Various provisions governing securities broker-dealers and broker-dealers' agents modified, penalties provided, and administrative rulemaking authorized.

A bill for an act

relating to financial institutions; modifying various provisions governing securities

broker-dealers and broker-dealers' agents; providing penalties; authorizing

administrative rulemaking; amending Minnesota Statutes 2024, sections 80A.50;

80A.69; 80C.12, subdivision 1; Minnesota Statutes 2025 Supplement, section

80A.66; proposing coding for new law in Minnesota Statutes, chapter 80A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 80A.50, is amended to read:

80A.50 SECTION 302; FEDERAL COVERED SECURITIES; SMALL

CORPORATE OFFERING REGISTRATION.

(a)
Federal covered securities.

(1)
Required filing of records.
With respect to a federal covered security, as defined

in Section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(2)), that is not

otherwise exempt under sections 80A.45 through 80A.47, a rule adopted or order issued

under this chapter may require the filing of any or all of the following records:

(A) before the initial offer of a federal covered security in this state, all records that are

part of a federal registration statement filed with the Securities and Exchange Commission

under the Securities Act of 1933 and a consent to service of process complying with section

80A.88 signed by the issuer;

(B) after the initial offer of the federal covered security in this state, all records that are

part of an amendment to a federal registration statement filed with the Securities and

Exchange Commission under the Securities Act of 1933; and

(C) to the extent necessary or appropriate to compute fees, a report of the value of the

federal covered securities sold or offered to persons present in this state, if the sales data

are not included in records filed with the Securities and Exchange Commission.

(2)
Notice filing effectiveness and renewal.
A notice filing under subsection (a) is

effective for one year commencing on the later of the notice filing or the effectiveness of

the offering filed with the Securities and Exchange Commission. On or before expiration,

the issuer may renew a notice filing by filing a copy of those records filed by the issuer with

the Securities and Exchange Commission that are required by rule or order under this chapter

to be filed. A previously filed consent to service of process complying with section 80A.88

may be incorporated by reference in a renewal. A renewed notice filing becomes effective

upon the expiration of the filing being renewed.

(3)
Notice filings for federal covered securities under section 18(b)(4)(D).
With

respect to a security that is a federal covered security under Section 18(b)(4)(D) of the

Securities Act of 1933 (15 U.S.C. Section 77r(b)(4)(D)), a rule under this chapter may

require a notice filing by or on behalf of an issuer to include a copy of Form D, including

the Appendix, as promulgated by the Securities and Exchange Commission, and a consent

to service of process complying with section 80A.88 signed by the issuer not later than 15

days after the first sale of the federal covered security in this state.

(4)
Stop orders.
Except with respect to a federal security under Section 18(b)(1) of the

Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)), if the administrator finds that there is

a failure to comply with a notice or fee requirement of this section, the administrator may

issue a stop order suspending the offer and sale of a federal covered security in this state.

If the deficiency is corrected, the stop order is void as of the time of its issuance and no

penalty may be imposed by the administrator.

(b)
Small corporation offering registration.

(1)
Registration required.
A security meeting the conditions set forth in this section

may be registered as set forth in this section.

(2)
Availability.
Registration under this section is available only to the issuer of securities

and not to an affiliate of the issuer or to any other person for resale of the issuer's securities.

The issuer must be organized under the laws of one of the states or possessions of the United

States. The securities offered must be exempt from registration under the Securities Act of

1933 pursuant to Rule 504 of Regulation D (15 U.S.C. Section 77c).

(3)
Disqualification.
Registration under this section is not available to any of the

following issuers:

(A) an issuer subject to the reporting requirements of Section 13 or 15(d) of the Securities

Exchange Act of 1934;

(B) an investment company;

(C) a development stage company that either has no specific business plan or purpose

or has indicated that its business plan is to engage in a merger or acquisition with an

unidentified company or companies or other entity or person;

(D) an issuer if the issuer or any of its predecessors, officers, directors, governors,

partners, ten percent stock or equity holders, promoters, or any selling agents of the securities

to be offered, or any officer, director, governor, or partner of the selling agent:

(i) has filed a registration statement that is the subject of a currently effective registration

stop order entered under a federal or state securities law within five years before the filing

of the small corporate offering registration application;

(ii) has been convicted within five years before the filing of the small corporate offering

registration application of a felony or misdemeanor in connection with the offer, purchase,

or sale of a security or a felony involving fraud or deceit, including, but not limited to,

forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to

defraud;

