CHAPTER 4. BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS
IC 23-19-4
Chapter 4. Broker-Dealers, Agents, Investment Advisers,Investment Adviser Representatives, and Federal CoveredInvestment Advisers
IC 23-19-4-1
Broker-dealer registration; exemptions; restrictions onemployment or association; foreign transactions
Sec. 1. (a) It is unlawful for a person to transact business in thisstate as a broker-dealer unless the person is registered under thisarticle as a broker-dealer or is exempt from registration as abroker-dealer under subsection (b) or (d).
(b) The following persons are exempt from the registrationrequirement of subsection (a):
(1) A broker-dealer without a place of business in this state if itsonly transactions effected in this state are with:
(A) the issuer of the securities involved in the transactions;
(B) a broker-dealer registered as a broker-dealer under thisarticle or not required to be registered as a broker-dealerunder this article;
(C) an institutional investor;
(D) a nonaffiliated federal covered investment adviser withinvestments under management in excess of one hundredmillion dollars ($100,000,000) acting for the account ofothers under discretionary authority in a signed record;
(E) a bona fide preexisting customer whose principal placeof residence is not in this state, and the person is registeredas a broker-dealer under the Securities Exchange Act of1934 or not required to be registered under the SecuritiesExchange Act of 1934 and is registered under the securitiesact of the state in which the customer maintains a principalplace of residence;
(F) a bona fide preexisting customer whose principal placeof residence is in this state but who was not present in thisstate when the customer relationship was established, if:
(i) the broker-dealer is registered under the SecuritiesExchange Act of 1934 or not required to be registeredunder the Securities Exchange Act of 1934 and isregistered under the securities laws of the state in whichthe customer relationship was established and where thecustomer had maintained a principal place of residence;and
(ii) within forty-five (45) days after the customer's firsttransaction in this state, the person files an application forregistration as a broker-dealer in this state and a furthertransaction is not effected more than seventy-five (75)days after the date on which the application is filed, or, ifearlier, the date on which the commissioner notifies theperson that the commissioner has denied the applicationfor registration or has stayed the pendency of the
application for good cause;
(G) not more than three (3) customers in this state during theprevious twelve (12) months, in addition to those customersspecified in clauses (A) through (F) and under clause (H), ifthe broker-dealer is registered under the Securities ExchangeAct of 1934 or not required to be registered under theSecurities Exchange Act of 1934 and is registered under thesecurities act of the state in which the broker-dealer has itsprincipal place of business; and
(H) any other person exempted by rule adopted or orderissued under this article.
(2) A person that deals solely in United States governmentsecurities and is supervised as a dealer in government securitiesby the Board of Governors of the Federal Reserve System, theComptroller of the Currency, the Federal Deposit InsuranceCorporation, or the Office of Thrift Supervision.
(c) It is unlawful for a broker-dealer, or for an issuer engaged inoffering, offering to purchase, purchasing, or selling securities in thisstate, directly or indirectly, to employ or associate with an individualto engage in an activity related to securities transactions in this stateif the registration of the individual is suspended or revoked or theindividual is barred from employment or association with abroker-dealer, an issuer, an investment adviser, or a federal coveredinvestment adviser by an order of the commissioner under thisarticle, the Securities and Exchange Commission, or a self-regulatoryorganization. A broker-dealer or issuer does not violate thissubsection if the broker-dealer or issuer did not know and in theexercise of reasonable care could not have known, of the suspension,revocation, or bar. Upon request from a broker-dealer or issuer andfor good cause, an order under this article may modify or waive, inwhole or in part, the application of the prohibitions of this subsectionto the broker-dealer.
(d) A rule adopted or order issued under this article may permit:
(1) a broker-dealer that is registered in Canada or anotherforeign jurisdiction and that does not have a place of businessin this state to effect transactions in securities with or for, orattempt to effect the purchase or sale of any securities by:
(A) an individual from Canada or another foreignjurisdiction who is temporarily present in this state and withwhom the broker-dealer had a bona fide customerrelationship before the individual entered the United States;
(B) an individual from Canada or another foreignjurisdiction who is present in this state and whosetransactions are in a self-directed tax advantaged retirementplan of which the individual is the holder or contributor inthat foreign jurisdiction; or
(C) an individual who is present in this state, with whom thebroker-dealer customer relationship arose while theindividual was temporarily or permanently resident inCanada or the other foreign jurisdiction; and (2) an agent who represents a broker-dealer that is exempt underthis subsection to effect transactions in securities or attempt toeffect the purchase or sale of securities in this state as permittedfor a broker-dealer described in subdivision (1).
