HOUSE BILL No. 5763


     May 10, 2000, Introduced by Reps. Richner, Bishop, Shulman, Hart, Baird and Koetje and referred to the Committee on
Family and Civil Law.


        A bill to amend 1964 PA 265, entitled

   "Uniform securities act,"

   by amending the title and sections 101, 102, 103, 201, 202, 203,

   204, 301, 304a, 305, 401, 402, 403, 405, 406, 409, 410, 412, 413,

   414, and 417 (MCL 451.501, 451.502, 451.503, 451.601, 451.602,

   451.603, 451.604, 451.701, 451.704a, 451.705, 451.801, 451.802,

   451.803, 451.805, 451.806, 451.809, 451.810, 451.812, 451.813,

   451.814, and 451.817), section 201 as amended by 1996 PA 349,

   sections 202, 203, 402, and 410 as amended by 1990 PA 150, sec-

   tion 304a as added and section 305 as amended by 1996 PA 529,

   sections 401 and 409 as amended by 1988 PA 408, and section 413

   as amended by 1992 PA 207, and by adding sections 202a and 308.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:






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                                    TITLE

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           An act to enact the uniform securities act relating to the

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      issuance, offer, sale, or purchase of securities;  and commodity

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      contracts;  to prohibit fraudulent practices in relation

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       thereto  TO SECURITIES; to establish civil and criminal

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       penalties  SANCTIONS for violations of the act and civil

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       penalties  SANCTIONS for violation of the rules promulgated pur-

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      suant to the act; to require the registration of broker-dealers,

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       and their principals,  agents, investment advisers,  commodity

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      issuers,  and securities; to make uniform the law with reference

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       thereto  TO SECURITIES; and to repeal  certain  acts and
   parts

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      of acts.

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           Sec. 101.  It is unlawful for any person, in connection with

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      the offer, sale, or purchase of any security,  or commodity

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      contract,  directly or indirectly:

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           (1) To employ any device, scheme, or artifice to defraud.

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           (2) To make any untrue statement of a material fact or to

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      omit to state a material fact necessary in order to make the

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      statements made, in the light of the circumstances under which

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      they are made, not misleading.

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           (3) To engage in any act, practice, or course of business

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      which operates or would operate as a fraud or deceit upon any

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      person.

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           Sec. 102.  (a)  It is unlawful for any person who receives

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      any consideration from another person primarily for advising the

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      other person as to the value of securities or commodity contracts

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      or their purchase or sale, whether through the issuance of



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      analyses or reports or otherwise  AN INVESTMENT ADVISER, A

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      FEDERALLY COVERED ADVISER, OR A PERSON WHO REPRESENTS AN INVEST-

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      MENT ADVISER OR A FEDERALLY COVERED ADVISER SHALL NOT, DIRECTLY

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      OR INDIRECTLY, DO ANY OF THE FOLLOWING:

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           (1)  To employ any  EMPLOY A device, scheme, or artifice to

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      defraud  the other person.  A CLIENT OR PROSPECTIVE CLIENT.

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           (2)  To engage  ENGAGE in  any  AN act, practice, or
   course

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      of business  which  THAT operates or  would  COULD operate
   as a

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      fraud or deceit upon  the other person.  A CLIENT OR PROSPECTIVE

10
      CLIENT.

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           (3) Acting as principal for his OR HER own account, know-

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      ingly  to  sell any security  or commodity contract to  or
   pur-

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      chase any security  or commodity contract  from an investment

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      advisory client, or acting as a broker for a person other than

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      that client, knowingly  to  effect any sale or purchase of any

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      security  or commodity contract  for the account of that client,

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      without disclosing to the client in writing before the completion

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      of the transaction the capacity in which he OR SHE is acting and

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      obtaining the consent of the client in writing to the

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      transaction.  The prohibitions of this subdivision  shall  DO not

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      apply to a transaction with a customer of a broker-dealer if the

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      broker-dealer is not acting as an adviser in relation to the

23
      transaction.

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           (b) It is unlawful for any investment adviser to enter into,

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      extend, or renew any investment advisory contract unless it pro-

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      vides in writing ALL OF THE FOLLOWING:





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           (1) That the investment adviser shall not be compensated on

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      the basis of a share of capital gains upon or capital

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      appreciation of the funds or any portion of the funds of the

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      client.  ; 

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           (2) That no assignment of the INVESTMENT ADVISORY contract

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      may be made by the investment adviser without the consent of the

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      other party to the contract.  ; and 

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           (3) That the investment adviser, if a partnership, shall

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      notify the other party to the INVESTMENT ADVISORY contract of any

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      change in the membership of the partnership within a reasonable

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      time after the change.

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           (c) It is unlawful for any investment adviser acting as a

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      finder to DO ANY OF THE FOLLOWING:

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           (1) Take possession of funds or securities in connection

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      with the transaction for which payment is made for services as a

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      finder.

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           (2) Fail to disclose clearly and conspicuously in writing to

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      all persons involved in the transaction as a result of his or her

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      finding activities before the sale or purchase that the person is

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      acting as a finder,  a  ANY payment for services as a finder, the

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      method and amount of payment, as well as any beneficial interest,

22
      direct or indirect, of the finder or a member of the finder's

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      immediate family in the issue of the securities  or commodities 

24
      that are the subject of services as a finder.

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           (3) Participate in the offer, purchase, or sale of a secur-

26
      ity  or commodity  in violation of section 301.  However, if the

27
      investment adviser makes a reasonable effort to ascertain if a



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      registration has been effected or an exemption order granted in

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      this state  ,  or  alternatively  TO ASCERTAIN the basis
   for an

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      exemption claim and does not have knowledge that the proposed

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      transaction would violate section 301, his or her activities as a

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      finder  shall  DO not violate section 301.

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           (4) Participate in the offer, purchase, or sale of a secur-

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      ity  or commodity  without obtaining information relative to the

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      risks of the transaction, the direct or indirect compensation to

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      be received by promoters, partners, officers, directors, or their

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      affiliates, the financial condition of the issuer, and the use of

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      proceeds to be received from investors, or fail to read any

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      offering materials obtained.  This section  shall  DOES not

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      require independent investigation or alteration of offering mate-

14
      rials furnished to the finder.

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           (5) Fail to inform or otherwise  insure  ENSURE disclosure

16
      to all persons involved in the transaction as a result of his or

17
      her finding activities of any material information which the

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      finder knows, or in the exercise of reasonable care should know

19
      based on the information furnished to him or her, is material in

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      making an investment decision, until conclusion of the

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      transaction.

22
           (6) Locate, introduce, or refer persons that the finder

23
      knows, or after a reasonable inquiry should know, are not suit-

24
      able investors by reason of their financial condition, age,

25
      experience, or need to diversify investments.

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           (D)  (7)  The finder is not required to independently

27
      generate information.



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           (E) UNLESS WAIVED BY THE ADMINISTRATOR, AN INVESTMENT

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      ADVISER REGISTERED OR REQUIRED TO BE REGISTERED UNDER THIS ACT

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      SHALL, IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION, FURNISH

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      EACH ADVISORY CLIENT AND PROSPECTIVE ADVISORY CLIENT WITH A WRIT-

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      TEN DISCLOSURE STATEMENT WHICH MAY BE A COPY OF PART II OF ITS

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      FORM ADV OR WRITTEN DOCUMENTS CONTAINING THE INFORMATION REQUIRED

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      BY PART II OF FORM ADV.  AN INVESTMENT ADVISER SHALL DELIVER THE

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      DISCLOSURE STATEMENT REQUIRED BY THIS SECTION TO A CLIENT OR PRO-

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      SPECTIVE CLIENT NOT LESS THAN 48 HOURS PRIOR TO ENTERING INTO AN

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      INVESTMENT ADVISORY CONTRACT WITH THE CLIENT OR PROSPECTIVE

11
      CLIENT, OR AT THE TIME OF ENTERING INTO THE INVESTMENT ADVISORY

12
      CONTRACT IF THE ADVISORY CLIENT HAS A RIGHT TO RESCIND THE

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      INVESTMENT ADVISORY CONTRACT WITHOUT PENALTY WITHIN 5 BUSINESS

14
      DAYS OF ENTERING INTO THE INVESTMENT ADVISORY CONTRACT.

15
           (F) AN INVESTMENT ADVISER SHALL ANNUALLY AND WITHOUT CHARGE

16
      DELIVER OR OFFER TO DELIVER TO EACH OF ITS ADVISORY CLIENTS THE

17
      DISCLOSURE STATEMENT REQUIRED BY THIS SECTION.  ANY DISCLOSURE

18
      STATEMENT REQUIRED BY THIS SECTION AND REQUESTED IN WRITING BY AN

19
      ADVISORY CLIENT PURSUANT TO AN OFFER TO DELIVER MUST BE MAILED OR

20
      DELIVERED WITHIN 5 BUSINESS DAYS OF THE REQUEST.  THE DELIVERY OR

21
      OFFER TO DELIVER REQUIRED BY THIS SECTION NEED NOT BE MADE TO

22
      ADVISORY CLIENTS RECEIVING ADVISORY SERVICES SOLELY PURSUANT TO A

23
      CONTRACT WITH AN INVESTMENT COMPANY REGISTERED PURSUANT TO SEC-

24
      TION 15(c) OF THE INVESTMENT COMPANY ACT OF 1940, 15

25
      U.S.C. 80a-15.

26
           (G)  (d)  Subsection (b)(1)  of this section shall not be

27
      construed to  DOES NOT prohibit an investment advisory contract



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      which provides for compensation based upon the total value of a

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      fund averaged over a definite period, or as of definite dates, or

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      taken as of a definite date,  or shall  AND DOES not apply to an

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      investment advisory contract with an investment company regis-

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      tered under the investment company act of 1940, or any person,

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      except a trust, collective trust fund, or separate account

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      referred to in section 3(c)(11) of the investment company act of

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      1940, 15 U.S.C. 80a-3, if the INVESTMENT ADVISORY contract

 9
      relates to the investment of assets in excess of $1,000,000.00,

10
      and the INVESTMENT ADVISORY contract provides for compensation

11
      based on the asset value of the company or fund under management

12
      averaged over a specific period and increasing and decreasing

13
      proportionately with the investment performance of the company or

14
      fund over a specific period in relation to the investment record

15
      of an appropriate index of securities prices, or  such other 

16
      ANOTHER measure of investment performance as the administrator by

17
      rule, regulation, or order may specify.  For purposes of deter-

18
      mining whether subsection (b)(1) applies to an investment

19
      advisory contract, the point from which increases and decreases

20
      in compensation are measured shall be the fee which is paid or

21
      earned when the investment performance of the company or fund is

22
      equivalent to that of the index or other measure of performance,

23
      and an index of securities prices shall be  deemed  CONSIDERED

24
      appropriate unless the administrator by order shall determine

25
      otherwise.  The definition of the term "assignment" and the other

26
      terms used in this section shall be the same as the definitions





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      of those terms in the investment advisers act of 1940.  , as

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      amended. 

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           (H)  (e)  Unless the administrator by rule or order permits

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       such  TAKING OR HAVING custody, it is unlawful for any invest-

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      ment adviser not registered as a broker-dealer to take or have

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      custody of any securities or funds  or commodity contracts  of

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      any client.

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           (I)  (f)  It is unlawful for an agent registered with a

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      broker-dealer to conduct business as an investment adviser OR AN

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      INVESTMENT ADVISER REPRESENTATIVE except through the

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      broker-dealer with which the agent is registered and with the

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      written consent of the broker-dealer filed with the administra-

13
      tor, in a form and subject to terms and conditions acceptable to

14
      the administrator.

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           Sec. 103.  It is unlawful for any person with intent to

16
      deceive to make, offer, or sell imitation or false ingots, bars

17
      of  boullion  BULLION, wafers, medals, or similar artifacts, or

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      certificates or other instruments representing securities.  or

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      commodities. 

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           Sec. 201.  (a) A person shall not transact business in this

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      state as a broker-dealer  , commodity issuer,  or agent unless

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      registered under this act.

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           (b) A broker-dealer or issuer shall not employ an agent

24
      unless the agent is registered.  The registration of an agent is

25
      not effective during any period when the agent is not associated

26
      with a particular broker-dealer registered under this act or a

27
      particular issuer.  If an agent begins or terminates a connection



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      with a broker-dealer or issuer, or begins or terminates those

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      activities that make him or her an agent, the agent as well as

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      the broker-dealer or issuer shall immediately notify the adminis-

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      trator in writing on a form prescribed by the administrator.

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            (c) Unless a broker-dealer is a member of a national secur-

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      ities exchange as defined in title I of the securities exchange

 7
      act of 1934, chapter 404, 48 Stat. 881, the administrator may by

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      rule or order require that a broker-dealer designate a person who

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      shall be registered as a principal of the broker-dealer in charge

10
      of management, financial matters, or compliance and the

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      broker-dealer shall at all times designate and maintain a

12
      principal.  The registration of a principal is not effective

13
      during any period when the principal is not associated with a

14
      particular broker-dealer registered under this act.  If a princi-

15
      pal begins or terminates a connection with a broker-dealer, or

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      begins or terminates activities and designation as a principal,

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      the principal as well as the broker-dealer shall immediately

18
      notify the administrator in writing on a form prescribed by the

19
      administrator. 

20
           (C)  (d)  A person shall not transact business in this state

21
      as an investment adviser unless the person  complies with  MEETS

22
      1 or more of the following:

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           (1) The person is registered under this act.

24
           (2) The person is registered as a broker-dealer without the

25
      imposition of a condition under section 204(b)(5).

26
           (3) The person's only clients in this state are investment

27
      companies, as defined in section 3 of the investment company act



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      of 1940,  title I of chapter 686, 54 Stat. 789,  15 U.S.C. 80a-3,

 2
       or  insurance companies, banks, or trust companies.

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           (4) THE PERSON IS AN INVESTMENT ADVISER WHO IS NOT REQUIRED

 4
      TO BE REGISTERED AS AN INVESTMENT ADVISER UNDER THE INVESTMENT

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      ADVISERS ACT OF 1940 IF ANY OF THE FOLLOWING APPLY:

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           (A) THE INVESTMENT ADVISER'S ONLY CLIENTS IN THIS STATE ARE

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      OTHER INVESTMENT ADVISERS, FEDERALLY COVERED ADVISERS,

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      BROKER-DEALERS, OR INSTITUTIONAL INVESTORS.

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           (B) THE INVESTMENT ADVISER HAS NO PLACE OF BUSINESS IN THIS

10
      STATE AND THE INVESTMENT ADVISER DIRECTS BUSINESS COMMUNICATIONS

11
      IN THIS STATE TO A PERSON WHO IS AN EXISTING CUSTOMER AND WHOSE

12
      PRINCIPAL PLACE OF RESIDENCE IS NOT IN THIS STATE.

13
           (C) THE INVESTMENT ADVISER HAS NO PLACE OF BUSINESS IN THIS

14
      STATE AND THE INVESTMENT ADVISER DURING THE PRECEDING 12-MONTH

15
      PERIOD HAS HAD NOT MORE THAN 5 CLIENTS, OTHER THAN THOSE SPECI-

16
      FIED IN SUBPARAGRAPH (A), WHO ARE RESIDENTS OF THIS STATE.

17
           (5)  (4)  The person's only clients in this state are indi-

18
      viduals who access the person's services through a 1-900 or

19
       1-800  TOLL-FREE telephone number and the services are generic

20
      in nature and not customized or specific to an individual and

21
      would not otherwise be considered the offering of investment

22
      advice.

23
           (6) THE PERSON IS A FEDERALLY COVERED ADVISER.

24
           (7) A FEDERALLY COVERED ADVISER WHOSE ONLY CLIENTS ARE

25
      INVESTMENT COMPANIES AS DEFINED IN SECTION 3 OF THE INVESTMENT

26
      COMPANY ACT OF 1940, 15 U.S.C. 80a-3.





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           (D)  (e)  A registration under this section  shall be 
   IS

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      effective  until it is withdrawn, terminated, revoked, or

 3
      canceled.  A registrant shall be required to file or have filed

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      an annual report with such information as the administrator may

 5
      require.  The administrator may by rule or order reduce the

 6
      filing fee for registration applications received more than 6

 7
      months after the beginning of the fiscal year.  UPON ORDER OF THE

 8
      ADMINISTRATOR AND EXPIRES ON DECEMBER 31 OF THAT YEAR.  IF A

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      PERSON DOES NOT FILE AN ANNUAL REPORT, WITH THE INFORMATION

10
      REQUIRED BY THE ADMINISTRATOR, BEFORE DECEMBER 31 OF EACH YEAR,

11
      THE PERSON SHALL NOT CONTINUE TO TRANSACT BUSINESS IN THIS STATE

12
      AS AN INVESTMENT ADVISER, BROKER-DEALER, OR AGENT.

13
            (f) Unless the administrator by rule provides for regula-

14
      tion, the broker-dealer, commodity issuer, and agent registration

15
      provisions of this act do not apply to a person engaged in the

16
      commodities business in this state and whose transactions with

17
      the public involve 1 or more of the following:

18
           (1) A sale with delivery into the possession of the buyer of

19
      the commodity sold, within 10 days after the cash payment, if,

20
      with respect to the sales the seller does not do any of the

21
      following:

22
           (i) Guarantee or promise the repurchase of the commodity

23
      from the buyer in the future.

24
           (ii) Promise or agree to act as a broker or dealer on behalf

25
      of the buyer in connection with a future resale of the commodity

26
      by the buyer.





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           (iii) Advertise the commodity except under a plan accepted

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      by the administrator.

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           (iv) Pay a commission directly or indirectly for soliciting

 4
      any prospective buyer.

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           (2) Except for investment purposes, the sale or purchase of

 6
      the commodity from a person using or processing the commodity in

 7
      a trade or business, including the resale of the commodity,

 8
      whether or not for immediate delivery.

 9
           (g) The registration provisions of this act do not apply to

10
      all commodities accounts, agreements, and transactions excluded

11
      from state jurisdiction under the commodity exchange act, chapter

12
      369, 42 Stat. 998, 7 U.S.C. 1 to 9b, 10a to 13, 13a to 13c, 15,

13
      16, 17, and 18 to 25. 

14
           (E)  (h)  The registration provisions of this act do not

15
      apply to a county treasurer acting under his or her authority

16
      under the local government investment pool act,  Act No. 121 of

17
      the Public Acts of 1985, being sections 129.141 to 129.150 of the

18
      Michigan Compiled Laws  1985 PA 121, MCL 129.141 TO 129.150.

19
           (F)  (i)  A person licensed or registered as a mortgage

20
      broker, mortgage lender, or mortgage servicer under the mortgage

21
      brokers, lenders, and servicers licensing act,  Act No. 173 of

22
      the Public Acts of 1987, being sections 445.1651 to 445.1683 of

23
      the Michigan Compiled Laws, shall be  1987 PA 173, MCL 445.1651

24
      TO 445.1684, IS exempted from registering as a broker-dealer

25
      under this act for the offer or sale of mortgage loans as defined

26
      under  Act No. 173 of the Public Acts of 1987  THE MORTGAGE

27
      BROKERS, LENDERS, AND SERVICERS LICENSING ACT, 1987 PA 173, MCL



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      445.1651 TO 445.1684.  Employees  AN EMPLOYEE of  persons 
   A

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      PERSON licensed or registered under  Act No. 173 of the Public

 3
      Acts of 1987 are  THE MORTGAGE BROKERS, LENDERS, AND SERVICERS

 4
      LICENSING ACT, 1987 PA 173, MCL 445.1651 TO 445.1684, IS exempted

 5
      from the agent registration provision of this act for THE offer

 6
      or sale of mortgage loans as defined under  that act  THE MORT-

 7
      GAGE BROKERS, LENDERS, AND SERVICERS LICENSING ACT, 1987 PA 173,

 8
      MCL 445.1651 TO 445.1684, when acting as  employees  AN EMPLOYEE

 9
      of the licensed  persons  OR REGISTERED PERSON.

10
           Sec. 202.  (a) A broker-dealer,  principal, commodity

11
      issuer,  agent, or investment adviser may obtain an initial reg-

12
      istration by filing with the administrator an application

13
      together with a consent to service of process pursuant to section

14
      414(g).  The application shall contain  whatever  THE information

15
      THAT the administrator by rule requires concerning  such matters

16
      as  ANY OF THE FOLLOWING:

17
           (1) The applicant's form and place of organization.  ; 

18
           (2) The applicant's proposed method of doing business.  ; 

19
           (3) The qualifications and business history of the appli-

20
      cant; in the case of a broker-dealer or investment adviser, the

21
      qualifications and business history of any partner, officer, or

22
      director, any person occupying a similar status or performing

23
      similar functions, or any person directly or indirectly control-

24
      ling the broker-dealer or investment adviser; and, in the case of

25
      an investment adviser, the qualifications and business history of

26
      any employee.  ; 





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           (4) Any injunction or administrative order or conviction of

 2
      a misdemeanor or of a felony.  ; and 

 3
           (5) The applicant's financial condition and history.

