Substitute Senate Bill No. 1039

Public Act No. 99-38

An Act Concerning the Securities and Business Investment Law of Connecticut.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subdivision (11) of section 36b-3 of the general statutes is repealed and the following is substituted in lieu thereof:

(11) (A) "Investment adviser agent" includes (i) any individual, including an officer, partner or director of an investment adviser, or an individual occupying a similar status or performing similar functions, employed, appointed or authorized by or associated with an investment adviser to solicit business from any person for such investment adviser, within or from this state, and who receives compensation or other remuneration, directly or indirectly, for such solicitation; or (ii) any partner, officer, or director of an investment adviser, or an individual occupying a similar status or performing similar functions, or other individual employed, appointed, or authorized by or associated with an investment adviser, who makes any recommendation or otherwise renders advice regarding securities to clients and who receives compensation or other remuneration, directly or indirectly, for such advisory services.

(B) "Investment adviser agent" does not include an individual employed, appointed or authorized by, associated with or acting on behalf of an investment adviser exempt from registration under subdivision (1) or (2) of subsection (e) of section 36b-6, who is a "supervised person", as defined in Section 202(a)(25) of the Investment Advisers Act of 1940, unless [(i) more than ten per cent of the advisory clients are natural persons and the supervised person has a place of business in this state, (ii) the supervised person on a regular basis solicits, meets with, or otherwise communicates with clients of the exempt investment adviser in this state, and (iii) the supervised person does not exclusively render impersonal investment advice] such supervised person is an "investment adviser representative", as defined in Securities and Exchange Commission Rule 203A-3, 17 CFR 275.203A-3.

[(C) For purposes of subparagraph (B) of this subdivision: (i) "Impersonal investment advice" means investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts; (ii) "natural person" does not include an individual who immediately after entering into the investment advisory contract with the exempt investment adviser has at least five hundred thousand dollars under management with such investment adviser, or who the exempt investment adviser reasonably believes, immediately prior to entering into the advisory contract, has a net worth together with assets held jointly with a spouse, at the time the contract is entered into, of more than one million dollars; and (iii) "supervised person" means any partner, officer, director, or other person occupying a similar status or performing similar functions, or employee of an exempt investment adviser, or other person who provides investment advice on behalf of such investment adviser and is subject to the supervision and control of such investment adviser.]

[(D)] (C) "Investment adviser agent" does not include such other individuals not within the intent of this subdivision as the commissioner may by regulation or order designate.