(iii) is currently subject to a state administrative enforcement order or judgment entered

by a state securities administrator or the Securities and Exchange Commission within five

years before the filing of the small corporate offering registration application, or is subject

to a federal or state administrative enforcement order or judgment in which fraud or deceit,

including, but not limited to, making untrue statements of material facts or omitting to state

material facts, was found and the order or judgment was entered within five years before

the filing of the small corporate offering registration application;

(iv) is currently subject to an order, judgment, or decree of a court of competent

jurisdiction temporarily restraining or enjoining, or is subject to an order, judgment, or

decree of a court of competent jurisdiction permanently restraining or enjoining the party

from engaging in or continuing any conduct or practice in connection with the purchase or

sale of any security or involving the making of a false filing with a state or with the Securities

and Exchange Commission entered within five years before the filing of the small corporate

offering registration application; or

(v) is subject to a state's administrative enforcement order, or judgment that prohibits,

denies, or revokes the use of an exemption for registration in connection with the offer,

purchase, or sale of securities,

(I) except that clauses (i) to (iv) do not apply if the person subject to the disqualification

is duly licensed or registered to conduct securities-related business in the state in which the

administrative order or judgment was entered against the person or if the dealer employing

the party is licensed or registered in this state and the form BD filed in this state discloses

the order, conviction, judgment, or decree relating to the person, and

(II) except that the disqualification under this subdivision is automatically waived if the

state securities administrator or federal agency that created the basis for disqualification

determines upon a showing of good cause that it is not necessary under the circumstances

to deny the registration.

(4)
Filing and effectiveness of registration statement.
A small corporate offering

registration statement must be filed with the administrator. If no stop order is in effect and

no proceeding is pending under section 80A.54, such registration statement shall become

effective automatically at the close of business on the 20th day after filing of the registration

statement or the last amendment of the registration statement or at such earlier time as the

administrator may designate by rule or order. For the purposes of a nonissuer transaction,

other than by an affiliate of the issuer, all outstanding securities of the same class identified

in the small corporate offering registration statement as a security registered under this

chapter are considered to be registered while the small corporate offering registration

statement is effective. A small corporate offering registration statement is effective for one

year after its effective date or for any longer period designated in an order under this chapter.

A small corporate offering registration statement may be withdrawn only with the approval

of the administrator.

(5)
Contents of registration statement.
A small corporate offering registration statement

under this section shall be on Form U-7, including exhibits required by the instructions

thereto, as adopted by the North American Securities Administrators Association, or such

alternative form as may be designated by the administrator by rule or order and must include:

(A) a consent to service of process complying with section 80A.88;

(B) a statement of the type and amount of securities to be offered and the amount of

securities to be offered in this state;

(C) a specimen or copy of the security being registered, unless the security is

uncertificated, a copy of the issuer's articles of incorporation and bylaws or their substantial

equivalents in effect, and a copy of any indenture or other instrument covering the security

to be registered;

(D) a signed or conformed copy of an opinion of counsel concerning the legality of the

securities being registered which states whether the securities, when sold, will be validly

issued, fully paid, and nonassessable and, if debt securities, binding obligations of the issuer;

(E) the states (i) in which the securities are proposed to be offered; (ii) in which a

registration statement or similar filing has been made in connection with the offering

including information as to effectiveness of each such filing; and (iii) in which a stop order

or similar proceeding has been entered or in which proceedings or actions seeking such an

order are pending;

(F) a copy of the offering document proposed to be delivered to offerees; and

(G) a copy of any other pamphlet, circular, form letter, advertisement, or other sales

literature intended as of the effective date to be used in connection with the offering and

any solicitation of interest used in compliance with section 80A.46(17)(B).

(6)
Copy to purchaser.
A copy of the offering document as filed with the administrator

must be delivered to each person purchasing the securities prior to sale of the securities to

such person.

(c)
Offering limit.
Offers and sales of securities under a small corporate offering

registration as set forth in this section are allowed up to the limit prescribed by Code of

Federal Regulations, title 17, part 230.504 (b)(2), as amended.

(d)
Regulation A - Tier 2 filing requirements.

(1)
Initial filing.
An issuer planning to offer and sell securities in Minnesota in an

offering exempt under Tier 2 of federal Regulation A must, at least 21 calendar days before

the date of the initial sale of securities in Minnesota, submit to the administrator:

(A) a completed Regulation A - Tier 2 offering notice filing form or copies of all the

documents filed with the Securities Exchange Commission; and

(B) a consent to service of process on Form U-2, if consent to service of process is not

provided in the Regulation A - Tier 2 offering notice filing form.

The initial notice filing made in Minnesota is effective for 12 months after the date the

filing is made.