As added by P.L.27-2007, SEC.23.
IC 23-19-4-2
Agent registration; exemptions; restrictions on employment orassociation; restrictions if no affiliation
Sec. 2. (a) It is unlawful for an individual to transact business inthis state as an agent unless the individual is registered under thisarticle as an agent or is exempt from registration as an agent undersubsection (b).
(b) The following individuals are exempt from the registrationrequirement of subsection (a):
(1) An individual who represents a broker-dealer in effectingtransactions in this state limited to those described in Section15(h)(2) of the Securities Exchange Act of 1934 (15 U.S.C.78o(h)(2)).
(2) An individual who represents a broker-dealer that is exemptunder section 1(b) or 1(d) of this chapter.
(3) An individual who represents an issuer with respect to anoffer or sale of the issuer's own securities or those of the issuer'sparent or any of the issuer's subsidiaries, and who is notcompensated in connection with the individual's participationby the payment of commissions or other remuneration based,directly or indirectly, on transactions in those securities.
(4) An individual who represents an issuer and who effectstransactions in the issuer's securities exempted by IC 23-19-2-2,other than IC 23-19-2-2(11) and IC 23-19-2-2(14).
(5) An individual who represents an issuer that effectstransactions solely in federal covered securities of the issuer,but an individual who effects transactions in a federal coveredsecurity under Section 18(b)(3) or 18(b)(4)(D) of the SecuritiesAct of 1933 (15 U.S.C. 77r(b)(3) or 77r(b)(4)(D)) is not exemptif the individual is compensated in connection with the agent'sparticipation by the payment of commissions or otherremuneration based, directly or indirectly, on transactions inthose securities.
(6) An individual who represents a broker-dealer registered inthis state under section 1(a) of this chapter or exempt fromregistration under section 1(b) of this chapter in the offer andsale of securities for an account of a nonaffiliated federalcovered investment adviser with investments undermanagement in excess of one hundred million dollars($100,000,000) acting for the account of others underdiscretionary authority in a signed record.
(7) An individual who represents an issuer in connection withthe purchase of the issuer's own securities.
(8) An individual who represents an issuer and who restricts
participation to performing clerical or ministerial acts.
(9) Any other individual exempted by rule adopted or orderissued under this article.
(c) The registration of an agent is effective only while the agentis employed by or associated with a broker-dealer registered underthis article or an issuer that is offering, selling, or purchasing itssecurities in this state.
(d) It is unlawful for a broker-dealer, or an issuer engaged inoffering, selling, or purchasing securities in this state, to employ orassociate with an agent who transacts business in this state on behalfof broker-dealers or issuers unless the agent is registered undersubsection (a) or exempt from registration under subsection (b).
(e) An individual may not act as an agent for more than one (1)broker-dealer or one (1) issuer at a time, unless the broker-dealer orthe issuer for which the agent acts are affiliated by direct or indirectcommon control or are authorized by rule or order under this article.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-3
Investment adviser registration; exemptions; restrictions onemployment or association
Sec. 3. (a) It is unlawful for a person to transact business in thisstate as an investment adviser unless the person is registered underthis article as an investment adviser or is exempt from registration asan investment adviser under subsection (b).
(b) The following persons are exempt from the registrationrequirement of subsection (a):
(1) A person without a place of business in this state that isregistered under the securities act of the state in which theperson has its principal place of business if its only clients inthis state are:
(A) federal covered investment advisers, investment advisersregistered under this article, or broker-dealers registeredunder this article;
(B) institutional investors;
(C) bona fide preexisting clients whose principal places ofresidence are not in this state if the investment adviser isregistered under the securities act of the state in which theclients maintain principal places of residence; or
(D) any other client exempted by rule adopted or orderissued under this article.
(2) A person without a place of business in this state if theperson has had, during the preceding twelve (12) months, notmore than five (5) clients that are resident in this state inaddition to those specified under subdivision (1).
(3) Any other person exempted by rule adopted or order issuedunder this article.
(c) It is unlawful for an investment adviser, directly or indirectly,to employ or associate with an individual to engage in an activityrelated to investment advice in this state if the registration of the
individual is suspended or revoked or the individual is barred fromemployment or association with an investment adviser, federalcovered investment adviser, or broker-dealer by an order under thisarticle, the Securities and Exchange Commission, or a self-regulatoryorganization, unless the investment adviser did not know, and in theexercise of reasonable care could not have known, of the suspension,revocation, or bar. Upon request from the investment adviser and forgood cause, the commissioner, by order, may waive, in whole or inpart, the application of the prohibitions of this subsection to theinvestment adviser.
