic equivalent designated by any rule adopted or an order issued under this chapter or a record filed with the securities and exchange commission that is publicly available and contains:
- A description of the business and operations of the issuer;
- The names of the issuer’s executive officers and the names of the issuer’s directors, if any;
- An audited balance sheet of the issuer as of a date within eighteen (18) months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had an audited balance sheet, a pro forma balance sheet for the combined organization; and
- An audited income statement for each of the issuer’s two (2) immediately previous fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case of a reorganization or merger when each party to the reorganization or merger had audited income statements, a pro forma income statement; and
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Any one (1) of the following requirements is met:
- The issuer of the security has a class of equity securities listed on a national securities exchange registered under section 6 of the securities exchange act of 1934 or designated for trading on the national association of securities dealers automated quotation system;
- The issuer of the security is a unit investment trust registered under the investment company act of 1940;
- The issuer of the security, including its predecessors, has been engaged in continuous business for at least three (3) years; or
- The issuer of the security has total assets of at least two million dollars ($2,000,000) based on an audited balance sheet as of a date within eighteen (18) months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had such an audited balance sheet, a pro forma balance sheet for the combined organization; (3) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the board of governors of the federal reserve system;
- A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the board of governors of the federal reserve system;
- A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in an outstanding security if the guarantor of the security files reports with the securities and exchange commission under the reporting requirements of section 13 or 15(d) of the securities exchange act of 1934 (15 U.S.C. 78m or 78o(d));
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A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security that:
- Is rated at the time of the transaction by a nationally recognized statistical rating organization in one (1) of its four (4) highest rating categories; or
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Has a fixed maturity or a fixed interest or dividend, if:
- A default has not occurred during the current fiscal year or within the three (3) previous fiscal years of the issuer or any predecessor, in the payment of principal, interest, or dividends on the security; and
- The issuer is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not and has not been within the previous twelve (12) months a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
- A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter effecting an unsolicited order or offer to purchase;
- A nonissuer transaction executed by a bona fide pledgee without the purpose of evading this chapter;
- A nonissuer transaction by a federal covered investment adviser with investments under management in excess of one hundred million dollars ($100,000,000) acting in the exercise of discretionary authority in a signed record for the account of others;
- A transaction in a security, whether or not the security or transaction is otherwise exempt, in exchange for one (1) or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, if the terms and conditions of the issuance and exchange or the delivery and exchange and the fairness of the terms and conditions have been approved by the administrator after a hearing as provided in section 30-14-202A, Idaho Code, or otherwise;
- A transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;
- A transaction in a note, bond, debenture or other evidence of indebtedness secured by a mortgage or other security agreement if the note, bond, debenture or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit;
- A transaction by an executor, administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian or conservator;
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A sale or offer to sell to:
- An institutional investor;
- A federal covered investment adviser; or (c) Any other person exempted by a rule adopted or an order issued under this chapter;
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A sale or an offer to sell securities of an issuer, if the transaction is part of a single issue in which:
- Not more than ten (10) purchasers are present in this state during any twelve (12) consecutive months, other than those designated in subsection (13) of this section;
- A general solicitation or general advertising is not made in connection with the offer to sell or sale of the securities;
- A commission or other remuneration is not paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting a prospective purchaser in this state; and
- The issuer reasonably believes that all the purchasers in this state, other than those designated in subsection (13) of this section, are purchasing for investment;
- A transaction under an offer to existing security holders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options or warrants, if a commission or other remuneration, other than a standby commission, is not paid or given, directly or indirectly, for soliciting a security holder in this state;
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An offer to sell, but not a sale, of a security not exempt from registration under the securities act of 1933 if:
- A registration or offering statement or similar record as required under the securities act of 1933 has been filed, but is not effective, or the offer is made in compliance with rule 165 adopted under the securities act of 1933 (17 CFR 230.165); and
- A stop order of which the offeror is aware has not been issued against the offeror by the administrator or the securities and exchange commission, and an audit, inspection or proceeding that is public and that may culminate in a stop order is not known by the offeror to be pending;
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An offer to sell, but not a sale, of a security exempt from registration under the securities act of 1933 if:
- A registration statement has been filed under this chapter, but is not effective;
- A solicitation of interest is provided in a record to offerees in compliance with a rule adopted by the administrator under this chapter; and
- A stop order of which the offeror is aware has not been issued by the administrator under this chapter and an audit, inspection or proceeding that may culminate in a stop order is not known by the offeror to be pending;
- A transaction involving the distribution of the securities of an issuer to the security holders of another person in connection with a merger, consolidation, exchange of securities, sale of assets, or other reorganization to which the issuer, or its parent or subsidiary and the other person, or its parent or subsidiary, are parties;
- A rescission offer, sale or purchase under section 30-14-510, Idaho Code;
- An offer or sale of a security to a person not a resident of this state and not present in this state if the offer or sale does not constitute a violation of the laws of the state or foreign jurisdiction in which the offeree or purchaser is present and is not part of an unlawful plan or scheme to evade this chapter;
- Employees’ stock purchase, savings, option, profit-sharing, pension, or similar employees’ benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer’s parent for the participation of their employees including offers or sales of such securities to: (a) Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers;
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A transaction involving:
- A stock dividend or equivalent equity distribution, whether the corporation or other business organization distributing the dividend or equivalent equity distribution is the issuer or not, if nothing of value is given by stockholders or other equity holders for the dividend or equivalent equity distribution other than the surrender of a right to a cash or property dividend if each stockholder or other equity holder may elect to take the dividend or equivalent equity distribution in cash, property or stock;
- An act incident to a judicially approved reorganization in which a security is issued in exchange for one (1) or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash; or
- The solicitation of tenders of securities by an offeror in a tender offer in compliance with rule 162 adopted under the securities act of 1933 (17 CFR 230.162); or
- A nonissuer transaction in an outstanding security by or through a broker-dealer registered or exempt from registration under this chapter, if the issuer is a reporting issuer in a foreign jurisdiction designated by this subsection or by a rule adopted or an order issued under this chapter; has been subject to continuous reporting requirements in the foreign jurisdiction for not less than one hundred eighty (180) days before the transaction; and the security is listed on the foreign jurisdiction’s securities exchange that has been designated by this subsection or by a rule adopted or an order issued under this chapter, or is a security of the same issuer that is of senior or substantially equal rank to the listed security or is a warrant or right to purchase or subscribe to any of the foregoing. For purposes of this subsection, Canada, together with its provinces and territories, is a designated foreign jurisdiction and the Toronto stock exchange, inc., is a designated securities exchange. After an administrative hearing in compliance with chapter 52, title 67, Idaho Code, the administrator, by rule adopted or an order issued under this chapter, may revoke the designation of a securities exchange under this subsection, if the administrator finds that revocation is necessary or appropriate in the public interest and for the protection of investors.
(b) Family members who acquire such securities from those persons through gifts or domestic relations orders;
(c) Former employees, directors, general partners, trustees, officers, consultants and advisers if those individuals were employed by or providing services to the issuer when the securities were offered; and
(d) Insurance agents who are exclusive insurance agents of the issuer, or the issuer’s subsidiaries or parents, or who derive more than fifty percent (50%) of their annual income from those organizations;
History.
I.C.,§ 30-14-202, as added by 2004, ch. 45, § 2, p. 169; am. 2008, ch. 143, § 1, p. 415; am. 2012, ch. 65, § 2, p. 171.
STATUTORY NOTES
Amendments.
The 2008 amendment, by ch. 143, deleted the paragraph (11)(a) designation and deleted paragraphs (11)(b) and (11)(c), which read: “(b) A general solicitation or general advertisement of the transaction is not made; and (c) A commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this chapter as a broker-dealer or as an agent”.
The 2012 amendment, by ch. 65, inserted “and” preceding “contains” near the end of the introductory paragraph in (2)(d).
Federal References.
The investment company act of 1940, referred to in this section, is codified as 15 USCS § 80a-1 et seq.
Section 6 of the securities exchange act of 1934, referred to in paragraph (2)(e)(i), is codified as 15 USCS § 78f.
The securities act of 1933, referred to in this section, is codified as 15 USCS § 77a et seq.
Compiler’s Notes.
For more on securities and exchange commission, referred to in paragraph (2)(d), subsection (4), and paragraph (16)(b), see http://www.sec.gov .
For more on the Toronto stock exchange, inc., referred to in subsection (23), see http://www.tmx.com/en/index.html .
The words enclosed in parentheses so appeared in the law as enacted.
CASE NOTES
Enjoining Sales.
Where defendant failed to carry his burden under the nonpublic offer and limited offering exemptions and failed to establish that a genuine issue of material fact existed on the issue of securities fraud, summary judgment was properly granted to Idaho department of finance seeking a permanent injunction to prohibit defendant from selling said securities. State v. Shama Resources Ltd. Partnership, 127 Idaho 267, 899 P.2d 977 (1995).
Official Comment
- Sections 202(1) through (8) are available only for nonissuer transactions. An issuer selling securities in an initial public offering or other offering may not rely on Sections 202(1) through (8). A nonissuer, however, can rely on any issuer transaction exemption such as Section 202(13), when the exemption would be applicable to a nonissuer. The term “nonissuer transaction or nonissuer distribution” is defined in Section 102(18); the term “issuer” is defined in Section 102(17).
- Section 202(1): Isolated nonissuer transactions: Prior Provisions: 1956 Act Section 402(b)(1); RUSA Section 402(1). The term “isolated transaction” is not defined in this Act, but left to the states to develop. Historically under state law there has been somewhat varied case law development of the term “isolated transactions.” See, e.g., Blinder, Robinson & Co., Inc. v. Goettsch , 403 N.W.2d 772 (Iowa 1987) (isolated nonissuer transaction exemption is not unconstitutionally vague); Allen v. Schauf , 449 P.2d 1010 (Kan. 1969) (regulation defined isolated transactions to not exceed four persons solicited in a 12 month period); Nelson v. State , 355 P.2d 413, 420 (Okla. Ct. Crim. App. 1960) (“[a]n isolated sale means one standing alone, disconnected from any other”); see generally 1 Louis Loss & Joel Seligman, Securities Regulation 125-130 (3d ed. rev. 1998).
- Section 202(2): Nonissuer transactions in specified outstanding securities: Prior Provisions: 1956 Act Section 402(b)(2); RUSA Sections 402(3) and (4). This Section represents a modernization of the securities manual exemption which was included in both the 1956 Act and RUSA. NASAA recommended an amendment to the 1956 Act Section 402(b) after discussion with the Securities Industry Association and others in the securities industry. This Section generally follows the NASAA amendment.
- Section 202(3): Nonissuer transactions in specified foreign transactions: No Prior Provision. The NASAA recommendation that was the basis of Section 202(2) also included specified foreign nonissuer transactions subject to a manual exemption when there was disclosure of the issuer’s officers and directors in the issuer’s country of domicile. This subsection uses margin securities as an alternative approach to identify sufficiently seasoned foreign securities. Margin securities are required to be in compliance with Regulation T which was adopted by the Board of Governors of the Federal Reserve System.
- Section 202(4): Nonissuer transactions in securities subject to Securities Exchange Act reporting: Prior Provision: RUSA Section 402(2). RUSA added this exemption to authorize nonissuer secondary trading in the securities of issuers that were subject to the periodic reporting requirements of the Securities Exchange Act of 1934. To bar immediate secondary trading in nonregistered initial public offerings, there was a further requirement that these securities be subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934 for not less than 90 days. Section 202(4) only covers the guarantor because if the issuer of the security is a reporting company under Sections 13 or 15(d) of the Securities Exchange Act of 1934, the transaction is preempted by Section 18(b)(4)(A) of the Securities Act of 1933.
- This subsection includes both debt securities with fixed maturity or a fixed interest rate and preferred stock with fixed dividend provisions.
- Section 202(6): Unsolicited brokerage transactions: Prior Provisions: 1956 Act Section 402(b)(3); RUSA Section 402(5). Section 18(b)(4)(B) of the Securities Act of 1933 defines as federal covered securities those subject to Section 4(4) of the Securities Act of 1933: “brokerage transactions executed upon customers’ orders on any exchange or in the over-the-counter market but not the solicitation of such orders.” Section 202(6) is intended to provide exemption for nonagency transactions by dealers not within the scope of Section 4(4).
- Section 202(7): Nonissuer transactions by pledgees: Prior Provisions: 1956 Act Section 402(b)(7); RUSA Section 402(9). This subsection is identical to the 1956 Act and substantively identical to RUSA.
- Section 202(8): Nonissuer transactions with federal covered investment advisers: No Prior Provision. This exemption was added because of a recognition that federal covered investment advisers are sophisticated financial professionals capable of determining the merits of a security and do not require the protections provided by requiring registration in a particular state.
- Section 202(9): Specified exchange transactions: No Prior Provision. Section 202(9) provides a state counterpart to the exemption in Section 3(a)(10) of the Securities Act of 1933.
- Section 202(10): Underwriter transactions: Prior Provisions: 1956 Act Section 402(b)(4); RUSA Section 402(6). This subsection is substantively identical to the 1956 Act and RUSA.
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Section 202(11): Unit secured transactions: Prior Provisions: 1956 Act Section 402(b)(5); RUSA Section 402(7). In recent years the application of this exemption has been one of concern to state securities administrators. The conditions that conclude this exemption are new and are intended to address these concerns.
13. Section 202(12): Bankruptcy, guardian, or conservator transactions: Prior Provisions: 1956 Act Section 402(b)(6); RUSA Section 402(8). This subsection is identical to that in the 1956 Act and RUSA.
- are the offerings part of a single plan of financing;
- do the offerings involve issuance of the same class of securities;
- are the offerings made at or about the same time;
- is the same type of consideration to be received; and
- are the offerings made for the same general purpose.
In general this subsection is intended to cover the occasional sale by a person. It would not exempt multiple or successive transactions by a person or group, whether those sales are sufficient to constitute a “distribution” as that term is used for purposes of the federal securities laws, see 2 Louis Loss & Joel Seligman, Securities Regulation 1138.50-1138.52 (3d ed. rev. 1999), or merely too frequent to be considered “isolated” under the relevant state law.
Limited issuer offering transactions are separately addressed in Section 202(14).
Rule 419 issued under the Securities Act of 1933 defines a “blank check company” to be a company that “is a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person.” A “blind pool” is similar and would involve an investment in a blank check or other entity with no identified business plan or purpose. A “shell company” is also similar and would involve an entity which, to date, has no significant business assets, plan, or purpose.
Section 18(b)(4)(A) of the National Securities Markets Improvement Act of 1996 defines nonissuer transactions under Section 4(1) of the Securities Act of 1933 (“transactions by persons other than an issuer, underwriter, or dealer”) as “federal covered securities,” see Section 102(7), if the issuer files reports with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934. Under Section 18(a) of the Securities Act of 1933 no state statute, rule, order, or other administrative action with respect to registration of securities or reporting requirements may apply to a federal covered security. To harmonize Section 202(4) with Sections 18(a) and 18(b)(4)(A) of the Securities Act of 1933, the 90 day reporting period in RUSA Section 402(2) is not adopted in this Act. 6. Section 202(5): Nonissuer transactions in specified fixed income securities: Prior Provisions: 1956 Act Section 402(b)(2)(B); RUSA Section 402(4). The concept of a fixed income security rated by a nationally recognized statistical rating organization in one of its four highest rating categories described in Section 202(5)(A) is well established in federal securities law in Form S-3 adopted under the Securities Act of 1933 and the net capital Rule 15c3-1(c)(2)(vi)(F) adopted under the Securities Exchange Act of 1934. See 2 Louis Loss & Joel Seligman, Securities Regulation 649-653 (3d ed. rev. 1999). Nationally recognized statistical rating organizations have been identified by the Securities and Exchange Commission and include such organizations as Moody’s and Standard and Poor’s. Rating categories typically begin with AAA and under this Act would include BBB as the fourth highest rating category.
Section 202(5)(B) follows the 1956 Act and RUSA, but also addresses blank check and similar offerings, which became major concerns at the state and federal levels during the past two decades. Cf. Securities Act of 1933 Rule 419. See Official Comment (3).
The 1956 Act Section 402(b)(3) had provided that the administrator “may by rule require that the customer acknowledge upon a specified form that the same was unsolicited, and that a signed copy of each such form be preserved by the broker-dealer for a specified period.” This type of requirement is preempted by Section 18(a) of the Securities Act of 1933 for federal covered securities and is viewed as unnecessary for the limited class of dealer nonagency transactions that will be exempted by Section 202(6).
14. Section 202(13): Transactions with specified investors: Prior Provision: 1956 Act Section 402(b)(8). The 1956 Act contains similar but less inclusive language in Section 402(b)(8). If the Securities and Exchange Commission adopts a rule defining “qualified purchaser” as used in Section 18(b)(3) of the Securities Act to specify certain purchasers of federal covered securities, part or all of this exemption will be redundant. As of September 2002, the Commission has proposed, but not adopted, Rule 146(c).
Section 202(13)(B) is limited to transactions for the account of a federal covered investment adviser and is not intended to reach transactions on behalf of others by such adviser.
15. Section 202(14): Limited offering transactions: Prior Provisions: 1956 Act Section 402(b)(9); RUSA Section 402(11). The reference in the prefatory language to “a single issue” signifies that two or more issues can be “integrated” and potentially destroy the exemption. There are two general tests for integration under the federal securities laws. The states similarly have followed generally these types of integration principles with respect to securities transaction exemptions. First, there is a six month “buffer” before and after an offer, offer to sell, or sale of a transaction exempt under Section 202(14) during which no other issue can be distributed if integration automatically is to be avoided. See Rule 147(b)(2) and Rule 502(a) of the Securities Act of 1933. Second, if two issues occur within six months, integration may occur depending upon the following factors:
See generally 3 Louis Loss & Joel Seligman, Securities Regulation 1231-1248 (3d ed. rev. 1999).
Section 402(b)(9) of the 1956 Act and Section 402(11) of the 1985 Act provide alternative limited offering transaction exemptions. The 1956 Act was limited to offers to no more than ten persons (other than institutional investors specified in Section 402(b)(8)); all purchasers in the State had to purchase for investment; and no remuneration was given for soliciting prospective purchasers in the State. RUSA, in contrast, was limited to no more than 25 purchasers (other than financial or institutional investors); no general solicitation or advertising; and no remuneration was paid to a person other than a broker-dealer for soliciting a prospective purchaser.
This Section would apply to preorganization limited offerings as well as operating company limited offerings. The Securities Act of 1933 Sections 3(b) and 4(2) also apply to both. In contrast, the 1956 Act Section 402(b)(10) and RUSA Section 402(12) used similar concepts in separate Sections to apply to preorganization limited offerings.
Section 18(b)(4)(D) of the Securities Act of 1933 defines as federal covered securities those issued under Securities and Exchange Commission rules under Section 4(2) of the Securities Act. This would include Rule 506, which uses the “accredited investor” definition in Rule 501(a). When a transaction involves Rule 506, Section 18(b)(4)(D) further provides “that this paragraph does not prohibit a state from imposing notice filing requirements that are substantially similar to those required by rule or regulation under Section 4(2) that are in effect on September 1, 1996.” These notice requirements are found in Section 302(c) of this Act. A majority of states have adopted a Uniform Limited Offering Exemption, coordinate to varying degrees with Regulation D. The authority to adopt this and other exemptive rules is provided in Section 203.
16. Section 202(15): Transactions with existing security holders: Prior Provisions: 1956 Act Section 402(b)(11); RUSA Section 402(14). Section 3(a)(9) of the Securities Act of 1933 exempts exchange offerings with existing security holders. Under Section 18(b)(4)(C) transactions subject to Section 3(a)(9) are federal covered securities. See Section 102(7). Notice requirements in the earlier 1956 Act and RUSA accordingly would be preempted by the Securities Act of 1933. See Section 18(a) of the Securities Act of 1933. Otherwise this exemption is substantively identical to the 1956 Act and RUSA.
17. Section 202(16): Offerings registered under this [Act] and the Securities Act of 1933: Prior Provisions: 1956 Act Section 402(b)(12); RUSA Section 402(15). This exemption generally follows the 1956 Act and RUSA. Rule 165 of the Securities Act of 1933, which was adopted in 1999, allows the offeror of securities in a business combination to make written communications that offer securities for sale before a registration statement is filed as long as specified conditions are satisfied.
RUSA Section 402(15)(ii) also required that a registration statement be filed under this Act, but not yet be effective. By eliminating the filing requirement this exemption will reach the offer (but not the sale) of a security that is anticipated to be a federal covered security by applying for listing on the New York Stock Exchange or other exchange specified in Section 18(b)(1) of the Securities Act of 1933, but the listing and federal covered security status has not yet become effective.
18. Section 202(17): Offerings when registration has been filed, but is not effective under this [Act] and exempt from the Securities Act of 1933: Prior Provisions: RUSA Section 402(16). If a rule is adopted by the administrator a solicitation of interest document must accompany a registration by qualification as specified in Section 304(b)(13).
Oral offers may be made after a registration statement has been filed, both before and after a registration statement is effective.
This exemption does not operate unless the administrator adopts a rule under 202(17)(B).
19. Section 202(18): Control transactions: Prior Provision: RUSA Section 402(17). Until 1972 mergers and similar transactions were not considered to involve sales and did not have to register under the Securities Act of 1933. In 1972 the Securities and Exchange Commission adopted Rule 145 defining many mergers and similar transactions to be sales and abandoned its earlier “no sale” doctrine. See 3 Louis Loss & Joel Seligman, Securities Regulation 1262-1280 (3d ed. rev. 1999).
Because most merger and similar transactions require shareholder approval and shareholders often have appraisal rights if they choose to dissent, the potential for abuse is less than in an offering of securities for cash. When appropriate the administrator can deny, condition, limit or revoke this exemption under Section 204. Section 202(18) does not follow the requirement in RUSA Section 402(17) that written notice of the transactions and a copy of the solicitation materials be given to the administrator 10 days before the consummation of the transaction and, that the administrator is empowered to disallow the exemption within the next 10 days. 20. Section 202(19): Rescission offers: No Prior Provision. See Section 510 for discussion of rescission offers.
21. Section 202(20): Out-of-state offers or sales: Source of law: Colo. Section 11-51-102(7). Compare A.S. Goldmen & Co., Inc. v. New Jersey Bur. of Sec. , 163 F.3d 780 (3d Cir. 1999), which held that under the United States Constitution’s Commerce Clause a State could authorize a securities administrator to prevent a broker-dealer from selling securities from a State to purchasers in other States where purchase of the securities was authorized. The concluding phrase “and is not part of an unlawful plan or scheme to evade this [Act]” is intended to preclude reliance on this exemption by boiler rooms and others engaged in illegal activities.
Section 202(20) provides an exemption from securities registration and does not address an administrator’s power to investigate and bring enforcement actions under Articles 5 and 6.
22. Section 202(21): Employee benefit plans: Prior Provision: RUSA Section 401(b)(12). The 1956 Act Section 402(a)(11) was limited to investment contracts issued in connection with specified employee benefit plans if the administrator was given 30 days written notice.
In 1979, the United States Supreme Court in International Bhd. of Teamsters v. Daniel , 439 U.S. 551 (1979), held that a noncontributory, mandatory pension plan subject to the Employee Retirement Income Security Act of 1974 (ERISA) was not a security within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934. The Securities and Exchange Commission staff subsequently took the position that the interests of employees in involuntary, contributory plans are not securities. Sec. Act Rel. 6188, 19 SEC Dock. 465, 473 (1980). Both contributory and noncontributory pension or welfare plans subject to ERISA are excluded from the definition of security in Section 102(28).
In this definition, the term “advisors” does not mean “investment advisers,” as defined in Section 102(15).
With respect to employee benefit plans that are securities, Section 202(21) provides an exemption, but follows RUSA in not limiting the exemption to investment contracts and not requiring 30 days notice to the administrator.
Section 202(21) is modeled, in part, on Rule 701(c) adopted under the Securities Act of 1933. Compliance with Rule 701 will provide compliance with this exemption.
Both the 1956 Act and RUSA, for unstated reasons, treated employee benefit plans as exempt securities, rather than exempt securities transactions. There appears to be no appropriate reason to do so.
Resale of employee benefit plan securities can occur under appropriate section 202 transaction exemptions. Section 202(21) is not intended to provide a new method of publicly issuing securities.
The administrator, when appropriate, can deny, condition, limit, or revoke an exemption under Section 202(21). See Section 204.
23. Section 202(22): Specified dividends and tender offers and judicially recognized reorganizations: Prior Provision: 1956 Act Section 401(j)(6)(B) and (D); RUSA Section 101(13)(vi). Section 202(22)(A) and (B) generally follow exclusions from the definition of sale in the 1956 Act and RUSA. Section 202(22)(C) is new and corresponds to Rule 162, recently adopted under the Securities Act of 1933, which allows the offeror in a stock exchange offer to solicit tenders of securities before a registration statement is effective as long as no securities are purchased until the registration statement is effective and the tender offer has expired.
24. Section 202(23): Nonissuer transactions involving specified foreign issuer securities traded on designated securities exchanges. This exemption expressly covers Toronto Stock Exchange issuers that are public reporting companies under Canadian securities law and meet the 180 day continuous reporting requirement. In conformance with the North American Free Trade Agreement (NAFTA) and General Agreement on Trade in Services (GATS), the exemption separately provides authority for the administrator to designate by rule or order other specific foreign jurisdictions and their trading exchanges upon an adequate showing. The exemption also provides authority for an administrator to revoke any designation if necessary or appropriate in the public interest and for the protection of investors.
§ 30-14-202A. Fairness hearing. — (a) The administrator is expressly authorized to hold a hearing and consider the fairness of the terms and conditions of a transaction described in section 30-14-202(9), Idaho Code. This section 30-14-202A, Idaho Code, is intended to provide for a fairness hearing before the administrator with respect to transactions which, if approved by the administrator, will be exempt from the registration requirements of the federal securities laws under section 3(a)(10) of the securities act of 1933, or any section comparable thereto which may subsequently be enacted.
(b) An application for approval shall describe the proposed transaction and shall be in such form, contain such information and be accompanied by such documents as the administrator shall reasonably require by rule or otherwise. The applicant shall pay to the administrator a filing fee of three hundred dollars ($300) and shall file with the administrator an undertaking to defray the costs of a hearing officer and a stenographer for the hearing.
(c) An application for approval shall be set for hearing within thirty (30) days after the filing of an application. The applicant shall give notice of the hearing to all persons to whom securities are to be issued in the proposed transaction, and all such persons shall have the right to appear at the hearing.
(d) Within ten (10) days after the hearing, the administrator shall issue an order either granting or denying approval of the terms of conditions of the proposed plan. The order shall grant approval if the proposed transaction is fair, equitable and free from fraud. The order shall deny approval if the proposed transaction is unfair, inequitable or not free from fraud.
History.
I.C.,§ 30-14-202A, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
Section 3(a)(10) of the securities act of 1933, referred to in subsection (a), is codified as 15 USCS § 78c(a)(10).
§ 30-14-203. Additional exemptions and waivers.
- A rule adopted or an order issued under this chapter may exempt a security, transaction or offer.
- A rule adopted under this chapter may exempt a class of securities, transactions or offers from any or all of the requirements of sections 30-14-301 through 30-14-306, Idaho Code, and section 30-14-504, Idaho Code.
- An order issued under this chapter may waive, in whole or in part, any or all of the conditions for an exemption or offer under sections 30-14-201 and 30-14-202, Idaho Code.
History.
I.C.,§ 30-14-203, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
- Under this type of authority, 50 of 53 jurisdictions through September 2002 had adopted the Uniform Limited Offering Exemption (ULOE) or a Regulation D exemption, and 32 jurisdictions had adopted a Rule 144A exemption. This Act does not incorporate ULOE or a Rule 144A exemption because of their complexity and the likelihood of periodic updating of their provisions. Rule 144A, and similar exemptions in ULOE, can be most effectively implemented by rule rather than statute.
- Under Section 203 a state would also be authorized to adopt by rule or order new exemptions as circumstances warrant for new technologies such as the Internet. Cf. NASAA Resolution Regarding Securities Offered on Internet, NASAA Rep. ¶ 7040 (Jan. 7, 1996).
- It is the intent of this Section that ULOE, Rule 144A, and additional exemptions or waivers be adopted uniformly by states, to the extent this is practicable.
§ 30-14-204. Denial, suspension, revocation, condition or limitation of exemptions.
- Enforcement related powers. Except with respect to a federal covered security or a transaction involving a federal covered security, an order under this chapter may deny, suspend application of, condition, limit, or revoke an exemption created under section 30-14-201(3)(c), (7) or (8), Idaho Code, or section 30-14-202, Idaho Code, or an exemption or waiver created pursuant to section 30-14-203, Idaho Code, with respect to a specific security, transaction or offer. An order under this section may be issued only pursuant to the procedures set forth in section 30-14-306(d) or 30-14-604, Idaho Code, and only prospectively.
- Knowledge of order required. A person does not violate section 30-14-301, 30-14-303 through 30-14-306, 30-14-504 or 30-14-510, Idaho Code, by an offer to sell, offer to purchase, sale, or purchase effected after the entry of an order issued under this section if the person did not know, and in the exercise of reasonable care could not have known, of the order.
History.
I.C.,§ 30-14-204, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provision:
Prior Provision: 1956 Act Section 402(c); RUSA Section 404.
- Section 204 is potentially far reaching. The ability to deny, condition, limit, or revoke the exemptions specified in Sections 201(3)(C), 201(7), 201(8), 202, or 203 is adopted concomitant with the breadth of these exemptions. One or more than one security, transaction, or offer can be covered by a Section 204 order.
- The courts have given a securities administrator’s decision to deny or revoke an exemption substantial deference when there was compliance with applicable due process and statutory requirements. See, e.g., Johnson-Bowles Co., Inc. v. Div. of Sec. , 829 P.2d 101 (Utah Ct. App. 1992).
Part 3 Registration of Securities and Notice Filing of Federal Covered Securities
§ 30-14-301. Securities registration requirement.
It is unlawful for a person to offer or sell a security in this state unless:
- The security is a federal covered security;
- The security, transaction or offer is exempted from registration under sections 30-14-201 through 30-14-203, Idaho Code; or
- The security is registered under this chapter.
History.
I.C.,§ 30-14-301, as added by 2004, ch. 45, § 2, p. 169.
CASE NOTES
Public Offering.
Where purchaser was an attorney licensed in California and had no knowledge of the intricacies of seller’s business, the purchasers were of the class designed to be protected by the requirement of a prospectus and the sale was a public offering necessitating registration. Frachiseur v. Mountain View Irrigation Co., 100 Idaho 336, 597 P.2d 222 (1979).
Scienter.
Scienter is not required for violations of the securities registration and licensing requirements. State v. Montgomery, 135 Idaho 348, 17 P.3d 292 (2001).
Official Comment
Prior Provisions:
- This Section is substantively identical to the 1956 Act and RUSA except for the addition of Section 301(1), which is necessitated by the National Securities Markets Improvement Act of 1996. See Section 102(7).
- Except for federal covered securities, exempt securities, or securities offered or sold in exempt transactions, no sale of a security may be made in this State before the security is registered. “Sale” is defined in Section 102(26); “in this State” is addressed in Section 610; and securities registration is addressed in Sections 303 through 306.
- The Securities Act of 1933 permits certain types of offers during the “waiting period” between the filing and effectiveness of a registration statement. The exemptive provisions of Sections 202(16) and (17) operate to permit similar offers for securities that are not federal covered securities and are in the process of registration under federal or state statutes or both. 4. Notice filings and fees applicable to federal covered securities, see Section 102(7), are addressed in Section 302.
§ 30-14-302. Notice filing.
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Required filing of records. With respect to a federal covered security, as defined in section 18(b)(2) of the securities act of 1933 (15 U.S.C. 77r(b)(2)), that is not otherwise exempt under sections 30-14-201 through 30-14-203, Idaho Code, a rule adopted or an order issued under this chapter may require the filing of any or all of the following records:
- 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 the securities act of 1933 and a consent to service of process complying with section 30-14-611, Idaho Code, signed by the issuer and the payment of a fee of three hundred dollars ($300) for mutual funds and one hundred dollars ($100) for unit investment trusts;
- 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 the securities act of 1933; and
- 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, if the sales data are not included in records filed with the securities and exchange commission; and
- Each series or portfolio of an investment company offering shall be required to make a separate notice filing. Separate notice filings for classes of an investment company are not required as long as classes are used solely as a method of distinguishing payment plans within a series or portfolio.
- Notice filing effectiveness and renewal. A notice filing under subsection (a) of this section is effective for one (1) year commencing on the later of the notice filing or the effectiveness of the offering filed with the securities and exchange commission. 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 a renewal fee of three hundred dollars ($300) for mutual funds and one hundred dollars ($100) for unit investment trusts. A previously filed consent to service of process complying with section 30-14-611, Idaho Code, may be incorporated by reference in a renewal. A renewed notice filing becomes effective upon the expiration of the filing being renewed.
- Notice filings for federal covered securities under section 18(b)(4)(D) and (F). With respect to a security that is a federal covered security under section 18(b)(4)(D) and (F) of the securities act of 1933 (15 U.S.C. 77r(b)(4)(D) and (F)), a rule or order under this chapter may require a notice filing by or on behalf of an issuer and may include a copy of form D, or other filing requirements as determined by the director of the department of finance, and the payment of a fee of fifty dollars ($50.00).
History.
(d) Stop orders. Except with respect to a federal security under section 18(b)(1) of the securities act of 1933 (15 U.S.C. 77r(b)(1)), if the administrator finds that there is a failure to comply with a notice or fee requirement of this section, the administrator 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 administrator. History.
I.C.,§ 30-14-302, as added by 2004, ch. 45, § 2, p. 169; am. 2012, ch. 65, § 3, p. 171; am. 2019, ch. 260, § 1, p. 770.
STATUTORY NOTES
Amendments.
The 2012 amendment, by ch. 65, in subsection (c), updated the federal citations near the beginning and substituted “and the payment of a fee of fifty dollars ($50.00)” for “including the appendix, as promulgated by the securities and exchange commission, and a consent to service of process complying with section 30-14-611, Idaho Code, signed by the issuer not later than fifteen (15) days after the first sale of the federal covered security in this state and the payment of a fee of fifty dollars ($50.00); and the payment of a fee of fifty dollars ($50.00) for any late filing” at the end.
The 2019 amendment, by ch. 260, in subsection (c), added “and (F)” to the three statutory references, and substituted “and may include a copy of form D, or other filing requirements as determined by the director of the department of finance” for “to include a copy of form D”.
Federal References.
The securities act of 1933, referred to in this section, is codified as 15 USCS § 77a et seq.
Compiler’s Notes.
For more on securities and exchange commission, see http://www.sec.gov .
For more on form D, referred to in subsection (c), see http://www.sec.gov/answers/formd.htm .
The words enclosed in parentheses so appeared in the law as enacted.
Official Comment
No Prior Provision.
- The little used “registration by notification” in the 1956 Act Section 302 or “registration by filing” in RUSA Section 302 are omitted from this Act because of the notice filing approach required by Section 18(b)(2) of the Securities Act of 1933 for federal covered securities, which, in essence, replaces the need for registration by notification.
- For Rule 506 offerings which are addressed by Section 18(d)(4)(D) of the Securities Act of 1933, the Securities and Exchange Commission requires the filing of Form D. See Rule 503. When an issuer meets the conditions of Rule 506, Section 302(c) is intended to limit required state filings to no more than a requirement of filing a copy of Form D, including the Appendix, a consent to service of process, and a fee.
- The definition of “filing” in Section 102(8) will permit states to receive electronic filing of records under this Section. An administrator may also accept under this Section a signed consent filed electronically with a designee of the administrator. See Section 105.
- If a State prefers to have the fees in this section established by rule, replace the phrase “a fee of $[___]” in subsections (a), (b), and (c) with the phrase “a fee established by the administrator by rule”. See Comment 3 to Section 410.
§ 30-14-303. Securities registration by coordination.
- Registration permitted. A security for which a registration statement has been filed under the securities act of 1933 in connection with the same offering may be registered by coordination under this section.
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Required records. A registration statement and accompanying records under this section must contain or be accompanied by the following records in addition to the information specified in section 30-14-305, Idaho Code, and a consent to service of process complying with section 30-14-611, Idaho Code:
- A copy of the latest form of prospectus filed under the securities act of 1933;
- A copy of the articles of incorporation and bylaws or their substantial equivalents currently in effect; a copy of any agreement with or among underwriters; a copy of any indenture or other instrument governing the issuance of the security to be registered; and a specimen, copy or description of the security that is required by any rule adopted or an order issued under this chapter;
- Copies of any other information or any other records filed by the issuer under the securities act of 1933 requested by the administrator; and
- An undertaking to forward each amendment to the federal prospectus, other than an amendment that delays the effective date of the registration statement, promptly after it is filed with the securities and exchange commission.
-
Conditions for effectiveness of registration statement. A registration statement under this section becomes effective simultaneously with or subsequent to the federal registration statement when all the following conditions are satisfied:
- A stop order issued pursuant to subsection (d) of this section or section 30-14-306, Idaho Code, or issued by the securities and exchange commission, is not in effect and a proceeding is not pending against the issuer under section 30-14-306, Idaho Code, and the administrator has not given written notice of deficiencies that are unresolved and that would constitute grounds for a stop order under section 30-14-306, Idaho Code; and
- The registration statement has been on file for at least twenty (20) days or a shorter period provided by a rule adopted or an order issued under this chapter.
- Notice of federal registration statement effectiveness. The registrant shall promptly notify the administrator in a record of the date when the federal registration statement becomes effective and the content of any price amendment and shall promptly file a record containing the price amendment. If the notice is not timely received, the administrator may issue a stop order, without prior notice or hearing, retroactively denying effectiveness to the registration statement or suspending its effectiveness until compliance with this section. The administrator shall promptly notify the registrant of an order by telegram, telephone or electronic means and shall promptly confirm this notice by a record. If the registrant subsequently complies with the notice requirements of this section, the stop order is void as of the date of its issuance.
History.
