SECURITIES LAW 551 .024247

CHAPTER 551

WISCONSIN UNIFORM SECURITIES LAW

SUBCHAPTER I 551,42 Market manipulation .TITLE AND DEFINITI ONS 551 .43 Broker-dealer activities .,

551.01 Short title 551 .44 Advisory activities .551.02 Definitions. SUBCHAPTER V

SUBCHAPTER II GENERAL PROVISIONSREGISTRATION OF SECURITIES a

directly or indirectly for soliciting any person inthis state . .

(3) "Broker-dealer" means any person en-gaged in the business of effecting transactions insecurities for the accountt of others or forr theperson's own account . "Broker-dealer" does notinclude :

(a) An agent;(b) An.issuei;(c) A bank, savings institution or trust com-

pany, when effecting transactions> forr its ownaccount or as agent under s. 551 .31 (5) ;

(d) An executor, administrator, guardian,conservator or pledgee;

(e) A person whose dealings in securities arelimited to transactions exempt by s . 551 .23 (5) ;

(f) A person licensed as a real estate brokerunder ch. 452 and whose transactions in securi-ties are isolated transactions incidentall to thatbusiness;; or

(g) The investment board ; or(h) Other persons not within the intent of this

subsection whom the commissioner by rule ororder designates..

(4) "Commissioner" means the commis-sioner of securities .

(5) "Fraud", "deceit" and "defraud" are notlimited to common law deceit.

(6) "Guaranteed" means guaranteed as topayment of principal, interest, or dividends ..

(7) "Investment adviser" means any personwho; for compensation, engages in thee business

TITLE AND DEFINITIONS

551.01 Short title. This chapter shall beknown and may be citedd as the "WisconsinUniform Securities Law",

551 .02 Definitions. In this chapter, unlessthe context otherwise requires :

(1) "Advertising" means any circular, pro-spectus, advertisement or other, material or anycommunication by radio, television, pictures orsimilar means used in connection with a sale orpurchase or an offer to sell oz purchase anysecurity

(2) "Agent" means any individual other'than a broker-dealer who represents a broker-dealer or issuer, in effecting or attempting toeffect' .transactions in securities.. A partner,officer or director, of abroker-dealer or issuer, ora person occupying a similar status or perform-ing similar functions, is an agent if he or she iswithin this definition, "Agent" does not includean individual who represents an issuer in :

(a) Effecting transactions . in asecurity . ex-empted by s . 551 .22 ;

(b) Effecting transactions exempted by s ..551 .23 ; or

(c) Effecting other transactions if no com-mission or other remuneration is paid or given

551.21 Registration requirement ,'55122 Exempt securities .551 .23 Exempt uansactions551 .24 Esemption.proceedings .,551 .25 Registration by coordination.551 .26 Registration by qualification551 .27 General registration provisions .

,55t28 ' Denial, suspension and revocation of'registrationsSUBCHAPTER III

LICENSING OF BROKER-DEALERS, AGENTS ANDINVESTMENT ADVISERS

551 . 31 r Licensing requirement., _551,32 Licensing procedure .551 .33 Post-licensing provisions . ;551 .34 Denial, suspension and revocation of licenses .

SUBCHAPTER IVFRAUDULENT PRACTICES

551 . 41 Sales and purchases

SUBCHAPTER I

55 1 . .51 A mm~strauon551 ,,52 Fees and expenses..551 ..53 Advertising. .551,54 M isleading fili ngs .551 .55 Unlawful representations.55 1 „56 I nvestigations and subpoenas .551 .57 Injunctions.551,58 Cri minal penalties.55 1 .5 9 Civil liabilities .551 ..60 . M iscellaneous powers of commissioner . .551 .61 Hearings and judicial review. .551 .62 Stay of proceedings,551 .63 Rules, forms and orders, .551 .64 Administrative fil es and opinions..551 .65 Service of process . .55 L66 Scope of chapter.551 .67 `Statutory policy.

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of advising others, either' directly or through in a security for value, but does not includepublications or, writings, as to the value of secur- solicitation by a licensed broker-dealer of tenta-ities or as to thee advisability of investing in, true reservations of securities which shall not bepurchasing or, selling securities, or who, for b inding upon the purchaser until ratified by thecompensation and as a part of a regular busi- purchaser after the securities may legally beness, issues ox- promulgates analyses or reports sold .concerning securities . "Investment adviser" (c) Any security given or delivered with, or asdoes not include : a bonus on account of, any purchase of securities

(a) A bank, savings institution or trust or, any other thing is considered to constitutecompany; part of the subject of the purchase and to have

(b) A lawyer, accountant,, engineer or been offered and sold for value ,teacher whose performance of : these-services is (d) Every sale or, offer of a warrant or right tosolely incidental to the practice, of his oi• her purchase or subscribe to another security of theprofession; sameor- another ' issuer, as well as every sale or

(c) A broker-dealer whose performance of offer of a security which gives the holder athese services is solely incidental to the conduct present or future right or p r ivilege to convertof his or her business as abroker-dealer and who into another security of the same or, anotherreceives no special compensation for them ; . issuer, is considered to include an offer of the

(d) A publisher of any bona fide newspaper, other , 'security ,news magazine or,'business or financial publica- (e) The terms defined in this subsection dolion with a regular and paid circulation or a not include any bona fide pledge or, loan ..publisher of any securities advisory newsletter (12) ' "Securities act of ' 1933", "securitieswith a regular and paid circulation which does ~exchange act of 1934", "investment companynot provide advice to subscribers on their spe- act of 1940", "investment advisers act of 1940"cific investment situation; and "internal revenue code" mean the federal

(e) The investment board ; or statutes of those names as amended on January(f) Other persons not within the intent of this, . 1, 1970, including such later amendments as the

subsection whom the commissioner by rule or, commissioner determines are not inconsistentorder designates ., with the purpose of this chapter ..

(8) "Issuer" means any person who issues or (13) (a) ",Security" means any stock; trea-proposes 'fo issue` any security and any promoter Bury stock ; note ; ' bond; debenture; evidence ofwho acts for- an issuer to be formed, except: indebtedness; share of beneficial interest in a

(a) With respect to certi ficates of deposit or business trust ; certificate of interest or partici-trust certificates, "issuer" means the person patron in any 'profit sharing agreement; collat=performing the acts and assuming the duties of ex-al trust certificate; preorganization subscrip-depositor, manager or, trustee pursuant to the lion; transferable share; investment contract ;provisions of the trust or,otlier, instrument under commodity futures contract ; voting trust certifi-which the security is issued ; and .d rate; certificate of deposit for a security; limited

(b) With respect to certificates of interest or partnership interest; ' certificate of interest orparticipation in oil, gas or mining titles or leases, participation in an oil, gas or- mining ' title or"issuer" means the owne r r of any such title or lease or in payments out of production underlease who creates fr actional interests therein for such a title or lease ; or-, in general, any interest orpurposes of sale instrument commonly known as of having the

(9) "Nonis"suet'" means not directly or- indi- incidents of a security or offered in the mannerrectly for the ' benefit of the issuer . . in which securities are offered ; or any certificate

(10) "Person" means an individual, a corpa of interest or- participation in, temporary orration, a partnership, an association, a joint interim certificate for ; receipt for-, guarantee ofstock company, a trust where the interests of the or option, warrant o f right to, subscribe to orbeneficiaries are, evidenced by a -security, . an purchase of sell, any of the foregoingunincorporated organization, a government, a (b) "Security" does not include any fixed or-political . subdivision of a government or any variable insu rance or- endowment policy or another entity , nuity contract under which an insurer promises

(11) (a) "Sale" or "sell" includes every sale, to pay money either in a lump sum or pe r̀iodi-disposition or exchange, and every contract of rally for life o f some other specified period ; anysale of, or contract to sell, a secu r ity or interest beneficial interest in any voluntary inter vivosin a security for value , trust not created fore the purpose of carrying on

(b) "Offer" or -"offer to sell" includes every any businesss or solely for the purpose of voting ;attempt or offer to sell or dispose of, or, solicita- or any beneficial interest in any testamentarylion ofan offer to purchase; a security or interest trust .

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other than a revenue obligation or security is-sued or guaranteed by the United States or anagency or corporate instrumentality of theUnited States;, is exempt under thiss subsectiononly if the issuer's financial statements aree pre-pared according to generally accepted account-ing principles or guidelines which the commis-sioner designates by rule.

(2) Any security, excluding a revenue obli-gation, issued or guaranteed by Canada, anyCanadian province, any political subdivision ofany such province, any agency or corporate orother instrumentality of one or more of theforegoing, or any other foreign government withwhich the United States currently maintainsdiplomatic relations, if the security is recognizedas a valid obligation by the issuer or guarantor .

(3) Any security issued by and representingan interest in or a debt of, or guaranteed by, anybank organized under, the laws of the UnitedStates, or any bank, savings institution or, trustcompany organized under the laws of any stateand subject to regulation in respect of the issu-ance or guarantee of its securities by a govern-mental authority of that state„

(4) Any security issued by and representingan interest in or a debt of, or guaranteed by, anyfederal savings and loan association, or anysavings and loan or similar association orga-nized under the laws of any state and licensed todo business in this state, but not including thecapital stock of a state-chartered capital stocksavings and loan association ..

(5) Any security issued or guaranteed by anyfederal credit union, or' any credit union ofsimilar association : organized and supervisedunder, the laws of this state ..

(6) Any security issued or, guaranteed by anyrailroad, other, common carrier, public servicecorporation, public utility or public utility hold-ing company, which is subject to regulation inrespect of the issuance ° of guarantee of thesecurity by a governmental authority of theUnited States, any state, Canada or, any Cana-dian province

(7) Any security listed, or approved forlisting upon notice of issuance, on a nationalsecurities exchange registered under the securi-ties exchange act of 1934 and designated by ruleof the commissioner; any other security of thesame issuer which is of senior orsubstantiallyequal rank; any security called for by subscrip-tion rights or warrants so listed or' approved ; orany warrantor right to purchase or subscribe : toany of the foregoing, .

(8) Any security issued to its members by adomestic: corporation, organized and operatednot for private profit but exclusively for reli-gious, educational, benevolent, charitable, fra-

551.21 Registration requirement. (1) It isunlawful for any person to offer or, sell anysecurity in this state unless it is registered underthis chapter or the security or, transaction isexempted under s,551 .22 or 551 ..23 . .

