Updated securities law protects investors

The market outlook may not look good, but the state of Wisconsin has recently adopted legislation to protect consumers and companies who deal in securities. On Jan. 1, 2009, a state-adapted version of the National Conference of Commissioners on Uniform State Laws’ 2002 Uniform Securities Act will go into effect and marks the first major overhaul of the law in 40 years.

Making a substantive change to securities regulation involves the difficult task of balancing the protection of investors while at the same time ensuring that businesses can still raise capital through the offer and sale of securities.

In the past, Wisconsin has reached this balance through adaptations to nationally adopted uniform laws. This new act originally crafted in 2002 and currently adopted by 13 states, allows Wisconsin to retain beneficial Wisconsin-specific provisions while creating a greater uniformity to our securities regulation with both federal and other states’ law.

The new securities act brings the law up to speed with today’s securities markets and adjusts the law to account for electronic and other innovative versions of fraud. Investors will benefit from the new securities act because their expectations of protection and treatment should not vary from state to state. Specifically, the 2002 Act changes the exclusion from registration of certain securities professionals such as agents, to an exemption, thus making these agents subject to antifraud provisions. Additionally, the 2002 Act now authorizes new enforcement techniques such as cease-and-desist orders, asset freezes, and rescission orders.

The 2002 Act also modifies the definition of “investment adviser representative” as an individual employed by or associated with an investment adviser or federal covered investment adviser who makes recommendations or gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendation or advice regarding securities should be given, provides investment advice, receives compensation to solicit, offer, or sell investment advice, or supervises employees who perform any of these activities.

As a minor note, the new Wisconsin securities law changes the use of the term “licensing” to “registration,” but retains the same meaning of licensing, except for the changes mentioned below. To comply with the federal regulation law, the new act changes the specific exclusion for a bank, savings institution, or trust company to apply only to a bank or savings institution whose activities as a broker-dealer are limited to certain activities specified under federal law. Changes of definitions of exclusions and broadening other definitions will also make the enforcement provisions apply to more securities professionals, thus increasing accountability in the securities markets. These new additions lend businesses dealing in securities the confidence and assurances necessary to ease the way for investors.

The new enforcement provisions also reflect the goal of uniformity in that the state securities administrator may assist securities regulators in other jurisdictions as well as seek assistance from district attorneys, the attorney general, or federal authorities in enforcing subpoenas. This is important as more and more securities deals are interstate or international in nature.

Overall, Wisconsin’s adaptation of the 2002 Uniform Securities Act modernizes regulation on securities and moves towards a uniform way of protecting investors, helping businesses, and cooperating with other state and federal regulation in order to cut down on fraud and bolster confidence in securities markets. 


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