(e) Effectiveness of registration statement. If the federal registration statement becomes effective before each of the conditions in this section is satisfied or is waived by the administrator, the registration statement is automatically effective under this chapter when all the conditions are satisfied or waived. If the registrant notifies the administrator of the date when the federal registration statement is expected to become effective, the administrator shall promptly notify the registrant by telegram, telephone or electronic means and shall promptly confirm this notice by a record, indicating whether all the conditions are satisfied or waived and whether the administrator intends the institution of a proceeding under section 30-14-306, Idaho Code. The notice by the administrator does not preclude the institution of such a proceeding. History.
I.C.,§ 30-14-303, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The securities act of 1933, referred to in this section, is compiled as 15 USCS § 77a et seq.
Compiler’s Notes.
For more on securities and exchange commission, see http://www.sec.gov .
Official Comment
Prior Provisions:
- Registration by coordination was one of the key innovations of the 1956 Act. As in the 1956 Act, Section 303 streamlines the content of the registration statement and the procedure by which a registration statement becomes effective, but not the substantive standards governing the effectiveness of a registration statement.
- The phrase “in connection with the same offering” in Section 303 does not require that the federal and state registration statements be filed simultaneously or become effective simultaneously. A registration by coordination can be filed in a State after the effectiveness of the federal registration statement as long as the administrator does not conclude that the interval was too long to consider the State registration statement “the same offering.”
- Section 303 is similar to the 1956 Act except that these provisions have been modernized to include electronic filing and electronic notification. Cf. Sections 102(8), 102(25), 105. It is anticipated that this will facilitate simultaneous filing with the Securities and Exchange Commission and the States which is consistent with the uniformity intended by this Act. Simultaneous or sequential filing could be administered through a designee similar to the current Web-CRD or in conjunction with the Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system or otherwise.
- Section 303(b) is not intended to limit the administrator to requiring only the information and records filed with the Securities and Exchange Commission.
- Sections 303(c) through (e) describe the conditions to be satisfied to achieve effectiveness of a coordinated filing. “Price amendment” is defined in Section 102(23). The administrator retains the right to test the registration statement by the substantive standards of Section 306(a) and may issue a stop or denial order if the administrator believes any of those provisions are applicable.
§ 30-14-304. Securities registration by qualification.
- Registration permitted. A security may be registered by qualification under this section.
-
Required records. A registration statement under this section must contain the information or records specified in section 30-14-305, Idaho Code, a consent to service of process complying with section 30-14-611, Idaho Code, and, if required by rule adopted under this chapter, the following information or records unless waived by the administrator for good cause shown:
- With respect to the issuer and any significant subsidiary, its name, address, and form of organization; the state or foreign jurisdiction and date of its organization; the general character and location of its business; a description of its physical properties and equipment; and a statement of the general competitive conditions in the industry or business in which it is or will be engaged;
- With respect to each director and officer of the issuer, and other person having a similar status or performing similar functions, the person’s name, address, and principal occupation for the previous five (5) years; the amount of securities of the issuer held by the person as of the thirtieth day before the filing of the registration statement; the amount of the securities covered by the registration statement to which the person has indicated an intention to subscribe; and a description of any material interest of the person in any material transaction with the issuer or a significant subsidiary effected within the previous three (3) years or proposed to be effected;
- With respect to persons covered by paragraph (2) of this subsection, the aggregate sum of the remuneration paid to those persons during the previous twelve (12) months and estimated to be paid during the next twelve (12) months, directly or indirectly, by the issuer, and all predecessors, parents, subsidiaries and affiliates of the issuer;
- With respect to a person owning of record or owning beneficially, if known, ten percent (10%) or more of the outstanding shares of any class of equity security of the issuer, the information specified in paragraph (2) of this subsection other than the person’s occupation;
- With respect to a promoter, if the issuer was organized within the previous three (3) years, the information or records specified in paragraph (2) of this subsection, any amount paid to the promoter within that period or intended to be paid to the promoter, and the consideration for the payment;
- With respect to a person on whose behalf any part of the offering is to be made in a nonissuer distribution, the person’s name and address; the amount of securities of the issuer held by the person as of the date of the filing of the registration statement; a description of any material interest of the person in any material transaction with the issuer or any significant subsidiary effected within the previous three (3) years or proposed to be effected; and a statement of the reasons for making the offering;
- The capitalization and long-term debt, on both a current and pro forma basis, of the issuer and any significant subsidiary, including a description of each security outstanding or being registered or otherwise offered, and a statement of the amount and kind of consideration, whether in the form of cash, physical assets, services, patents, goodwill, or anything else of value, for which the issuer or any subsidiary has issued its securities within the previous two (2) years or is obligated to issue its securities; (8) The kind and amount of securities to be offered; the proposed offering price or the method by which it is to be computed; any variation at which a proportion of the offering is to be made to a person or class of persons other than the underwriters, with a specification of the person or class; the basis on which the offering is to be made if otherwise than for cash; the estimated aggregate underwriting and selling discounts or commissions and finders’ fees, including separately cash, securities, contracts, or anything else of value to accrue to the underwriters or finders in connection with the offering or, if the selling discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering, and accounting charges; the name and address of each underwriter and each recipient of a finder’s fee; a copy of any underwriting or selling group agreement under which the distribution is to be made or the proposed form of any such agreement whose terms have not yet been determined; and a description of the plan of distribution of any securities that are to be offered otherwise than through an underwriter;
- The kind and amount of securities to be offered; the proposed offering price or the method by which it is to be computed; any variation at which a proportion of the offering is to be made to a person or class of persons other than the underwriters, with a specification of the person or class; the basis on which the offering is to be made if otherwise than for cash; the estimated aggregate underwriting and selling discounts or commissions and finders’ fees, including separately cash, securities, contracts, or anything else of value to accrue to the underwriters or finders in connection with the offering or, if the selling discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering, and accounting charges; the name and address of each underwriter and each recipient of a finder’s fee; a copy of any underwriting or selling group agreement under which the distribution is to be made or the proposed form of any such agreement whose terms have not yet been determined; and a description of the plan of distribution of any securities that are to be offered otherwise than through an underwriter;
- The estimated monetary proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the estimated amount to be used for each purpose; the order or priority in which the proceeds will be used for the purposes stated; the amounts of any funds to be raised from other sources to achieve the purposes stated; the sources of the funds; and, if a part of the proceeds is to be used to acquire property, including goodwill, otherwise than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons that have received commissions in connection with the acquisition, and the amounts of the commissions and other expenses in connection with the acquisition, including the cost of borrowing money to finance the acquisition;
- A description of any stock options or other security options outstanding, or to be created in connection with the offering, and the amount of those options held or to be held by each person required to be named in paragraph (2), (4), (5), (6) or (8) of this subsection and by any person that holds or will hold ten percent (10%) or more in the aggregate of those options;
- The dates of, parties to, and general effect concisely stated of each managerial or other material contract made or to be made otherwise than in the ordinary course of business to be performed in whole or in part at or after the filing of the registration statement or that was made within the previous two (2) years, and a copy of the contract;
- A description of any pending litigation, action or proceeding to which the issuer is a party and that materially affects its business or assets, and any litigation, action or proceeding known to be contemplated by governmental authorities;
- A copy of any prospectus, pamphlet, circular, form letter, advertisement or other sales literature intended as of the effective date to be used in connection with the offering and any solicitation of interest used in compliance with section 30-14-202(17)(b), Idaho Code;
- A specimen or copy of the security being registered, unless the security is uncertificated; a copy of the issuer’s articles of incorporation and bylaws or their substantial equivalents, in effect; and a copy of any indenture or other instrument covering the security to be registered;
- A signed or conformed copy of an opinion of counsel concerning the legality of the security being registered, with an English translation if it is in a language other than English, which states whether the security when sold will be validly issued, fully paid, and nonassessable and, if a debt security, a binding obligation of the issuer;
- A signed or conformed copy of a consent of any accountant, engineer, appraiser or other person whose profession gives authority for a statement made by the person, if the person is named as having prepared or certified a report or valuation, other than an official record, that is public, which is used in connection with the registration statement; (17) A balance sheet of the issuer as of a date within four (4) months before the filing of the registration statement; a statement of income and a statement of cash flows for each of the three (3) fiscal years preceding the date of the balance sheet and for any period between the close of the immediately previous fiscal year and the date of the balance sheet, or for the period of the issuer’s and any predecessor’s existence if less than three (3) years; and, if any part of the proceeds of the offering is to be applied to the purchase of a business, the financial statements that would be required if that business were the registrant; and
-
Conditions for effectiveness of registration statement. A registration statement under this section becomes effective thirty (30) days, or any shorter period provided by a rule adopted or an order issued under this chapter, after the date the registration statement or the last amendment other than a price amendment is filed, if:
- A stop order is not in effect and a proceeding is not pending under section 30-14-306, Idaho Code;
- The administrator has not issued an order under section 30-14-306, Idaho Code, delaying effectiveness; and
- The applicant or registrant has not requested that effectiveness be delayed.
- Delay of effectiveness of registration statement. The administrator may delay effectiveness once for not more than ninety (90) days if the administrator determines the registration statement is not complete in all material respects and promptly notifies the applicant or registrant of that determination. The administrator may also delay effectiveness for a further period of not more than thirty (30) days if the administrator determines that the delay is necessary or appropriate.
-
Prospectus distribution may be required. A rule adopted or an order issued under this chapter may require as a condition of registration under this section that a prospectus containing a specified part of the information or record specified in subsection (b) of this section be sent or given to each person to which an offer is made, before or concurrently, with the earliest of:
- The first offer made in a record to the person otherwise than by means of a public advertisement, by or for the account of the issuer or another person on whose behalf the offering is being made or by an underwriter or broker-dealer that is offering part of an unsold allotment or subscription taken by the person as a participant in the distribution;
- The confirmation of a sale made by or for the account of the person;
- Payment pursuant to such a sale; or
- Delivery of the security pursuant to such a sale.
(18) Any additional information or records required by a rule adopted or an order issued under this chapter.
History.
I.C.,§ 30-14-304, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
- This Section generally follows the 1956 Act and RUSA. Any security may be registered by qualification, whether or not another type of registration is available. Ordinarily, however, registration by qualification will only be used by an issuer when no other procedure is available. 2. Section 304(b) originally was modeled on Schedule A of the Securities Act of 1933.
3. In Section 304(b)(12) pending litigation can include litigation that has not yet been filed.
4. Section 304(b)(17) uses the same terminology as is used currently in Regulation S-X of the Securities and Exchange Commission. Under Sections 605(a) and (c) the administrator is authorized to specify the form and content of rules and forms governing registration statements and the form and content of financial statements required under this Act.
5. Under Sections 304(b)(18) and 307 the administrator may require additional information or may waive in whole or in part or condition any of the requirements of Section 304(b). Section 304(b)(18), for example, would authorize the administrator to require that a report by an accountant, engineer, appraiser or other professional person be filed. Section 304(b)(18) would also authorize that securities of designated classes under a trust indenture contain additional specified information.
§ 30-14-305. Securities registration filings.
- Who may file. A registration statement may be filed by the issuer, a person on whose behalf the offering is to be made, or a broker-dealer registered under this chapter.
- Filing fee. A person filing a registration statement shall pay a filing fee of three hundred dollars ($300). If a registration statement is withdrawn before the effective date or a pre-effective stop order is issued under section 30-14-306, Idaho Code, the administrator shall retain the fee.
-
Status of offering. A registration statement filed under section 30-14-303 or 30-14-304, Idaho Code, must specify:
- The amount of securities to be offered in this state;
- The states in which a registration statement or similar record in connection with the offering has been or is to be filed; and
- Any adverse order, judgment or decree issued in connection with the offering by a state securities regulator, the securities and exchange commission, or a court.
- Incorporation by reference. A record filed under this chapter or the predecessor act within five (5) years preceding the filing of a registration statement may be incorporated by reference in the registration statement to the extent that the record is currently accurate.
- Nonissuer distribution. In the case of a nonissuer distribution, information or a record may not be required under subsection (i) of this section or section 30-14-304, Idaho Code, unless it is known to the person filing the registration statement or to the person on whose behalf the distribution is to be made or unless it can be furnished by those persons without unreasonable effort or expense.
- Escrow and impoundment. A rule adopted or an order issued under this chapter may require as a condition of registration that a security issued within the previous five (5) years or to be issued to a promoter for a consideration substantially less than the public offering price or to a person for a consideration other than cash be deposited in escrow; and that the proceeds from the sale of the registered security in this state be impounded until the issuer receives a specified amount from the sale of the security either in this state or elsewhere. The conditions of any escrow or impoundment required under this subsection may be established by a rule adopted or an order issued under this chapter, provided however that the administrator may not reject a depository institution solely because of its location in another state.
- Form of subscription. A rule adopted or an order issued under this chapter may require as a condition of registration that a security registered under this chapter be sold only on a specified form of subscription or sale contract and that a signed or conformed copy of each contract be filed under this chapter or preserved for a period specified by the rule or order, which may not be longer than five (5) years.
- Effective period. Except while a stop order is in effect under section 30-14-306, Idaho Code, a registration statement is effective for one (1) year after its effective date, or for any longer period designated in an order under this chapter during which the security is being offered or distributed in a nonexempted transaction by or for the account of the issuer or other person on whose behalf the offering is being made or by an underwriter or broker-dealer that is still offering part of an unsold allotment or subscription taken as a participant in the distribution. A registration statement remains effective for each additional year by filing a renewal as prescribed by a rule adopted or an order issued under this chapter. For the purposes of a nonissuer transaction, all outstanding securities of the same class identified in the registration statement as a security registered under this chapter are considered to be registered while the registration statement is effective. If any securities of the same class are outstanding, a registration statement may not be withdrawn until one (1) year after its effective date. A registration statement may be withdrawn only with the approval of the administrator.
- Periodic reports. While a registration statement is effective, a rule adopted or an order issued under this chapter may require the person that filed the registration statement to file reports, not more often than quarterly, to keep the information or other record in the registration statement reasonably current and to disclose the progress of the offering.
- Posteffective amendments. A registration statement shall be amended after its effective date if there are material changes in information or documents in the registration statement. The posteffective amendment becomes effective when the administrator so orders.
History.
I.C.,§ 30-14-305, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
For more on securities and exchange commission, see http://www.sec.gov .
Official Comment
Prior Provisions:
- Section 305 generally follows the 1956 Act and RUSA except that earlier provisions in both Acts referring to Investment Company Act of 1940 securities, which are federal covered securities, see Section 102(7), have been deleted.
- Section 305 is applicable both to registration by coordination, see Section 303, and to registration by qualification, see Section 304.
- Section 305(a) expressly authorizes registration by “a person on whose behalf the offering is to be made.” This would permit a nonissuer, cf. Section 102(18), or a broker-dealer to file a registration statement independent of the issuer.
- This Act is intended, to the extent practicable, to be revenue neutral in its impact on existing state law, see Comment 3 to Section 608. Accordingly, Section 305(b) does not specify what fees states should provide. If a State prefers to have the fees in this section established by rule, replace the phrase “a fee of $[___]” in subsections (b) and (j) with the phrase “a fee established by the administrator by rule pursuant to the [state administrative procedure act]” and replace the phrase “$[___] of the fee” in subsection (b) with the phrase “an amount of the fee established by the administrator by rule”. See Comment 3 to Section 410.
- Section 305(c), which generally follows the 1956 Act and RUSA, does not require in Section 305(c)(3) disclosure of an order permitting the withdrawal of a registration statement. The administrator may, however, require disclosure of this information in a registration by qualification under Section 304(b)(18).
- Section 305(c), like every other provision concerned with the content of the registration statement, must be read with Section 306(a)(1) which judges the accuracy and completeness of the registration statement as of its effective date unless an order denying effectiveness had been entered before the effective date. A registration statement must be kept current with changing developments until the effectiveness date, but a registration statement is not required to be amended after the effective date except to correct inaccuracies or deficiencies which existed as of the effective date. An administrator, however, separately may require under Section 305(i) or (j) periodic reports or amendments to keep reasonably current the information contained in the registration statement. 7. Under Section 305(d) incorporation by reference is permitted as a matter of administrative practice.
- Under Section 305(d) incorporation by reference is permitted as a matter of administrative practice.
- Section 305(e) is the substantive equivalent to provisions in the 1956 Act and RUSA. This subsection is designed to address nonissuer offerings where the seller cannot obtain certified financial statements and other normally required records. The phrase “without unreasonable effort or expense” originated in Section 10(a)(3) of the Securities Act of 1933. It is not meant to apply to expenses incidental to supplying required information required for registration in the case of a nonissuer distribution by a person in a control relationship with the issuer or otherwise having access to or contractual rights to obtain the required information. Section 305(e) applies only to registration by qualification under Section 304 and periodic reports for either registration by coordination or registration by qualification under Section 305(i).
- Section 305(f), follows the 1956 Act and RUSA, and authorizes the administrator to require the impoundment of funds until the issuer receives a specified amount from the sale of the security in this State or elsewhere and to require the escrow of promotional stock until specific conditions are met. This Section is limited to a security issued within the past five years or to be issued to a promoter for a consideration substantially different from the public offering price or to a person for a consideration other than cash. The typical distribution subject to Section 305(f) will be a relatively new promotional or speculative offering. Section 305(f) follows the 1956 Act and RUSA and provides that the administrator may not reject a depository solely because of its location in another state. Unlike the statute in Schwaemmle Const. Co. v. Michigan Dep’t of Commerce , 360 N.W.2d 141 (Mich. 1984), Section 305(f) broadly provides that the administrator “may determine the conditions of any escrow or impoundment under this subsection.” As in Schwaemmle, this power will operate only until the impounded funds or escrowed shares are released.
- Section 305(g) follows the 1956 Act in authorizing the administrator to specify the form of a subscription or sale contract.
- Section 305(h) generally follows the 1956 Act and RUSA. The term “nonissuer transaction” or “nonissuer distribution” is defined in Section 102(18). A sale by a nonissuer would have to be registered under Section 301 unless it is exempted or involves a federal covered security. Section 202(1) exempts “isolated nonissuer transactions.” When a nonissuer transaction is not exempt under Section 202(1), it may still be exempted under other transaction exemptions.
- Section 305(j) follows RUSA and a procedure limited to investment companies in the 1956 Act in allowing posteffective date amendments. Under Section 305(j), when a posteffective amendment increases the number of securities to be offered or sold, an additional registration fee is required.
If no exemption is available for a nonissuer distribution, and it does not involve a federal covered security, the security must be registered under Article 3. Under the first sentence of Section 305(h) each registration statement remains effective for at least one year and for any longer period the administrator may determine. However, no registration statement is effective while a stop order with respect to it is in effect under Section 306. For the purposes of a nonissuer transaction, all outstanding securities of the same class as a registered security are considered to be registered as long as the registration statement remains effective. This means that during the effective period of a registration statement under this Act all outstanding securities of the same class can be traded by anyone, including nonissuers, as if they were registered.
Section 305(h) also provides that, unless the administrator determines otherwise, a registration statement cannot be withdrawn until one year after its effective date if any securities of the same class are outstanding. This is designed to protect sellers who would be unaware of a withdrawal from being subject to civil liability.
§ 30-14-306. Denial, suspension, and revocation of securities registration.
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Stop orders. The administrator may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, a registration statement if the administrator finds that the order is in the public interest and that:
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Any of the following is incomplete in a material respect or contains a statement that, in the light of the circumstances under which it was made, was false or misleading with respect to a material fact:
- The registration statement as of its effective date, or before the effective date in the case of an order denying effectiveness;
- A posteffective amendment under section 30-14-305(j), Idaho Code, as of its effective date; or
- A periodic report under section 30-14-305(i), Idaho Code;
- This chapter or a rule adopted or an order issued under this chapter, or a condition imposed under this chapter, has been willfully violated in connection with the offering, by: the person filing the registration statement; the issuer, a partner, officer or director of the issuer or a person having a similar status or performing a similar function; a promoter of the issuer; or a person directly or indirectly controlling or controlled by the issuer; but only if the person filing the registration statement is directly or indirectly controlled by or acting for the issuer; or by an underwriter;
- The security registered or sought to be registered is the subject of a permanent or temporary injunction of a court of competent jurisdiction or an administrative stop order or similar order issued under any federal, foreign or state law other than this chapter applicable to the offering, provided however the administrator may not institute a proceeding against an effective registration statement under this paragraph more than one (1) year after the date of the order or injunction on which it is based, and the administrator may not issue an order under this paragraph on the basis of an order or injunction issued under the securities act of another state unless the order or injunction was based on conduct that would constitute, as of the date of the order, a ground for a stop order under this section;
- The issuer’s enterprise or method of business includes or would include activities that are unlawful where performed;
- With respect to a security sought to be registered under section 30-14-303, Idaho Code, there has been a failure to comply with the undertaking required by section 30-14-303(b)(4), Idaho Code;
- The applicant or registrant has not paid the filing fee, provided however the administrator shall void the order if the deficiency is corrected; or
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The offering:
- Will work or tend to work a fraud upon purchasers or would so operate;
- Has been or would be made with unreasonable amounts of underwriters’ and sellers’ discounts, commissions or other compensation, or promoters’ profits or participations, or unreasonable amounts or kinds of options; or
- Is being made on terms that are unfair, unjust or inequitable. (b) Enforcement. To the extent practicable, the administrator by a rule adopted or an order issued under this chapter shall publish standards that provide notice of conduct that violates subsection (a)(7) of this section.
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Any of the following is incomplete in a material respect or contains a statement that, in the light of the circumstances under which it was made, was false or misleading with respect to a material fact:
- Enforcement. To the extent practicable, the administrator by a rule adopted or an order issued under this chapter shall publish standards that provide notice of conduct that violates subsection (a)(7) of this section.
- Institution of stop order. The administrator may not institute a stop order proceeding against an effective registration statement on the basis of conduct or a transaction known to the administrator when the registration statement became effective unless the proceeding is instituted within thirty (30) days after the registration statement became effective.
- Summary process. The administrator may summarily revoke, deny, postpone or suspend the effectiveness of a registration statement pending final determination of an administrative proceeding. Upon the issuance of the order, the administrator shall promptly notify each person specified in subsection (e) of this section that the order has been issued, the reasons for the revocation, denial, postponement or suspension, and that within fifteen (15) days after the receipt of a request in a record from the person the matter will be scheduled for a hearing. If a hearing is not requested and none is ordered by the administrator, within thirty (30) days after the date of service of the order, the order becomes final. If a hearing is requested or ordered, the administrator, after notice of and an opportunity for a hearing for each person subject to the order, may modify or vacate the order or extend the order until final determination.
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Procedural requirements for stop order. A stop order may not be issued under this section without:
- Appropriate notice to the applicant or registrant, the issuer, and the person on whose behalf the securities are to be or have been offered;
- An opportunity for a hearing; and
- Findings of fact and conclusions of law in a record in accordance with chapter 52, title 67, Idaho Code.
- Modification or vacation of stop order. The administrator may modify or vacate a stop order issued under this section if the administrator finds that the conditions that caused its issuance have changed or that it is necessary or appropriate in the public interest or for the protection of investors.
History.
I.C.,§ 30-14-306, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
- This Section generally follows the 1956 Act and RUSA and applies to both registration by coordination under Section 303 and registration by qualification under Section 304.
- Section 306(a)(1) follows the 1956 Act and RUSA in testing in a suspension or revocation proceeding the completeness and accuracy of a registration statement as of the registration statement’s effective date. A registration statement that becomes misleading because of a development that occurs after its effective date is not a ground for the issuance of a stop order under Section 306(a)(1). An administrator, however, may require periodic reports under Section 305(i) or a posteffective amendment under Section 305(j). With respect to periodic reports under Section 305(i), a misleading report would be the basis of a stop order under Section 306(a)(1) if it is materially inaccurate as of the date it was filed.
- On the meaning of “willfully,” see Comment 2 under Section 508. 4. A violation by an issuer has the same consequences whether the issuer has filed a registration statement or has had a broker-dealer file it. But this is not the case when the registration statement is filed by a broker-dealer acting independently.
- A violation by an issuer has the same consequences whether the issuer has filed a registration statement or has had a broker-dealer file it. But this is not the case when the registration statement is filed by a broker-dealer acting independently.
- The verb “is” at the beginning of Section 306(a)(3) means that a stop order or injunction that has expired or been vacated is not the ground for action under this paragraph.
- Section 306(a)(4) applies to activity that is conducted in a State where that activity is illegal. It does not apply if the activity is not illegal under that State’s law. This paragraph is not meant to apply to activity which is lawful where conducted but would be illegal if conducted in the State where the registration statement is filed.
- Sections 306(a)(5) and (6) follow the 1956 Act and RUSA.
- Sections 306(a)(7) and (b) address merit regulation. Sections 306(E) and (F) of the 1956 Act authorized a stop order when an “offering has worked or tended to work a fraud upon purchasers or would so operate” or “the offering has been or would be made with unreasonable amounts of underwriters’ and sellers’ discounts, commissions, or other compensation, or promoters’ profits or participation, or unreasonable amounts or kinds of options.” By 1985 a majority of states which had adopted the 1956 Act had adopted this approach to merit regulation rather than the earlier and broader “unfair, unjust or inequitable” standard that then applied in a minority of States.
- Section 306(c) follows the 1956 Act and RUSA and allows an administrator up to 30 days after a registration statement becomes effective to institute a stop order proceeding on the basis of a fact or transaction known when the registration statement became effective. This is to avoid the necessity of an administrator issuing a stop order prematurely.
- Sections 306(d) and (e) assure each person subject to a stop order of notice, opportunity for a hearing, and findings of fact and conclusions of law contained in a record.
- An administrator must consider the public interest when issuing a stop order and may under Section 306(f) consider the public interest when modifying or vacating a stop order. See, e.g., TechnoMedical Lab., Inc. v. Utah Sec. Div. , 744 P.2d 320, 324-325 (Utah Ct. App. 1987) (a state has a valid public interest in stopping the issuance of hundreds of thousands of public shares that did not comply with the disclosure requirements of securities registration); cf. stop orders under the Securities Act of 1933, see 1 Louis Loss & Joel Seligman, Securities Regulation 576-589 (3d ed. rev. 1998).
- As of September 2002 46 jurisdictions had adopted a form of Section 306(a)(7)(A) (“will tend to work a fraud or would so operate”); 34 jurisdictions had adopted a form of Section 306(a)(7)(B) (“unreasonable amounts of underwriters’ and sellers’ discounts, commissions, or other compensation, or promoter profits or participations, or unreasonable amounts or kinds of options”); and 16 jurisdictions had adopted a form of bracketed Section 306(a)(7)(C) (“terms that are unfair, unjust, or inequitable”).
RUSA Sections 306(a)(5) and (6) adopted provisions substantively identical to the 1956 Act and included in brackets an “unfair, unjust, or inequitable” alternative.
The National Securities Markets Improvement Act of 1996 subsequently preempted merit regulation of federal covered securities. See Section 102(7).
Sections 306(a)(7) and (b) take a different approach. Subject to the National Securities Markets Improvement Act of 1996, merit standards are retained but hortatory paragraph 306(b) encourages the administrator, to the extent practicable, to adopt, by rule or order, standards that provide notice to issuers of a state’s merit standards. Notice will address one criticism of merit regulation. See generally 1 Louis Loss & Joel Seligman, Securities Regulation 111-124 (3d ed. rev. 1998). Statements of Policy of the North American Securities Administrator Association that have been adopted by a state would provide notice in compliance with Section 306(b). Similarly other state rules or orders could be adopted in the future to address new types of securities as they occur.
An order under Section 306(b) can be adopted after a securities registration statement has been filed. Under Section 306(b) an administrator, by rule or order, for example, could adopt a standard that would provide the basis for a stop order denying effectiveness to a development stage company that has no specific business purpose or plan or has indicated that its primary business plan is to engage in a merger or acquisition with an unidentified company, entity, or person. “Blank check offerings” are subject to Rule 419 adopted under the Securities Act of 1933. See Comment 3 to Section 202.
§ 30-14-307. Waiver and modification.
The administrator may waive or modify, in whole or in part, any or all of the requirements of sections 30-14-302, 30-14-303 and 30-14-304(b), Idaho Code, or the requirement of any information or record in a registration statement or in a periodic report filed pursuant to section 30-14-305(i), Idaho Code.
History.
I.C.,§ 30-14-307, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provision:
Prior Provision: RUSA Section 303(h). Section 307 follows RUSA Section 303(h) and empowers the administrator to waive or modify any of the requirements of 302, 303, 304(b), or the requirement of any information or record in a registration statement. An example would be the expedited procedure several states have adopted to coordinate with shelf registration under Rule 415 of the Securities Act of 1933. In waiving or modifying requirements the administrator must make a finding satisfying the requirements of Section 605(b).
Part 4 Broker-Dealers, Agents, Investment Advisers, Investment Adviser Representatives, and Federal Covered Investment Advisers
§ 30-14-401. Broker-dealer registration requirement and exemptions.
- Registration requirement. It is unlawful for a person to transact business in this state as a broker-dealer unless the person is registered under this chapter as a broker-dealer or is exempt from registration as a broker-dealer under subsection (b) or (d) of this section.
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Exemptions from registration. The following persons are exempt from the registration requirement of subsection (a) of this section:
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A broker-dealer without a place of business in this state if its only transactions effected in this state are with:
- The issuer of the securities involved in the transactions;
- A broker-dealer registered as a broker-dealer under this chapter or not required to be registered as a broker-dealer under this chapter;
- An institutional investor;
- A nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars ($100,000,000) acting for the account of others pursuant to discretionary authority in a signed record;
- 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 the securities exchange act of 1934 or is not required to be registered under the securities exchange act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence;
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A bona fide preexisting customer whose principal place of residence is in this state but who was not present in this state when the customer relationship was established, if:
- The broker-dealer is registered under the securities exchange act of 1934 or is not required to be registered under the securities exchange act of 1934 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
- Within forty-five (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 seventy-five (75) days after the date on which the application is filed or, if earlier, the date on which the administrator notifies the person that the administrator has denied the application for registration or has stayed the pendency of the application for good cause;
- 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.
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A broker-dealer without a place of business in this state if its only transactions effected in this state are with:
- Limits on employment or association. It is unlawful for a broker-dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this state, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this state if the registration of the individual is suspended or revoked or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by an order of the securities regulator of a state, the securities and exchange commission, or a self-regulatory organization. A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know, and in the exercise of reasonable care could not have known, of the suspension, revocation or bar. Upon request from a broker-dealer or issuer and for good cause, an order under this chapter may modify or waive, in whole or in part, the application of the prohibitions of this subsection to the broker-dealer.
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Foreign transactions. A rule adopted or an order issued under this chapter may permit:
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A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by:
- An individual from Canada or other foreign jurisdiction who is temporarily present in this state and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States;
- An individual from Canada or other foreign jurisdiction who is present in this state and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction; or
- An individual who is present in this state, with whom the broker-dealer customer relationship arose while the individual was temporarily or permanently resident in Canada or the other foreign jurisdiction; and
- An agent who represents a broker-dealer that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of securities in this state as permitted for a broker-dealer described in subsection (b)(1) [paragraph (1)] of this subsection.
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A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by:
(G) Not more than three (3) customers in this state during the previous twelve (12) months, in addition to those customers specified in subsections (b)(1)(A) through (b)(1)(F) and subsection (b)(1)(H) of this section, if the broker-dealer is registered under the securities exchange act of 1934 or not required to be registered under the securities exchange act of 1934 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 a rule adopted or an order issued under this chapter; and
History.
I.C.,§ 30-14-401, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The “securities exchange act of 1934”, referred to throughout subsection (b)(1) of this section, is compiled as 15 U.S.C.S. §§ 77b to 77e, 77j, 77k, 77m, 77o, 77s, 78a to 78o, 78o-3, and 78p to 78hh. The office of thrift supervision, referred to in paragraph (b)(2), was merged into the office of the comptroller of the currency and ceased to exist on October 19, 2011, pursuant to 12 U.S.C.S. § 5412.
Compiler’s Notes.
For more on board of governors of the federal reserve system, see http://www.federalreserve.gov/ .
For more on comptroller of the currency, see http://www.occ.treas.gov/ .
For more on federal deposit insurance corporation, see http://www.fdic.gov/ .
The bracketed insertion near the end of paragraph (d)(2) was added by the compiler to correct the statutory reference and to conform to the uniform act.
CASE NOTES
Violations of Registration and Licensing Requirements.
Scienter is not required for violations of the securities registration and licensing requirements; therefore, because defendant’s racketeering charge was predicated on twenty-three counts of violating those requirements, strict liability provision, good faith reliance on legal counsel is not a defense. State v. Montgomery, 135 Idaho 348, 17 P.3d 292 (2001).
Official Comment
Prior Provisions:
- “Broker-dealer” is defined in Section 102(4). The scope of the Section 401(a) reference “to transact business in this State” is specified in Section 610. “Transacts a business” has been held to mean “more than a trivial or de minimis business.” United States v. Schwartz , 464 F.2d 499, 506 (2d Cir. 1972), cert. denied, 409 U.S. 1009 (1972).
- Under Section 401(a) a person can be required to register as a securities broker-dealer only if the person transacts business in securities. See, e.g., AMR Realty Co. v. State , 373 A.2d 1002 (N.J. Supr. Ct. App. Div. 1977) (requirement that the transactions involve securities).
- “Bona fide” is a much construed term particularly in the U.C.C. context. See, e.g., MCC Proceeds, Inc. v. Advest, Inc. , 743 N.Y.S.2d 1 (N.Y. A.D. 2002) (comparing bona fide to good faith standard).
- Section 401(b)(1)(D) was added to provide relief in situations where a broker-dealer is accepting orders from a sophisticated financial professional who is making the investment decisions for its customers.
- Under 401(b)(1)(E) and (F) preexisting customers must be bona fide. A principal place of residence, for example, normally would be the residence where the customer spends a majority of time. These exemptions were intended to facilitate ongoing broker-customer relationships with customers who have established a second or other residence for such purposes as a winter home (i.e. “snowbirds”).
- Section 401(c) prohibits a broker-dealer or issuer from employing or associating with an individual in a capacity for which that individual has been suspended by the administrator. Violation of this provision does not result in strict liability. In order for a broker-dealer or issuer to be liable, the broker-dealer or issuer must have known or should have known of the administrator’s order to the individual suspended or barred. Cf. Comment 17 to Section 412. 7. Section 401(d) recognizes the increasingly transnational nature of securities brokerage and permits, if the administrator adopts a rule or order, transactions by a Canadian or a foreign broker-dealer with a person from Canada or other foreign jurisdiction who is resident in this State. This subsection is not self-executing and is effective only if the administrator adopts a rule or order.
8. To give effect to action taken by rule or order under Section 401(d), there must be a transaction registration exemption that will enable securities transactions to take place in customer accounts involving the broker-dealers and agents contemplated in Section 401(d). See Sections 202 and 203.
§ 30-14-402. Agent registration requirement and exemptions.
- Registration requirement. It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this chapter as an agent or is exempt from registration as an agent under subsection (b) of this section.
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Exemptions from registration. The following individuals are exempt from the registration requirement of subsection (a) of this section:
- An individual who represents a broker-dealer in effecting transactions in this state limited to those described in section 15(i)(3) of the securities exchange act of 1934 (15 U.S.C. 78o(i)(3));
- An individual who represents a broker-dealer that is exempt under section 30-14-401(b) or (d), Idaho Code;
- An individual who represents an issuer with respect to an offer or sale of the issuer’s own securities or those of the issuer’s parent or any of the issuer’s subsidiaries, and who is not compensated in connection with the individual’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;
- An individual who represents an issuer and who effects transactions in the issuer’s securities exempted by section 30-14-202, Idaho Code, other than section 30-14-202(14), Idaho Code;
- An individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, provided however that an individual who effects transactions in a federal covered security under section 18(b)(3), 18(b)(4)(D), or 18(b)(4)(F) of the securities act of 1933 (15 U.S.C. 77r(b)(3), 77r(b)(4)(D), or 77r(b)(4)(F)) is not exempt if the individual is compensated in connection with the agent’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;
- An individual who represents a broker-dealer registered in this state under section 30-14-401(a), Idaho Code, or exempt from registration under section 30-14-401(b), Idaho Code, in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars ($100,000,000) acting for the account of others pursuant to discretionary authority in a signed record;
- An individual who represents an issuer in connection with the purchase of the issuer’s own securities;
- An individual who represents an issuer and who restricts participation to performing clerical or ministerial acts; or
- Any other individual exempted by a rule adopted or an order issued under this chapter.
- Registration effective only while employed or associated. The registration of an agent is effective only while the agent is employed by or associated with a broker-dealer registered under this chapter or an issuer that is offering, selling or purchasing its securities in this state.
- Limit on employment or association. It is unlawful for a broker-dealer, or an issuer engaged in offering, selling or purchasing securities in this state, to employ or associate with an agent who transacts business in this state on behalf of broker-dealers or issuers unless the agent is registered under subsection (a) of this section or is exempt from registration under subsection (b) of this section. (e) Limit on affiliations. Unless prohibited by a rule adopted or an order issued under this chapter, an individual may act as an agent for more than one (1) broker-dealer or one (1) issuer at a time.
History.
I.C.,§ 30-14-402, as added by 2004, ch. 45, § 2, p. 169; am. 2012, ch. 65, § 4, p. 171; am. 2020, ch. 103, § 1, p. 274.
STATUTORY NOTES
Amendments.
The 2012 amendment, by ch. 65, updated several federal references throughout the section and substituted “section 30-14-202(14)” for “sections 30-14-202(11) and 30-14-202(14)” in paragraph (b)(4).
The 2020 amendment, by ch. 103, in subsection (b), substituted “section 15(i)(3) of the securities exchange act of 1934 (15 U.S.C. 78o(i)(3))” for “section 15(h)(2) of the securities exchange act of 1934 (15 U.S.C. 78o(h)(2))” near the end of paragraph (1), and substituted “section 18(b)(3), 18(b)(4)(D), or 18(b)(4)(F) of the securities act of 1933 (15 U.SC. 77r(b)(3), 77r(b)(4)(D), or 77r(b)(4)(F)” for “section 18(b)(3) or 18(b)(4)(D) of the securities act of 1933 (15 U.S.C. 77r(b)(3) or 77r(b)(4)(D)” near the middle of paragraph (5).