(2) It is unlawful for, any issuer or registrantof any securities registered under this chapter,or any person in control of or controlled by orunder common control with the issuer or regis-trant, to offer or _ sell any of the registeredsecurities in this state if'the issuer or registrant isin violation of "this.s chapter', or any rule under thischapter, or any order under this chapter ofwhich he or she has notice, or if the, registrationstatement `relating 'to the securities, as of thedate of such offer or sale, is incomplete in anymaterial respect or contains any statementwhich is false or, misleading with respect to anymaterial fact :

History: ' 1 97 1 c 84; 1981 a 53 s . 4.3,e See note to 5 51 . . 02, citin g Hardtke v. . Love I reeCorp.. 386 FSupp . 1085

Registra tion a nd r eporting requirements for exemp t trans-actions discuss ed . Feitl er v., Midas Associates, 41 8 F Supp.735.

The f inancing o f corporate expa nsi on th rough industria lrevenue bonds. Mulcahy, Guszkowski, 57 MLR 201

551.22 ' Exempt securities. The followingsecurities are exempt from registration under s . .551,:21 (1) :

`(1) Any security, including a revenue obliga-tion, issued or guaranteed by the United States,any state, any political subdivision of a state orany agency: or corporate or other, instrumental-ity of one or, more of the foregoing; or anycertificate of deposit for any of the foregoing ;but any revenue obligation payable from pay-ments to be made in respect of property ormoney' used under a lease, sale or, loan arrange-ment by or for a nongovei nmental industriall orcommercial enterprise is exempted subject torules adopted by the commissioner, . A security,

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(14) "State" means any state, territory orpossession of the United States, the District ofColumbia and Pue rto Rico.

History: 1971 c. 84; 1977 c.. 144 ; 1979 c , : 102 s_236 (3) ;1981 c . . 53 ss. ] to 4, 43 .,

Where certificate of stock was mailed to plaintiff in Wis-consin, and extensive . solicitation was conducted by defend-ants in Wisconsin, it qualified as an "offer." within (11) (b) . .Since securities were neither registered in Wisconsin nor ex-empt from registration, plaintiff was entitled to rescind trans-action and recover purchase price of securities plus costs ,.Hardtke v . . Love Tree Corp. 386 F Supp,. 1085 ,

"Offer to sell" under (11) (b) occurred when defendantgave unexecuted partnership agreement to plaintiff, thus im-plicitly invitingplaintiff ' to return it completed as to form andamount . . Feitler v . Midas 'Associates; 418 F Supp ., '735..

State and federal regulation of condominiums . Minahan,58 MLR 55 .

SUBCHAPTER II

REGISTRATION OF SECURITIES

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ternal, social, athletic or reformatory purposes ;and any evidences of debt issued by any suchcorporation to nonmembers in compliance withrulesadopted by the commissioner .

(9) Any commercial paper which arises outof a current transaction or the proceeds of whichhave been or are to be usedd for current transac-tions, and which evidences an obligation to paycash within 9 months of the date of issuance,exclusive of days of grace, or any renewal ofsuch paper which is likewise limited,, or, anyguarantee of such paper or of any such renewal .

(10) Any investment contract or other secur-ity issued in connection with an employe's stockpurchase, savings, pension, profit sharingg orsimilar' benefit plan if, in the case of planswhichare not qualified under section 401 of the inter-nal revenue code and which provide for contri-bution by employes, there is filed with thecommissioner prior to any offe r or sale a noticespecifying the terms of the plan and the commis-sioner, :does not by order-, disallow the exemptionwithin 10 days ..

(11) Any sharess of common stock issued by aservice corporation organized under s . 180 ,:99.

('02) Any securities of a coope r ative corpora-tion organized under ch. 185,

(13) Any option to put or call any outstand-ing security transactions in which are exemptedunder s . 551 .23 ( .3)

(14) Any security issued by a licensed bro-ker-dealer to . its officers, partners or, employes,subject to rules adopted by thee commissioner .

(15),Any contract for the sale o r purchase ofa commodity for future delivery .

(16) Contribution notes issued under s . .611 .33 (2) (b), 613.33 (2) or 614.33 , and anydebt securities approved by the commissioner ofinsurance and issued under s. 611,35 (2) inconnection with the conversion of a stock insur-ance corporation to a mutual, or under s . 613 . . 75or' 614 .76 in connection with the conversion of aservice insurance corporation or fraternal to amutual ,

(17) Any security as to which the commis -sioner by rule or order finds that registration isnot necessary or appropriate for the protectionof investors ,` History: 1971 c: 84,260 ; ] 97 .3 c . . 265 ;1975 c 359;1977 c .144; 1979 c . 102;. 1981 c.. 53,

551.23 . Exempttransactions. The followingtransactions are exempt from registrat ionn under-s. 551.21 (1) :

(1) Any isolated - nonissuer, transaction,whether effected through . a bY Oker-dealer or not..

(2) Any nonissuer transaction effected by orthrough a licensed broker-dealer pursuant to anunsolicited order or- offer to purchase ;, but thecommissioner may by rule require that the

records of the broker-dealer confirm that theorder or, offer to purchase was unsolicited

(3) Any sale of any outstanding security byor on behalf of a person not the issuer and not incontrol of the issuer or controlled by the issuer orunder common control with the issuer at a pricereasonably related to the current market price if.

(a) The issuer has any securities registeredunder s . 12 of the securities exchange act of 1934or exempted from registration by s . 12 (g) (2)(G) of that act, or is an investment companyregistered under the investment company act of1940; or,

(b) Securities of the same class have beenregistered under this chapter under a registra-tion statement becoming effective within 2 yearsprecedingg the sale and the registration has notbeen revoked or suspended; or

(c) Securities of the same class have beenregistered under the securities act of 1933 andthere is filed with the commissioner prior to anyoffer or sale a notice of the proposed sale andother information as the commissioner by rulerequires and the commissioner does not by orderdisallow : the exemption within 10' days ; or,

(d) The issuer or-, applicant files with thecommissioner such information, and an under-taking to file such reports, as the commissionerby rule requires and the commissioner does notby order disallow the exemption within 10 days ..

(4) Any transaction between the issuer orother person on whose behalf the offering ismade and an underwriter or amongunderwriters ..

(5) Any transaction in a bond or otherevidence of indebtedness secured by a real orchattel mortgage or deed of trust, or by anagreement for the sale of real estate or chattels,if the entire mortgage, deed of trust or agree-ment, together with all the bonds or, other evi-dences of indebtedness' secured thereby, is of-fered and sold as a unit .

(6) Any judicial sale or, any transaction by anexecutor, administrator,, sheriff, marshal, re-ceiver, trustee in bankruptcy, guardian orconservator

(7) Any transaction executed by a bona fidepledgee withoutt any purpose of evading thischapter.

(8) Any offer or sale of' a security to theissuer thereof or to a bank, savings institution,trust company, insurer', broker-dealer, savingsand loan association; investment company asdefined in the investment company act of 1940,of pension or profit sharing trust, or the state or,any agency or political subdivision thereof, or toany.y other financial institution or institutionalinvestor, whether such person is, actingg for itselfor as trustee .

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(9) ' Any offer or sale of a preorganizationsubsc r iption, if no commission or other remu-neration is paid or given directly or indirectly forsoliciting any subscr •iber- in this state and noadvertising is published or circulated unless ithas been permitted by the commissioner, and ifthe subscription is not binding and no payment ismade by any subscriber until the securitiessubscribed for may legally be sold .

(10) Anyy offer or- sale of its securities by acorporation, partnership or association havingits principal office in this state, if the aggregatenumber of persons holding directly or indirectlyall the issuer's securities, after the securities tobe issued are sold, does not exceed 15, exclusiveof persons exempt under sub . (8), and if nocommission or other remuneration is paid orgiven directly or indirectly for soliciting anyperson in this state and no advertising is pub-lished or circulated unless it has been permittedby the commissioner ; but the commissioner mayby rule or, order waive the condition with respectto commissions and may require reports of salesunder this exemption.

(11) (a) Any transaction - pursuant, to anoffer directed by the offeror to not more than 10persons in this state, excluding persons exemptunder sub,. (8) but including personss exemptunder sub. (10), during any period of 12 consec-utive months, whether or not the offer-or or anyof the offer -ees is then present in this state, if theofferor reasonably believes that all the personsin this state are purchasing for investment, andno commission or other remuneration is paid orgiven directly or indirectly for soliciting anyperson in this state other than those exempt bysub. ( 8) ..

(b) The commissioner may by rule or order,as to any security or, transaction or, any type ofsecurity or ' transaction, withdraw or furthercondition this exemption, or increase or decreasethe number of offerees permitted, or waive theconditions in par. (a), and may require reportsof sales under this exemption.;

( 12) Any transaction pursuant to an offer toexisting security holders of the issuer or of acorporation which,' pr•iot• to the offer, ownedsubstantially all of the voting stock of the issueror whose controlling persons organized the is-suer forthe purpose of the offer, if no commis-sion or other remuneration other , than a standbycommission repaid or given directly or indirectlyfor soliciting any secu rity holder in this state,and if, prior- to any offer or sale, the issuer files anotice specifying the terms of the offer and allather, information which the commissioner byrule requires and the commissioner does not byorder disallow the exemption within 10 days „"Security holders" include persons who at the

(15) , Any offer or sale of an evidence of debtissued by a corporation organized and operatednot for private profit but .t exclusively for reli-gious, educational, benevolent or charitable pui•-poses if the security qualifies under this exemp-tion, and if there has been filed with thecommissioner prior to any offer ' or sale a noticeidentifying the security and the basiss of itsqualification under this exemption together withany further information as the commissioner byrule or order requires, and if the commissionerdoes not by order disallow the exemption with in10 days or such shorter period as the commis-sioner petmits The security qualifies under thisexemption if the issuer and any predecessor havenot defaulted within the current fiscal year orthe 3 preceding fiscal years in any fixed interestor principal obligation ; and the issuer complieswith rules of the commissioner with respect totrust indentures and the use of a prospectus ; andthe security qualifies under either of thefollowing :

(a) The issuer and its predecessors have notbeen in existence for 3 years, and the securitiesproposed to be sold are secured by a mortgage or,deed of trust upon land and buildings which is orwill become a first lien at or prior to the issuanceof such evidences of debt or- provision satisfac-toty to the commissioner ' is made for- im-pounding the proceeds from their ' sale until suchfirst lien is established, and the total amount ofsuch securities does not exceed 50% of the thenfair market value of the land and buildingsincluded in such mortgage or- deed of trust, less

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time of the transaction are holders of convertiblesecurities, nontransferable wax rants or transfer,-able warrants exercisable within not more than90 days of their issuance .

(13) Any transaction incident to a class voteby stockholders, pursuant to the articles of in-corporation or the applicable corporation stat-ute, on a merger, consolidation, reclassificationof secu r ities, or sale of corporate assets in con-sideration of the issuance of securities of anothercorporation ; or any transaction incident to a,judicially approved reorganization in which asecurity is issued ' in exchange for one or moreoutstanding securities, claims or property inter-ests or- partly in such exchange and partly forcash .