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           (B) The administrator may by rule or order require an appli-

 5
      cant for initial registration to publish an announcement of the

 6
      application in 1 or more specified newspapers published in this

 7
      state.  Registration becomes effective upon order of the

 8
      administrator.  The administrator may by rule or order establish

 9
      classes of or otherwise condition the registration of

10
      broker-dealers,  principals, commodities issuers,  agents, or

11
      investment advisers.

12
           (C)  (b)  Every applicant for registration shall pay a

13
      filing fee and every registrant shall pay an annual fee of

14
      $250.00 in the case of a broker-dealer,  $250.00 in the case of a

15
      commodity issuer, $30.00 in the case of a principal,  $30.00 in

16
      the case of an agent, and $150.00 in the case of an investment

17
      adviser.  Every applicant filing an application for registration

18
      of a successor pursuant to  section 202(c)  SUBSECTION (D) shall

19
      pay a filing fee of $100.00 for the unexpired portion of the

20
      year.  A  licensed  REGISTERED agent who has terminated his or

21
      her connection with a broker-dealer shall pay a transfer fee of

22
      $10.00 when transferring his or her connection to another

23
      broker-dealer.  The administrator, in connection with any exami-

24
      nation pursuant to section 204(b)(6), may require by rule the

25
      payment of a reasonable fee sufficient to defray the expense of

26
      preparing, administering, scoring, and disseminating information

27
      concerning the examination.  The administrator may either collect



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      this fee for, or direct that it be paid in whole or in part to,

 2
      any agency, association, or organization cooperating in adminis-

 3
      tering this examination.

 4
           (D)  (c)  A registered broker-dealer  , commodity issuer,
   

 5
      or investment adviser may file an application for registration of

 6
      a successor, whether or not the successor is then in existence.

 7
      The administrator may grant or deny the application.

 8
           (E) AN APPLICANT FOR REGISTRATION UNDER THIS ACT OR AN

 9
      ISSUER WHO OFFERS OR SELLS A SECURITY IN THIS STATE THROUGH ANY

10
      PERSON SHALL FILE WITH THE ADMINISTRATOR, IN THE FORM PRESCRIBED

11
      BY THE ADMINISTRATOR BY RULE OR ORDER, AN IRREVOCABLE CONSENT TO

12
      SERVICE OF PROCESS.

13
           (F)  (d)  The administrator may by rule OR ORDER require a

14
      minimum capital for registered broker-dealers  , commodity

15
      issuers,  WHO ARE SUBJECT TO SECTION 15 OF TITLE I OF THE SECURI-

16
      TIES EXCHANGE ACT OF 1934, 15 U.S.C. 78o, and investment advisers

17
      WHO ARE SUBJECT TO SECTION 222 OF THE INVESTMENT ADVISERS ACT OF

18
      1940, 15 U.S.C. 80b-18a, and prescribe a ratio between net capi-

19
      tal and aggregate indebtedness.  If the registrant fails to

20
      comply with the minimum net capital requirement, the registrant

21
      shall immediately cease all investment advisory  services,  OR

22
      securities  , or commodities  business operations and promptly

23
      notify the administrator of its failure to maintain the required

24
      net capital, of the steps to be taken to cure the net capital

25
      deficiency, and of its anticipated date of reopening business

26
      operations.  The registrant shall not reactivate its securities





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       or commodities  or investment advisory business OPERATIONS

 2
      without prior notification to the administrator.

 3
            (e) The administrator may by rule require registered

 4
      broker-dealers, commodity issuers, principals, agents, and

 5
      investment advisers to post surety bonds in amounts up to

 6
      $100,000.00, and may determine their conditions.  Any appropriate

 7
      deposit of cash or securities shall be accepted in lieu of any

 8
      bond required.  A bond may not be required of any registrant

 9
      whose net capital, which may be defined by rule, exceeds

10
      $100,000.00.  Every bond shall provide for action thereon by any

11
      person who has a cause of action under section 410 and, if the

12
      administrator by rule or order requires, by any person who has a

13
      cause of action not arising under this act.  Every bond shall

14
      provide that action may not be maintained to enforce any liabil-

15
      ity on the bond unless brought within 2 years after the sale or

16
      other act upon which it is based.  If a civil action is main-

17
      tained under the provisions of the bond, the court shall require

18
      the person maintaining an action against the principal or surety,

19
      or both, on the bond to place a notice in a newspaper of general

20
      circulation in the county where the registrant maintains its

21
      principal office, or if there is no principal office in this

22
      state, then in the county of each registered office in this

23
      state, for 3 successive days, stating that a claim has been made

24
      under the provisions of the bond; or the court may provide for

25
      alternative notice designed to advise prospective claimants

26
      against the broker-dealer or surety.  The court shall for a

27
      period of 30 days thereafter permit other claimants against the



   02726'99
                                  17

 1
      bond to join the action and claim under the provisions of the

 2
      bond. 

 3
            (f) The administrator may by rule require registered

 4
      broker-dealers and investment advisers to carry fidelity bonds in

 5
      amounts up to $400,000.00 in the case of broker-dealers and up to

 6
      $100,000.00 in the case of investment advisers covering the

 7
      registrant's general partners and employees or covering its offi-

 8
      cers and employees. 

 9
           (G) THE ADMINISTRATOR MAY REQUIRE A FIDELITY BOND FROM A

10
      BROKER-DEALER, AGENT, OR INVESTMENT ADVISER WHO IS REQUIRED TO BE

11
      REGISTERED UNDER THIS ACT.

12
           (H)  (g)  Unless the requirement is waived by rule or order

13
      of the administrator, all persons, including but not limited to

14
      partners, officers, directors, and agents employed by a

15
      broker-dealer  , commodity issuer,  or investment adviser who are

16
      regularly employed within this state shall, as a condition of

17
      employment, be fingerprinted.  The administrator may process the

18
      fingerprint cards with the federal bureau of investigation and

19
      the department of state police either directly or through the

20
      national association of securities dealers.  The fingerprints or

21
      information relating to the fingerprints shall be used for the

22
      official use of the administrator only.

23
           SEC. 202A.  (A) EXCEPT AS PROVIDED IN SUBSECTION (B), BEFORE

24
      CONDUCTING BUSINESS IN THIS STATE, A FEDERALLY COVERED ADVISER

25
      SHALL FILE WITH THE ADMINISTRATOR SOME OR ALL OF THE DOCUMENTS

26
      THAT THE FEDERALLY COVERED ADVISER HAS FILED WITH THE SECURITIES

27
      AND EXCHANGE COMMISSION, AND AMENDMENTS TO DOCUMENTS FILED WITH



   02726'99
                                  18

 1
      THE SECURITIES AND EXCHANGE COMMISSION, AS THE ADMINISTRATOR BY

 2
      RULE REQUIRES.  THE ADMINISTRATOR MAY REQUIRE A CONSENT TO SERV-

 3
      ICE OF PROCESS AND A FEE IN CONJUNCTION WITH THE FILING.

 4
           (B) A FEDERALLY COVERED ADVISER IS NOT REQUIRED TO MAKE A

 5
      NOTICE FILING IF 1 OR MORE OF THE FOLLOWING APPLY TO THE FEDER-

 6
      ALLY COVERED ADVISER:

 7
           (1) HE OR SHE IS A REGISTERED BROKER-DEALER WHO IS NOT

 8
      SUBJECT TO A CONDITION IMPOSED UNDER SECTION 204(B)(5).

 9
           (2) HE OR SHE IS NOT AN INVESTMENT ADVISER UNDER SECTION

10
      401(l)(1), (2), (3), (4), (6), (7), (8), (9), OR (11).

11
           (3) HE OR SHE DOES NOT HAVE A PLACE OF BUSINESS IN THE STATE

12
      AND DURING ANY PERIOD OF 12 CONSECUTIVE MONTHS HE OR SHE DOES NOT

13
      HAVE MORE THAN 5 CLIENTS IN THIS STATE OTHER THAN INVESTMENT COM-

14
      PANIES AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940 OR CLI-

15
      ENTS DESCRIBED IN SECTION 401(l)(5)(A).

16
           (4) HIS OR HER ONLY CLIENTS IN THIS STATE ARE INDIVIDUALS

17
      WHO ACCESS HIS OR HER SERVICES THROUGH A TOLL-FREE TELEPHONE

18
      NUMBER, AND THE SERVICES ARE GENERIC IN NATURE, ARE NOT CUSTOM-

19
      IZED OR SPECIFIC TO AN INDIVIDUAL, AND ARE NOT OTHERWISE THE

20
      OFFERING OF INVESTMENT ADVICE.

21
           (C) A NOTICE FILING SHALL BE EFFECTIVE UPON RECEIPT BY THE

22
      ADMINISTRATOR AND SHALL EXPIRE ON DECEMBER 31 OF THE YEAR OF

23
      FILING.  A FEDERALLY COVERED ADVISER SHALL MAKE A NEW NOTICE

24
      FILING TO CONDUCT BUSINESS IN THIS STATE IN A SUBSEQUENT CALENDAR

25
      YEAR.

26
           (D) A FEDERALLY COVERED ADVISER MAY TERMINATE OR WITHDRAW A

27
      NOTICE FILING BY NOTIFYING THE ADMINISTRATOR OF THE TERMINATION



   02726'99
                                  19

 1
      OR WITHDRAWAL IN WRITING.  A TERMINATION OR WITHDRAWAL IS

 2
      EFFECTIVE UPON RECEIPT BY THE ADMINISTRATOR OF THE WRITTEN

 3
      NOTIFICATION.

 4
           (E) A FEDERALLY COVERED ADVISER THAT ACQUIRES THE BUSINESS

 5
      OF AN INVESTMENT ADVISER OR ANOTHER FEDERALLY COVERED ADVISER, OR

 6
      AN INVESTMENT ADVISER THAT ACQUIRES THE BUSINESS OF A FEDERALLY

 7
      COVERED ADVISER, SHALL MAKE A NOTICE FILING.

 8
           (F) IF A FEDERALLY COVERED ADVISER FILES AN AMENDMENT WITH

 9
      THE SECURITIES AND EXCHANGE COMMISSION TO CORRECT INFORMATION

10
      THAT IS OR BECOMES INACCURATE OR INCOMPLETE IN A DOCUMENT ALSO

11
      FILED WITH THE ADMINISTRATOR AS PART OF A NOTICE FILING, THE FED-

12
      ERALLY COVERED ADVISER SHALL FILE A COPY OF THE AMENDMENT WITH

13
      THE ADMINISTRATOR.

14
           (G) IF A FEDERALLY COVERED ADVISER FILES AN AMENDMENT TO ITS

15
      DISCIPLINARY HISTORY WITH THE SECURITIES AND EXCHANGE COMMISSION,

16
      THE FEDERALLY COVERED ADVISER SHALL AT THE SAME TIME FILE A COPY

17
      OF THE AMENDMENT WITH THE ADMINISTRATOR.

18
           (H) FOR PURPOSES OF THIS SECTION, "NOTICE FILING" MEANS THE

19
      DOCUMENTS FILED WITH THE ADMINISTRATOR UNDER SUBSECTION (A).

20
           Sec. 203.  (a) Every registered broker-dealer  , commodity

21
      issuer,  and investment adviser shall make and keep  such 

22
      accounts, correspondence, memoranda, papers, books, and other

23
      records as the administrator by rule OR ORDER prescribes.  All

24
      records  so  required shall be preserved for 3 years unless the

25
      administrator by rule OR ORDER prescribes otherwise for particu-

26
      lar types of records.





   02726'99
                                  20

 1
           (b) Every registered broker-dealer  , commodity issuer,  and

 2
      investment adviser shall file  such  financial reports as the

 3
      administrator by rule prescribes.

 4
           (c) If the information contained in any document filed with

 5
      the administrator is or becomes inaccurate or incomplete in any

 6
      material respect, the registrant shall promptly file a correcting

 7
      amendment unless notification of the correction has been given

 8
      under section 201(b).

 9
           (d) All the records referred to in subsection (a) are

10
      subject at any time or from time to time to  such  reasonable

11
      periodic, special, or other examinations by representatives of

12
      the administrator, within or without this state, as the adminis-

13
      trator  deems  CONSIDERS necessary or appropriate in the public

14
      interest or for the protection of investors.  The expenses rea-

15
      sonably attributable to the examination of a matter arising under

16
      this section may be charged to the applicant or registrant

17
      involved.  For the purpose of avoiding unnecessary duplication of

18
      examinations, the administrator, insofar as it deems it practica-

19
      ble in administering this subsection, may cooperate and exchange

20
      information with the securities and commodities administrators of

21
      other states, the securities and exchange commission, the commod-

22
      ity futures trading commission,  and  any national securities

23
      exchange or national securities association registered under the

24
      securities exchange act of 1934, and other appropriate law

25
      enforcement agencies.  Failure of a registrant to promptly pro-

26
      vide records for inspection shall be cause for a summary





   02726'99
                                  21

 1
      suspension order until conclusion of the examination of the

 2
      records.

 3
           (e) A registered broker-dealer  , commodity issuer,  or

 4
      investment adviser may not withdraw or terminate its registration

 5
      unless the registrant has complied with all of the following:

 6
           (1) Filed a broker-dealer  , commodity issuer,  or invest-

 7
      ment adviser withdrawal form as prescribed by the administrator.

 8
           (2) Delivered all securities  , commodities,  and cash bal-

 9
      ances owing to all customers.

10
           (3) Delivered all securities owing to other broker-dealers.

11
           (4) Met other conditions as the administrator may by rule or

12
      order prescribe.

13
           (5) Received a withdrawal order from the administrator

14
      approving the withdrawal request.

15
           (f) Notwithstanding the provisions of subsection (e):

16
           (1) A registrant may temporarily cease business by promptly

17
      advising the administrator in writing on or before the date of

18
      temporary cessation of business of the fact of cessation, the

19
      reasons for cessation, and the date or basis for reopening of the

20
      business.

21
           (2) A registrant OR FEDERALLY COVERED ADVISER subject to a

22
      merger or acquisition where all obligations of the predecessor

23
      registrant OR FEDERALLY COVERED ADVISER are acquired by or trans-

24
      ferred to the new broker-dealer  , commodity issuer,  or invest-

25
      ment adviser  which shall continue  OR FEDERALLY COVERED ADVISER

26
      THAT CONTINUES the business in an uninterrupted fashion shall





   02726'99
                                  22

 1
      comply with  the provisions of  section  202(c)  202(D) OR

 2
      202A(E), WHICHEVER IS APPLICABLE, instead of this section.

 3
            (3) The administrator may modify the aforementioned

 4
      requirements by rule or order, in unusual and appropriate

 5
      circumstances. 

 6
           (g) A registered broker-dealer shall immediately notify the

 7
      administrator of the appointment of a trustee for the registrant

 8
      pursuant to the securities investor protection act of 1970.  A

 9
      broker-dealer for whom such a trustee has been appointed shall

10
      file with the administrator a broker-dealer withdrawal form in

11
      accordance with subsection (e).  A broker-dealer's registration

12
      continues effective until entry of the withdrawal order by the

13
      administrator.

14
           (h) A registrant or applicant for registration shall

15
      promptly notify the administrator in writing if any proceedings

16
      have been commenced or any sanction imposed by securities admin-

17
      istrators  or commodities administrators  of other states, other

18
      state regulatory agencies, the securities and exchange commis-

19
      sion,  the commodity futures trading commission,  or any national

20
      securities exchange  , commodities exchange,  or national securi-

21
      ties association registered under the securities exchange act of

22
      1934.

23
           (i)  The  EXCEPT FOR ADVERTISING RELATED TO A FEDERALLY COV-

24
      ERED SECURITY, THE administrator may by rule or order require a

25
      broker-dealer or investment adviser to file all advertising for

26
      review and acceptance before use.  All advertising shall be

27
      filed with the administrator contemporaneously with its use. 



   02726'99
                                  23

 1
           (J) THE ADMINISTRATOR SHALL NOT REQUIRE ANY OF THE

 2
      FOLLOWING:

 3
           (1) THAT A BROKER-DEALER THAT IS REGISTERED UNDER THE SECUR-

 4
      ITIES EXCHANGE ACT OF 1934 MAKE, MAINTAIN, OR PRESERVE ANY

 5
      RECORDS OTHER THAN THOSE REQUIRED TO BE MADE, MAINTAINED, AND

 6
      PRESERVED UNDER THE SECURITIES EXCHANGE ACT OF 1934.

 7
           (2) THAT AN INVESTMENT ADVISER THAT MAINTAINS ITS PRINCIPAL

 8
      PLACE OF BUSINESS IN ANOTHER STATE MAKE, MAINTAIN, OR PRESERVE

 9
      ANY RECORDS OTHER THAN THOSE REQUIRED BY THAT STATE, PROVIDED

10
      THAT THE INVESTMENT ADVISER IS REGISTERED IN THAT STATE AND IS IN

11
      COMPLIANCE WITH ANY RECORD-KEEPING REQUIREMENTS OF THAT STATE.

12
           (3) THAT A BROKER-DEALER THAT IS REGISTERED UNDER THE SECUR-

13
      ITIES EXCHANGE ACT OF 1934 FILE A FINANCIAL REPORT THAT IS NOT

14
      REQUIRED TO BE CREATED AND FILED UNDER THE SECURITIES EXCHANGE

15
      ACT OF 1934.

16
           (4) THAT AN INVESTMENT ADVISER THAT MAINTAINS ITS PRINCIPAL

17
      PLACE OF BUSINESS IN ANOTHER STATE CREATE OR FILE A FINANCIAL

18
      REPORT THAT IS NOT REQUIRED BY THAT STATE, PROVIDED THAT THE

19
      INVESTMENT ADVISER IS REGISTERED IN THAT STATE AND IS IN COMPLI-

20
      ANCE WITH ANY FINANCIAL REPORTING REQUIREMENTS OF THAT STATE.

21
           Sec. 204.  (a) The administrator may by order, if it finds

22
      the order in the public interest, deny, suspend, or revoke any

23
      registration, or censure a registrant, if it finds that 1 OR MORE

24
      OF THE FOLLOWING APPLY:

25
           (1) The applicant or registrant or, in the case of a

26
      broker-dealer  , commodity issuer,  or investment adviser, any

27
      partner, officer,  principal,  or director, any person occupying



   02726'99
                                  24

 1
      a similar status or performing similar functions, or any person

 2
      directly or indirectly controlling the broker-dealer  , commodity

 3
      issuer,  or investment adviser:

 4
           (A) Has filed an application for registration which as of

 5
      its effective date, or as of any date after filing in the case of

 6
      an order denying effectiveness, was incomplete in any material

 7
      respect or contained any statement which was, in light of the

 8
      circumstances under which it was made, false or misleading with

 9
      respect to any material fact.  ; 

10
           (B) Has violated or failed to comply with any provision of

11
      this act or a predecessor act or any rule or order under this act

12
      or a predecessor act.  ; 

13
           (C) Has been convicted of any misdemeanor involving moral

14
      turpitude or any felony.  ; 

15
           (D) Is permanently or temporarily enjoined by any court of

16
      competent jurisdiction from engaging in or continuing any conduct

17
      or practice involving any aspect of the securities  or commodity

18
      contracts  business.  ; 

19
           (E) Is the subject of an order of the administrator denying,

20
      suspending, or revoking registration as a broker-dealer, agent,

21
      or investment adviser.  ; 

22
           (F) Is the subject of an order entered by the securities  or

23
      commodities  administrator of any other state or by the securi-

24
      ties and exchange commission  or the commodity futures trading

25
      commission  denying, suspending, or revoking registration as a

26
      broker-dealer,  future commission merchant,  floor broker,

27
       commodity exchange, commodity solicitor, commodity option



   02726'99
                                  25

 1
      issuer, commodity salesman, commodity adviser, commodity trading

 2
      adviser, commodity pool operator,  agent, or investment adviser,

 3
      or the substantial equivalent of those terms as defined in this

 4
      act, or is the subject of an order of the securities and exchange

 5
      commission suspending or expelling him OR HER from a national

 6
      securities exchange or national securities association registered

 7
      under the securities exchange act of 1934 or in the case of an

 8
      individual, is subject to an order by the securities and exchange

 9
      commission barring the individual from association with a

10
      broker-dealer or investment adviser  or equivalent order of the

11
      commodity futures trading commission  or is the subject of an

12
      order of a national securities exchange or a national securities

13
      association registered under the securities EXCHANGE act of 1934

14
      suspending or expelling him OR HER from membership, or is the

15
      subject of a United States post office fraud order.  The adminis-

16
      trator may by order deny, suspend, or revoke any broker-dealer  ,

17
      commodity issuer,  OR investment adviser  , or principal 
   regis-

18
      tration if the applicant or registrant has been associated with a

19
      broker-dealer which was liquidated pursuant to the securities

20
      investor protection act of 1970, or if 1 or more of the

21
      applicant's or registrant's partners, officers, OR directors  ,

22
      or principals has  HAVE been associated with a broker-dealer liq-

23
      uidated under that act, unless the association was terminated 12

24
      months or more before the commencement of litigation under that

25
      act, or unless the associated person establishes that he or she

26
      did not engage in dishonest or unethical business practices or

27
      violate or fail to comply with any provisions of this act or a



   02726'99
                                  26

 1
      predecessor act, or any rule or order  thereunder  UNDER THIS ACT

 2
      OR A PREDECESSOR ACT, during association with that broker-dealer.

 3
       ; 

