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Substitute House Bill No. 5412

PUBLIC ACT NO. 96-192

AN ACT CONCERNING THE CONNECTICUT UNIFORM SECURITIES ACT.

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

Section 1. Subdivision (2) of section 36b-3 of the general statutes is repealed and the following is substituted in lieu thereof:

(2) "Agent" means any individual, other than a broker-dealer, who represents a broker-dealer or "issuer", in effecting or attempting to effect purchases or sales of securities. "Agent" shall not include an individual who represents an issuer in (A) effecting transactions in a security exempted by subdivision (1), (2), (3), (4), (6), (9), (10), (11), or (21) of subsection (a) of section 36b-21, AS AMENDED BY SECTION 6 OF THIS ACT (B) effecting transactions exempted by subsection (b) of section 36b-21, AS AMENDED BY SECTION 6 OF THIS ACT except for transactions exempted BY SUBDIVISION (13) OF SAID SUBSECTION WHERE THE TRANSACTION IS EXEMPT UNDER SECTION 4(6) OF THE SECURITIES ACT OF 1933, by subdivision (9) of said subsection and by subdivision (12) of said subsection, or (C) effecting transactions with existing employees, partners or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state. "Agent" shall not include such other persons not within the intent of this subsection as the commissioner may by regulation or order determine. A general partner, officer or director of a broker-dealer or issuer, or a person occupying a similar status or performing similar functions, is an agent only if he otherwise comes within this definition and any compensation that he receives is directly or indirectly related to purchases or sales of securities.

Sec. 2. Section 36b-4 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) No person shall, in connection with the offer, sale or purchase of any security, directly or indirectly: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

(b) NO PERSON SHALL, IN CONNECTION WITH THE OFFER, SALE OR PURCHASE OF ANY SECURITY, DIRECTLY OR INDIRECTLY ENGAGE IN ANY DISHONEST OR UNETHICAL PRACTICE.

Sec. 3. Section 36b-5 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) No person who directly or indirectly receives compensation or other remuneration for advising another person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise, shall: (1) Employ any device, scheme or artifice to defraud the other person; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon such other person.

(b) (1) It is unlawful for any investment adviser to have, enter into, extend or renew any investment advisory contract, whether written or oral, unless it is signed by the client or clients and discloses in writing: (A) That the investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client; (B) that an assignment of the contract may not be made by the investment adviser without the consent of the other party to the contract; (C) that the investment adviser, if a partnership, shall notify the other party to the contract of any change in the membership of the partnership within a reasonable time after the change; (D) the fee arrangement between the investment adviser and the client or clients; and (E) the services which the investment adviser will render; provided that investment advisory contracts with clients in effect on October 1, 1982, which would not otherwise be in compliance with subparagraphs (D) and (E) of this subdivision may continue in effect until October 1, 1983. (2) Subparagraph (A) of subdivision (1) of this subsection does not prohibit an investment advisory contract which provides for compensation based upon the total or net asset value of a fund averaged over a definite period or as of definite dates or taken as of a definite date. (3) "Assignment", as used in subparagraph (B) of subdivision (1) of this subsection, includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of the beneficial ownership of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor, but, if the investment adviser is a partnership, an assignment of an investment advisory contract is not considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment adviser of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.

(c) It is unlawful for any investment adviser to take or have custody of any securities or funds of any client if: (1) The commissioner by rule prohibits custody; or (2) in the absence of rule, the investment adviser fails to notify the commissioner that he has or may have custody.

(d) Notwithstanding any other provisions of sections 36b-2 to 36b-33, inclusive, AS AMENDED investment advisory contracts with clients in effect on April 20, 1978, which would not otherwise be in compliance with subsections (b) and (c) of this section, may continue in effect until July 1, 1979.

(e) Subparagraph (A) of subdivision (1) of subsection (b) of this section shall not be construed to prohibit performance fees permitted and determined in accordance with Section 205 of the Federal Investment Advisers Act of 1940, as amended, and any rules or regulations adopted in accordance with said act.

(f) No person who directly or indirectly receives compensation or other remuneration for soliciting advisory business on behalf of a person subject to the prohibition contained in subsection (a) of this section shall, in connection with such solicitation: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice or course of business which operates or would operate as a fraud or deceit.