(d) It is unlawful for an investment adviser to employ or associatewith an individual required to be registered under this article as aninvestment adviser representative who transacts business in this stateon behalf of the investment adviser unless the individual is registeredunder section 4(a) of this chapter or is exempt from registrationunder section 4(b) of this chapter.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-4
Investment adviser representative registration; exemptions;restrictions on conducting business; referrals
Sec. 4. (a) It is unlawful for an individual to transact business inthis state as an investment adviser representative unless theindividual is registered under this article as an investment adviserrepresentative or is exempt from registration as an investment adviserrepresentative under subsection (b).
(b) The following individuals are exempt from the registrationrequirement of subsection (a):
(1) An individual who is employed by or associated with aninvestment adviser that is exempt from registration undersection 3(b) of this chapter or a federal covered investmentadviser that is excluded from the notice filing requirements ofsection 5 of this chapter.
(2) Any other individual exempted by rule adopted or orderissued under this article.
(c) The registration of an investment adviser representative is noteffective while the investment adviser representative is not employedby or associated with an investment adviser registered under thisarticle or a federal covered investment adviser that has made or isrequired to make a notice filing under section 5 of this chapter.
(d) An individual may transact business as an investment adviserrepresentative for more than one (1) investment adviser or federalcovered investment adviser unless a rule adopted or order issuedunder this article prohibits or limits an individual from acting as aninvestment adviser representative for more than one (1) investmentadviser or federal covered investment adviser.
(e) It is unlawful for an individual acting as an investment adviserrepresentative, directly or indirectly, to conduct business in this stateon behalf of an investment adviser or a federal covered investmentadviser if the registration of the individual as an investment adviser
representative is suspended or revoked or the individual is barredfrom employment or association with an investment adviser or afederal covered investment adviser by an order under this article, theSecurities and Exchange Commission, or a self-regulatoryorganization. Upon request from a federal covered investmentadviser and for good cause, the commissioner, by order issued, maywaive, in whole or in part, the application of the requirements of thissubsection to the federal covered investment adviser.
(f) An investment adviser registered under this article, a federalcovered investment adviser that has filed a notice under section 5 ofthis chapter, or a broker-dealer registered under this article is notrequired to employ or associate with an individual as an investmentadviser representative if the only compensation paid to the individualfor a referral of investment advisory clients is paid to an investmentadviser registered under this article, a federal covered investmentadviser who has filed a notice under section 5 of this chapter, or abroker-dealer registered under this article with which the individualis employed or associated as an investment adviser representative.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-5
Federal covered investment adviser requirements; exemptions;filing
Sec. 5. (a) Except with respect to a federal covered investmentadviser described in subsection (b), it is unlawful for a federalcovered investment adviser to transact business in this state as afederal covered investment adviser unless the federal coveredinvestment adviser complies with subsection (c).
(b) The following federal covered investment advisers are notrequired to comply with subsection (c):
(1) A federal covered investment adviser without a place ofbusiness in this state if its only clients in this state are:
(A) federal covered investment advisers, investment advisersregistered under this article, and broker-dealers registeredunder this article;
(B) institutional investors;
(C) bona fide preexisting clients whose principal places ofresidence are not in this state; or
(D) other clients specified by rule adopted or order issuedunder this article.
(2) A federal covered investment adviser without a place ofbusiness in this state if the person has had, during the precedingtwelve (12) months, not more than five (5) clients that areresident in this state in addition to those specified undersubdivision (1).
(3) Any other person excluded by rule adopted or order issuedunder this article.
(c) A person acting as a federal covered investment adviser, notexcluded under subsection (b), shall file a notice, a consent to serviceof process complying with IC 23-19-6-11, and such records as have
been filed with the Securities and Exchange Commission under theInvestment Advisers Act of 1940 required by rule adopted or orderissued under this article and pay the fees specified in section 10(e)of this chapter.
(d) The notice under subsection (c) becomes effective upon itsfiling.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-6
Application for initial registration; requirements; amendments;national criminal history background check for investment adviserrepresentative; effective date; renewal; conditions and waivers
Sec. 6. (a) A person shall register as a broker-dealer, agent,investment adviser, or investment adviser representative by filing anapplication and a consent to service of process complying withIC 23-19-6-11, and paying the fee specified in section 10 of thischapter and any reasonable fees charged by the designee of thecommissioner for processing the filing. The application must contain:
(1) the information or record required for the filing of a uniformapplication; and
(2) upon request by the commissioner, any other financial orother information or record that the commissioner determinesis appropriate.