 4
           (G) Has engaged in dishonest or unethical business

 5
      practices.  ; 

 6
           (H) Is insolvent, either in the sense that his OR HER

 7
      liabilities exceed his OR HER assets or in the sense that he OR

 8
      SHE cannot meet his OR HER obligations as they mature; but the

 9
      administrator may not enter an order against a broker-dealer or

10
      investment adviser under this  clause  SUBDIVISION without a

11
      finding of insolvency as to the broker-dealer or investment

12
      adviser.  ; 

13
           (I) Is not qualified on the basis of such factors as train-

14
      ing, experience, and knowledge of the securities  or commodities

15
      businesses  BUSINESS, except as otherwise provided in subsection

16
      (b).  ; 

17
           (J) Has delayed unreasonably delivery of securities  or

18
      commodities  to the extent that the registrant is in a position

19
      to control or direct the delivery of the securities.  The burden

20
      of proof of inability to CONTROL OR DIRECT delivery shall rest

21
      with the registrant.  ; 

22
           (K) Has represented that securities will be listed or that

23
      application for listing will be made, without basis in fact for

24
      the representation.  ; 

25
           (L) Has induced excessive trading in a customer's account,

26
      or induced trading beyond the customer's known financial

27
      resources, if done with the intent to produce profits and



   02726'99
                                  27

 1
      commissions for the registrant or an agent in disregard of the

 2
      customer's best interests as they reasonably appeared at the time

 3
      of the transaction, and if improper under the then existing

 4
      circumstances.  ; 

 5
           (M) Has recommended to a customer the purchase, sale, or

 6
      exchange of any  security or commodity contract  SECURITY without

 7
      reasonable grounds to believe that the recommendation is suitable

 8
      for the customer on the basis of information furnished by the

 9
      customer after reasonable inquiry as may be necessary under the

10
      circumstances concerning the customer's investment objectives,

11
      financial situation and needs, and other information known by the

12
      person making the recommendation.  ; 

13
           (N) Has recommended speculative low priced securities to

14
      customers without knowledge of or an attempt to obtain informa-

15
      tion concerning the customer's other securities holdings, finan-

16
      cial situation, investment objectives, and ability to bear the

17
      risks inherent in the purchase of those securities, or has recom-

18
      mended the securities in disregard of the information.  ; 

19
           (O) Has executed a transaction on behalf of a customer with-

20
      out authority to do so.  ; 

21
           (P) Has executed transactions pursuant to general discre-

22
      tionary authority for the account of a customer without first

23
      obtaining general discretionary authority in writing from the

24
      customer.  However, written authority is not required if the dis-

25
      cretionary authority relates solely to the execution of an order

26
      and is limited in scope.  ; 





   02726'99
                                  28

 1
           (Q) Has acted on an agency basis for both the seller and the

 2
      purchaser of a security  or commodity contract  without

 3
      disclosing that fact to both on the confirmation.  ; 

 4
           (R) Has, while acting on an agency basis for a customer in

 5
      any transaction, charged the customer more than a fair commission

 6
      or service charge, taking into consideration all relevant circum-

 7
      stances including market conditions with respect to a security

 8
       or commodity  at the time of the transaction, the expense of

 9
      executing the order and the value of any service rendered by

10
      reason of experience in and knowledge of the security,  or

11
      commodity,  and the market  therefor  FOR THE SECURITY; or
    while

12
      acting on a principal basis for a customer in any transaction, 

13
      has sold at an excessive markup in relation to the market price

14
      of the security  or commodity  at the time of sale in light of

15
      the volume of securities  or commodities  traded at that time.

16
       ; 

17
           (S) Has entered into a transaction with a customer in a

18
      security  or commodity  at a price not reasonably related to the

19
      market price of the security.  or commodity; 

20
           (T) Has extended credit to a customer in violation of the

21
      securities exchange act of 1934 or the regulations of the federal

22
      reserve board.  ; 

23
           (U) Has employed in connection with the purchase or sale of

24
      a security  or commodity  a manipulative or deceptive device or

25
      contrivance.  ; 

26
           (V) Has sold a security to or purchased a security from a

27
      customer without disclosing that the broker-dealer is acting as a



   02726'99
                                  29

 1
      market maker  is  IN that security or has a substantial position

 2
      in the market.  ; 

 3
           (W) Has, while registered as an agent or investment

 4
       advisor  ADVISER, borrowed money from a customer.  ; 

 5
           (X) Has made unauthorized use of the funds of a customer; or

 6
      has hypothecated a customer's securities  or commodity  contract

 7
      without having a lien thereon unless written consent of the cus-

 8
      tomer was first obtained.  ; 

 9
           (Y) Has, while registered as an agent, effected securities

10
       or commodity contract  transactions when those transactions were

11
      not recorded on the records of the employer broker-dealer.  ; 

12
           (Z) Has operated an account under a fictitious name.

13
           (2) The applicant or registrant has failed reasonably to

14
      supervise its agents if it is a broker-dealer or its employees if

15
      an investment adviser.  ; or 

16
           (3) The applicant or registrant has failed to pay the proper

17
      filing fee.  ; but the  THE administrator may enter only a denial

18
      order under this  clause  SUBDIVISION, and it shall vacate  such

19
      an  THE DENIAL order when the deficiency has been corrected.

20
           (b) The following provisions govern the application of

21
       section 204(a)(1)(I)  SUBSECTION (A)(1)(I):

22
           (1) The administrator may not enter an order against a

23
      broker-dealer on the basis of the lack of qualification of any

24
      person other than the broker-dealer  himself  if he OR SHE is an

25
      individual or an agent of the broker-dealer.

26
           (2) The administrator may not enter an order against an

27
      investment adviser on the basis of the lack of qualification of



   02726'99
                                  30

 1
      any person other than the investment adviser  himself  if he OR

 2
      SHE is an individual or any other person who represents the

 3
      investment adviser in doing any of the acts which make him OR HER

 4
      an investment adviser.

 5
           (3) The administrator may not enter an order solely on the

 6
      basis of lack of experience if the applicant or registrant is

 7
      qualified by training or knowledge or both.

 8
           (4) The administrator shall consider that an agent who will

 9
      work under the supervision of a registered broker-dealer need not

10
      have the same qualifications as a broker-dealer.

11
           (5) The administrator shall consider that an investment

12
      adviser is not necessarily qualified solely on the basis of

13
      experience as a broker-dealer or agent.  When it finds that an

14
      applicant for registration as a broker-dealer is not qualified as

15
      an investment adviser, it may by order condition the applicant's

16
      registration as a broker-dealer upon his OR HER not transacting

17
      business in this state as an investment adviser.

18
           (6) The administrator may by rule provide for an examina-

19
      tion, which may be written or oral or both, to be taken by any

20
      class of or all applicants, as well as persons who represent or

21
      will represent an investment adviser in doing any of the acts

22
      which make him OR HER an investment adviser.

23
           (c) The administrator may by order summarily postpone or

24
      suspend registration pending final determination of any proceed-

25
      ing under this section.  Upon the entry of the order, the admin-

26
      istrator shall promptly notify the applicant or registrant, as

27
      well as the employer or prospective employer if the applicant or



   02726'99
                                  31

 1
      registrant is an agent, that  it  THE ORDER has been entered and

 2
      of the reasons therefor and that within 15 days after the receipt

 3
      of a written request the matter will be set down for hearing.  If

 4
      a hearing is not requested and none is ordered by the administra-

 5
      tor, the order will remain in effect until it is modified or

 6
      vacated by the administrator.  If a hearing is requested or

 7
      ordered, the administrator, after notice of and opportunity for

 8
      hearing, may modify or vacate the order or extend it until final

 9
      determination.

10
           (d) If the administrator finds that any registrant or appli-

11
      cant for registration is no longer in existence or has ceased to

12
      do business as a broker-dealer,  commodity issuer, principal, 

13
      agent, or investment adviser, or is subject to an adjudication of

14
      mental incompetence or to the control of a committee, conserva-

15
      tor, or guardian, or cannot be located after reasonable search,

16
      the administrator may by order cancel the registration or

17
      application.

18
           (e) The administrator may institute a revocation or suspen-

19
      sion proceeding under  section 204(a)(1)(B)  SUBSECTION (A)(1)(B)

20
      within 1 year after withdrawal from registration of a

21
      broker-dealer,  commodity issuer, principal,  agent, or invest-

22
      ment adviser became effective and enter a revocation or suspen-

23
      sion order as of the last date on which registration was

24
      effective.

25
           (f) An order may not be entered under any part of this sec-

26
      tion except the first sentence of subsection (c) without ALL OF

27
      THE FOLLOWING:



   02726'99
                                  32

 1
           (1) Appropriate prior notice to the applicant or registrant,

 2
      as well as to the employer or prospective employer if the appli-

 3
      cant or registrant is an agent.  ; 

 4
           (2) Opportunity for hearing.  ; and 

 5
           (3) Written findings of fact and conclusions of law.

 6
           (g) The administrator may by order, if it finds the order to

 7
      be in the public interest, impose a civil  penalty  FINE of

 8
      $1,000.00 on any registrant if it finds that the registrant, or

 9
      in the case of a broker-dealer  , commodity issuer,  or invest-

10
      ment adviser, any partner, officer,  principal  or director, any

11
      person occupying a similar status or performing similar func-

12
      tions, or any person directly or indirectly controlling the

13
      broker-dealer  , commodity issuer,  or investment adviser, has

14
      engaged in conduct prohibited by  sections 204(a)(1)(B) 

15
      SUBSECTION (A)(1)(B), (G), or (J) to (Z).

16
           (h) A violation of a provision of THIS section  204  or

17
      action of the administrator pursuant to THIS section  204  shall

18
      not subject a registrant to civil liability to a customer of the

19
      registrant  , except as  UNLESS that violation or action is con-

20
      trary to another provision of this act.

21
           Sec. 301.  It is unlawful for any person to offer or sell

22
      any security in this state unless 1 OF THE FOLLOWING IS MET:

23
           (1)  it  IT is registered under this act.  or 

24
           (2)  the  THE security or transaction is exempted under sec-

25
      tion 402.

26
           (3) THE SECURITY IS A FEDERALLY COVERED SECURITY.





   02726'99
                                  33

 1
           Sec. 304a.  (1) A security that is exempt from registration

 2
      under the federal exemption set forth in 17 C.F.R. 230.504 may be

 3
      registered under this section.  An issuer eligible to register a

 4
      security under this section shall use a registration form

 5
      approved by the administrator as the disclosure document for the

 6
      offering.  A registration under this section shall be known as a

 7
      small  corporate  COMPANY offering registration.

 8
           (2) An application for a small  corporate  COMPANY offering

 9
      registration shall comply with this section.  THE OFFERING IS

10
      EXEMPT PURSUANT TO 17 C.F.R. 230.504, 17 C.F.R. 230.251, OR SEC-

11
      TION 3(a)(11) OF THE SECURITIES ACT OF 1933. However, the admin-

12
      istrator may waive provisions of this section.

13
           (3) A small  corporate  COMPANY offering registration under

14
      this section is not available to either of the following:

15
           (a) Investment companies subject to the investment company

16
      act of 1940.  , title I of chapter 686, 54 Stat. 789, 15

17
      U.S.C. 80a-1 to 80a-64. 

18
           (b) Issuers subject to the reporting requirements of section

19
      13 or section 15(d) of title I of the securities exchange act of

20
      1934, 15 U.S.C. 78m and 78o.

21
           (4) All of the following provisions apply to the availabil-

22
      ity of a small  corporate  COMPANY offering registration:

23
           (a) A small  corporate  COMPANY offering registration shall

24
      not be utilized by the following issuers and programs unless the

25
      administrator grants written permission based upon a showing that

26
      adequate disclosure can be made to investors using the small

27
       corporate  COMPANY offering registration format:



   02726'99
                                  34

 1
           (i) Holding companies, OR companies that have a principal

 2
      purpose of owning stock in, or supervising the management of,

 3
      other companies.

 4
           (ii) Portfolio companies, such as real estate investment

 5
      trusts.

 6
           (iii) Issuers with complex capital structures.

 7
           (iv) Commodity pools.

 8
           (v) Equipment leasing programs.

 9
           (vi) Real estate programs.

10
           (b) A small  corporate  COMPANY offering registration under

11
      this section is available only to the issuer of the securities

12
      and not to any affiliate of that issuer or to any other person

13
      for resale of the issuer's securities.  In addition, each of the

14
      following requirements shall be met:

15
           (i) The issuer is a domestic corporation,  or  a foreign

16
      corporation, OR A MANAGER MANAGED LIMITED LIABILITY COMPANY orga-

17
      nized under the laws of any state, territory, or possession of

18
      the United States OR PROVINCE OR TERRITORY OF CANADA.  The admin-

19
      istrator may allow other entities to file a small  corporate 

20
      COMPANY offering registration.

21
           (ii) The offering is not a blind pool or other offering for

22
      which the specific business to be engaged in or property to be

23
      acquired by the issuer cannot be specified.

24
           (iii) The offering price for  common stock  SECURITIES; the

25
      exercise price if the securities offered are options, warrants,

26
      or rights for common stock OR MEMBERSHIP INTERESTS;  and  OR the

27
      conversion price if the securities are convertible into common



   02726'99
                                  35

 1
      stock OR UNITS OF MEMBERSHIP INTEREST is at least  $5.00  $1.00

 2
      per share  , unless the administrator authorizes a lower price

 3
      per share  OR UNIT OF MEMBERSHIP INTEREST.  THE ISSUER SHALL

 4
      ENTER INTO AN AGREEMENT WITH THE ADMINISTRATOR THAT THE ISSUER

 5
      WILL NOT SPLIT ANY CLASS OF SECURITY OR DECLARE A DIVIDEND FOR 2

 6
      YEARS AFTER THE EFFECTIVE DATE OF THE REGISTRATION IF SUCH ACTION

 7
      HAS THE EFFECT OF LOWERING THE PRICE BELOW $1.00 PER SHARE.

 8
           (iv) The aggregate offering price of the securities offered,

 9
      within or outside this state, is not more than $1,000,000.00,

10
       under the federal exemption set forth in  OR A GREATER AMOUNT

11
      ESTABLISHED UNDER 17 C.F.R. 230.504, or $5,000,000.00 if a fed-

12
      eral exemption is granted to this state pursuant to section 3(b)

13
      of the securities act of 1933,  title I of chapter 38, 48

14
      Stat. 75,  15 U.S.C. 77c, OR AN AMOUNT AUTHORIZED UNDER 17

15
      C.F.R. 230.251, IF THE ISSUER IS UTILIZING A REGISTRATION FORM

16
      APPROVED BY THE ADMINISTRATOR.

17
           (c) A small  corporate  COMPANY offering registration under

18
      this section is only available for debt offerings if the issuer

19
      can demonstrate a reasonable ability to service its debt.

20
           (5) EXCEPT AS OTHERWISE PROVIDED IN THIS SUBSECTION, FINAN-

21
      CIAL STATEMENTS SHALL BE PREPARED IN ACCORDANCE WITH GENERALLY

22
      ACCEPTED ACCOUNTING PRINCIPLES OR THE CANADIAN EQUIVALENT.  IF

23
      THE ISSUER HAS NOT CONDUCTED SIGNIFICANT OPERATIONS, STATEMENTS

24
      OF RECEIPTS AND DISBURSEMENTS SHALL BE INCLUDED IN LIEU OF STATE-

25
      MENTS OF INCOME.  INTERIM FINANCIAL STATEMENTS MAY BE UNAUDITED.

26
      ANNUAL FINANCIAL STATEMENTS SHALL BE AUDITED BY INDEPENDENT

27
      CERTIFIED PUBLIC ACCOUNTANTS OR CHARTERED ACCOUNTANTS, AS



   02726'99
                                  36

 1
      APPROPRIATE, EXCEPT THAT ANNUAL FINANCIAL STATEMENTS IN LIEU OF

 2
      BEING AUDITED MAY BE REVIEWED BY INDEPENDENT CERTIFIED PUBLIC

 3
      ACCOUNTANTS OR CHARTERED ACCOUNTANTS, IN ACCORDANCE WITH THE

 4
      ACCOUNTING AND REVIEW SERVICES STANDARDS PROMULGATED BY THE

 5
      AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OR THE

 6
      CANADIAN EQUIVALENT, CONSISTENTLY APPLIED, RATHER THAN AUDITED,

 7
      IF ALL OF THE FOLLOWING CONDITIONS ARE SATISFIED:

 8
           (A) THE ISSUER HAS NOT PREVIOUSLY SOLD SECURITIES THROUGH AN

 9
      OFFERING INVOLVING GENERAL ADVERTISING OR THE SOLICITATION OF

10
      PROSPECTIVE INVESTORS.

11
           (B) THE ISSUER HAS NOT BEEN PREVIOUSLY REQUIRED UNDER FEDER-

12
      AL, STATE, PROVINCIAL, OR TERRITORIAL SECURITIES LAWS TO PROVIDE

13
      AUDITED FINANCIAL STATEMENTS IN CONNECTION WITH ANY SALE OF ITS

14
      SECURITIES.

15
           (C) THE AGGREGATE AMOUNT OF ALL PREVIOUS SALES OF SECURITIES

16
      BY THE ISSUER WITHIN THE LAST 24 MONTHS DOES NOT EXCEED

17
      $1,000,000.00.

18
           (D) THE AMOUNT OF THE SMALL COMPANY OFFERING FOR WHICH A

19
      SMALL COMPANY REGISTRATION IS SOUGHT DOES NOT EXCEED

20
      $1,000,000.00.

21
           (6)  (5)  A small  corporate  COMPANY offering
   registration

22
      under this section is not available if any of the following pro-

23
      visions apply to the issuer, to any of the issuer's officers,

24
      directors, MANAGERS, 10%  stockholders  SECURITY HOLDERS, promot-

25
      ers, or selling agent of the securities to be offered, or to any

26
      officer, director, or partner of the selling agent of the

27
      securities to be offered:



   02726'99
                                  37

 1
           (a) The person has filed a registration statement that is

 2
      the subject of a currently effective registration stop order

 3
      entered pursuant to any federal or state securities law within 5

 4
      years before the small  corporate  COMPANY offering registration

 5
      application is filed.

 6
           (b) The person has been convicted of any felony or misde-

 7
      meanor in connection with the offer, purchase, or sale of any

 8
      security or any felony involving fraud or deceit, including any

 9
      of the following, within 5 years before the small  corporate 

10
      COMPANY offering registration application is filed:

11
           (i) Forgery.

12
           (ii) Embezzlement.

13
           (iii) Obtaining money under false pretenses.

14
           (iv) Larceny.

15
           (v) Conspiracy to defraud.

16
           (c) The person is currently subject to either of the

17
      following:

18
           (i) A state administrative enforcement order or judgment

19
      entered against that person by a state securities administrator

20
      or the securities and exchange commission within 5 years before

21
      the small  corporate  COMPANY offering registration application

22
      is filed.

23
           (ii) A federal or state administrative enforcement order or

24
      judgment in which fraud or deceit, including making untrue state-

25
      ments of material facts or failing to state material facts, was

26
      found and the order or judgment was entered within 5 years before





   02726'99
                                  38

 1
      the small  corporate  COMPANY offering registration application

 2
      is filed.

 3
           (d) The person is subject to a federal or state administra-

 4
      tive enforcement order or judgment that prohibits, denies, or

 5
      revokes the use of any exemption for registration in connection

 6
      with the offer, purchase, or sale of securities.

 7
           (e) The person is currently subject to a court order, judg-

 8
      ment, or decree entered within 5 years before the small

 9
       corporate  COMPANY offering registration application is filed

10
      that does either of the following:

11
           (i) Temporarily, preliminarily, or permanently restrains or

12
      enjoins that person from engaging in or continuing any conduct or

13
      practice in connection with the purchase or sale of any

14
      security.

15
           (ii) Involves the making of a false filing with any state or

16
      with the securities and exchange commission.

17
           (f) A person who is disqualified under this subsection shall

18
      not act in any capacity other than that for which the person is

19
      licensed or registered.  A disqualification under this subsection

20
      is automatically waived if the administrator or other state or

21
      federal agency that created the basis for disqualification deter-

22
      mines, upon a showing of good cause, that it is not necessary

23
      under the circumstances to deny the exemption.

