Purpose

Conforms Arizona statute to federal law in order to provide for more uniform securities regulation among the states. Modifies the Commerce and Economic Development Commission membership.

Background

The Arizona Corporation Commission (ACC) contains a securities division that is responsible for overseeing, implementing and administering statutes dealing with the securities industry, commonly known as the Arizona Securities and Investment Management Acts. Included in the oversight activities are the registration of securities dealers and salesmen, investment advisers and their representatives; review of their conduct; investigation of possible violations; and the initiation of administrative, civil or criminal enforcement actions.

Investment Advisers Registration Depository (IARD)

Currently, the certification and licensing process can be long and cumbersome, considering the technology that is available today. Also, multiple governing bodies require identical registration criteria causing firms to produce the same information multiple times, which inhibit their efficiency. The Securities and Exchange Commission (SEC) adopted a set of rules in September 2000 that creates an electronic filing system for IARD. The National Association of Securities Dealers will operate the IARD, and all federally registered investment advisers are required to use the IARD. The Securities Division proposes placing the IARD filing requirement on state-licensed investment advisers. This requirement will decrease paperwork for investment advisers by allowing them to update their registration information on-line and provide increased consumer protection through ease of access to information.

Subpoenas

In addition, security agencies in other states sometimes seek to issue subpoenas in Arizona, but the ACC cannot enforce subpoenas on behalf of other state security agencies at this time. S.B. 1044 allows the ACC to issue and enforce subpoenas on behalf of another state.

Commerce and Economic Development Commission (CEDC)

The Director of the Securities Division of the ACC is currently part of the CEDC. While the CEDC handles economic development issues, including financial decisions, the ACC is responsible for regulating business activities. The Director of Securities Division acts only as an adviser on regulatory issues for the CEDC. The ACC seeks to remove the Director of Securities from a board primarily making commercial and economic development decisions, since the CEDC does not deal with regulatory issues.

According to the State Department of Banking, there is no fiscal impact associated with S.B. 1044.

Provisions

IARD

1. Strikes definitions and references regarding the Securities Registration Depository system and substitutes IARD filing requirements on investment advisers seeking licensure in Arizona.

Subpoenas

2. Authorizes the ACC to issue and enforce subpoenas that are requested by another state securities agency if the activities being investigated would violate Arizona’s laws.

Commerce and Economic Development Commission

3. Replaces the Director of the Securities Division of the Arizona Corporation Commission as a member of the Commerce and Economic Development Commission with a member appointed by the Governor.

Miscellaneous

4. Eliminates certain information required for registration of dealers, such as information regarding securities sales in the state, potential locations for branch offices and changes in ownership requirements.

5. Requires securities issuers to submit disclosure documents as prescribed by the ACC, and offers a completed small company offering registration form as adopted by the North American Securities Administrators Association as an example.

6. Makes numerous conforming and technical changes.

7. Provides for a general effective date.

Prepared by Senate Staff