Sec. 2. Subsection (a) of section 36b-15 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) The commissioner may by order deny, suspend or revoke any registration or by order restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if he finds (1) that the order is in the public interest and (2) that the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer or investment adviser: (A) Has filed an application for registration which as of its effective date, or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact; (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-33, inclusive, or a predecessor statute or any regulation or order under said sections or a predecessor statute; (C) has been convicted, within the past ten years, of any misdemeanor involving a security, any aspect of the securities business, or any felony, provided any denial, suspension or revocation of such registration shall be in accordance with the provisions of section 46a-80; (D) is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities or commodities business; (E) is the subject of a cease and desist order of the commissioner or an order of the commissioner denying, suspending, or revoking registration as a broker-dealer, agent, investment adviser or investment adviser agent; (F) is the subject of any of the following sanctions that are currently effective or were imposed within the past five years: (i) An order issued by the securities administrator of any other state, Canadian province or territory, or by the Securities and Exchange Commission or the Commodity Futures Trading Commission denying, suspending or revoking registration as a broker-dealer, agent, investment adviser, investment adviser agent or a person required to be registered under the Commodity Exchange Act, as amended, 7 USC 1 et seq., and the rules and regulations thereunder, or the substantial equivalent of those terms as defined in sections 36b-2 to 36b-33, inclusive, (ii) an order of the Securities and Exchange Commission or Commodity Futures Trading Commission suspending or expelling him from a national securities or commodities exchange or national securities or commodities association registered under the Securities Exchange Act of 1934 or the Commodity Exchange Act, as amended, 7 USC 1 et seq., or, in the case of an individual, an order of the Securities and Exchange Commission or an equivalent order of the commodity futures trading commission barring the individual from association with a broker-dealer or an investment adviser, (iii) a suspension, expulsion or other sanction issued by a national securities exchange or other self-regulatory organization registered under federal laws administered by the Securities and Exchange Commission or the Commodity Futures Trading Commission if the effect of the sanction has not been stayed or overturned by appeal or otherwise, (iv) a United States Post Office fraud order, or (v) a cease and desist order entered by the Securities and Exchange Commission or the securities agency or administrator of another state or Canadian province or territory; but (aa) the commissioner may not institute a revocation or suspension proceeding under this subparagraph more than one year from the date of the sanction relied on, and (bb) he may not enter an order under this subparagraph on the basis of an order under another state act unless that order was based on facts which would constitute a ground for an order under this section; (G) may under federal law be denied registration as a broker-dealer, agent, investment adviser, investment adviser agent or as a person required to be registered under the Commodity Exchange Act, as amended, 7 USC 1 et seq., and the rules and regulations promulgated thereunder, or the substantial equivalent of those terms as defined in sections 36b-2 to 36b-33, inclusive; (H) has engaged in dishonest or unethical practices in the securities or commodities business; (I) is insolvent, either in the sense that his liabilities exceed his assets or in the sense that he cannot meet his obligations as they mature; but the commissioner may not enter an order against a broker-dealer or investment adviser under this subparagraph without a finding of insolvency as to the broker-dealer or investment adviser; (J) is not qualified on the basis of such factors as training, experience, and knowledge of the securities business, except as otherwise provided in subsection (b) of this section; (K) has failed reasonably to supervise his agents if he is a broker-dealer or an agent charged with exercising supervisory authority on behalf of the broker-dealer, or his investment adviser agents if he is an investment adviser; (L) in connection with any investigation conducted pursuant to section 36b-26 or any examination under subsection (d) of section 36b-14, has made any material misrepresentation to the commissioner or upon request made by the commissioner, has withheld or concealed material information from, or refused to furnish material information to the commissioner, provided, there shall be a rebuttable presumption that any records, including, but not limited to, written, visual, audio, magnetic or electronic records, computer printouts and software, and any other documents, that are withheld or concealed from the commissioner in connection with any such investigation or examination are material, unless such presumption is rebutted by substantial evidence; or (M) has failed to pay the proper filing fee; but the commissioner may enter only a denial order under this subparagraph, and he shall vacate any such order when the deficiency has been corrected. The commissioner may not institute a suspension or revocation proceeding on the basis of a fact or transaction known to him when the registration became effective unless the proceeding is instituted within one hundred eighty days of the effective date of such registration.

Sec. 3. Subsection (a) of section 36b-19 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) A registration statement may be filed with the commissioner, or with any other depository that the commissioner may designate by regulation or order, by the issuer, any other person on whose behalf the offering is to be made or a registered broker-dealer.