(2)
Renewal.
For each additional 12-month period in which the same offering is

continued, an issuer conducting a Tier 2 offering under federal Regulation A may renew

the notice filing by filing (i) the Regulation A - Tier 2 offering notice filing form marked

"renewal," or (ii) a cover letter or other document requesting renewal. The renewal filing

must be made on or before the date notice filing expires.

(3)
Amendment.
An issuer may increase the amount of securities offered in Minnesota

by submitting a Regulation A - Tier 2 offering notice filing form or other document

describing the transaction.

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(e)
Notice filing requirement for federal crowdfunding offerings.
This paragraph

applies to offerings made under Regulation Crowdfunding, Code of Federal Regulations,

title 17, part 227, and sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933, United

States Code, title 15, sections 77d(A)(6) and 77r(b)(4)(C).

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(1)
Initial filing.
An issuer that (i) offers and sells securities in Minnesota in an offering

exempt under federal Regulation Crowdfunding, and (ii) has a principal place of business

in Minnesota or sells at least 50 percent of the offering's aggregate amount to Minnesota

residents, must file with the administrator:

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(A) a completed Uniform Notice of Federal Crowdfunding Offering form or copies of

all documents filed with the Securities Exchange Commission; and

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(B) if the issuer is not filing on the Uniform Notice of Federal Crowdfunding Offering

form, consent to service of process on Form U-2.

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If the issuer's principal place of business is in Minnesota, the initial filing must be submitted

with the administrator when the issuer makes the issuer's initial Form C filing concerning

the offering with the Securities and Exchange Commission. If the issuer's principal place

of business is not in Minnesota but Minnesota residents have purchased at least 50 percent

of the aggregate amount of the offering, the filing must be submitted when the issuer becomes

aware that the aggregate purchases made by Minnesota residents meets the threshold, but

no later than 30 days after the date the offering is complete. The initial notice filing is

effective for a 12-month period beginning on the date the initial filing is submitted to the

administrator.

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(2)
Renewal.
For each additional 12-month period in which a single offering is continued,

an issuer conducting an offering under federal Regulation Crowdfunding may renew the

issuer's notice filing by filing with the administrator on or before the date the current notice

filing expires:

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(A) a completed Uniform Notice of Federal Crowdfunding Offering form that is marked

"renewal"; or

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(B) a cover letter or other document requesting renewal

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.

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(3)
Amendment.
An issuer may increase the amount of securities offered in Minnesota

by submitting (i) a completed Uniform Notice of Federal Crowdfunding Offering form that

is marked "amendment," or (ii) another document that describes the modified transaction.

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Sec. 2.

Minnesota Statutes 2025 Supplement, section 80A.66, is amended to read:

80A.66 SECTION 411; POSTREGISTRATION REQUIREMENTS.

(a)
Financial requirements.
Subject to Section 15(h) of the Securities Exchange Act

of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940

(15 U.S.C. Section 80b-22), a rule adopted or order issued under this chapter may establish

minimum financial requirements for broker-dealers registered or required to be registered

under this chapter and investment advisers registered or required to be registered under this

chapter.

(b)
Financial reports.
Subject to Section 15(h) of the Securities Exchange Act of 1934

(15 U.S.C. Section 78o(h)) or Section 222(b) of the Investment Advisers Act of 1940 (15

U.S.C. Section 80b-22), a broker-dealer registered or required to be registered under this

chapter and an investment adviser registered or required to be registered under this chapter

shall file such financial reports as are required by a rule adopted or order issued under this

chapter. If the information contained in a record filed under this subsection is or becomes

inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting

amendment.

(c)
Record keeping.
Subject to Section 15(h) of the Securities Exchange Act of 1934

(15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15

U.S.C. Section 80b-22):

(1) a broker-dealer registered or required to be registered under this chapter and an

investment adviser registered or required to be registered under this chapter shall make and

maintain the accounts, correspondence, memoranda, papers, books, and other records

required by rule adopted or order issued under this chapter;

(2) broker-dealer records required to be maintained under paragraph (1) may be

maintained in any form of data storage acceptable under Section 17(a) of the Securities

Exchange Act of 1934 (15 U.S.C. Section 78q(a)) if they are readily accessible to the

administrator;
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and
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(3) a broker-dealer must establish and maintain: (i) a set of written supervisory procedures

that reasonably prevent and detect violations of chapter 80A; Minnesota Rules, chapter

2876; or related orders issued by the commissioner; and (ii) a system to apply the procedures

established under this clause. The procedures must designate by name or title a number of

supervisory employees that is reasonable relative to the number of the broker-dealer's

registered agents, offices, and transactions in Minnesota. A copy of the written procedures

and the system to apply the procedures must be kept and maintained at each branch office

affiliated with the broker-dealer; and

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(3)
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(4)
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investment adviser records required to be maintained under paragraph (d)(1) may

be maintained in any form of data storage required by rule adopted or order issued under

this chapter.