(g) NO PERSON WHO DIRECTLY OR INDIRECTLY RECEIVES COMPENSATION OR OTHER REMUNERATION FOR: (1) ADVISING ANOTHER PERSON AS TO THE VALUE OF SECURITIES OR THEIR PURCHASE OR SALE, WHETHER THROUGH THE ISSUANCE OF ANALYSES OR REPORTS OR OTHERWISE; OR (2) SOLICITING ADVISORY BUSINESS ON BEHALF OF A PERSON SUBJECT TO THE PROHIBITION CONTAINED IN SUBSECTION (a) OF THIS SECTION SHALL ENGAGE IN ANY DISHONEST OR UNETHICAL PRACTICE IN CONNECTION WITH THE RENDERING OF SUCH ADVICE OR IN CONNECTION WITH SUCH SOLICITATION.

Sec. 4. Subsection (e) of section 36b-15 of the general statutes is repealed and the following is substituted in lieu thereof:

(e) (1) Withdrawal from registration as a broker-dealer, agent, investment adviser or investment adviser agent becomes effective ninety days after receipt of an application to withdraw or within such shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the application is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within ninety days after the application is filed. If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines. If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a revocation or suspension proceeding under subsection (a) of this section within one year after withdrawal became effective. (2) IF THE REGISTRATION OF A BROKER-DEALER, AGENT, INVESTMENT ADVISER OR INVESTMENT ADVISER AGENT EXPIRES DUE TO THE REGISTRANT'S FAILURE TO RENEW, WITHIN ONE YEAR OF SUCH EXPIRATION, THE COMMISSIONER MAY NEVERTHELESS INSTITUTE A REVOCATION OR SUSPENSION PROCEEDING OR ISSUE AN ORDER SUSPENDING OR REVOKING THE REGISTRATION UNDER SUBSECTION (a) OF THIS SECTION.

Sec. 5. Subsection (b) of section 36b-18 of the general statutes is repealed and the following is substituted in lieu thereof:

(b) A registration statement under this section shall contain the following information and be accompanied by the following documents in addition to the information specified in subsection (c) of section 36b-19 and the consent to service of process required by subsection (g) of section 36b-33: (1) With respect to the issuer and any significant subsidiary: Its name, address, and form of organization; the state or foreign jurisdiction and date of its organization; the general character and location of its business; A DISCUSSION OF THE PRINCIPAL FACTORS THAT MAKE THE OFFERING SPECULATIVE OR ONE OF HIGH RISK a description of its physical properties and equipment, and a statement of the general competitive conditions in the industry or business in which it is or will be engaged; (2) with respect to every director and officer of the issuer, or person occupying a similar status or performing similar functions: His name, address and principal occupation for the past five years; the amount of securities of the issuer held by him as of a specified date within thirty days of the filing of the registration statement; the amount of the securities covered by the registration statement to which he has indicated his intention to subscribe; and a description of any material interest in any material transaction with the issuer or any significant subsidiary effected within the past three years or proposed to be effected; (3) with respect to persons covered by subdivision (2) of this subsection: The remuneration paid during the past twelve months and estimated remuneration to be paid during the next twelve months, directly or indirectly, by the issuer together with all predecessors, parents, subsidiaries, and affiliates to all such persons in the aggregate; (4) with respect to any person owning of record, or beneficially if known, ten per cent or more of the outstanding shares of any class of equity security of the issuer: The information specified in said subdivision (2) of this subsection other than his occupation; (5) with respect to every promoter if the issuer was organized within the past three years: The information specified in said subdivision (2) of this subsection, any amount paid to him within that period or intended to be paid to him, and the consideration for any such payment; (6) with respect to any person on whose behalf any part of the offering is to be made in a nonissuer distribution: His name and address; the amount of securities of the issuer held by him as of the date of the filing of the registration statement; a description of any material interest in any material transaction with the issuer or any significant subsidiary effected within the past three years or proposed to be effected; and a statement of his reasons for making the offering; (7) the capitalization and long-term debt, on both a current and pro forma basis, of the issuer and any significant subsidiary, including a description of each security outstanding or being registered or otherwise offered, and a statement of the amount and kind of consideration, whether in the form of cash, physical assets, services, patents, good will or anything else, for which the issuer or any subsidiary has issued any of its securities within the past two years or is obligated to issue any of its securities; (8) the kind and amount of securities to be offered; the proposed offering price or the method by which it is to be computed; any variation therefrom at which any proportion of the offering is to be made to any person or class of persons other than the underwriters, with a specification of any such person or class; the basis upon which the offering is to be made if otherwise than for cash; the estimated aggregate underwriting and selling discounts or commissions and finders' fees, including separately cash, securities, contracts or anything else of value to accrue to the underwriters or finders in connection with the offering, or, if the selling discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering, and accounting charges; the name and address of every underwriter and every recipient of a finder's fee; a copy of any underwriting or selling-group agreement pursuant to which the distribution is to be made, or the proposed form of any such agreement whose terms have not yet been determined, and a description of the plan of distribution of any securities which are to be offered otherwise than through an underwriter; (9) the estimated cash proceeds to be received by the issuer from the offering; the purposes for which the proceeds are to be used by the issuer; the amount to be used for each purpose, the order or priority in which the proceeds will be used for the purposes stated; the amounts of any funds to be raised from other sources to achieve the purposes stated; the sources of any such funds, and, if any part of the proceeds is to be used to acquire any property, including good will, other than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons who have received commissions in connection with the acquisition, and the amounts of any such commissions and any other expense in connection with the acquisition, including the cost of borrowing money to finance the acquisition; (10) a description of any stock options or other security options outstanding, or to be created in connection with the offering, together with the amount of any such options held or to be held by every person required to be named in subdivision (2), (4), (5), (6) or (8) of this subsection and by any person who holds or will hold ten per cent or more in the aggregate of any such options; (11) the dates of, parties to and general effect concisely stated of, every management or other material contract made or to be made otherwise than in the ordinary course of business if it is to be performed in whole or in part at or after the filing of the registration statement or was made within the past two years, together with a copy of every such contract [, and] (12) a description of any [pending] MATERIAL litigation or proceeding COMMENCED OR RESOLVED WITHIN THE PAST TEN YEARS, INCLUDING ANY ADMINISTRATIVE PROCEEDING OR ANY DISCIPLINARY ACTION BY SELF-REGULATORY ORGANIZATIONS to which the issuer [is a party and which materially affects its business or assets, including any such litigation or proceeding known to be contemplated by any governmental authorities; (12)] OR ANY OF ITS OFFICERS, DIRECTORS, PERSONS NOMINATED AS DIRECTORS, OR GENERAL PARTNERS, ANY BENEFICIAL OWNER OF TEN PER CENT OR MORE OF ANY CLASS OF ITS EQUITY SECURITIES, ANY PROMOTER, OR ANY UNDERWRITER OF THE SECURITIES TO BE OFFERED, INCLUDING ANY PARTNER, DIRECTOR OR OFFICER OF ANY SUCH UNDERWRITER WAS NAMED A PARTY, PROVIDED ANY CONVICTION FOR ANY MISDEMEANOR INVOLVING A SECURITY OR ANY ASPECT OF THE SECURITIES BUSINESS OR ANY FELONY SHALL BE DEEMED MATERIAL UNLESS DETERMINED BY THE COMMISSIONER NOT TO BE MATERIAL; (13) a copy of any prospectus, pamphlet, circular, form letter, advertisement or other sales literature intended as of the effective date to be used in connection with the offering; [(13)] (14) a specimen or copy of the security being registered; a copy of the issuer's articles of incorporation and bylaws, or their substantial equivalents, as currently in effect, and a copy of any indenture or other instrument covering the security to be registered; [(14)] (15) a signed or conformed copy of an opinion of counsel as to the legality of the security being registered with an English translation if it is in a foreign language, which shall state whether the security when sold will be legally issued, fully paid and nonassessable, and, if a debt security, a binding obligation of the issuer; [(15)] (16) the written consent of any accountant, engineer, appraiser or other person whose profession gives authority to a statement made by him if any such person is named as having prepared or certified a report or valuation other than a public and official document or statement which is used in connection with the registration statement; [(16)] (17) (A) a balance sheet STATEMENT OF INCOME AND CASH FLOW AND CHANGES IN STOCKHOLDERS' EQUITY of the issuer as of the date within four months prior to the filing of the registration statement [; a profit and loss statement and analysis of surplus for each of the three fiscal years preceding the date of the balance sheet and for any period between the close of the last fiscal year and the date of the balance sheet, or for the period of the issuer's and any predecessors' existence if less than three years; and, if] WHICH FINANCIAL STATEMENTS MAY BE UNAUDITED, PROVIDED IF THE ISSUER HAS BEEN IN BUSINESS FOR LESS THAN ONE FULL YEAR FROM THE DATE OF THE FILING OF THE REGISTRATION STATEMENT, SUCH FINANCIAL STATEMENTS MUST BE REVIEWED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT; (B) A BALANCE SHEET, STATEMENT OF INCOME AND CASH FLOW AND CHANGES IN STOCKHOLDERS' EQUITY FOR EACH OF THE THREE PRECEDING FISCAL YEARS, WHICH FINANCIAL STATEMENTS MUST BE AUDITED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT; AND (C) IF any part of the proceeds of the offering is to be applied to the purchase of any business, the same financial statements which would be required if that business were the registrant, and [(17)] (18)m such additional information as the commissioner requires by regulation or order.