(14) .. Any stock split and any stock dividend,whether, the corporation distributing the divi-dend is the issuer r of the stock or not, if nothing ofvalue is given by stockholders for the dividendother than the surrender of a right to a cash orproperty dividend when each stockholder mayelect to take the dividend in cash or property orin stock .

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the amount of any unpaid special assessmenttaxes; or

(b) The issuer or its predecessors have had anexcess of revenues over, expenses,, excluding in••terest expense, provision for depreciation andextraordinary items, for r each of the 2 fiscalyears next preceding such offer', or sale, or aver-age net revenues for the last 3 fiscal years nextpreceding such offer- or sale, of not less than1 1/2 times the aggregate annual interest re-quirements on the issue of securities to be soldunder this subsection and all securities of equalor prior rank to be outstanding, immediatelyafter such sale .

(16) Any offer, but not a sale, of a securityfor, which registration statements have beenfiled under both this chapter and the securitiesact of 1933 if no stop order or- denial order is ineffect and no proceeding is pending under eitherl aw, .

(17) Any offer or- sale of warrants for orrights to subscribe to any security, provided thesa le of the security deliverable on exercise of thewarrant or right is in compliance with thischapter . .

(18) Any other transaction as to which thecommissioner by rule or order- finds that iegis-tration is not necessary or appropriate for- theprotection of investors :

History : 1971 c. 84; 197'1 c. 1 4 4; 1979 c.. 102 s, 236 (3) ;198 1 c. . 53 ss . 6, 7, 43; 1981 c 31 4 ,

See note to 551 ..02, citing Hardtke v . Love Tree C orp . .386 FSupp.. 108 5 . . .

Regi str ation and rep orting requirements for exempt trans-action s d iscussed. Feitler v.. M idas Associates, 418 F Supp.735 .

H as securi ties law regul ation in the private capi t al mar-kets become a deterrent to capital growth: a critical review, .Coles, 58 MLR 395 .

551 .24 Exemption proceeding. (1) Thecommissioner may by order deny or revoke anyexemption under s.._ 551 .:22 or 551,23 with re-spect to a s pecified security or, transaction .

(2) If the public interest and the .e protectionof i nvestors so require, the commissioner may byorder summarily deny or- revoke any exemptionunder s. 551 .22 or 551,23 with respect to aspecified security or transaction . Upon entry ofthe order, the commissioner shall serve upon allnamed parties a copy of the order and notify theparties of their. right to request a hearing . .

(3) No order under this section may operateretroactively.

(4) A person who offers or sells a securitypursuant to an exemption under s. 551 .22 or55'1 .23 after, the exemption is denied or, revokedby an order of the commissioner, does not violates. 55:1,:21 (1) if.

(a) The person was not given notice of theorder; and .

551 .25 Registration by coordination . (1)Registration by coordination may be used forany security for which a registration statementhas been filed under the securities act of 1933 inconnection with the same offering and has notbecome effective . .

(2) A registration statement under this sec-tion shall contain the following information andbe accompanied by the following documents inaddition to the information specified in s ..551 ..27(2)' and the consent to service of process re-quired `bys„ 551 .65 (1) :

(a) Three copies of the latest form of pro-spectus filed under the securities act of 1933 ;

((b) If the commissioner, by rule or otherwiserequires, a copy of the articles of incorporationand bylaws or their substantial equivalents cur-rently in effect, a copy of any agreements with or-among underwriters, a copy of any indenture orother instrument governing the issuance of thesecurity to be registered, and a specimen or copyof the security ;

(c) If the commissioner requires, any otherinformation, or copies of any documents, filedunder the securities act of 1933 ; and

(d) An undertaking to forward all futureamendments to the federal prospectus,, other'than an amendment which merely delays theeffective date of the registration statement, notlater than the first business day after they areforwarded to or- filed with the securities andexchange commission, or such longer period as.the commissioner permits ..

(3)- (a) A registration statement under, thissection automatically becomes effective at themoment the federal registration statement be-comes effective if no stop order is in effect andno proceeding is pending under s . 551,28 ; andthe registration statement has been on file withthe commissioner for at least 10 days ; and .astatement of the maximum and minimum pro-posed offering prices and the maximum under-writing discounts and .d commissions has been onfile for 2 full business days or such shorter periodas the commissioner, ppermits and the offering ismade within these limitations .

(b) The registrant shall promptly notify thecommissioner by telephone or telegram of thedate and time when the federal registrationstatement. became: effective and the content ofthe price amendment, if any, and shall promptly

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(b) The person sustainss the burden of proof 'to establish that he or she was not given noticeand didd nott know and, in the exercise of reason-able care, could not have known of the order .

(5) In any proceeding under this chapter, theburden of proving an exemption or an exceptionfrom a definition is upon the person claiming it ,.

History: 197 1 c.. 84 ; 1975 c. . 57, 199; 1981 c. . 53 . .

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ale a post-effective amendment containing theinformation and documents in the price amend-ment . "Price amendment" means the finalfederal amendment which includes a statementof the offering price, underwriting and sellingdiscounts or commissions, amount of proceeds,conversion rates, call prices and other smattersdependent upon the offering price ; Upon failureto receive the required notification and post-effective amendment with respect to the priceamendment, the commissioner mayenter , a stoporder, without notice or, hearing, retroactivelydenying effectiveness to the registration state-ment or, suspending its effectiveness until com-pliance with this subsection is effected, if thecommissioner promptly notifies the registrantby telephone or telegram of the issuancee of theorder. If the registrant proves compliance withthe requirements of this subsection as to noticeand post-effective amendment, the stop ordershall be vacated The commissioner may by ruleor otherwise waive any of the conditions speci-fed ` in par . (. a) If the federal registration

signer takes no action within the period, theregistration becomes effective at the end of the10-day period .

(4) The commissioner may by rule or orderrequire as a condition of registration under thissection that a prospectus containing any desig-nated part of the information contained in theregistration statement or filed with it be sent orgiven to each person to whom an offer is madebefore or concurrently with the first writtenoffer' made. .e to the person, otherwise than bymeans of a publicc advertisement, by or for theaccount of the issuer or any other person onwhose behalf the offering is made, or by anyunderwriter or broker-dealer who is offeringpart of an unsold allotment or subscription takenby him or her as a participant in the distribution ;or the confirmation of any sale made by or forthe account - of any person; or the paymentpursuant to any sale; or the delivery of thesecurity pursuant to any sale ; whichever firstoccurs .

History: 1981 c 53..

ditions in this subsection are satisfied and they 551 .2? General registration provisions .are not waived, the registration statement auto- (1) A registration statement may be filed by thematically becomes effective as soon as all the issuer, any other person on whose behalf theconditions are satisfied . . If the registrant advises offering is ,to be made or a licensed broker-the commissioner of the date when the federal dealer', but the commissioner may in specificregistration statement is expected to become cases require that it be executed by the issuer . .effective, the commissioner shall promptly ad- (2) Every registration statement shallvise the registrant by telephone or telegram, at specify : ,the registrant's expense, whether all the condi- (a) The amount of'securities to be offered inLions are satisfied and whether' the commissioner this state;then contemplates the institution of a proceed- (b) The states in which a registration state -ing under s. 551 . .28

; but this advice by the mentor application in connection with the offer-commissioner does not preclude the institutionof such a proceeding at any time ing has been or is to be filed; andH;story: 1981 c . ss s. 43, (c) Any adverse order, judgment or decree

entered in connection with the offering by the551.26 Registration by qualification . (1)Any security may be registered by qualification .

(2 ) A registration statement under this sec-tion shall contain the information specified in s . .551..27(2);shall be accompanied by the consentto service of process required by s . . 551 ;. 65 (1),and shall contain such further information andbe accompanied by such further documents asthe commissioner, by rule or, otherwise requires ..For, this purpose the commissioner may classifyi ssuers and types of securities...

(3) Registration under this section becomeseffective when the commissioner so orders:, If aregistration statement has been on file for'.r atleast 30 days and all information required bythecommissioner has been furnished, the personfiling the statement may at any time file awritten request that the commissioner take ac-tion within 10 days following the filing of suchrequest, ; If a request is filed, and the commis-

regulatory authorities in any state or, by anycourt or the .e securities and exchange commis-sion, or any withdrawal of a registration state-ment or application relating to the offering .

(3) Any document filed under, this chapter ora predecessor law within 5 years preceding thefiling of a registration statement may be incor-porated by reference in the registration state-ment to the extent that the document is cur-rently accurate . .

(4) The commissioner may by rule or other-wise permit the omission of any item of informa-tion or document from any registrationstatement .

(5) The commissioner may by rule or orderrequire as a condition of registration, and at theexpense of the applicant or registrant, that areport by an accountant, engineer, appraiser orother professional person be filed, The commis-sioner may also designate one of the commis-

4253 SECURITIES LAW 551 .27Electronically scanned images of the published statutes.

or order of the commissioner . No registrationstatement is effective during the time a stoporder is in effect underr s . 551 .28 . .

(12) During the effective period of a regis-tration statement, the commissioner may by ruleor order require the person who filed the regis-tration statement to file reports, not more oftenthan quarterly, to keep reasonably current theinformation contained in the registration state-ment and to disclose the progress of the offering ..If any of the securities registered have been soldin the state, the commissioner may by rule ororder extend the period for filing the reports foran additional period not exceeding 2 years fromthe date the registration became effective or thedate of its last amendment or extension .

(13) (a) Securities issued or guaranteed byan insurer authorized by the commissioner ofinsurance, or by a person whose business consistsprincipally of owning or~ controlling the secuii-ties of any such insurer, may not be registeredwithoutthe prior approval of the commissionerof insurance. Issuance of an organization per-mit under s. 611 .13, 613 ;, 13 or 614.13 consti-tutes such approval for the securities describedin the permit, and also precludes application ofs :. 551 . 28 (1) (d) and (i) .

(b) No issuer which is being organized in thisstate or elsewhere solely or pa rtly for the pur-pose of organizing a corporation under ch . 611,613 or 614 may register~ or sell its securities inthis state unless it obtains an organizationn per-mit under ~s„ 611 .13, 613 : . 13 or, 614.13, Nosecurity may be registered or sold in this state ifthere is any representation that an insurer wi llbe organized or purchased in this state with theproceeds of the sale, unless the issuer obtains anorganization permit under s .. 611 .. 13, 61,113 or,614.13 .

(14) A registration statement relating toredeemable securities issued by an open-endmanagement company or unit investment trustas defined in the investment company act of1940, or to securities : issued by any class offinancial institutions which the commissioner byrule deter-mines, may be amended after its effec•.true datee so as to increase the specified amountof securitiess proposed to be offereri . The amend-ment<becomes effective when the commissionerso orders .