(d)
Records and reports of private funds.

(1)
In general.
An investment adviser to a private fund shall maintain such records of,

and file with the administrator such reports and amendments thereto, that an exempt reporting

adviser is required to file with the Securities and Exchange Commission pursuant to SEC

Rule 204-4, Code of Federal Regulations, title 17, section 275.204-4.

(2)
Treatment of records.
The records and reports of any private fund to which an

investment adviser provides investment advice shall be deemed to be the records and reports

of the investment adviser.

(3)
Required information.
The records and reports required to be maintained by an

investment adviser, which are subject to inspection by a representative of the administrator

at any time, shall include for each private fund advised by the investment adviser, a

description of:

(A) the amount of assets under management;

(B) the use of leverage, including off-balance-sheet leverage, as to the assets under

management;

(C) counterparty credit risk exposure;

(D) trading and investment positions;

(E) valuation policies and practices of the fund;

(F) types of assets held;

(G) side arrangements or side letters, whereby certain investors in a fund obtain more

favorable rights or entitlements than other investors;

(H) trading practices; and

(I) such other information as the administrator determines is necessary and appropriate

in the public interest and for the protection of investors, which may include the establishment

of different reporting requirements for different classes of fund advisers, based on the type

or size of the private fund being advised.

(4)
Filing of records.
A rule or order under this chapter may require each investment

adviser to a private fund to file reports containing such information as the administrator

deems necessary and appropriate in the public interest and for the protection of investors.

(e)
Audits or inspections.
The records of a broker-dealer registered or required to be

registered under this chapter and of an investment adviser registered or required to be

registered under this chapter, including the records of a private fund described in paragraph

(d) and the records of investment advisers to private funds, are subject to such reasonable

periodic, special, or other audits or inspections by a representative of the administrator,

within or without this state, as the administrator considers necessary or appropriate in the

public interest and for the protection of investors. An audit or inspection may be made at

any time and without prior notice. The administrator may copy, and remove for audit or

inspection copies of, all records the administrator reasonably considers necessary or

appropriate to conduct the audit or inspection. The administrator may assess a reasonable

charge for conducting an audit or inspection under this subsection.

(f)
Custody and discretionary authority bond or insurance.
Subject to Section 15(h)

of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the

Investment Advisers Act of 1940 (15 U.S.C. Section 80b-22), a rule adopted or order issued

under this chapter may require a broker-dealer or investment adviser that has custody of or

discretionary authority over funds or securities of a customer or client to obtain insurance

or post a bond or other satisfactory form of security in an amount of at least $25,000, but

not to exceed $100,000. The administrator may determine the requirements of the insurance,

bond, or other satisfactory form of security. Insurance or a bond or other satisfactory form

of security may not be required of a broker-dealer registered under this chapter whose net

capital exceeds, or of an investment adviser registered under this chapter whose minimum

financial requirements exceed, the amounts required by rule or order under this chapter.

The insurance, bond, or other satisfactory form of security must permit an action by a person

to enforce any liability on the insurance, bond, or other satisfactory form of security if

instituted within the time limitations in section 80A.76(j)(2).

(g)
Requirements for custody.
Subject to Section 15(h) of the Securities Exchange Act

of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940

(15 U.S.C. Section 80b-22), an agent may not have custody of funds or securities of a

customer except under the supervision of a broker-dealer and an investment adviser

representative may not have custody of funds or securities of a client except under the

supervision of an investment adviser or a federal covered investment adviser. A rule adopted

or order issued under this chapter may prohibit, limit, or impose conditions on a broker-dealer

regarding custody of funds or securities of a customer and on an investment adviser regarding

custody of securities or funds of a client.

(h)
Investment adviser brochure rule.
With respect to an investment adviser registered

or required to be registered under this chapter, a rule adopted or order issued under this

chapter may require that information or other record be furnished or disseminated to clients

or prospective clients in this state as necessary or appropriate in the public interest and for

the protection of investors and advisory clients.

(i)
Continuing education.
A rule adopted or order issued under this chapter may require

an individual registered under section 80A.57 or
80A.58
to participate in a continuing

education program approved by the Securities and Exchange Commission and administered

by a self-regulatory organization, the North American Securities Administrators Association,

or the commissioner.