Sec. 4. Section 36b-21 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) The following securities are exempted from sections 36b-16 and 36b-22: (1) Any security including a revenue obligation issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporate or other instrumentality of one or more of the foregoing; or any certificate of deposit for any of the foregoing; (2) any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency or corporate or other instrumentality of one or more of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; (3) any security issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution or trust company organized and supervised under the laws of any state; (4) any security issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any savings and loan or similar association organized under the laws of any state; (5) any security issued by and representing an interest in or a debt of, or guaranteed by, any insurance company organized under the laws of any state and authorized to do business in this state; (6) any security issued or guaranteed by any federal credit union or any credit union, industrial loan association or similar association organized and supervised under the laws of this state; (7) any security issued or guaranteed by any railroad, other common carrier, public utility or holding company which is (A) subject to the jurisdiction of the Interstate Commerce Commission or its successor agency; (B) a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a company within the meaning of that act; (C) regulated in respect of its rates and charges by a governmental authority of the United States or any state; or (D) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, any state, Canada or any Canadian province; (8) (A) any security appearing on the list of over-the-counter and foreign securities approved for margin by the Board of Governors of the Federal Reserve System which is not otherwise a covered security, (B) any warrant or right to purchase or subscribe to any security described in subparagraph (A) of this subdivision, and (C) any warrant or right to purchase or subscribe to any security listed or approved for listing upon notice of issuance on (i) the New York Stock Exchange, the American Stock Exchange, the Chicago Board Options Exchange and such other securities exchanges as may be designated by the commissioner from time to time, (ii) the list of over-the-counter securities approved for margin by the Board of Governors of the Federal Reserve System where such security is a covered security, or (iii) the national market system of the National Association of Securities Dealers Automated Quotation System established pursuant to the Securities Exchange Act of 1934; (9) any security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic or reformatory purposes, or as a Chamber of Commerce or trade or professional association; (10) any commercial paper which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of such paper which is likewise limited, or any guarantee of such paper or of any such renewal; (11) any security issued in connection with an employees' stock purchase, stock option, savings, pension, profit-sharing or similar benefit plan; (12) any security issued by any cooperative apartment corporation incorporated under the laws of this state, located in and operating wholly within the borders of this state, in conjunction with the execution of proprietary leases; (13) any security issued by any person, organized and located in this state and operating exclusively for the purpose of promoting the industrial or commercial development of this state, or such development of any political subdivision thereof or such development of any regional planning area within this state, if such persons are approved by the Commissioner of Economic and Community Development and such approval has been certified, in writing, by said Commissioner of Economic and Community Development to the commissioner; such approval and certification shall be conclusive as to the nature and purpose of such person; (14) any security issued by the Connecticut Development Credit Corporation; (15) any security issued by any nonstock corporation, which is incorporated under the laws of this state as a cooperative marketing corporation and has its principal place of business in this state, and which is a farmers' cooperative organization as defined in Section 521 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, if such corporation has been certified in writing by the Connecticut Department of Agriculture to the commissioner to be a bona fide cooperative marketing corporation; such certification shall be conclusive as to the nature and purpose of such corporation; (16) any security issued by all cooperative associations organized or existing under chapter 595; (17) any security issued by any person organized, located and operating within or from the borders of this state, when selling or offering for sale an interest in real estate limited partnerships or real estate syndications exclusively, if such person has obtained a permit from the Real Estate Commission; (18) any security which, prior to or within sixty days after October 1, 1977, has been sold or disposed of by the issuer or bona fide offered to the public, but this exemption shall not apply to any new offer of any such security by an issuer or underwriter subsequent to such sixty days; (19) any interest or participation in any common trust fund or similar fund established and maintained by a bank, or by one or more banks under common control as otherwise authorized by general statute, exclusively for the collective investment and reinvestment of assets contributed thereto by such bank in its fiduciary capacity; (20) any security issued by a worker cooperative corporation formed under the provisions of sections 33-418f to 33-418o, inclusive; (21) any other security that the commissioner may exempt, conditionally or unconditionally, on a finding that registration is not necessary or appropriate in the public interest or for the protection of investors.