(15) No warrant or right to purchase orsubscribe to another security and no secur ityconvertiblee into another , security shall be r egis-tered unless it appears to the commissioner thatboth the warrant or, right or convertible securityand ' the securities deliverable on the exercise ofthe warrant or right or conversion privilegecomply with this chapter.

History:, 1971c, . 84, 260;1979 c . 102;1981 c. . 53 ss„ 10,43,

signer's employes to make an examination of thebusiness and records of an issuer of securities forwhich a registration statement has been filed byqualification, at the expense of the applicant orregistrant..

(6) In the case of a nonissuer distribution,information may not be required under , s . 551 .26(2) or 551 .27 (12) unless it is known to theperson filing the registrationn statement or ' to thepersons on whose behalf the distribution is to bemade, or canbe furnished by them withoutunreasonable effort or expense .

(7) The commissioner- may by rule or' order 'require as a condition of registration that anysecurity issued within the past 3 years or to beissued to a promoter for a consideration substan-tially different from the public offeringprice, orto any person for a 'consideration other thancash, be deposited in escrow ; or that the pro-ceeds from the sale of the registered security inthis state be impounded until the issuer receivesa specified amount from the sale of the securityeither in this state or elsewhere; or ' the commis-sionermay impose both such requirements.. Thecommissioner may by rule or or der , determinethe conditions of any escrow or impoundingrequired hereunder, but the commissioner maynot reject a depository solely because of locationin another' state . .

(8) The commissioner may by rule requirethat securities of designated classes shall beissued under a trust indenture containing suchprovisions as the commissioner, determines.,

(9) The commissione r may by rule or orderrequire as a condition of registration that anysecurity registered be sold only on a specifiedform of subscription or sale contract; and that asigned or conformed copy of each contract befiled with the commissioner or preserved for anyperiod up to 3 years .

(10) The commissioner' may by rule or order 'impose other conditions under, which a securityregistered by qualification or coordination maybe sold, if these conditions are reasonable and inthe public interest,

(11) A registration statement is effective fo rone year from its effective date unless extendedby rulee or order of the commissioner . . Alloutstanding securities of the same class as aregistered security are considered to be regis-tered for the purpose of any transaction by or' onbehalf of a person not the issuer and not incontrol of the issuer or' controlled by the issuer orunder common control with the issuer ', so long asthe `registration statement is effective, unlessotherwise prescribed by order: A registrationstatement may not be withdrawn after' its effec-tive date if any of the securities registered havebeen sold in this state, unlesss permitted by rule

551.27 SECURITIES LAW 4254Electronically scanned images of the published statutes.

Blu e sky law: Is there merit inthe merit requirements?Goodkind, 1976 WLR 79.

551 .28 Denial , suspension ancd revoca -tion of registrations ., (1) The commissionermay issue a stop order, denying effectiveness to,or suspending or revoking the effectiveness of,anyy registration statement if the commissionerfinds that the order is in the public interest andthat:. _

(a) The registration statement as of its effec .•true date or as of any earlier date in the case of anorderr denying effectiveness, or any amendmentfiled under s, 551,27 (14) as of its effective date,or' any report under' s . 551,27 (12) is incompletein any material respect or contains any state-ment, which was, in the light of the circum-stances ,under which it was made, false or mis-leading with respect to any material fact ;

(b) Any provision of this chapter or any rule,order or condition lawfully imposed under thischapter has been wilfully violated, in connectionwith the offering, by the person filing the regis-tration statement ; the issuer, any partner, of-ficer or director, of the issuer; any person occupy-ing a similar status or performing similar,functions, or any person directly or indirectlycontrolling or controlled by the issuer, but only ifthe person filing the registration statement isdirectly or indirectly controlled by the issuer ; or,any broker-dealer or other person involved di-rectly or indirectly in the offering ;

(c) The securities are the subject ofan : ad-ministrative stop order or similar order or apermanent or, temporary injunction of any courtof competent jurisdiction entered under anyother federal or state' act applicable to theoffering, but the commissioner may not institutea proceeding.g against an effective registrationstatement under this paragraph more than oneyear from the date of the order or injunctionrelied on, and the commissioner may not enteran order, under this paragraph on the basis of anorder or injunction entered under any other stateact, unless that order or injunction was based onfacts which would currently constitute a groundfor a stop order-under this section ;

(d) The issuer's enterprise or ;methodd ofbusiness includes or <would, include activitieswhich;are illegal where performed ;

(e) The issuance or sale of the : securities is orwould: be unfair or inequitable to purchasers-orhas worked or tended :to work a fraud uponpurchasers or would so operate ;;, -

(f)'The offering has been or would be madewith unreasonable amounts of under writers' andsellers' discounts, commissions or other, compen-sation or promoters' profits or, pparticipation, orunreasonable amounts or kinds of options ;,

(3) In a proceeding for registration by quali-fication, the applicant or registrant has theburden of satisfying the requirements of sub ..(1)' ; In 'a proceeding for registration by coordi-nation, the commissioner has the burden ofestablishing the existence of one of the causesenumerated in sub .. (1) .

(4) If the public interest and the protectionof investors so require, the commissioner may,by order, summarily deny, postpone, suspend orrevoke the effectiveness of the registration state-ment .. Upon the entry of the order, the commis-sioner shallserve upon all named parties a copyof the order and notify the parties of their rightto requestt a hearing .

(5) No stop order may be entered under thissection,, except under sub. (4), unless s 551 .61(1) " is complied with and appropriate priornotice is given to the applicant or registrant, theissuer, and the person on whose behalf the securi-ties are to be or have been offered,

(6) The commissioner may vacate or modifya stop order- if the commissionerr finds that the.conditions which prompted its entry havechanged or that it is otherwise in the publicinterest to do so .

Flistory: 1971 c. . 84; 19'77 c. . 144 ; 1 981 c 53 ss. 11, 43 .Adverse consequences of blue sky regulation of public of-

fering expenses, . Mofsky, 1972 WL R 1010 .:

SUBCHAPTER III

LICENSING OF BROKER-DEALERS,AGENTS AND INVESTMENT

ADVISERS

55 .37 Licensing requirement. (1) It isunlawful for any person to transact business inthis state as abroker-.dealer or agent unless. solicensedd under this chapter, except that a personwho effects transactions in this state exclusively

4255 SECURITIES LAW 551 . 3

(g) The applicant or registrant has failed topay the proper filing fee ; but the commissioner'mayenter only a denial order under this para-graph and the commissioner shall vacate anysuch order' when the deficiency has beencorrected ;

(h) Advertising prohibited by s 551,53 hasbeen used in connection with the sale or offeringof the securities; or

(i)'The financial condition of the issuer af-fects or would affect the soundness of thesecurities

(2) The commissioner may not institute astop order proceeding against an effective regis-tration statement on the basis of a fact oftransaction known to the commissioner whenthe registration statement became effective un-less the proceeding is instituted within 180 daysafter the effective date .

Electronically scanned images of the published statutes.

551.32 Licensing proce dure. (1) (a) Abroker-dealer, agent or investment adviser mayobtain an initial or renewal license by filing withthe commissioner, or an organization which thecommissioner by rule designates, an applicationtogether with a consent to service of processunder s. 551 .65 (1) .

(b) An application under par .. (a) shall con-tain whatever information the commissioner byrule requires concerning the applicant's formand place of organization, proposed method ofdoing business and financial condition, the qual-ifications and experience of the applicant, in-cluding, in the case of abroker-dealer or invest-ment adviser, the qualifications and experienceof any partner, officer', director or controllingperson, any injunction or administrative order orconviction of a misdemeanor involving securitiesand any conviction of a felony, and any othermatters which the commissioner determines arerelevant to the application . The commissionermay by rule or order require an applicant for aninitial license to publish an announcement of theapplication in one or more specified newspaperspublished in this state .

(c) Licensing under this subchapter is effec-tive 30 days after an application is filed except:

1, : Licensing is not effective if an order is ineffect, or a proceeding: is pending, under s.551.34 ;

2. If the commissioner makes a written re-quest for additional information relevant to theapplication within .30 days after the applicationis filed, the licensing is effective 30 days after theinformation is filed;

3 :: Ifan amendment to a pending applicationis filed, licensing is effective 30 days after theamendment is filed; and

4., The commissioner may by rule or orderspecify an earlier effective date .

(d) The commissioner' shall cooperate withother securities administrators and regulatoryauthorities to simplify and coordinate licenseapplication and renewal procedures, :

(2) Before action on an application the com-missioner may designate an employs to make anexamination of the books, records and affairs ofthe applicant at thee applicant's expense

(3) A licensed broker-dealer or investmentadvisee may file an application for licensing of asuccessor, :whethet• or not the successor is then inexistence, for the unexpired portion of .the year.There shall be no filing fee .

(4) The commissioner may by rule prescribestandards of qualification with respect to train-ing experience: and knowledge of the securitiesbusiness and provide for an examination, whichmay be written or oral or both, to be taken byany class of or all applicants, as well as persons

for the account of persons specified in s „ 55(8) is not required to be so . licensed .

(2) It is unlawful for any broker-dealer orissuer to employ an agent to represent it in thisstate unless the agent is licensed for that broker-dealer of, issuer or the agent is excluded from thelicensing requirement under sub, .( 1 ) . No agentmay at any timee represent more than onebroker-dealer or issuer, except an agent mayrepresent licensed broker-dealers or issuers ofsecurities registered under this chapter, or both,who are affiliated by direct or indirect commoncontrol. When an agent terminates employmentwith a broker-dealer or issuer, or terminatesthose activities which ' make that individual anagent, or transfers employment between li-censed broker-dealers, thee agent, the broker-dealer or the issuer shall promptly file a notice inaccordance with rules adopted by thecommissioner..

(3) It is unlawful for- any person to transactbusiness in this statee as an investment adviserunless so licensed or licensed as a broker dealerdealer-under this chapter, exceptt that a person whoseonly clients in this state are persons specified ins. 55 (8) may transact business without alicense..

(4) Every license expires one year, from itseffective date unless renewed, or, unless theperiodd of the license is limited by rule or order.The commissioner by rule or order may preparean initial schedule for license renewals so thatsubsequent renewals of licenses effective Janu-ary 1, 1970, may be staggered by calenda rmonths. For'r this purpose the commissioner mayadjust the license fee proportionately No li-cense is effective after its expiration, and expira-tion of a license for which a renewal applicationhas not been filed is deemed an application forwithdrawal under §., 551,34 (6) ,.