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(j)
Business continuity and succession plan.
An investment adviser must establish,

maintain, and enforce written policies and procedures relating to business continuity and

succession planning. At a minimum, the policies and procedures under this paragraph must

provide:

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(1) a means to protect, back up, and recover books and records;

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(2) an alternate method to provide notice to customers; key personnel; employees;

vendors; service providers, including third-party custodians; and regulators, regarding issues

pertaining to the investment adviser's business operations, including but not limited to

significant business interruption, the death or unavailability of key personnel, other disruption

to business activities, or ceasing business operations;

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(3) a plan to relocate the office space for a principal place of business that is subject to

a temporary or permanent loss;

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(4) a plan to assign duties to qualified responsible persons if key personnel die or are

otherwise unavailable; and

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(5) a plan to otherwise minimize service disruption and client harm that might result

from sudden and significant business interruption.

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(k)
Physical security and cybersecurity policies and procedures.
An investment

adviser must establish, implement, update, and enforce written physical security and

cybersecurity policies and procedures that are designed to ensure the confidentiality, integrity,

and availability of physical and electronic records and information. The policies and

procedures must be tailored to the investment adviser's business model and must take into

account the investment advisor's business size, type of service provided, and number of

locations.

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(1) The physical security and cybersecurity policies and procedures must:

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(A) protect against reasonably anticipated threats or hazards to the security or integrity

of client records and information;

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(B) ensure that the investment adviser protects confidential client records and information;

and

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(C) protect client records and information that, if released, might result in harm or

inconvenience to the client.

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(2) At a minimum, the physical security and cybersecurity policies and procedures must

develop and implement:

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(A) an organizational understanding to manage information security risk with respect

to systems, assets, data, and capabilities;

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(B) safeguards to ensure delivery of critical infrastructure services;

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(C) actions and tools to identify when an information security event occurs;

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(D) actions to take when a information security event is detected; and

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(E) plans for security and system resilience, and to restore capabilities or services that

are impaired due to an information security event.

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(3) At the time a client engages an investment adviser and on an annual basis thereafter,

an investment adviser must deliver to the client a privacy policy that is reasonably designed

to assist the client understand how the investment adviser collects and shares, to the extent

permitted by state and federal law, nonpublic personal information. If information in the

policy becomes inaccurate, the investment adviser must promptly update and deliver an

amended privacy policy to the client.

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(l)
Written confirmation.
A broker-dealer must promptly provide to the customer a

written confirmation after executing a transaction and before completing a transaction. The

confirmation must:

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(1) describe the security purchased or sold, the date of the transaction, the price of the

security purchased or sold, and any commission charged;

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(2) indicate whether the broker-dealer acted for the broker-dealer's account, as an agent

for a customer, as an agent for another person, or an agent for both a customer and another

person;

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(3) if the broker-dealer is acting as an agent for a customer, include (i) the name of the

person who purchased the security, (ii) the name of the person who sold the security, or (iii)

a statement that the information in item (i) or (ii) is available to a customer on request if

the broker-dealer knows the information or is able to ascertain the information with

reasonable diligence;

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(4) indicate whether the transaction was unsolicited; and

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(5) indicate the name of the agent that executed the transaction.

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A broker-dealer that complies with Securities and Exchange Commission Rule 10b-10,

Code of Federal Regulations, title 17, part 240.10b-10, or article III, section 12, of the

Financial Institutions Regulatory Authority Rules of Fair Practice, complies with this

paragraph.

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(m)
Conditions; stipulations; provisions.
A broker-dealer is prohibited from entering

into a contract with a customer if the contract contains a condition, stipulation, or provision

that binds the customer to waive rights under chapter 80A; Minnesota Rules, chapter 2876;

or an order issued by the commissioner. A condition, stipulation, or provision included in

a contract subject to this paragraph is void.

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(n)
Principal office; employment.
A broker-dealer whose principal office is located in

Minnesota must have at least one registered person employed on a full-time basis at the

principal office located in Minnesota. This paragraph does not apply to a broker-dealer

engaged solely in offering and selling:

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(1) interests in a direct participation program; or

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(2) securities issued by open-end investment companies, face amount certificate

companies, or unit investment trusts registered under the Investment Company Act of 1940,

United State Code, title 15, sections 80a-1 to 80a-64.

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Sec. 3.

Minnesota Statutes 2024, section 80A.69, is amended to read:

80A.69 SECTION 502; PROHIBITED CONDUCT IN PROVIDING INVESTMENT

ADVICE.