Sec. 6. Section 36b-21 of the general statutes, as amended by section 1 of public act 95-250, 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; (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) any security listed or approved for listing upon notice of issuance on 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, any security appearing on the list of over-the-counter securities approved for margin by the Board of Governors of the Federal Reserve System or any security designated or approved for designation upon notice of issuance as a national market system security on the National Association of Securities Dealers Automated Quotation System established pursuant to the Securities Exchange Act of 1934 if, in each case, quotations have been available and public trading has taken place for such class of security prior to the offer or sale of that security in reliance upon this exemption; any other security of the same issuer which is of senior or substantially equal rank; any security called for by subscription rights or warrants so listed, approved or designated; or any warrant or right to purchase or subscribe to any of the foregoing; (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 [by regulation or order] 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 distribution of an outstanding security if (A) a recognized securities manual contains the names of the issuer's officers and directors, a balance sheet of the issuer as of a date within eighteen months, and a profit and loss statement for either the fiscal year preceding that date or the most recent year of operations, except that the exemption 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 or (B) 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; (3) 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; (4) any transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters; (5) 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; (6) any transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, creditors' committee in a proceeding under the Bankruptcy Act, guardian, or conservator; (7) any transaction executed by a bona fide pledgee without any purpose of evading sections 36b-2 to 36b-33, inclusive AS AMENDED; (8) any offer or sale to a state 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, as amended, 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; (9) (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, as amended, and 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, as amended. The exemptions set forth in subdivisions (9)(A) and (9)(B) of this subsection shall not be available for transactions in securities issued by any blank check company, shell company or dormant company. The exemptions set forth in subdivisions (9)(A) and (9)(B) of this subsection 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. A fee of one hundred fifty dollars shall accompany any filing made with the commissioner pursuant to this subdivision; (10) 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; (11) 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; (12) 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, AS AMENDED and the Securities Act of 1933, as amended, 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, as amended; (13) any transaction exempt under Section 4(1), Section 4(4) or section 4(6) of the federal Securities Act of 1933, as amended, and the rules and regulations thereunder. With respect to transactions exempt under section 4(6) of the federal Securities Act of 1933, as amended, 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; (14) 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 registered under sections 36b-2 to 36b-33, inclusive, AS AMENDED or sold pursuant to an exemption under said sections other than this subdivision 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; (15) any other transaction that the commissioner [by regulation, rule or order] 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) The commissioner may by order 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. 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 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.

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

Sec. 7. Section 36b-28 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) Any person who willfully violates any provision of SUBSECTION (a) OF section 36b-4 AS AMENDED BY THIS ACT or SUBSECTION (a) OR (f) OF SECTION 36b-5 AS AMENDED BY THIS ACT shall be fined not more than ten thousand dollars or imprisoned for not more than ten years or both.

(b) Any person who willfully violates any other provision of sections 36b-2 to 36b-33, inclusive, AS AMENDED shall be fined not more than two thousand dollars or imprisoned for not more than two years or both.

(c) No information may be returned under sections 36b-2 to 36b-33, inclusive, AS AMENDED more than five years after the alleged violation.

Approved June 3, 1996. Effective October 1, 1996.

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