(5) A bank, savings institution or , trust com-pany not licensed as abroker-dealer may exe-cute orders for the purchase or sale of securitiesas agent for the purchaser or seller' thereof inaccordance with rules adopted by thecommissioner:,

(6) It is unlawful for any licensed broker,-dealer, agent or investment adviser, or any per-son directly or indirectly controlling a licensedbroker-dealer~ or, investment adviser, to transactbusiness in this state if the licensee is in violationof this chapter, or any rule under this chapter, orany order under this chapter of which the li-censee or' person has notice, or if the informationcontained in the licensee's or person's applica-tion for license, as of the date of such transac-tions is incomplete in any material respect or isfalse or m isleading with respect to any materialfact .

ffistory: 1971 c., 84; 1977 a , 144; 1981 c. 53 .

551 .31 SECURITIES LAW 4256Electronically scanned images of the published statutes.

who represent or will represent an investmentadviser, and the commissioner may by orderrequire an examination of a licensed ; broker-dealer agent or,< investment adviser for- duecause .,

(5) The commissioner may by rule require aminimum capital for broker-dealers and invest-ment advisers and establish limitations on ag-gregate<indebtedness of broker-dealers in rela-tion to net capital

(6) The commissioner may by rule requirethe furnishing of'surety bonds by broker-dealersand investment advisers and' all bonds .so re-quired'shall provide for suit thereon by injuredcustomers or clients, but no bond may bee re-quired of any licensee whose net capital exceedsthe amount prescribed by rule for this purpose .,

(7) The commissioner may by rule or orderimpose other conditions or limitations in connec-tion with the issuance of licenses under thischapter as the commissioner deems appropriatein the public interest or for the protection of'investors.

History: "1981 a 53 .

551.33 Post-licensing provisions. - (1)Every licensed broker-dealer ; agent and invest-ment,adviser shall make and keep all accounts,correspondence,, memoranda, papers; books andother records which the commissioner by rule:prescribes All records required shall be pre-served for 3 years unless the commissioner byrule prescribes otherwise for particular types: ofrecords. All required records shall- be keptwithin this state or shall, at ,the request of. thecommissioner, be made available at any time forexamination by the commissioner either in theprincipal office of the licensee or by productionof exact copies thereof' in this state

(2) .Every licensed broker-dealer and invest-ment adviser shall file such reports .as the com-missioner by rule prescribes,

(3) ` If the information contained in any ap-plication for license or other, document filed withthe commissioner, or an organization designatedunder s.. 551,32 (1) (a) is or becomes inaccu-rate or, incomplete in any material respect, thelicensee shall promptly file, a correctingamendment .

(4) The commissioner shall' make periodicexaminations, within or without this state, of thebusiness and records of each licensed broker--dealer and investment adviser, at such times andin such scope as the commissioner, determines, .The examinations may be made without priornotice to the broker-dealer or,-inuestment ad-viser . The expense, reasonably attributable toany such examination shall ; be paid by thebroker-dealer or investment adviser whose busi-

ness is examined, but the expense so payableshall not exceed an amount which the commis-sioner, by rule prescribes . For the purpose ofavoiding unnecessary duplication of examina-tions, the commissioner, insofar as it is practica-ble in administering this subsection, may coop-erate with securities administrators of otherstates, the securities and exchange commission,and any national securities exchange or, nationalsecurities association registered under, the secur-ities exchange act ,of 1934 .. The commissionershall not make public the information obtainedin the course of examinations, except when thecommissioner's duty under this chapter requiresthe commissioner to take action regarding anybroker-dealer or investment adviser, or to makethe information available to one of'the organiza-tions specified in this subsection, or except whencalled as a witness in any criminal or civilproceeding .,

(5) The commissioner, may by rule prohibitunreasonable charges, profits, commissions orother compensation of broker-dealers and in-vestment advisers .

(6) The commissioner, mmay by rule establishstandards for the conduct of business by broker-dealers, agents, investment advisers and clear-ing corporations as defined in s 408 .102 (3) ..

(7) No licensed broker-dealer, shall be sub-ject to s„ 138 .05 (1) (a) with respect to anydebit balance in a customer account if the debitbalance is payable on demand and the onlycollateral for the balance is securities .History: 1971'c: 84; 1975 c:10'7, 199; 197'7 c .. 144 ; 1981 c

5.3 . .

551 .34 Denial , suspens ion insd revoca-tion of licenses . (1) The commissioner mayby order deny an application for, or, postpone theeffective date of, a licensee or suspend or revokeany license or may censure the licensee, if thecommissioner finds that the order is in the publicinterest and that thee applicant or licenseee or, inthe case -of a broker-dealer or' investmentt ad-viser, any partner, officer or director, any personoccupying a similar, status or performing similar,functions, or any person directly or indirectlycontrolling the broker-dealer or investmentadviser:

(a) Has filed an application for, license whichas of its effective date, or as of any date afterfiling in the, case of an order denying effective-ness, was incomplete in any material respect orcontained any statement which was, in light ofthe circumstances under which it was made,false or misleading with respect to any materialfact ;

(b) Has wilfully violated or wilfully failed tocomply with any provision of this chapter or apredecessor, law or the securities act of 1933, the

"4257 SECURITIES LAW 551.34

Electronically scanned images of the published statutes.

with this chapter, but no person may be deemedto have failed in such supervision i f there havebeen established written procedures, and a -sys-tem for applying such procedures, which wouldreasonably be expected to prevent and detect,insofar, as practicable, any violations -of statutes,rules or orders and if the person has reasonablydischarged the duties incumbent upon the per-son by reason of such procedures and system ;

(k) Has failed to pay the proper filing fee, butthe commissionerr shall vacatee any such orderwhen the deficiency has been corrected ;

(T) Is selling or has sold, or is offering or hasoffered for sale, in :this state securities throughany unlicensed agent or for any dealer or issuerwith knowledge that the dealer or issuer has notcomplied with this chapter ;

(m :) Has made anyy materiall misrepresenta-tion to or withheld or concealed any materialfact from the commi ssioner or any of his or herrepresentatives, or has refused to furnish infor • -mation < reasonably requested by the commis-sioner ; or

(n)' Has not complied with the conditions orlimitations of a license issued under this chapter.

(2) `:The enumeration of the causes stated insub. . (1). shall not be exclusive and the commis-sioner may deny an application or suspend orrevoke any license `or censure any licensee forany cause whether, similar to or different fromthese causes when necessary or appropriate inthe public interest or for the protection ofinvestor' s,

(3)' The commissioner may not institute asuspension or revocation proceeding on the basisof a 'fact of transaction known to the commis-sioner when the license was issued unless theproceeding is instituted within 180 days follow-i ng issuance of the license

(4)` If the public interest or the protection ofinvestors so requires, the commissioner may byorder summarily deny or suspend a license orpostpone the effective date of a license . Uponthe entry of the order, the commissioner- shallsetve.upon all named parties a copy of the orderand notify the parties of their right to request ahearing .

(5) If the commissioner finds that any li-censee or applicantt is no longer in existence orhas ceased to do business as a broker-dealer,agent or investment adviser, or is subject to anadjudication of mental incompetence or to thecontrol of a committee, conservator or guardian,or cannot belocated after reasonable search, thecommissioner may on order issued : summarilyrevoke the license or deny the application.

(6) Withdrawal from the status of a licensedbroker-dealer, '` agent or investment adviser be-comes effective 30 days after receipt of an

securities exchange act of 1934, the investmentadvisers act of 1940, the investment companyact of 1940, or any rule under any of suchstatutes of any order thereunder of which he orshe has notice ;

(c) Subject to ss;' 111 .321, 111 .322 And111 . .3 .35, has been convicted, within the past 10years, of any misdemeanor involving 'a security

' or any aspect of the securities business, or anyfelony ;

(d) Is permanently or temporarily enjoinedby any court of competent jurisdiction fromengaging in or continuing - any conduct or prac-tice involving any aspect ` of' the securitiesbusiness;

(e) Is the subject of an or ' der' of the commis-sioner denying an application or suspending orrevoking a license as abroker-dealer, agent orinvestment advise r ;

(f) Is the subject of an order entered withinthe past 5 years by the securities administratorof any other state or by, the securities andexchange :commission 'denying, suspending orrevoking the pe r- son's registration or. license as abroker-dealer, agent or investment adviser, or isthe subject of an order of the securities andexchange commission or of a , securities ex-change or association registered under the se-curities , exchange act of 1934 suspending orexpelling such person from a securities exchangeor association or forbidding the association oraffi liation of the person with abroker-dealer orinvestment adviser, or is the subject of a U . . S..postal- service fraud order- . . The commissionermay not institute a revocation or suspensionproceeding under this paragraph more than oneyear from the date of' the order relied on, and thecommissioner , may not enter , an order, under thisparagraph on the basis of` an order under . an-other, sstate law or federal law unless the -oderwas based on facts which would currently consti-tute a ground fo r an order under, this section;

(g) Has engaged in dishonest or unethicalpractices in the securities or investment advisorybusiness or has taken unfair advantage - of acustomer ;

(h) Is insolvent, in the sense that liabilitiesexceed assets or that the ` person cannot meetobligations as they mature, or is in such 4inan-ciaLcondition that the person cannot continue inbusiness with safety to customer 's, or the persondoes not have sufficient financial responsibilityto carry out the obligationsincident ` to theper-son's operations ;

(i) Is not qualified on the basis of such factorsas training, experience and knowledge of thesecurities business ;

(j )' Has failed reasonably to supervisee agentsif a broker-dealer or, in the case of an investmentadviser, employes, to assure their compliance

59 .34 SECURITIES LAW 4258Electronically scanned images of the published statutes.

application to withdraw or within such shorterperiod as thee commissioner determines, unless arevocation or suspension proceeding is pendingwhen the application is filed or a proceeding torevoke or suspend or to impose conditions uponthe withdrawal is instituted within 30 days afterthee application is filed ,. . . If a proceeding ispending .g or instituted, withdrawal becomes ef-fective at such time and upon such conditions asthe commissioner by order dete rmines., If noproceeding is pending or instituted and with.-drawal automatically becomes effective, thecommissioner may institute a revocation or sus-pension proceeding for the grounds specifiedunder sub. (1) (b) within one year after with-drawal became effective and enter a revocationor suspension orde r as of the lastt date on whichthe license was in effect ..

(7) No order may be entered under thissection except under sub . (4) without appropr i-ate prior notice to the applicant or licensee, aswell as the employer or prospective employer ifthe applicant or licensee is an agent. In cases ofdenial orders written findings of fact and conclu-sions of law aree required only if requested by theapplicant .History: 19' 71 c . . 84 ; 1977 c . 125, 144 ; 19811 c . 5.3 as, 19 to

21 ; 43 ; 1981 c 334 s . 25 (1)

SUBCHAPTER IV

FRAUDULENT PRACTICES

551.41 Sales and purchases. It is unlawfulfor any pe rson, in connection with the offer, saleor purchase of any security in this state ; directlyor indirectly :

(1) To employ any device, scheme or Artificeto defraud ;

(2) ' To make any untrue . statement of amaterial fact or to omit to state a material factnecessary in order to make the statements made,in the light of the circumstances under whichthey are made, not misleading ; or _ -

(3) To engage in any act, practice or courseof businesswhich operates or, would operate as afraud or deceit upon any person .