(a)
Fraud in providing investment advice.
It is unlawful for a person that advises

others for compensation, either directly or indirectly or through publications or writings, as

to the value of securities or the advisability of investing in, purchasing, or selling securities

or that, for compensation and as part of a regular business, issues or promulgates analyses

or reports relating to securities:

(1) to employ a device, scheme, or artifice to defraud another person; or

(2) to engage in an act, practice, or course of business that operates or would operate as

a fraud or deceit upon another person.

(b)
Rules defining fraud.
A rule adopted under this chapter may define an act, practice,

or course of business of an investment adviser or an investment adviser representative, other

than a supervised person of a federal covered investment adviser, as fraudulent, deceptive,

or manipulative, and prescribe means reasonably designed to prevent investment advisers

and investment adviser representatives, other than supervised persons of a federal covered

investment adviser, from engaging in acts, practices, and courses of business defined as

fraudulent, deceptive, or manipulative.

(c)
Rules specifying contents of advisory contract.
A rule adopted under this chapter

may specify the contents of an investment advisory contract entered into, extended, or

renewed by an investment adviser.

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(d)
Use of client login information.
An investment adviser is prohibited from accessing

a client's account by using the client's unique identifying information, including but not

limited to the client's username and password.

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Sec. 4.

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[80A.691] BROKER-DEALERS; AGENTS; DISHONEST OR UNETHICAL

BUSINESS PRACTICES.

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Subdivision 1.

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Broker-dealers; standards and principles.

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A broker-dealer must observe

high standards of commercial honor and just and equitable principles of trade when

conducting the broker-dealer's business. An act or practice that is contrary to the standards

constitutes grounds for the administrator to deny, suspend, or revoke the broker-dealer's

registration or to take other action authorized by statute. For purposes of this subdivision,

an act or practice that is contrary to the standards includes:

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(1) engaging in a pattern of unreasonable and unjustifiable delays with respect to: (i)

delivering securities purchased by a customer; or (ii) upon request, paying free credit balances

reflecting a customer's completed transactions;

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(2) inducing trading in a customer's account that is excessive in size or frequency

considering the account's financial resources and character;

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(3) recommending that a customer purchase, sell, or exchange a security without

reasonable grounds to believe the transaction or recommendation is suitable for the customer,

based on: (i) a reasonable inquiry regarding the customer's investment objectives, financial

situation, and needs; and (ii) other relevant information known by the broker-dealer;

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(4) executing a transaction on behalf of a customer without the customer's authorization;

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(5) exercising discretionary power to effect a transaction for a customer's account without

first obtaining written discretionary authority from the customer, unless the discretionary

power relates solely to the time the order is executed or the order's price;

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(6) executing a transaction in a margin account without securing from the customer a

properly executed written margin agreement promptly after the account's initial transaction;

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(7) failing to segregate customers' free securities or securities held in safekeeping;

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(8) hypothecating a customer's securities without having a lien on the customer's

securities, unless the broker-dealer secures the customer's properly executed written consent

promptly after the initial transaction, except as permitted by Securities and Exchange

Commission regulations;

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(9) entering into a transaction with or for a customer at a price that is not reasonably

related to the security's current market price, or receiving an unreasonable commission or

profit;

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(10) failing to furnish to a customer purchasing securities in an offering, no later than

the due date for the transaction's confirmation: (i) a final prospectus; or (ii) a preliminary

prospectus and an additional document that, when combined with the preliminary prospectus,

includes all of the information included in the final prospectus;

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(11) charging an unreasonable or inequitable fee for services performed, including: (i)

miscellaneous services that include but are not limited to collecting money due for principal,

dividends or interest, exchanging or transferring securities, appraisals, safekeeping, or

maintaining custody of securities; and (ii) other services related to the broker-dealer's

securities business;

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(12) offering to buy or sell a security at a stated price if the broker-dealer is not prepared

to purchase or sell at the stated price and under the stated conditions at the time the offer

to buy or sell is made;

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(13) representing that a security is being offered to a customer "at the market" or at a

price relevant to the market price, unless the broker-dealer knows or has reasonable grounds

to believe a market for the security exists other than the market made, created, or controlled

by: (i) the broker-dealer; (ii) a person for whom the broker-dealer is acting or with whom

the broker-dealer is associated with respect to the security's distribution; or (iii) a person

controlled by, controlling, or under common control with the broker-dealer;

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(14) effecting a transaction in, or inducing the purchase or sale of, a security using a

manipulative, deceptive, or fraudulent device, practice, plan, program, design, or contrivance,

which includes but is not limited to:

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(i) effecting a transaction in a security that involves no change in the security's beneficial

ownership;

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(ii) entering an order to purchase or sell a security with the knowledge that at least one

other order for the same security that is substantially the same size, entered at substantially

the same time, and for substantially the same price as the order has been or will be entered

by or for the same or a different party to create (A) a false or misleading appearance of

active trading in the security, or (B) a false or misleading appearance with respect to the

market for the security. This item does not prohibit a broker-dealer from entering bona fide

agency cross transactions for the broker-dealer's customers; or

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(iii) effecting, alone or with another person, a series of transactions in a security that

creates actual or apparent active trading in the security, or raises or reduces the price of the

security, to induce others to purchase or sell the security;

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(15) guaranteeing a customer against loss in: (i) a securities account the broker-dealer

carries for the customer; (ii) a securities transaction effected by the broker-dealer; or (iii) a

securities transaction effected by the broker-dealer with or for the customer;

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(16) publishing or circulating, or causing to be published or circulated, a notice, circular,

advertisement, newspaper article, investment service, or communication of any kind that

purports to: (i) report a transaction as a purchase or sale of a security, unless the broker-dealer

believes that the transaction was a bona fide purchase or sale of the security; or (ii) quote

the bid price or asked price for a security, unless the broker-dealer believes the quote

represents a bona fide bid for or offer of the security;

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(17) using an advertising or sales presentation in a manner that is deceptive or misleading,

including but not limited to distributing: (i) nonfactual data, material, or a presentation based

on conjecture, unfounded or unrealistic claims; or (ii) assertions in a brochure, flyer, or

display using words, pictures, graphs, or other representations that are designed to

supplement, detract from, supersede, or defeat a prospectus' or disclosure's purpose or effect;

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(18) failing to disclose to a customer, before entering into a contract with or for a customer

to purchase or sell a security, that the broker-dealer is controlled by, controlling, affiliated

with, or under common control with the security's issuer. If a disclosure under this clause

is not made in writing, the disclosure must be supplemented by giving or sending written

disclosure before or at the time the transaction is completed;

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(19) failing to make a bona fide public offering of all of the securities allotted to a

broker-dealer for distribution, whether the securities are acquired as an underwriter, a selling

group member, or from a member participating in the distribution as an underwriter or

selling group member;

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(20) failing or refusing to: (i) furnish a customer, upon reasonable request, information

the customer is entitled to; or (ii) respond to a formal written request or complaint;

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(21) failing to pay and fully satisfy a final judgment or arbitration award resulting from

an arbitration or court proceeding relating to an investment and initiated by the customer,

unless: (i) the customer and broker-dealer, or broker-dealer's agent, agree in writing to an

alternative payment arrangement; and (ii) the broker-dealer or broker-dealer's agent complies

with the terms of the alternative payment arrangement;

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(22) attempting to avoid paying a final judgment or arbitration award resulting from an

arbitration or court proceeding relating to an investment and initiated by the customer,

unless: (i) the customer and broker-dealer, or broker-dealer's agent, agree in writing to an

alternative payment arrangement; and (ii) the broker-dealer or broker-dealer's agent complies

with the terms of the alternative payment arrangement;

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(23) failing to pay and fully satisfy a fine, civil penalty, order of restitution, order of

disgorgement, or similar monetary payment obligation imposed upon the broker-dealer or

broker-dealer's agent by the Securities and Exchange Commission, a state or provincial

securities or other financial services regulator, or a self-regulatory organization;

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(24) accessing a client's account by using the client's unique identifying information,

including but not limited to the client's username and password;

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(25) in connection with soliciting a sale or purchase of an over-the-counter non-NASDAQ

security, failing to promptly provide the most current prospectus or the most recently filed

periodic report filed under Section 13 of the Securities Exchange Act of 1934, United States

Code, title 15, section 78m, as amended, if the broker-dealer receives a request from a

customer;

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(26) marking an order ticket or confirmation as unsolicited if the transaction is solicited;

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(27) for each month in which activity has occurred in a customer's account and no less

frequently than once every three months regardless of whether customer account activity

has occurred, failing to provide the customer with an account statement that, with respect

to all over-the-counter non-NASDAQ equity securities in the account, contains a value for

each security based on the closing market bid on a date certain. This clause applies only if

the broker-dealer has been a market maker in the security at any time during the month in

which the monthly or quarterly statement is issued; or

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(28) failing to comply with an applicable provision of the Financial Institutions

Regulatory Authority conduct rules or an applicable fair practice or ethical standard

promulgated by the Securities Exchange Commission or a self-regulatory organization

approved by the Securities Exchange Commission.

