What Is the Uniform Securities Act?
The Uniform Securities Act is a model law created as a starting point for state-level securities regulation. The purpose of the Uniform Securities Act is to deal with securities fraud at the state level and to assist the Securities and Exchange Commission (SEC) in enforcement and regulation.
Uniform Securities Act Explained
Because not all investments are covered federally and not all investment dealers are registered at the federal level, the SEC cannot protect all investors and pursue all security violations. This created the need for state-level regulations such as the Uniform Securities Act to further protect investors. Each state has its own security laws colloquially referred to as the “blue sky laws.”
How the Uniform Securities Act Is Applied
The Uniform Securities Act is a framework that guides states in the crafting of their own securities legislation. The act evolved through a series of amendments due to earlier regulations not being adopting consistently across the country. Some jurisdictions did not enact each securities act introduced by the Uniform Law Commissioners. Through subsequent revisions and replacements of prior regulations, the Uniform Securities Act brought more parity to the federal and state implementation of securities protections.
One of the issues with regulating securities from two different levels of government is the potential for duplication. The Uniform Securities Act outlines the authority and role of state and federal regulators in dealing with securities fraud. For example, many fraudulent acts occur at the local level with pyramid schemes and other scams. That means enforcement through state law is necessary to address such crimes.
The act provides more structure and consistency in enforcement authority across states as well as in coordination with federal authority regarding the prosecution of securities fraud.
The intent of securities regulations, whether at the state or federal levels, is to prevent the fraudulent sale of securities to investors. Regulatory efforts stem from three primary elements. Registration is required for initial public offerings. Those who deal in securities, specifically investment advisers, broker-dealers, and their representatives and agents, must also be registered. In order to prohibit and prevent securities fraud, regulatory agencies must also have enforcement authority to address such actions. That includes being granted the ability to establish regulations and rules on securities transactions and having the capacity to bring the prosecution of criminal and civil violations to court.
The Uniform Securities Act serves as structure that includes state-level authority to take action on these issues.
I. Fraudulent and other prohibited practices A. Sales and purchases-Section 101 Liability for violations B. Advisory activities Investment advisory contracts-Section 102(c) 1. Fraudulent Advice-Section 102(a) II. Registration of investment advisers, investment adviser representatives, A. Registration requirements 1. Broker dealers and agents-Section 201(a) Exemptions due to nature of clients 3. Expiration of
registration-Section 201(e) 4. Limited registration of Canadian broker-dealers and agents-Section 201-A B. Registration and notice filing procedure
Use of non-public information
Suitability
Disclosure of material information
Custody of clients’ funds and securities-Section 102(e)
Dishonest or unethical
conduct-Section 102(a)
Compensation-Section 102(d)
Solicitation of clients – Section 102(b)
broker dealers and agents
2. Investment advisers and investment
adviser representatives-Sections 201 (c) and 201 (d)
Investment companies
Other investment advisers
Federal covered advisers
Broker dealers
Banks
Trust companies
Savings and loan associations
Insurance companies
Certain employee benefit plans
Government agencies or instrumentalities
De minimis exemption-Sections 201(c), 201(d), 401(f), and 401(g)
Application and effective date-Section 202(a)
Federal covered advisers notice filing-Section 202(b)
Registration fee-Section 202(c)
Successor firm-Section 202(d)
Minimum capital rules-Section 202(e)
Surety bonds and minimum financial requirements-Section
202(f)
C. Post-registration provisions
Books and accounts-Section 203(a)
Information to be furnished-Section 203(b)
Financial Reports-Section 203(c)
Corrections and amendments-Section 203(d)
Inspection power-Section 203(e)
D. Denial, revocation, suspension, cancellation and withdrawal of registration
1. Grounds-Section 204(a)
2. Qualifications-Section 204(b)
3.