Section 551,41 does not create private right o4' action..551 .59 (1) contains civil remedy for violation of 551 .41 (2),and limitation period in 551 .59 (5) applies. Colonial Bank &Trust Co.„ v American Bankshares, 478 F Supp „ 1186(1979) ,

See note to 895, 01, citing Continental Assut . . v:. AmericanBankshares .Coip 483, E Supp , 175 (1980) ,:

State was not required to prove that defendant enteredinto investment contracts with purpose or intent of defraudinginvestors Van Duyse v. Israel, 486 FSupp., 1382 (1980) , .

551.42 Market manipulation . It is unlawfulfor any person, directly or indirectly, in thisstate:

(1) To effect any transaction in a secu ritywhich involves no change in the beneficial own-

ership thereof ; or to enter any order or orders forthe purchase or sale of any security with theknowledge that an order or orders of substan-tially the same size, at substantially the sametime, and at substantially the same price, for thesale or purchase of the recur ity, have been or willbe entered by or for the same or affiliatedpersons, for the purpose of creating a false or'misleading appearance of active trading in thesecurity or a false or misleading appearancewith respect to the market for the security ;

(2) To effect, alone or with one or more otherpersons, a series of transactionss in any securitycreating actual or apparent active trading in thesecurity or, raising or depressing the price of thesecurity, for the purpose of inducing thepurchasee or sale of the security by others ; or

(3) To induce- the purchase or sale of anysecurity by the circulation or dissemination ofinformation to the effect that the price of thesecurity will or is likely to rise or fall because ofmarket operations of any one or more personsconductedd for', the purpose of raising or- depress-ing the price of the security, if he or she is sellingor offering to sell or purchasing or offering topurchase the security or, is receiving a considera••tian, directly or indirectly, from any suchperson .History: 1981 c. 53 s 43 . .'

551 .43 Broker-dealer activities. It is un-lawful for a broker-dealer to effect in this stateany transaction in, or to induce the purchase orsale of, any security by means of any manipula-tive, deceptive' or other fraudulent device orcontrivance,, including any fictitious quotation . .The commissioner may by rule define the terms"manipulative, deceptive ` or other fraudulentdevice or contrivance"„

551 .44 ` lldvisory activit ies. It is unlawfulfor any person who receives any considerationfrom another person primarily for advising theother person as to the value of securities or theirpurchase or sale, whether through the issuanceof analyses of reports or otherwise, in this state,to employ any ;device ; scheme or artifice todefraud-the other person ; or engage in any act,practice or course of business which operatess orwould operate as a fraud or deceit upon the otherperson; or take or have custody of any securitiesor funds of any client unless the adviser islicensed as a broker-dealer under this chapter .The commissioner may adopt rules defining theterms used in this section .

Hi s tory : 1981 c . 53 .

4259 SECURITIES LAW 551.44

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559.59 . . Administration . (1) This chaptershall be administered by the commissioner , ofsecurities . The commissioner shall appoint adeputyy commissioner, subject to s . 15 .04 (2)and (3) .. The commissioner may designate thedeputy commissioner, or any employe to performany duty or exercise any power or functionassigned to the commissioner when he or she isabsent from the office.

(2) It is unlawful for the commissioner orany officers or'employes of the office of thecommissioner, to use for personal benefit anyinformation which is filed with or obtained bythe commissioner' or an organization designatedunder.r s.. 551 . 32 (1) (a) and which is not gener-ally available to thee public. Nothing in thischapter authorizes the commissioner or anyofficers or employer of the office of the commis-sioner, to disclose any confidential informationexcept among themselves or to other securitiesadministrators or regulatory authorities or whennecessary or appropriate in a proceeding ' orinvestigation under this chapter , No pr ovisionof this chapter either creates or derogates fromany privilege which exists at common law orotherwisee when documentary or other ' evidenceis sought under a subpoena directed to thecommissioner or any officers or employes of ' theoffice of the commissioner..

History : 1971 c. 84 ; 1977 c„ 418 ; . 1981 c . . 5 .3 . .

551.52 Fees and expenses (1) (a) Thereshall be a minimum filing fee of $200 for everyregistration statementt filed under s, . 551,25 or551. :26 ., When a registration statement is with-drawn before the effective date or a pre-effectivestop order is ente red under s , 551 28, the mini-mum fee shall be retained.. Except as providedin par,, (b), there shalll be an additional fee ofone-tenth of one .petcent of the maximum aggre-gate, offering price at which the registered secur-ities are to be offered in this state, and themaximum filing fee shall be $400:.

(b) If the registration statement relates toredeemable securities issued by an open-endmanagement company, unit investment trust ora face amount certificate company, as defined inthe investment company act of 1940, the addi-tional fee shall be one-twentieth of one percentof the maximum aggregate offering price atwhich the registered securities are to be offeredin this state, and there shall be no maximumfiling fee., The commissioner may by rule permitthe registration of an indefinite amount of suchsecur ities and prescribe a method for payment ofthe filing fee . .

551 .54 Misleading filings. It is unlawful forany person to make or cause to be made, in anydocument filed with the commissioner' or filedunder s .. 551,32 (1) (a) with an organizationdesignated by thee commissioner, or in any pro-ceeding under this chapter; any statement whichis, at the time and in the light of the circum-stances under which it is made, false or mislead-ing in any material respect or, in connection withsuchh statement, to omit to state a material factnecessary in order to make the statements made,in the lightt of the circumstances under whichthey are made, not misleading .

History : . 1981 a 53

551.55 Unlawful representations . Neitherthe fact that a registration statement or an

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SUBCHAPTER V

GENERAL PROVISIONS

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(2) Every applicant for an initial or renewallicense under s . 551 . 32 shall pay a filing fee of$100 in the case of abroker-dealer, $20 in thecase of an agent or person representing aninvestment adviser, and $100 in the case of aninvestment adviser,, A broker-dealer o f invest-ment advisor maintaining any office within thisstate shall payy an additional filing fee of $30 foreach office,. When an application is denied orwithdrawn, the filing fee shall be retained „

(3) The -expenses reasonably attributable tothe examination of any matter arising under thischapter shall be charged to the applicant, regis-trant or' licenseee involved, but the expenses socharged shall not exceed such maximumamounts as thee commissioner by rule prescribes,

(4) The comm issioner may by rule requitethe payment of prescribed fees for delinquent ormaterially deficient filings of information ordocuments required under , this chapter, to befiled with the commissioner or an organizationdesignated under s „ 551 .32 (1) ' (a) .

<(5) All fees and expenses collected under thissection shall be paid into the state treasu r y "

History:- 1973 c. 333; : 19'7'7 c . 4 18 ; 1981 c 5.3 .

551 .53 Advertising. (1) It is unlawful forany person, in connection with the of'f'er; sale orpurchase of any security in this state, to publish,circulate or use any advertising which containsan untrue statement of a material fact or omitsto state a material fact necessary in order tomakee the statements therein, in the light of thecircumstances under which they were made, notmisleading „ All advertising shall be filed withthe commissioner, not later than the date ofpublication or, circulation, except as the eommis-sioner, may otherwise provide by rule or order

(2) The commissioner ' may by rule or order,prohibit the publication, circulation or use ofany advertising deemed false or misleading

History : 1 9' 71 c 84; 1975 c : 5 7; 1981 c 53

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forfeiture ; but no individual may be prosecutedor subjected to any penalty or forfeiture for, or onaccount of any transaction, matter or thingconcerning which the individual is compelled,after claiming his or her privilegee against self-incrimination, to testify or produce evidence,except that the individual testifying is not ex-empt from prosecution and punishment for per-jury or :contempt committed in testifying,Histo ry: 1975 c. 57; 1981 c.. 53 ss : 2'7, 43

551 .57 Injunc tions. Whenever' it appears tothe commissioner that any person has engagedor is about to engage in any act or practiceconstituting a violation of this chapter or anyrule or order hereunder, the commissioner maybring an action in the name of the state in thecircuit court of the appropriate county to enjointhe acts or, practices and to enforce compliancewith this chapter' or any rule or order hereunder,or the commissioner may refer the matter, to theattorney general or the district attorney of theappropriate county. Upon a proper showing, thecourt may `grant a permanent or temporaryinjunction or restraining order, or may appoint areceiver for the defendant or the defendant'sassets, or may order rescission of any sales orpurchases of securities determined to be unlaw-ful under this chapter, oor, any rule or orderhereundet , The court may not require thecommissioner to post a bond ..

History: 1971 c . . 84; 1981 c.. 53 s . 43 . .

551:5 Criminal penalties. (1) Any personwho wilfully violates any provision of this chap-ter, 'except s . 551 .54, or any rule under thischapter, or any order of which the person hasnotice, or who violates s .. 551 .54 knowing orhaving reasonable cause to believe that thestatement made was false or misleading in anymaterial respect, may be fined not more than$5,000 or imprisoned not more than 'S years orboth. Each of the acts specified shall constitutea separate offense and a prosecution or convic-tion for~ any one of such offenses shall not barprosecution or conviction fox- any other offense .N01'E Sub. (1) was amended by c hapter 53, laws of 1981,

to delete the tim e limitation on prosecution. Section 44 ofchapter 53 gives the applicability: date of vi olation s under thissecti on and of the successor s. 939.74.

(2)° The commissioner may refer such evi-dence as is available concerning violations ofthis, chapter or of anyy rule or order underr thischapter to the attorney general or the districtattorney of thee appropriate county ; who may,with or without any reference, institute theappropriate criminal proceedings under : thischapter. If referred to a district attorney, thedistrict attorney shall, within 90 days, file withthe commissioner- a statement concerning any

application for a license has been filed nor thefact thatt a security is effectively registered or aperson is licensed constitutes a finding by thecommissioner that any document filed underthis chapter is true, complete and not mislead-ing Neither any suchh fact norr the fact that anexemptionn or, exception is available for, a secur-ity or a transaction means that the commissioner'has passed in any way upon the merits or qualifi-cations of, or recommended or given approval to,any person, security or, transaction . . It is unlaw-ful to make, or cause too be made, to any prospec-tive purchaser,, customer or client any represen-tation inconsistent with the foregoing

551 .56 Investigations and subpoenas .( .1) The commissioner may :

(a) Make such public or private investiga-tions within or without this state as are neces-sary to determine whether any person has vio-lated or is about to violate this chapter or anyrule or, order under this chapter;; or to aid in theenforcement of this chapter or in the prescribingof rules and forms under, this chapter ;

(b) Require or, permit any person to file astatement in writing, under oath or otherwise asthe commissioner determines, as to all the factsand circumstances concerning the matter beinginvestigated;

(c) Publish information concerning any vio-lation of this chapter or any rule or order underthis chapter or concerning securities, or prac-tices`in the sale of securities, which appear ortend to be unfair', inequitable or fraudulent ; and

(d) Hold hearings, upon reasonable notice,and issue orders on the basis thereof, in respectof any matter, arising out of the administrationof thiss chapter .