(b) The following transactions are exempted from sections 36b-16 and 36b-22: (1) Any isolated nonissuer transaction, whether effected through a broker-dealer or not; (2) any nonissuer transaction by a registered agent of a registered broker-dealer in a security of a class that has been outstanding in the hands of the public for at least ninety days provided, at the time of the transaction: (A) The security is sold at a price reasonably related to the current market price of the security; (B) the security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security; (C) a nationally recognized securities manual contains (i) a description of the business and operations of the issuer; (ii) the names of the issuer's officers and directors or, in the case of a non-United States issuer, the corporate equivalents of such persons in the issuer's country of domicile; (iii) an audited balance sheet of the issuer as of a date within eighteen months, or in the case of a reorganization or merger where the parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet; and (iv) an audited income statement for each of the issuer's immediately preceding two fiscal years, or for the period of existence of the issuer, if in existence for less than two years, or in the case of a reorganization or merger where the parties to the reorganization or merger had such audited income statement, a pro forma income statement; and (D) the issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, or designated for trading on the National Association of Securities Dealers Automated Quotation System, [except that the] unless the issuer, including any predecessors of the issuer (i) has been engaged in continuous business for at least three years or (ii) has total assets of at least two million dollars based on an audited balance sheet of the issuer as of a date within eighteen months, or in the case of a reorganization or merger where the parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet. The exemption in this subdivision shall not be available for any distribution of securities issued by a blank check company, shell company, dormant company or any issuer that has been merged or consolidated with or has bought out a blank check company, shell company or dormant company unless the issuer or any predecessor has continuously operated its business for at least the preceding five years and has had gross operating revenue in each of the preceding five years, including gross operating revenue of at least five hundred thousand dollars per year in three of the preceding five years; (3) any nonissuer distribution of an outstanding security if the security has a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year or within the three preceding fiscal years, or during the existence of the issuer and any predecessors if less than three years, in the payment of principal, interest or dividends on the security; (4) any nonissuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy; but the commissioner may by regulation require that the customer acknowledge upon a specified form that the sale was unsolicited, and that a signed copy of each such form be preserved by the broker-dealer for a specified period or that the confirmation delivered to the purchaser or a memorandum delivered in connection therewith shall confirm that such purchase was unsolicited by the broker-dealer or any agent of the broker-dealer; (5) any transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters; (6) any transaction in a bond or other evidence of indebtedness secured by a real or chattel mortgage or deed of trust or by an agreement for the sale of real estate or chattels, if the entire mortgage, deed of trust or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit; (7) any transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, creditors' committee in a proceeding under the Bankruptcy Act, guardian or conservator; (8) any transaction executed by a bona fide pledgee without any purpose of evading sections 36b-2 to 36b-33, inclusive; (9) any offer or sale to a bank and trust company, a national banking association, a savings bank, a savings and loan association, a federal savings and loan association, a credit union, a federal credit union, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity; (10) (A) subject to the provisions of this subdivision, any transaction not involving a public offering within the meaning of Section 4(2) of the Securities Act of 1933, but not including any transaction specified in the rules and regulations thereunder; (B) subject to the provisions of this subdivision, any transaction made in accordance with the uniform exemption from registration for small issuers authorized in Section 19(c)(3)(C) of the Securities Act of 1933. (C) The exemptions set forth in subparagraphs (A) and (B) of this subdivision shall not be available for transactions in securities issued by any blank check company, shell company or dormant company. (D) The exemptions set forth in subparagraphs (A) and (B) of this subdivision may, with respect to any security or transaction or any type of security or transaction, be modified, withdrawn, further conditioned or waived as to conditions, in whole or in part, conditionally or unconditionally, by the commissioner, acting by regulation, rule or order, on a finding that such regulation, rule or order is necessary or appropriate in the public interest or for the protection of investors. (E) A fee of one hundred fifty dollars shall accompany any filing made with the commissioner pursuant to this subdivision; (11) any offer or sale of a preorganization certificate or subscription if (A) no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber, (B) the number of subscribers does not exceed ten, and (C) no payment is made by any subscriber; (12) any transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants or transferable warrants exercisable within not more than ninety days of their issuance, if (A) no commission or other remuneration other than a standby commission is paid or given directly or indirectly for soliciting any security holder in this state, or (B) the issuer first files a notice, in such form and containing such information as the commissioner may by regulation prescribe, specifying the terms of the offer and the commissioner does not by order disallow the exemption within the next ten full business days; (13) any offer, but not a sale, of a security for which registration statements have been filed under both sections 36b-2 to 36b-33, inclusive, and the Securities Act of 1933, if no stop order or refusal order is in effect and no public proceeding or examination looking toward such an order is pending under either said sections or the Securities Act of 1933; (14) any transaction exempt under Section 4(6) of the Securities Act of 1933, and the rules and regulations thereunder. The issuer shall, prior to the first sale, file with the commissioner a notice, in such form and containing such information as the commissioner may by regulation, rule or order prescribe. A fee of one hundred fifty dollars shall accompany any such filing made pursuant to this subdivision; (15) any transaction if all the following conditions are satisfied: (A) The offer and sale is effectuated by the issuer of the security; (B) the total number of purchasers of all securities of the issuer does not exceed ten. A subsequent sale of securities that (i) is registered under sections 36b-2 to 36b-33, inclusive, (ii) is sold pursuant to an exemption under said sections other than this subdivision, or (iii) involves covered securities, shall not be integrated with a sale pursuant to this exemption in computing the number of purchasers hereunder. For the purpose of this subdivision, each of the following is deemed to be a single purchaser of a security: A husband and wife, a child and his parent or guardian when the parent or guardian holds the security for the benefit of the child, a corporation, a partnership, an association or other unincorporated entity, a joint stock company or a trust, but only if the corporation, partnership, association, unincorporated entity, joint stock company or trust was not formed for the purpose of purchasing the security; (C) no advertisement, article, notice or other communication published in any newspaper, magazine or similar medium, or broadcast over television or radio, or any other general solicitation is used in connection with the sale; and (D) no commission, discount or other remuneration is paid or given directly or indirectly in connection with the offer and sale, and the total expenses, excluding legal and accounting fees, in connection with the offer and sale do not exceed one per cent of the total sales price of the securities. For purposes of this subdivision, a difference in the purchase price among the purchasers shall not, in and of itself, be deemed to constitute indirect remuneration; (16) any transaction exempt under Rule 701, 17 CFR Section 230.701 promulgated under Section 3(b) of the Securities Act of 1933; (17) any other transaction that the commissioner may exempt, conditionally or unconditionally, on a finding that registration is not necessary or appropriate in the public interest or for the protection of investors.