Suspensions-Section 204(c)
4. Cancellations-Section 204(d)
5. Withdrawals-Section 204(e)
6. Procedures-Section 204(f)
III. Registration and notice filing procedures for securities
A. Registration requirement-Section 301
B. Registration by filing
Applicability-Section 302(a)
Content of registration statement-Section 302(b)
Effective date-Section 302(c)
C. Registration by coordination Applicability-Section 303(a)
Content of registration statement-Section 303(b)
Effective date-Section 303(c)
D. Registration by qualification
Applicability-Section 304(a)
Content of registration statement-Section 304(b)
Effective date-Section 304(c)
E. General registration provisions
Persons who may file-Section 305(a)
Fees-Section 305(b)
Annexes-Section 305(c)
Incorporation by reference-Section 305(d)
Administrator’s power to reduce content Section 305(e)
Content of registration statement for non-issuer distributions-Section 305(f)
Escrow and impounding-Section 305(g)
Contract form-Section 305(h)
Effective period, withdrawal and non-issuer distributions-Section 305(i)
Reports-Section 305(j)
Certain investment company securities – Section 305(k)
Use of prospectus –
Section 305(l)
F. Denial, suspension and revocation of registration
Grounds-Section 306(a)
Suspensions-Section 306(b)
Procedures-Section 306(c)
Stop orders-Section 306(d)
G. Federal covered securities
Filings of Securities Act of 1933 documents-Section 307(a)
Filings of SEC Form D documents-Section 307(b)
Stop orders-Section 307(d)
IV. General provisions
A. Definitions
1. Fraud-Section 401(d)
2. Investment adviser-Section 401(f)
Definition
Exclusions from definition
Banks
Publishers
Investment adviser representative
Broker-dealers
Incidental to profession
Federal covered advisers
3. Investment adviser representatives-Section 401(g)
4. Sale and offer-Section 401(k)
5. Security-Section 401(m)
Definition
Exclusions from definition
6. Broker-dealer-Section 401(c)
Definition
Exclusions from definition
Agent
Issuer
Financial institutions
Out of state place of business
7. Agent-Section 401(b)
8. Other Definitions-Section 401
9. Federal covered adviser-Section 401 (c1)
10. Federal covered security-Section 401(c2)
B. Exemptions from registration
1. Exempted securities-Section 402(a)
American governments
Foreign governments
Banks
Building and loan associations
Insurance companies
Credit unions
Railroads, other common carriers and public utilities
Securities listed on certain exchanges
Non-profit persons
Commercial paper
Employees’ benefit plans
Cooperatives
Provisions to which exemption applies
2. Exempted transactions-Section 402(b)
Isolated non-issuer transactions
Certain non-issuer distributions
Unsolicited non-issuer transactions by broker dealers
Underwriting transactions
Whole mortgages
Sales by certain parties acting in an official capacity
Sales by pledgees
Sales to institutional buyers and broker-dealers
Offerings to a limited number of persons
Preorganizational subscriptions by
a limited number of persons
Offers to existing security
holders
Offers during Securities and
Exchange Commission waiting period
Provisions to which exemption applies
3. Denial and revocation of exemptions-Section 402(c)
4. Burden of Proof-Section 402(d)
C. Filing of sales and advertising literature-Section 403
D. Misleading filings-Section 404
E. Unlawful representations concerning registration, exemption or notice filing-Section 405
No official approval
Unlawful representations
F. Administration of Act-Section 406
Designation of administrator
Restrictions on officials’ conduct
Fees
G. Investigations and subpoenas-Section 407
Investigations
Subpoenas
Subpoena enforcement
Compulsory testimony
H. Prohibitory orders and injunctions-Section 408
I. Criminal penalties-Section 409
Penalties prescribed
Prosecuting authority
Saving of other crimes
J. Civil liabilities-Section 410
Violation of registration or fraud provisions
Additional special investment adviser and investment
adviser representative liabilities
Persons liable
Tender
Survivability
Statute of limitations
Offers to rescind
Unenforceability of illegal contracts
Waivers void
Saving of existing remedies
K. Judicial review of orders-Section 411
Procedures
Stays
L. Rules, forms, orders and hearings-Section 412
Standards for adoption
Form and content of financial statements
Publication of rules and forms
Good faith reliance
Hearings to be public
M. Administrative files and opinions-Section 413
When filing occurs
Register
Data may be made public
Copies and certifications
Interpretations
N. Scope of the Act and service of process-Section 414
Sellers
Buyers
Offers in this state
Acceptance in this state
Publications, radio and television
Investment advice
Consent to service of process
Substituted service of process
Continuances
O. Statutory policy-Section 415
P. Short title-Section 416
Q. Severability of provisions-Section 417
R. Repeal and saving provision-Section 418