Commerce and Insurance, Dept. of

Plain English Breakdown

The official source material did not provide specific details on how the changes might affect enforcement or specific cases.

Amendments to Investment Advisor Regulations and Securities Act

This bill amends Tennessee laws related to investment advisors, securities examinations, legal actions for violations of the Securities Act, customer disputes involving broker-dealers or agents, and eliminates educational cooperative scholarship plans.

What This Bill Does

• Allows people who are exempt from being called an 'investment advisor' by a rule made by the commissioner to work as investment advisors in Tennessee.
• Clarifies that information gathered during securities examinations can be shared with other states’ securities offices or federal agencies, but it must not be made public.
• Requires courts to appoint the commissioner of commerce and insurance as receiver or conservator for defendants when requested by the commissioner after finding a violation of the Securities Act.
• Limits how long someone has to sue for violations of the Securities Act: five years from the act or two years from discovering it, whichever is sooner.
• Sets rules for broker-dealers or agents who want to remove customer dispute information from their records and requires them to notify the department 60 days before doing so.
• Eliminates educational cooperative scholarship plans.

Who It Names or Affects

• Investment advisors
• People involved in securities examinations
• Courts dealing with violations of the Securities Act
• Broker-dealers or agents handling customer disputes

Terms To Know

receiver or conservator

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

expungement

The process of removing customer dispute information from records.

Limits and Unknowns

• It is not clear how the changes will affect specific cases or enforcement.
• There are no details on how the commissioner's discretion in waiving the requirement to name the department as a party will be applied.

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

HOUSE BILL 2529
By Lamberth

SENATE BILL 1866
By Johnson
SB1866
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.