24
           (g) Subdivisions (a), (b), (c), and (e) do not apply if the

25
      person disqualified under those subdivisions is licensed or reg-

26
      istered to conduct securities related business in the state in

27
      which the administrative order or judgment was entered against



   02726'99
                                  39

 1
      that person or if the broker-dealer who employs the person is

 2
      licensed or registered in this state and the form BD filed in

 3
      this state discloses the order, conviction, judgment, or decree

 4
      relating to that person.

 5
           (7)  (6)  An applicant who files a small  corporate 
   COMPANY

 6
      offering registration application in this state shall not split

 7
       common stock  ITS SECURITIES or declare a stock OR MEMBERSHIP

 8
      dividend for any security issued under this section for 2 years

 9
      after the registration is effective without the prior written

10
      approval of the administrator.

11
           (8)  (7)  In addition to a properly completed application

12
      form, an applicant for a small  corporate  COMPANY offering reg-

13
      istration under this section shall file all of the following

14
      exhibits with the administrator:

15
           (a) The form of the selling agency agreement.

16
           (b) The issuer's articles of incorporation or other charter

17
      documents and all amendments.

18
           (c) The issuer's bylaws OR OPERATING AGREEMENT, as amended.

19
           (d) Copies of any resolutions by directors OR MANAGERS set-

20
      ting forth terms and provisions of  capital stock  SECURITIES to

21
      be issued.

22
           (e) Any indenture, form of note, or other contractual provi-

23
      sion containing terms of notes or other debt or of options, war-

24
      rants, or rights to be offered.

25
           (f) A specimen of the security to be offered, including any

26
      legend restricting resale.





   02726'99
                                  40

 1
           (g) Consent to service of process accompanied by an

 2
      appropriate  corporate  resolution.

 3
           (h) Copies of all material directed or furnished to invest-

 4
      ors in the offering.

 5
           (i) The form of escrow agreement for escrow of proceeds.  An

 6
      escrow agreement shall comply with all of the following:

 7
           (i) The administrator may require that the issuer impound

 8
      the proceeds from the sale of a registered security in this state

 9
      until the issuer receives a specified amount from the sale of

10
      that security in this state or elsewhere that is sufficient to

11
      accomplish the stated purposes of the offering or until the

12
      issuer's stipulated requirements are met.

13
           (ii) The administrator may require that the issuer return

14
      any impounded proceeds, together with any accrued interest, to

15
      investors if the issuer fails to raise the specified amount while

16
      the registration is effective or within 1 year or if the issuer's

17
      stipulated requirements are not met.

18
           (iii) A bank or trust company may act as THE depositary or

19
      escrow agent for impounded proceeds.  Checks, drafts, and money

20
      orders shall be made payable to the depositary.  If a

21
      broker-dealer is acting as selling agent for the issuer, the

22
      broker-dealer shall promptly remit payments made directly to

23
       that  THE broker-dealer to the depositary or escrow agent.

24
           (iv) A request to release impounded funds shall be in

25
      writing.  The request shall confirm compliance with the registra-

26
      tion and shall be accompanied by a statement from the depositary

27
      or escrow agent setting forth the total amount on deposit.



   02726'99
                                  41

 1
           (j) Consent to inclusion in the disclosure document of an

 2
      accountant's report.

 3
           (k) Consent to inclusion in the disclosure document of a tax

 4
      advisor's opinion or a description of tax consequences.

 5
           (l) Consent to inclusion in the disclosure document of an

 6
      evaluation by a licensed attorney of any pending or anticipated

 7
      litigation or administrative action.

 8
           (m) The form of any subscription agreement for the purchase

 9
      of securities in the offering.

10
           (n) An opinion of a licensed attorney that the securities to

11
      be sold in the offering are duly authorized and binding on the

12
      issuer in accordance with the terms of the securities.

13
           (o) A list of the residence street addresses of officers,

14
      directors, MANAGERS, and principal  stockholders  SECURITY

15
      HOLDERS.

16
           (9)  (8)  Information provided to the administrator under

17
      subsection  (7)  (8) is exempt from disclosure under the freedom

18
      of information act,  Act No. 442 of the Public Acts of 1976,

19
      being sections 15.231 to 15.246 of the Michigan Compiled Laws 

20
      1976 PA 442, MCL 15.231 TO 15.246.

21
           (10)  (9)  An applicant for a small  corporate 
   COMPANY

22
      offering registration under this section shall pay a filing fee

23
      of 1/10 of 1% of the maximum aggregate offering price at which

24
      the registered securities are to be offered in this state, but in

25
      no case less than $100.00 or more than $1,250.00, to the adminis-

26
      trator with the application form.  If the applicant withdraws the

27
      application before the small  corporate  COMPANY offering



   02726'99
                                  42

 1
      registration is effective or before a preeffective stop order is

 2
      issued, the administrator shall retain the entire filing fee if

 3
      review of the application has commenced, or shall retain a

 4
      $100.00 fee and refund the balance of the filing fee to the

 5
      applicant if review of the application has not commenced.

 6
           (11)  (10)  A small  corporate  COMPANY offering
   registra-

 7
      tion statement filed under this section is effective for 1 year

 8
      from its effective date, except during the time a stop order is

 9
      in effect under this section.  A small  corporate  COMPANY offer-

10
      ing registration statement may be extended by the administrator

11
      by rule or order.  All outstanding securities of the same class

12
      as a registered security are considered to be registered for the

13
      purpose of any nonissuer transaction so long as the small

14
       corporate  COMPANY offering registration statement is

15
      effective.  A small  corporate  COMPANY offering registration

16
      statement may not be withdrawn for 1 year from its effective date

17
      if any securities of the same class are outstanding.  A small

18
       corporate  COMPANY offering registration statement may be with-

19
      drawn otherwise only in the discretion of the administrator.

20
           (12)  (11)  For the period that a small  corporate 
   COMPANY

21
      offering registration statement is effective, the administrator

22
      may by rule or order require the person who filed the small

23
       corporate  COMPANY offering registration statement to file

24
      reports, not more often than quarterly, to keep reasonably cur-

25
      rent the information contained in the small  corporate  COMPANY

26
      offering registration statement and to disclose the progress of

27
      the offering.



   02726'99
                                  43

 1
           (13)  (12)  A small  corporate  COMPANY offering

 2
      registration statement relating to a security may be amended

 3
      after its effective date to increase the securities specified as

 4
      proposed to be offered.  As to securities not yet sold, an amend-

 5
      ment becomes effective upon the administrator's order.  In the

 6
      case of securities that are sold in an amount in excess of the

 7
      amount or number of securities specified in an effective small

 8
       corporate  COMPANY offering registration statement  ,  as
   pro-

 9
      posed to be offered, the person or persons who filed the small

10
       corporate  COMPANY offering registration statement may, in

11
      accordance with rules the administrator shall promulgate as nec-

12
      essary or appropriate in the public interest and for the protec-

13
      tion of investors, elect to have the small  corporate  COMPANY

14
      offering registration of those securities considered effective as

15
      of the time of their sale, upon payment to the administrator

16
      within 6 months after the sale of a registration fee equal to the

17
      difference between the registration fee previously paid and the

18
      amount of the fee that would have otherwise been applicable to

19
      those additional securities if they had been included in the

20
      small  corporate  COMPANY offering registration statement, if

21
      any, plus a late registration fee of $250.00.  Upon the election

22
      and payment, the small  corporate  COMPANY offering registration

23
      statement shall be considered to have been in effect with respect

24
      to those  shares  SECURITIES.  Every person filing an amendment

25
      under this section shall pay a filing fee, calculated in the

26
      manner specified in subsection  (9)  (10), with respect to the

27
      additional securities.



   02726'99
                                  44

 1
           (14)  (13)  Fees, expense reimbursements, and fines received

 2
      under this section shall be deposited in the state treasury to

 3
      the credit of the administrator, to be used pursuant to legisla-

 4
      tive appropriation by the corporation,  and  securities, AND LAND

 5
      DEVELOPMENT bureau in carrying out those duties required by law.

 6
      After the payment of the amounts appropriated by the legislature

 7
      for the necessary expenses incurred in the administration of this

 8
      act, the money remaining shall be credited to the general fund of

 9
      this state.

10
           (15)  (14)  Fees and fines received under this section shall

11
      not be expended for partisan political activity.

12
           (16)  (15)  All of the following apply to orders under this

13
      subsection:

14
           (a) The administrator may issue a stop order denying effec-

15
      tiveness to, or suspending or revoking the effectiveness of, any

16
      small  corporate  COMPANY offering registration statement if it

17
      finds that the order is in the public interest and any of the

18
      following:

19
           (i) The small  corporate  COMPANY offering registration

20
      statement as of its effective date or as of any earlier date in

21
      the case of an order denying effectiveness, or any amendment

22
      under subsection  (12)  (13) as of its effective date, or any

23
      report under subsection  (11)  (12) is incomplete in any material

24
      respect or contains any statement that was, in the light of the

25
      circumstances under which it was made, false or misleading with

26
      respect to any material fact.





   02726'99
                                  45

 1
           (ii) Any provision of this section or any rule, order, or

 2
      condition lawfully imposed under this section has been violated

 3
      in connection with the offering by any of the following:

 4
           (A) The person filing the small  corporate  COMPANY offering

 5
      registration statement.

 6
           (B) The issuer, any  partner,  officer,  or  director,
   OR

 7
      MANAGER of the issuer, any person occupying a similar status or

 8
      performing similar functions, or any person directly or indi-

 9
      rectly controlling or controlled by the issuer, but only if the

10
      person filing the small  corporate  COMPANY offering registration

11
      statement is directly or indirectly controlled by or acting for

12
      the issuer.

13
           (C) Any underwriter.

14
           (iii) The security registered or sought to be registered is

15
      the subject of an administrative stop order or similar order or a

16
      permanent or temporary injunction of any court entered under any

17
      other federal or state act applicable to the offering.  However,

18
      the administrator shall not institute a proceeding against an

19
      effective small  corporate  COMPANY offering registration state-

20
      ment under this subdivision more than 1 year from the date of the

21
      order or injunction relied on, and may not enter an order under

22
      this subdivision on the basis of an order or injunction entered

23
      under any other state act unless that order or injunction was

24
      based on facts that would currently constitute a ground for a

25
      stop order under this section.

26
           (iv) The issuer's enterprise or method of business includes

27
      or would include activities that are illegal where performed.



   02726'99
                                  46

 1
           (v) The offering has worked or has tended to work a fraud,

 2
      deception, or imposition or would operate to work a fraud, decep-

 3
      tion, or imposition.

 4
           (b) The administrator may by order summarily postpone or

 5
      suspend the effectiveness of the small  corporate  COMPANY offer-

 6
      ing registration statement pending final determination of any

 7
      proceeding under this section.  Upon the entry of the order, the

 8
      administrator shall promptly notify each person specified in

 9
      subdivision (c) that the order has been entered, the reasons that

10
      the order has been entered, and that within 15 days after the

11
      receipt of a written request the matter will be scheduled for

12
      hearing.  If no hearing is requested and none is ordered by the

13
      administrator, the order shall remain in effect until it is modi-

14
      fied or vacated by the administrator.  If a hearing is requested

15
      or ordered, the administrator, after notice and opportunity for

16
      hearing to each person specified in subdivision (c), may modify,

17
      vacate, or extend the order until final determination.

18
           (c) A stop order shall not be entered under this section

19
      except under the first sentence of subdivision (b) without all of

20
      the following:

21
           (i) Appropriate prior notice to the applicant or registrant,

22
      the issuer, and the person on whose behalf the securities are to

23
      be or have been offered.

24
           (ii) Opportunity for hearing.

25
           (iii) Written findings of fact and conclusions of law.

26
           (d) The administrator may vacate or modify a stop order if

27
      it finds that the conditions that prompted entry of the stop



   02726'99
                                  47

 1
      order have changed or that it is otherwise in the public interest

 2
      to vacate or modify the stop order.

 3
           Sec. 305.  (a) A registration statement may be filed by the

 4
      issuer, any other person on whose behalf the offering is to be

 5
      made, or a registered broker-dealer.

 6
           (b) Every person filing a registration statement shall pay a

 7
      filing fee of 1/10 of 1% of the maximum aggregate offering price

 8
      at which the registered securities are to be offered in this

 9
      state, but the fee shall in no case be less than $100.00 or more

10
      than $1,250.00.  When an application for registration is with-

11
      drawn before the effective date or a preeffective stop order is

12
      issued, the administrator shall retain a fee of $100.00 if the

13
      initial review has not been commenced, and the full filing fee

14
      after review has been commenced.

15
           (c) Every registration statement shall specify ALL OF THE

16
      FOLLOWING:

17
           (1) The amount of securities to be offered in this state.

18
           (2) The states in which a registration statement or similar

19
      document in connection with the offering has been or is to be

20
      filed.

21
           (3) Any withdrawal or any adverse order, judgment, or decree

22
      entered in connection with the offering by the regulatory author-

23
      ities in each state or by any court or the securities and

24
      exchange commission.

25
           (d) Any document filed under this act or a predecessor act

26
      within 5 years preceding the filing of a registration statement





   02726'99
                                  48

 1
      may be incorporated by reference in the registration statement to

 2
      the extent that the document is currently accurate.

 3
           (e) The administrator may by rule or otherwise permit the

 4
      omission of any item of information or document from any regis-

 5
      tration statement.

 6
           (f) The administrator may by rule or order require as a con-

 7
      dition of registration by qualification or coordination both of

 8
      the following:

 9
           (1) That any security issued or to be issued to a promoter

10
      for a consideration substantially different from the public

11
      offering price, or to any person for a consideration other than

12
      cash, be deposited in escrow.

13
           (2) That the proceeds from the sale of the registered secur-

14
      ity in this state be impounded until the issuer receives a speci-

15
      fied amount from the sale of the security either in this state or

16
      elsewhere.  The administrator may by rule or order determine the

17
      conditions of any escrow or impounding required under this sub-

18
      section, and, after prior notice and opportunity for hearing, may

19
      order the cancellation in whole or in part of any security depos-

20
      ited in escrow if necessary for the protection of security

21
      holders.  The administrator may not reject a depository solely

22
      because of location in another state.

23
           (g) The administrator may by rule or order impose conditions

24
      under which a security registered by qualification may be sold,

25
      if it finds that the conditions are reasonable and in the public

26
      interest.





   02726'99
                                  49

 1
           (h) Every registration statement is effective for 1 year

 2
      from its effective date, except during the time a stop order is

 3
      in effect under section 306.  A registration statement may be

 4
      extended by the administrator by rule or order.  All outstanding

 5
      securities of the same class as a registered security are consid-

 6
      ered to be registered for the purpose of any nonissuer transac-

 7
      tion so long as the registration statement is effective or the

 8
      issuer has a class of securities that have been subject to the

 9
      reporting requirements of section 13 or 15(d) of title I of the

10
      securities exchange act of 1934, 15 U.S.C. 78m and 78o, for not

11
      less than 9 months before the transaction and all reports

12
      required by that act have been filed for that period.  A regis-

13
      tration statement may not be withdrawn for 1 year from its effec-

14
      tive date if any securities of the same class are outstanding.  A

15
      registration statement may be withdrawn otherwise only in the

16
      discretion of the administrator.

17
           (i) For the period that the registration statement is effec-

18
      tive, the administrator may by rule or order require the person

19
      who filed the registration statement to file reports, not more

20
      often than quarterly, to keep reasonably current the information

21
      contained in the registration statement and to disclose the

22
      progress of the offering.

23
           (j) A registration statement relating to a security may be

24
      amended after its effective date to increase the securities spec-

25
      ified as proposed to be offered.  As to securities not yet sold,

26
      an amendment becomes effective upon the administrator's order.

27
      In the case of securities that are sold in an amount in excess of



   02726'99
                                  50

 1
      the amount or number of securities specified in an effective

 2
      registration statement, as proposed to be offered, the person or

 3
      persons who filed the registration statement may, in accordance

 4
      with rules the administrator shall promulgate as necessary or

 5
      appropriate in the public interest and for the protection of

 6
      investors, elect to have the registration of those securities

 7
      considered effective as of the time of their sale, upon payment

 8
      to the administrator within 6 months after the sale of a regis-

 9
      tration fee equal to the difference between the registration fee

10
      previously paid and the amount of the fee that would have other-

11
      wise been applicable to those additional securities if they had

12
      been included in the registration statement, if any, plus a late

13
      registration fee of $250.00.  Upon the election and payment, the

14
      registration statement shall be considered to have been in effect

15
      with respect to those shares.  Every person filing an amendment

16
      under this subsection shall pay a filing fee, calculated in the

17
      manner specified in subsection (b), with respect to the addi-

18
      tional securities.

19
           (k) Fees, expense reimbursements, and fines received under

20
      this act shall be deposited in the state treasury to the credit

21
      of the administrator, to be used pursuant to legislative appro-

22
      priation by the corporation,  and  securities AND LAND

23
      DEVELOPMENT bureau in carrying out those duties required by law.

24
      After the payment of the amounts appropriated by the legislature

25
      for the necessary expenses incurred in the administration of this

26
      act, the money remaining shall be credited to the general fund of

27
      this state.



   02726'99
                                  51

 1
           (l) Fees and fines received under this act shall not be

 2
      expended for partisan political activity.

 3
           (m) This section does not apply to securities registered

 4
      under section 304a.

 5
           SEC. 308.  (A) ANY SECURITY ISSUED BY AN INVESTMENT COMPANY,

 6
      OTHER THAN A UNIT INVESTMENT TRUST, THAT IS REGISTERED OR THAT

 7
      HAS FILED A REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY

 8
      ACT OF 1940 MAY BE OFFERED FOR SALE AND SOLD INTO, FROM, OR

 9
      WITHIN THIS STATE UPON THE ANNUAL RECEIPT BY THE ADMINISTRATOR OF

10
      ALL OF THE FOLLOWING:

11
           (1) A NOTICE AS PRESCRIBED BY THE ADMINISTRATOR.  A COPY OF

12
      THE FEDERAL REGISTRATION STATEMENT FILED WITH THE SECURITIES AND

13
      EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 MAY BE PRO-

14
      VIDED TO THE ADMINISTRATOR IN LIEU OF THE NOTICE.

15
           (2) PAYMENT OF A FEE OF $1,000.00.

16
           (3) A CONSENT TO SERVICE OF PROCESS.