(c) (1) Any person who offers or sells a security that is a covered security under Section 18(b)(2) of the Securities Act of 1933 shall file with the commissioner, or with any other depository that the commissioner may designate by regulation or order, a notice for each series or portfolio prior to the initial offer of such security in this state, provided such notice requirement does not apply to any offer or sale described in subdivision (9) or (12) of subsection (b) of this section. The notice shall contain such information as the commissioner may require and shall be accompanied by a consent to service of process as required by subsection (g) of section 36b-33 and a nonrefundable fee of five hundred dollars; (2) any notice filed pursuant to this subsection relating to a security issued by a face-amount certificate company or unit investment trust, as such terms are defined in the Investment Company Act of 1940, shall be valid for a period of one year from the date that such security is declared effective by the Securities and Exchange Commission, without limitation as to the number of shares or aggregate amount. Such notice may be renewed annually thereafter upon submission of such information as the commissioner may require, not earlier than thirty days nor later than five days prior to the date upon which such previously filed notice is due to expire, together with a nonrefundable fee of five hundred dollars; (3) any notice filed pursuant to this subsection relating to a redeemable security issued by an open-end management company, as defined in the Investment Company Act of 1940, shall be valid until December thirty-first of the calendar year in which it was first filed, without limitation as to the number of shares or aggregate amount. Such notice may be renewed annually thereafter upon submission of such information as the commissioner may require together with a nonrefundable fee of five hundred dollars.

(d) Any person who offers or sells a security that is a covered security under Section 18(b)(3) of the Securities Act of 1933 shall file a consent to service of process with the commissioner as required by subsection (g) of section 36b-33 prior to the first offer or sale of such security in this state.

(e) Any person who offers or sells a security that is a covered security under Section 18(b)(4)(D) of the Securities Act of 1933 shall file a notice with the commissioner within fifteen days after the first sale of such a security in this state. Such notice shall contain such information as the commissioner may require and shall be accompanied by a consent to service of process as required by subsection (g) of section 36b-33 and a nonrefundable fee of one hundred fifty dollars.

(f) The commissioner may by order (1) deny or revoke any exemption specified in subdivision (9) or (11) of subsection (a) or in subsection (b) of this section with respect to a specific security or transaction, (2) suspend the offer or sale of a covered security in this state if any person who offers a covered security fails to comply with any of the requirements set forth in subsections (c), (d) or (e) of this section, or (3) require any person who offers a covered security in this state and refuses to pay any fee required by subsections (c) or (e) of this section to register such security pursuant to section 36b-16. For purposes of this subsection, a delay in the payment of a fee or underpayment of a fee that is promptly remedied shall not constitute a refusal to pay such fee. No such order may be entered without appropriate prior notice to all interested parties, opportunity for hearing and written findings of fact and conclusions of law, except that the commissioner may by order summarily deny or revoke any of the specified exemptions or summarily suspend the offer or sale of any covered security subject to any of the requirements set forth in subsections (c), (d) or (e) of this section pending final determination of any proceeding under this subsection. Upon the entry of a summary order, the commissioner shall promptly notify all interested parties that it has been entered and of the reasons therefor and that within fifteen days of the receipt of a written request the matter will be set down for hearing. If no hearing is requested and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner after notice of, and opportunity for, hearing to all interested persons may modify or vacate the order or extend it until final determination. No order under this subsection may operate retroactively. No person may be considered to have violated sections 36b-16 and 36b-22, by reason of any offer or sale effected after the entry of an order under this subsection if he sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the order.

(g) In any proceeding under sections 36b-2 to 36b-33, inclusive, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

Sec. 5. Section 36b-23 of the general statutes is repealed and the following is substituted in lieu thereof:

No person shall make or cause to be made in any document filed with the commissioner or in any proceeding, investigation or examination under sections 36b-2 to 36b-33, inclusive, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.