Compiler’s Notes.
The words enclosed in parentheses so appeared in the law as enacted.
Official Comment
Prior Provisions:
- “Agent” is defined in Section 102(2). The scope of the Section 402(a) reference to “transact business in this State” is specified in Section 610. An administrator may by rule or order take action under Section 401(d)(2) to address an agent.
- An independent contractor must be either a broker-dealer or an agent if the individual transacts business as a broker-dealer or agent. There is no other status permitted under this Act for securities activities.
- A broker-dealer in violation of Section 402(a) may be disciplined under Section 412 and be subject to a civil or administrative enforcement action under Section 603 or 604.
- Under Sections 402(b)(3) and (5) an agent may be exempt if acting for an issuer and receiving compensation (for example, as a corporate executive), as long as the compensation is not a commission or other remuneration based on transactions in the issuer’s own securities. Such an agent could receive a salary with conventional benefits, including an annual bonus (related to his or her performance) as an executive, and still be within this exemption unless the agent is also being compensated directly or indirectly for participation in the specified securities transactions. 5. Section 402(b)(6) was added to provide relief in situations where an agent is accepting orders from a sophisticated financial professional who is making the investment decisions for its customers.
6. Ministerial or clerical acts in Section 402(b)(8) might include preparing routine written communications or responding to inquiries.
7. Section 402(e) limits agents to a single employment or affiliation unless a rule or order of the administrator authorizes multiple affiliations. In any event an agent must be registered, see Section 402(a), or exempt from registration, see Section 402(b). Registration is effective only while an agent is employed by or associated with a broker-dealer or an issuer. See Section 402(c).
§ 30-14-403. Investment adviser registration requirement and exemptions.
- Registration requirement. It is unlawful for a person to transact business in this state as an investment adviser unless the person is registered under this chapter as an investment adviser or is exempt from registration as an investment adviser under subsection (b) of this section.
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Exemptions from registration. The following persons are exempt from the registration requirement of subsection (a) of this section:
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A person without a place of business in this state that is registered under the securities act of the state in which the person has its principal place of business if its only clients in this state are:
- Federal covered investment advisers, investment advisers registered under this chapter, or broker-dealers registered under this chapter;
- Institutional investors;
- Bona fide preexisting clients whose principal places of residence are not in this state if the investment adviser is registered under the securities act of the state in which the clients maintain principal places of residence; or
- Any other client exempted by a rule adopted or an order issued under this chapter;
- A person without a place of business in this state if the person has had, during the preceding twelve (12) months, not more than five (5) clients that are resident in this state in addition to those specified under subsection (b)(1) of this section;
- A federal covered investment adviser; or
- Any other person exempted by a rule adopted or an order issued under this chapter.
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A person without a place of business in this state that is registered under the securities act of the state in which the person has its principal place of business if its only clients in this state are:
- Limits on employment or association. It is unlawful for an investment adviser, directly or indirectly, to employ or associate with an individual to engage in an activity related to investment advice in this state if the registration of the individual is suspended or revoked or the individual is barred from employment or association with an investment adviser, federal covered investment adviser, or broker-dealer by an order under this chapter, the securities and exchange commission, or a self-regulatory organization, unless the investment adviser did not know, and in the exercise of reasonable care could not have known, of the suspension, revocation or bar. Upon request from the investment adviser and for good cause, the administrator, by order, may waive, in whole or in part, the application of the prohibitions of this subsection to the investment adviser.
- Investment adviser representative registration required. It is unlawful for an investment adviser to employ or associate with an individual required to be registered under this chapter as an investment adviser representative who transacts business in this state on behalf of the investment adviser unless the individual is registered under section 30-14-404(a), Idaho Code, or is exempt from registration under section 30-14-404(b), Idaho Code.
History.
I.C.,§ 30-14-403, as added by 2004, ch. 45, § 2, p. 169.
CASE NOTES
Federal Law.
The provisions of 15 U.S.C. § 80b-1 do not have the effect of invalidating this section which requires registration of investment advisers. Kinsela v. State, Dep’t of Fin., 117 Idaho 632, 790 P.2d 1388 (1990).
Cited
In re Tolman, 491 B.R. 138 (Bankr. D. Idaho 2013).
Official Comment
Prior Provisions:
- “Investment adviser” is defined in Section 102(15). The scope of the Section 403(a) reference to “transact business in this State” is specified in Section 610.
- Excluded from the definition of investment adviser in Section 102(15)(C) is a broker-dealer who receives no special compensation for investment advisory services. Such a broker-dealer would not have to register as both a broker-dealer and investment adviser in this State. A broker-dealer that does receive special compensation, on the other hand, would also meet the statutory definition of investment adviser and would be required to register in both capacities.
- Section 403(b)(2) is consistent with the National Securities Markets Improvement Act of 1996 which prohibits a State from regulating an investment adviser that does not have a place of business in this State and had fewer than six clients who were state residents during the preceding 12 months.
- Section 403(c) prohibits an investment adviser from employing an individual who is prohibited from such employment or association by the administrator. Violation of this provision does not result in strict liability. To be liable the investment adviser must have known or should have known of the administrator’s order to the individual suspended or barred.
§ 30-14-404. Investment adviser representative registration requirement and exemptions.
- Registration requirement. It is unlawful for an individual to transact business in this state as an investment adviser representative unless the individual is registered under this chapter as an investment adviser representative or is exempt from registration as an investment adviser representative under subsection (b) of this section.
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Exemptions from registration. The following individuals are exempt from the registration requirement of subsection (a) of this section:
- An individual who is employed by or associated with an investment adviser that is exempt from registration under section 30-14-403(b), Idaho Code, unless the individual has a place of business in this state or is not an investment adviser representative as defined by this chapter; and
- Any other individual exempted by a rule adopted or an order issued under this chapter.
- Registration effective only while employed or associated. The registration of an investment adviser representative is not effective while the investment adviser representative is not employed by or associated with an investment adviser registered under this chapter or a federal covered investment adviser that has made or is required to make a notice filing under section 30-14-405, Idaho Code.
- Limit on affiliations. An individual may transact business as an investment adviser representative for more than one (1) investment adviser or federal covered investment adviser unless a rule adopted or an order issued under this chapter prohibits or limits an individual from acting as an investment adviser representative for more than one (1) investment adviser or federal covered investment adviser.
- Limits on employment or association. It is unlawful for an individual acting as an investment adviser representative, directly or indirectly, to conduct business in this state on behalf of an investment adviser or a federal covered investment adviser if the registration of the individual as an investment adviser representative is suspended or revoked or the individual is barred or enjoined from employment or association with an investment adviser or a federal covered investment adviser by an order under this chapter, the securities and exchange commission, or a self-regulatory organization, or a court of competent jurisdiction. Upon request from a federal covered investment adviser and for good cause, the administrator, by order issued, may waive, in whole or in part, the application of the requirements of this subsection to the federal covered investment adviser.
History.
(f) Referral fees. An investment adviser registered under this chapter, a federal covered investment adviser that has filed a notice under section 30-14-405, Idaho Code, or a broker-dealer registered under this chapter, is not required to employ or associate with an individual as an investment adviser representative if the only compensation paid to the individual for a referral of investment advisory clients is paid to an investment adviser registered under this chapter, a federal covered investment adviser who has filed a notice under section 30-14-405, Idaho Code, or a broker-dealer registered under this chapter with which the individual is employed or associated as an investment adviser representative. History.
I.C.,§ 30-14-404, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
No Prior Provision.
- “Investment adviser representative” is defined in Section 102(16). The scope of the Section 404(a) reference to “transacts business in this State” is specified in Section 610.
- Neither the 1956 Act nor RUSA provided for the registration of investment adviser representatives. In recent years, however, the states increasingly have done so.
- Under this Act a sole practitioner may register as an investment adviser. See Section 403. The Investment Adviser Registration Depository currently provides for entry of the legal name of the individual as the investment adviser and the entry of any name the individual is doing business under that is different from the individual’s name. A sole practitioner is not required to register under Section 404 as an investment adviser representative, unless the administrator requires such registration.
- Section 404(e) prohibits an investment adviser representative from association with a federal covered investment adviser when such association is prohibited by an order of the administrator. Unlike similar provisions in Sections 401 and 403, there is no culpability requirement that the investment adviser representative’ “knows or in the exercise of reasonable care should have known” of a suspension or bar because the order should be received by the investment adviser representative. As with Sections 401 and 403, the administrator may waive this prohibition. Cf. Comment 17 to Section 412.
- The administrator may adopt rules or orders under Section 404(f) in accordance with Section 605. The Securities and Exchange Commission has adopted a rule that addresses referral fees in Rule 206(4)-3 of the Investment Advisers Act of 1940.
- For a state that intends to extend Section 404(f) to those broker-dealers and investment advisers who are not required to register and those federal covered investment advisers not required to file a notice, this subsection should read:
(f) [ Referral Fees. ] An investment adviser registered under this [Act], a federal covered investment adviser that has filed a notice under Section 405, or a broker-dealer registered under this [Act] is not required to employ or associate with an individual as an investment adviser representative if the only compensation paid to the individual for a referral of investment advisory clients is paid to an investment adviser registered under this [Act], or not required to register under this [Act], a federal covered investment who has filed a notice under Section 405 or is not required to file a notice under Section 405, or a broker-dealer registered under this [Act] or not required to register under this [Act] with which the individual is employed or associated as an investment adviser representative.
§ 30-14-405. Federal covered investment adviser notice filing requirement.
- Notice filing requirement. Except with respect to a federal covered investment adviser described in subsection (b) of this section, it is unlawful for a federal covered investment adviser to transact business in this state as a federal covered investment adviser unless the federal covered investment adviser complies with subsection (c) of this section.
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Notice filing requirement not required. The following federal covered investment advisers are not required to comply with subsection (c) of this section:
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A federal covered investment adviser without a place of business in this state if its only clients in this state are:
- Federal covered investment advisers, investment advisers registered under this chapter, and broker-dealers registered under this chapter;
- Institutional investors;
- Bona fide preexisting clients whose principal places of residence are not in this state; or
- Other clients specified by a rule adopted or an order issued under this chapter;
- A federal covered investment adviser without a place of business in this state if the person has had, during the preceding twelve (12) months, not more than five (5) clients that are resident in this state in addition to those specified under subsection (b)(1) of this section; and
- Any other person excluded by a rule adopted or an order issued under this chapter.
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A federal covered investment adviser without a place of business in this state if its only clients in this state are:
- Notice filing procedure. A person acting as a federal covered investment adviser, not excluded under subsection (b) of this section, shall file a notice, a consent to service of process complying with section 30-14-611, Idaho Code, and such records as have been filed with the securities and exchange commission under the investment advisers act of 1940 required by a rule adopted or an order issued under this chapter and pay the fees specified in section 30-14-410(e), Idaho Code.
- Effectiveness of filing. The notice under subsection (c) of this section becomes effective upon its filing and expires on December thirty-first of each year unless renewed.
History.
I.C.,§ 30-14-405, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The investment advisers act of 1940, referred to in subsection (c), is codified as 15 USCS § 80b-1 et seq.
Compiler’s Notes.
For more on securities and exchange commission, see http://www.sec.gov .
Official Comment
No Prior Provision.
- “Federal covered investment adviser” is defined in Section 102(6). The scope of the Section 405(a) reference to “transacts business in this State” is specified in Section 610.
- Section 405(b)(2) is necessitated by the National Securities Markets Improvement Act of 1996 and is intended to coordinate this Act with the Investment Advisers Act of 1940.
- Section 404(c) provides limits on those who can be employed by or associated with a federal covered investment adviser.
- The succession provision of Section 407(a) is available to a federal covered investment adviser who has filed a notice under Section 405.
§ 30-14-406. Registration by broker-dealer, agent, investment adviser, and investment adviser representative.
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Application for initial registration. A person shall register as a broker-dealer, agent, investment adviser, or investment adviser representative by filing an application and a consent to service of process complying with section 30-14-611, Idaho Code, and paying the fee specified in section 30-14-410, Idaho Code, and any reasonable fees charged by the designee of the administrator for processing the filing. The application must contain:
- The information or record required for the filing of a uniform application; and
- Upon request by the administrator, any other financial or other information or record that the administrator determines is appropriate.
- Amendment. If the information or record contained in an application filed under subsection (a) of this section is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.
- Effectiveness of registration. If an order is not in effect and a proceeding is not pending under section 30-14-412, Idaho Code, registration becomes effective at noon on the forty-fifth day after a completed application is filed, unless the registration is denied. A rule adopted or an order issued under this chapter may set an earlier effective date or may defer the effective date until noon on the forty-fifth day after the filing of any amendment completing the application.
- Registration renewal. A registration is effective until midnight on December thirty-first of the year for which the application for registration is filed. Unless an order is in effect under section 30-14-412, Idaho Code, a registration may be automatically renewed each year by filing such records as are required by a rule adopted or an order issued under this chapter, by paying the fee specified in section 30-14-410, Idaho Code, and by paying costs charged by the designee of the administrator for processing the filings.
- Additional conditions or waivers. A rule adopted or an order issued under this chapter may impose such other conditions, not inconsistent with the national securities markets improvement act of 1996 (110 Stat. 3416). An order issued under this chapter may waive, in whole or in part, specific requirements in connection with registration as are in the public interest and for the protection of investors.
History.
I.C.,§ 30-14-406, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
Compiler’s Notes.
The national securities market improvement act of 1996, referred to in subsection (e), is Public Law 104-290, enacted October 11, 1996, which is generally codified throughout Title 15 of the United States Code. Compiler’s Notes.
The words enclosed in parentheses so appeared in the law as enacted.
Official Comment
Prior Provisions:
- Under Section 406(a), the administrator is authorized to accept standardized forms such as Form B-D for broker-dealers; Form U-4 for agents and investment adviser representatives; and Form ADV for investment advisers, which are filed today through such designees as the Web-CRD or the Investment Adviser Registration Depository (IARD). While this Act generally encourages uniformity, Sections 406(a) and (e) are intended to give the administrator authority to augment or waive disclosure requirements in appropriate cases.
- Section 406(a) eliminates the listing of specified information delineated in Section 202 of the 1956 Act. As with RUSA Section 205, the intent is to facilitate coordination with widely used standardized forms.
- Under this Act a single person may act both as an agent and investment adviser representative if the person satisfies applicable registration requirements to be both an agent and investment adviser representative.
§ 30-14-407. Succession and change in registration of broker-dealer or investment adviser.
- Succession. A broker-dealer or investment adviser may succeed to the current registration of another broker-dealer or investment adviser or a notice filing of a federal covered investment adviser, and a federal covered investment adviser may succeed to the current registration of an investment adviser or notice filing of another federal covered investment adviser, by filing as a successor an application for registration pursuant to section 30-14-401 or 30-14-403, Idaho Code, or a notice pursuant to section 30-14-405, Idaho Code, for the unexpired portion of the current registration or notice filing.
- Organizational change. A broker-dealer or investment adviser that changes its form of organization or state of incorporation or organization may continue its registration by filing an amendment to its registration if the change does not involve a material change in its financial condition or management. The amendment becomes effective when filed or on a date designated by the registrant in its filing. The new organization is a successor to the original registrant for the purposes of this chapter. If there is a material change in financial condition or management, the broker-dealer or investment adviser shall file a new application for registration. A predecessor registered under this chapter shall stop conducting its securities business other than winding down transactions and shall file for withdrawal of broker-dealer or investment adviser registration within forty-five (45) days after filing its amendment to effect succession.
- Name change. A broker-dealer or investment adviser that changes its name may continue its registration by filing an amendment to its registration. The amendment becomes effective when filed or on a date designated by the registrant.
- Change of control. A change of control of a broker-dealer or investment adviser may be made in accordance with a rule adopted or an order issued under this chapter.
History.
I.C.,§ 30-14-407, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 202(c); RUSA 210.
- Section 407 is intended to avoid unnecessary interruptions of business by specifying procedures for a successor broker-dealer or investment adviser; a broker-dealer or investment adviser to maintain its registration if it changes its form of organization or name; or, in accordance with a rule or order adopted under this Act, a change of control of a broker-dealer or investment adviser.
- There is no filing fee under Section 407.
§ 30-14-408. Termination of employment or association of agent and investment adviser representative and transfer of employment or association.
- Notice of termination. If an agent registered under this chapter terminates employment by or association with a broker-dealer or issuer, or if an investment adviser representative registered under this chapter terminates employment by or association with an investment adviser or federal covered investment adviser, or if either registrant terminates activities that require registration as an agent or investment adviser representative, the broker-dealer, issuer, investment adviser, or federal covered investment adviser shall promptly file a notice of termination. If the registrant learns that the broker-dealer, issuer, investment adviser, or federal covered investment adviser has not filed the notice, the registrant may do so.
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Transfer of employment or association. 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 30-14-405, Idaho Code, 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 30-14-405, Idaho Code; then upon the filing by or on behalf of the registrant, within thirty (30) days after the termination, of an application for registration that complies with the requirement of section 30-14-406(a), Idaho Code, and payment of the filing fee required under section 30-14-410, Idaho Code, the registration of the agent or investment adviser representative is:
- 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 registration depository record or successor record does not contain a new or amended disciplinary disclosure within the previous twelve (12) months; or
- 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 registration depository record or successor record contains a new or amended disciplinary disclosure within the preceding twelve (12) months.
- Withdrawal of temporary registration. The administrator may withdraw a temporary registration if there are or were grounds for discipline as specified in section 30-14-412, Idaho Code, and the administrator does so within thirty (30) days after the filing of the application. If the administrator does not withdraw the temporary registration within the thirty (30) day period, registration becomes automatically effective on the thirty-first day after filing.
- Power to prevent registration. The administrator may prevent the effectiveness of a transfer of an agent or investment adviser representative under subsection (b)(1) or (2) of this section based on the public interest and the protection of investors.
History.
(e) Termination of registration or application for registration. If the administrator determines that a registrant or applicant for registration is no longer in existence or has ceased to act as a broker-dealer, agent, investment adviser or investment adviser representative, or is the subject of an adjudication of incapacity or is subject to the control of a committee, conservator or guardian, or cannot reasonably be located, a rule adopted or an order issued under this chapter may require the registration be canceled or terminated or the application denied. The administrator may reinstate a canceled or terminated registration, with or without hearing, and may make the registration retroactive. History.
I.C.,§ 30-14-408, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provision:
Prior Provision: 1956 Act Section 204(d).
- Under Sections 402(c) and 404(c) registration of an agent or investment adviser representative is effective only while the agent or investment adviser representative is employed by or associated with a broker-dealer, issuer, or investment adviser, as may be the case. Section 408(a) specifies a procedure to inform the administrator of a notice of termination.
- To expedite transfer to a new broker-dealer or investment adviser, Section 408(b) provides a procedure by which agents or investment adviser representative registration will be effective immediately as of the date of new employment when there is no new or added disciplinary disclosure in the relevant Central Research Depository or Investment Adviser Registration Depository records. Both electronic systems are currently administered by the National Association of Securities Dealers. Section 408(d) is intended to ensure that the administrator has the authority to prevent immediate effectiveness in appropriate cases.
§ 30-14-409. Withdrawal of registration of broker-dealer, agent, investment adviser and investment adviser representative.
Withdrawal of registration by a broker-dealer, agent, investment adviser or investment adviser representative becomes effective sixty (60) days after the filing of the application to withdraw or within any shorter period as provided by a rule adopted or an order issued under this chapter unless a revocation or suspension proceeding is pending when the application is filed. If a proceeding is pending, withdrawal becomes effective when and upon such conditions as required by a rule adopted or an order issued under this chapter. The administrator may institute a revocation or suspension proceeding under section 30-14-412, Idaho Code, within one (1) year after the withdrawal became effective automatically and issue a revocation or suspension order as of the last date on which registration was effective if a proceeding is not pending.
History.
I.C.,§ 30-14-409, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 204(e); RUSA Section 214.
- This section generally follows the 1956 Act Section 204(e) and RUSA Section 214. This section does not affect any applicant’s privilege of withdrawal of an application from registration before the registration becomes effective. It is simply designed to prevent withdrawal of an effective registration under fire. The last sentence preserves the ability of the administrator to initiate an action under Section 412 when the administrator does not know of a reason to object to withdrawal until after withdrawal has become effective.
- Ordinarily today a registrant will file a standardized form such as Form U-5, BD-W or ADV-W to withdraw registration.
§ 30-14-410. Filing fees.
- Broker-dealers. A person shall pay a fee of two hundred dollars ($200) when initially filing an application for registration as a broker-dealer and a fee of two hundred dollars ($200) when filing a renewal of registration as a broker-dealer. If the filing results in a denial or withdrawal, the administrator shall retain the fee.
- Agents. The fee for an individual is fifty dollars ($50.00) when filing an application for registration as an agent, a fee of fifty dollars ($50.00) when filing a renewal of registration as an agent, and a fee of fifty dollars ($50.00) when filing for a change of registration as an agent. If the filing results in a denial or withdrawal, the administrator shall retain the fee.
- Investment advisers. A person shall pay a fee of one hundred fifty dollars ($150) when filing an application for registration as an investment adviser and a fee of one hundred fifty dollars ($150) when filing a renewal of registration as an investment adviser. If the filing results in a denial or withdrawal, the administrator shall retain the fee.
- Investment adviser representatives. The fee for an individual is thirty dollars ($30.00) when filing an application for registration as an investment adviser representative, a fee of thirty dollars ($30.00) when filing a renewal of registration as an investment adviser representative, and a fee of thirty dollars ($30.00) when filing a change of registration as an investment adviser representative. If the filing results in a denial or withdrawal, the administrator shall retain the fee.
- Federal covered investment advisers. A federal covered investment adviser required to file a notice under section 30-14-405, Idaho Code, shall pay an initial fee of thirty dollars ($30.00) and an annual notice fee of thirty dollars ($30.00).
- Payment. A person required to pay a filing or notice fee under this section may transmit the fee through or to a designee as a rule or order provides under this chapter.
- Dual agent/investment adviser representative. An investment adviser representative who is registered as an agent under section 30-14-402, Idaho Code, and who represents a person that is both registered as a broker-dealer under section 30-14-401, Idaho Code, and registered as an investment adviser under section 30-14-403, Idaho Code, or required as a federal covered investment adviser to make a notice filing under section 30-14-405, Idaho Code, is not required to pay an initial or annual registration fee for registration as an investment adviser representative.
History.
I.C.,§ 30-14-410, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 202(b); RUSA Section 206.
- Each state should determine the appropriate fee for each type of registration and for each type of renewal, denial, or withdrawal of a registration.
- Similarly each state should determine whether it wishes to remove the brackets from Section 410(g) and charge a single fee for dually registered agents and investment adviser representatives.
SECTION 410. FILING FEES.
3. If a State prefers to have the fees in this section established by rule, amend this section to read as follows, inserting the appropriate reference to the State’s administrative procedure act: [SECTION 410. FILING FEES.
-
[
Fee established by administrator.
] The administrator shall establish fees by rule pursuant to the [state administrative procedure act] for:
- an initial filing of an application as a broker-dealer and renewal of an application by a broker-dealer for registration, but, if the filing results in a denial or withdrawal, the administrator shall retain an amount of the fee established by the administrator;
- an application for registration as an agent and renewal of registration as an agent, but, if the filing results in a denial or withdrawal, the administrator shall retain an amount of the fee established by the administrator;
- an application for registration as an investment adviser and renewal of registration as an investment adviser, but, if the filing results in a denial or withdrawal, the administrator shall retain an amount of the fee established by the administrator.
- an application for registration as an investment adviser representative, a renewal of registration as an investment adviser representative, and a change of registration as an investment adviser representative, but, if the filing results in a denial or withdrawal, the administrator shall retain an amount of the fee established by the administrator; and
- an initial fee and annual notice fee for a federal covered investment adviser required to file a notice under Section 405.
- [ Payment. ] A person required to pay a filing or notice fee under this section may transmit the fee through or to a designee as a rule or order provides under this [Act].
- [ Dual agent/investment adviser representative. ] An investment adviser representative who is registered as an agent under Section 402 and who represents a person that is both registered as a broker-dealer under Section 401 and registered as an investment adviser under Section 403 or required as a federal covered investment adviser to make a notice filing under Section 405 is not required to pay an initial or annual registration fee for registration as an investment adviser representative.]
§ 30-14-411. Postregistration requirements.
- Financial requirements. Subject to section 15(i) of the securities exchange act of 1934 (15 U.S.C. 78o(i)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-18a), a rule adopted or an order issued under this chapter may establish minimum financial requirements for broker-dealers registered or required to be registered under this chapter and investment advisers registered or required to be registered under this chapter.
- Financial reports. Subject to section 15(i) of the securities exchange act of 1934 (15 U.S.C. 78o(i)) or section 222(b) of the investment advisers act of 1940 (15 U.S.C. 80b-18a), a broker-dealer registered or required to be registered under this chapter and an investment adviser registered or required to be registered under this chapter shall file such financial reports as are required by a rule adopted or an order issued under this chapter. If the information contained in a record filed under this subsection is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.
-
Recordkeeping. Subject to section 15(i) of the securities exchange act of 1934 (15 U.S.C. 78o(i)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-18a):
- A broker-dealer registered or required to be registered under this chapter and an investment adviser registered or required to be registered under this chapter shall make and maintain the accounts, correspondence, memoranda, papers, books and other records required by a rule adopted or an order issued under this chapter;
- Broker-dealer records required to be maintained under subsection (c)(1) of this section may be maintained in any form of data storage acceptable under section 17(a) of the securities exchange act of 1934 (15 U.S.C. 78q(a)) if they are readily accessible to the administrator; and
- Investment adviser records required to be maintained under subsection (c)(1) of this section may be maintained in any form of data storage required by a rule adopted or an order issued under this chapter.
- Audits or inspections. The records of every person issuing or guaranteeing any securities subject to the provisions of this chapter, if such person is registered or required to be registered under this chapter, and of every broker-dealer, agent, investment adviser or investment adviser representative registered or required to be registered under this chapter are subject to such reasonable periodic, special or other audits or inspections by a representative of the administrator, within or without this state, as the administrator considers necessary or appropriate in the public interest and for the protection of investors. An audit or inspection may be made at any time and without prior notice. The administrator may copy, and may remove for audit or inspection copies of, all records the administrator reasonably considers necessary or appropriate to conduct the audit or inspection. The administrator may assess a reasonable charge for conducting an audit or inspection under this subsection.
- Custody and discretionary authority bond or insurance. Subject to section 15(i) of the securities exchange act of 1934 (15 U.S.C. 78o(i)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-18a), a rule adopted or an order issued under this chapter may require a broker-dealer or investment adviser that has custody of or discretionary authority over funds or securities of a customer or client to obtain insurance or post a bond or other satisfactory form of security in an amount not to exceed twenty-five thousand dollars ($25,000). The administrator may determine the requirements of the insurance, bond or other satisfactory form of security. Insurance or a bond or other satisfactory form of security may not be required of a broker-dealer registered under this chapter whose net capital exceeds, or of an investment adviser registered under this chapter whose minimum financial requirements exceed, the amounts required by rule or order under this chapter. The insurance, bond or other satisfactory form of security must permit an action by a person to enforce any liability on the insurance, bond or other satisfactory form of security if instituted within the time limitations in section 30-14-509(j)(2), Idaho Code. (f) Requirements for custody. Subject to section 15(i) of the securities exchange act of 1934 (15 U.S.C. 78o(i)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-18a), an agent may not have custody of funds or securities of a customer except under the supervision of a broker-dealer and an investment adviser representative may not have custody of funds or securities of a client except under the supervision of an investment adviser or a federal covered investment adviser. A rule adopted or an order issued under this chapter may prohibit, limit, or impose conditions on a broker-dealer regarding custody of funds or securities of a customer and on an investment adviser regarding custody of securities or funds of a client.
(g) Investment adviser brochure rule. With respect to an investment adviser registered or required to be registered under this chapter, a rule adopted or an order issued under this chapter may require that information or other record be furnished or disseminated to clients or prospective clients in this state as necessary or appropriate in the public interest and for the protection of investors and advisory clients.
(h) Continuing education. A rule adopted or an order issued under this chapter may require an individual registered under section 30-14-402 or 30-14-404, Idaho Code, to participate in a continuing education program approved by the securities and exchange commission and administered by a self-regulatory organization or, in the absence of such a program, a rule adopted or an order issued under this chapter may require continuing education for an individual registered under section 30-14-404, Idaho Code.
History.
I.C.,§ 30-14-411, as added by 2004, ch. 45, § 2, p. 169; am. 2020, ch. 82, § 17, p. 174; am. 2020, ch. 103, § 2, p. 274.
STATUTORY NOTES
Amendments.
This section was amended by two 2020 acts which appear to be compatible and have been compiled together.
The 2020 amendment, by ch. 82, substituted “(15 U.S.C. 80b-18a)” for “(15 U.S.C. 80b-22)” near the middle of subsection (a), near the beginning of the first sentence in subsection (b), at the end of the introductory paragraph in subsection (c), and near the beginning of the first sentences in subsections (e) and (f).
Compiler’s Notes.
The 2020 amendment, by ch. 103, substituted “section 15(i) of the securities exchange act of 1934 (15 U.S.C. 78o(i)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-18a)” for “section 15(h) of the securities exchange act of 1934 (15 U.S.C. 78o(h)) or section 222 of the investment advisers act of 1940 (15 U.S.C. 80b-22)” throughout the section. Compiler’s Notes.
The words enclosed in parentheses so appeared in the law as enacted.
CASE NOTES
Production of Records.
Idaho department of finance did not have the authority to request a securities agent’s list of clients’ addresses and telephone numbers, her financial records, and her personal bank account records, as they were not the type of records subject to the recordkeeping requirements, and, therefore, the agent’s license should not have been suspended as a result of her refusal to produce these records. In re Karel, 144 Idaho 379, 162 P.3d 758 (2007).
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Sections 102(c), 202(d) and (e) and 203; RUSA Sections 209, 211 and 215.
- Sections 411(a) through (c) and (e) through (f) implicitly refer to “capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements.” Under the National Securities Markets Improvement Act of 1996, States may not impose such requirements on covered broker-dealers and investment advisers greater than those specified in Section 15(h) of the Securities Exchange Act of 1934 and Section 222 of the Investment Advisors Act of 1940.
- Minimum financial requirements must be maintained during the entire time a person is registered and not merely at the time of the registration. See, e.g., National Grange Mut. Ins. Co. v. Prioleau , 236 S.E.2d 808 (S.C. 1977) (continuing bond requirement); Ridgeway, McLeod & Assoc. , 281 A.2d 390 (N.J. Super. Ct. App. Div. 1971) (continuing minimum capital requirement).
- The duty in Section 411(b) to correct or update information is limited to material information which a reasonable investor would continue to consider important in deciding whether to purchase or sell securities. Cf. TSC Indus., Inc. v. Northway, Inc. , 426 U.S. 438, 444-450 (1970); Securities Act Release No. 6084, 17 SEC Dock. 1048, 1054 (1979) (“persons are continuing to rely on all or any material portion of the statements”).
- Section 411(c)(1) authorizes the administrator to require all records to be preserved for the period the administrator prescribes by rule or order.
- Rule 17a-4 is the current rule under Section 17(a) of the Securities Exchange Act referred to in Section 411(c)(2) that addresses acceptable forms of data storage.
- The administrator’s power to copy and examine records in Section 411(d) is subject to all applicable privileges. See, e.g., 10 Louis Loss & Joel Seligman, Securities Regulation 4921-4925 n.69 (3d ed. rev. 1996). The power in Section 411(d) to conduct audits or inspections is distinguishable from the administrator’s enforcement powers under Section 602. No subpoena is necessary under Section 411(d). Failure to submit to a reasonable audit or inspection is a violation of this Act which may result in an action by the administrator under Section 412(d)(8), a criminal prosecution under Section 508, or an injunction under Section 603. An unreasonable audit, inspection or demand for information or documents would be subject to challenge in an appropriate court. 7. Section 411(f) broadens 1956 Act Section 102(c) and RUSA Section 215 to apply to agents as well as investment adviser representatives. Subject to Section 15(h) of the Securities Exchange Act of 1934 and Section 222 of the Investment Adviser Act of 1940, the administrator is given broad authority to prohibit, limit, or condition custody arrangements.
8. Section 411(g) parallels Rule 204-3, adopted under the Investment Advisers Act of 1940, popularly known as the brochure rule, which authorizes the SEC to require dissemination to investment adviser clients of specified information about the investment adviser and investment advice.
§ 30-14-412. Denial, revocation, suspension, withdrawal, restriction, condition or limitation of registration. — (a) Disciplinary conditions
Applicants. If the administrator finds that the order is in the public interest and subsection (d) of this section authorizes the action, an order issued under this chapter may deny an application, or may condition or limit registration of an applicant to be a broker-dealer, agent, investment adviser or investment adviser representative, and, if the applicant is a broker-dealer or investment adviser of any partner, officer, director or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.
(b) Disciplinary conditions — Registrants. If the administrator finds that the order is in the public interest and subsection (d) of this section authorizes the action, an order issued under this chapter may revoke, suspend, condition or limit the registration of a registrant and, if the registrant is a broker-dealer or investment adviser of any partner, officer, director or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser. Provided however, the administrator may not:
- Institute a revocation or suspension proceeding under this subsection based on an order issued under a law of another state that is reported to the administrator or a designee of the administrator more than one (1) year after the date of the order on which it is based; or
-
Under subsection (d)(5)(A) or (B) of this section, issue an order on the basis of an order issued under the securities act of another state unless the other order was based on conduct for which subsection (d) of this section would authorize the action had the conduct occurred in this state.
- The securities, depository institution, insurance or other financial services regulator of a state or by the securities and exchange commission or other federal agency denying, revoking, barring or suspending registration as a broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative;
- The securities regulator of a state or the securities and exchange commission against a broker-dealer, agent, investment adviser, investment adviser representative, or federal covered investment adviser;
- The securities and exchange commission or a self-regulatory organization suspending or expelling the registrant from membership in the self-regulatory organization;
- A court adjudicating a United States postal service fraud order;
- The insurance regulator of a state denying, suspending or revoking registration as an insurance agent; or
- A depository institution regulator suspending or barring the person from the depository institution business;
-
Findings of fact and conclusions of law in a record in accordance with chapter 52, title 67, Idaho Code.
- Limit on investigation or proceeding. The administrator may not institute a proceeding under subsection (a), (b) or (c) of this section based solely on material facts actually known by the administrator unless an investigation or the proceeding is instituted within one (1) year after the administrator actually acquires knowledge of the material facts.
(c) Disciplinary penalties — Registrants. If the administrator finds that the order is in the public interest and subsections (d)(1) through (6), (8), (9), (10), (12) or (13) of this section authorizes the action, an order under this chapter may censure, impose a bar or suspension from association with a broker-dealer or investment adviser registered in this state, or impose a civil penalty in an amount not to exceed five thousand dollars ($5,000) for each violation, on a registrant and, if the registrant is a broker-dealer or investment adviser, a partner, officer, director or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.
(d) Grounds for discipline. A person may be disciplined under subsections (a) through (c) of this section if the person:
(1) Has filed an application for registration in this state under this chapter or the predecessor act within the previous ten (10) years, which, as of the effective date of registration or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained a statement that, in light of the circumstances under which it was made, was false or misleading with respect to a material fact;
(2) Willfully violated or willfully failed to comply with this chapter or the predecessor act or a rule adopted or an order issued under this chapter or the predecessor act within the previous ten (10) years; (3) Has been convicted of any felony or within the previous ten (10) years has been convicted of a misdemeanor involving a security, a commodity future or option contract, or an aspect of a business involving securities, commodities, investments, franchises, insurance, banking or finance;
(4) Is enjoined or restrained by a court of competent jurisdiction in an action instituted by the administrator under this chapter or the predecessor act, a state, the securities and exchange commission, or the United States from engaging in or continuing an act, practice or course of business involving an aspect of a business involving securities, commodities, investments, franchises, insurance, banking or finance;
(5) Is the subject of an order, issued after notice and opportunity for hearing by:
(6) Is the subject of an adjudication or determination, after notice and opportunity for hearing, by the securities and exchange commission, the commodity futures trading commission; the federal trade commission; a federal depository institution regulator, or a depository institution, insurance or other financial services regulator of a state that the person willfully violated the securities act of 1933, the securities exchange act of 1934, the investment advisers act of 1940, the investment company act of 1940, or the commodity exchange act, the securities or commodities law of a state, or a federal or state law under which a business involving investments, franchises, insurance, banking or finance is regulated;
(7) Is insolvent, either because the person’s liabilities exceed the person’s assets or because the person cannot meet the person’s obligations as they mature, provided however that the administrator may not enter an order against an applicant or registrant under this paragraph (7) without a finding of insolvency as to the applicant or registrant;
(8) Refuses to allow or otherwise impedes the administrator from conducting an audit or inspection under section 30-14-411(d), Idaho Code, or refuses access to a registrant’s office to conduct an audit or inspection under section 30-14-411(d), Idaho Code;
(9) Has failed to reasonably supervise an agent, investment adviser representative or other individual, if the agent, investment adviser representative or other individual was subject to the person’s supervision and committed a violation of this chapter or the predecessor act or a rule adopted or an order issued under this chapter or the predecessor act within the previous ten (10) years;
(10) Has not paid the proper filing fee within thirty (30) days after having been notified by the administrator of a deficiency, provided however that the administrator shall vacate an order under this paragraph (10) when the deficiency is corrected; (11) After notice and opportunity for a hearing, has been found within the previous ten (10) years:
(A) By a court of competent jurisdiction to have willfully violated the laws of a foreign jurisdiction under which the business of securities, commodities, investment, franchises, insurance, banking or finance is regulated;
(B) To have been the subject of an order of a securities regulator of a foreign jurisdiction denying, revoking or suspending the right to engage in the business of securities as a broker-dealer, agent, investment adviser, investment adviser representative or similar person; or
(C) To have been suspended or expelled from membership by or participation in a securities exchange or securities association operating under the securities laws of a foreign jurisdiction;
(12) Is the subject of a cease and desist order issued by the securities and exchange commission or issued under the securities, commodities, investment, franchise, banking, finance or insurance laws of a state;
(13) Has engaged in dishonest or unethical practices in the securities, commodities, investment, franchise, banking, finance or insurance business within the previous ten (10) years; or
(14) Is not qualified on the basis of factors such as training, experience and knowledge of the securities business. Provided however, in the case of an application by an agent for a broker-dealer that is a member of a self-regulatory organization or by an individual for registration as an investment adviser representative, a denial order may not be based on this paragraph (14) if the individual has successfully completed all examinations required by subsection (e) of this section. The administrator may require an applicant for registration under section 30-14-402 or 30-14-404, Idaho Code, who has not been registered in a state within the two (2) years preceding the filing of an application in this state to successfully complete an examination.