17
           (B) ANY SECURITY ISSUED BY A UNIT INVESTMENT TRUST THAT IS

18
      REGISTERED OR THAT HAS FILED A REGISTRATION STATEMENT UNDER THE

19
      INVESTMENT COMPANY ACT OF 1940 AS AN INVESTMENT COMPANY MAY BE

20
      OFFERED FOR SALE AND SOLD INTO, FROM, OR WITHIN THIS STATE FOR AN

21
      INDEFINITE PERIOD COMMENCING UPON THE LATER OF THE TRUST'S EFFEC-

22
      TIVENESS WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE

23
      ADMINISTRATOR'S RECEIPT OF A NOTICE AS PRESCRIBED BY THE

24
      ADMINISTRATOR.

25
           (C) EACH OF THE FOLLOWING APPLIES TO A NOTICE FILING UNDER

26
      SUBSECTION (A):





   02726'99
                                  52

 1
           (1) A NOTICE FILING IS EFFECTIVE FOR A PERIOD OF 1 YEAR,

 2
      COMMENCING UPON THE LATER OF THE EFFECTIVENESS OF THE OFFERING

 3
      WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE

 4
      ADMINISTRATOR'S RECEIPT OF THE NOTICE FILING.

 5
           (2) A NOTICE FILING MAY BE RENEWED FOR AN ADDITIONAL 1-YEAR

 6
      PERIOD BY FILING THE DOCUMENTS AND FEE REQUIRED BY SUBSECTION (A)

 7
      BEFORE THE EXPIRATION OF THE 1-YEAR EFFECTIVE PERIOD.  THE

 8
      RENEWAL IS EFFECTIVE UPON THE EXPIRATION OF THE PRIOR NOTICE

 9
      PERIOD.

10
           (3) A NOTICE FILING MAY BE TERMINATED BY FILING WITH THE

11
      ADMINISTRATOR A NOTICE OF TERMINATION AS PRESCRIBED BY THE

12
      ADMINISTRATOR.  THE TERMINATION IS EFFECTIVE UPON THE

13
      ADMINISTRATOR'S RECEIPT OF THE NOTICE OF TERMINATION.

14
           (D) WITH RESPECT TO ANY SECURITY THAT IS A FEDERALLY COVERED

15
      SECURITY UNDER THE SECURITIES ACT OF 1933, THE ISSUER SHALL FILE

16
      A NOTICE ON SECURITIES AND EXCHANGE COMMISSION FORM D OR A FORM

17
      APPROVED BY THE ADMINISTRATOR; WITH A CONSENT TO SERVICE OF PRO-

18
      CESS SIGNED BY THE ISSUER, NO LATER THAN 15 DAYS AFTER THE FIRST

19
      SALE OF A FEDERALLY COVERED SECURITY IN THIS STATE, TOGETHER WITH

20
      A NONREFUNDABLE FILING FEE OF $100.00.

21
           (E) THE ADMINISTRATOR, BY RULE OR ORDER, MAY REQUIRE THE

22
      FILING OF ANY DOCUMENT FILED WITH THE SECURITIES AND EXCHANGE

23
      COMMISSION UNDER THE SECURITIES ACT OF 1933, WITH RESPECT TO A

24
      FEDERALLY COVERED SECURITY UNDER THE SECURITIES ACT OF 1933,

25
      TOGETHER WITH A NONREFUNDABLE FILING FEE OF $100.00.

26
           (F) THE ADMINISTRATOR MAY ISSUE A STOP ORDER SUSPENDING THE

27
      OFFER AND SALE OF A FEDERALLY COVERED SECURITY, EXCEPT A



   02726'99
                                  53

 1
      FEDERALLY COVERED SECURITY UNDER SECTION 18(b)(1) OF THE

 2
      SECURITIES ACT OF 1933, 15 U.S.C. 77r, IF IT FINDS THAT THE ORDER

 3
      IS IN THE PUBLIC INTEREST AND THERE IS A FAILURE TO COMPLY WITH

 4
      THIS SECTION.

 5
           (G) THE ADMINISTRATOR, BY RULE OR ORDER, MAY WAIVE ANY OR

 6
      ALL OF THE PROVISIONS OF THIS SECTION.

 7
           (H) FOR PURPOSES OF THIS SECTION, "NOTICE FILING" MEANS THE

 8
      DOCUMENTS FILED WITH THE ADMINISTRATOR UNDER SUBSECTION (A).

 9
           Sec. 401.  When  AS used in this act, unless the context

10
      otherwise requires:

11
           (a) "Administrator" means the corporation,  and  securities

12
      AND LAND DEVELOPMENT bureau of the department of  commerce 

13
      CONSUMER AND INDUSTRY SERVICES.

14
           (B) "AFFILIATE" MEANS A PERSON THAT DIRECTLY OR INDIRECTLY

15
      THROUGH 1 OR MORE INTERMEDIARIES CONTROLS, IS CONTROLLED BY, OR

16
      IS UNDER COMMON CONTROL WITH A SPECIFIED PERSON.

17
           (C)  (b)  "Agent" means any individual other than a

18
      broker-dealer who represents a broker-dealer or issuer in effect-

19
      ing or attempting to effect purchases or sales of securities.  or

20
      commodity contracts.  "Agent" does not include an individual who

21
      represents an issuer in (1) effecting transactions in a security

22
      exempted by section 402(a)(1), (2), (3), (4), (5), (9), or (10),

23
      (2) effecting transactions exempted by section 402(b), (3)

24
      EFFECTING TRANSACTIONS IN A COVERED SECURITY AS DEFINED IN SEC-

25
      TION 18(b)(3) OR 18(b)(4)(D) OF THE SECURITIES ACT OF 1933, 15

26
      U.S.C. 77r, or  (3)  (4) effecting transactions with existing

27
      employees, partners, officers, or directors of the issuer or any



   02726'99
                                  54

 1
      of its subsidiaries  and  if, in connection with all of these  3
   

 2
      4 cases, no commission is paid or given directly or indirectly

 3
      for soliciting any person in this state.  "Agent" does not

 4
      include an officer or general partner of an issuer whose securi-

 5
      ties are registered under the provisions of this act, who repre-

 6
      sents the issuer in effecting transactions in  such  THE regis-

 7
      tered securities, if no commission is paid or given directly or

 8
      indirectly for soliciting any person in this state.  "Agent" does

 9
      not include a person acting solely as a finder and registered

10
      pursuant to this act or acting as a finder under a transaction

11
      exempt pursuant to section 402(b)(19).  "AGENT" DOES NOT INCLUDE

12
      A PERSON WHOSE TRANSACTIONS IN THIS STATE ARE LIMITED TO ONLY

13
      THOSE TRANSACTIONS SET FORTH IN SECTION 15(h)(2) OF THE SECURI-

14
      TIES EXCHANGE ACT OF 1934, 15 U.S.C. 78o. A partner, officer, or

15
      director of a broker-dealer or issuer, or a person occupying a

16
      similar status or performing similar functions, is an agent only

17
      if he or she otherwise comes within this definition.  The admin-

18
      istrator may by rule or order exclude other persons from the def-

19
      inition of the word "agent".

20
           (D)  (c)  "Broker-dealer" means any person engaged in the

21
      business of effecting transactions in securities  or commodity

22
      contracts  for the account of others or for his or her own

23
      account.  "Broker-dealer" does not include (1) an agent, (2) an

24
      issuer, (3) a bank, savings institution, or trust company, (4) a

25
      person who has no place of business in this state if (A) he or

26
      she effects transactions in this state exclusively with or

27
      through (i) the issuers of the securities  or commodity



   02726'99
                                  55

 1
      contracts  involved in the transactions, (ii) other

 2
      broker-dealers, or (iii) banks, savings institutions, trust com-

 3
      panies, insurance companies, investment companies as defined in

 4
      the investment company act of 1940, pension or profit-sharing

 5
      trusts, or other financial institutions or institutional buyers,

 6
      whether acting for themselves or as trustees, or (B) during any

 7
      period of 12 consecutive months he or she does not direct more

 8
      than 15 offers to sell or buy into this state in any manner to

 9
      persons other than those specified in clause (A) OF THIS

10
      SUBDIVISION, whether or not the offeror or any of the offerees is

11
      then present in this state, or (5) a person acting solely as a

12
      finder and registered pursuant to this act or acting as a finder

13
      under a transaction exempt pursuant to section 402(b)(19).  The

14
      administrator may by rule or order exclude other persons from the

15
      definition of the word "broker-dealer".

16
           (E) "COMMISSION" MEANS ANY PAYMENT IN CASH, SECURITIES, OR

17
      GOODS FOR OFFERING OR SELLING, PROMISE, OR COMMITMENT TO PROVIDE

18
      PAYMENT IN THE FUTURE FOR OFFERING OR SELLING, OR ANY OTHER SIMI-

19
      LAR PAYMENT.  COMMISSION DOES NOT INCLUDE A REAL ESTATE COMMIS-

20
      SION COMMENSURATE WITH FEES PAID IN THE AREA FOR SIMILAR SERV-

21
      ICES, PAID TO LICENSED REAL ESTATE BROKERS SOLELY FOR REAL ESTATE

22
      SERVICES WHICH HAVE BEEN RENDERED, OR PAYMENT BY A PERSON TO A

23
      LAWYER OR ACCOUNTANT IN CONNECTION WITH ADVICE OR RECOMMENDATIONS

24
      MADE BY A LAWYER OR ACCOUNTANT TO THE CLIENT WITH WHOM THE LAWYER

25
      OR ACCOUNTANT HAS AN ESTABLISHED PROFESSIONAL RELATIONSHIP, IF

26
      DISCLOSURE OF THE PAYMENT AND THE INTEREST OF THE LAWYER OR

27
      ACCOUNTANT IN THE TRANSACTION OR IN THE ISSUER OR ANY AFFILIATE



   02726'99
                                  56

 1
      OF THE ISSUER, IS MADE IN WRITING TO THE CLIENT BEFORE THE SALE.

 2
      OFFICERS, DIRECTORS, AND PARTNERS OF AN ISSUER OR PURCHASER, OR

 3
      PERSONS OCCUPYING A SIMILAR STATUS SHALL NOT BE CONSIDERED A

 4
      FINDER IF THEIR CONTACT WAS PURELY INCIDENTAL AND THEIR COMPENSA-

 5
      TION WAS NOT DIRECTLY OR INDIRECTLY TIED TO OR CONDITIONED UPON

 6
      INVOLVEMENT IN SECURITIES SOLICITATION OR PURCHASE.

 7
           (F) "DIRECT OR INDIRECT COMPENSATION OR REMUNERATION" MEANS

 8
      ANY PAYMENT, RECEIPT OR USE OF PROCEEDS OF AN OFFERING FOR THE

 9
      BENEFIT OF THE PROMOTER, GENERAL PARTNERS, OFFICERS OR DIRECTORS,

10
      OR PERSONS OCCUPYING SIMILAR POSITIONS OR THEIR AFFILIATES, ANY

11
      RECEIPT, PAYMENT, OR USE OF SECURITIES OR GOODS BY THOSE PERSONS

12
      AT LESS THAN THE AMOUNT PUBLIC INVESTORS PAID FOR THE SECURITIES

13
      OR GOODS, OR ANY MARKUP CHARGED ON SALE OF PROPERTY TO THE ENTITY

14
      RAISING CAPITAL, ANY ADVANTAGEOUS CONTRACTUAL RELATIONSHIPS, ANY

15
      REAL ESTATE COMMISSION, OR OTHER SIMILAR PAYMENTS OR ARRANGEMENTS

16
      TO THOSE PERSONS.

17
           (G) "FEDERALLY COVERED ADVISER" MEANS A PERSON WHO IS REGIS-

18
      TERED UNDER SECTION 203 OF THE INVESTMENT ADVISERS ACT OF 1940,

19
      15 U.S.C. 80b-3; OR IS EXCLUDED FROM THE DEFINITION OF

20
      "INVESTMENT ADVISER" UNDER SECTION 202(a)(11) OF THE INVESTMENT

21
      ADVISERS ACT OF 1940, 15 U.S.C. 80b-2; EXCEPT AS PROVIDED IN THE

22
      INVESTMENT ADVISERS ACT OF 1940, A FEDERALLY COVERED ADVISER FOR

23
      WHICH A NONPAYMENT OR UNDERPAYMENT OF A FEE HAS NOT BEEN PROMPTLY

24
      REMEDIED FOLLOWING WRITTEN NOTIFICATION TO THE ADVISER OF THE

25
      NONPAYMENT OR UNDERPAYMENT IS NOT A FEDERALLY COVERED ADVISER.

26
           (H) "FEDERALLY COVERED SECURITY" MEANS ANY SECURITY THAT IS

27
      A "COVERED SECURITY" UNDER THE SECURITIES ACT OF 1933 OR RULES OR



   02726'99
                                  57

 1
      REGULATIONS PROMULGATED UNDER THAT ACT.  EXCEPT IF PROVIDED BY

 2
      THE SECURITIES ACT OF 1933, A FEDERALLY COVERED SECURITY FOR

 3
      WHICH A FEE HAS NOT BEEN PAID AND PROMPTLY REMEDIED FOLLOWING

 4
      WRITTEN NOTIFICATION FROM THE ADMINISTRATOR TO THE ISSUER OF THE

 5
      NONPAYMENT OR UNDERPAYMENT OF THE FEE, AS REQUIRED BY THIS ACT,

 6
      IS NOT A FEDERALLY COVERED SECURITY.

 7
           (I) "FINDER" MEANS A PERSON WHO, FOR CONSIDERATION, PARTICI-

 8
      PATES IN THE OFFER TO SELL, SALE, OR PURCHASE OF SECURITIES OR

 9
      COMMODITIES BY LOCATING, INTRODUCING, OR REFERRING POTENTIAL PUR-

10
      CHASERS OR SELLERS.  THE FINDER DOES NOT INCLUDE A PERSON WHOSE

11
      ACTIONS ARE SOLELY INCIDENTAL TO A TRANSACTION EXEMPT PURSUANT TO

12
      SECTION 402(B)(19).  THE ADMINISTRATOR MAY BY RULE OR ORDER

13
      EXCLUDE OTHER PERSONS FROM THIS DEFINITION.

14
           (J)  (d)  "Fraud", "deceit", and "defraud" are not limited

15
      to common-law deceit.

16
           (K)  (e)  "Guaranteed" means guaranteed as to payment of

17
      principal, interest, or dividends.

18
           (l)  (f)  "Investment adviser" means any person who, for

19
      consideration, engages in the business of advising others, either

20
      directly or through publications or writings, as to the value of

21
      securities,  or commodity contracts,  or as to the advisability

22
      of investing in, purchasing, or selling securities,  or commodity

23
      contracts,  who, for consideration and as a part of a regular

24
      business, issues or promulgates analyses or reports concerning

25
      securities,  or commodity contracts,  or who acts as a finder in

26
      conjunction with the offer, sale, or purchase of a security.  or





   02726'99
                                  58

 1
      commodity.  "Investment adviser" does not include ANY OF THE

 2
      FOLLOWING:

 3
           (1)  a  A bank, savings institution, or trust company.  ;
   

 4
           (2)  a  A lawyer, accountant, engineer, geologist, geophysi-

 5
      cist, or teacher whose performance of these services is solely

 6
      incidental to the practice of his or her profession.  ; 

 7
           (3)  a  A broker-dealer or a registered agent acting on

 8
      behalf of a broker-dealer whose performance of these services is

 9
      solely incidental to the conduct of his or her business as a

10
      broker-dealer.  ; 

11
           (4)  a  A publisher,  of any bona fide newspaper, news maga-

12
      zine, or business or financial publication of general, regular,

13
      and paid circulation;  EMPLOYEE, OR COLUMNIST OF A NEWSPAPER,

14
      NEWS MAGAZINE, OR BUSINESS OR FINANCIAL PUBLICATION, OR AN OWNER,

15
      OPERATOR, PRODUCER, OR EMPLOYEE OF A CABLE, RADIO, OR TELEVISION

16
      NETWORK, STATION, OR PRODUCTION FACILITY IF, IN EITHER CASE, THE

17
      FINANCIAL OR BUSINESS NEWS PUBLISHED OR DISSEMINATED IS MADE

18
      AVAILABLE TO THE GENERAL PUBLIC AND THE CONTENT DOES NOT CONSIST

19
      OF RENDERING ADVICE ON THE BASIS OF THE SPECIFIC INVESTMENT SITU-

20
      ATION OF A CLIENT.

21
           (5)  a  A person who has no place of business in this state

22
      if EITHER OF THE FOLLOWING APPLIES:

23
           (A)  his  HIS or her only clients in this state are other

24
      investment advisers, FEDERALLY COVERED ADVISERS, broker-dealers,

25
      banks, savings institutions, trust companies, insurance com-

26
      panies, investment companies as defined in the investment company

27
      act of 1940, pension or profit-sharing trusts the assets of which



   02726'99
                                  59

 1
      are managed by a bank or trust company or other institutional

 2
      manager, or other financial institutions or institutional buyers,

 3
      whether acting for themselves or as trustees.  , or 

 4
           (B)  during  DURING any period of 12 consecutive months he

 5
      or she does not  direct business communications into this state

 6
      in any manner to  HAVE more than 5 clients IN THIS STATE other

 7
      than those specified in  clause (A), whether or not he or she or

 8
      any of the persons to whom the communications are directed is

 9
      then present in this state;  SUBPARAGRAPH (A).

10
           (6) A PERSON EXCLUDED FROM THE DEFINITION OF INVESTMENT

11
      ADVISER UNDER SECTION 202(a)(11) OF THE INVESTMENT ADVISERS ACT

12
      OF 1940, 15 U.S.C. 80b-2.

13
           (7)  any  ANY other persons not within the intent of this

14
      paragraph as the administrator may by rule or order designate.

15
       ; 

16
           (8)  (7) a  A trustee whose custody of assets is pursuant to

17
      judicial appointment, OR appointment under a trust indenture  , 

18
      or agreement, and who does not hold himself or herself out to the

19
      general public as giving advice to others with respect to securi-

20
      ties and who maintains close contact with the personal financial

21
      affairs of his or her clients as a part of his or her fiduciary

22
      responsibilities, or a person who gives advice only to such a

23
      trustee.  ; or, 

24
           (9)  (8) a  A county treasurer acting pursuant to his or her

25
      authority under the local government investment pool act, 1985 PA

26
      121, MCL 129.141 TO 129.150.





   02726'99
                                  60

 1
           (10) A PERSON WHO IS A FEDERALLY COVERED ADVISER.

 2
           (11) A PERSON WHO IS EMPLOYED BY OR ASSOCIATED WITH AN

 3
      INVESTMENT ADVISER.

 4
           (M) "INVESTMENT ADVISER REPRESENTATIVE" MEANS A PARTNER,

 5
      OFFICER, OR DIRECTOR, OR A PERSON OCCUPYING A SIMILAR STATUS OR

 6
      PERFORMING SIMILAR FUNCTIONS, OR OTHER INDIVIDUAL EXCEPT A CLERI-

 7
      CAL OR MINISTERIAL EMPLOYEE OR OTHER EMPLOYEE OR ASSOCIATE DESIG-

 8
      NATED BY THE ADMINISTRATOR BY RULE OR ORDER AS WITHIN THE INTENT

 9
      OF THIS SUBSECTION, WHO IS EMPLOYED BY OR ASSOCIATED WITH EITHER

10
      OF THE FOLLOWING:

11
           (1) AN INVESTMENT ADVISER THAT IS REGISTERED OR REQUIRED TO

12
      BE REGISTERED UNDER THIS ACT AND WHO DOES ANY OF THE FOLLOWING:

13
           (i) MAKES ANY RECOMMENDATIONS OR OTHERWISE RENDERS ADVICE

14
      REGARDING SECURITIES.

15
           (ii) MANAGES ACCOUNTS OR PORTFOLIOS OF CLIENTS.

16
           (iii) DETERMINES WHICH RECOMMENDATION OR ADVICE REGARDING

17
      SECURITIES SHOULD BE GIVEN.

18
           (iv) SOLICITS, OFFERS, OR NEGOTIATES FOR THE SALE OF OR

19
      SELLS INVESTMENT ADVISORY SERVICES.

20
           (v) SUPERVISES EMPLOYEES WHO PERFORM ANY OF THE ACTIVITIES

21
      DESCRIBED IN SUBPARAGRAPH (i), (ii), (iii), OR (iv).

22
           (2) A FEDERALLY COVERED ADVISER THAT IS SUBJECT TO

23
      SECTION 203A OF TITLE II OF THE INVESTMENT ADVISERS ACT OF 1940,

24
      15 U.S.C. 80b-3a, AND IS DESIGNATED BY THE ADMINISTRATOR BY RULE

25
      OR ORDER.







   02726'99
                                  61

 1
           (N) "INVESTMENT ADVISERS ACT OF 1940" MEANS THE INVESTMENT

 2
      ADVISERS ACT OF 1940, TITLE II OF CHAPTER 686, 54 STAT. 847, 15

 3
      U.S.C. 80b-1 TO 80b-21.

 4
           (O) "INVESTMENT COMPANY ACT OF 1940" MEANS THE INVESTMENT

 5
      COMPANY ACT OF 1940, TITLE I OF CHAPTER 686, 54 STAT. 789, 15

 6
      U.S.C. 80a-1 TO 80a-3 AND 80a-4 TO 80a-64.

 7
           (P)  (g)  "Issuer" means any person who issues or proposes

 8
      to issue any security,  or commodity contract,  except that:

 9
           (1) For certificates of deposit, voting-trust certificates

10
      or collateral-trust certificates, or with respect to certificates

11
      of interest or shares in an unincorporated investment trust not

12
      having a board of directors, or persons performing similar func-

13
      tions or of the fixed, restricted management or unit type, the

14
      term "issuer" means the person or persons performing the acts and

15
      assuming the duties of depositor or manager pursuant to the pro-

16
      visions of the trust or other agreement or instrument under which

17
      the security is issued.

18
           (2) For certificates of interest or participation in oil,

19
      gas, or mining titles or leases, or in payments out of production

20
      under titles or leases, the term "issuer" means the owner of the

21
      oil, gas, or mining titles or leases or payments out of produc-

22
      tion or any fractional part thereof who creates and sells certif-

23
      icates of interest or participation therein.

24
            (3) For commodity contracts, issuer means a person engaged

25
      in the operation of a market on which commodities contracts are

26
      traded, and a person providing services or performing a function

27
      including, but not limited to, clearing, constituting a portion



   02726'99
                                  62

 1
      of the market.  The administrator may by rule or order exempt any

 2
      person from the definition of commodity issuer. 

 3
           (Q)  (h)  "Nonissuer" means not directly or indirectly for

 4
      the benefit of the issuer.  A sale of securities shall be consid-

 5
      ered to be indirectly for the benefit of the issuer if all of the

 6
      following conditions are met:

 7
           (1) The sale is directly or indirectly made for the benefit

 8
      of a director  ,  or executive officer of the issuer, or a person

 9
      occupying a similar status or performing similar functions, or a

10
      beneficial owner of 10% or more of any class of equity securities

11
      of the issuer.

