Commerce and Insurance, Dept. of

Plain English Breakdown

The bill summary and official digest do not mention the elimination of educational cooperative scholarship plans. This claim was removed as it is unsupported by the provided sources.

Changes to Investment Advisor Regulations and Securities Act

This bill amends Tennessee laws related to investment advisors who are exempt from certain definitions, clarifies information sharing for securities examinations with other states, requires courts to appoint the commissioner as receiver or conservator upon request in cases of Securities Act violations, limits legal actions after discovery of a violation, and sets rules for broker-dealers and agents regarding customer dispute expungement.

What This Bill Does

• Allows people who are exempt from being an investment advisor under rules made by the commissioner to work as investment advisors in Tennessee.
• Clarifies that the commissioner can share information about securities examinations with other states' securities offices without breaking confidentiality laws.
• Requires a court to appoint the commissioner of commerce and insurance as receiver or conservator for someone who violated the Securities Act, if requested by the commissioner.
• Limits how long people have to sue after discovering a violation of the Securities Act.
• Sets rules for broker-dealers and agents in Tennessee when they want to remove customer dispute information from their records.

Who It Names or Affects

• Investment advisors
• People who violate the Tennessee Securities Act
• Broker-dealers and agents with business locations in Tennessee

Terms To Know

receiver or conservator

A person appointed by a court to manage someone's assets when they have violated securities laws.

expungement

The process of removing customer dispute information from records.

Limits and Unknowns

• Some parts of the bill are unclear and may need further explanation.
• It is not clear how this act will be enforced or what specific changes it will bring to current practices.

Official Summary Text

Present law prohibits persons from transacting business in this state as an investment advisor unless (i) the person is an investment advisor or an investment adviser representative; (ii) the person is required to register as an investment advisor pursua
nt to federal law and has filed an initial notice filing with the
commissioner of commerce and insurance ("commissioner");
or (iii) the person's only clients in this state are insurance companies. This bill also authorizes a person to transact business in
this state as an investment advisor if the person is exempted from the definition of an investment advisor or investment advisor representative pursuant to a rule adopted by the commissioner.

CONFIDENTIAL RECORDS

Present law requires the working papers, recorded information, documents, and required records and copies of such documents obtained by or disclosed to the commissioner or another person in the course of an examination made under the Tennessee Securities
Act of 1980 ("the Act") to be kept confidential and not made public. However, this bill clarifies that the commissioner is not prohibited from disclosing the content of an examination to the securities administration of other states, the securities and
ex
change commission, any securities exchange or association registered under federal law, or any securities administrators' associate for the purpose of avoiding unnecessary duplication of examinations.

INJUNCTIONS AND CIVIL LIABILITY

Present law authorizes the commissioner to bring an action to enjoin the acts or practices of any person that has engaged or is about to engage in a violation of the Act. Upon proper showing, a permanent or temporary injunction, restraining order, writ
of mandamus, disgorgement, or other proper equitable relief must be granted. This bill requires the court to appoint the commissioner as the receiver or conservator for the defendant or the defendant's assets upon the request of the commissioner.

Present law creates a private right of action to enforce liability for violations of the Act in any court with jurisdiction. This bill requires that such private right of action be commenced less than five years after the violation or two years after th
e discovery of the facts constituting the violation, or after such discovery should have been made, whichever expires first.

CUSTOMER DISPUTES

This bill authorizes broker-dealers or agents with a business location in this state to file to vacate, modify, or confirm an arbitration award relating to expungement of consumer dispute information from the Central Registration Depository system or to
file an action in court to obtain expungement of customer dispute information from the Central Registration Depository system. Broker-dealers previously registered in this state with a business location in this state at the time the underlying customer d
is
pute occurred may also initiate such proceedings. Sixty days prior to initiation, the broker-dealer or agent must provide the department of commerce and insurance ("department") with a written notice of the proceeding. The department must also be named
a party to the proceeding. However, this bill authorizes the commissioner to waive the obligation to name the department.

COOPERATIVE SCHOLARSHIP PLANS

Present law authorizes the creation of educational cooperative scholarship plans and authorizes the commissioner to regulate the operation and administration of such plans. This bill eliminates educational cooperative scholarship plans.

Current Bill Text

SENATE BILL 1866
By Johnson

HOUSE BILL 2529
By Lamberth
HB2529
011707
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 48,
Chapter 1, Part 1 and Title 49, Chapter 4, Part 1,
relative to matters regulated by the department of
commerce and insurance.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 48-1-109(c), is amended by adding
the following as a new subdivision:
(4) The person is exempted from the definition of an investment adviser or
investment adviser representative by rule adopted by the commissioner pursuant to §
48-1-102(13)(F) or § 48-1-102(14)(B).
SECTION 2. Tennessee Code Annotated, Section 48-1-111(d)(4), is amended by
deleting "in this subdivision (d)(4)" and substituting "in subdivision (d)(3)".
SECTION 3. Tennessee Code Annotated, Section 48-1-119(b), is amended by adding
the following language at the end of the subsection:
Upon request of the commissioner, the chancery court shall appoint the commissioner
as the receiver or the conservator for the defendant or the defendant's assets.
SECTION 4. Tennessee Code Annotated, Section 48-1-122(h), is amended by deleting
the subsection and substituting:
(h) A private right of action brought by any person under this section must not be
maintained unless commenced before the expiration of five (5) years after the act or
transaction constituting the violation or the expiration of two (2) years after the discovery
of the facts constituting the violation, or after such discovery should have been made by
the exercise of reasonable diligence, whichever expires first.

- 2 - 011707

SECTION 5. Tennessee Code Annotated, Section 48-1-128, is amended by deleting the
section and substituting:
(a) The requirements of subsection (b) apply to the following:
(1) A broker-dealer or an agent with a principal place of business, branch
office, or other business location in this state; or
(2) A broker-dealer or an agent previously registered in this state, with a
principal place of business, branch office, or other business location in this state
at the time during which the underlying customer dispute being sought to be
expunged occurred.
(b) Prior to initiating a proceeding described in subdivision (b)(1)(A) or (b)(1)(B),
a person described in subdivision (a)(1) or (a)(2) must:
(1) Provide the department with written notice at least sixty (60) days
prior to:
(A) Filing to vacate, modify, or confirm an arbitration award
relating to expungement of customer dispute information from the Central
Registration Depository (CRD) system; or
(B) Filing an action in a court of competent jurisdiction to obtain
expungement of customer dispute information from the CRD system; and
(2) Name the department as a party to the proceeding described in
subdivision (b)(1)(A) or (b)(1)(B).
(c) Notwithstanding subdivision (b)(2), upon receiving the written notice required
by subdivision (b)(1), the commissioner may, in the commissioner's discretion, waive the
obligation of a person described in subdivision (a)(1) or (a)(2) to name the department
as a party pursuant to a proceeding described in subdivision (b)(1)(A) or (b)(1)(B).

- 3 - 011707

SECTION 6. Tennessee Code Annotated, Title 49, Chapter 4, Part 1, is amended by
deleting the part.
SECTION 7. This act takes effect upon becoming a law, the public welfare requiring it.