(e) Examinations. A rule adopted or an order issued under this chapter may require that an examination, including an examination developed or approved by an organization of securities regulators, be successfully completed by a class of individuals or all individuals. An order issued under this chapter may waive, in whole or in part, an examination as to an individual and a rule adopted under this chapter may waive, in whole or in part, an examination as to a class of individuals if the administrator determines that the examination is not necessary or appropriate in the public interest and for the protection of investors.
(f) Summary process. The administrator may suspend or deny an application summarily; restrict, condition, limit or suspend a registration; or censure, bar, or impose a civil penalty on a registrant before final determination of an administrative proceeding. Upon the issuance of an order, the administrator shall promptly notify each person subject to the order that the order has been issued, the reasons for the action, and that within fifteen (15) days after the receipt of a request in a record from the person the matter will be scheduled for a hearing. If a hearing is not requested and none is ordered by the administrator within thirty (30) days after the date of service of the order, the order becomes final by operation of law. If a hearing is requested or ordered, the administrator, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend the order until final determination.
(g) Procedural requirements. An order issued may not be issued under this section, except under subsection (f) of this section, without: (1) Appropriate notice to the applicant or registrant;
(2) Opportunity for hearing; and
(h) Control person liability. A person that controls, directly or indirectly, a person not in compliance with this section may be disciplined by order of the administrator under subsections (a) through (c) of this section to the same extent as the noncomplying person, unless the controlling person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct that is a ground for discipline under this section.
History.
I.C.,§ 30-14-412, as added by 2004, ch. 45, § 2, p. 169; am. 2008, ch. 143, § 2, p. 420; am. 2012, ch. 65, § 5, p. 171.
STATUTORY NOTES
Amendments.
The 2008 amendment, by ch. 143, in subsection (a) and in the introductory paragraph in subsection (b), substituted “or a partner” for “of a partner.”
The 2012 amendment, by ch. 65, substituted “of any partner” for “or a partner” in subsection (a) and in the introductory paragraph in subsection (b).
Federal References.
The federal references in subsection (d)(6) of this section are codified as follows: The Securities Act of 1933, 15 U.S.C.S., § 77a et seq.; the Securities Exchange Act of 1934, 15 U.S.C.S., § 78a et seq.; the Investment Advisers Act of 1940, 15 U.S.C.S. § 80b-1 et seq.; the Investment Company Act of 1940, 15 U.S.C.S. § 80a-1 et seq.; and the commodity exchange act, 7 U.S.C.S. § 1 et seq.
Compiler’s Notes.
For more on securities and exchange commission, referred to in paragraphs (d)(4), (d)(5), (d)(6), and (d)(12), see http://www.sec.gov .
For more on the United States commodity futures trading commission, referred to in paragraph (d)(6), see http://www.cftc.gov/index.htm .
For more on the federal trade commission, referred to in paragraph (d)(6), see http://ftc.gov/ .
Official Comment
Prior Provisions:
- Section 412 generally follows Section 204 of the 1956 Act and Sections 207 and 212-213 of RUSA, but has been modified to reflect subsequent developments that have broadened the scope and remedies of counterpart federal and state statutes. 2. Section 412 authorizes the administrator to seek a sanction based on the seriousness of the misconduct. Under Section 412 the administrator must prove that the denial, revocation, suspension, cancellation, withdrawal, restriction, condition, or limitation both is (1) in the public interest and (2) involves one of the enumerated grounds in Section 412(d). See, e.g., Mayflower Sec. Co., Inc. v. Bureau of Sec. , 312 A.2d 497 (N.J. 1973). The “public interest” is a much litigated concept that has come to have settled meanings. See generally 6 L. Loss & J. Seligman, Securities Regulation 3103.5-3103.18 (3d ed. rev. 2002) (under federal securities laws). The public interest will not require imposition of a sanction for every minor or technical violation of subsection (d).
3. The term “foreign” means a jurisdiction outside of the United States, not a different state within the United States.
4. Section 412(a) through (c) authorizes the administrator to proceed against an entire firm, regardless of whether the administrator proceeds against any individual, when an individual partner, officer, or director or person occupying a similar status or performing similar functions, or a controlling person is disciplined under subsection (d), but only if proceeding against the entire firm is in the public interest. The discipline of such an individual may not automatically be used against a broker-dealer or investment adviser. When, however, there is a failure to reasonably supervise, see Section 412(d)(9) or control person liability, see Section 412(h), the administrator is empowered to proceed against a firm in an appropriate case. In Section 412, “any partner, officer, or director, any person occupying a similar status or performing similar function.” can include a branch manager, assistant branch manager, or other supervisor.
5. In Section 412(d)(1) the completeness and accuracy of an effective application for registration is tested as of the appropriate effective date. An application that becomes incomplete or inaccurate after its effective date is not a ground for discipline under paragraph (d)(1). In an appropriate case, an action might be available under paragraph (d)(2) and Section 406(b). On the other hand, in a proceeding to deny effectiveness to a pending application for registration, the completeness and accuracy of the application is not limited to the effective date and can be judged on any date after filing.
6. The term “willfully” in Section 412(d)(2) and (11)(A) is discussed in Comment 2 to Section 508.
7. There is no time limit or statute of limitations on felony convictions in Section 412(d)(3) as a ground for disciplinary action.
8. The present tense of the verb “is” in Sections 412(d)(4) through (6) and (12) means that an injunction, order, adjudication, or determination that has expired or been vacated is no longer a ground for discipline.
9. In Sections 412(d)(5) and (6) the administrator is not required to prove the validity of the ground which led to the earlier disciplinary order.
10. Under Section 412(d)(7) the administrator may not proceed against a broker-dealer or investment adviser firm on the basis of the insolvency of a partner, officer, director, controlling person or other person specified in subsection (b), unless it is a sole proprietorship.
11. Section 412(d)(8) can be violated by a refusal to cooperate with an administrator’s reasonable audit or inspection, including by withholding or concealing records, refusing to furnish required records, or refusing the administrator reasonable access to any office or location within an office to conduct an audit or inspection under this Act. However, a request by a person subject to an audit or inspection for a reasonable delay to obtain assistance of counsel does not constitute a violation of Section 412(d)(8). 12. The term “failed to supervise reasonably” in Section 412(d)(9) includes not having reasonable supervisory procedures in place as well as a proper system of supervision and internal control. Cf. Hollinger v. Titan Capital Corp. , 914 F.2d 1564 (9th Cir. 1990), cert. denied, 499 U.S. 976 (1991). Section 15(b)(4)(E) of the Securities Exchange Act of 1934 similarly addresses “failure to supervise reasonably.” See 6 Louis Loss & Joel Seligman, Securities Regulation 3097-3101 (3d ed. rev. 2002).
13. The term “dishonest and unethical practices” in Section 412(d)(13) has been held not to be unconstitutionally vague. See, e.g., Brewster v. Maryland Sec. Comm’n , 548 A.2d 157, 160 (M.D. Ct. Spec. App. 1988) (“a broad statutory standard is not vague if it has a meaningful referent in business practice, custom or usage”); Johnson-Bowles Co. v. Division of Sec. , 829 P.2d 101, 114 (Utah Ct. App. 1992) (such legislative language bespeaks a legislative intent to delegate the interpretation of what constitutes “dishonest and unethical practices” in the securities industry to the administrator). Ministerial or clerical violations of a statute or rule, if immaterial and occurring without intent or recklessness, typically would not constitute dishonest or unethical practices.
14. Under the counterparts to Section 412(d)(14) and (e) applicants to become agents of broker-dealers typically take standardized tests administered by the National Association of Securities Dealers, Inc.
15. Sections 412(f) and (g) amplify the earlier procedures found in Section 204(f) of the 1956 Act and are intended to facilitate summary disciplinary proceedings, when these are appropriate.
16. Section 412(i) parallels the language of Section 204 of the 1956 Act and Section 212(b) of RUSA with some significant changes. The time period in which the administrator can act has been extended to one year from 30 days in the 1956 Act and 90 days in RUSA. The limitation on instituting a proceeding can also be tolled by instituting a formal investigation. The addition of the word “solely” is intended to make it clear that an administrator may consider the prior history of an applicant or registrant even if that prior history had been known to the administrator for more than one year if there are additional material facts which are actually known to the administrator within the last year.
17. “Actually known” in Section 412(i) is used to signify that the mere filing of material facts in the Central Registration Depository or Investment Advisory Registration Depository systems does not constitute actual knowledge, unless that information was received by the administrator, or, but for a decision by the administrator, would have been received by the administrator.
Part 5 Fraud and Liabilities
§ 30-14-501. General fraud.
It is unlawful for a person, in connection with the offer, sale, or purchase of a security, directly or indirectly:
- To employ a device, scheme, or artifice to defraud;
- To make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
- To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person; or
- To divert investor money to the personal use of the issuer, offeror or seller, or to pay prior investors without specifically disclosing that use before receiving the investor’s money.
History.
I.C.,§ 30-14-501, as added by 2004, ch. 45, § 2, p. 169; am. 2012, ch. 65, § 6, p. 171.
STATUTORY NOTES
Amendments.
The 2012 amendment, by ch. 65, added subsection (4).
CASE NOTES
Detrimental Reliance.
Detrimental reliance is not required when the department of finance is pursuing an enforcement action for the offer of securities under this section. State Dep’t of Fin. v. Tenney, 124 Idaho 243, 858 P.2d 782 (Ct. App. 1993).
Cited
Mannos v. Moss, 143 Idaho 927, 155 P.3d 1166 (2007).
Official Comment
Prior Provisions:
- Section 501, which was Section 101 in the 1956 Act, was modeled on Rule 10b-5 adopted under the Securities Exchange Act of 1934 and on Section 17(a) of the Securities Act of 1933. There has been significant later case development interpreting Rule 10b-5, Section 17(a), and Section 101 of the 1956 Act. Section 501 is not identical to either Rule 10b-5 or Section 17(a). 2. There are no exemptions from Section 501.
3. Section 501 applies to any securities offer, sale or purchase, including offers, sales, or purchases involving registered, exempt, or federal covered securities. It would also apply to a rescission offer under Section 510.
4. The possible consequences of violating Section 501 are many. These include denial, suspension, or revocation of securities registration under Section 306; denial, revocation, suspension, withdrawal, restriction, condition or limitation of a broker-dealer, agent, investment adviser, or investment adviser representative registration under Section 412; criminal prosecution under Section 508; civil enforcement proceedings under Sections 603; and administrative proceedings under 604.
5. Because Section 501, like Rule 10b-5, reaches market manipulation, see 8 Louis Loss & Joel Seligman, Securities Regulation Ch. 10D (3d ed. 1991), this Act does not include the RUSA market manipulation Section 502, which had no counterpart in the 1956 Act.
6. The culpability required to be pled or proved under Section 501 is addressed in the relevant enforcement context. See, e.g., Section 508, criminal penalties, where “willfulness” must be proven; Section 509, civil liabilities, which includes a reasonable care defense; or civil and administrative enforcement actions under Sections 603 and 604, where no culpability is required to be pled or proven.
7. There is no private cause of action, express or implied, under Section 501. Section 509(m) expressly provides that only Section 509 provides a private cause of action for conduct that could violate Section 501.
§ 30-14-502. Prohibited conduct in providing investment advice.
-
Fraud in providing investment advice. It is unlawful for a person that advises others for compensation, either directly or indirectly 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 part of a regular business, issues or promulgates analyses or reports relating to securities:
- To employ a device, scheme, or artifice to defraud another person;
- To engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person; or
- To divert investor money to the personal use of the issuer, offeror or seller, or to pay prior investors without specifically disclosing that use before receiving the investor’s money.
- Rules defining fraud. A rule adopted under this chapter may define an act, practice, or course of business of an investment adviser or an investment adviser representative, as fraudulent, deceptive or manipulative, and prescribe means reasonably designed to prevent investment advisers and investment adviser representatives, from engaging in acts, practices, and courses of business defined as fraudulent, deceptive or manipulative.
- Rules specifying contents of advisory contract. A rule adopted or an order issued under this chapter may specify the contents of an investment advisory contract entered into, extended or renewed by an investment adviser.
History.
I.C.,§ 30-14-502, as added by 2004, ch. 45, § 2, p. 169; am. 2012, ch. 65, § 7, p. 171.
STATUTORY NOTES
Amendments.
The 2012 amendment, by ch. 65, added paragraph (a)(3).
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 102(a); RUSA Section 503.
- Section 502(a) applies to any person that commits fraud in providing investment advice. Section 502(b) is not limited to persons registered as investment advisers or investment adviser representatives.
- A person can violate both Section 501 and Section 502 if the person violates Section 502 in connection with the offer, purchase, or sale of a security.
- The rulemaking authority under Sections 502(b) and (c) would provide the basis for existing NASAA rules concerning investment advisers, to the extent these rules are not preempted by the National Securities Markets Improvement Act of 1996.
- Under Section 203A(b)(2) of the Investment Advisers Act States retain their authority to investigate and bring enforcement actions with respect to fraud or deceit against a federal covered investment adviser or a person associated with a federal covered investment adviser. Under Section 502(a), which applies to any person, a State could bring an enforcement action against a federal covered investment adviser, including a federal covered investment adviser excluded from the definition of investment adviser in Section 102(15)(E). 5. There is no private cause of action, express or implied, under Section 502. Section 509(m) expressly provides that only Section 509 provides for a private cause of action for prohibited conduct in providing investment advice that could violate Section 502.
§ 30-14-503. Evidentiary burden.
- Civil. In a civil action or administrative proceeding under this chapter, a person claiming an exemption, exception, preemption or exclusion has the burden to prove the applicability of the claim.
- Criminal. In a criminal proceeding under this chapter, a person claiming an exemption, exception, preemption or exclusion has the burden of going forward with evidence of the claim.
History.
I.C.,§ 30-14-503, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 402(d); RUSA Section 608.
- As specified in Section 503(a), in a civil or administrative action, the person claiming an exemption, exception, preemption, or exclusion has the burden of persuasion.
- In contrast, in a criminal action under Section 503(b), the prosecutor is required to prove each element of a crime “beyond a reasonable doubt.” The defendant only has the burden of producing evidence of an exemption, exception, preemption, or exclusion. Some court decisions have characterized this burden as an affirmative defense. See, e.g., United States ex. rel. Schott v. Tehan, 365 F.2d 191, 195 (6th Cir. 1966) (Ohio blue sky law constitutionally shifts burden of production to defendant); Commonwealth v. David, 309 N.E.2d 484, 488 (Mass. 1974) (exemption is an affirmative defense); State v. Frost, 387 N.E.2d 235, 238-239 (Ohio 1979) (it is not unconstitutional to require the burden of proof as an affirmative defense to prove a securities law exemption); State v. Andersen, 773 A.2d 328 (Conn. 2001) (an exemption from registration is an affirmative defense to the charge of selling unregistered securities).
§ 30-14-504. Filing of sales and advertising literature.
- Filing requirement. Except as otherwise provided in subsection (b) of this section, a rule adopted or an order issued under this chapter may require the filing of a prospectus, pamphlet, circular, form letter, advertisement, sales literature or other advertising record relating to a security or investment advice, addressed or intended for distribution to prospective investors, including clients or prospective clients of a person registered or required to be registered as an investment adviser under this chapter.
- Excluded communications. This section does not apply to sales and advertising literature specified in subsection (a) of this section which relates to a federal covered security, a federal covered investment adviser, or a security or transaction exempted by section 30-14-201, 30-14-202 or 30-14-203, Idaho Code, except as required pursuant to section 30-14-201(7), Idaho Code.
History.
I.C.,§ 30-14-504, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
- The prospectuses, pamphlets, circulars, form letters, advertisements, sales literature or advertising communications, include material disseminated electronically or available on a web site.
- The administrator may bring a civil enforcement action in a court under Section 603 or institute administrative enforcement under Section 604 to prevent publication, circulation or use of any materials required by the administrator to be filed under Section 504 that have not been filed.
- Section 504(b) is meant to refer to the communications described in Section 504(a).
§ 30-14-505. Misleading filings.
It is unlawful for a person to make or cause to be made, in a record that is used in an action or proceeding or filed under this chapter, a statement that, at the time and in the light of the circumstances under which it is made, is false or misleading in a material respect, or, in connection with the statement, to omit to state a material fact necessary to make the statement made, in the light of the circumstances under which it was made, not false or misleading.
History.
I.C.,§ 30-14-505, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions.
The definition of “materiality” in TSC Indus., Inc. v. Northway, Inc. , 426 U.S. 438, 449 (1976) (“an omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote”) has generally been followed in both federal and state securities law. See 4 Louis Loss & Joel Seligman, Securities Regulation 2071-2105 (3d ed. rev. 2000).
§ 30-14-506. Misrepresentations concerning registration or exemption.
The filing of an application for registration, a registration statement, a notice filing under this chapter, the registration of a person, the notice filing by a person, or the registration of a security under this chapter does not constitute a finding by the administrator that a record filed under this chapter is true, complete, and not misleading. The filing or registration or the availability of an exemption, exception, preemption or exclusion for a security or a transaction does not mean that the administrator has passed upon the merits or qualifications of, or recommended or given approval to, a person, security or transaction. It is unlawful to make, or cause to be made, to a purchaser, customer, client, or prospective customer or client a representation inconsistent with this section.
History.
I.C.,§ 30-14-506, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
This Section follows the 1956 Act and RUSA, as well as state securities statutes generally, in providing that a misrepresentation concerning registration or an exemption is unlawful.
§ 30-14-507. Qualified immunity.
A broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative is not liable to another broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative for defamation relating to a statement that is contained in a record required by the administrator, or designee of the administrator, the securities and exchange commission or a self-regulatory organization, unless the person knew, or should have known at the time that the statement was made, that it was false in a material respect or the person acted in reckless disregard of the statement’s truth or falsity.
History.
I.C.,§ 30-14-507, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Source of Law:
- In 1994 The Securities and Exchange Commission Division of Market Regulation published The Large Firm Project: A Review of Hiring, Retention, and Supervisory Practices (1994), which found that a small number of “rogue brokers” were responsible for a significant proportion of customer disciplinary complaints. These brokers in some instances moved from one broker-dealer firm to another, it was explained, without full and complete disclosure of disciplinary problems by the broker-dealer, because of broker-dealer firms’ fear of state law defamation claims. See also GAO, Actions Needed to Better Protect Investors against Unscrupulous Brokers 3 (1994); Testimony of SEC Chairman Arthur Levitt Concerning the Large Firm Project, Subcomm. on Telecommunications & Fin., House Comm. on Energy & Commerce (Sept. 14, 1994), reprinted in 1994-1995 Fed. Sec. L. Rep. (CCH) ¶ 85,433 (1994).
- In 1998, the National Association of Securities Dealers proposed qualified immunity for statements made in Forms U-4 and U-5 to address this problem. This proposal was reprinted in Securities Exchange Act Release 39,892, 66 SEC Dock. 2473 (1998). This proposal was limited to arbitration proceedings. It was not acted on by the Securities and Exchange Commission.
- An alternative approach would be a standard providing for absolute immunity. See generally Anne Wright, Form U-5 Defamation, 52 Wash. & Lee L. Rev. 1299 (1995); Acciardo v. Millennium Sec. Corp. , 83 F. Supp. 2d 413 (S.D.N.Y. 2000) (discussing both New York qualified and absolute immunity cases).
- Securities administrators or self-regulatory organizations generally are subject to absolute or qualified immunity for actions of their employees within the course of their official duties. See 10 Louis Loss & Joel Seligman, Securities Regulation 4818-4821 (3d ed. rev. 1996).
- As is generally the law “truth is a complete defense to a defamation action.” Andrews v. Prudential Sec., Inc. , 160 F.3d 304, 308 (6th Cir. 1998). 6. An agent who has been the subject of a Form U-5, Uniform Termination Notice for Securities Industry Registration, may respond to specified adverse disclosures and have her or his responses reprinted on the published version of Form U-5.
7. Through September 2002 no state had adopted an immunity provision in its securities statute. No state has rejected immunity in this context by judicial decision. A number of states have adopted qualified immunity by judicial decision. See, e.g., Eaton Vance Distrib., Inc. v. Ulrich , 692 So.2d 915 (Fla. Dist. Ct. App. 1997); Bavarati v. Josephal, Lyon & Ross, Inc. , 28 F.3d 704 (7th Cir. 1994) (Illinois); Andrews v. Prudential Sec., Inc. , 160 F.3d 304 (6th Cir. 1998) (Michigan); Prudential Sec., Inc. v. Dalton , 929 F. Supp. 1411 (N.D. Okla. 1996) (Oklahoma); Glennon v. Dean Witter Reynolds Inc. , 83 F.3d 132 (6th Cir. 1996) (Tennessee).
§ 30-14-508. Criminal penalties.
- Criminal penalties. A person that willfully violates this chapter, or a rule adopted or an order issued under this chapter, except section 30-14-504, Idaho Code, or the notice filing requirements of section 30-14-302 or 30-14-405, Idaho Code, or that willfully violates section 30-14-505, Idaho Code, knowing the statement made to be false or misleading in a material respect, shall be guilty of a felony and upon conviction, shall be fined not more than ten thousand dollars ($10,000) or imprisoned not more than five (5) years, or both. An individual convicted of violating a rule or order under this chapter may be fined, but may not be imprisoned, if the individual did not have knowledge of the rule or order.
-
A person that willfully violates section 30-14-501 or 30-14-502(a), Idaho Code, and in connection with that violation, the violator knowingly accepts any money representing:
- Equity in a person’s home;
- A withdrawal from any individual retirement account or similar retirement account; or
- A withdrawal from any qualified retirement plan as defined in the Internal Revenue Code,
-
If, in the commission of an offense described in subsection (a) or (b) of this section, the victim is an elder or dependent adult, and the violator has knowledge that the victim is an elder or dependent adult, the defendant shall receive an additional term of imprisonment as follows:
- Three (3) years if the victim is under seventy (70) years of age.
- Five (5) years if the victim is seventy (70) years of age or older.
- As used in this section, “elder” means any person who is sixty-five (65) years of age or older.
- As used in this section, “dependent adult” means any person who is between the ages of eighteen (18) and sixty-four (64) years, who has physical or mental limitations which restrict the person’s ability to carry out normal activities or to protect the person’s rights, including, but not limited to, persons who have physical or developmental disabilities or whose physical or mental abilities have diminished because of age.
- No indictment or information may be returned under this chapter more than five (5) years after the alleged violation.
- Criminal reference not required. The attorney general or the proper prosecuting attorney with or without a reference from the administrator, may institute criminal proceedings under this chapter.
- No limitation on other criminal enforcement. This chapter does not limit the power of this state to punish a person for conduct that constitutes a crime under other laws of this state.
shall upon conviction be punished by imprisonment for not less than three (3) years or more than fifteen (15) years if, at the time the crime was committed, the property, money or thing unlawfully obtained or sought to be obtained was worth ten thousand dollars ($10,000) or more.
History.
I.C.,§ 30-14-508, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Cross References.
Attorney general,§ 67-1401 et seq.
CASE NOTES
Limitation on action.
Defendant’s securities fraud crimes were governed by the five-year statute of limitation in the securities law, rather than by the three-year statute of limitation generally applicable to all felonies,§ 19-402. State v. Burchard, 123 Idaho 382, 848 P.2d 440 (Ct. App. 1993).
Sentence Upheld.
Where defendant, who pled guilty to three counts of omitting material facts in the sale of securities, was convicted and sentenced to a suspended three-year term with nine years of probation and ordered to make $42,000 in restitution to the defrauded investors and to perform 2,500 hours of community service, the trial court did not abuse its sentencing discretion by failing to grant a withheld judgment, because the public interest would be best served by requiring defendant to make restitution, keeping defendant out of the security-advising field, and deterring others. State v. Geier, 109 Idaho 963, 712 P.2d 664 (Ct. App. 1985).
Willfully.
Although “wilfulness” is not specifically defined within the provisions of the law governing the sale of securities, since both the securities laws and the criminal code relate to criminal prosecutions, the definition of wilfulness, as set forth in the criminal code, is applicable. See§ 18-101. State v. Montgomery, 135 Idaho 348, 17 P.3d 292 (2001).
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 409; RUSA Section 604; Securities Exchange Act of 1934 Section 32(a).
- This Section follows the 1956 Act and the federal securities laws in imposing criminal penalties for any willful violation of the Act. RUSA Section 604 distinguished between felonies and misdemeanors, limiting willful violations of cease and desist orders to a misdemeanor.
- The term “willfully” has the same meaning in Section 508 as it did in the 1956 Act. All that is required is proof that a person acted intentionally in the sense that the person was aware of what he or she was doing. Proof of evil motive or intent to violate the law or knowledge that the law was being violated is not required.
- The final sentence of Section 508(a) is based on Section 32(a) of the Securities Exchange Act of 1934, which provides: “[N]o person shall be subject to imprisonment under this section in violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.” The “no knowledge” clause in Section 508(a) is relevant only to sentencing. The person convicted has the burden of persuasion to prove no knowledge at sentencing. Because this does not impose a burden on the defendant to disprove the elements of a crime, Section 32(a) of the Securities Exchange Act of 1934 has been held not to raise a constitutional problem. United States v. Mandel , 296 F. Supp. 1038, 1040 (S.D.N.Y. 1969).
- The appropriate state prosecutor under Section 508(b) may decide whether to bring a criminal action under this statute, another statute, or, when applicable, common law. In certain states the administrator has full or limited criminal enforcement powers.
- This section does not specify maximum dollar amounts for criminal fines, maximum terms for imprisonment, nor the years of limitation, but does provide for each state to specify appropriate magnitudes for criminal fines or maximum terms for imprisonment.
- The definition of willfulness in Comment 2 to Section 508 has been followed by most courts. See, e.g., State v. Hodge , 460 P.2d 596, 604 (Kan. 1969) (“No specific intent is necessary to constitute the offense where one violates the securities act except the intent to do the act denounced by the statute”); State v. Nagel , 279 N.W.2d 911, 915 (S.D. 1979) (“[I]t is widely understood that the legislature may forbid the doing of an act and make its commission a crime without regard to the intent or knowledge of the doer”); State v. Fries , 337 N.W.2d 398, 405 (Neb. 1983) (proof of a specific intent, evil motive, or knowledge that the law was being violated is not required to sustain a criminal conviction under a state’s blue sky law); People v. Riley , 708 P.2d 1359, 1362 (Colo. 1985) (“A person acts ‘knowingly’ or ‘willfully’ with respect to conduct . . . when he is aware that his conduct . . . exists”); State v. Larsen , 865 P.2d 1355, 1358 (Utah 1993) (willful implies a willingness to commit the act, not an intent to violate the law or to injure another or acquire any advantage); State v . Montgomery , 17 P.3d 292, 294 (Idaho 2001) (bad faith is not required for a violation of a state securities act; willful implies “simply a purpose or willingness to commit the act or make the omission referred to”); State v. Dumke , 901 S.W.2d 100, 102 (Mo. Ct. App. 1995) ( mens rea not required); State v. Mueller , 549 N.W.2d 455, 460 (Wis. Ct. App. 1996) (willfulness does not require proof that the defendant acted with intent to defraud or knowledge that the law was violated); United States v. Lilley , 291 F. Supp. 989, 993 (S.D. Tex. 1968) (“no knowledge” clause in federal statute not available to defendant claiming lack of knowledge of particular SEC rule).
§ 30-14-509. Civil liability.
- Securities litigation uniform standards act. Enforcement of civil liability under this section is subject to the securities litigation uniform standards act of 1998, as cited in section 30-14-103, Idaho Code.
-
Liability of seller to purchaser. A person is liable to the purchaser if the person sells a security in violation of section 30-14-301, Idaho Code, or, by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading, the purchaser not knowing the untruth or omission and the seller not sustaining the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following:
- The purchaser may maintain an action to recover the consideration paid for the security, less the amount of any income received on the security, and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the purchase, costs, and reasonable attorneys’ fees determined by the court, upon the tender of the security, or for actual damages as provided in subsection (b)(3) of this section.
- The tender referred to in subsection (b)(1) of this section may be made any time before entry of judgment. Tender requires only notice in a record of ownership of the security and willingness to exchange the security for the amount specified. A purchaser that no longer owns the security may recover actual damages as provided in subsection (b)(3) of this section.
- Actual damages in an action arising under this subsection are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it, and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the purchase, costs, and reasonable attorneys’ fees determined by the court.
-
Liability of purchaser to seller. A person is liable to the seller if the person buys a security by means of an untrue statement of a material fact or omission to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading, the seller not knowing of the untruth or omission, and the purchaser not sustaining the burden of proof that the purchaser did not know, and in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following:
- The seller may maintain an action to recover the security, and any income received on the security, costs, and reasonable attorneys’ fees determined by the court, upon the tender of the purchase price, or for actual damages as provided in subsection (c)(3) of this section.
- The tender referred to in subsection (c)(1) of this section may be made any time before entry of judgment. Tender requires only notice in a record of the present ability to pay the amount tendered and willingness to take delivery of the security for the amount specified. If the purchaser no longer owns the security, the seller may recover actual damages as provided in subsection (c)(3) of this section.
- Actual damages in an action arising under this subsection are the difference between the price at which the security was sold and the value the security would have had at the time of the sale in the absence of the purchaser’s conduct causing liability, and at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the sale of the security, costs, and reasonable attorneys’ fees determined by the court. (d) Liability of unregistered broker-dealer and agent. A person acting as a broker-dealer or agent that sells or buys a security in violation of section 30-14-401(a), 30-14-402(a) or 30-14-506, Idaho Code, is liable to the customer. The customer, if a purchaser, may maintain an action for recovery of actual damages as specified in subsections (b)(1) through (3) of this section, or, if a seller, for a remedy as specified in subsections (c)(1) through (3) of this section.
-
A person that is a broker-dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under subsections (b) through (f) of this section, unless the person sustains the burden of proof that the person did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which liability is alleged to exist.
(h) Right of contribution. A person liable under this section has a right of contribution as in cases of contract against any other person liable under this section for the same conduct.
- Survival of cause of action. A cause of action under this section survives the death of an individual who might have been a plaintiff or defendant.
(e) Liability of unregistered investment adviser and investment adviser representative. A person acting as an investment adviser or investment adviser representative that provides investment advice for compensation in violation of section 30-14-403(a), 30-14-404(a) or 30-14-506, Idaho Code, is liable to the client. The client may maintain an action to recover the consideration paid for the advice, interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of payment, costs, and reasonable attorneys’ fees determined by the court.
(f) Liability for investment advice. A person that receives directly or indirectly any consideration for providing investment advice to another person and that employs a device, scheme or artifice to defraud the other person or engages in an act, practice, or course of business that operates or would operate as a fraud or deceit on the other person, is liable to the other person. An action under this subsection is governed by the following:
(1) The person defrauded may maintain an action to recover the consideration paid for the advice and the amount of any actual damages caused by the fraudulent conduct, interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the fraudulent conduct, costs, and reasonable attorneys’ fees determined by the court, less the amount of any income received as a result of the fraudulent conduct.
(2) This subsection does not apply to a broker-dealer or its agents if the investment advice provided is solely incidental to transacting business as a broker-dealer and no special compensation is received for the investment advice.
(g) Joint and several liability. The following persons are liable jointly and severally with and to the same extent as persons liable under subsections (b) through (f) of this section:
(1) A person that directly or indirectly controls a person liable under subsections (b) through (f) of this section, unless the controlling person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;
(2) An individual who is a managing partner, executive officer, or director of a person liable under subsections (b) through (f) of this section, including an individual having a similar status or performing similar functions, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;
(3) An individual who is an employee of or associated with a person liable under subsections (b) through (f) of this section and who materially aids the conduct giving rise to the liability, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist; and
(j) Statute of limitations. A person may not obtain relief:
(1) Under subsection (b) of this section for violation of section 30-14-301, Idaho Code, or under subsection (d) or (e) of this section, unless the action is instituted within one (1) year after the violation occurred; or
(2) Under subsection (b) of this section, other than for violation of section 30-14-301, Idaho Code, or under subsection (c) or (f) of this section, unless the action is instituted within the earlier of two (2) years after discovery of the facts constituting the violation or five (5) years after the violation.
(k) No enforcement of violative contract. A person that has made, or has engaged in the performance of, a contract in violation of this chapter or a rule adopted or an order issued under this chapter, or that has acquired a purported right under the contract with knowledge of conduct by reason of which its making or performance was in violation of this chapter, may not base an action on the contract.
( l ) No contractual waiver. A condition, stipulation, or provision binding a person purchasing or selling a security or receiving investment advice to waive compliance with this chapter or a rule adopted or an order issued under this chapter is void.
(m) Survival of other rights or remedies. The rights and remedies provided by this chapter are in addition to any other rights or remedies that may exist, but this chapter does not create a cause of action not specified in this section or section 30-14-411(e), Idaho Code.
History.
I.C.,§ 30-14-509, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Federal References.
The securities litigation uniform standards act of 1998, referred to in subsection (a), is generally codified as 15 USCS § 77p and 78bb(f).
CASE NOTES
Attorneys’ Fees.
Statute of Limitations.
The mere inclusion of reasonable attorneys’ fees as an item of recovery does not mean that the subject of attorneys’ fees should have been submitted to the jury as a question at law; the allowance and amount of attorneys’ fees is not a jury question, but is within the sound discretion of the trial judge. Hatrock v. Edward D. Jones & Co., 750 F.2d 767 (9th Cir. 1984). Statute of Limitations.
Defendant’s securities fraud crimes were governed by the statute of limitation specifically set out in the securities act, providing for criminal punishment for violations of the act, rather than by the statute of limitations applicable to all felonies,§ 19-402. State v. Burchard, 123 Idaho 382, 848 P.2d 440 (Ct. App. 1993).
Venue.
In a securities case brought by the shareholders against the corporation and its representatives, alleging fraud, venue was proper in the county where the offer to sell was made and the shares were sold. Hayes v. Kingston, 140 Idaho 551, 96 P.3d 652 (2004).
Cited
Mannos v. Moss, 143 Idaho 927, 155 P.3d 1166 (2007).
Official Comment
Prior Provisions:
- Under Section 509 violations of two or more sections can be proven, but the remedy is limited either to rescission or actual damages. Actual damages means compensatory damages. Punitive or “double” damages are not provided by this section which also is the standard under Section 28(a) of the Securities Exchange Act of 1934. See 9 Louis Loss & Joel Seligman, Securities Regulation 4408-4427 (3d ed. rev. 1992).
- The Securities Litigation Uniform Standards Act of 1998 cited in Section 509(a) modifies the entire Section 509.
- As with Section 12(a)(2) of the Securities Act of 1933, Section 509(b) contains a type of privity requirement in that the purchaser is required to bring an action against the seller. Section 509(b) is broader than Section 12(a)(2) in that it will reach all sales in violation of Section 301, not just sales “by means of a prospectus” as is the law under Section 12(a)(2). See Gustafson v. Alloyd Co., Inc., 513 U.S. 561 (1995).
- Unlike the current standards on implied rights of action under Rule 10b-5, neither causation nor reliance has been held to be an element of a private cause of action under the precursor to Section 509(b). See Gerhard W. Gohler, IRA v. Wood , 919 P.2d 561 (Utah 1996); Ritch v. Robinson-Humphrey Co. , 748 So. 2d 861 (Ala. 1999); Kaufman v. I-Stat Corp. , 754 A.2d 1188 (N.J. 2000).
- The measure of damages in Section 509(b)(3) is that contemplated by Section 12 of the Securities of 1933. See 9 Louis Loss and Joel Seligman, Securities Regulations 4242-4246 (3d ed. 1992). The measure of damages in Section 509(c)(3), however, is that contemplated by Rule 10b-5. Sec. 9 id. 4408-4427. In providing for damages as an alternative to rescission, Section 509(b)(3) follows the 1956 Act and is an improvement upon many earlier state provisions, which conditioned the plaintiff’s right of recovery on his or her being in a position to make a good tender. A plaintiff is not given the right under this type of statutory formula to retain stock and also seek damages.
- Sections 509(e) and (f) are based on a proposed NASAA amendment to the Uniform Securities Act adopted in order “to establish civil liability for individuals who willfully violate Section 102 dealing with fraudulent practices pertaining to advisory activities.” Neither provision is intended to limit other state law claims for providing investment advice.
- Broker-dealer employees, including research analysts, who receive no special compensation from third parties for investment advice would not be liable under Section 509(f). 8. The control liability provision in Section 509(g)(1) is modeled on that in the 1956 Act. On the meaning of “control,” see 4 Louis Loss & Joel Seligman, Securities Regulations 1703-1727 (3d ed. rev. 2000).
9. The defense of lack of knowledge in Sections 509(g) is also modeled on the 1956 Act.
10. Under Section 509(g)(2) partners, officers, and directors are liable, subject to the defense afforded by that subsection, without proof that they aided in the sale. In Section 509(g)(2), the term “partner” is intended to be limited to partners with management responsibilities, rather than a partner with a passive investment.
11. Under 509(g)(4), the performance by a clearing broker of the clearing broker’s contractual functions — even though necessary to the processing of a transaction — without more would not constitute material aid or result in liability under this subsection. See, e.g., Ross v. Bolton , 904 F.2d 819 (2d Cir. 1990).
12. The “reasonable attorneys’ fees” specified in Section 509 are permissive, not mandatory. See, e.g., Andrews v. Blue , 489 F.2d 367, 377 (10th Cir. 1973), (Colorado statute).