12
           (2) The sale, together with all sales made in this state by

13
      or for the benefit of the issuer during the 6-month period imme-

14
      diately before the date of the sale, otherwise than pursuant to a

15
      registration statement or exemption order under this act, exceeds

16
      1% of the outstanding securities of the class of securities being

17
      sold.

18
           (3) The securities are not of a class that has been desig-

19
      nated by the administrator as eligible for trading in this

20
      state.

21
           (R) "NOTICE FILING" MEANS THE DOCUMENTS FILED WITH THE

22
      ADMINISTRATOR UNDER SECTION 202A OR 308, OR BOTH, AS APPLICABLE.

23
           (S)  (i)  "Person" means an individual, a corporation, a

24
      partnership, an association, a joint-stock company, a trust where

25
      the interests of the beneficiaries are evidenced by a security,

26
      an unincorporated organization, a government, or a political

27
      subdivision of a government.



   02726'99
                                  63

 1
           (T) "PROMOTER" MEANS A PERSON WHO, ACTING ALONE OR IN

 2
      CONJUNCTION WITH 1 OR MORE PERSONS, DIRECTLY OR INDIRECTLY TAKES

 3
      THE INITIATIVE IN FOUNDING AND ORGANIZING THE BUSINESS OR ENTER-

 4
      PRISE OF AN ISSUER; OR A PERSON WHO, IN CONNECTION WITH THE

 5
      FOUNDING OR ORGANIZING OF THE BUSINESS OR ENTERPRISE OF AN

 6
      ISSUER, DIRECTLY OR INDIRECTLY RECEIVES IN CONSIDERATION OF SERV-

 7
      ICES OR PROPERTY, 10% OR MORE OF THE PROCEEDS FROM THE SALE OF

 8
      ANY CLASS OF SECURITIES OR 10% OR MORE OF THE EQUITY INTEREST IN

 9
      THE ISSUER AFTER THE OFFERING IS COMPLETE.  HOWEVER, A PERSON WHO

10
      RECEIVES SUCH AN AMOUNT OF SECURITIES OR PROCEEDS EITHER SOLELY

11
      AS UNDERWRITING COMMISSIONS PURSUANT TO AN OFFERING OF SECURITIES

12
      REGISTERED UNDER THIS ACT OR SOLELY IN CONSIDERATION OF PROPERTY

13
      OR LEGAL OR ACCOUNTING SERVICES SHALL NOT BE CONSIDERED A PRO-

14
      MOTER WITHIN THE MEANING OF THIS SUBSECTION IF THE PERSON DOES

15
      NOT OTHERWISE TAKE PART IN FOUNDING AND ORGANIZING THE

16
      ENTERPRISE.

17
           (U) "PUBLIC UTILITY HOLDING COMPANY ACT OF 1935" MEANS THE

18
      PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, TITLE I OF

19
      CHAPTER 687, 49 STAT. 838.

20
           (V)(1)  (j)(1)  "Sale" or "sell" includes every contract of

21
      sale of, contract to sell, or disposition of a security  or com-

22
      modity contract,  or interest in a security  or commodity

23
      contract,  for value.

24
           (2) "Offer" or "offer to sell" includes every attempt or

25
      offer to dispose of, or solicitation of an offer to buy, a secur-

26
      ity  or commodity contract,  or interest in a security  or

27
      commodity contract,  for value.



   02726'99
                                  64

 1
           (3) Any security  or commodity contract  given or delivered

 2
      with, or as a bonus on account of, any purchase of securities  ,

 3
      or commodity contracts,  or any other thing is considered to con-

 4
      stitute part of the subject of the purchase and to have been

 5
      offered and sold for value.

 6
           (4) A purported gift of assessable stock is considered to

 7
      involve an offer and sale.

 8
           (5) Every sale or offer of a warrant or right to purchase or

 9
      subscribe to another security  or commodity contract  of the same

10
      or another issuer, as well as every sale or offer of a security

11
       or commodity contract  which gives the holder a present or

12
      future right or privilege to convert into another security  or

13
      commodity contract  of the same or another issuer, is considered

14
      to include an offer of the other security.  or commodity

15
      contract. 

16
           (6) The terms defined in this  subsection  SUBDIVISION do

17
      not include:

18
           (A) Any stock dividend, whether the corporation distributing

19
      the dividend is the issuer of the stock or not, if nothing of

20
      value is given by stockholders for the dividend other than the

21
      surrender of a right to a cash or property dividend when each

22
      stockholder may elect to take the dividend in cash or property or

23
      in stock.

24
           (B) Any act incident to a judicially approved reorganization

25
      in which a security is issued in exchange for 1 or more outstand-

26
      ing securities, claims, or property interests, or partly in

27
       such  exchange and partly for cash.



   02726'99
                                  65

 1
            (k) "Securities act of 1933", "securities exchange act of

 2
      1934", "public utility holding company act of 1935", "investment

 3
      company act of 1940", "investment advisers act of 1940",

 4
      "securities investor protection act of 1970", "commodity futures

 5
      trading commission act of 1974", and "small business investment

 6
      act of 1958", mean the federal statutes of those names as amended

 7
      before or after the effective date of this act. 

 8
           (W) "SECURITIES ACT OF 1933" MEANS THE SECURITIES ACT OF

 9
      1933, TITLE I OF CHAPTER 38, 48 STAT. 74, 15 U.S.C. 77a TO 77r

10
      AND 77s TO 77aa.

11
           (X) "SECURITIES EXCHANGE ACT OF 1934" MEANS THE SECURITIES

12
      EXCHANGE ACT OF 1934, CHAPTER 404, 48 STAT. 881.

13
           (Y) "SECURITIES INVESTOR PROTECTION ACT OF 1970" MEANS THE

14
      SECURITIES INVESTOR PROTECTION ACT OF 1970, PUBLIC LAW 91-598, 84

15
      STAT. 1636.

16
           (Z)  (l)  "Security" means any note; stock; treasury stock;

17
      bond; debenture; evidence of indebtedness; certificate of inter-

18
      est or participation in any profit-sharing agreement;

19
      collateral-trust certificate; preorganization certificate or sub-

20
      scription; transferable share; investment contract; voting-trust

21
      certificate; certificate of deposit for a security; certificate

22
      of interest or participation in an oil, gas, or mining title or

23
      lease or in payments out of production under such a title or

24
      lease; or, in general, any interest or instrument commonly known

25
      as a "security", or any certificate of interest or participation

26
      in, temporary or interim certificate for, receipt for, guarantee

27
      of, or warrant or right to subscribe to or purchase, any of the



   02726'99
                                  66

 1
      foregoing.  "Security" includes any contractual or quasi

 2
      contractual arrangement pursuant to which:  (1) a person fur-

 3
      nishes capital, other than services, to an issuer; (2) a portion

 4
      of that capital is subjected to the risks of the issuer's enter-

 5
      prise; (3) the furnishing of that capital is induced by the rep-

 6
      resentations of an issuer, promoter, or their affiliates which

 7
      give rise to a reasonable understanding that a valuable tangible

 8
      benefit will accrue to the person furnishing the capital as a

 9
      result of the operation of the enterprise; (4) the person fur-

10
      nishing the capital does not intend to be actively involved in

11
      the management of the enterprise in a meaningful way; and (5) a

12
      promoter or its affiliates anticipate, at the time the capital is

13
      furnished, that financial gain may be realized as a result

14
      thereof.  "Security" does not include an insurance or endowment

15
      policy or annuity contract under which an insurance company prom-

16
      ises to pay money either in a lump sum or periodically for life

17
      or some other specified period or a commodity contract.  The

18
      administrator may exclude by rule or by order other transactions

19
      or agreements from the definition of the word "security".

20
           (AA) "SMALL BUSINESS INVESTMENT ACT OF 1958" MEANS THE SMALL

21
      BUSINESS INVESTMENT ACT OF 1958, PUBLIC LAW 85-699, 72 STAT. 689.

22
           (BB)  (m)  "State" means any state, territory, or possession

23
      of the United States, the District of Columbia, and Puerto Rico.

24
            (n) "Commodity" means:  (1) Those goods defined as commodi-

25
      ties in the commodity futures trading commission act of 1974, (2)

26
      those goods commonly classified as commodities within the normal

27
      course of business dealings, (3) anything movable which is traded



   02726'99
                                  67

 1
      or for which contracts are executed or issued on any board of

 2
      trade, or commodity exchange or market, or (4) precious metals.

 3
      The administrator may by rule further define "commodity" or

 4
      "commodity contract".

 5
           (o) "Commodity contract" means the transactions dealing in,

 6
      resulting in, or relating to contracts of purchase or sale of a

 7
      commodity:  for (1) delivery in the future at a specified time or

 8
      a time to be determined or where delivery is not customarily

 9
      made, including puts, calls, or any combinations thereof; (2) for

10
      present delivery where the value of the commodity is difficult to

11
      ascertain except by a person expert in the analysis of the com-

12
      modity, and the commodity is offered for sale to the general

13
      public as an investment; (3) other options; (4) margin contracts;

14
      (5) or in general, any interest in an instrument commonly known

15
      as a commodity contract.

16
           (p) "Principal" means a person associated with a

17
      broker-dealer who is actively engaged in the management of the

18
      broker-dealer's commodities, investment banking, or securities

19
      business, including supervision, solicitation, conduct of busi-

20
      ness, or training of persons associated with a broker-dealer for

21
      any of these functions. 

22
            (q) "Promoter" means a person who, acting alone or in con-

23
      junction with 1 or more persons, directly or indirectly takes the

24
      initiative in founding and organizing the business or enterprise

25
      of an issuer; or a person who, in connection with the founding or

26
      organizing of the business or enterprise of an issuer, directly

27
      or indirectly receives in consideration of services or property,



   02726'99
                                  68

 1
      10% or more of the proceeds from the sale of any class of

 2
      securities or 10% or more of the equity interest in the issuer

 3
      after the offering is complete.  However, a person who receives

 4
      such an amount of securities or proceeds either solely as under-

 5
      writing commissions pursuant to an offering of securities regis-

 6
      tered under this act or solely in consideration of property or

 7
      legal or accounting services shall not be deemed a promoter

 8
      within the meaning of this subsection if the person does not oth-

 9
      erwise take part in founding and organizing the enterprise.

10
           (r) "Commission" means any payment in cash, securities, or

11
      goods for offering or selling, promise, or commitment to provide

12
      payment in the future for offering or selling, or any other simi-

13
      lar payment.  Commission does not include a real estate commis-

14
      sion commensurate with fees paid in the area for similar serv-

15
      ices, paid to licensed real estate brokers solely for real estate

16
      services which have been rendered, or payment by a person to a

17
      lawyer or accountant in connection with advice or recommendations

18
      made by a lawyer or accountant to the client with whom the lawyer

19
      or accountant has an established professional relationship, if

20
      disclosure of the payment and the interest of the lawyer or

21
      accountant in the transaction or in the issuer or any affiliate

22
      of the issuer, is made in writing to the client before the sale.

23
      Officers, directors, and partners of an issuer or purchaser, or

24
      persons occupying a similar status shall not be considered a

25
      finder if their contact was purely incidental and their compensa-

26
      tion was not directly or indirectly tied to or conditioned upon





   02726'99
                                  69

 1
      involvement in securities or commodities solicitation or

 2
      purchase.

 3
           (s) "Direct or indirect compensation or remuneration" means

 4
      any payment, receipt or use of proceeds of an offering for the

 5
      benefit of the promoter, general partners, officers or directors,

 6
      or persons occupying similar positions or their affiliates, any

 7
      receipt, payment, or use of securities or goods by those persons

 8
      at less than the amount public investors paid for the securities

 9
      or goods, or any markup charged on sale of property to the entity

10
      raising capital, any advantageous contractual relationships, any

11
      real estate commission, or other similar payments or arrangements

12
      to those persons.

13
           (t) "Affiliate" means a person that directly or indirectly

14
      through 1 or more intermediaries controls, is controlled by, or

15
      is under common control with a specified person.

16
           (u) "Finder" means a person who, for consideration, partici-

17
      pates in the offer to sell, sale, or purchase of securities or

18
      commodities by locating, introducing, or referring potential pur-

19
      chasers or sellers.  The finder does not include a person whose

20
      actions are solely incidental to a transaction exempt pursuant to

21
      section 402(b)(19).  The administrator may by rule or order

22
      exclude other persons from this definition. 

23
           Sec. 402.  (a) The following securities are exempted from

24
      sections 301 and 403:

25
           (1) Any security, including a revenue obligation, issued or

26
      guaranteed by the United States, any state, any political

27
      subdivision of a state, or any agency or corporate or other



   02726'99
                                  70

 1
      instrumentality of 1 or more of the foregoing, or any certificate

 2
      of deposit for any of the foregoing, or any guarantee or other

 3
      obligation made in connection therewith.

 4
           (2) Any security issued or guaranteed by Canada, any

 5
      Canadian province, any political subdivision of any  such 

 6
      CANADIAN province, any agency or corporate or other instrumental-

 7
      ity of 1 or more of the foregoing, or any other foreign govern-

 8
      ment with which the United States currently maintains diplomatic

 9
      relations, if the security is recognized as a valid obligation by

10
      the issuer or guarantor.

11
           (3) Any security issued by and representing an interest in

12
      or a debt of, or guaranteed by, any bank organized under the laws

13
      of the United States, or any bank, savings institution, or trust

14
      company organized and supervised under the laws of any state.

15
           (4) Any security issued by and representing an interest in

16
      or a debt of, or guaranteed by, any federal savings and loan

17
      association, or any building and loan or similar association

18
      organized under the laws of any state and authorized to do busi-

19
      ness in this state.

20
           (5) Any security issued or guaranteed by any federal credit

21
      union, any credit union organized and supervised under the laws

22
      of this state or any other state or territory of the United

23
      States, or any industrial loan association, or similar associa-

24
      tion organized and supervised under the laws of this state.

25
           (6) Any security issued or guaranteed by any railroad, other

26
      common carrier, public utility, or public utility holding company

27
       which  THAT is  :  (A) A  A registered holding company
   under the



   02726'99
                                  71

 1
      public utility holding company act of 1935 or a subsidiary of

 2
      such a company within the meaning of that act,  ; or (B)

 3
      Regulated  OR REGULATED in respect of the issuance or guarantee

 4
      of the security by a governmental authority of the United States,

 5
       any  A state, Canada, or  any  A Canadian province.
    ; also 

 6
      ALSO, any equipment trust certificate or equipment note or bond

 7
      based on chattel mortgages, leases, or agreements for conditional

 8
      sales of cars, motive power, or other rolling stock mortgages,

 9
      leased or sold to or furnished for the use of or upon  such 

10
      railroads, other common carriers, public utilities, or holding

11
      companies supervised  as above  BY A GOVERNMENTAL AUTHORITY OF

12
      THE UNITED STATES, A STATE, CANADA, OR A CANADIAN PROVINCE, or

13
      equipment, notes, or bonds where the ownership or title of such

14
      equipment is pledged or retained in accordance with the provi-

15
      sions of the laws of the United States,  any  A state, Canada, or

16
       any  A Canadian province, to secure the payment of  such 
   THE

17
      equipment trust certificates, bonds, or notes.

18
           (7) Any security listed or approved for listing upon notice

19
      of issuance on the New York or American stock exchanges; any

20
      other security of the same issuer which is of senior or substan-

21
      tially equal rank; any security called for by subscription rights

22
      or warrants so listed or approved; or any warrant or right to

23
      purchase or subscribe to any of the foregoing.  The administrator

24
      may by rule exempt securities listed on other exchanges or may

25
      establish criteria for designating other classifications of

26
      exempt securities.





   02726'99
                                  72

 1
           (8) Any security issued by any person organized and operated

 2
      not for private profit but exclusively for religious,

 3
      educational, benevolent, charitable, fraternal, social, athletic,

 4
      or reformatory purposes, or as a chamber of commerce or trade or

 5
      professional association.  However, unless the securities are

 6
      part of an issue having an aggregate sales price of $250,000.00

 7
      or less,  and  are sold only to bona fide members of the issuing

 8
      organization, and are sold without payment of a commission or

 9
      consulting fee,  then  the issuer shall do all of the following:

10
           (A)  (i)  Ten days before offer or sale of the security file

11
      with the administrator an offering circular in a form the admin-

12
      istrator may by rule or order require together with a filing fee

13
      of $50.00, and the administrator does not disallow the

14
      exemption.

15
           (B)  (ii)  Not pay a commission or consulting fee to any

16
      person except a registered broker-dealer in connection with the

17
      offer or sale of the security.

18
           (C)  (iii)  Sell only through registered securities

19
      broker-dealers or through persons exempted from the definition of

20
      the term "agent" by the administrator.  In connection with all of

21
      the foregoing, the administrator may by rule or order withdraw or

22
      further condition this exemption, or waive the conditions con-

23
      tained in subparagraphs  (i)  (A) and  (ii) 
   (B).

24
           (9) Any prime quality negotiable commercial paper sold in an

25
      aggregate amount of not less than $25,000.00 to any 1 purchaser

26
      which arises out of a current transaction or the proceeds of

27
      which have been or are to be used for current transactions, and



   02726'99
                                  73

 1
      which evidences an obligation to pay cash at a fixed date within

 2
      9 months of the date of issuance, exclusive of days of grace, or

 3
      any nonautomatic renewal of  such  THE commercial paper which is

 4
      likewise limited, or any guarantee of  such  THE commercial paper

 5
      or of any such renewal if the commercial paper is sold through a

 6
      registered broker-dealer or an institution whose securities are

 7
      exempted under subsection (a)(3).

 8
           (10) Any investment contract or option issued in connection

 9
      with an employees' stock purchase, option, savings, pension,

10
      profit sharing or similar benefit plan.

11
            (11) Any security issued by an issuer registered as an

12
      open-end management investment company or unit investment trust

13
      under section 8 of the investment company act of 1940,

14
      15 U.S.C. 80a-8, if all of the following apply:

15
           (A) If either 1 of the following applies:

16
           (1) The issuer has acted, or is affiliated with an invest-

17
      ment adviser that has acted, as an investment adviser to 1 or

18
      more registered investment companies or unit investment trusts

19
      for at least 3 years next preceding an offer or sale of a secur-

20
      ity claimed to be exempt under this subsection; and the issuer is

21
      advised by an investment adviser that:

22
           (i) Is a depository institution exempt from registration

23
      under the investment advisers act of 1940, 15 U.S.C. 80b-1 to

24
      80b-21.

25
           (ii) Is currently registered as an investment adviser and

26
      has been registered, or is affiliated with an adviser that has

27
      been registered, as an investment adviser under the investment



   02726'99
                                  74

 1
      advisers act of 1940 for at least 3 years next preceding an offer

 2
      or sale of a security claimed to be exempt under this

 3
      subsection.

 4
           (2) The issuer has a sponsor that has at all times through-

 5
      out the 3 years preceding an offer or sale of a security claimed

 6
      to be exempt under this subsection sponsored 1 or more registered

 7
      investment companies or unit investment trusts the aggregate

 8
      total assets of which have exceeded $100,000,000.00.

 9
           (B) The administrator has received, prior to any sale

10
      exempted under this subsection, both of the following:

11
           (1) Notice of intention to sell on a form specified by the

12
      administrator which has been executed by the issuer setting forth

13
      the name and address of the issuer and the securities to be

14
      offered in this state.

15
           (2) A filing fee of $1,250.00 for the open-end management

16
      companies or a filing fee of $750.00 for unit investment trust.

17
           (C) In the event any offer or sale is to be made more than

18
      12 months after the date the notice under subparagraph (B) was

19
      filed with the bureau under this subsection, it shall be neces-

20
      sary to refile a notice of intention to sell and to pay the

21
      filing fee set forth in subparagraph (B).

22
           (D) For the purpose of this subsection, an investment

23
      adviser is affiliated with another investment adviser if it con-

24
      trols, is controlled by, or is under common control with the

25
      other investment adviser.







   02726'99
                                  75

 1
           (E) An exemption under this subsection does not grant an

 2
      exemption from registration for salespersons under

 3
      section 201(a). 

 4
           (11)  (12)  A security listed or approved for listing upon

 5
      notice of issuance on the national association of securities

 6
      dealers automated quotation national market system and any other

 7
      security of the same issuer that is of senior or substantially

 8
      equal rank, a security called for by subscription rights or war-

 9
      rants so listed or approved, or a warrant or right to purchase or

10
      subscribe to any of the foregoing.  The administrator may, after

11
      providing notice of hearing to all interested parties, opportu-

12
      nity for hearing, written findings of fact and conclusions of

13
      law, and a right to judicial appeal, do any of the following:

14
           (A) Deny or revoke this exemption by order for a specific

15
      issue of securities.

16
           (B) Deny this exemption by rule or order to a category of

17
      securities when necessary in the public interest and for the pro-

18
      tection of investors.

