corporation commission;
securities enforcement
DP |
Committee on Financial Institutions & Insurance |
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DPA |
Committee on Commerce and Economic Development |
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X |
Caucus and COW |
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Third Read |
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As Passed the House |
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SB 1107 expands the regulatory oversight of the Securities Division of the Arizona Corporation Commission with regards to viatical settlement contracts and variable contracts. The legislation would also grant authority to attorneys in the Securities Division to conduct legal administrative and civil proceedings.
SB 1107 passed the Financial Institutions and Insurance committee unamended. The bill was amended in the Commerce and Economic Development committee to exempt viatical settlement companies and sales representatives from the ACC securities division licensing requirements.
Laws, 2000 (SB 1265, Chapter 108) made numerous changes that govern the Securities Division of the Arizona Corporation Commission [ACC]. The Securities Division oversees the registration of investment advisers and their representatives, securities dealers and securities brokers. In addition, the Division is responsible for reviewing their conduct, investigating possible violations and initiating the appropriate administrative, civil or criminal enforcement actions. While the division utilizes staff counsel for investigative and enforcement matters, there is no statutory authority for division attorneys to represent the Commission in administrative and civil proceedings. They are reliant on the Office of the Attorney General (OAG). Currently, the OAG does not have dedicated counsel for the Commission and timely response to consumer complaints is problematic. The proposed legislation grants authority to attorneys in the Securities Division to conduct legal administrative and civil proceedings.
Another issue previously addressed related to the ACC’s oversight of viatical settlement contracts. Viatical settlements allow life insurance policyholders to sell their policies to investors for immediate cash benefits. These transactions are prevalent among terminally ill patients and the elderly. Questionable sales practices guaranteeing a high rate of return at no risk to investors is a problem the ACC seeks to address. Current law requires persons who perform three or more viatical or life settlement investment contracts per year to register with the ACC. SB 1107 would require sales representatives or dealers of viatical settlements to register with the ACC and contains enhanced enforcement provisions for fraudulent activity.
In addition, current law does not
clarify the role of the ACC and the common sales practices relating to variable
contracts. Variable contracts are
securities that provide for life insurance or annuity benefits. The Arizona Department of Insurance has
regulatory oversight of the agents selling these products as they relate to
insurance, but refers all investigations relating to the variable investment
contracts to the Securities Division.
SB 1107 would also require persons who sell variable contracts to
register with the Commission.
· Authorizes attorneys employed by the Securities Division to represent the Commission in administrative and civil matters.
· Requires dealers and salesmen engaging in transactions involving variable contracts and viatical settlement and investment contracts to register with the Commission.
· Modifies the balance sheet information requirements submitted in support of registered securities to reflect current accounting standards.
· Specifies that the balance sheet requirement must reflect the financial condition of the company not more than 120 days prior to filing with the Division. The department is authorized to establish alternative financial requirement by rule.
· Stipulates that dishonest or unethical practices are grounds for revocation or suspension of a dealer’s license. The ACC may forward evidence of criminal conduct to the United States Attorney, the Attorney General or county attorney.
· Provides that dealers or salesmen that offer investment advice are subject to the antifraud provisions of the Investment Management Act.
· Authorizes the Securities Division to impose administrative penalties and order the dealer to cease and desist conducting business. The Division may also take affirmative action to address violations, including restitution.
· Allows the ACC to name a spouse in an administrative action to determine the liability of the community.
· Conforms the rehearing procedure to that of the Utilities Division. Filing an application for a rehearing of a denied application does not stay the ACC’s decision. The application is considered denied if a rehearing is not granted within twenty calendar days from the request of a rehearing.
· Adopts current accounting terminology and contains technical and conforming changes.
SB 1107 was amended
in the Commerce and Economic Development Committee as follows:
· Stipulates that viatical or life settlement investment contracts are exempt from the ACC Securities Division licensing requirements.
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45th Legislature
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Second Regular Session 3 April
16, 2002
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