13. The contribution provision in Section 509(h) is a safeguard to avoid the common law principle that prohibited contribution among joint tortfeasors.
14. The statute of limitations in Section 509(j) is a hybrid of the 1956 Act and federal securities law approaches. The 1956 Act Section 410(p) provided that: “No person may sue under this section more than two years after the contract of sale.” Under this provision, the state courts generally decline to extend a statute of limitations period on grounds of fraudulent concealment or equitable tolling.
Before the July 2002 enactment of the Sarbanes-Oxley Act, Rule 10b-5 of the Securities Exchange Act as construed by the United States Supreme Court in Lampf, Pleva, Lipkind, Prepis & Petigrew v. Gilbertson, 501 U.S. 350 (1991), prohibited equitable tolling under the federal securities law one year after discovery and three years after the act formula. See generally 10 Louis Loss & Joel Seligman, Securities Regulation 4505-4525 (3d. ed. rev. 1996). The Sarbanes-Oxley Act added 28 U.S.C. §1658(b) which provides
. . . a private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws, as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), may be brought not later than the earlier of —
- 2 years after the discovery of the facts constituting the violation; or
- 5 years after such violation.
Section 509(j)(1), as with the 1956 Act, is a unitary statute of repose, requiring an action to be commenced within one year after a violation occurred. It is not intended that equitable tolling be permitted.
Section 509(j)(2), in contrast, generally follows the federal securities law model. An action must be brought within the earlier of two years after discovery or five years after the violation. As with federal courts construing the statute of limitations under Rule 10b-5, it is intended that the plaintiff’s right to proceed is limited to two years after actual discovery “or after such discovery should have been made by the exercise of reasonable diligence” (inquiry notice), see, e.g., Law v. Medco Research, Inc. , 113 F.3d 781 (7th Cir. 1997), or five years after the violation.
The rationale for replicating the basic federal statute of limitations in this Act is to discourage forum shopping. If the statute of limitations applicable to Rule 10b-5 were to be changed in the future, identical changes should be made in Section 509(j)(2). 15. Section 509(k) is similar to Section 29(b) of the Securities Exchange Act and is intended to apply only to actions to enforce illegal contracts. See Louis Loss, Commentary on the Uniform Securities Act 150 (1976).
16. Section 509(m) follows the 1956 Act.
17. Section 509 and Section 411(e) provide the exclusive private causes of action under this Act.
§ 30-14-510. Rescission offers.
A purchaser, seller, or recipient of investment advice may not maintain an action under section 30-14-509, Idaho Code, if:
-
The purchaser, seller, or recipient of investment advice receives in a record, before the action is instituted:
- An offer stating the respect in which liability under section 30-14-509, Idaho Code, may have arisen and fairly advising the purchaser, seller, or recipient of investment advice of that person’s rights in connection with the offer, and any financial or other information necessary to correct all material misrepresentations or omissions in the information that was required by this chapter to be furnished to that person at the time of the purchase, sale, or investment advice;
- If the basis for relief under this section may have been a violation of section 30-14-509(b), Idaho Code, an offer to repurchase the security for cash, payable on delivery of the security, equal to the consideration paid, and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the purchase, less the amount of any income received on the security, or, if the purchaser no longer owns the security, an offer to pay the purchaser upon acceptance of the offer damages in an amount that would be recoverable upon a tender, less the value of the security when the purchaser disposed of it, and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the purchase in cash equal to the damages computed in the manner provided in this subsection;
- If the basis for relief under this section may have been a violation of section 30-14-509(c), Idaho Code, an offer to tender the security, on payment by the seller of an amount equal to the purchase price paid, less income received on the security by the purchaser and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the sale; or if the purchaser no longer owns the security, an offer to pay the seller upon acceptance of the offer, in cash, damages in the amount of the difference between the price at which the security was purchased and the value the security would have had at the time of the purchase in the absence of the purchaser’s conduct that may have caused liability and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the sale;
- If the basis for relief under this section may have been a violation of section 30-14-509(d), Idaho Code; and if the customer is a purchaser, an offer to pay as specified in subsection (b) of this section [paragraph (2) of this subsection]; or, if the customer is a seller, an offer to tender or to pay as specified in subsection (c) of this section [paragraph (3) of this subsection];
- If the basis for relief under this section may have been a violation of section 30-14-509(e), Idaho Code, an offer to reimburse in cash the consideration paid for the advice and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of payment; or
- If the basis for relief under this section may have been a violation of section 30-14-509(f), Idaho Code, an offer to reimburse in cash the consideration paid for the advice, the amount of any actual damages that may have been caused by the conduct, and interest at the annual rate of interest set forth in section 28-22-104(2), Idaho Code, from the date of the violation causing the loss; (b) The offer under subsection (a)(1) [subsection (a)] of this section states that it must be accepted by the purchaser, seller, or recipient of investment advice within thirty (30) days after the date of its receipt by the purchaser, seller, or recipient of investment advice or any shorter period, of not less than three (3) days, that the administrator, by order, specifies;
(c) The offeror has the present ability to pay the amount offered or to tender the security under subsection (a)(1) [subsection (a)] of this section;
(d) The offer under subsection (a)(1) [subsection (a)] of this section is delivered to the purchaser, seller, or recipient of investment advice, or sent in a manner that ensures receipt by the purchaser, seller, or recipient of investment advice; and
(e) The purchaser, seller, or recipient of investment advice that accepts the offer under subsection (a)(1) [subsection (a)] of this section in a record within the period specified under subsection (a)(2) [subsection (b)] of this section is paid in accordance with the terms of the offer.
History.
I.C.,§ 30-14-510, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
The bracketed insertions in paragraph (a)(4) and subsections (b), (c), (d), and (e) were added by the compiler to correct the statutory references and to conform to the uniform act.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 410(e); RUSA Section 607.
- A rescission offer must meet the specific requirements of Section 510 for civil liability under Section 509 to be extinguished. Cf. Binder v. Gordian Sec., Inc. , 742 F. Supp. 663, 666 (N.D. Ga. 1990). See generally Rowe, Rescission Offers under Federal and State Securities Law, 12 J. Corp. L. 383 (1987).
- A rescission offer that does not comply with Section 510 is subject to civil liability, administrative enforcement, or criminal penalties under this Act. A rescission offer, for example, could violate Section 501, the general fraud provision.
- The administrator may publish a form that would comply with Section 510, but the form would not be the only one that could be used by the parties.
- A valid rescission offer will be exempt from securities registration. See Section 202(19).
- If a state chooses to add a notice or filing provision, it could provide this provision in Section 510(6), which would state:
(6) The offer [or a notice] is required to be filed with the administrator 10 business days before the offering and conform in form and content with a rule prescribed by the administrator.
Part 6 Administration and Judicial Review
§ 30-14-601. Administration.
- Administration. The administration of the provisions of this chapter shall be under the general supervision and control of the administrator.
- Unlawful use of records or information. It is unlawful for the administrator or an officer, employee, or designee of the administrator to use for personal benefit or the benefit of others records or other information obtained by or filed with the administrator that are not public under section 30-14-607(b), Idaho Code. This chapter does not authorize the administrator or an officer, employee, or designee of the administrator to disclose the record or information, except in accordance with section 30-14-602, 30-14-607(c) or 30-14-608, Idaho Code.
- No privilege or exemption created or diminished. This chapter does not create or diminish a privilege or exemption that exists at common law, by statute or rule, or otherwise.
- Investor education. The administrator may develop and implement investor education initiatives to inform the public about investing in securities, with particular emphasis on the prevention and detection of securities fraud. In developing and implementing these initiatives, the administrator may collaborate with public and nonprofit organizations with an interest in investor education. The administrator may accept a grant or donation from a person that is not affiliated with the securities industry or from a nonprofit organization, regardless of whether the organization is affiliated with the securities industry, to develop and implement investor education initiatives. This subsection does not authorize the administrator to require participation or monetary contributions of a registrant in an investor education program.
- The securities investor education and training fund. The securities investor education and training fund is hereby created to provide funds for the purposes specified in subsection (d) of this section. All moneys received by the state by reason of civil penalties and administrative fines collected pursuant to this chapter shall be deposited in the securities investor education and training fund up to but not exceeding fifty thousand dollars ($50,000) per year. The administrator may use funds in this account in a manner consistent with the duties of the department of finance under this chapter.
History.
I.C.,§ 30-14-601, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
- Section 601(b) should be read with Section 607. Section 601(b) prohibits the administrator or the administrator’s officers and employees from using for personal benefit records or information that Section 607(b) specifies do not constitute public records. Section 601(b) is not intended to limit the operation of Section 607(a). Neither Section 601(b) nor 607(b) is intended to impede the ability of the agencies specified in Section 608(a) from sharing records or other information in connection with an examination or an investigation. 2. Section 601(c) makes clear that nothing in this Act alters the availability of evidentiary privileges. That question is left to the general law of the particular state.
3. Sections 601(d) and (e) were adopted in recognition of the importance of investor education. An increasing number of jurisdictions are earmarking specific funds for this purpose. The lack of financial acumen among public investors, seniors, and students continues to be demonstrated in recent industry and regulatory studies. The importance of investor financial literacy is increasingly crucial given the decades long shift from defined benefit retirement plans toward defined contribution plans where employees are left to direct their own retirement accounts.
§ 30-14-602. Investigations and subpoenas.
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Authority to investigate. The administrator may:
- Conduct public or private investigations within or outside of this state which the administrator considers necessary or appropriate to determine whether a person has violated, is violating, or is about to violate this chapter or a rule adopted or an order issued under this chapter, or to aid in the enforcement of this chapter or in the adoption of rules and forms under this chapter;
- Require or permit a person to testify, file a statement, or produce a record, under oath or otherwise as the administrator determines, as to all the facts and circumstances concerning a matter to be investigated or about which an action or proceeding is to be instituted; and
- Publish a record concerning an action, proceeding, or an investigation under, or a violation of, this chapter or a rule adopted or an order issued under this chapter if the administrator determines it is necessary or appropriate in the public interest and for the protection of investors.
- Administrator powers to investigate. For the purpose of an investigation or proceeding under this chapter, the administrator or its designated officer may administer oaths and affirmations, subpoena witnesses, seek compulsion of attendance, take evidence, require the filing of statements, and require the production of any records that the administrator considers relevant or material to the investigation or proceeding.
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Procedure and remedies for noncompliance. If a person does not appear or refuses to testify, file a statement, produce records, or otherwise does not obey a subpoena as required by the administrator under this chapter, the administrator may apply to any court of competent jurisdiction or a court of another state for an order to enforce compliance. The court may:
- Hold the person in contempt;
- Order the person to appear before the administrator;
- Order the person to testify about the matter under investigation or in question;
- Order the production of records;
- Grant injunctive relief, including restricting or prohibiting the offer or sale of securities or the providing of investment advice;
- Impose a civil penalty of not less than five hundred dollars ($500) and not greater than five thousand dollars ($5,000) for each violation; and
- Grant any other necessary or appropriate relief.
- Application for relief. This section does not preclude a person from applying to any court of competent jurisdiction or a court of another state for relief from a request to appear, testify, file a statement, produce records, or obey a subpoena.
- Use immunity procedure. An individual is not excused from attending, testifying, filing a statement, producing a record or other evidence, or obeying a subpoena of the administrator under this chapter or in an action or proceeding instituted by the administrator under this chapter on the ground that the required testimony, statement, record, or other evidence, directly or indirectly, may tend to incriminate the individual or subject the individual to a criminal fine, penalty, or forfeiture. If the individual refuses to testify, file a statement, or produce a record or other evidence on the basis of the individual’s privilege against self-incrimination, the administrator may apply to any court of competent jurisdiction to compel the testimony, the filing of the statement, the production of the record, or the giving of other evidence. The testimony, record, or other evidence compelled under such an order may not be used, directly or indirectly, against the individual in a criminal case, except in a prosecution for perjury or contempt or otherwise failing to comply with the order. (f) Assistance to securities regulator of another jurisdiction. At the request of a law enforcement or other governmental or regulatory agency or self-regulatory organization, the administrator may provide assistance if the requesting entity states that it is conducting an investigation to determine whether a person has violated, is violating, or is about to violate a law or rule of the other state or foreign jurisdiction relating to securities matters that the requesting regulator administers or enforces. The administrator may provide the assistance by using the authority to investigate and the powers conferred by this section as the administrator determines is necessary or appropriate. The assistance may be provided without regard to whether the conduct described in the request would also constitute a violation of this chapter or other law of this state if occurring in this state. In deciding whether to provide the assistance, the administrator may consider whether the requesting regulator is permitted and has agreed to provide assistance reciprocally within its state, federal or foreign jurisdiction to the administrator on securities matters when requested; whether compliance with the request would violate or prejudice the public policy of this state; and the availability of resources and employees of the administrator to carry out the request for assistance.
History.
I.C.,§ 30-14-602, as added by 2004, ch. 45, § 2, p. 169.
CASE NOTES
Production of Materials.
In an investigation of a seminar scheme offering $10 million “self-liquidating loans” in exchange for a $4000 fee, the department of finance had the authority to require the materials sought, where there was no assertion that the department was arbitrary or capricious, that its acts were overreaching, or that the action was taken solely to harass the individual conducting the seminar. State ex rel. McEldowney v. Uhl, 111 Idaho 915, 728 P.2d 1324 (1986).
Official Comment
Prior Provisions:
- Sections 602 (a) and (b) follow the 1956 Act, which was modeled generally on Sections 21(a) through (d) of the Securities Exchange Act of 1934 as it then read.
- Standards for issuance of subpoenas have been generally established in federal and state securities law. See, e.g., 10 Louis Loss & Joel Seligman, Securities Regulation 4917-4937 (3d ed. rev. 1996) (discussing Oklahoma Press Pub. Co. v. Walling , 327 U.S. 186 (1946) and other cases). The scope of subpoena enforcement in each state is a general matter for judicial determination. Under Section 602, an individual subpoenaed to testify by the administrator is not compelled to testify within the meaning of these sections simply by service of a subpoena. Under Section 602(b) the individual can be subpoenaed and compelled to attend. Once in attendance an individual can assert an evidentiary privilege or exemption, see Section 601(c), including the Fifth Amendment privilege against self-incrimination. If an individual refuses to testify or give evidence, the administrator may apply (or have the appropriate State attorney apply) to the appropriate court for the relief specified in Section 602(c). If the individual invokes the privilege against self-incrimination, Section 602(d) allows the administrator to apply to the appropriate court to compel testimony under the “use immunity” provision barring the record compelled or other evidence obtained from being used in a criminal case. See People v. District Co. of Arapahoe County , 894 P.2d 739 (Colo. 1995). The phrase “directly or indirectly” in Section 602(e) is intended to include testimony, other evidence, or other information derived from immunized testimony, statements, records, or evidence.
- Section 602 is intended to apply generally to securities offers and sales under Article 3 and broker-dealer and investment adviser activity under Article 4, when there is noncompliance with the first sentence of Section 602(c). This subsection does not limit the powers of an administrator under other provisions of this Act.
- A court may quash a subpoena for good cause under Section 602(d). The court may decline to enforce a subpoena that is arbitrary, capricious, or oppressive.
- Where appropriate under Section 602(f), an administrator could move to authorize admission of a requesting state’s attorney under existing pro hac vice rules.
- Section 602(f) is consistent with the Securities Litigation Uniform Standard Act of 1998 which provides in Section 102(e):
- There are limitations on financial institutions being subject to visitorial powers by State officials, such as those affecting national banks contained in 12 U.S.C. 484 and 12 C.F.R. Sec. 7.4000. Law outside this Act may place similar limits on state chartered financial institutions being subjected to visitorial powers. This Act does not negate these limitations.
The Securities and Exchange Commission, in consultation with State securities commissions (or any agencies or offices performing like functions), shall seek to encourage the adoption of State laws providing for reciprocal enforcement by State securities commissions of subpoenas issued by another State securities commission seeking to compel persons to attend, testify in, or produce documents or records in connection with an action or investigation by a State securities commission of an alleged violation of State securities laws.
§ 30-14-603. Civil enforcement.
- Civil action instituted by administrator. If the administrator believes that a person has engaged, is engaging, or is about to engage in an act, practice, or course of business constituting a violation of this chapter or a rule adopted or an order issued under this chapter or that a person has, is, or is about to engage in an act, practice, or course of business that materially aids a violation of this chapter or a rule adopted or an order issued under this chapter, the administrator may maintain an action in any court of competent jurisdiction to enjoin the act, practice, or course of business and to enforce compliance with this chapter or a rule adopted or an order issued under this chapter.
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Relief available. In an action under this section and on a proper showing, the court may:
- Issue a permanent or temporary injunction, restraining order, or declaratory judgment;
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Order other appropriate or ancillary relief, which may include:
- An asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator, that may be the administrator, for the defendant or the defendant’s assets;
- Ordering the administrator to take charge and control of a defendant’s property, including investment accounts and accounts in a depository institution, rents, and profits; to collect debts; and to acquire and dispose of property;
- Imposing a civil penalty not to exceed ten thousand dollars ($10,000) for each violation; an order of rescission, restitution, or disgorgement directed to a person that has engaged in an act, practice, or course of business constituting a violation of this chapter or the predecessor act or a rule adopted or an order issued under this chapter or the predecessor act; and
- Ordering the payment of prejudgment and postjudgment interest; or
- Order such other relief as the court considers appropriate.
- No bond required. The administrator shall not be required to post a bond in an action or proceeding under this chapter.
- Statute of limitation. If the administrator brings a civil action under this section, such action must be instituted within three (3) years from the discovery by the administrator of the facts constituting the alleged violation.
History.
I.C.,§ 30-14-603, as added by 2004, ch. 45, § 2, p. 169; am. 2012, ch. 65, § 8, p. 171.
STATUTORY NOTES
Amendments.
The 2012 amendment, by ch. 65, added subsection (d).
CASE NOTES
Decisions Under Prior Law
Intent.
Intent was not an element of securities fraud under subsections (2) and (3) of former§ 30-1403. State v. Shama Resources Ltd. Partnership, 127 Idaho 267, 899 P.2d 977 (1995). (See now§ 30-14-603 and§ 30-14-604).
Official Comment
Prior Provisions:
- Section 408 of the 1956 Act was limited to injunctions. This Section follows RUSA in broadening the civil remedies available when the administrator believes that a violation has occurred. A primary purpose of a broad range of potential sanctions is to enable administrators to better tailor appropriate sanctions to particular misconduct.
- The administrator alternatively may proceed to seek administrative enforcement under Section 604; to deny, suspend, or revoke a securities registration under Section 306; or to deny, suspend, revoke, or take other action against a broker-dealer, agent, investment adviser, or investment adviser representative registration under Section 412.
- Constitutional due process considerations can also be addressed by rulemaking or incorporation of the applicable administrative procedure act provisions of each jurisdiction. The term “upon a proper showing” has a settled meaning in the federal securities laws. See, e.g., Securities Act of 1933 Section 20(b).
- As with Sections 509(g)(3) and (4), materially aid in Section 603(a) does not include ministerial or clerical acts.
§ 30-14-604. Administrative enforcement.
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Issuance of an order or notice. If the administrator determines that a person has engaged, is engaging, or is about to engage in an act, practice, or course of business constituting a violation of this chapter or a rule adopted or an order issued under this chapter or that a person has materially aided, is materially aiding, or is about to materially aid an act, practice, or course of business constituting a violation of this chapter or a rule adopted or an order issued under this chapter, the administrator may:
- Issue an order directing the person to cease and desist from engaging in the act, practice, or course of business or to take other action necessary or appropriate to comply with this chapter;
- Issue an order denying, suspending, revoking, or conditioning the exemptions for a broker-dealer under section 30-14-401(b)(1)(D) or (F), Idaho Code, or an investment adviser under section 30-14-403(b)(1)(C), Idaho Code; or
- Issue an order under section 30-14-204, Idaho Code.
- Summary process. An order under subsection (a) of this section is effective on the date of issuance. Upon issuance of the order, the administrator shall promptly serve each person subject to the order with a copy of the order and a notice that the order has been entered. The order must include a statement whether the administrator will seek a civil penalty or costs of the investigation, a statement of the reasons for the order, and notice that, within fifteen (15) days after receipt of a request in a record from the person, the matter will be scheduled for a hearing. If a person subject to the order does not request a hearing and none is ordered by the administrator within thirty (30) days after the date of service of the order, the order, which may include a civil penalty or costs of the investigation if a civil penalty or costs were sought in the statement accompanying the order, becomes final as to that person by operation of law. If a hearing is requested or ordered, the administrator, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend it until final determination.
- Procedure for final order. If a hearing is requested or ordered pursuant to subsection (b) of this section, a hearing must be held pursuant to chapter 52, title 67, Idaho Code. A final order may not be issued unless the administrator makes findings of fact and conclusions of law in a record pursuant to chapter 52, title 67, Idaho Code. The final order may make final, vacate, or modify the order issued under subsection (a) of this section.
- Civil penalty. In a final order under subsection (c) of this section, the administrator may impose a civil penalty not to exceed five thousand dollars ($5,000) for each violation.
- Costs. In a final order, the administrator may charge the actual cost of an investigation or proceeding for a violation of this chapter or a rule adopted or an order issued under this chapter.
- Filing of certified final order with court — Effect of filing. If a petition for judicial review of a final order is not filed in accordance with section 30-14-609, Idaho Code, the administrator may file a certified copy of the final order with the clerk of a court of competent jurisdiction. The order so filed has the same effect as a judgment of the court and may be recorded, enforced, or satisfied in the same manner as a judgment of the court. (g) Enforcement by court — Further civil penalty. If a person does not comply with an order under this section, the administrator may petition a court of competent jurisdiction to enforce the order. The court may not require the administrator to post a bond in an action or proceeding under this section. If the court finds, after service and opportunity for hearing, that the person was not in compliance with the order, the court may adjudge the person in civil contempt of the order. The court may impose a further civil penalty against the person for contempt in an amount not less than five hundred dollars ($500) but not greater than five thousand dollars ($5,000) for each violation and may grant any other relief the court determines is just and proper in the circumstances.
History.
I.C.,§ 30-14-604, as added by 2004, ch. 45, § 2, p. 169.
CASE NOTES
Decisions Under Prior Law
Intent.
Intent was not an element of securities fraud under subsections (2) and (3) of former§ 30-1403. State v. Shama Resources Ltd. Partnership, 127 Idaho 267, 899 P.2d 977 (1995). (See now§ 30-14-603 and§ 30-14-604).
Official Comment
Prior Provisions:
- Section 604, unlike Section 603, may be initiated by the administrator without prior judicial process or a prior hearing. The section, among other matters, empowers the administrator to act summarily in appropriate circumstances.
- Sections 603 and 604 are intended to be available to the administrator against persons not subject to stop orders under Section 306 or proceedings against registered broker-dealers, agents, investment advisers, or investment adviser representatives under Section 412. All persons or securities not subject to Section 306 or 412 will be subject to Sections 603 and 604. A person must be covered by either (1) Sections 306 or 412 or (2) Sections 603 or 604.
- Service of an order or notice under this Section is not effective unless made in accordance with Section 611.
§ 30-14-605. Rules, forms, orders, interpretative opinions, and hearings.
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Issuance and adoption of forms, orders, and rules. The administrator may:
- Issue forms and orders and, after notice and comment, may adopt and amend rules necessary or appropriate to carry out this chapter and may repeal rules, including rules and forms governing registration statements, applications, notice filings, reports, and other records;
- By rule, define terms, whether or not used in this chapter, but those definitions may not be inconsistent with this chapter; and
- By rule, classify securities, persons, and transactions and adopt different requirements for different classes.
- Findings and cooperation. Under this chapter, a rule or form may not be adopted or amended, or an order issued or amended, unless the administrator finds that the rule, form, order, or amendment is necessary or appropriate in the public interest or for the protection of investors and is consistent with the purposes intended by this chapter. In adopting, amending, and repealing rules and forms, section 30-14-608, Idaho Code, applies in order to achieve uniformity among the states and coordination with federal laws in the form and content of registration statements, applications, reports, and other records, including the adoption of uniform rules, forms, and procedures.
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Financial statements. Subject to section 15(i) of the securities exchange act and section 222 of the investment advisers act of 1940, the administrator may require that a financial statement filed under this chapter be prepared in accordance with generally accepted accounting principles in the United States and comply with other requirements specified by rule adopted or an order issued under this chapter. A rule adopted or an order issued under this chapter may establish:
- Subject to section 15(i) of the securities exchange act and section 222 of the investment advisors act of 1940, the form and content of financial statements required under this chapter;
- Whether unconsolidated financial statements must be filed; and
- Whether required financial statements must be audited by an independent certified public accountant.
- Interpretative opinions. The administrator may provide interpretative opinions or issue determinations that the administrator will not institute a proceeding or an action under this chapter against a specified person for engaging in a specified act, practice, or course of business if the determination is consistent with this chapter. A rule adopted or an order issued under this chapter may establish a reasonable charge for interpretative opinions or determinations that the administrator will not institute an action or a proceeding under this chapter.
- Effect of compliance. A penalty under this chapter may not be imposed for, and liability does not arise from, conduct that is engaged in or omitted in good faith believing it conforms to a rule, form, or order of the administrator under this chapter.
- Presumption for public hearings. A hearing in an administrative proceeding under this chapter must be conducted in public unless the administrator for good cause consistent with this chapter determines that the hearing will not be so conducted.
History.
I.C.,§ 30-14-605, as added by 2004, ch. 45, § 2, p. 169; am. 2020, ch. 103, § 3, p. 274.
STATUTORY NOTES
Amendments.
The 2020 amendment, by ch. 103, in subsection (c), substituted “section 15(i) of the securities exchange act” for “section 15(h) of the securities exchange act” near the beginning of the introductory paragraph and near the beginning of paragraph (1).
Federal References.
The federal references in subsection (c) of this section are codified as follows: Section 15(i) of the Securities Exchange Act at 15 USCS § 78o(i) and § 222 of the Investment Advisers Act of 1940 at 15 USCS § 80b-18a.
Official Comment
Prior Provisions:
- It is anticipated that the administrator will propose amendments or make rules under Section 605(a) to remain coordinate with relevant federal law, as well as appropriate rules of the National Association of Securities Dealers, and to achieve uniformity among the States.
- Uniform forms such as Form B-D, U-4, U-5, and NF are today common in the securities industry and are authorized by Section 605(b).
- Section 605(c) refers to generally accepted accounting principles in the United States which currently are promulgated by the Financial Accounting Standards Board and the Securities and Exchange Commission.
- It is anticipated that the states will employ websites, e-mail or other electronic means to provide notice of proposed rulemaking or adoption of new rules, rule amendments, forms or form amendments, statements of policy or interpretations adopted by the administrator, and issuance of orders to registrants and others who have provided a current e-mail or similar address and expressed an interest in receiving such notice.
- Section 605(e) does not apply to staff no action or interpretative opinions, but does apply to rules, forms, orders, statements of policy or interpretations adopted by the administrator.
§ 30-14-606. Administrative files and opinions.
- Public register of filings. The administrator shall maintain, or designate a person to maintain, a register of applications for registration of securities; registration statements; notice filings; applications for registration of broker-dealers, agents, investment advisers, and investment adviser representatives; notice filings by federal covered investment advisers that are or have been effective under this chapter or the predecessor act; notices of claims of exemption from registration or notice filing requirements contained in a record; orders issued under this chapter or the predecessor act; and interpretative opinions or no action determinations issued under this chapter.
- Public availability. The administrator shall make all rules, forms, interpretative opinions, and orders available to the public.
- Copies of public records. The administrator shall furnish a copy of a record that is a public record or a certification that the public record does not exist to a person that so requests. A rule adopted under this chapter may establish a reasonable charge for furnishing the record or certification. A copy of the record certified or a certificate by the administrator of a record’s nonexistence is prima facie evidence of a record or its nonexistence.
History.
I.C.,§ 30-14-606, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
- “Record” is defined in Section 102(25).
- Compliance with a state records law will typically satisfy the requirements of Section 606(a).
§ 30-14-607. Public records — Confidentiality.
- Presumption of public records. Except as otherwise provided in subsection (b) of this section, records obtained by the administrator or filed under this chapter, including a record contained in or filed with a registration statement, application, notice filing, or report, are public records and are available for public examination.
- Nonpublic records. Records as set forth in section 74-111, Idaho Code, are not public records and are not available for public examination under subsection (a) of this section.
- Administrator discretion to disclose. If disclosure is for the purpose of a civil, administrative, or criminal investigation, action, or proceeding or to a person specified in section 30-14-608(a), Idaho Code, the administrator may disclose a record obtained in connection with an audit or inspection under section 30-14-411(d), Idaho Code, or a record obtained in connection with an investigation under section 30-14-602, Idaho Code.
History.
I.C.,§ 30-14-607, as added by 2004, ch. 45, § 2, p. 169; am. 2015, ch. 141, § 52, p. 379.
STATUTORY NOTES
Amendments.
The 2015 amendment, by ch. 141, substituted “74-111” for “9-340H” in subsection (b).
Official Comment
Prior Provisions:
Prior Provisions: RUSA Section 703; SEC Rule Section 200.80(b)(4); Securities Exchange Act of 1934 Sections 24(d) and (e).
- Section 607(a) reflects the extensive development of freedom of information and open records laws since the 1956 Act was adopted.
- Section 607(b) may insulate from public disclosure records or other information that may be available under a state freedom of information or open records act. Unless the state freedom of information or open records act implements a constitutional provision, this Act as the later and more specific enactment should control as a matter of statutory construction. A state may amend its freedom of information act, open records act or this section to eliminate any inconsistencies.
- Records and other information obtained by an administrator in connection with an audit or inspection under subsection 411(d) or an investigation under Section 602 may be made public in the enforcement action, even if records and other information would otherwise be subject to subsection 607(b)(1).
- An administrator may orally disclose information under Section 607(c) to a person specified in Section 608(a) for the purposes specified in Section 607(c).
§ 30-14-608. Uniformity and cooperation with other agencies.
- Objective of uniformity. The administrator shall, in its discretion, cooperate, coordinate, consult, and, subject to section 30-14-607, Idaho Code, share records and information with the securities regulator of another state, Canada, a Canadian province or territory, a foreign jurisdiction, the securities and exchange commission, the United States department of justice, the commodity futures trading commission, the federal trade commission, the securities investor protection corporation, a self-regulatory organization, a national or international organization of securities regulators, a federal or state banking or insurance regulator, and a governmental law enforcement or regulatory agency to effectuate greater uniformity in securities matters among the federal government, self-regulatory organizations, states, and foreign governments.
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Policies to consider. In cooperating, coordinating, consulting, and sharing records and information under this section and in acting by rule, order, or waiver under this chapter, the administrator shall, in the administrator’s discretion, take into consideration in carrying out the public interest the following general policies:
- Maximizing effectiveness of regulation for the protection of investors;
- Maximizing uniformity in federal and state regulatory standards; and
- Minimizing burdens on the business of capital formation, without adversely affecting essentials of investor protection.
-
Subjects for cooperation. The cooperation, coordination, consultation, and sharing of records and information authorized by this section include:
- Establishing or employing one (1) or more designees as a central depository for registration and notice filings under this chapter and for records required or allowed to be maintained under this chapter;
- Developing and maintaining uniform forms;
- Conducting a joint examination or investigation;
- Holding a joint administrative hearing;
- Instituting and prosecuting a joint civil or administrative proceeding;
- Sharing and exchanging personnel;
- Coordinating registrations under section 30-14-301, Idaho Code, and sections 30-14-401 through 30-14-404, Idaho Code, and exemptions under section 30-14-203, Idaho Code;
- Sharing and exchanging records, subject to section 30-14-607, Idaho Code;
- Formulating rules, statements of policy, guidelines, forms, and interpretative opinions and releases;
- Formulating common systems and procedures;
- Notifying the public of proposed rules, forms, statements of policy, and guidelines;
- Attending conferences and other meetings among securities regulators, which may include representatives of governmental and private sector organizations involved in capital formation, deemed necessary or appropriate to promote or achieve uniformity; and (13) Developing and maintaining a uniform exemption from registration for small issuers, and taking other steps to reduce the burden of raising investment capital by small businesses.
History.
I.C.,§ 30-14-608, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
For more on securities and exchange commission, see http://www.sec.gov .
For more on the United States commodity futures trading commission, see http://www.cftc.gov/index.htm .
For more on the federal trade commission, see http://ftc.gov/ .
For more on the securities investor protection corporation, see http://www.sipc.org/ .
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 415; RUSA Sections 704 and 803; 19(c) of the Securities Act of 1933.
- Uniformity of regulation among the states and coordination with the Securities and Exchange Commission is a principal objective of this Act. Section 608 is intended to encourage such cooperation to the maximum extent appropriate. Operative phrases such as “shall, in its discretion” in Sections 608(a) and (b) are intended to be precisely coordinate with the directive that Congress gave to the Securities and Exchange Commission in Section 19(c) of the Securities Act of 1933.
- The goals of uniformity among the states and coordination with related federal regulation, including self-regulatory organizations, may be enhanced by greater use of information technology systems such as the Web-CRD, the Investment Adviser Registration Depository (IARD), or the Securities and Exchange Commission Electronic Data Gathering, Analysis and Retrieval System (EDGAR). These types of techniques are consistent with a potential system of “one stop filing” of all federal and state forms that is encouraged by this Act.
- This Act is intended, to the extent practicable, to be revenue neutral in its impact on existing state laws.
- Section 608(c) lists some joint or coordinated efforts which might be undertaken. Other appropriate cooperative activities are also encouraged.
- Court decisions interpreting the securities laws have construed these acts to achieve “broad protection to investors,” a remedial approach that “embodies a flexible rather than a static principle, one that is capable of adaption to meet the countless and variable schemes devised by those who seek to use the money of others on the promise of profits.” SEC v. W.J. Howey Co. , 328 U.S. 293, 299, 301 (1946).
§ 30-14-609. Judicial review.
Judicial review of orders. A final order issued by the administrator under this chapter is subject to judicial review in accordance with chapter 52, title 67, Idaho Code.
History.
I.C.,§ 30-14-609, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Section 411; RUSA Section 711(b).
- The 1956 Act Section 411 specified procedures for judicial review of orders, in part modeled on Section 12 of the Model Administrative Procedure Act, 54 Handbook of National Conference of Commissioners on Uniform State Laws 334 (1944) and partly on Section 25 of the Securities Exchange Act.
- A rule adopted under this Act may be subject to judicial review in accordance with the state administrative procedure act. [Idaho did not adopt subsection (b) of the uniform act, governing judicial review of rules adopted under this chapter.]
- In those states in which judicial review of rules is permitted, a state may choose to add Section 609(b). In those states in which judicial review of rules is not permitted, Section 609(b) should be deleted. [Idaho did not adopt subsection (b) of the uniform act, governing judicial review of rules adopted under this chapter.]
§ 30-14-610. Jurisdiction.
- Sales and offers to sell. Sections 30-14-301, 30-14-302, 30-14-401(a), 30-14-402(a), 30-14-403(a), 30-14-404(a), 30-14-501, 30-14-506, 30-14-509 and 30-14-510, Idaho Code, do not apply to a person that sells or offers to sell a security unless the offer to sell or the sale is made in this state or the offer to purchase or the purchase is made and accepted in this state.
- Purchases and offers to purchase. Sections 30-14-401(a), 30-14-402(a), 30-14-403(a), 30-14-404(a), 30-14-501, 30-14-506, 30-14-509 and 30-14-510, Idaho Code, do not apply to a person that purchases or offers to purchase a security unless the offer to purchase or the purchase is made in this state or the offer to sell or the sale is made and accepted in this state.
-
Offers in this state. For the purpose of this section, an offer to sell or to purchase a security is made in this state, whether or not either party is then present in this state, if the offer:
- Originates from within this state; or
- Is directed by the offeror to a place in this state and received at the place to which it is directed.
-
Acceptances in this state. For the purpose of this section, an offer to purchase or to sell is accepted in this state, whether or not either party is then present in this state, if the acceptance:
- Is communicated to the offeror in this state and the offeree reasonably believes the offeror to be present in this state and the acceptance is received at the place in this state to which it is directed; and
- Has not previously been communicated to the offeror, orally or in a record, outside this state.
-
Publications, radio, television, or electronic communications. An offer to sell or to purchase is not made in this state when a publisher circulates or there is circulated on the publisher’s behalf in this state a bona fide newspaper or other publication of general, regular, and paid circulation that is not published in this state, or that is published in this state but has had more than two-thirds (2/3) of its circulation outside this state during the previous twelve (12) months or when a radio or television program or other electronic communication originating outside this state is received in this state. A radio or television program, or other electronic communication is considered as having originated in this state if either the broadcast studio or the originating source of transmission is located in this state, unless:
- The program or communication is syndicated and distributed from outside this state for redistribution to the general public in this state;
- The program or communication is supplied by a radio, television, or other electronic network with the electronic signal originating from outside this state for redistribution to the general public in this state;
- The program or communication is an electronic communication that originates outside this state and is captured for redistribution to the general public in this state by a community antenna or cable, radio, cable television, or other electronic system; or
- The program or communication consists of an electronic communication that originates in this state, but which is not intended for distribution to the general public in this state. (f) Investment advice and misrepresentations. Sections 30-14-403(a), 30-14-404(a), 30-14-405(a), 30-14-502, 30-14-505 and 30-14-506, Idaho Code, apply to a person if the person engages in an act, practice, or course of business instrumental in effecting prohibited or actionable conduct in this state, whether or not either party is then present in this state.
History.
I.C.,§ 30-14-610, as added by 2004, ch. 45, § 2, p. 169.
Official Comment
Source of Law:
- Section 610 defines the application of the Act to interstate or international transactions when only some of the elements of a violation occur in this State. This Section applies to all types of proceedings specified by the Act — administrative, civil, and criminal. The law is now settled that a person may violate the law of a particular state without ever being within the state or performing each act necessary to violate the law within that state.
- Section 610 generally follows Section 414 of the 1956 Act, but has been modernized to reflect the development of the Internet and other electronic communications after 1956.