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Subd. 2.

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Broker-dealer's agents; standards and principles.

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A broker-dealer's agent

must observe high standards of commercial honor and just and equitable principles of trade

when conducting the broker-dealer's agent's business. An act or practice that is contrary to

the standards constitutes grounds for the administrator to deny, suspend, or revoke the

broker-dealer's agent's registration or to take other action authorized by statute. For purposes

of this subdivision, an act or practice that is contrary to the standards includes:

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(1) lending to or borrowing from a customer money or securities, or acting as a custodian

for a customer's money, securities, or executed stock power;

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(2) effecting securities transactions that are not recorded on the regular books or records

maintained by the broker-dealer the broker-dealer's agent represents, unless the transactions

are authorized in writing by the broker-dealer before executing the transaction;

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(3) establishing or maintaining an account that contains fictitious information in order

to execute transactions that are otherwise prohibited;

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(4) sharing directly or indirectly in profits or losses in a customer account without the

written authorization from the customer and the broker-dealer the broker-dealer's agent

represents;

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(5) dividing or otherwise splitting the broker-dealer's agent's commissions, profits, or

other compensation from purchasing or selling securities with a person who is not also

registered as a broker-dealer's agent for the same broker-dealer or for a broker-dealer under

direct or indirect common control; or

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(6) engaging in the conduct specified under subdivision 1, clauses (2), (3), (4), (5), (6),

(9), (10), (14), (15), (16), (17), (21), (22), (23), (24), (25), (26), (27), or (28).

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Subd. 3.

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Conduct specified not exclusive.

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The conduct identified as a violation under

subdivisions 1 and 2 is not exclusive. A broker-dealer or broker-dealer's agent that engages

in other conduct, including but not limited to forgery, embezzlement, nondisclosure,

incomplete disclosure or misstatement of material facts, or manipulative or deceptive

practices, is also subject to denial, suspension, or revocation of registration.

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Sec. 5.

Minnesota Statutes 2024, section 80C.12, subdivision 1, is amended to read:

Subdivision 1.

Grounds.

The commissioner, with or without prior notice or hearing,

may issue a cease and desist order and may issue an order denying, suspending or revoking

any registration, amendment or exemption on finding any of the following:

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(a)
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(1)
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that the applicant, registrant or franchisor or any officer, director, agent or

employee thereof or any other person has violated or failed to comply with any provision

of sections
80C.01
to
80C.22
or any rule or order of the commissioner;

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(b)
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(2)
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that the offer, sale, or purchase of the franchise would constitute misrepresentation

to or deceit or fraud upon purchasers thereof, or has worked or tended to work a fraud upon

purchasers or would so operate;

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(c)
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(3)
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that the applicant, registrant or franchisor or any officer, director, agent or

employee thereof or any other person is engaging or about to engage in false, fraudulent or

deceptive practices in connection with the offer and sale of a franchise;

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(d)
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(4)
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that any person identified in a public offering statement has been
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:
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(i)
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convicted

of an offense
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or held liable in a civil action by final judgment
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described in section
80C.04
,
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subdivision 1, paragraph (e),
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clause
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(5)
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(1)
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, has a civil or criminal action pending as described

in section 80C.04, subdivision 1, paragraph (e), clause (5)
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, or is subject to an order
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, or has

had a civil judgment entered against the person as described in section
80C.04
, clause (5),
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described in section 80C.04, subdivision 1, paragraph (e), clauses (2) to (4);
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and
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(ii)
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the

involvement of the person in the business of the applicant or franchisor creates a substantial

risk to prospective franchisees;

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(e)
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(5)
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that the financial condition of the franchisor adversely affects or would adversely

affect the ability of the franchisor to fulfill its obligations under the franchise agreement;

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(f)
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(6)
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that the franchisor's enterprise or method of business includes or would include

activities which are illegal where performed;
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or
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(g)
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(7)
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that the method of sale or proposed method of sale of franchises or the operation

of the business of the franchisor or any term or condition of the franchise agreement or any

practice of the franchisor is or would be unfair or inequitable to franchisees.

Sec. 6.
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OTHER REAL ESTATE; EXPEDITED RULEMAKING.
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The commissioner of commerce must adopt rules amending Minnesota Rules, part

2675.2170, item A, to conform with generally accepted accounting principles. The

commissioner of commerce may use the expedited rulemaking process under Minnesota

Statutes, section 14.389, to amend Minnesota Rules, part 2675.2170, item A, under this

section.

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