19
           (C) Decertify the system by order if the administrator

20
      determines that the system's requirements are so changed from

21
      those listed in securities act release no. 33-6810, 53  Federal

22
      Register  F.R. p. 52550 (Dec. 28, 1988), or insufficiently

23
      applied that the public interest and protection of investors con-

24
      templated by the requirements is no longer afforded.

25
           (b) The following transactions are exempted from sections

26
      301 and 403:





   02726'99
                                  76

 1
           (1)  Any  AN isolated nonissuer transaction, and with

 2
      respect to a certificate of interest or participation in an oil,

 3
      gas or mining title or a lease or payment out of production under

 4
      a title or lease, any isolated transaction not involving an offer

 5
      or sale by a promoter, whether effected through a broker-dealer

 6
      or not.

 7
           (2)  Any  A nonissuer distribution of an outstanding secur-

 8
      ity whose issuer and any predecessors have been in continuous

 9
      operation for at least 5 years if  :  (A) A  A recognized securi-

10
      ties manual contains the names of the issuer's officers and

11
      directors, a balance sheet of the issuer as of a date within 18

12
      months, and a profit and loss statement for either the fiscal

13
      year preceding that date or the most recent year of operations,

14
      or  (B) The  THE security has a fixed maturity or a fixed inter-

15
      est or dividend provision and there has been no default during

16
      the current fiscal year or within the 3 preceding fiscal years in

17
      the payment of principal, interest, or dividends on the

18
      security.  (C)  For purposes of this subdivision, an issuer or

19
      predecessor is in continuous operation only if it has gross oper-

20
      ating revenue in each of the 5 years immediately preceding its

21
      claim of exemption and has had gross operating revenue of at

22
      least $500,000.00 in not less than 3 of those 5 years.

23
           (3)  Any  A nonissuer transaction effected by or through a

24
      registered broker-dealer pursuant to an unsolicited order or

25
      offer to buy; but the administrator may by rule require that the

26
      customer acknowledge upon a specified form that the sale was





   02726'99
                                  77

 1
      unsolicited, and that a signed copy of each such form be

 2
      preserved by the broker-dealer for a specified period.

 3
           (4)  Any  A transaction between the issuer or other person

 4
      on whose behalf the offering is made and an underwriter, or A

 5
      TRANSACTION among underwriters.

 6
           (5)  Any  A transaction not part of a series of transactions

 7
      in related or adjacent properties to individual investors, or

 8
       any  A transaction involving an offer or sale to a financial

 9
      institution as  defined  DESCRIBED in subdivision (8), in a bond

10
      or other evidence of indebtedness secured by a real or chattel

11
      mortgage or deed of trust, or by an agreement for the sale of

12
      real estate or chattels, if the entire mortgage, deed of trust,

13
      or agreement, together with all the bonds or other evidences of

14
      indebtedness secured thereby, is offered and sold as a unit.

15
           (6)  Any  A transaction by an executor, a personal represen-

16
      tative, administrator, sheriff, marshal, receiver, trustee in

17
      bankruptcy, guardian, or conservator.

18
           (7)  Any  A bona fide pledge or transaction in foreclosure

19
      of a pledge executed by a bona fide pledgee without any purpose

20
      of evading this act.

21
           (8)  Any  AN offer or sale to a bank, savings institution,

22
      trust company, insurance company, investment company as defined

23
      in the investment company act of 1940, the federal national mort-

24
      gage association, the federal home loan mortgage corporation, or

25
      the government national mortgage association, pension or profit

26
      sharing trust the assets of which are managed by an institutional

27
      manager, the treasurer of this state, other financial



   02726'99
                                  78

 1
      institution, broker-dealer, whether the purchaser is acting for

 2
      itself or in some fiduciary capacity, or a lender approved by the

 3
      federal housing administration and who has satisfied any addi-

 4
      tional requirements established by the administrator by rule or

 5
      order.

 6
           (9)  Any  A transaction pursuant to an offering which satis-

 7
      fies in full each of the following requirements:

 8
           (A) The issuer and any person acting on its behalf shall

 9
      exercise reasonable care to assure that purchasers in this state

10
      of the securities in the offering do not resell the securities

11
      without compliance with state and federal securities laws.  For

12
      sales described in subparagraph (D)(2), (3), and (5) that reason-

13
      able care shall include, where appropriate, but not necessarily

14
      be limited to, all of the following:

15
           (1) Making reasonable inquiry to determine if the purchaser

16
      is acquiring the securities for his OR HER own account or on

17
      behalf of other persons who may be considered as separate

18
      offerees or purchasers.  ; 

19
           (2) Placing a legend on the certificate or other document

20
      evidencing the securities stating that the securities have not

21
      been registered under the act and setting forth or referring to

22
      the restrictions on transferability and sale of the securities.

23
       ; 

24
           (3) Issuing stop transfer instructions to the issuer's

25
      transfer agent, if any, with respect to the securities or, if the

26
      issuer transfers its own securities, making a notation in the

27
      appropriate records of the issuer.  ; 



   02726'99
                                  79

 1
           (4) Obtaining from the purchaser a signed agreement that the

 2
      securities will not be sold without registration under the act or

 3
      exemption therefrom.

 4
           (B) The securities are not offered or sold in reliance upon

 5
      this subdivision by means of any general advertising or general

 6
      solicitation, except as approved by the administrator.

 7
           (C) A commission is not paid or given directly or indirectly

 8
      for soliciting any prospective purchaser in this state, except to

 9
      a broker-dealer registered pursuant to this act who is not affil-

10
      iated with the issuer or its affiliates.  Those payments shall be

11
      reflected on the books and records of the broker-dealer, and

12
      shall be fully disclosed in writing to each prospective

13
      purchaser.  The broker-dealer or issuer shall file with the

14
      administrator on  such  forms as the administrator prescribes, a

15
      confidential report of offering within 30 days after initiation

16
      of the offering in this state and every 90 days thereafter until

17
      the final report of completion of the offering.

18
           (D) Each sale in the offering made in reliance upon this

19
      subdivision meets all of the conditions of 1 of the following:

20
           (1)  Sales  THE SALE IS to any of the following classes of

21
      persons:

22
           (i) Promoters or other persons actively engaged or reason-

23
      ably expected to be actively engaged in the management of the

24
      issuer, or in a professional capacity as attorneys or accountants

25
      to the issuer, or directly related by blood or marriage to the

26
      promoter or person actively engaged or reasonably expected to be

27
      actively engaged in the management of the issuer, if such persons



   02726'99
                                  80

 1
      are purchasing with investment intent and the issuer relies upon

 2
      this subparagraph for sales to not more than 10 persons in this

 3
      state within a 12-month period.  ; 

 4
           (ii) Not more than 15 persons whose principal business is

 5
      the line of business to which the offering relates, and who are

 6
      qualified by previous experience to evaluate the risks of the

 7
      investment.  The provisions of subparagraph (A) shall not apply

 8
      to sales covered by subparagraph (d)(1) (i) and (ii).

 9
           (2) Sales to not more than 15 persons in this state within

10
      any 12-month period, in reliance upon this subparagraph, and the

11
      issuer provides to all such offerees at least 48 hours before

12
      sale a document THAT INCLUDES ALL OF THE FOLLOWING:

13
           (i) Disclosing in reasonable detail the intended application

14
      of the proceeds to be received from the offering.  ; 

15
           (ii) Disclosing in reasonable detail the current financial

16
      condition of the issuer and in the case of a limited partnership

17
      or oil and gas venture, the current financial condition of the

18
      general partner or oil and gas issuer; except that in the case of

19
      a limited partnership interest or interest in oil or gas, the

20
      document may merely state that the general partner or oil and gas

21
      issuer has a net worth, determined in accordance with generally

22
      accepted accounting principles, in excess of a stated sum, and

23
      that its net worth exceeds the obligations undertaken by the gen-

24
      eral partner or oil and gas issuer, and that the assets or opera-

25
      tions of the general partner or oil and gas issuer will generate

26
      sufficient cash to meet these obligations as they come due.  ; 





   02726'99
                                  81

 1
           (iii) Disclosing in all reasonable detail direct or indirect

 2
      compensation or remuneration to be received by a promoter or

 3
      affiliates of the promoter and fully identifying the persons who

 4
      shall be recipients of that compensation.  ; 

 5
           (iv) Disclosing the form, date, and jurisdiction under which

 6
      formed, and nature of business of the issuer.  ; 

 7
           (v) Disclosing the kind and amount of securities to be

 8
      offered and the offering price or method by which the offering

 9
      price is computed.  ; 

10
           (vi) Stating, except in the case of a corporate issuer, that

11
      each investor or his OR HER designated representative may inspect

12
      the books and records of the issuer or the venture at any reason-

13
      able time for proper purposes.  ; 

14
           (vii) Stating, except in the case of a corporate issuer,

15
      that the issuer shall promptly call an informational meeting of

16
      all investors upon request by 25% in interest or more of the

17
      investors in any class of securities who are unaffiliated with a

18
      promoter or affiliate of the promoter.  ; 

19
           (viii) Stating, except in the case of a corporate issuer,

20
      that the issuer shall agree to maintain at its offices a list of

21
      names and addresses of all investors in the entity available to

22
      any investor or the designated representative of any investor.

23
       ; 

24
           (ix) Stating that the issuer shall provide all investors

25
      with a detailed written statement of the application of the pro-

26
      ceeds of the offering within 6 months after commencement of the

27
      offering or upon completion, whichever occurs first, and with



   02726'99
                                  82

 1
      annual current balance sheets and income statements to investors

 2
      thereafter.

 3
           (3) Sales to not more than 35 persons in this state within

 4
      any 12-month period in reliance upon this subparagraph, if all of

 5
      the following conditions are met:

 6
           (i) The offeror files with the administrator an exemption

 7
      application, an offering circular, and a $100.00 filing fee.  ; 

 8
           (ii) The administrator by order finds the offering consis-

 9
      tent with  the provisions of  section 306 and declares this

10
      exemption effective.  ; 

11
           (iii) The offering is made upon  such  conditions and with

12
       such  information or provisions in the offering circular as the

13
      administrator may require.  ; 

14
           (iv) The offering circular is delivered to each purchaser at

15
      least 48 hours before the sale to the purchaser.

16
           (4) Sales made by a person other than an issuer to not more

17
      than 10 persons pursuant to offers to not more than 15 persons in

18
      this state within a 12-month period in reliance upon this sub-

19
      paragraph, if the offering is not part of a distribution of the

20
      issuer's securities.

21
           (5) Sales made to a person who the seller has reasonable

22
      grounds to believe and does believe  meets  IS 1 of the

23
      following:  conditions: 

24
           (i) A business entity having either  (i)  net income from

25
      operations after taxes in excess of $100,000.00 in its last

26
      fiscal year or its latest 12-month period, or  (ii)  a net worth

27
      in excess of $1,000,000.00 at the time of purchase, and after the



   02726'99
                                  83

 1
      purchase has less than 10% of its total assets invested in the

 2
      securities of the issuer.

 3
           (ii) An individual who after the purchase has an investment

 4
      of $50,000.00 or more in the securities of the issuer, including

 5
      installment payments to be made within 1 year after purchase by

 6
      the investor; has either personal income before taxes in excess

 7
      of $100,000.00 for his or her last fiscal year or latest 12-month

 8
      period and is capable of bearing the economic risk, or net worth

 9
      in excess of $1,000,000.00; and has  such  THE knowledge and

10
      experience in financial and business matters that he or she is

11
      capable of evaluating the merits and risks of the prospective

12
      investment or has obtained the advice of an attorney, certified

13
      public accountant,  or  investment adviser registered under the

14
      investment advisers act of 1940,  title II of chapter 686, 54

15
      Stat. 789, 15 U.S.C. 80b-1 to 80b-21,  or an investment adviser

16
      registered under this act, with respect to the merits and risks

17
      of the prospective investment.

18
           (E)  (F)  For purposes of this  subdivision 
   SUBPARAGRAPH:

19
           (1) Each offer or sale made to a pension or profit sharing

20
      trust shall be  deemed  CONSIDERED to have been made to each ben-

21
      eficiary as an individual offeree unless all of the following

22
      apply:

23
           (i) The trust has an independent trustee.  ; 

24
           (ii) The issuer makes inquiry and reasonably believes that

25
      the trust invests not more than 10% of its assets in the securi-

26
      ties sold by the issuer.  ; and 





   02726'99
                                  84

 1
           (iii) Within the 2-year period before the initial offer of

 2
      the securities, the issuer was not directly or indirectly

 3
      connected with the formation or subsequent operation of the trust

 4
      or solicitation of its investors and the issuer makes inquiry and

 5
      reasonably believes that the trust was not formed to purchase the

 6
      securities of the issuer.

 7
           (2) Each offer or sale made to a partnership or association

 8
      shall be deemed to have been made to each partner or member as an

 9
      individual unless  all  BOTH of the following occur:

10
           (i) The issuer makes inquiry and reasonably believes that

11
      the partnership or association invests not more than 10% of its

12
      assets in the securities offered or sold by the issuer.

13
           (ii) Within the 2-year period before the initial offer of

14
      the securities, the issuer was not directly or indirectly con-

15
      nected with the formation or subsequent operation of the partner-

16
      ship or association or solicitation of its investors and the

17
      issuer makes inquiry and reasonably believes that the partnership

18
      or association was not formed to purchase the securities of the

19
      issuer.

20
           (3) Each offer or sale made to a corporation or business

21
      trust shall be  deemed  CONSIDERED to have been made to each

22
      security holder of the corporation or business trust as an indi-

23
      vidual unless within the 2-year period before the initial offer

24
      of the securities the issuer was not directly or indirectly con-

25
      nected with the formation or subsequent operation of the corpora-

26
      tion or trust or solicitation of its investors and the issuer

27
      makes inquiry and reasonably believes that the corporation or



   02726'99
                                  85

 1
      trust, or in the case of a wholly owned subsidiary, its parent,

 2
      was not formed to purchase the securities of the issuer and 1 of

 3
      the following applies:

 4
           (i)  a  A class of securities of the corporation or trust is

 5
      registered pursuant to the securities exchange act of 1934.  , 

 6
           (ii)  the  THE decision of the corporation or trust to

 7
      acquire the shares of the issuer is directly or indirectly

 8
      related to the business of the corporation or trust and not for

 9
      investment purposes, and its principal business is not investing

10
      in securities.  , or 

11
           (iii)  the  THE issuer makes inquiry and reasonably believes

12
      that the corporation or trust invests not more than 10% of its

13
      assets in the securities offered or sold by the issuer.

14
           (4) An offer or sale to an investment company registered

15
      under the investment company act of 1940  shall constitute 

16
      CONSTITUTES an offer or sale to an individual.

17
           (5) Husband, wife, and children living as a family are con-

18
      sidered to be 1 individual.

19
           (6) Each client of an investment adviser, each customer of a

20
      broker-dealer, or a person with a similar relationship shall be

21
      considered an offeree or purchaser for purposes of this subdivi-

22
      sion regardless of the amount of discretion given to the invest-

23
      ment adviser, broker-dealer, or other person to act on behalf of

24
      the client, customer, or trust.

25
           (F)  (G)  The administrator may by rule or order as to any

26
      security or transaction, or any type of security or transaction,

27
      increase the number of offerees or purchasers, waive any



   02726'99
                                  86

 1
      conditions, and in conjunction with a request to exercise its

 2
      discretion under these provisions, the administrator may further

 3
      condition this exemption.

 4
           (10) Any offer or sale of a preorganization certificate or

 5
      subscription in a corporation, and the issuance of securities

 6
      pursuant thereto, if all of the following apply:

 7
           (A) No commission is paid or given directly or indirectly

 8
      for soliciting any prospective subscriber.  ; 

 9
           (B) There are not more than 10 purchasers.  ; 

10
           (C) Advertising is not published or circulated unless it has

11
      been reviewed and no objection thereto is made by the administra-

12
      tor in writing.  ; 

13
           (D) The seller reasonably believes that all the buyers in

14
      this state, other than those designated in  this  subsection

15
      (b)(8), are purchasing for investment.  ; 

16
           (E) The administrator may by rule or order waive the condi-

17
      tions in subparagraph (A) and require reports of sales under this

18
      exemption.

19
           (11)  Any  A transaction pursuant to an offer to existing

20
      security holders of the issuer, including persons who at the time

21
      of the transaction are holders of convertible securities, non-

22
      transferable warrants, or transferable warrants exercisable

23
      within not more than 90 days of their issuance, if either of the

24
      following occurs:

25
           (A) A commission, other than a standby commission, is not

26
      paid or given directly or indirectly for soliciting any security

27
      holder in this state and the offer is made either to holders of



   02726'99
                                  87

 1
      the convertible securities or warrants and relates to the

 2
      underlying security, or the securities are purchased by not more

 3
      than 25 security holders in this state within a 12-month period.

 4
           (B) Twenty business days before any offer, the issuer files

 5
      with the administrator the offering circular or other materials

 6
      proposed to be sent to security holders and other persons

 7
      describing the terms of the offer together with a filing fee of

 8
      $100.00 and the administrator does not by order disallow the

 9
      exemption within the next 20 business days.

10
           (12)  Any  AN offer, but not a sale, of a security for which

11
      a registration statement or exemption order request was filed

12
      under this act if a stop order is not in effect and a public pro-

13
      ceeding or examination looking toward  such an  A STOP order is

14
      not pending and if made in compliance with section 307.

15
           (13)  Any  AN offer, sale, or issuance of securities pursu-

16
      ant to an investment contract or option which is exempt under

17
      subsection (a)(10).

18
           (14)  Any  AN offer or sale of a security as contemplated

19
      under the small business investment act of 1958  (1)  to the fed-

20
      eral small business administration, or  (2)  by a small business

21
      concern to a small business investment company or to a develop-

22
      ment company for equity capital provided or loans made, or  (3) 

23
      by a small business investment company to a small business con-

24
      cern as a condition to providing the latter with equity capital

25
      or loans.

26
           (15)  Any  AN offer or sale of any security by a nonprofit

27
      development corporation, formed and existing under the laws of



   02726'99
                                  88

 1
      this state, if the primary purpose of the corporation is to

 2
      promote and assist the growth and development of business enter-

 3
      prises in the area covered by its operations.

 4
           (16) The distribution by a cooperative corporation of its

 5
      securities to its patrons as patronage refunds or returns dis-

 6
      tributed on a patronage basis.

 7
           (17)  Any  A nonissuer transaction effected by or through a

 8
      broker-dealer in any outstanding security of the same class as

 9
      that which has been designated by order by the administrator as

   10 eligible for trading in this state.  A person requesting a desig-

11
      nation order shall pay a filing fee of $100.00.

12
           (18) The sale of capital stock issued by a professional

13
      service corporation formed under the professional service corpo-

14
      ration act,  Act No. 192 of the Public Acts of 1962, as amended,

15
      being sections 450.221 to 450.235 of the Michigan Compiled Laws 

16
      1962 PA 192, MCL 450.221 TO 450.235.

17
           (19)  Any  A transaction incident to a class vote by share-

18
      holders pursuant to the certificate of incorporation or the

19
      applicable corporation statute, on a merger, consolidation,

20
      reclassification of securities, or sale of corporate assets in

21
      consideration of the issuance of securities of another

22
      corporation.

23
           (20)  Any  A transaction that the administrator by order

24
      exempts from the registration provisions of this act after a

25
      determination that registration is not necessary in the public

26
      interest and for the protection of investors.  An order may be





   02726'99
                                  89

 1
      granted either before or after consummation of the transaction

 2
      upon the petition of any interested party in the transaction.

 3
           (21)  Any  A transaction made pursuant to a uniform limited

 4
      offering exemption filing WITH THE DEPARTMENT.  A person claiming

 5
      under this subdivision shall pay a filing fee of $100.00 at the

 6
      time of filing the initial notice form.

 7
           (c) In any proceeding under this act, the burden of proving

 8
      an exemption or an exception from a definition is upon the person

 9
      claiming it.

10
           (d) Offers or sales which are exempt under subsection (b)(1)

11
      through (20) may be combined to exempt an entire transaction or

12
      series of transactions.

13
           Sec. 403.  The administrator may by rule or order require

14
      the filing and acceptance before use of any prospectus, pamphlet,

15
      circular, form letter, advertisement, or other sales literature

16
      or advertising communication addressed or intended for distribu-

17
      tion to prospective investors, including clients or prospective

18
      clients of an investment adviser OR FEDERALLY COVERED ADVISER,

19
      unless the security,  commodity contract,  or transaction is

20
      exempted by section 402(a)(1) to (7) OR IS A FEDERALLY COVERED

21
      SECURITY.

22
           Sec. 405.  (a) Neither the fact that an application for reg-

23
      istration under sections 201 to 204, A NOTICE FILING UNDER

24
      SECTION 202A OR 308, or a registration statement under sections

25
      301 to 306 has been filed, nor the fact that a person or security

26
      is effectively registered OR A NOTICE FILING HAS BEEN MADE,

27
      constitutes a finding by the administrator that any document



   02726'99
                                  90

 1
      filed under this act is true, complete, and not misleading.