(2) For the purpose of any -investigation,hearing or proceeding under this chapter, thecommissioner, oor' any officer designated by thecommissioner° may administer' oaths and affir-mations, subpoena witnesses, compel their at-tendance, take evidence and require the produc-tion of any books, papers, correspondence,memoranda, agreements or other documents or,records which the commissioner deems relevantor material to the inquiry Failure to obey asubpoena or give evidence may be dealt with inaccordance with s . :885,12,

(3) No person is excused from attending andtestifying or ;from producing any document orrecord before the commissioner-, or in obedienceto the subpoena< of the commissioner or anyofficer designated by'the. commissioner; or, inany proceeding instituted by the commissioner,on the ground that the testimony or- evidencerequired of the person may tend to incriminatehim or her, or, subject the person to a penalty or,

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(a) if the seller knew of the untrue statement ofa material fact or omission of a statement of amaterial fact or the person sustains the burdenof proof to establish that he or she did not knowand in the exercise of reasonable care could nothave known of the untrue statement or omission .

(3) Any person who wilfully participates inany act or transaction in violation of s.. 551 .42shall be liable to anyyother person who purchasesor sells any security at a price which was af-fected by the act ortransaction forr the damagessustained as a result of such act or transaction,Damages shall be the difference between theprice at which the other person purchased orsold securities andd the market value which thesecurities would have had at the time of his orher purchase or sale in the absence of the act ortransaction, plus interest at the legal rate ." (4) Everyy person who directly or indirectly

controls a person l iable under sub , (1) (2) or(3), every partner, principal executive officer or-director of such person, every person occupyinga similar status or performing similar functions,every .y employe of such person who materiallyaids in the act or transaction constituting theviolation, and every broker-dealer or agent whomaterially aids in the act or~ transaction consti-tuting the violation, are also liable ,jointly andseverally with and to the same extent as suchperson,unless the person liable hereunderproves that he or she did not know, and in theexercise of reasonable care could not haveknown, of the existence of the facts by reason ofwhich the liability is alleged to exist . There iscontribution as in cases of contract among theseveral persons so liable

(5) No action shall be maintained under thissection unless commenced before the expi rationof 3' years after the act or, transaction constitut-ing the violation or the expiration of one yearafter the discovery of the facts constituting theviolation, whichever fir st expires, but the timespecified ' for commencing such action shall beextended by reason of any fact and for the timespecified in ss. 893 .13 and 893.16 to 89 : 3 .2 .3 ..

(6) (a) No purchaser may commence anaction under this section °if, before suit is com-menced, the, pu rchaser has received a writtenoffer stating the respect in which liability underthis section may have arisen and fai rly advisingthe purchaser of his or her rights ; offering torepurchase the security for cash payable ondelivery of the security equal to the considera-tion paid, together with interest at the legal ratefrom the date of payment, less the amount of anyyincomee received thereon or, if the purchaser nolonger owns the -security, offering to pay thepurchaser upon: acceptance of the offer anamount in cash equal to the damages computed

action taken or, if no action has been taken, thereasons therefor .

(3) Nothing in this chapter limits the powerof thestate to punish any person for any conductwhich constitutes a c rime under any otherstatute..

History: 1981 c .. 53 . .

551.59 Civil liabilities. (1) (a) Any personwho offers or sells a security in violationn of s ..551 .21, 551 . . .31, 551,41 or, 551 .55 or any rulerelating thereto; or any condition imposed unders. 551.26 or 551 .27 or' any order under thischapter of which the person has notice is liableto the person purchasing the security from himor her . The person purchasing the security maysue either at law or in equity to recover- theconsideration paid for the .e security, together,with interest at the legal rate from the date ofpayment, less the amount of any income re-ceived on the security, upon the tender of thesecurity,, or for damages if the person no longerowns the security. Damages are the amount thatwould be recoverable upon a tender less thevalue of the security when thee purchaser dis-posed of it and interest at, the legal rate from thedate of disposition. Tender, shalll require onlynotice of willingness to exchange the security forthe amount specified .. Any notice may be givenby service as in civil actions or by certified mailaddressed to the last-known address of the per-son liable.

(b) A person who offers or sells a security inviolation of s. 551,41 (2) is not liable under par.(a) if the purchaser knew of the untrue state-ment of a material fact or omission of a state-ment of a material fact or the person sustains theburden .: of proof to establish that he or she didnot know and in the exercise of reasonable carecould not have known of the untrue statement oromission .

(2) (a) Any person who purchases a securityin violation of s , . 551 . 41 (2) is liable to theperson selling the security to him or her, whomay sue either at law or in equity to recover thesecurity, plus any income received by the pur'-chaser' the r eon, upon tender of the considerationreceived;. or forr damages if the purchaser nolonger owns the security . Damages are theexcess of the value of the security when thepurchaser disposed of it, plus interest at the legalrate from the date of disposition, over the consideration paid for the security., Tenderr requiresonly notice of willingness to pay the amountspecified in exchange for the security,, Anynotice may be given by service as in civil actionsor by certified mail to the last-known address ofthe person liable..,

(b) A person who purchases a security inviolation of s . 551 .41 (2) is not liable under par .

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gently investigated, disclose the fraud . Gieringer v .Silverman, 539 F ' Supp „ 498 (1982) .

551.60 Miscellaneous powers of commis-sioner . (1) The commissioner may by rule ororder require any issuer of securities registered`or exempted by order of thee commissioner underthis chapter or predecessor laws to file with thecommissioner, and distribute to its security hold-ers in this state at least annually specified finan-cial or other information concerning the issuer ,

(2) If the commissioner has reason to beli evethat any offer or sale of an unregistered securityis or would be unfair, inequitable or fraudulentto purchasers, the commissioner may by ordersummarily prohibit further offers or sales ofsuch security in this state until it is registeredunder this chapter . . If the commissioner hasreasonn to believe that any security is beingoffered or sold in this state by any unlicensedperson in violation of this chapter or any rule ororder, heteundet, the commissioner may by or-der summarily prohibit such person from fur-ther offers or sales of securities in this state untillicensed under this chapter . ; If the commissionerhas reason to believe that any unlicensed personis transacting business in this state as an invest-ment advisor inn violation of this chapter' or anyrule or order promulgated under this chapter-,the commissioner may by order summarily pro-hibit such person from further engaging in suchactivity in thisstate until licensed under thischapter.

(3) If the public interest and the protectionof investors so require, the commissioner may byorder summarily suspend all t rading in this stateby broker-dealers and agents in any security forany period speci fied. No broker-dealer, or agentmay effect any transaction in, or induce orattempt to induce the purchase or sale of, anysecurity in this state in which trading is sosuspended, except in performance of a contractpreviously entered into . ' At any time after theissuance of an order under this subsection, anyinterested: person may in writing request that thesuspension of trading be vacated , Upon thereceipt of a written request, the matter shall benoticed for- hearing and a hearing shall be held inthe manner provided in s , 551 .61 (2) , After thehearing, the commissioner may order- the sus-pension to be continued until modified or va-cated by further order upon a finding thattrading in the security will be unfair or inequita-ble or will tend to work a fraud upon thepurchasers or sellers of the security .. Otherwise,the commissioner shall vacate the suspension oftrading and no further order may be enteredunder this subsection with respect to the samesecurity in the absence- of changed circum-stances ,justifying an order.,

in accordance with sub.. (1); and stating that theeoffer, may be accepted by the purchaser at anytime within a specified period of not less than ;30days after the date of receipt thereof' or suchshorter period as the commissioner may by ruleprescribe; and the purchaser has failed to acceptsuch offer in writing within the specified period s

(b) No seller may commence an action underthis section if, before suit is commenced,, theseller has received a w ritten offer stating therespect in which liability under this section mayhave arisen and fairly advising the seller of his orher rights; offering too return the security plusthe amount of any income received thereon uponnpayment of the consideration received, or, if thepurchaser ' no longer; owns the security, offeringto pay the seller upon acceptance of the offer anamount in cash equal to the damages computedin accordance with sub . . (2); and providing thatthe offer' may be accepted by the seller at anytime within a specified period of not less than 30days after the date of receipt thereof; and theseller has failed to accept the offer in writingwithin the specified period. - ,

(c) Offers shall be in the form and containthe information ' the commissioner by ruleprescribes . Every offer- under this subsectionshall be !< delivered to the offetee or, sent bycertified mail addressed to the offeree at theofferee's last-known address . If an offer' is notperformed in accordance with its terms, suit bythe offeree under this section shall be permittedwithout regard to this subsection .

(7) No person Who has made or engaged inthe performance of any contract in violation ofthis chapter, or any rule or order hereunder, -or-whohas acquired any purported right under, anycontract with knowledge of the facts by reasonof which its making' or performance was inviolation, may base any suit on the contract,;

(8) Any condition, stipulation or provisionbinding any person acquiring any security towaive - compliance with . any provision of thischapter or any rule or order , hereunder is void .

(9) The rights and remedies under this chap-ter are in addition to any other rights or reme-dies that may exist at law or in equity .

H-listacy: . 1979 c. 323 s.. 33; 1981 c 53 ss. 29 to 33, . 43 . .Civil action brought in Wisconsin under federal law is sub-

ject to limitation under (5) . Cahill v . : Emst & Ernst, 625 :F(2d) 151 ` (1980) .

Section 551 59 (5) applies to actions arising out of sales of'securities under SEC rules-rather than 893 .19 (7) [now893 93 (1,) (b)] ., Kramer v Loewi & Co ,; Tne -357 , FSupp.83

Interpretation of phrase, "discovery of the facts constitut-ing the fraud", in (5) ,, Cahill v `Einst & Ernst, 448 F Supp, .84(1978),

See note to 551 .41, citing Colonial Bank & Trust Co., v. .American`Bankshares, 478 F Supp 1186 (1979) „`

See note to 895 01, citing Con6nental,Assuc v Amer icanBankshaces Cor p . 483 F Supp. 175 (1980).. .

'' Limitation period under : (5) begins to run when defraudedparty, is in possession of such essential facts as will, if dili-

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reviewed only if the party seeking review hasrequested a hearing within the time provided bysub:. (2)--History: . 1971 c.. 84; 1975 c ., 57, 199, 414 ; 1981 c 53.