Sec. 6. Section 36b-27 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) Whenever it appears to the commissioner after an investigation that any person or persons have violated, are violating or are about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, rule or order, or that any person or persons have engaged in a dishonest or unethical practice in the securities or commodities business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may in his discretion order the person or persons to cease and desist from the violations of the provisions of said sections or of the regulations, rules or orders thereunder, or from the further sale or offer to sell securities constituting or which would constitute a violation of the provisions of said sections or of the regulations, rules or orders thereunder, or from further engaging in such dishonest or unethical practice. After such an order is issued, the person or persons named therein may, within fourteen days after receipt of the order, file a written request for a hearing. Said hearing shall be held in accordance with the provisions of chapter 54.

(b) Whenever it appears to the commissioner, after an investigation, that any person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, rule or order, or that such person or persons have engaged in a dishonest or unethical practice in the securities or commodities business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may, in addition to any other remedy under this section, (1) order the person or persons to make restitution of any sums shown to have been obtained in violation of any of the provisions of said sections or any such regulation, rule or order or as a result of such dishonest or unethical practice plus interest at the legal rate set forth in section [37-3a or] 37-1 and (2) order the person or persons to provide disgorgement of any sums shown to have been obtained in violation of any of the provisions of said sections or any such regulation, rule or order or as a result of such dishonest or unethical practice. After such an order is issued, the person or persons named therein may, within fourteen days after receipt of the order, file a written request for a hearing. Said hearing shall be held in accordance with the provisions of chapter 54.

(c) The commissioner, in the commissioner's discretion, may order any person who directly or indirectly controls a person liable under subsection (b) of this section to make restitution or to provide disgorgement of any sums shown to have been obtained as a result of a dishonest or unethical practice or in violation of any of the provisions of sections 36b-2 to 36b-33, inclusive. Such controlling person shall be liable jointly and severally with and to the same extent as the person liable under subsection (b) of this section, unless such controlling person allegedly liable under this subsection sustains the burden of proof that such person did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist. After such an order is issued, the person or persons named therein may, within fourteen days after receipt of the order, file a written request for a hearing. Said hearing shall be held in accordance with the provisions of chapter 54. There shall be contribution as in cases of contract among the several [people] persons so liable under this subsection.

(d) (1) Whenever the commissioner finds as the result of an investigation that any person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may send a notice to such person or persons by registered mail, return receipt requested. Any such notice shall include: (A) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (B) a short and plain statement of the matter asserted or charged; (C) the maximum fine that may be imposed for such violation; and (D) the time and place for the hearing. Such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.

(2) The commissioner shall hold a hearing upon the charges made unless such person or persons fail to appear at the hearing. Said hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may, in his discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. If such person or persons fail to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, to any person or persons named in such order.

(e) Whenever it appears to the commissioner that any person or persons have violated, are violating or are about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, rule or order, the commissioner may, in his discretion and in addition to any other remedy authorized by this section: (1) Bring an action in the superior court for the judicial district of Hartford to enjoin the acts or practices and to enforce compliance with sections 36b-2 to 36b-33, inclusive, or any such regulation, rule or order. Upon a proper showing a permanent or temporary injunction, restraining order or writ of mandamus shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets. The court shall not require the commissioner to post a bond; (2) seek a court order imposing a fine not to exceed ten thousand dollars per violation against any person found to have violated any order issued by the commissioner; or (3) apply to the superior court for the judicial district of Hartford for an order of restitution whereby the defendants in such action shall be ordered to make restitution of those sums shown by the commissioner to have been obtained by them in violation of any of the provisions of sections 36b-2 to 36b-33, inclusive, plus interest at the rate set forth in section 37-3a. Such restitution shall, at the option of the court, be payable to the receiver or conservator appointed pursuant to this subsection, or directly to the persons whose assets were obtained in violation of any provision of sections 36b-2 to 36b-33, inclusive.

(f) Any time after the issuance of an order provided for in subsection (a), (b) or (c) of this section, the commissioner may accept an agreement by any [person charged with violating any provision of sections 36b-2 to 36b-33, inclusive,] respondent named in such order to enter into a written consent order in lieu of an adjudicative hearing. The acceptance of a consent order shall be within the complete discretion of the commissioner. The consent order provided for in this subsection shall contain (1) an express waiver of the right to seek judicial review or otherwise challenge or contest the validity of the order; (2) a provision that the order may be used in construing the terms of the consent order; (3) a statement that the consent order shall become final when issued; (4) a specific assurance that none of the violations or dishonest or unethical practices alleged in the order shall occur in the future; (5) such other terms and conditions as are necessary to further the purposes and policies of sections 36b-2 to 36b-33, inclusive; (6) the signature of each of the individual respondents evidencing [his] such respondent's consent; and (7) the signature of the commissioner or of [his] the commissioner's authorized representative.