(b) If the information or record contained in an application filedunder subsection (a) is or becomes inaccurate or incomplete in amaterial respect, the registrant shall promptly file a correctingamendment.
(c) At the time of application for an initial registration as aninvestment adviser representative under this article, thecommissioner shall require each applicant to submit fingerprints fora national criminal history background check (as defined inIC 10-13-3-12) by the Federal Bureau of Investigation, for use by thecommissioner in determining whether the applicant should be deniedregistration under this chapter for any reason set forth in section12(d) of this chapter. The applicant shall pay any fees or costsassociated with the fingerprints and background check requiredunder this subsection.
(d) If an order is not in effect and a proceeding is not pendingunder section 12 of this chapter, registration becomes effective atnoon on the forty-fifth day after a completed application is filed,unless the registration is denied. A rule adopted or order issued underthis article may set an earlier effective date or may defer the effectivedate until noon on the forty-fifth day after the filing of anyamendment completing the application.
(e) A registration is effective until midnight on December 31 ofthe year for which the application for registration is filed. Unless anorder is in effect under section 12 of this chapter, a registration maybe automatically renewed each year by filing such records as arerequired by rule adopted or order issued under this article, by payingthe fee specified in section 10 of this chapter, and by paying costs
charged by the designee of the commissioner for processing thefilings.
(f) A rule adopted or order issued under this article may imposeother conditions, not inconsistent with the National SecuritiesMarkets Improvement Act of 1996. An order issued under this articlemay waive, in whole or in part, specific requirements in connectionwith registration as are in the public interest and for the protection ofinvestors.
As added by P.L.27-2007, SEC.23. Amended by P.L.114-2010,SEC.9.
IC 23-19-4-7
Succession; organization change; name change; change of control
Sec. 7. (a) A broker-dealer or investment adviser may succeed tothe current registration of another broker-dealer or investmentadviser or a notice filing of a federal covered investment adviser, anda federal covered investment adviser may succeed to the currentregistration of an investment adviser or notice filing of anotherfederal covered investment adviser, by filing as a successor anapplication for registration under section 1 or 3 of this chapter or anotice under section 5 of this chapter for the unexpired portion of thecurrent registration or notice filing.
(b) A broker-dealer or investment adviser that changes its form oforganization or state of incorporation or organization may continueits registration by filing an amendment to its registration if thechange does not involve a material change in its financial conditionor management. The amendment becomes effective when filed or ona date designated by the registrant in its filing. The new organizationis a successor to the original registrant for the purposes of thisarticle. If there is a material change in financial condition ormanagement, the broker-dealer or investment adviser shall file a newapplication for registration. A predecessor registered under thisarticle shall stop conducting its securities business other thanwinding down transactions and shall file for withdrawal ofbroker-dealer or investment adviser registration within forty-five (45)days after filing its amendment to effect succession.
(c) A broker-dealer or investment adviser that changes its namemay continue its registration by filing an amendment to itsregistration. The amendment becomes effective when filed or on adate designated by the registrant.
(d) A change of control of a broker-dealer or investment advisermay be made in accordance with a rule adopted or order issued underthis article.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-8
Termination notice; transfer of employment or association;temporary registration; prevention or suspension of transfer;cancellation or termination of registration; reinstatement
Sec. 8. (a) If an agent registered under this article terminates
employment by or association with a broker-dealer or issuer, or if aninvestment adviser representative registered under this articleterminates employment by or association with an investment adviseror federal covered investment adviser, or if either registrantterminates activities that require registration as an agent orinvestment adviser representative, the broker-dealer, issuer,investment adviser, or federal covered investment adviser shallpromptly file a notice of termination. If the registrant learns that thebroker-dealer, issuer, investment adviser, or federal coveredinvestment adviser has not filed the notice, the registrant may do so.
(b) If an agent registered under this article terminates employmentby or association with a broker-dealer registered under this articleand begins employment by or association with another broker-dealerregistered under this article, or if an investment adviserrepresentative registered under this article terminates employment byor association with an investment adviser registered under this articleor a federal covered investment adviser that has filed a notice undersection 5 of this chapter and begins employment by or associationwith another investment adviser registered under this article or afederal covered investment adviser that has filed a notice undersection 5 of this chapter, then upon the filing by or on behalf of theregistrant, within thirty (30) days after the termination, of anapplication for registration that complies with the requirement ofsection 6(a) of this chapter and payment of the filing fee requiredunder section 10 of this chapter, the registration of the agent orinvestment adviser representative is:
(1) immediately effective as of the date of the completed filing,if the agent's Central Registration Depository record orsuccessor record or the investment adviser representative'sInvestment Adviser Registration Depository record or successorrecord does not contain a new or amended disciplinarydisclosure within the previous twelve (12) months; or
(2) temporarily effective as of the date of the completed filing,if the agent's Central Registration Depository record orsuccessor record or the investment adviser representative'sInvestment Adviser Registration Depository record or successorrecord contains a new or amended disciplinary disclosurewithin the preceding twelve (12) months.