- Section 610 can be illustrated in the context of a civil action under Section 509(b) by a purchaser in State A against a seller in State B:
Section 610(a) would apply when an “offer to sell is made in this State.”
Section 610(c) provides that an offer which originates in State B and is directed to State A is made in both states. The securities act of State A would apply under Section 610(c)(2). The act of State B would apply also, under Section 610(c)(1). The intent is to prevent a seller in State B from using that state as a base of operations for defrauding person in other states.
Section 610(e) addresses offers made through publications, radio, television, or electronic communications. The subsection provides a series of safe harbors for advertisements in newspapers, magazines, radio, television, or electronic media that either originate outside State A or that originate in State A but are directed outside the state to the general public. With respect to bona fide newspapers or other publications of general, regular, and paid circulation, the safe harbor requires that more than two thirds of its circulation be outside State A. With respect to radio, television, or other electronic communications, safe harbors are specified in Sections 610(e)(1) through (4).
Section 610(d), however, provides that a person in State A who makes an offer to purchase as a result of communication described in Section 610(e) may cause the act to be applicable if the offeror accepts the offer “in this State.” Section 610(d) defines when an offer is accepted “in this State.”
If a selling broker-dealer in State B solely sends a confirmation into State A, or the purchaser in State A sends a check from within State A, the act will not apply unless, under Section 610(d), the confirmation or delivery constitutes the seller’s acceptance of the purchaser’s offer to buy in State A.
The applicability of the act to purchaser is addressed by Section 610(b) which is the converse of Section 610(a). Under Section 509(c) there can be liability of purchasers to sellers.
Section 610(f) is a new provision that specifies jurisdictions in cases involving investment advice and misrepresentations. 4. Under subsection 202(20) certain out-of-state offers or sales are exempt from securities registration.
5. The phrase “other electronic means” is coextensive with computer or other information technology permitted by subsections 102(8), 102(25).
6. Under Section 610 the administrator may adopt interpretative rules or orders to specify when particular uses of new electronic communications, including the Internet, involve an offer to sell or to purchase a security, acceptance of an order to purchase or sell a security, or an act or practice involving prohibited conduct, within a State, whether or not a purchaser, seller, or other party is then present in the State. The NASAA Interpretive Order Concerning Broker-Dealers, Agents, and Investment Adviser Representatives Using the Internet for General Dissemination of Information for Products and Services (Apr. 23, 1997) is an illustration of an interpretative order that would be in compliance with the administrator’s authority under Section 610. Under this Order, broker-dealers, agents, investment advisers, and investment adviser representatives who distribute information on available products and services through communications on the Internet generally to anyone having access to the Internet such as postings on a bulletin board or home page shall not be deemed to be transacting business in a State if specified conditions are satisfied including a legend clearly stating that the broker-dealer, agent, investment adviser, or investment adviser representative may transact business in that State only if first registered, excluded or exempted from applicable registration requirements.
§ 30-14-611. Service of process.
- Signed consent to service of process. A consent appointing the administrator the person’s agent for service of process in a noncriminal action or proceeding against the person, or the person’s successor or personal representative under this chapter or a rule adopted or an order issued under this chapter after the consent is filed, has the same force and validity as if the service were made personally on the person filing the consent. Registrants shall be required to submit a consent to service of process only if there has been a material change.
- Conduct constituting appointment of agent for service. If a person, including a nonresident of this state, engages in an act, practice, or course of business prohibited or made actionable by this chapter or a rule adopted or an order issued under this chapter and the person has not filed a consent to service of process under subsection (a) of this section, the act, practice, or course of business constitutes the appointment of the administrator as the person’s agent for service of process in a noncriminal action or proceeding against the person or the person’s successor or personal representative.
-
Procedure for service of process. Service under subsection (a) or (b) of this section may be made by providing a copy of the process to the office of the administrator, but it is not effective unless:
- The plaintiff, which may be the administrator, promptly sends notice of the service and a copy of the process, return receipt requested, to the defendant or respondent at the address set forth in the consent to service of process or, if a consent to service of process has not been filed, at the last known address, or takes other reasonable steps to give notice; and
- The plaintiff files an affidavit of compliance with this subsection in the action or proceeding on or before the return day of the process, if any, or within the time that the court, or the administrator in a proceeding before the administrator, allows.
- Service in administrative proceedings or civil actions by administrator. Service pursuant to subsection (c) of this section may be used in a proceeding before the administrator or by the administrator in a civil action in which the administrator is the moving party.
- Opportunity to defend. If process is served under subsection (c) of this section, the court, or the administrator in a proceeding before the administrator, shall order continuances as are necessary or appropriate to afford the defendant or respondent reasonable opportunity to defend.
History.
I.C.,§ 30-14-611, as added by 2004, ch. 45, § 2, p. 169; am. 2008, ch. 143, § 3, p. 423; am. 2012, ch. 65, § 9, p. 171.
STATUTORY NOTES
Amendments.
The 2008 amendment, by ch. 143, deleted the former second sentence in subsection (a), which read: “From September 1, 2004, through June 30, 2005, all persons applying for registration or making a notice filing shall submit to the administrator a signed consent to service of process.” The 2012 amendment, by ch. 65, deleted “From July 1, 2005, and thereafter” from the beginning of the last sentence in subsection (a).
Official Comment
Prior Provisions:
Prior Provisions: 1956 Act Sections 414(g) and (h); RUSA Section 708.
- Section 611 follows the 1956 Act and RUSA in providing for a signed consent to service of process in Section 611(a); a substituted service of process in Section 611(b); and process and opportunity to defend in Sections 611(c) through (e).
- An issuer is not required to file a consent to service of process unless it proposes to offer a security in this State through someone acting on an agency basis. Since the civil liability provisions of Section 509(b) apply only in a suit by a purchaser against a seller, the issuer in a firm commitment underwriting is civilly liable only to the underwriter, who, in turn, may be liable to the dealer, who, in turn, may be liable to the purchaser. In contrast, in a best efforts underwriting, when the security is sold on an agency basis and title passes directly to the purchaser, the issuer can be liable to the purchaser.
- Section 611(b) generally follows Section 414(h) of the 1956 Act and Section 708(c) of RUSA. The intent is to provide for substituted service of process when a seller in one state directs an offer into a second state either in violation of the laws of the second state or fraudulently. Under Section 611(b) the purchaser may sue the seller in the purchaser’s state and then bring an action on the judgment in the seller’s state. The constitutionality of this type of statute has long been sustained.
- This section was originally based on the type of nonresident motorist statute whose constitutionality was sustained in Hess v. Pawlowski , 274 U.S. 352 (1927) and subsequently in other contexts. See, e.g., International Shoe Co. v. State of Wash. , 326 U.S. 310 (1945); Travelers Health Ass’n v. Commonwealth of Va. , 339 U.S. 643 (1950).
§ 30-14-612. Severability clause.
If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.
History.
I.C.,§ 30-14-612, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” refers to S.L. 2004, Chapter 45, which is codified as§§ 18-7803, 30-14-101 to 30-14-703, 39-1452 and 41-1004.
Official Comment
Prior Provisions:
Part 7 Transition
§ 30-14-701. Effective date.
This act takes effect on September 1, 2004.
History.
I.C.,§ 30-14-701, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” refers to S.L. 2004, Chapter 45, which is codified as§§ 18-7803, 30-14-101 to 30-14-703, 39-1452 and 41-1004.
§ 30-14-702. Repeals.
The following chapter is repealed: The Idaho securities act, chapter 14, title 30, Idaho Code.
History.
I.C.,§ 30-14-702, as added by 2004, ch. 45, § 2, p. 169.
§ 30-14-703. Application of chapter to existing proceeding and existing rights and duties.
- Applicability of predecessor act to pending proceedings and existing rights. The predecessor act exclusively governs all actions or proceedings that are pending on the effective date of this act or may be instituted on the basis of conduct occurring before the effective date of this act, but a civil action may not be maintained to enforce any liability under the predecessor act unless instituted within any period of limitation that applied when the cause of action accrued or within five (5) years after the effective date of this act, whichever is earlier.
- Continued effectiveness under predecessor act. All effective registrations under the predecessor act, all administrative orders relating to the registrations, rules, statements of policy, interpretative opinions, declaratory rulings, no action determinations, and conditions imposed on the registrations under the predecessor act remain in effect while they would have remained in effect if this act had not been enacted. They are considered to have been filed, issued, or imposed under this act, but are exclusively governed by the predecessor act.
- Applicability of predecessor act to offers or sales. The predecessor act exclusively applies to an offer or sale made within one (1) year after the effective date of this act pursuant to an offering made in good faith before the effective date of this act on the basis of an exemption available under the predecessor act.
History.
I.C.,§ 30-14-703, as added by 2004, ch. 45, § 2, p. 169.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” in subsection (b) refers to S.L. 2004, Chapter 45, which is codified as§§ 18-7803, 30-14-101 to 30-14-703, 39-1452 and 41-1004.
The phrase “the effective date of this act” in subsections (a) and (e) refers to the effective date of S.L. 2004, Chapter 45, which was effective September 1, 2004.
Official Comment
Prior Provisions:
Prior law governs all suits, actions, prosecutions, or proceedings which are pending or may be initiated on the basis of facts or circumstances occurring before the effective date of a State blue sky statute. See Hilton v. Mumaw , 522 F.2d 588, 600 (9th Cir. 1975).
Chapter 15 IDAHO COMMODITY CODE
Sec.
§ 30-1501. Definitions.
- “Board of trade” means any person or group of persons engaged in buying or selling any commodity or receiving the same for sale on consignment, whether such person or group of persons is characterized as a board of trade, exchange or other form of marketplace.
- “CFTC rule” means any rule, regulation or order of the commodity futures trading commission in effect on the effective date of this chapter and all subsequent amendments, additions or other revisions thereto, unless the director, within thirty (30) days following the effective date of any such amendment, addition or revision, disallows the application thereof to any provision of this chapter by rule, regulation or order.
-
“Commodity” means, except as otherwise specified by the director by rule, regulation or order, any agricultural, grain or livestock product or by-product, any metal or mineral including a precious metal as defined in subsection (13) of this section, any gem or gemstone whether characterized as precious, semiprecious or otherwise, any fuel whether liquid, gaseous or otherwise, any foreign currency, and all other goods, articles, products or items of any kind of any other commodity as defined in the commodity exchange act or commodity futures trading commission rules; provided that the term commodity shall not include:
- A numismatic coin whose fair market value is at least fifteen per cent (15%) higher than the value of the metal it contains;
- Real property or any timber, agricultural or livestock product grown or raised on real property and offered or sold by the owner or lessee of such real property; or
- Any work of art offered or sold by art dealers, at public auction or offered or sold through a private sale by the owner thereof.
-
“Commodity contract” means:
- Any account, agreement or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract or otherwise. Any commodity contract offered or sold shall, in the absence of evidence to the contrary, be presumed to be offered or sold for speculation or investment purposes; and
- Does not include any contract or agreement which requires, and under which the purchaser receives, within twenty-eight (28) calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement.
- An associated person of any of the foregoing,
- Floor broker, and
- Any other person, other than a futures association, required to register with the commodity futures trading commission.
- “Commodity exchange act” means the act of congress known as the commodity exchange act, as amended, codified at 7 U.S.C. section 1, et seq. and all subsequent amendments, additions or other revisions thereto, unless the director, within thirty (30) days following the effective date of any such amendment, addition or revision, disallows the application thereof to any provision of this chapter by rule, regulation or order.
- “Commodity futures trading commission” means the independent regulatory agency established by congress to administer the commodity exchange act.
- “Commodity merchant” means any of the following as defined or described in the commodity exchange act or by CFTC rule: (a) Futures commission merchant,
-
“Commodity option” means:
- Any account, agreement or contract giving a party thereto the right, but not the obligation, to purchase or sell one or more commodities or one or more commodity contracts, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty or otherwise; and
- Does not include an option traded on a national securities exchange registered with the United States securities and exchange commission.
- “Director” means the director of the Idaho department of finance or an agent or employee authorized to act on the director’s behalf.
- “Financial institution” means a bank, savings institution or trust company organized under, or supervised pursuant to the laws of the United States or this state.
- “Offer” includes every offer to sell, offer to purchase, or offer to enter into a commodity contract or commodity option.
- “Person” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government, but shall not include a contract market designated by the commodity futures trading commission or any clearinghouse thereof or a national securities exchange registered with the securities and exchange commission, or any employee, officer or director of such contract market, clearinghouse or exchange acting solely in that capacity.
-
“Precious metal” means the following in either coin, bullion or other form:
- Silver,
- Gold,
- Platinum,
- Palladium,
- Copper, and
- Such other items as the director may specify by rule.
- “Sale” or “sell” includes every sale, contract of sale, contract to sell, or disposition, for value.
(b) Commodity pool operator,
(c) Commodity trading adviser,
(d) Introducing broker,
(e) Leverage transaction merchant,
History.
I.C.,§ 30-1501, as added by 1989, ch. 414, § 1, p. 1006.
STATUTORY NOTES
Cross References.
Department of finance,§ 67-2701 et seq.
Prior Laws.
Former§§ 30-1501 to 30-1513, which were compiled from 1975, ch. 248, § 1, p. 66; 1980, ch. 135, §§ 1 to 3, p. 294; 1982, ch. 139, § 1, p. 393; 1984, ch. 47, § 16, p. 76, were repealed by S.L. 1986, ch. 149, § 1.
Another former§§ 30-1501 to 30-1514, which comprised S.L. 1986, ch. 149, § 2, p. 425, were repealed by S.L. 1988, ch. 84, § 1.
Compiler’s Notes.
For more on the commodity futures trading commission, see http://www.cftc.gov/index.htm and 7 U.S.C.S. § 2.
For more on the securities and exchange commission, see http://www.sec.gov/ and 15 U.S.C.S. § 78d.
The phrase “the effective date of this chapter” in subsection (2) refers to the effective date of S.L. 1989, Chapter 414, which was effective July 1, 1989.
§ 30-1502. Unlawful commodity transactions.
Except as otherwise provided in sections [section] 30-1503 or 30-1504, Idaho Code, no person shall sell or purchase or offer to sell or purchase any commodity under any commodity contract or under any commodity option or offer to enter into or enter into as seller or purchaser any commodity contract or any commodity option.
History.
I.C.,§ 30-1502, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1503. Exempt person — Transactions.
-
The prohibitions in section 30-1502, Idaho Code, shall not apply to any transaction offered by and in which any of the following persons or any employee, officer or director thereof, acting solely in that capacity is the purchaser or seller:
- A person registered with the commodity futures trading commission as a futures commission merchant or as a leverage transaction merchant whose activities require such registration;
- A person registered with the securities and exchange commission or under the laws of this state as a securities broker-dealer whose activities require such registration;
- A person affiliated with, and whose obligations and liabilities under the transaction are guaranteed by a person referred to in paragraph (a) or (b) of this subsection;
- A person who is a member of a contract market designated by the commodity futures trading commission or any clearinghouse thereof; or
- A financial institution.
- The exemption provided in this section shall not apply to any transaction or activity which is prohibited by the commodity exchange act or CFTC rule.
History.
I.C.,§ 30-1503, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1504. Exempt transactions.
-
The prohibitions in section 30-1502, Idaho Code, shall not apply to the following:
- An account, agreement or transaction within the exclusive jurisdiction of the commodity futures trading commission as granted under the commodity exchange act;
-
A commodity contract for the purchase of one or more precious metals which requires, and under which the purchaser receives, within seven (7) calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased by such payment, provided that, for purposes of this paragraph, physical delivery shall be deemed to have occurred if, within such seven (7) day period, such quantity of precious metals purchased by such payment is delivered whether in specifically segregated or fungible bulk form into the possession of a depository, other than the seller, which is either:
- A financial institution,
- A depository the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the commodity futures trading commission,
- A storage facility licensed or regulated by the United States or any agency thereof, or
- A depository designated by the director, and such depository or other person which itself qualifies as a depository as aforesaid, issues and the purchaser receives, a certificate, document of title, confirmation or other instrument evidencing that such quantity of precious metals has been delivered to the depository and is being and will continue to be held by the depository on the purchaser’s behalf, free and clear of all liens and encumbrances, other than liens of the purchaser, tax liens, liens agreed to by the purchaser, or liens of the depository for fees and expenses, which have previously been disclosed to the purchaser;
- A commodity contract solely between persons engaged in producing, processing, using commercially or handling as merchants, each commodity subject thereto, or any by-product; or
- A commodity contract under which the offeree or the purchaser is a person referred to in section 30-1503, Idaho Code, an insurance company, or an investment company as defined in the investment company act of 1940.
- The director may issue rules, regulations or orders prescribing the terms and conditions of all transactions and contracts covered by the provisions of this chapter which are not within the exclusive jurisdiction of the commodity futures trading commission as granted by the commodity exchange act, exempting any person or transaction from any provision of this chapter conditionally or unconditionally and otherwise implementing the provisions of this chapter for the protection of purchasers and sellers of commodities.
History.
I.C.,§ 30-1504, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1505. Unlawful commodity activities.
-
No person shall engage in a trade or business or otherwise act as a commodity merchant unless such person:
- Is registered or temporarily licensed with the commodity futures trading commission for each activity constituting such person as a commodity merchant and such registration or temporary license shall not have expired, nor been suspended nor revoked; or
- Is exempt from such registration by virtue of the commodity exchange act or of a CFTC rule.
- No board of trade shall trade, or provide a place for the trading of, any commodity contract or commodity option required to be traded on or subject to the rules of a contract market designated by the commodity futures trading commission unless such board of trade has been so designated for such commodity contract or commodity option and such designation shall not have been vacated, nor suspended nor revoked.
History.
I.C.,§ 30-1505, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1506. Fraudulent conduct — Liability of principals, controlling persons and others.
-
It is unlawful for any person, directly or indirectly, in connection with a commodity contract or commodity option:
- To employ any device, scheme or artifice to defraud;
- To make any false report, enter any false record or make any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading;
- To engage in any transaction, act, practice or course of business which operates or would operate as a fraud or deceit upon any person; or
- To misappropriate or convert the funds, security or property of any other person.
- The act, omission or failure of any person acting for any individual, association, partnership, corporation or trust within the scope of the person’s employment or office shall be deemed the act, omission or failure of the individual, association, partnership, corporation or trust, as well as of the person.
- Every person who directly or indirectly controls another person liable under any provision of this chapter, every partner, officer, or director of such other person, every person occupying a similar status or performing similar functions, every employee of such other person who materially aids in the violation is also liable jointly and severally with and to the same extent as such other person, unless the person who is also liable by virtue of this provision sustains the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist.
History.
I.C.,§ 30-1506, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1507. Securities statutes unaffected.
Nothing in this chapter shall impair, derogate or otherwise affect the authority or powers of the director under the Idaho securities act [uniform securities act (2004)] or the application of any provision thereof to any person or transaction subject thereto.
History.
I.C.,§ 30-1507, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1508. Purpose.
The provisions of this chapter may be construed and implemented to effectuate the general purpose to protect investors, to prevent and prosecute illegal and fraudulent schemes involving commodity contracts and to maximize coordination with federal law and laws of other states and the administration and enforcement thereof. The provisions of this chapter are not intended to create any rights or remedies upon which actions may be brought by private persons against persons who violate the provisions of this chapter.
History.
I.C.,§ 30-1508, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1509. Investigations.
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The director may make investigations, within or outside this state, as the director deems necessary or appropriate to:
- Determine whether any person has violated, or is about to violate, any provision of this chapter or any rule or order hereunder; or
- Aid in enforcement of the provisions of this chapter.
- The director may publish information concerning any violation of the provisions of this chapter or any rule or order of the director.
- For purposes of any investigation or proceeding under this chapter, the director or any officer or employee designated by him, may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the director deems to be relevant or material to the inquiry.
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- If a person does not give testimony or produce the documents required by the director pursuant to an administrative subpoena, the director may apply for a court order compelling compliance with the subpoena or the giving of the required testimony. (4)(a) If a person does not give testimony or produce the documents required by the director pursuant to an administrative subpoena, the director may apply for a court order compelling compliance with the subpoena or the giving of the required testimony.
- The request for order of compliance may be addressed to any court of competent jurisdiction, within or outside the state.
History.
I.C.,§ 30-1509, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1510. Enforcement.
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If the director believes, whether or not based upon an investigation conducted under section 30-1509, Idaho Code, that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order hereunder, the director may:
- Issue a cease and desist order;
- Issue an order imposing a civil penalty in an amount which may not exceed twenty-five thousand dollars ($25,000) for any single violation or one hundred thousand dollars ($100,000) for multiple violations in a single proceeding or a series of related proceedings; or
- Initiate any of the actions specified in subsection (2) of this section.
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The director may institute any of the following actions in the appropriate courts of this state, or in the appropriate courts of another state, in addition to any legal or equitable remedies otherwise available:
- An action for a declaratory judgment;
- An action for a permanent or temporary injunction, restraining order or writ of mandamus to enjoin the violation and to ensure compliance with the provisions of this chapter or any rule or order of the director;
- An action for disgorgement and other equitable remedies; and
- An action for appointment of a receiver or conservator for the defendant or the defendant’s assets.
History.
I.C.,§ 30-1510, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1511. Power of court to grant relief.
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- Upon a showing by the director that a person has violated, or is about to violate, any provision of this chapter or any rule or order of the director, the court may grant appropriate legal or equitable remedies. (1)(a) Upon a showing by the director that a person has violated, or is about to violate, any provision of this chapter or any rule or order of the director, the court may grant appropriate legal or equitable remedies.
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Upon a showing of violation of the provisions of this chapter or a rule or order of the director, the court, in addition to traditional legal and equitable remedies, including temporary restraining orders, permanent or temporary injunctions, and writs of prohibition or mandamus, may grant the following special remedies:
- Imposition of a civil penalty in an amount which may not exceed twenty-five thousand dollars ($25,000) for any single violation or one hundred thousand dollars ($100,000) for multiple violations in a single proceeding or a series of related proceedings;
- Disgorgement;
- Declaratory judgment;
- Restitution to investors wishing restitution; and
- Appointment of a receiver or conservator for the defendant or the defendant’s assets.
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Appropriate remedies when the defendant is shown only about to violate the provisions of this chapter or a rule or order of the director shall be limited to:
- A temporary restraining order;
- A temporary or permanent injunction;
- A writ of prohibition or mandamus; or
- An order appointing a receiver or conservator for the defendant or the defendant’s assets.
- The court shall not require the director to post a bond in any official action under this chapter.
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- Upon a proper showing by the director or securities or commodity agency of another state that a person, other than a government or governmental agency or instrumentality, has violated, or is about to violate, any provision of the commodity act of that state or any rule or order of the director or securities or commodity agency of that state, the court may grant appropriate legal and equitable remedies. (3)(a) Upon a proper showing by the director or securities or commodity agency of another state that a person, other than a government or governmental agency or instrumentality, has violated, or is about to violate, any provision of the commodity act of that state or any rule or order of the director or securities or commodity agency of that state, the court may grant appropriate legal and equitable remedies.
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Upon a showing of a violation of the securities or commodity act of the foreign state or a rule or order of the director or securities or commodity agency of the foreign state, the court, in addition to traditional legal or equitable remedies including temporary restraining orders, permanent or temporary injunctions and writs of prohibition or mandamus, may grant the following special remedies:
- Disgorgement; and
- Appointment of a receiver, conservator, or ancillary receiver or conservator for the defendant or the defendant’s assets located in the state.
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Appropriate remedies when the defendant is shown only about to violate the securities or commodity act of the foreign state or a rule or order of the director or securities or commodity agency of the foreign state shall be limited to:
- A temporary restraining order;
- A temporary or permanent injunction;
- A writ of prohibition or mandamus; or (iv) An order appointing a receiver, conservator, or ancillary receiver or conservator for the defendant or the defendant’s assets located in this state.
History.
I.C.,§ 30-1511, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1512. Criminal penalties.
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Any person who willfully violates:
- Any provision of this chapter; or
- Any rule or order of the director under this chapter shall, upon conviction, be fined not more than twenty-five thousand dollars ($25,000) or imprisoned for not more than ten (10) years, or both, for each violation.
- Any person convicted of violating a rule or order under this chapter may be fined, but may not be imprisoned, if the person proves he had no knowledge of the rule or order.
- The director may refer such evidence as is available concerning violations of the provisions of this chapter or any rule or order of the director to the attorney general of this state or the proper prosecuting attorney, who may, with or without such a reference from the director, institute the appropriate criminal proceedings under this chapter.
History.
I.C.,§ 30-1512, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1513. Administration — Rules and forms.
- The administration of the provisions of this chapter shall be under the general supervision and control of the director. The director may from time to time make, amend and rescind such rules and forms as are necessary to carry out the provisions of this chapter. No rule or form may be made unless the director finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes of this chapter.
- Neither the director nor any employees of the director shall use any information which is filed with or obtained by the director which is not public information for personal gain or benefit, nor shall the director nor any employees of the director conduct any securities or commodity dealings whatsoever based upon any such information, even though public, if there has not been a sufficient period of time for the securities or commodity markets to assimilate such information.
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- Except as provided in paragraph (b) of this subsection, all information collected, assembled or maintained by the director is public information and is available for the examination of the public. (3)(a) Except as provided in paragraph (b) of this subsection, all information collected, assembled or maintained by the director is public information and is available for the examination of the public.
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The following items are not public information and are deemed to be confidential:
- Information or documents obtained by the director concerning any matter or party under investigation;
- Information designated as confidential by any rule or order of the director;
- Information obtained from federal agencies which may not be disclosed under federal law.
- The director in his discretion may disclose any information made confidential under paragraph (b)(i) of this subsection to persons identified in section 30-1514, Idaho Code.
- No provision of this chapter either creates or derogates any privilege which exists at common law, by statute or otherwise when any documentary or other evidence is sought under subpoena directed to the director or any employee of the director.
History.
I.C.,§ 30-1513, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1514. Cooperation with other agencies.
To encourage uniform application and interpretation of the provisions of this chapter and securities regulation and enforcement in general, the director and the employees of the director may cooperate, including bearing the expense of the cooperation, with the securities agencies or director of another jurisdiction, Canadian province or territory or such other agencies administering the provisions of this chapter, the commodity futures trading commission, the securities and exchange commission, any self-regulatory organization established under the commodity exchange act or the securities exchange act of 1934, any national or international organization of commodities or securities officials or agencies, and any governmental law enforcement agency.
History.
I.C.,§ 30-1514, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1515. Consent to service of process.
When a person including a nonresident of this state, engages in conduct prohibited or made actionable by the provisions of this chapter or any rule or order of the director, such conduct shall constitute the appointment of the director and his successors as the person’s attorney to receive service of any lawful process in a noncriminal proceeding against the person, a successor, or personal representative, which grows out of that conduct and which is brought under this chapter or any rule or order of the director with the same force and validity as if served personally.
History.
I.C.,§ 30-1515, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1516. Scope.
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Sections 30-1502, 30-1505 and 30-1506, Idaho Code, apply to persons who sell or offer to sell when:
- An offer to sell is made in this state, or
- An offer to buy is made and accepted in this state.
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Sections 30-1502, 30-1505 and 30-1506, Idaho Code, apply to persons who buy or offer to buy when:
- An offer to buy is made in this state, or
- An offer to sell is made and accepted in this state.
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For the purposes of this section, an offer to sell or to buy is made in this state, whether or not either party is then present in this state, when the offer:
- Originates from this state, or
- Is directed by the offeror to this state and received at the place to which it is directed or at any post office in this state in the case of a mailed offer.
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For the purpose of this section, an offer to buy or to sell is accepted in this state when acceptance:
- Is communicated to the offeror in this state, and
- Has not previously been communicated to the offeror, orally or in writing, outside this state; and acceptance is communicated to the offeror in this state, whether or not either party is then present in this state, when the offeree directs it to the offeror in this state, reasonably believing the offeror to be in this state and it is received at the place to which it is directed or at any post office in this state in the case of a mailed acceptance.
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An offer to sell or to buy is not made in this state when:
- The publisher circulates or there is circulated on his behalf in this state any bona fide newspaper or other publication of general, regular, and paid circulation which is not published in this state, or which is published in this state, but more than two-thirds of the publication’s circulation has been outside this state during the previous twelve (12) months, or
- A radio or television program originating outside this state is received in this state.
History.
I.C.,§ 30-1516, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1517. Procedure for entry of an order.
- The director shall commence an administrative proceeding under this chapter by entering either a notice of intent to do a contemplated act or a summary order. The notice of intent or summary order may be entered without notice, without opportunity for hearing, and need not be supported by findings of fact or conclusions of law, but must be in writing.
- Upon entry of a notice of intent or summary order, the director shall promptly notify all interested parties that the notice or summary order has been entered and the reasons therefor. If the proceeding is pursuant to a notice of intent, the director shall inform all interested parties of the date, time and place set for the hearing on the notice. If the proceeding is pursuant to a summary order, the director shall inform all interested parties that they have thirty (30) business days from the entry of the order to file a written request for a hearing on the matter with the director and that the hearing will be scheduled to commence within thirty (30) business days after the receipt of the written request.
- If the proceeding is pursuant to a summary order, the director, whether or not a written request for a hearing is received from any interested party, may set the matter down for hearing on the director’s own motion.
- If no hearing is requested and none is ordered by the director, the summary order will automatically become a final order after thirty (30) business days.
- If a hearing is requested or ordered, the director, after notice of an opportunity for hearing to all interested persons, may modify or vacate the order or extend it until final determination.
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No final order or order after hearing may be returned without:
- Appropriate notice to all interested persons;
- Opportunity for hearing by all interested persons; and
- Entry of written findings of fact and conclusions of law.
Every hearing in an administrative proceeding under the provisions of this chapter shall be public unless the director grants a request joined in by all the respondents that the hearing be conducted privately.
History.
I.C.,§ 30-1517, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1518. Judicial review of orders.
Any person aggrieved by a final order of the director may obtain judicial review of the order pursuant to the provisions of chapter 52, title 67, Idaho Code.
History.
I.C.,§ 30-1518, as added by 1989, ch. 414, § 1, p. 1006; am. 1993, ch. 216, § 15, p. 587.
§ 30-1519. Pleading exemptions.
It shall not be necessary to negative any of the exemptions in this chapter in any complaint, information or indictment, or any writ or proceeding brought under this chapter, and the burden of proof of any such exemption shall be upon the party claiming the same.
History.
I.C.,§ 30-1519, as added by 1989, ch. 414, § 1, p. 1006.
§ 30-1520. Short title.
This chapter shall be known and may be cited as the “Idaho Commodity Code.”
History.
I.C.,§ 30-1520, as added by 1989, ch. 414, § 1, p. 1006.
Chapter 16 CONTROL SHARE ACQUISITION ACT
Sec.
§ 30-1601. Definitions.
In this chapter the following terms have the meaning specified:
- “Acquiring person” means a person that makes or proposes to make a control share acquisition. If two (2) or more persons act as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement, relationship, understanding or otherwise, whether or not in writing, for the purposes of acquiring, owning or voting shares of an issuing public corporation, all members of the partnership, syndicate or other group constitute a “person.” An “acquiring person” does not include a licensed broker or dealer or licensed underwriter that purchases shares of an issuing public corporation solely for purposes of resale to the public and is not acting in concert with an acquiring person.
- “Affiliate” means a person that directly or indirectly controls, is controlled by, or is under common control with a specified person.
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“Associate,” when used to indicate a relationship with any person, means:
- Any corporation or organization of which the person is an officer, director or partner or is, directly or indirectly, the beneficial owner of ten per cent (10%) or more of any class or series of shares entitled to vote or other equity interests;
- Any trust or estate in which the person has a ten per cent (10%) or more beneficial interest or as to which the person serves as trustee or personal representative or in a similar fiduciary capacity; or
- Any relative or spouse of the person, or any relative of the spouse, residing in the home of the person.
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“Beneficial owner,” when used with respect to shares or other securities, includes any person who, directly or indirectly, through any agreement, arrangement, relationship, understanding or otherwise, whether or not in writing, has or shares the power to vote, or direct the voting of, the shares or securities or has or shares the power to dispose of, or direct the disposition of, the shares or securities, except that:
- A person is not deemed the beneficial owner of shares or securities tendered pursuant to a tender or exchange offer made by the person or any of the person’s affiliates or associates until the tendered shares or securities are accepted for purchase or exchange or payment, or purchased or exchanged; and
- A person is not deemed the beneficial owner of shares or securities with respect to which the person has the power to vote or direct the voting arising solely from a revocable proxy given in response to a proxy solicitation made in accordance with the applicable rules and regulations under the Securities Exchange Act of 1934, as amended, and is not then reportable under that act on a schedule 13D or comparable report under that act.
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“Beneficial ownership” includes the right to acquire shares or securities through the exercise of options, warrants or rights, the conversion of convertible securities or otherwise, regardless of whether exercisable only after the passage of time (whether or not less than sixty (60) days) or the occurrence or nonoccurrence of a future event. The shares or securities subject to the options, warrants, rights or conversion privileges held by a person are deemed to be outstanding for the purpose of computing the percentage of outstanding shares or securities of the class or series owned by the person but are not deemed to be outstanding for the purpose of computing the percentage of the class or series owned by any other person. A person is deemed the beneficial owner of shares and securities beneficially owned by an affiliate or associate of the person.
(6) “Business combination,” when used in reference to any issuing public corporation and any interested shareholder of the issuing public corporation, means:
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Any merger or consolidation of the issuing public corporation or any subsidiary of the issuing public corporation with either:
- The interested shareholder; or
- Any other domestic or foreign corporation, whether or not itself an interested shareholder of the issuing public corporation, that is, or after the merger would be, an affiliate or associate of the interested shareholder, except that the foregoing does not include the merger of a wholly owned subsidiary of the issuing public corporation into the issuing public corporation or the merger of two (2) or more wholly owned subsidiaries of the issuing public corporation; or
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Any exchange, pursuant to a plan of exchange under the laws of this state or a comparable statute of any other state or jurisdiction, of shares of the issuing public corporation or any subsidiary of the issuing public corporation for shares of either:
- The interested shareholder; or
- Any other domestic or foreign corporation, whether or not itself an interested shareholder of the issuing public corporation, that is, or after the exchange would be, an affiliate or associate of the interested shareholder; or
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Any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in a single transaction or a series of transactions, to or with the interested shareholder or any affiliate or associate of the interested shareholder, whether as part of a dissolution or otherwise, of assets of the issuing public corporation or any subsidiary of the issuing public corporation to which any of the following applies:
- Has an aggregate market value equal to ten per cent (10%) or more of the aggregate market value of all the assets, determined on a consolidated basis, of the issuing public corporation;
- Has an aggregate market value equal to ten per cent (10%) or more of the aggregate market value of all the outstanding shares of the issuing public corporation; or
- Represents ten per cent (10%) or more of the earning power or net income, determined on a consolidated basis, of the issuing public corporation; or
- Any transaction which results in the issuance or transfer by the issuing public corporation or any subsidiary of the issuing public corporation, in a single transaction or a series of transactions, of any shares of the issuing public corporation that have an aggregate market value equal to five per cent (5%) or more of the aggregate market value of all the outstanding shares of the issuing public corporation to the interested shareholder or any affiliate or associate of the interested shareholder, except pursuant to the exercise of warrants or rights to purchase shares offered or distributed or a dividend or distribution paid or made pro rata to all shareholders of the issuing public corporation, and except pursuant to the exercise or conversion of securities exercisable for or convertible into shares of the issuing public corporation or any subsidiary of the issuing public corporation which securities were outstanding prior to the time that the interested stockholder became such; or
- The adoption of any plan or proposal for the liquidation or dissolution of the issuing public corporation, or any reincorporation of the issuing public corporation in another state or jurisdiction, proposed by, on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder; or
- Any transaction involving any reclassification of securities, including any share dividend or split, reverse share split or other distribution of shares in respect of shares, recapitalization of the issuing public corporation, merger or consolidation of the issuing public corporation with any subsidiary of the issuing public corporation, exchange of shares of the issuing public corporation with any subsidiary of the issuing public corporation or other transaction, whether or not with or into or otherwise involving the interested shareholder, proposed by, on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with the interested shareholder or any affiliate or associates of the interested shareholder that has the effect directly, or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of shares entitled to vote, or securities that are exchangeable for or convertible into or that carry a right to acquire shares entitled to vote, of the issuing public corporation or any subsidiary of the issuing public corporation that is, directly or indirectly, owned by the interested shareholder of any affiliate or associate of the interested shareholder, except as a result of immaterial changes due to fractional share adjustments; or
- Any receipt by the interested shareholder or any affiliate or associate of the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the issuing public corporation, of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the issuing public corporation or any subsidiary of the issuing public corporation.
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Any merger or consolidation of the issuing public corporation or any subsidiary of the issuing public corporation with either:
(7) “Control,” “controlling,” “controlled by” or “under common control with” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise. A person’s beneficial ownership of ten per cent (10%) or more of the voting power of a corporation’s outstanding shares entitled to vote in the election of directors creates a presumption that the person has control of the corporation. A person is not considered to have control of a corporation if the person holds voting power, in good faith and not for the purpose of avoiding the provisions of this chapter, as an agent, bank, broker, nominee, custodian or trustee for one (1) or more beneficial owners who do not individually or as a group have control of the corporation.
(8) “Control share acquisition” means an acquisition, directly or indirectly, by an acquiring person of beneficial ownership of shares of an issuing public corporation that, except for the provisions of this chapter, would, when added to all other shares of the issuing public corporation, beneficially owned by the acquiring person, entitle the acquiring person, immediately after the acquisition, to exercise or direct the exercise of a new range of voting power within any of the ranges specified in section 30-1604(1)(d), Idaho Code, but does not include any of the following:
(a) An acquisition by a donee pursuant to an inter vivos gift not made to avoid the provisions of this chapter or by a distributee as defined in section 15-1-201, Idaho Code;
(b) An acquisition pursuant to a security agreement not created to avoid the provisions of this chapter;
(c) An acquisition from the issuing public corporation; and
(d) An acquisition for the benefit of others by a person acting in good faith and not made to avoid the provisions of this chapter to the extent that the person may not exercise or direct the exercise of voting power or disposition of the shares except on the instruction of others.