 2
      Neither any such fact nor the fact that an exemption or exception

 3
      is available for a security or a transaction, or that an order

 4
      has been issued by the administrator, means that the administra-

 5
      tor has passed in any way upon the merits or qualifications of,

 6
      or recommended or given approval to, any person, security, or

 7
      transaction.

 8
           (b) A person shall not make, or cause to be made, to a pro-

 9
      spective purchaser, customer, or client a representation incon-

10
      sistent with subsection (a).

11
           Sec. 406.  (a) This act shall be administered by the

12
      corporation,  and  securities AND LAND DEVELOPMENT bureau of the

13
      department of  commerce  CONSUMER AND INDUSTRY SERVICES which

14
       shall be  IS a criminal justice agency as defined in 28 C.F.R.

15
      20.3(c).

16
           (b) The administrator or any of its officers or employees

17
      shall not disclose to the public or use for personal benefit any

18
      information which is filed with or obtained by the administrator

19
      and which is not made public pursuant to this act.  This act does

20
      not authorize the administrator or any of its officers or employ-

21
      ees to disclose any  such  information except among themselves or

22
      when necessary or appropriate in a proceeding or investigation

23
      under this act, or to federal, state, local, or foreign govern-

24
      mental agencies for their own official use.  No provision of this

25
      act either creates or derogates from any privilege which exists

26
      at common law or otherwise when documentary or other evidence is





   02726'99
                                  91

 1
      sought under a subpoena directed to the administrator or any of

 2
      its officers or employees.

 3
           (c) The administrator may conduct joint investigations or

 4
      inspections with  the  federal, state, or local agencies, or

 5
      self-regulatory bodies as defined in the securities exchange act

 6
      of 1934.

 7
           Sec. 409.  (a) Any person who willfully violates  sections 

 8
      SECTION 101, 102, 103, 201, 203(h),  301,  301(1) OR (2), 402,

 9
      405(b), or 406(b), or who engages in conduct prohibited by sec-

10
      tion 204(a)(1)(J) to (S) and (V) to (Z), or who willfully vio-

11
      lates section 404 knowing the statement made to be false or mis-

12
      leading in any material respect, shall upon conviction be fined

13
      not more than $25,000.00 for each violation, or imprisoned not

14
      more than 10 years, or both.

15
           (b) The administrator may refer such evidence as is avail-

16
      able concerning violations of this act or of any rule or order

17
      hereunder to the attorney general or the proper prosecuting

18
      attorney, who may, with or without such a reference, institute

19
      the appropriate criminal proceedings under this act.

20
           (c) Nothing in this act limits the power of the state to

21
      punish any person for any conduct which constitutes a crime by

22
      statute or at common law.

23
           (d) Any criminal complaint or indictment for violation of

24
      this act shall be filed within 6 years after the commission of

25
      the offense, but any period during which the party charged was

26
      not usually and publicly resident within this state shall not be

27
      included as part of the 6 years.



   02726'99
                                  92

 1
           Sec. 410.  (a) Any person who does either of the following

 2
       shall be  IS liable to the person buying the security  or com-

 3
      modity contract  from him or her and the buyer may sue either at

 4
      law or in equity to recover the consideration paid for the

 5
      security,  or commodity contract,  together with interest at 6%

 6
      per year from the date of payment, costs, and reasonable

 7
       attorneys'  ATTORNEY fees, less the amount of income received on

 8
      the security,  or commodity contract,  upon the tender of the

 9
      security  or commodity contract,  or, if he or she no longer owns

10
      the security,  or commodity contract,  for damages which shall be

11
      the amount that would be recoverable upon a tender less the value

12
      of the security  or commodity contract  when the buyer disposed

13
      of it and interest at 6% per year from the date of disposition:

14
           (1) Offers or sells a security  or commodity contract  in

15
      violation of section 201(a), 301, or 405(b), or of any rule or

16
      order under section 403 which requires the affirmative approval

17
      of sales literature before it is used, or of any condition

18
      imposed under section 304(d), 305(f), 305(g), or 412(g).  , or 

19
           (2) Offers or sells a security  or commodity contract  by

20
      means of any untrue statement of a material fact or any omission

21
      to state a material fact necessary in order to make the state-

22
      ments made, in the light of the circumstances under which they

23
      are made, not misleading, the buyer not knowing of the untruth or

24
      omission, and who does not sustain the burden of proof that he or

25
      she did not know, and in the exercise of reasonable care could

26
      not have known, of the untruth or omission.





   02726'99
                                  93

 1
           (b) Every person who directly or indirectly controls a

 2
      seller liable under subsection (a), every partner, officer, or

 3
      director of  such a  THE seller, every person occupying a similar

 4
      status or performing similar functions, every employee of  such

 5
      a  THE seller who materially aids in the sale, and every

 6
      broker-dealer or agent who materially aids in the sale are also

 7
      liable jointly and severally with and to the same extent as the

 8
      seller, unless the  nonseller who is so liable  PERSON sustains

 9
      the burden of proof that he or she did not know, and in exercise

10
      of reasonable care could not have known, of the existence of the

11
      facts by reason of which the liability is alleged to exist.

12
      There is contribution as in cases of contract among the several

13
      persons so liable.

14
           (c) Any tender specified in this section may be made at any

15
      time before entry of judgment.

16
           (d) Every cause of action under this statute survives the

17
      death of any person who might have been a plaintiff or

18
      defendant.

19
           (e) A person may not bring an action under subsection (a)(1)

20
      more than 2 years after the contract of sale.  A person may not

21
      bring an action under subsection (a)(2) more than 2 years after

22
       such  THE person, in the exercise of reasonable care, knew or

23
      should have known of the untruth or omission, but in no event

24
      more than 4 years after the contract of sale.  A person may not

25
      bring an action under this section if the buyer received a writ-

26
      ten RESCISSION offer, before the action and at a time when he or

27
      she owned the security,  or commodity contract,  to refund the



   02726'99
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 1
      consideration paid together with interest at 6% per year from the

 2
      date of payment, less the amount of any income received on the

 3
      security, and he or she failed to accept the offer within 30 days

 4
      of its receipt, or if the buyer received  such an  THE offer

 5
      before the action and at a time when he or she did not own the

 6
      security,  or commodity contract,  unless he or she rejected the

 7
      offer in writing within 30 days of its receipt.  The documents

 8
      making full written disclosure about the financial and business

 9
      condition of the issuer and the financial and business risks

10
      associated with the retention of the securities  or commodities 

11
      shall be provided to the offeree concurrently with the written

12
      rescission offer.  Such an offer shall not be made until 45 days

13
      after the date of sale of the securities and acceptance or rejec-

14
      tion of the offer shall not be binding until 48 hours after

15
      receipt by the offeree.  The rescission offer shall recite the

16
      provisions of this section.  A rescission offer under this

17
       section  SUBSECTION shall not be valid unless the offeror sub-

18
      stantiates that it has the ability to fund the offering and this

19
      information is set forth in the disclosure documents.

20
           (f) No person who has made or engaged in the performance of

21
      any contract in violation of any provision of this act or any

22
      rule or order hereunder, or who has acquired any purported right

23
      under any such contract with knowledge of the facts by reason of

24
      which its making or performance was in violation, may base any

25
      suit on the contract.

26
           (g) Any condition, stipulation, or provision binding any

27
      person acquiring any security  or commodity contract  to waive



   02726'99
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 1
      compliance with any provision of this act or any rule or order

 2
      hereunder is void.

 3
           (h) The rights and remedies provided by this act are in

 4
      addition to any other rights or remedies that may exist at law or

 5
      in equity, but this act does not create any cause of action not

 6
      specified in this section.  or section 202(e). 

 7
           Sec. 412.  (a) The administrator may from time to time make,

 8
      amend, and rescind rules, forms, and orders as are necessary to

 9
      carry out the provisions of this act, including rules and forms

10
      governing registration statements, NOTICE FILINGS UNDER

11
      SECTION 202A OR 308, applications, and reports  ,  and defining

12
      any terms, whether or not used in this act, insofar as the defi-

13
      nitions are not inconsistent with this act.  For the purpose of

14
      rules and forms, the administrator may classify securities,  or

15
      commodity contracts,  persons, and matters within its jurisdic-

16
      tion  ,  and prescribe different requirements for different

17
      classes.

18
           (b) A rule, form, or order may not be made, amended, or

19
      rescinded unless the administrator finds that the action is nec-

20
      essary or appropriate in the public interest or for the protec-

21
      tion of investors and consistent with the purposes fairly

22
      intended by the policy and provisions of this act.  In prescrib-

23
      ing rules and forms, the administrator may cooperate with the

24
      securities administrators of the other states and the securities

25
      and exchange commission with a view to effectuating the policy of

26
      this statute to achieve maximum uniformity in the form and





   02726'99
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 1
      content of registration statements, applications, and reports

 2
      wherever practicable.

 3
           (c) The administrator may by rule or order prescribe  (1) 

 4
      the form and content of financial statements required under this

 5
      act,  (2)  the circumstances under which consolidated financial

 6
      statements shall be filed, and  (3)  whether any required finan-

 7
      cial statements shall be certified by independent or certified

 8
      public accountants.  Financial statements shall be prepared in

 9
      accordance with generally accepted accounting practices.

10
           (d) Rules and forms of the administrator shall be

11
      published.

12
           (e) A provision of this act imposing any liability applies

13
      to any act done or omitted in good faith in conformity with any

14
      rule, form, or order of the administrator, notwithstanding that

15
      the rule, form, or order may not later be amended or rescinded or

16
      be determined by judicial or other authority to be invalid for

17
      any reason.

18
           (f) Every hearing in an administrative proceeding shall be

19
      public unless the administrator in its discretion grants a

20
      request joined in by all the respondents that the hearing be con-

21
      ducted privately.

22
           (g) The administrator shall promulgate rules with respect to

23
       commodity issuers,  broker-dealers  ,  and agents as
   necessary

24
      or appropriate in the public interest or for the protection of

25
      investors.  The rules may require, among other things, the

26
      promulgation and issuance of a disclosure statement by the

27
      broker-dealer,  or issuer of a commodity contract,  the



   02726'99
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 1
      segregation of customer's funds and assets, maintenance of

 2
      reserves for obligations, contingent or otherwise, to customers,

 3
      the maintenance of a fidelity bond, hedging or covering obliga-

 4
      tions to customers, the signing and filing of a consent to serv-

 5
      ice of process, and prior approval of advertising, limitation of

 6
      the content of  such  advertising, and margin requirements.

 7
           (h) The rules promulgated and hearings held under this act

 8
      shall be in accordance with  Act No.  306 of the Public Acts of

 9
      1969, as amended, being sections 24.201 to 24.315 of the Michigan

10
      Compiled Laws  THE ADMINISTRATIVE PROCEDURES ACT OF 1969, 1969 PA

11
      306, MCL 24.201 TO 24.328.

12
           Sec. 413.  (a) A document is filed when it is received by

13
      the administrator with the appropriate fee and all required

14
      forms.

15
           (b) The administrator shall keep a register of all applica-

16
      tions for registration, NOTICE FILINGS UNDER SECTIONS 202A AND

17
      308, and registration statements that are or have ever been

18
      effective under this act and all denial, suspension, or revoca-

19
      tion orders that have been entered under this act.  The register

20
      shall be open for public inspection.

21
           (c) The information contained in or filed with any registra-

22
      tion statement, NOTICE FILING, application, or report may be

23
      retained and stored by the administrator in the document's origi-

24
      nal form or by reproduction pursuant to the records media act.

25
      Reproductions of any registration statement, application, or

26
      report may be made available to the public under  such  rules

   27  as  PRESCRIBED BY the administrator,  prescribes,  except
   that



   02726'99
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 1
      the administrator may withhold from public inspection

 2
      information, the disclosure of which is not necessary in the

 3
      public interest and for the protection of investors.

 4
           (d) Upon request and for a reasonable charge as  it  HE OR

 5
      SHE prescribes, the administrator shall furnish to any person a

 6
      reproduction pursuant to the records media act, 1992 PA 116, MCL

 7
      24.401 TO 24.403, certified under  its  HIS OR HER seal of office

 8
      if requested, of  any  AN entry in the register or any document

 9
      that is a matter of public record.  The charges made shall con-

10
      stitute reimbursement to the administrator for the cost of

11
      reproduction.  In  any  A proceeding or prosecution under this

12
      act, a CERTIFIED reproduction in a medium pursuant to the records

13
      media act, 1992 PA 116, MCL 24.401 TO 24.403, or a CERTIFIED

14
      reproduction consisting of a printout or other output readable by

15
      sight from  such  a medium  , so certified,  PURSUANT TO
   THE

16
      RECORDS MEDIA ACT, 1992 PA 116, MCL 24.401 TO 24.403, is prima

17
      facie evidence of the contents of the entry or document

18
      certified.

19
           (e) The administrator may certify the nonexistence of a

20
      filing for  any documents  A DOCUMENT that this act permits to be

21
      filed with the administrator, upon certification that the

22
       documents are  DOCUMENT IS of a type that, if filed,  would be
   

23
      ARE filed with the administrator and that a personal search of

24
      the records has been made by the person  so certifying  MAKING

25
      THE CERTIFICATION.  A certificate of nonexistence is prima facie

26
      evidence that  such a  THE document has not been filed with the

27
      administrator.



   02726'99
                                  99

 1
           (f) The administrator in  its  HIS OR HER discretion may

 2
      honor  requests  A REQUEST from AN interested  persons 
   PERSON

 3
      for AN interpretative  opinions  OPINION and may promulgate rules

 4
       setting forth procedures  THAT SET FORTH THE PROCEDURE for

 5
      requesting  those opinions  AN OPINION.

 6
           Sec. 414.  (a) Sections 101, 201(a), 301, 405, and 410 apply

 7
      to persons who sell or offer to sell when  (1)  an offer to sell

 8
      is made in this state, or  (2)  an offer to buy is made and

 9
      accepted in this state.

10
           (b) Sections 101, 201(a), and 405 apply to persons who buy

11
      or offer to buy when  (1)  an offer to buy is made in this state,

12
      or  (2)  an offer to sell is made and accepted in this state.

13
           (c) For the purpose of this section, an offer to sell or to

14
      buy is made in this state, whether or not either party is then

15
      present in this state, when the offer  (1)  originates from this

16
      state, or  (2)  is directed by the offeror to this state and

17
      received at the place to which it is directed  ,  or at any post

18
      office in this state in the case of a mailed offer.

19
           (d) For the purpose of this section, an offer to buy or to

20
      sell is accepted in this state when acceptance  (1)  is communi-

21
      cated to the offeror in this state and  (2)  has not previously

22
      been communicated to the offeror, orally or in writing, outside

23
      this state; and acceptance is communicated to the offeror in this

24
      state, whether or not either party is then present in this state,

25
      when the offeree directs it to the offeror in this state reason-

26
      ably believing the offeror to be in this state and it is received





   02726'99
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 1
      at the place to which it is directed, or at any post office in

 2
      this state in the case of a mailed acceptance.

 3
           (e) An offer to sell or to buy is not made in this state

 4
      when  (1)  the publisher circulates or there is circulated on his

 5
      OR HER behalf in this state any bona fide newspaper or other pub-

 6
      lication of general, regular, and paid circulation which is not

 7
      published in this state, or which is published in this state but

 8
      has had more than 2/3 of its circulation outside this state

 9
      during the past 12 months, or  (2)  a radio or television program

10
      originating outside this state is received in this state.

11
           (f) Sections 102 and 201(c), as well as section 405 so far

12
      as investment  advisors  ADVISERS are concerned, apply when any

13
      act instrumental in effecting prohibited conduct is done in this

14
      state, whether or not either party is then present in this

15
      state.

16
           (g) Every applicant for registration under this act, EVERY

17
      PERSON SUBMITTING A NOTICE FILING UNDER SECTION 202A OR 308, and

18
      every issuer which proposes to offer a security  or commodity

19
      contract  in this state through any person acting on an agency

20
      basis in the common-law sense shall file with the administrator,

21
      in  such  A form as  it  THE ADMINISTRATOR by rule
   prescribes, an

22
      irrevocable consent appointing the administrator or its successor

23
      in office to be his OR HER attorney to receive service of any

24
      lawful process in any noncriminal suit, action, or proceeding

25
      against him OR HER or his OR HER successor executor or adminis-

26
      trator which arises under this act or any rule or order hereunder

27
      after the consent has been filed, with the same force and



   02726'99
                                  101

 1
      validity as if served personally on the person filing the

 2
      consent.  A person who has filed  such  a consent in connection

 3
      with a previous registration OR NOTICE FILING need not file

 4
      another.  Service may be made by leaving a copy of the process in

 5
      the office of the administrator, but it is not effective unless

 6
       (1)  the plaintiff, who may be the administrator in a suit,

 7
      action, or proceeding instituted by it,  forthwith  PROMPTLY

 8
      sends notice of the service and a copy of the process by regis-

 9
      tered mail to the defendant or respondent at his OR HER last

10
      address on file with the administrator, and  (2)  the plaintiff's

11
      affidavit of compliance with this subsection is filed in the case

12
      on or before the return day of the process, if any, or within

13
       such  A further time  as  THAT the court allows.

14
           (h) When  any  A person, including  any  A nonresident
   of

15
      this state, engages in conduct prohibited or made actionable by

16
      this act or any rule or order hereunder, and he OR SHE has not

17
      filed a consent to service of process under subsection (g) and

18
      personal jurisdiction over him OR HER cannot otherwise be

19
      obtained in this state, that conduct shall be considered equiva-

20
      lent to his OR HER appointment of the administrator or its suc-

21
      cessor in office to be his OR HER attorney to receive service of

22
      any lawful process in any noncriminal suit, action, or proceeding

23
      against him OR HER or his OR HER successor executor or adminis-

24
      trator which grows out of that conduct and which is brought under

25
      this act or any rule or order hereunder, with the same force and

26
      validity as if served on him OR HER personally.  Service may be

27
      made by leaving a copy of the process in the office of the



   02726'99
                                  102

 1
      administrator, and it is not effective unless  (1)  the

 2
      plaintiff, who may be the administrator in a suit, action, or

 3
      proceeding instituted by it,  forthwith  PROMPTLY sends notice of

 4
      the service and a copy of the process by registered mail to the

 5
      defendant or respondent at his OR HER last known address or takes

 6
      other steps which are reasonably calculated to give actual

 7
      notice, and  (2)  the plaintiff's affidavit of compliance with

 8
      this subsection is filed in the case on or before the return day

 9
      of the process, if any, or within  such  A further time  as
    THAT

10
      the court allows.

11
           (i) When process is served under this section, the court, or

12
      the administrator in a proceeding before it, shall order  such  A

13
      continuance as may be necessary to afford the defendant or

14
      respondent reasonable opportunity to defend.

15
           Sec. 417.  Except as saved in this section:

16
           (a) Act No. 220 of the Public Acts of 1923, as amended,

17
      being sections 451.101 to 451.133 of the Compiled Laws of 1948,

18
      is repealed.

19
           (b) Prior law exclusively governs all suits, actions,

20
      prosecutions, or proceedings which are pending or may be initi-

21
      ated on the basis of facts or circumstances occurring before the

22
      effective date of this act, except that no civil suit or action

23
      may be maintained to enforce any liability under prior law unless

24
      brought within  any  A period of limitation which applied when

25
      the cause of action accrued and in any event within 2 years after

26
      the effective date of this act.





   02726'99
                                  103

 1
           (c) All effective registrations under prior law, all

 2
      administrative orders relating to  such  EFFECTIVE registrations

 3
      UNDER PRIOR LAW,  and  all conditions imposed upon  such 

 4
      EFFECTIVE registrations UNDER PRIOR LAW, AND ALL NOTICE FILINGS

 5
      UNDER SECTION 202A OR 308 MADE WITH THE ADMINISTRATOR SINCE

 6
      ENACTMENT OF THE NATIONAL SECURITIES MARKETS IMPROVEMENTS ACT OF

 7
      1996, PUBLIC LAW 104-290, 110 STAT. 3416, remain in effect so

 8
      long as they would have remained in effect if this act had not

 9
      been passed.  They are considered to have been filed, entered, or

10
      imposed under this act, but are governed by prior law.

11
           (d) Prior law applies in respect of any offer or sale made

12
      within 1 year after the effective date of this act pursuant to an

13
      offering begun in good faith before its effective date on the

14
      basis of an exemption available under prior law.

15
           (e) Judicial review of all administrative orders as to which

16
      review proceedings have not been instituted by the effective date

17
      of this act are governed by section 411, except that no review

18
      proceeding may be instituted unless the petition is filed within

19
      any period of limitation which applied to a review proceeding

20
      when the order was entered and in any event within 60 days after

21
      the effective date of this act.















   02726'99          Final page.                            DAM