551.62 Stay of proceedings. (1) No in-,junctionn shall issue in any proceeding under ; s ,551 .61 suspending or staying any order of thecommissione r;, except upon application to thecircuit court of the appropriate county, notice ofwhich shall be given to the commissioner anddother parties to the proceeding, and except: afteropportunity for r hearing thereon . No injunctionshall issue in any other - proceeding or action, inany court, which shall have the effect of delay-ing or preventing any such order , from becomingeffective, unless thee parties - to the proceedingbefore - the. commissioner are also parties to theecourt , proceeding or action, and except afterrnotice and opportunity for hearing thereon

(2): No injunction shall issue in any proceed-ing under s. 551=.61 o f in any other proceeding oraction, : in anyy court, suspendingg or staying anyorder of the commissioner, or having the effect ofdelaying or preventing any such order frombecoming effective, unless an undertaking isentered into on the part ' of the petitioner, orplaintiff, with a surety and in the sum the courtor the presiding judge thereof directs or ap-proves to the effect that the petitioner or plain-tiff will pay alll damages which any party sus-tains by the suspension or stay of' the order or thedelay or prevention of the order from becomingeffective, and to such other effect as the court orjudge directs, and no order orjudgment in anyproceeding or action shall be stayed on appealtherefromm unlesss a like undertaking is enteredinto by the petitioner or, plaintiff in addition tothe undertaking under s . 808 . . 07 .

History: 19'71 c. 84; Sup. . Ct . Order, 67 W (2d) 7 '76 ;19'1 ' 7c 187 s : . 135 .

551.63 '' Rules, forms and orders . (1) Thecommissioner' may make, amend and rescindany rules, forms and orders that are necessar y tocarry out this chapter, including rules, and formsgoverning registration statements, applicationsand reports, and defining any terms, whether ornot used in this chapter, insofar as the defini-tions, are nott inconsistent with this chapter :. Forthe purpose of rules and forms, the commis-sionermay classify securities, persons and mat-ters within the commissioner'sprescribe different requirements for differentclasses. Rules shall be made and published inaccordance with ch. 227 .

(2) No rule, form or order may be made,amended or rescinded unless the commissionerfinds that the action is necessary or appropriatein the public interest and for the protection of

(4) Every corporation, partnership or associ-ation having its principal office in this state orwhose securities have been registered under thischapter or predecessor, laws shall,within 20 daysafter receipt .t of written request from the com-missoner, made in connection with any investi-gation under s . 551 . :56 (1), furnish the commis-sioner with a list of all. of part of its securityholders as the commissioner requests, showingthe amount of securities held by each securityholder and the date of issuance of such securitiesand information reasonably related thereto,signed by the president, secreta ry or partner ofthe issuer ors person occupying a similar statusor performing similar functions.

(5) The commissioner may take such actionas is authorized under 7 `USC 13a-2, asamended .

History: 19 7 1 c. . 84; 1975 c.. 57, 199; 1977 c 144; 1981 c ,53 ss ,,34, 35, 43 ,

551 .61 Hearings and judicial review. (1)No order, other than an order issued summarilysubject to sub (2), may be entered by thecommissioner - under, s 551 . 24,- 551 ..28,551 , 34 or551.53 (2) without appropriate prior notice toall interested parties ; opportunity for a hearingand, except as provided by s :. 551 .. .34 (7), writtenfindings of fact and conclusions of law . .

(2) Within 30 dayss after the commissioner'has issued an order, ssummarily, an interestedparty may file a written request with the -com-missioner, for a hearing in respect to any matter'sdetermined by the order, except a party may filea request for a hearingregarding an order issueddunder s, 551 .60 (3) at any time . Within 10 daysafter an interested, person files a written requestwith the commissione r for a hearing, the mattershall be noticed for ' hearing, and a hearing shallbe held w ithin 60 days after notice, unless : ex- .tendedd by the commissioner for, good cause.,During the pendency of any hearing requestedunder this subsection, the order issued summai •-ily shall remain in effect unless . vacated , ormodified by the commissioner .

(3) - . After. a hearing, the commissioner mayissuee a final order as appropr iate. The , finalorder may affirm, vacate or modify an orderissued summarily in effect during the pendencyof the hearing as appropriate, or may includesuch other sanctions as are provided for under s .55. 1 ..24; : 551 .28 or 551-..34 An order issuedsummarily against a party becomes a final orderrif the party fails to request a hearing under sub „(2) or if the party defaults after requesting ahearing .

(4) Hearings and rehearings shall be public.(5) Orders of the commissioner. are subject

to ',judicial review under, ch 227 but ordersoriginally entered without a hearing may be

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as agent shall file with the commissioner or, ifapplying for 'a license, with the organizationdesignated by the commissioner under s .. 551,32(i) (a), an irrevocable consent appointing thecommissioner or the commissioner's successor inoffice to be his or her attorney to receive serviceof any lawful process in any noncriminal suit,action or ` proceeding against him or her or asuccessor-, executor or administrator whicharises under this chapter or any rule or orderunder this chapter after ' the consent has beenfiled, with the same validity as if served person-ally on the person filing the consent . Theconsent shall be in the formthe commissioner byrule prescribes : The consent need not be filed bya person who has filed a consent in connectionwith a previous registration or license which isthen in effect :; Service may be made by leaving acopy of the process in the office of the commis-sioner, but it is not effective unless the plaintiff,who may be the commissioner in a suit, action or 'proceeding instituted by the commissioner,promptly sends notice of the service and a copyof the process by registered or certified mail tothe defendant or respondent at the person's lastaddress on file with the commissioner, and theplaintiff's affidavit of compliance with this sub-section is filed in the case on or before the returnday of the process, or within such time as thecourt allows.

(2) When any person, including any nonresi-dent of this state, engages in conduct prohibitedor made actionable by this chapter or, any rule ororder under this chapter, and the person has notfiled a consent to service of process under sub .(1) and personal jurisdiction over the personcannot otherwise be obtained in this state, thatconduct shall be considered equivalent to theperson's appointment of the commissioner to behis or her attorney to receive service of anylawful process in any noncriminal suit, action or'proceeding against the person or ' the person'ssuccessor, executor or administrator whicharises out of that conduct and which is broughtunder this chapter~ or any rule or order under thischapter, withh the same validity as if served onhim or her, personally. Service may be made byleaving a copy of the process in the office of thecommissioner, but it is not effective unless theplaintiff, who may be the commissioner in a suit,action or proceeding instituted by the commis-sioner, promptly sends notice of the service and acopy of the process by registered or certifiedmail to the defendant or respondent at theperson's last-known address or takes other' stepswhich are reasonably calculated to give actualnotice; and the plaintiff's affidavit of compli-ance with this subsection is filed in the case on orbefore the return day of the process or withinsuch time as the court allows .,

551 .65 Service of process. (1) Every ap-plicant for license or registration under thischapter and every issuer which proposes to offera 'security in this state through any person acting

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investors. In prescribing , rules and forms thecommissioner may cooperate with the securitiesadministrators of other states and the securitiesand exchange commission with a view to achiev-ing maximum uniformity in the form and con-tent of registration statements, applications andreports :wherever practicable. .

(3) The commissioner may by rule or orderprescribe the form and content of financialstatements requir-ed under this chapter , the cir-cumstances under which consolidated ' financialstatements shall be filed; and whether any re-quired financial statements shall be certified byindependent or certified . public accountants., Allfinancial statements shall be prepared in accord-ance with generally accepted accounting prac-tices unless otherwise permitted by rule or order-.

(4) No provision of this chapter imposingany liability applies to any act done or omitted ingood faith in conformity with any rule, form ororder of the commissioner, notwithstanding thatthe rule, form or order , may later be amended orrescinded or be determined to be invalid for anyreason

History: : 1981 c . . 53 s . 43.

551 .64 Administrative files and opinions.(1) A document is filed when it is received bythe commissioner- or' , if authorized under s ..551 .32 (1) (a), an organization designated bythe commissioner' .

(2) The commissioner ' shall keep a register ofall licenses and registration statements whichare or have ever been effective under this chap-ter and predecessor laws and all denial, suspen-sion or revocationn orders which have been en-tered under- this chapter and predecessor laws .The register shall be open for public inspection .

(3) The information contained in or filedwith any registration statement, application orreport shall be made available to the public inaccordance with rules adopted by thecommissioner ..

' (4) The commissioner upon request shallfurnish to any person at a reasonable chargephotostatic or other copies, certified under thecommissioner's seal of office, if ce r tification isrequested, of any entry in the register or anyorder or, other document on file in the commis-sioner's office, Any copy so certified is admissi-ble in evidence under s.. 889 .. 18 . .

(5) The commissioner may honor requestsfrom interested persons for, interpretativeopinions..

History. 1981 c.. 53 ss. 40, 43 . .

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551.65 SECURITIES LAW 4266

(3) When processs is served under this section this state, and has not previously been communi-the court, or the commissioner, in a proceeding Gated to the offeror, orally or in writing, outsidebefore the commissioner, shall order such con- thiss state ; and acceptancee is communicated totinuance as is necessary to afford the defendant thee offeror in this state, whether or not eitheror respondent reasonable opportunity to defend party is then present in this state, . when the

Histo ry: 1981 c 53 ss 41, as3 offeree directs it to the offeior in this statereasonably believing the oYferor to be in this

551 .66 Scope of chapter. (1) The provi- state and it is received by the.offeror in this state .sions of this chapter concerning sales and offers (4) An offer to sell or to purchase is not madeto sell apply when a sale or offer to sell is made in in this state when the publisher circulates or

this state or when an offer to purchase is made there is circulated on the publisher's behalf inand accepted in this state . . The provisions con- this state any bona fide newspaper or othercerning purchases and of'f'ers to purchase applywhen a purchase or offer to purchase is made in publication of general, regular and paid citcula-this state or an of'f'er to sell is made and accepted tion which is not published in this state, or ain this state radio or' television program originating outside

(2) For the purpose of this section, an offer to this state is received in this state .;sell or, to purchase is made in this state, whether story : 1971 c. sa; 1981 c 53

r This section focuses on locusof certa in actions, regardlessor not either party is then present in this state,, of either party's presence, F'eitlerv . Midas Associates, ai8Fwhen the offer originates from this state or is Supp 7.3s,directed by the of 'f'erox to this state and receivedby the of 'feree in this state, but for, the purpose of 551 .67 Statutory policy . This chapter shalls. 551 21, an offer to sell which is not directed to be so construed as to effectuate itss generalor received ; by the offeree in this state is not purpose to make uniform the law of those statesmade inthis state ., which enact the "Uniform Securities Act" and

(3) For the purpose of this section, an offer to to coordinate the interpretation and administra-puichase'oi to sell is accepted in this state when tion of this chapterr with related federalacceptance is communicated tothe offeror in regulation ..

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