All shares, the beneficial ownership of which is acquired within a one hundred twenty (120) day period, and all shares, the beneficial ownership of which is acquired pursuant to a plan to make a control share acquisition, are deemed to have been acquired in the same acquisition. (9) “Day” means a calendar day and shall consist of the time period from 12:01 a.m. through 12:00 midnight, Idaho time.
(10) “Interested shareholder,” when used in reference to any issuing public corporation, means any person, other than the issuing public corporation or any subsidiary of the issuing public corporation, that is either:
(a) The beneficial owner, directly or indirectly, of ten per cent (10%) or more of the voting power of the outstanding shares entitled to vote of the issuing public corporation; or
(b) An affiliate or associate of the issuing public corporation.
(11) “Interested shares” mean the shares of an issuing public corporation with respect to which any of the following persons may exercise or direct the exercise of voting power in the election of directors of the issuing public corporation:
(a) An acquiring person;
(b) Any officer of the issuing public corporation; or
(c) Any director of the issuing public corporation.
(12) “Issuing public corporation” means a publicly held corporation which has at least fifty (50) shareholders and which either:
(a) Is incorporated under the laws of this state; or
(b)(i) Has a place of business or its principal executive office located in this state, (ii) owns or controls assets located within this state that have a fair market value of at least one million dollars ($1,000,000), (iii) has more than two hundred fifty (250) employees residing in this state, and (iv) has either (X) more than ten per cent (10%) of its shareholders resident in this state, or (Y) more than ten per cent (10%) of its shares owned of record by state residents. For purposes of this subsection, the number of employees shall be computed by including all employees of subsidiaries or affiliates of the publicly held corporation. For purposes of this subsection, the record date for determining the percentages and number of shareholders and shares shall be the last shareholder record date before the event requiring that the determination be made, except that if a shareholder record date has not been fixed by the board of directors of the issuing public corporation within the preceding four (4) months, the determination shall be made as of the end of the issuing public corporation’s most recent fiscal quarter. The residence of a shareholder is presumed to be the address appearing in the records of the issuing public corporation. Shares held of record by banks (except as trustee or guardian), brokers, or nominees shall be disregarded for purposes of calculating percentages and numbers described in this subsection. Shares of an issuing public corporation allocated to the account of an employee or former employee or beneficiaries of employees or former employees of an issuing public corporation held in a plan that is qualified under section 401(a) of the Internal Revenue Code of 1986, as amended, and is a defined contribution plan within the meaning of section 414(i) of the code, shall be deemed for purposes of this subsection, to be held of record by the employee to whose account such shares are allocated.
(13) “Market value,” when used in reference to shares or property of any issuing public corporation or any of its subsidiaries, means:
(a) In the case of shares, the highest closing sale price during the thirty (30) day period immediately preceding the date in question of a share of the composite tape for New York Stock Exchange listed shares or, if the shares are not quoted on the composite tape or not listed on the New York Stock Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which the shares are listed or, if the shares are not listed on any such exchange, on the National Association of Securities Dealers, Inc. Automated Quotations National Market System or, if the shares are not quoted on the National Association of Securities Dealers, Inc. Automated Quotations National Market System, the highest closing bid quotation during the thirty (30) day period preceding the date in question of a share on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use or, if no such quotation is available, the fair market value on the date in question of a share as determined in good faith by the board of the issuing public corporation; and (b) In the case of property other than cash or shares, the fair market value of the property on the date in question as determined in good faith by the board of the issuing public corporation.
(14) “Publicly held corporation” means a corporation that has a class of equity securities registered pursuant to section 12 or is subject to section 15(d) of the Securities Exchange Act of 1934, as amended.
History.
I.C.,§ 30-1601, as added by 1988, ch. 84, § 2, p. 147; am. 1989, ch. 139, § 1, p. 320.
STATUTORY NOTES
Federal References.
The Securities Exchange Act of 1934, referred to in paragraphs (4)(b) and (13)(a), is compiled as 15 U.S.C.S. § 78a et seq.
Sections 401(a) and 414(i) of the internal revenue code of 1986, referred to paragraph (12)(b), are codified as 26 U.S.C.S. §§ 401(a) and 414(i), respectively.
Section 12 and 15(d) of the securities exchange act of 1934, referred to in subsection (14), are codified as 78 U.S.C.S. §§ 78 l and 78o(d), respectively.
Compiler’s Notes.
For more on schedule 13D of the securities exchange act of 1934, see http://www.sec.gov/answers/sched13.htm .
The national association of securities dealers, inc., referred to in paragraph (13)(a), was combined with certain oversight functions of the New York stock exchange in 2007 to form the financial industry regulatory authority. For more on the financial industry regulatory authority, see http://www.finra.org/.
For more information on the National Association of Securities Dealers, Inc. Automated Quotations System, referred to in paragraph (13)(a), see https://www.nasdaq.com/ .
For more on the New York stock exchange, see https://www.nyse.com .
The words enclosed in parentheses so appeared in the law as enacted.
§ 30-1602. Duties of director.
In discharging the duties of the position of director of an issuing public corporation, a director, in considering the best interests of the corporation, shall consider the long-term as well as the short-term interests of the corporation and its shareholders including the possibility that these interests may be best served by the continued independence of the corporation. In addition, a director may consider the interests of Idaho employees, suppliers, customers and communities in discharging his duties.
History.
I.C.,§ 30-1602, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1603. Application.
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The provisions of this chapter shall not apply to a control share acquisition if:
- The acquiring person was an acquiring person on, or became an acquiring person pursuant to a tender offer commenced prior to, the day following the effective date of this act, and remained such;
- The original articles or bylaws of the issuing public corporation contain a provision expressly electing not to be subject to this chapter;
- The issuing public corporation, by action of its board of directors, adopts an amendment to its bylaws expressly electing not to be subject to this chapter; or
- The issuing public corporation, by action of its shareholders, adopts an amendment to its articles of incorporation or bylaws approved by the shareholders holding sixty-six and two-thirds per cent (66 2/3%) of the outstanding voting power of all shares entitled to vote, excluding the shares of interested shareholders and their affiliates and associates, under which the issuing public corporation by such shareholder action expressly elects not to be subject to this chapter, and such amendment provides that it is not to be effective until eighteen (18) months after the effective date of this chapter.
- The shares of an issuing public corporation acquired by an acquiring person in a control share acquisition that exceed the threshold of voting power of any of the ranges specified in section 30-1604(1)(d), Idaho Code, have only the voting rights accorded them pursuant to section 30-1607, Idaho Code, and then only as provided in such section, and will not otherwise have any voting rights regardless of the terms thereof.
- This chapter does not apply to insurance companies regulated under Title 41, Idaho Code.
History.
I.C.,§ 30-1603, as added by 1988, ch. 84, § 2, p. 147.
STATUTORY NOTES
Compiler’s Notes.
The phrase “the effective date of this chapter” in paragraphs (1)(a) and (1)(d) refers to the effective date of S.L. 1988, Chapter 84, which was effective March 22, 1988.
§ 30-1604. Information statement.
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An acquiring person shall deliver to the issuing public corporation at its principal executive office an information statement containing all the following:
- The identity of the acquiring person, including the identity of each member of any partnership, limited partnership, syndicate or other group constituting the acquiring person and the identity of each affiliate and associate of the acquiring person, including the identity of each affiliate and associate of each member of such partnership, syndicate or other group;
- A reference that the information is made under the provisions of this section;
- The number and class or series of shares of the issuing public corporation beneficially owned, directly or indirectly, before the control share acquisition by each of the persons identified pursuant to paragraph (a) of this subsection;
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The number and class or series of shares of the issuing public corporation acquired or proposed to be acquired pursuant to the control share acquisition by each of the persons identified pursuant to paragraph (a) of this subsection and specification of which of the following ranges of voting power in the election of directors that, except for the provisions of this chapter, the acquiring person in good faith believes resulted or would result from consummation of control share acquisition:
- At least twenty percent (20%) but less than thirty-three and one-third percent (33 1/3%);
- At least thirty-three and one-third percent (33 1/3%) but less than or equal to fifty percent (50%); or
- Over fifty per cent (50%); and
- The terms of the control share acquisition or proposed control share acquisition, including the source of moneys or other consideration and the material terms of the financial arrangements for the control share acquisition, plans or proposals of the acquiring person, including plans or proposals under consideration to enter into a business combination or combinations involving the issuing public corporation, to liquidate or dissolve the issuing public corporation, to sell all or a substantial part of its assets or merge or consolidate it or exchange its shares with any other person, to change the location of its principal place of business or its principal executive office or of a material portion of its business activities, to change materially its management or policies of employment, to change materially its charitable or community contributions or its policies, programs or practices relating thereto, to change materially its relationship with suppliers or customers or the communities in which it operates or to make any other material change in its business, corporate structure, management or personnel and such other objective facts as would be substantially likely to affect the decision of a shareholder with respect to voting on the control share acquisition.
History.
(2) If any material change occurs in the facts set forth in the information statement, including any material increase or decrease in the number of shares of the issuing public corporation acquired or proposed to be acquired by the persons identified pursuant to subsection (1)(a) of this section, the acquiring person shall promptly deliver to the issuing public corporation at its principal executive office an amendment to the information statement containing information relating to such material change. An increase or decrease or proposed increase or decrease equal, in the aggregate for all persons identified pursuant to subsection (1)(a) of this section, to one percent (1%) or more of the total number of outstanding shares of any class or series of the issuing public corporation is deemed material for purposes of this subsection. An increase or decrease or proposed increase or decrease of less than this amount may be material, depending on the facts and circumstances. History.
I.C.,§ 30-1604, as added by 1988, ch. 84, § 2, p. 147; am. 2014, ch. 97, § 17, p. 265.
STATUTORY NOTES
Amendments.
The 2014 amendment, by ch. 97, corrected typographical errors and made minor stylistic changes throughout the section.
§ 30-1605. Meeting of shareholders.
If the acquiring person so requests in writing at the time of delivery of an information statement pursuant to section 30-1604, Idaho Code, and has made, or has made a bona fide written offer to make, a control share acquisition and gives a written undertaking to pay or reimburse the issuing public corporation’s expenses of a special meeting, except the expenses of the issuing public corporation in opposing approval of the control share acquisition, within ten (10) days after receipt by the issuing public corporation of the information statement, a special meeting of the shareholders of the issuing public corporation shall be called for the purpose of considering the voting rights to be accorded to shares referred to in section 30-1603(2), Idaho Code, acquired or to be acquired pursuant to the control share acquisition. The special meeting shall be held no later than fifty-five (55) days after receipt of the information statement, unless the acquiring person agrees to a later date. If no request for a special meeting is made, consideration of the voting rights to be accorded to shares referred to in section 30-1603(2), Idaho Code, acquired or to be acquired pursuant to the control share acquisition shall be presented at the next special or annual meeting of the shareholders, which takes place more than fifty-five (55) days after the receipt of the information statement by the issuing public corporation, unless the matter of the voting rights becomes moot. The notice of the meeting shall be accompanied at a minimum by a copy of the information statement and a copy of any amendment to the information statement previously delivered to the issuing public corporation and a statement disclosing that the board of the issuing public corporation recommends approval of, expresses no opinion and is remaining neutral toward, recommends rejection of or is unable to take a position with respect to according voting rights to shares referred to in section 30-1603(2), Idaho Code, acquired or to be acquired in the control shares acquisition. The notice of meeting shall be given at least ten (10) days before the meeting.
History.
I.C.,§ 30-1605, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1606. Financing.
No call of a special meeting of the shareholders of the issuing public corporation is required to be made pursuant to section 30-1605, Idaho Code, and no consideration of the voting rights to be accorded to shares referred to in section 30-1603(2), Idaho Code, acquired or to be acquired pursuant to a control share acquisition shall be presented at any special or annual meeting of the shareholders of the issuing public corporation unless at the time of delivery of the information statement pursuant to section 30-1604, Idaho Code, the acquiring person has entered into and has delivered to the issuing public corporation a copy or copies of a definitive financing agreement or agreements with one (1) or more responsible financial institutions or other entities having the necessary financial capacity for any financing of the control share acquisition not to be provided by moneys of the acquiring person.
History.
I.C.,§ 30-1606, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1607. Voting rights.
- Shares referred to in section 30-1603(2), Idaho Code, acquired in a control share acquisition have the same voting rights as were accorded the shares before the control share acquisition but only if and to the extent approved by a resolution of shareholders of the issuing public corporation at a special or annual meeting of shareholders pursuant to section 30-1605, Idaho Code.
- The resolution of shareholders must be approved by the affirmative vote of the holders of sixty-six and two-thirds per cent (66 2/3%) of the voting power of all shares entitled to vote excluding all interested shares.
- A class or series of shares of the issuing public corporation is entitled to vote separately as a class or series if any provision of the control share acquisition would, if contained in a proposed amendment to the articles of the issuing public corporation, entitle the class or series to vote separately as a class or series.
- To have the voting rights accorded by approval of a resolution of shareholders, any proposed control share acquisition not consummated before the time of the shareholder approval must be consummated within one hundred eighty (180) days after the shareholders’ approval.
- Any shares referred to in section 30-1603(2), Idaho Code, acquired in a control share acquisition that do not have voting rights accorded to them by approval of a resolution of shareholders shall regain their voting rights on transfer to a person other than the acquiring person or any affiliate or associate of the acquiring person unless the acquisition of the shares by the other person constitutes a control share acquisition, in which case the voting rights of the shares are subject to the provisions of this chapter.
History.
I.C.,§ 30-1607, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1608. Rights of action.
- An acquiring person, an issuing public corporation and shareholders of an issuing public corporation may sue at law or in equity to enforce the provisions of this chapter.
- The issuing public corporation may make application to a court of competent jurisdiction to obtain a declaration of the issuing public corporation’s and other persons’ obligations and rights under the act, and the court in any such action may, to the extent it deems appropriate, modify the timing requirements under this act during the time the court is determining the matter, provided, however, that, consistent with the proper adjudication of the matter, courts of this state will determine the matter in the most expeditious manner practicable.
History.
I.C.,§ 30-1608, as added by 1988, ch. 84, § 2, p. 147.
STATUTORY NOTES
Compiler’s Notes.
The terms “the act” and “this act” in subsection (2) refer to S.L. 1988, Chapter 84, which is compiled as§§ 30-1601 to 30-1614 and 30-1701 to 30-1710.
§ 30-1609. Redemption.
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Unless otherwise expressly provided in the articles or in bylaws of an issuing public corporation, the issuing public corporation may call for redemption of all but not less than all shares referred to in section 30-1603(2), Idaho Code, acquired in a control share acquisition at a redemption price equal to the market value of the shares at the time the call for redemption is given if either:
- An information statement has not been delivered to the issuing public corporation by the acquiring person by the tenth day after the control share acquisition; or
- An information statement has been delivered but the shareholders have voted not to accord voting rights to such shares pursuant to section 30-1607(2), Idaho Code.
- The issuing public corporation shall give the call for redemption within thirty (30) days after the event giving the issuing public corporation the option to call the shares for redemption and the shares shall be redeemed within sixty (60) days after the call is given.
History.
I.C.,§ 30-1609, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1610. Scope.
- Nothing contained in this chapter is intended or shall be construed in any way to limit, modify or restrict an issuing public corporation’s authority to take any action which the directors may appropriately determine to be in furtherance of the protection of the interests of the corporation and its shareholders, including without limitation the authority to adopt or enter into plans, arrangements or instruments that deny rights, privileges, power or authority to the holder or holders of at least a specified number of shares or percentage of share ownership or voting power in certain circumstances.
- The requirements imposed by this chapter are to be in addition to, and not in lieu of, requirements imposed on a transaction by any provision in the articles or the bylaws of the issuing public corporation, or otherwise.
History.
I.C.,§ 30-1610, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1611. Jurisdiction.
- If the jurisdiction under the laws of which the issuing public corporation is organized has adopted or adopts any law comparable to this chapter which imposes limitations on the voting rights of any person in the event that the person acquires or proposes to acquire shares of the issuing public corporation which exceed or meet any level or range of ownership or voting powers specified in such law, and that law contains provisions which are expressly inconsistent with, or cannot practically be applied in a manner consistent with, the provisions of this chapter as applicable to the issuing public corporation, the provisions of this chapter shall be inapplicable to the issuing public corporation to the extent necessary to resolve such inconsistency.
- If any jurisdiction other than the jurisdiction under the laws of which the issuing public corporation is organized has adopted or adopts any law comparable to the provisions of this chapter which imposes limitations on the voting rights of any person in the event that the person acquires or proposes to acquire shares of the issuing public corporation which exceed or meet any level or range of ownership specified in such law and that law contains provisions which are expressly inconsistent with, or cannot practically be applied in a manner consistent with, the provisions of this chapter as applicable to the issuing public corporation, the provisions of this chapter shall be inapplicable to the issuing public corporation to the extent that (i) a greater percentage of shareholders of the issuing public corporation reside in that jurisdiction than in this state, computed in accordance with provisions of section 30-1601(12), Idaho Code, and then, only to the extent necessary to resolve such inconsistency or (ii) the director of the department of finance determines within three (3) business days from the date on which this chapter’s provisions are first applicable to a particular control share acquisition that the other jurisdiction’s law adequately provides for the protection of Idaho shareholders.
History.
I.C.,§ 30-1611, as added by 1988, ch. 84, § 2, p. 147.
STATUTORY NOTES
Cross References.
Director of department of finance,§ 67-2701.
§ 30-1612. Severability.
The provisions of this chapter are hereby declared to be severable and if any provision of this act or the application of such provision to any person or circumstance is declared invalid for any reason, such declaration shall not affect the validity of remaining portions of this act that can be given effect without the invalid provision or application. The invalidity of any provision of this act shall not affect the remaining provisions of this act.
History.
I.C.,§ 30-1612, as added by 1988, ch. 84, § 2, p. 147.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” refers to S.L. 1988, Chapter 84, which is compiled as§§ 30-1601 to 30-1614 and 30-1701 to 30-1710.
§ 30-1613. Election.
Any publicly held corporation which meets the requirements specified in section 30-1601(12)(b)(i), (ii) and (iii), Idaho Code, may, by action of its board of directors, adopt an amendment to its bylaws electing to be subject to this chapter, provided such corporation has one thousand (1,000) or more shareholders of record in this state, and thereby shall be subject to the provisions of this chapter as an issuing public corporation.
History.
I.C.,§ 30-1613, as added by 1988, ch. 84, § 2, p. 147.
§ 30-1614. Short title.
This chapter shall be known and may be cited as the “Control Share Acquisition Law.”
History.
I.C.,§ 30-1614, as added by 1988, ch. 84, § 2, p. 147.
STATUTORY NOTES
Effective Dates.
Section 4 of S.L. 1988, ch. 84 declared an emergency. Approved March 22, 1988.
Chapter 17 BUSINESS COMBINATION ACT
Sec.
§ 30-1701. Definitions.
In this chapter the following terms have the meaning specified:
- “Affiliate” means a person that directly or indirectly controls, is controlled by or is under common control with a specified person.
- “Announcement date,” when used in reference to any business combination, means the date of the first public announcement of a definitive proposal for the business combination.
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“Associate,” when used to indicate a relationship with any person, means:
- Any corporation or organization of which the person is an officer, director or partner or is, directly or indirectly, the beneficial owner of ten per cent (10%) or more of any class or series of shares entitled to vote or other equity interests;
- Any trust or estate in which the person has a ten per cent (10%) or more beneficial interest or as to which the person serves as trustee or personal representative or in a similar fiduciary capacity; or
- Any relative or spouse of the person, or any relative of the spouse, residing in the home of the person.
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“Beneficial owner,” when used with respect to shares or other securities, includes any person who, directly or indirectly, through any agreement, arrangement, relationship, understanding or otherwise, whether or not in writing, has or shares the power to vote, or direct the voting of, the shares or securities or has or shares the power to dispose of, or direct the disposition of, the shares or securities, except that:
- A person is not deemed the beneficial owner of shares or securities tendered pursuant to a tender or exchange offer made by the person or any of the person’s affiliates or associates until the tendered shares or securities are accepted for purchase or exchange or payment, or purchased or exchanged; and
- A person is not deemed the beneficial owner of shares or securities with respect to which the person has the power to vote or direct the voting arising solely from a revocable proxy given in response to a proxy solicitation made in accordance with the applicable rules and regulations under the Securities Exchange Act of 1934, as amended, and is not then reportable under that act on a schedule 13D or comparable report under that act.
- “Beneficial ownership” includes the right to acquire shares or securities through the exercise of options, warrants or rights, the conversion of convertible securities or otherwise, regardless of whether exercisable only after the passage of time (whether or not less than sixty (60) days) or the occurrence or nonoccurrence of a future event. The shares or securities subject to the options, warrants, rights or conversion privileges held by a person are deemed to be outstanding for the purpose of computing the percentage of outstanding shares or securities of the class or series owned by the person but are not deemed to be outstanding for the purpose of computing the percentage of the class or series owned by any other person. A person is deemed the beneficial owner of shares and securities beneficially owned by an affiliate or associate of the person.
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“Business combination,” when used in reference to any issuing public corporation and any interested shareholder of the issuing public corporation, means:
- Any merger or consolidation of the issuing public corporation or any subsidiary of the issuing public corporation with either: 1. The interested shareholder; or
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Any exchange, pursuant to a plan of exchange under the laws of this state or a comparable statute of any other state or jurisdiction, of shares of the issuing public corporation or any subsidiary of the issuing public corporation for shares of either:
- The interested shareholder; or
- Any other domestic or foreign corporation, whether or not itself an interested shareholder of the issuing public corporation, that is, or after the exchange would be, an affiliate or associate of the interested shareholder; or
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Any sale, lease, exchange, mortgage, pledge, transfer or other disposition, in a single transaction or a series of transactions, to or with the interested shareholder or any affiliate or associate of the interested shareholder, whether as part of a dissolution or otherwise, of assets of the issuing public corporation or any subsidiary of the issuing public corporation to which any of the following applies:
- Has an aggregate market value equal to ten per cent (10%) or more of the aggregate market value of all the assets, determined on a consolidated basis, of the issuing public corporation;
- Has an aggregate market value equal to ten per cent (10%) or more of the aggregate market value of all the outstanding shares of the issuing public corporation; or
- Represents ten per cent (10%) or more of the earning power or net income, determined on a consolidated basis, of the issuing public corporation; or
- Any transaction which results in the issuance or transfer by the issuing public corporation or any subsidiary of the issuing public corporation, in a single transaction or a series of transactions, of any shares of the issuing public corporation that have an aggregate market value equal to five per cent (5%) or more of the aggregate market value of all the outstanding shares of the issuing public corporation to the interested shareholder or any affiliate or associate of the interested shareholder, except pursuant to the exercise of warrants or rights to purchase shares offered or distributed or a dividend or distribution paid or made pro rata to all shareholders of the issuing public corporation, and except pursuant to the exercise or conversion of securities exercisable for or convertible into shares of the issuing public corporation or any subsidiary of the issuing public corporation which securities were outstanding prior to the time that the interested stockholder became such; or
- The adoption of any plan or proposal for the liquidation or dissolution of the issuing public corporation, or any reincorporation of the issuing public corporation in another state or jurisdiction, proposed by, on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder; or
- Any transaction involving any reclassification of securities, including any share dividend or split, reverse share split or other distribution of shares in respect of shares, recapitalization of the issuing public corporation, merger or consolidation of the issuing public corporation with any subsidiary of the issuing public corporation, exchange of shares of the issuing public corporation with any subsidiary of the issuing public corporation or other transaction, whether or not with or into or otherwise involving the interested shareholder, proposed by, on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of shares entitled to vote, or securities that are exchangeable for or convertible into or that carry a right to acquire shares entitled to vote, of the issuing public corporation or any subsidiary of the issuing public corporation that is, directly or indirectly, owned by the interested shareholder of [or] any affiliate or associate of the interested shareholder, except as a result of immaterial changes due to fractional share adjustments; or (g) Any receipt by the interested shareholder or any affiliate or associate of the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the issuing public corporation, of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the issuing public corporation or any subsidiary of the issuing public corporation.
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“Consummation,” with respect to any business combination, means the date of consummation of the business combination or, in the case of a business combination as to which a shareholder vote is taken, the later of:
- The business day before the vote; or
- Twenty (20) days before the date of consummation of the business combination.
- “Control,” “controlling,” “controlled by” or “under common control with” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise. A person’s beneficial ownership of ten per cent (10%) or more of the voting power of a corporation’s outstanding shares entitled to vote in the election of directors creates a presumption that the person has control of the corporation. A person is not considered to have control of a corporation if the person holds voting power, in good faith and not for the purpose of avoiding the provisions of this chapter, as an agent, bank, broker, nominee, custodian or trustee for one (1) or more beneficial owners who do not individually or as a group have control of the corporation.
- “Day” means a calendar day and shall consist of the time period from 12:01 a.m. through 12:00 midnight, Idaho time.
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“Interested shareholder,” when used in reference to any issuing public corporation, means any person, other than the issuing public corporation or any subsidiary of the issuing public corporation, that is either:
- The beneficial owner, directly or indirectly, of ten per cent (10%) or more of the voting power of the outstanding shares entitled to vote of the issuing public corporation; or
- An affiliate or associate of the issuing public corporation.
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“Issuing public corporation” means a publicly held corporation which has at least fifty (50) shareholders and which either:
- Is incorporated under the laws of this state; or
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- Has a place of business or its principal executive office located in this state, (ii) owns or controls assets located within this state that have a fair market value of at least one million dollars ($1,000,000), (iii) has more than two hundred fifty (250) employees residing in this state, and (iv) has either (X) more than ten per cent (10%) of its shareholders resident in this state, or (Y) more than ten per cent (10%) of its shares owned of record by state residents. For purposes of this subsection, the number of employees shall be computed by including all employees of subsidiaries or affiliates of the publicly held corporation. For purposes of this subsection, the record date for determining the percentages and number of shareholders and shares shall be the last shareholder record date before the event requiring that the determination be made, except that if a shareholder record date has not been fixed by the board of directors of the issuing public corporation within the preceding four (4) months, the determination shall be made as of the end of the issuing public corporation’s most recent fiscal quarter. The residence of a shareholder is presumed to be the address appearing in the records of the issuing public corporation. Shares held of record by banks (except as trustee or guardian), brokers, or nominees shall be disregarded for purposes of calculating percentages and numbers described in this subsection. Shares of an issuing public corporation allocated to the account of an employee or former employee or beneficiaries of employees or former employees of an issuing public corporation held in a plan that is qualified under section 401(a) of the Internal Revenue Code of 1986, as amended, and is a defined contribution plan within the meaning of section 414(i) of the code, shall be deemed for purposes of this subsection, to be held of record by the employee to whose account such shares are allocated. (12) “Market value,” when used in reference to shares or property of any issuing public corporation or any of its subsidiaries, means: (b)(i) Has a place of business or its principal executive office located in this state, (ii) owns or controls assets located within this state that have a fair market value of at least one million dollars ($1,000,000), (iii) has more than two hundred fifty (250) employees residing in this state, and (iv) has either (X) more than ten per cent (10%) of its shareholders resident in this state, or (Y) more than ten per cent (10%) of its shares owned of record by state residents. For purposes of this subsection, the number of employees shall be computed by including all employees of subsidiaries or affiliates of the publicly held corporation. For purposes of this subsection, the record date for determining the percentages and number of shareholders and shares shall be the last shareholder record date before the event requiring that the determination be made, except that if a shareholder record date has not been fixed by the board of directors of the issuing public corporation within the preceding four (4) months, the determination shall be made as of the end of the issuing public corporation’s most recent fiscal quarter. The residence of a shareholder is presumed to be the address appearing in the records of the issuing public corporation. Shares held of record by banks (except as trustee or guardian), brokers, or nominees shall be disregarded for purposes of calculating percentages and numbers described in this subsection. Shares of an issuing public corporation allocated to the account of an employee or former employee or beneficiaries of employees or former employees of an issuing public corporation held in a plan that is qualified under section 401(a) of the Internal Revenue Code of 1986, as amended, and is a defined contribution plan within the meaning of section 414(i) of the code, shall be deemed for purposes of this subsection, to be held of record by the employee to whose account such shares are allocated. (12) “Market value,” when used in reference to shares or property of any issuing public corporation or any of its subsidiaries, means:
2. Any other domestic or foreign corporation, whether or not itself an interested shareholder of the issuing public corporation, that is, or after the merger would be, an affiliate or associates of the interested shareholder, except that the foregoing does not include the merger of a wholly owned subsidiary of the issuing public corporation into the issuing public corporation or the merger of two (2) or more wholly owned subsidiaries of the issuing public corporation; or
(a) In the case of shares, the highest closing sale price during the thirty (30) day period immediately preceding the date in question of a share of the composite tape for New York Stock Exchange listed shares or, if the shares are not quoted on the composite tape or not listed on the New York Stock Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which the shares are listed or, if the shares are not listed on any such exchange, on the National Association of Securities Dealers, Inc. Automated Quotations National Market System or, if the shares are not quoted on the National Association of Securities Dealers, Inc. Automated Quotations National Market System, the highest closing bid quotation during the thirty (30) day period preceding the date in question of a share on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use or, if no such quotation is available, the fair market value on the date in question of a share as determined in good faith by the board of the issuing public corporation; and
(b) In the case of property other than cash or shares, the fair market value of the property on the date in question as determined in good faith by the board of the issuing public corporation.
(13) “Publicly held corporation” means a corporation that has a class of equity securities registered pursuant to section 12 or is subject to section 15(d) of the Securities Exchange Act of 1934, as amended.
(14) “Share acquisition date,” with respect to any person and any issuing public corporation, means the date that the person first becomes an interested shareholder.
History.
I.C.,§ 30-1701, as added by 1988, ch. 84, § 3, p. 147; am. 1989, ch. 139, § 2, p. 320.
STATUTORY NOTES
Federal References.
Sections 12 and 15(d) of the securities exchange act of 1934, referred to in subsection (13), are codified as 78 U.S.C.S. §§ 78 l and 78o(d), respectively.
The Securities Exchange Act of 1934, referred to in paragraphs (4)(b) and (12)(a), is compiled as 15 U.S.C.S. § 78a et seq.
Sections 401(a) and 414(i) of the internal revenue code of 1986, referred to in subsection (11)(b), are codified as 26 U.S.C.S. §§ 401(a) and 414(i), respectively.
Compiler’s Notes.
For more on schedule 13D of the securities exchange act of 1934, see http://www.sec.gov/answers/sched13.htm .
For more on the New York stock exchange, see https://nyse.com .
The national association of securities dealers, inc., referred to in paragraph (12)(a), was combined with functions of the New York stock exchange in 2007 to form the financial industry regulatory authority. For more on the financial industry regulatory authority, see http://www.finra.org/ .
For more information on the National Association of Securities Dealers, Inc. Automated Quotations System, referred to in paragraph (12)(a), see https://www.nasdaq.com/ .
The bracketed insertion in paragraph (6)(f) was added by the compiler to correct the enacting legislation.
The words in parentheses so appeared in the law as enacted.
§ 30-1702. Duties of director.
In discharging the duties of the position of director of an issuing public corporation, a director, in considering the best interests of the corporation, shall consider the long-term as well as the short-term interests of the corporation and its shareholders including the possibility that these interests may be best served by the continued independence of the corporation. In addition, a director may consider the interests of Idaho employees, suppliers, customers and communities in discharging his duties.
History.
I.C.,§ 30-1702, as added by 1988, ch. 84, § 3, p. 147.
§ 30-1703. Exclusions from chapter.
The provisions of this chapter shall not apply to an interested shareholder if:
- The interested shareholder was an interested shareholder on, or became an interested shareholder pursuant to a tender offer commenced prior to, the day following the effective date of this act, and remained such;
- The original articles or bylaws of the issuing public corporation contain a provision expressly electing not to be subject to the provisions of this chapter;
- The issuing public corporation, by action of its board of directors, adopts an amendment to its bylaws expressly electing not to be subject to the provisions of this chapter; or
- The issuing public corporation, by action of its shareholders, adopts an amendment to its articles of incorporation or bylaws approved by the shareholders holding sixty-six and two-thirds per cent (66 2/3%) of the outstanding voting power of all shares entitled to vote, excluding the shares of interested shareholders and their affiliates and associates, under which the issuing public corporation by such shareholder action expressly elects not to be subject to this chapter, and such amendment provides that it is not to be effective until eighteen (18) months after the effective date of this chapter.
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The provisions of this chapter do not apply to any business combination of an issuing public corporation with an interested shareholder of the issuing public corporation who became an interested shareholder inadvertently, if the interested shareholder both:
- As soon as practicable, divests itself of a sufficient amount of the shares entitled to vote of the issuing public corporation so that it no longer is the beneficial owner, directly or indirectly, of ten per cent (10%) or more of the outstanding shares entitled to vote of the issuing public corporation; and
- Would not at any time within the three (3) year period preceding the announcement date with respect to the business combination have been an interested shareholder except for the inadvertent acquisition.
- This chapter does not apply to insurance companies regulated under title 41, Idaho Code.
History.
I.C.,§ 30-1703, as added by 1988, ch. 84, § 3, p. 147.
STATUTORY NOTES
Compiler’s Notes.
The phrase “the effective date of this chapter” in subsections (1) and (4) refers to the effective date of S.L. 1988, Chapter 84, which was effective March 22, 1988.
§ 30-1704. Business combination with interested shareholder — Approval by directors.
- Except as provided in section 30-1703, Idaho Code, and notwithstanding any other provisions to the contrary in this title, an issuing public corporation may not engage in any business combination or vote, consent or otherwise act to authorize a subsidiary of the issuing public corporation to engage in any business combination with respect to, proposed by or on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with, any interested shareholder of the issuing public corporation or any affiliate or associate of the interested shareholder for a period of three (3) years after the interested shareholder’s share acquisition date, unless the business combination or the acquisition of shares made by the interested shareholder on the interested shareholder’s share acquisition date is approved by a committee of the board of the issuing public corporation before the interested shareholder’s share acquisition date. The committee shall be formed in accordance with subsection (4) of this section.
- If a good faith definitive proposal regarding a business combination is made in writing to the board of the issuing public corporation, a committee of the board formed in accordance with subsection (4) of this section shall consider and take action on the proposal and respond in writing within forty-five (45) days after receipt of the proposal by the issuing public corporation, setting forth its decision regarding the proposal.
- If a good faith definitive proposal to acquire shares is made in writing to the board of the issuing public corporation, a committee of the board, formed in accordance with subsection (4) of this section, shall consider and take action on the proposal. Unless the committee responds affirmatively in writing within forty-five (45) days after receipt of the proposal by the issuing public corporation, the committee shall be considered to have disapproved the shares acquisition.
- When a business combination or acquisition of shares is proposed pursuant to this section, the board shall promptly form a committee, which may be a committee of the entire board of directors, a majority of which shall be disinterested directors. The committee shall take action on the proposal by the affirmative vote of a simple majority of the committee members. Notwithstanding the provisions of section 30-1703, Idaho Code, the committee is not subject to any direction or control by the board with respect to the committee’s consideration of or any action concerning a business combination or acquisition of shares pursuant to this section. For purposes of this subsection, a director or person is disinterested if the director or person (a) is not a present or former officer or employee of the issuing public corporation or a majority owned subsidiary of the issuing public corporation, or (b) is not an officer, director, employee, affiliate or associate of an interested shareholder.
History.
I.C.,§ 30-1704, as added by 1988, ch. 84, § 3, p. 147.
§ 30-1705. Requirements.
Except as provided in sections 30-1703 and 30-1704, Idaho Code, and notwithstanding any other provisions to the contrary in this title, an issuing public corporation may not engage at any time in any business combination or vote, consent or otherwise act to authorize a subsidiary of the issuing public corporation to engage in any business combination with respect to, proposed by or on behalf of or pursuant to any agreement, arrangement or understanding, whether or not in writing, with an interested shareholder of the issuing public corporation or any affiliate or associate of the interested shareholder other than a business combination meeting all the requirements of this chapter, the articles of the issuing public corporation and the requirements specified in any of the following:
- A business combination approved by the board of the issuing public corporation before the interested shareholder’s share acquisition date, or as to which the acquisition of shares made by the interested shareholder on the interested shareholder’s share acquisition date had been approved by the board of the issuing public corporation before the interested shareholder’s share acquisition date.
- A business combination approved by the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) of the outstanding shares entitled to vote not beneficially owned by the interested shareholder proposing the business combination or any affiliate or associate of the interested shareholder proposing the business combination at a meeting called for that purpose no earlier than three (3) years after the interested shareholder’s share acquisition date.
-
A business combination, with respect to which the consummation date is no earlier than three (3) years after the interested shareholder’s share acquisition date, that meets all the following conditions:
-
The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding common shares of the issuing public corporation in the business combination is at least equal to the higher of the following:
- The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers’ fees, paid by the interested shareholder, at a time when the interested shareholder was the beneficial owner, directly or indirectly, of five percent (5%) or more of the outstanding shares entitled to vote of the issuing public corporation, for any common shares of the same class or series acquired by it within the three (3) year period immediately before the announcement date with respect to the business combination or within the three (3) year period immediately before, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher, plus, in either case, interest compounded annually from the earliest date on which the highest per share acquisition price was paid through the consummation date at the rate for one (1) year United States treasury obligations from time to time in effect less the aggregate amount of cash dividends paid, and the market value of any dividends paid other than in cash, per common share since the earliest date, up to the amount of the interest; and 2. The market value per common share on the announcement date with respect to the business combination or on the interested shareholder’s share acquisition date, whichever is higher, plus interest compounded annually from that date through the consummation date at the rate for one (1) year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid and the market value of any dividends paid other than in cash, per common share since that date, up to the amount of the interest.