Sec. 7. Section 36b-31 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) The commissioner may from time to time make, amend and rescind such regulations, forms and orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive, including regulations, forms and orders governing registration statements, applications, and reports, and defining any terms, whether or not used in said sections, insofar as the definitions are not inconsistent with the provisions of said sections. For the purpose of regulations, forms and orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes.

(b) No regulation, form or order may be made, amended or rescinded unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive. In prescribing regulations, forms and orders the commissioner may cooperate with the securities administrators of the other states and the Securities and Exchange Commission with a view to effectuating the policy of said sections to achieve maximum uniformity in the form and content of registration statements, applications and reports wherever practicable.

(c) To encourage uniform interpretation and administration of sections 36b-2 to 36b-33, inclusive, and effective securities regulation and enforcement, the commissioner may cooperate with the securities agencies or administrators of other states, Canadian provinces or territories, or other countries, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Securities Investor Protection Corporation, any self-regulatory organization, any national or international organization of securities officials or agencies, and any governmental law enforcement or regulatory agency. The cooperation authorized by this subsection includes, but is not limited to, the following actions: (1) Establishing central depositories for the registration of securities or securities industry personnel under sections 36b-2 to 36b-33, inclusive, and for documents or records required or allowed to be filed with or maintained by the commissioner under sections 36b-2 to 36b-33, inclusive; (2) conducting joint examinations and investigations; (3) sharing and exchanging information and documents subject to the restrictions of chapter 3; (4) sharing and exchanging personnel; and (5) executing joint agreements, memoranda of understanding and orders.

[(c)] (d) The commissioner may by regulation or order prescribe: (1) The form and content of financial statements required under sections 36b-2 to 36b-33, inclusive; (2) the circumstances under which consolidated financial statements shall be filed; and (3) whether any required financial statements shall be certified by independent or certified public accountants. All financial statements shall be prepared in accordance with generally accepted accounting principles.

[(d)] (e) Any regulations issued pursuant to the provisions of sections 36b-2 to 36b-33, inclusive, shall be adopted in accordance with the provisions of chapter 54.

[(e)] (f) The commissioner, or employees of the Department of Banking authorized by him, may, whether or not requested by any person, issue declaratory rulings pursuant to section 4-176 or written advisory interpretations of sections 36b-2 to 36b-33, inclusive, including interpretation of the applicability of any provision of said sections.

[(f)] (g) Every hearing in an administrative proceeding shall be public.

[(g)] (h) No provision of sections 36b-2 to 36b-33, inclusive, imposing any liability applies to any act done or omitted in good faith in conformity with any regulation, form, order or advisory interpretation of the commissioner, notwithstanding that the regulation, form, order or advisory interpretation may later be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

Sec. 8. Subsection (a) of section 36b-74 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) If a business opportunity seller uses any untrue or misleading statement in the sale of a business opportunity, or fails to give the proper disclosures in the manner required by section 36b-63, or fails to deliver the equipment, supplies or products or render the services necessary to begin substantial operation of the business opportunity within forty-five days of the delivery date stated in the business opportunity contract, or if the contract does not comply with the requirements of section 36b-66, then within [one year] two years of the date of the contract, upon written notice to such business opportunity seller, the purchaser-investor may void the contract and shall be entitled to receive from such business opportunity seller all sums paid to such business opportunity seller. Upon receipt of such sums, such purchaser-investor shall make available to such business opportunity seller at such purchaser-investor's address or at the places at which they are located at the time notice is given, all products, equipment or supplies received by such purchaser-investor. Purchaser-investors shall not be entitled to unjust enrichment by exercising the remedies provided in this subsection.

Sec. 9. Section 36b-80 of the general statutes is repealed and the following is substituted in lieu thereof:

No person shall make or cause to be made in any document filed with the commissioner or in any proceeding, investigation or examination under sections 36b-60 to 36b-80, inclusive, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.

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