-
The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding shares of any class or series of shares, other than common shares, of the issuing public corporation in the business combination is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired any shares of the class or series:
- The highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers’ fees, paid by the interested shareholder, at a time when the interested shareholder was the beneficial owner, directly or indirectly, of five percent (5%) or more of the outstanding shares entitled to vote of the issuing public corporation, for any shares of the class or series acquired by it within the three (3) year period immediately before the announcement date with respect to the business combination or within the three (3) year period immediately before, or in, the transaction in which the interested shareholder became an interested shareholder, whichever is higher, plus, in either case, interest compounded annually from the earliest date on which the highest per share acquisition price was paid through the consummation date at the rate for one (1) year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid and the market value of any dividends paid other than in cash, per share of the class or series since such earliest date, up to the amount of the interest;
- The highest preferential amount per share to which the holders of shares of the class or series are entitled in the event of any voluntary liquidation, dissolution or winding up of the issuing public corporation, plus the aggregate amount of any unpaid dividends declared or due as to which the holders are entitled before payment of dividends on some other class or series of shares unless the aggregate amount of the dividends is included in the preferential amount; and
- The market value per share of the class or series on the announcement date with respect to the business combination or on the interested shareholder’s share acquisition date, whichever is higher, plus interest compounded annually from that date through the consummation date at the rate for one (1) year United States treasury obligations from time to time in effect less the aggregate amount of any cash dividends paid and the market value of any dividends paid other than in cash, per share of the class or series since that date, up to the amount of the interest.
- The consideration to be received by holders of a particular class or series of outstanding shares, including common shares, of the issuing public corporation in the business combination is in cash or in the same form as the interested shareholder has used to acquire the largest number of shares of the class or series of shares previously acquired by it and the consideration is distributed promptly.
-
The holders of all outstanding shares of the issuing public corporation not beneficially owned by the interested shareholder immediately before the consummation date with respect to the business combination are entitled to receive in the business combination cash or other consideration for the shares in compliance with paragraphs (a), (b) and (c) of this subsection.
(e) After the interested shareholder’s share acquisition date and before the consummation date with respect to the business combination, the interested shareholder has not become the beneficial owner of any additional shares entitled to vote of the issuing public corporation except:
- As part of the transaction that resulted in the interested shareholder becoming an interested shareholder;
- By virtue of proportionate share splits, share dividends or other distributions of shares in respect of shares not constituting a business combination;
- Through a business combination meeting all of the conditions of section 30-1704, Idaho Code, and this subsection; and
- Through purchase by the interested shareholder at any price that, if the price had been paid in an otherwise permissible business combination the announcement date and consummation date of which were the date of the purchase, would have satisfied the requirements of paragraphs (a), (b) and (c) of this subsection.
-
The aggregate amount of the cash and the market value as of the consummation date of consideration other than cash to be received per share by holders of outstanding common shares of the issuing public corporation in the business combination is at least equal to the higher of the following:
History.
I.C.,§ 30-1705, as added by 1988, ch. 84, § 3, p. 147; am. 2014, ch. 97, § 18, p. 265.
STATUTORY NOTES
Amendments.
The 2014 amendment, by ch. 97, corrected typographical errors and made minor stylistic changes throughout the section.
Compiler’s Notes.
The words enclosed in parentheses so appeared in the law as enacted.
§ 30-1706. Scope.
- Nothing contained in this chapter is intended or shall be construed in any way to limit, modify or restrict an issuing public corporation’s authority to take any action which the directors may appropriately determine to be in furtherance of the protection of the interests of the corporation and its shareholders, including without limitation the authority to adopt or enter into plans, arrangements or instruments that deny rights, privileges, power or authority to the holder or holders of at least a specified number of shares or percentage of share ownership or voting power in certain circumstances.
- The requirements imposed by this chapter are to be in addition to, and not in lieu of, requirements imposed on a transaction by any provision in the articles or the bylaws of the issuing public corporation, or otherwise.
History.
I.C.,§ 30-1706, as added by 1988, ch. 84, § 3, p. 147.
§ 30-1707. Jurisdiction.
- If the jurisdiction under the laws of which the issuing public corporation is organized has adopted or adopts any law comparable to this chapter which imposes special requirements applicable to any business combination, and that law contains provisions which are expressly inconsistent with, or cannot practically be applied in a manner consistent with, the provisions of this chapter as applicable to the issuing public corporation, the provisions of this chapter shall be inapplicable to the issuing public corporation to the extent necessary to resolve such inconsistency.
- If any jurisdiction other than the jurisdiction under the laws of which the issuing public corporation is organized has adopted or adopts any law comparable to the provisions of this chapter which imposes special requirements applicable to any business combination, and that law contains provisions which are expressly inconsistent with, or cannot practically be applied in a manner consistent with, the provisions of this chapter as applicable to the issuing public corporation, the provisions of this chapter shall be inapplicable to the issuing public corporation to the extent that (i) a greater percentage of shareholders of the issuing public corporation reside in that jurisdiction than in this state, computed in accordance with provisions of subsection 30-1701(14) and then, only to the extent necessary to resolve such inconsistency or (ii) the director of the department of finance determines within three (3) business days from the date on which this chapter’s provisions are first applicable to a business combination that the other jurisdiction’s law adequately provides for the protection of Idaho shareholders.
History.
I.C.,§ 30-1707, as added by 1988, ch. 84, § 3, p. 147.
STATUTORY NOTES
Cross References.
Director of department of finance,§ 67-2701.
§ 30-1708. Severability.
The provisions of this chapter are hereby declared to be severable and if any provision of this act or the application of such provision to any person or circumstance is declared invalid for any reason, such declaration shall not affect the validity of remaining portions of this act that can give effect without the invalid provision or application. The invalidity of any provision of this act shall not affect the remaining provisions of this act.
History.
I.C.,§ 30-1708, as added by 1988, ch. 84, § 3, p. 147.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” refers to S.L. 1988, Chapter 84, which is compiled as§§ 30-1601 to 30-1614 and 30-1701 to 30-1710.
§ 30-1709. Election.
Any publicly held corporation which meets the requirements specified in section 30-1701(11)(b)(i), (ii) and (iii), Idaho Code, may, by action of its board of directors, adopt an amendment to its bylaws electing to be subject to this chapter, provided such corporation has one thousand (1,000) or more shareholders of record in this state, and thereby shall be subject to the provisions of this chapter as an issuing public corporation.
History.
I.C.,§ 30-1709, as added by 1988, ch. 84, § 3, p. 147.
§ 30-1710. Short title.
This chapter shall be known and may be cited as the “Business Combination Law.”
History.
I.C.,§ 30-1710, as added by 1988, ch. 84, § 3, p. 147.
STATUTORY NOTES
Effective Dates.
Section 4 of S.L. 1988, ch. 84 declared an emergency. Approved March 22, 1988.
Chapter 18 IDAHO ENTITY TRANSACTIONS ACT
Part 1. General Provisions
Sec.
Part 2. Merger
Part 3. Interest Exchange
Part 4. Conversion
Part 5. Domestication
Part 6. (Reserved)
Part 7. Miscellaneous Provisions
Part 1 General Provisions
§ 30-18-101 — 30-18-110. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015. For present comparable provisions, see§ 30-22-101 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 18, Part 1, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
Part 2 Merger
§ 30-18-201 — 30-18-206. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015. For present comparable provisions, see§ 30-22-201 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 18, Part 2, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
Part 3 Interest Exchange
§ 30-18-301 — 30-18-306. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015. For present comparable provisions, see§ 30-22-301 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 18, Part 3, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
Part 4 Conversion
§ 30-18-401 — 30-18-406. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015. For present comparable provisions, see§ 30-22-401 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 18, Part 4, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
Part 5 Domestication
§ 30-18-501 — 30-18-506. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015. For present comparable provisions, see§ 30-22-501 et seq.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 18, Part 5, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
Part 6 (Reserved)
Part 7 Miscellaneous Provisions
§ 30-18-701 — 30-18-713. [Repealed.]
Repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
STATUTORY NOTES
Compiler’s Notes.
Title 30, Chapter 18, Part 7, which comprised the following sections, was repealed by S.L. 2015, ch. 243, § 3, effective July 1, 2015.
Chapter 19 SUCCESSOR CORPORATION ASBESTOS-RELATED LIABILITY FAIRNESS ACT
Sec.
§ 30-1901. Short title.
This act shall be known and may be cited as the “Successor Corporation Asbestos-Related Liability Fairness Act.”
History.
I.C.,§ 30-1901, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” refers to S.L. 2012, Chapter 193, which is codified as§§ 30-1901 to 30-1907.
S.L. 2012, Chapter 193 became law without the signature of the governor.
§ 30-1902. Definitions.
As used in this section, the following terms shall mean:
-
“Asbestos claim” means any claim, wherever or whenever made, for damages, losses, indemnification, contribution or other relief arising out of, based on, or in any way related to asbestos, including:
-
The health effects of exposure to asbestos, including a claim for:
- Personal injury or death;
- Mental or emotional injury;
- Risk of disease or other injury; or
- The costs of medical monitoring or surveillance;
- Any claim made by, or on behalf of, any person exposed to asbestos, or a representative, spouse, parent, child or other relative of the person; and
- Any claim for damage or loss caused by the installation, presence, or removal of asbestos.
-
The health effects of exposure to asbestos, including a claim for:
- “Corporation” means a corporation for profit, including a domestic corporation organized under the laws of this state or a foreign corporation organized under laws other than the laws of this state.
- “Successor” means a corporation that assumes or incurs or has assumed or incurred successor asbestos-related liabilities that is a successor and became a successor before January 1, 1972, or is any of that successor corporation’s successors.
- “Successor asbestos-related liabilities” means any liabilities, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, that are related in any way to asbestos claims and were assumed or incurred by a corporation as a result of or in connection with a merger or consolidation, or the plan of merger or consolidation related to the merger or consolidation with or into another corporation, or that are related in any way to asbestos claims based on the exercise of control or the ownership of stock of the corporation before the merger or consolidation. The term includes liabilities that, after the time of the merger or consolidation for which the fair market value of total gross assets is determined pursuant to section 30-1905, Idaho Code, were or are paid or otherwise discharged, or committed to be paid or otherwise discharged, by or on behalf of the corporation, or by a successor of the corporation, or by or on behalf of a transferor, in connection with settlements, judgments, or other discharges in this state or another jurisdiction.
- “Transferor” means a corporation from which the successor asbestos-related liabilities are or were assumed or incurred.
History.
I.C.,§ 30-1902, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
S.L. 2012, Chapter 193 became law without the signature of the governor.
§ 30-1903. Applicability.
- The limitations in section 30-1904, Idaho Code, shall apply to any successor corporation.
-
The limitations of section 30-1904, Idaho Code, shall not apply to:
- Worker’s compensation benefits paid by, or on behalf of, an employer to an employee under the provisions of title 72, Idaho Code, or a comparable worker’s compensation law of another jurisdiction;
- Any claim against a corporation that does not constitute a successor asbestos-related liability;
- Any obligation under the national labor relations act, 29 U.S.C. section 151 et seq., as amended, or under any collective bargaining agreement; or
- A successor that, after a merger or consolidation, continued in the business of mining asbestos or in the business of selling or distributing asbestos fibers or in the business of manufacturing, distributing, removing, or installing asbestos-containing products that were the same as those products previously manufactured, distributed, removed, or installed by the transferor.
History.
I.C.,§ 30-1903, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
S.L. 2012, Chapter 193 became law without the signature of the governor.
§ 30-1904. Limitations on successor asbestos-related liabilities.
- Except as further limited in subsection (2) of this section, the cumulative successor asbestos-related liabilities of a successor corporation are limited to the fair market value of the total gross assets of the transferor determined as of the time of the merger or consolidation. The successor corporation does not have responsibility for successor asbestos-related liabilities in excess of this limitation.
- If the transferor has assumed or incurred successor asbestos-related liabilities in connection with a prior merger or consolidation with a prior transferor, then the fair market value of the total assets of the prior transferor determined as of the time of the earlier merger or consolidation shall be substituted for the limitation set forth in subsection (1) of this section for purposes of determining the limitation of liability of a successor corporation.
History.
I.C.,§ 30-1904, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
S.L. 2012, Chapter 193 became law without the signature of the governor.
§ 30-1905. Establishing fair market value of total gross assets.
-
A successor corporation may establish the fair market value of total gross assets for the purpose of the limitations under section 30-1904, Idaho Code, through any method reasonable under the circumstances, including:
- By reference to the going concern value of the assets or to the purchase price attributable to or paid for the assets in an arms-length transaction; or
- In the absence of other readily available information from which the fair market value can be determined, by reference to the value of the assets recorded on a balance sheet.
- Total gross assets include intangible assets.
- To the extent total gross assets include any liability insurance that was issued to the transferor whose assets are being valued for purposes of this section, the applicability, terms, conditions and limits of such insurance shall not be affected by this statute, nor shall this statute otherwise affect the rights and obligations of an insurer, transferor or successor under any insurance contract and/or any related agreements, including, without limitation, preenactment settlements resolving coverage-related disputes, and the rights of an insurer to seek payment for applicable deductibles, retrospective premiums or self-insured retentions or to seek contribution from a successor for uninsured or self-insured periods or periods where insurance is uncollectible or otherwise unavailable. Without limiting the foregoing, to the extent total gross assets include any such liability insurance, a settlement of a dispute concerning any such liability insurance coverage entered into by a transferor or successor with the insurers of the transferor before the effective date of this act shall be determinative of the total coverage of such liability insurance to be included in the calculation of the transferor’s total gross assets.
History.
I.C.,§ 30-1905, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
The phrase “the effective date of this act” near the end of subsection (3) refers to the effective date of S.L. 2012, Chapter 193, which was effective July 1, 2012.
S.L. 2012, Chapter 193 became law without the signature of the governor.
§ 30-1906. Adjustment.
-
Except as provided in subsections (2) through (4) of this section, the fair market value of total gross assets at the time of the merger or consolidation shall increase annually at a rate equal to the sum of:
- The prime rate as listed in the first edition of the Wall Street Journal published for each calendar year since the merger or consolidation, unless the prime rate is not published in that edition of the Wall Street Journal, in which case any reasonable determination of the prime rate on the first day of the year may be used; and
- One percent (1%).
- The rate enumerated in subsection (1) of this section shall not be compounded.
- The adjustment of the fair market value of total gross assets shall continue as provided in subsection (1) of this section until the date the adjusted value is first exceeded by the cumulative amounts of successor asbestos-related liabilities paid or committed to be paid by, or on behalf of, the successor corporation or a predecessor or by, or on behalf of, a transferor after the time of the merger or consolidation for which the fair market value of total gross assets is determined.
- No adjustment of the fair market value of total gross assets shall be applied to any liability insurance that may be included in the definition of total gross assets by subsection (3) of section 30-1905, Idaho Code.
History.
I.C.,§ 30-1906, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
S.L. 2012, Chapter 193 became law without the signature of the governor.
§ 30-1907. Scope of chapter — Application.
- The courts of this state shall construe the provisions of this act liberally with regard to successors.
- This act shall apply to all asbestos claims filed against a successor on or after the effective date of this act and to any pending asbestos claims against a successor in which trial has not commenced as of the effective date of this act, except that any provisions of these sections which would be unconstitutional if applied retroactively shall be applied prospectively.
History.
I.C.,§ 30-1907, as added by 2012, ch. 193, § 1, p. 520.
STATUTORY NOTES
Compiler’s Notes.
The term “this act” refers to S.L. 2012, Chapter 193, which is codified as§§ 30-1901 to 30-1907.
The phrase “the effective date of this act” in subsection (2) refers to the effective date of S.L. 2012, Chapter 193, which was effective July 1, 2012.
S.L. 2012, Chapter 193 became law without the signature of the governor.
Chapter 20 IDAHO BENEFIT CORPORATION ACT
Sec.
§ 30-2001. Application and effect of this chapter.
- This chapter may be known and cited as the “Idaho Benefit Corporation Act.”
- This chapter shall be applicable to all benefit corporations.
- The existence of a provision of this chapter shall not of itself create an implication that a contrary or different rule of law is applicable to a business corporation that is not a benefit corporation. This chapter shall not affect a statute or rule of law that is applicable to a business corporation that is not a benefit corporation.
- Except as otherwise provided in this chapter, the Idaho business corporation act shall be generally applicable to all benefit corporations. A benefit corporation may be subject simultaneously to this chapter and other chapters of this title. The provisions of this chapter shall control over other provisions of this title, including chapters 1 and 13 of this title.
- A provision of the articles of incorporation or bylaws of a benefit corporation may not limit, be inconsistent with or supersede a provision of this chapter.
History.
I.C.,§ 30-2001, as added by 2015, ch. 217, § 1, p. 673.
STATUTORY NOTES
Cross References.
Idaho business corporation act,§ 30-29-101 et seq.
Compiler’s Notes.
Chapters 1 and 13 of title 30, referred to at the end of subsection (4) were repealed by S.L. 2015, ch. 243, § 1, and S.L. 2015, ch. 251, § 2, effective July 1, 2015. For present comparable provisions, see§ 30-21-101 et seq. and 30-29-101 et seq.
§ 30-2002. Definitions.
In this chapter:
- “Benefit corporation” means a business corporation that has elected to become subject to this chapter and the status of which as a benefit corporation has not been terminated.
- “Benefit director” means the director designated as the benefit director of a benefit corporation under section 30-2008, Idaho Code.
- “Benefit enforcement proceeding” means any claim, action or proceeding for failure of a benefit corporation to pursue or create general public benefit or a specific public benefit purpose as set forth in its articles, or violation of any obligation, duty or standard of conduct under this chapter.
- “Benefit officer” means the individual designated as the benefit officer of a benefit corporation under section 30-2010, Idaho Code.
- “General public benefit” means a material positive impact on society and the environment, taken as a whole, as assessed under a third-party standard, resulting from the business and operations of a benefit corporation.
-
“Independent” means having no material relationship with a benefit corporation or a subsidiary of the benefit corporation; provided however, that serving as a benefit director or benefit officer does not by itself preclude a person from being independent. A material relationship between an individual and a benefit corporation or any of its subsidiaries will be conclusively presumed to exist if any of the following apply:
- The individual is or has been within the last three (3) years an employee other than a benefit officer of the benefit corporation or a subsidiary.
- An immediate family member of the individual is or has been within the last three (3) years an executive officer other than a benefit officer of the benefit corporation or a subsidiary.
-
There is beneficial or record ownership of five percent (5%) or more of the outstanding shares of the benefit corporation, calculated as if all outstanding rights to acquire equity interests in the benefit corporation had been exercised, by:
- The individual; or
-
An entity:
- Of which the individual is a director, an officer or a manager; or
- In which the individual owns beneficially or of record five percent (5%) or more of the outstanding equity interests, calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.
-
“Minimum status vote” means:
-
In the case of a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions:
- The shareholders of every class or series shall be entitled to vote as a separate voting group on the corporate action regardless of a limitation stated in the articles of incorporation or bylaws on the voting rights of any class or series.
- The corporate action must be approved by vote of the shareholders of each class or series entitled to cast at least two-thirds (2/3) of the votes that all shareholders of the class or series are entitled to cast on the action.
- The action must be approved by vote or consent of the holders entitled to cast at least two-thirds (2/3) of the votes or consents that all of those holders are entitled to cast on the action.
- In the case of a domestic entity other than a business corporation, in addition to any other required approval, vote or consent, the satisfaction of the following conditions: (i) The holders of every class or series of equity interest in the entity that are entitled to receive a distribution of any kind from the entity shall be entitled to vote on or consent to the action regardless of any otherwise applicable limitation on the voting or consent rights of any class or series.
-
In the case of a business corporation, in addition to any other required approval or vote, the satisfaction of the following conditions:
- “Publicly traded corporation” means a business corporation that has shares listed on a national securities exchange or traded in a market maintained by one (1) or more members of a national securities association.
-
“Specific public benefit” includes:
- Providing low-income or underserved individuals or communities with beneficial products or services;
- Promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business;
- Protecting or restoring the environment;
- Improving human health;
- Promoting the arts, sciences or advancement of knowledge;
- Increasing the flow of capital to entities with a purpose to benefit society or the environment; or
- Conferring any other particular benefit on society or the environment.
- “Subsidiary” means, in relation to a person, an entity in which the person owns beneficially or of record fifty percent (50%) or more of the outstanding equity interests, calculated as if all outstanding rights to acquire equity interests in the entity had been exercised.
-
“Third-party standard” means a recognized standard for defining, reporting and assessing corporate social and environmental performance that is:
- Comprehensive in that it assesses the effect of the business and its operations on the interests listed in section 30-2007(1), Idaho Code;
- Developed by an entity that is not controlled by the benefit corporation;
- Credible in that it is developed by an entity that both has access to necessary expertise to assess overall corporate social and environmental performance, and uses a balanced multi-stakeholder approach to develop the standard, including a reasonable public comment period; and
-
Transparent in that information about the standard is publicly available, including information about:
- The criteria and weighting of such criteria used in the standard;
- The identity of those who developed or revised the standard; and
- An accounting of the revenue and sources of financial support for the entity that developed the standard, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest.
History.
I.C.,§ 30-2002, as added by 2015, ch. 217, § 1, p. 673.
§ 30-2003. Incorporation.
A benefit corporation shall be incorporated in accordance with part 2, chapter 29, title 30, Idaho Code, but its articles of incorporation must also state that it is a benefit corporation.
History.
I.C.,§ 30-2003, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 6, p. 98.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory reference.
§ 30-2004. Election of benefit corporation status.
- An existing business corporation may become a benefit corporation under this chapter by amending its articles of incorporation so that they contain a statement that the corporation is a benefit corporation. In order to be effective, the amendment must be adopted by at least the minimum status vote.
-
- Except as provided in paragraph (b) of this subsection, if a domestic entity that is not a benefit corporation is a party to a merger or conversion or the exchanging entity in an interest exchange and the surviving or converted entity in the merger, conversion or interest exchange is to be a benefit corporation, the plan of merger, conversion or interest exchange must be approved by the domestic entity by at least the minimum status vote. (2)(a) Except as provided in paragraph (b) of this subsection, if a domestic entity that is not a benefit corporation is a party to a merger or conversion or the exchanging entity in an interest exchange and the surviving or converted entity in the merger, conversion or interest exchange is to be a benefit corporation, the plan of merger, conversion or interest exchange must be approved by the domestic entity by at least the minimum status vote.
- Paragraph (a) of this subsection does not apply in the case of a corporation that is a party to a merger if the shareholders of the corporation are not entitled to vote on the merger pursuant to section 30-29-1105, Idaho Code.
History.
I.C.,§ 30-2004, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 7, p. 98.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory reference in paragraph (2)(b).
§ 30-2005. Termination of status.
- A benefit corporation may terminate its status as such and cease to be subject to this chapter by amending its articles of incorporation to delete the provision adopting benefit corporation status. In order to be effective, the amendment must be adopted by at least the minimum status vote.
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- Except as provided in paragraph (b) of this subsection, if a plan of merger, conversion or share exchange would have the effect of terminating the status of a business corporation as a benefit corporation, the plan must be adopted by at least the minimum status vote in order to be effective. (2)(a) Except as provided in paragraph (b) of this subsection, if a plan of merger, conversion or share exchange would have the effect of terminating the status of a business corporation as a benefit corporation, the plan must be adopted by at least the minimum status vote in order to be effective.
- Paragraph (a) of this subsection does not apply in the case of a corporation that is a party to a merger if the shareholders of the corporation are not entitled to vote on the merger pursuant to section 30-29-1105, Idaho Code.
- Any sale, lease, exchange or other disposition of all or substantially all of the assets of a benefit corporation, unless the transaction is in the usual and regular course of business, shall not be effective unless the transaction is approved by at least the minimum status vote.
History.
I.C.,§ 30-2005, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 8, p. 98.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory reference in paragraph (2)(b).
§ 30-2006. Corporate purposes.
- A benefit corporation shall have a purpose of creating general public benefit. This purpose is in addition to its purpose under section 30-29-301, Idaho Code.
- The articles of incorporation of a benefit corporation may identify one (1) or more specific public benefits that it is the purpose of the benefit corporation to create in addition to its purposes under section 30-29-301, Idaho Code, and subsection (1) of this section. The identification of a specific public benefit under this subsection does not limit the purpose of a benefit corporation to create general public benefit under subsection (1) of this subsection.
- The creation of general public benefit and specific public benefits under subsections (1) and (2) of this section is in the best interests of the benefit corporation.
- A benefit corporation may amend its articles of incorporation to add, amend or delete the identification of a specific public benefit that it is the purpose of the benefit corporation to create. In order to be effective, the amendment must be adopted by at least the minimum status vote.
- A professional corporation that is a benefit corporation does not violate section 30-29-1303(b), Idaho Code, by having the purpose to create general public benefit or a specific public benefit.
History.
I.C.,§ 30-2006, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 9, p. 98; am. 2019, ch. 90, § 172, p. 220.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory references in subsections (1), (2), and (5).
The 2019 amendment, by ch. 90, substituted “section 30-29-1303(b), Idaho Code” for “section 30-29-1303(2), Idaho Code” near the middle of subsection (5).
§ 30-2007. Standard of conduct for directors.
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In discharging the duties of their respective positions and in considering the best interests of the benefit corporation, the board of directors, committees of the board and individual directors of a benefit corporation shall consider the effects of any action or inaction on:
- The shareholders of the benefit corporation;
- The employees of the benefit corporation;
- The subsidiaries and suppliers of the benefit corporation;
- The interests of customers as beneficiaries of the general public benefit or specific public benefit purposes of the benefit corporation;
- Community and social factors, including those of each community in which offices or facilities of the benefit corporation, its subsidiaries, or its suppliers are located;
- The local and global environment;
- The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by the continued independence of the benefit corporation; and
- The ability of the benefit corporation to accomplish its general public benefit purpose and any specific public benefit purpose.
- In discharging the duties of their respective positions and in considering the best interests of the benefit corporation, the board of directors, committees of the board and individual directors of a benefit corporation may also consider any other pertinent factors or the interests of any group that they deem appropriate.
- The board of directors, committees of the board and individual directors of a benefit corporation need not give priority to a particular interest or factor referred to in subsection (1) or (2) of this section over any other interest or factor unless the benefit corporation has stated in its articles of incorporation its intention to give priority to certain interests or factors related to its accomplishment of its general public benefit or of a specific public benefit purpose identified in its articles of incorporation.
- The consideration of interests and factors in the manner required by this section does not constitute a violation of section 30-29-830, Idaho Code.
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Except as provided in the articles of incorporation, a director is not personally liable for monetary damages for:
- Any action or inaction in the course of performing the duties of a director under subsection (1) of this section if the director performed the duties of office in compliance with section 30-29-830, Idaho Code, and this section; or
- Failure of the benefit corporation to pursue or create general public benefit or specific public benefit.
- A director does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.
History.
I.C.,§ 30-2007, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 10, p. 98.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory references in subsection (4) and paragraph (5)(a).
§ 30-2008. Benefit director.
- The board of directors of a benefit corporation that is a publicly traded corporation shall, and the board of any other benefit corporation may, include a director who shall be designated the benefit director, and shall have, in addition to the powers, duties, rights and immunities of the other directors of the benefit corporation, the powers, duties, rights and immunities provided in this chapter.
- The benefit director shall be elected and may be removed in the manner provided in sections 30-29-803 through 30-29-809, Idaho Code. Except as provided in subsection (6) of this section, the benefit director shall be an individual who is independent. The benefit director may serve as the benefit officer at the same time as serving as the benefit director. The articles of incorporation or bylaws of a benefit corporation may prescribe additional qualifications of the benefit director not inconsistent with this subsection.
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The benefit director shall prepare and the benefit corporation shall include in the annual benefit report to shareholders required by section 30-2012, Idaho Code, the opinion of the benefit director on the following:
- Whether the benefit corporation acted in accordance with its general public benefit purpose and any specific public benefit purpose in all material respects during the period covered by the report;
- Whether the directors and officers complied with sections 30-2007 and 30-2009, Idaho Code, respectively; and
- If, in the opinion of the benefit director, the benefit corporation or its directors or officers failed to act or comply in the manner described in paragraphs (a) and (b) of this subsection, a description of the ways in which the benefit corporation or its directors or officers failed to act or comply.
- The act or inaction of an individual in the capacity of a benefit director shall constitute for all purposes an act or inaction of that individual in the capacity of a director of the benefit corporation.
- Regardless of whether the articles of incorporation or bylaws of a benefit corporation include a provision eliminating or limiting the personal liability of directors authorized by section 30-29-202, Idaho Code, a benefit director shall not be personally liable for an act or omission in the capacity of a benefit director unless the act or omission constitutes self-dealing, willful misconduct or a knowing violation of law.
- The benefit director of a professional corporation organized under chapter 13, title 30, Idaho Code, does not need to be independent.
History.
I.C.,§ 30-2008, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 11, p. 98.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory references in subsections (2) and (5).
Compiler’s Notes.
Chapter 13, title 30, Idaho Code, referred to in subsection (6) was repealed by S.L. 2015, chapter 251, effective July 1, 2015.
§ 30-2009. Standard of conduct for officers.
- Each officer of a benefit corporation shall consider the interests and factors as provided in section 30-2007, Idaho Code, if the officer has discretion to act with respect to a matter, and it reasonably appears to the officer that the matter may have a material effect on the creation by the benefit corporation of general public benefit or a specific public benefit identified in the articles of incorporation.
- The consideration of interests and factors as provided in subsection (1) of this section shall not constitute a violation of sections 30-29-841 and 30-29-842, Idaho Code.
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Except as provided in the articles of incorporation or bylaws, an officer is not personally liable for monetary damages for:
- An action or inaction as an officer in the course of performing the duties of an officer under subsection (1) of this section if the officer performed the duties of the position in compliance with sections 30-29-841 and 30-29-842, Idaho Code, and this section; or
- Failure of the benefit corporation to pursue or create general public benefit or specific public benefit.
- An officer does not have a duty to a person that is a beneficiary of the general public benefit purpose or a specific public benefit purpose of a benefit corporation arising from the status of the person as a beneficiary.
History.
I.C.,§ 30-2009, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 47, § 12, p. 98.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 47, updated the statutory references in subsection (2) and paragraph (3)(a).
§ 30-2010. Benefit officer.
A benefit corporation may have an officer designated the benefit officer. The benefit officer shall have:
- The powers and duties relating to the purpose of the corporation to create general public benefit or specific public benefit provided by the bylaws or, absent controlling provisions by the bylaws, by resolutions or orders of the board of directors; and
- The duty to prepare the benefit report required in section 30-2012, Idaho Code.
History.
I.C.,§ 30-2010, as added by 2015, ch. 217, § 1, p. 673.
§ 30-2011. Right of action.
- Except in a benefit enforcement proceeding, no person may bring an action or assert a claim against a benefit corporation or its directors or officers with respect to the corporation’s failure to pursue or create general public benefit or a specific public benefit set forth in its articles of incorporation, or the corporation’s violation of an obligation, duty or standard of conduct under this chapter.
- A benefit corporation shall not be liable for monetary damages under this chapter for any failure of the benefit corporation to pursue or create general public benefit or a specific public benefit.
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A benefit enforcement proceeding may be commenced or maintained directly by the benefit corporation, or derivatively by:
- A person or group of persons that owned beneficially or of record at least two percent (2%) of the total number of shares of a class or series outstanding at the time of the act or omission complained of;
- A director;
- A person or group of persons that owned beneficially or of record five percent (5%) or more of the outstanding equity interests in an entity of which the benefit corporation is a subsidiary at the time of the act or omission complained of; or
- Other persons as specified in the articles of incorporation or bylaws of the benefit corporation.
- For purposes of this section, a person is the beneficial owner of shares or equity interests if the shares or equity interests are held in a voting trust or by a nominee on behalf of the beneficial owner.
History.
I.C.,§ 30-2011, as added by 2015, ch. 217, § 1, p. 673.
§ 30-2012. Preparation of annual benefit report.
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A benefit corporation shall prepare an annual benefit report including the following:
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A narrative description of:
- The ways in which the benefit corporation pursued general public benefit during the year and the extent to which general public benefit was created;
- The ways in which the benefit corporation pursued a specific public benefit that the articles of incorporation describe as the purpose of the benefit corporation to create, and the extent to which the specific public benefit was created;
- Any circumstances that hindered the creation by the benefit corporation of either general public benefit or specific public benefit; and
- The process and rationale for selecting or changing the third-party standard used to prepare the benefit report.
- An assessment of the overall social and environmental performance of the benefit corporation under a third-party standard applied consistently with any application of that standard in prior benefit reports, or accompanied by an explanation of the reasons for any inconsistent application, or the change to that standard from the one used in the immediate prior report.
- The name of the benefit director and the benefit officer, if any, and the address to which correspondence to each of them may be directed.
- The compensation paid by the benefit corporation during the year to each director in the capacity of a director.
- The opinion of the benefit director described in section 30-2008(3), Idaho Code.
- A statement of any connection between the organization that established the third-party standard, or its directors, officers or any holder of five percent (5%) or more of the governance interests in the organization, and the benefit corporation or its directors, officers or any holder of five percent (5%) or more of the outstanding shares of the benefit corporation, including any financial or governance relationship that might materially affect the credibility of the use of the third-party standard.
- If the benefit corporation has dispensed with or restricted the discretion or powers of the board of directors, a description of the persons who exercise the powers, duties, and rights and who have the immunities of the board of directors, and the benefit director.
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A narrative description of:
- If, during the year covered by a benefit report, a benefit director resigned from or refused to stand for reelection to the position of benefit director, or was removed from the position of benefit director, and the benefit director furnished the benefit corporation with any written correspondence concerning the circumstances surrounding the resignation, refusal or removal, the benefit report shall include that correspondence as an exhibit.
- Neither the benefit report nor the assessment of the performance of the benefit corporation in the benefit report required in subsection (1) of this section needs to be audited or certified by a third party.
History.
I.C.,§ 30-2012, as added by 2015, ch. 217, § 1, p. 673.
§ 30-2013. Availability of annual benefit report.
- A benefit corporation shall send its annual benefit report to each shareholder either one hundred twenty (120) days following the end of the fiscal year of the benefit corporation, or at the same time that the benefit corporation delivers any other annual report to its shareholders, whichever is earlier.
- A benefit corporation shall post all of its benefit reports on the public portion of its website, if any; but the compensation paid to directors and financial or proprietary information included in the benefit reports may be omitted from the benefit reports as posted.
- If a benefit corporation does not have a website, the benefit corporation shall provide a copy of its most recent benefit report, without charge, to any person who requests a copy, provided however, that the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the copy of the benefit report provided.
History.
I.C.,§ 30-2013, as added by 2015, ch. 217, § 1, p. 673; am. 2016, ch. 157, § 1, p. 428.
STATUTORY NOTES
Amendments.
The 2016 amendment, by ch. 157, deleted former subsection (4), which read: “Concurrently with the delivery of the benefit report to shareholders under subsection (1) of this section, the benefit corporation shall deliver a copy of the benefit report to the secretary of state for filing, provided however, that the compensation paid to directors and financial or proprietary information included in the benefit report may be omitted from the benefit report as delivered to the secretary of state. The secretary of state shall charge a fee for filing a benefit report, such fee to be set in a rule promulgated by the secretary”.
Chapter 21 IDAHO UNIFORM BUSINESS ORGANIZATIONS CODE
Part 1. Preliminary Provisions
Sec.
Part 2. Filing
Part 3. Name of Entity
Part 4. Registered Agent of Entity
Part 5. Foreign Entities
Part 6. Administrative Dissolution
Part 7. Miscellaneous Provisions
Part 8. Assumed Business Names
Part 9. Professional Entities
Part 1 Preliminary Provisions
§ 30-21-101. Short titles.
- This act may be cited as the “Idaho Uniform Business Organizations Code.”
- This chapter [part] may be cited as the “Idaho Uniform Business Organizations Code — Preliminary Provisions.”
- Part 4 of this chapter may be cited as the “Idaho Registered Agent of Entity Act.”
- Part 8 of this chapter may be cited as the “Idaho Assumed Business Names Act.”
History.
I.C.,§ 30-21-101, as added by 2015, ch. 243, § 7, p. 758.
STATUTORY NOTES
Meaning of “this act”.
Meaning of “this act”. The term “this act” in this section is defined in§ 30-21-102(1) as being the Idaho uniform business organizations code. As enacted by S.L. 2015, Chapter 243, chapter 21, title 30, Idaho Code, carries the heading “Idaho Uniform Business Organizations Code.” But, as drafted by the Uniform Law Commission (ULC), also known as the National Conference of Commissioners on Uniform State Laws (NCCUSL), the uniform business organizations code is intended to be much more than what is codified in chapter 21, title 30, Idaho Code.
As explained in the Prefatory Note below, the vision of ULC is that the uniform business organizations code should include all of what is codified in chapters 21 through 27, Idaho Code, and chapter 21 should be headed “General Provisions,” as it contains definitions and provisions applicable to chapters 22 through 27, Idaho Code. (Chapters 29 and 30, Idaho Code, were amended and renumbered from former chapters 1 and 3, Idaho Code, by S.L. 2015, Chapter 243, but those chapters have not been addressed by ULC, so the applicability of the provisions of chapter 21, Idaho Code, to those chapters should be closely scrutinized.)
So, while “this act” is defined in§ 30-21-102(1) as being the contents of chapter 21, title 30, Idaho code, and, without that definition, would have been defined as all sections enacted or amended by S.L. 2015, Chapter 243, chapters 21 through 30, title 30, Idaho Code, the operative meaning of the term is more and less than either of those alternatives. Instances of “this act” in chapters 21 through 27, title 30, Idaho Code, will be referenced to this note. Instances of “this act” in chapter 29, Idaho Business Corporation Act, and chapter 30, Idaho Nonprofit Corporation Act, have been interpreted to be references to those individual acts and have been edited to convey that a reference to “this act” should, in fact, be to “this chapter.”
The bracketed insertion in subsection (b) was added by the compiler to correct the enacting legislation. The official comments in chapters 21 to 30 of title 30 are copyrighted by the National Conference of Commissioners of Uniform State Laws and the American Bar Association and are reproduced by permission.
Official Comment
PREFATORY NOTE
Since the early 1990s, the Uniform Law Conference (ULC) has promulgated, or in several cases revised, eight unincorporated business entity acts:
Revised Uniform Partnership Act (1997)
Revised Uniform Limited Partnership Act (2001)
Revised Uniform Limited Liability Company Act (2006)
Model Regist