(c) The commissioner may withdraw a temporary registration ifthere are or were grounds for discipline as specified in section 12 ofthis chapter and the commissioner does so within thirty (30) daysafter the filing of the application. If the commissioner does notwithdraw the temporary registration within the thirty (30) day period,registration becomes automatically effective on the thirty-first dayafter filing.
(d) The commissioner may prevent or suspend the effectivenessof a transfer of an agent or investment adviser representative undersubsection (b)(1) or (b)(2) based on the public interest and theprotection of investors. The commissioner, by order, may also extenda temporary registration to permit further time to review the
qualifications of an applicant.
(e) If the commissioner determines that a registrant or applicantfor registration is no longer in existence or has ceased to act as abroker-dealer, agent, investment adviser, or investment adviserrepresentative, or is the subject of an adjudication of incapacity or issubject to the control of a committee, conservator, or guardian, orcannot reasonably be located, a rule adopted or order issued underthis article may require the registration be canceled or terminated orthe application denied. The commissioner may reinstate a canceledor terminated registration, with or without hearing, and may make theregistration retroactive.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-9
Withdrawal of registration
Sec. 9. Withdrawal of registration by a broker-dealer, agent,investment adviser, or investment adviser representative becomeseffective sixty (60) days after the filing of the application towithdraw or within any shorter period as provided by rule adopted ororder issued under this article unless a revocation or suspensionproceeding is pending when the application is filed. If a proceedingis pending, withdrawal becomes effective when and upon suchconditions as required by rule adopted or order issued under thisarticle. The commissioner may institute a revocation or suspensionproceeding under section 12 of this chapter within one (1) year afterthe withdrawal became effective automatically and issue a revocationor suspension order as of the last date on which registration waseffective if a proceeding is not pending.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-10
Fees; transmittal of fee; exception
Sec. 10. (a) A person shall pay a fee of two hundred fifty dollars($250) when initially filing an application for registration as abroker-dealer and a fee of one hundred twenty-five dollars ($125)when filing a renewal of registration as a broker-dealer. If the filingresults in a denial or withdrawal, the commissioner shall retain all ofthe fee.
(b) The fee for an individual is twenty-five dollars ($25) whenfiling an application for registration as an agent, a fee of twenty-fivedollars ($25) when filing a renewal of registration as an agent, anda fee of twenty-five dollars ($25) when filing for a change ofregistration as an agent. If the filing results in a denial or withdrawal,the commissioner shall retain all of the fee.
(c) A person shall pay a fee of one hundred dollars ($100) whenfiling an application for registration as an investment adviser and afee of fifty dollars ($50) when filing a renewal of registration as aninvestment adviser. If the filing results in a denial or withdrawal, thecommissioner shall retain all of the fee.
(d) The fee for an individual is twenty-five dollars ($25) when
filing an application for registration as an investment adviserrepresentative, a fee of twenty-five dollars ($25) when filing arenewal of registration as an investment adviser representative, anda fee of twenty-five dollars ($25) when filing a change of registrationas an investment adviser representative. If the filing results in adenial or withdrawal, the commissioner shall retain all of the fee.
(e) A federal covered investment adviser required to file a noticeunder section 5 of this chapter shall pay an initial fee of fifty dollars($50) and an annual notice fee of fifty dollars ($50).
(f) A person required to pay a filing or notice fee under thissection may transmit the fee through or to a designee as a rule ororder provides under this article.
(g) An investment adviser representative who is registered as anagent under section 2 of this chapter and who represents a person thatis both registered as a broker-dealer under section 1 of this chapterand registered as an investment adviser under section 3 of thischapter or required as a federal covered investment adviser to makea notice filing under section 5 of this chapter is not required to payan initial or annual registration fee for registration as an investmentadviser representative.
As added by P.L.27-2007, SEC.23.
IC 23-19-4-11
Minimum financial requirements; financial reports; amendment;records; audits or inspections; insurance or posting bond;supervision; continuing education; compliance reports
Sec. 11. (a) Subject to Section 15(h) of the Securities ExchangeAct of 1934 (15 U.S.C. 78o(h)) or Section 222 of the InvestmentAdvisers Act of 1940 (15 U.S.C. 80b-18a), a rule adopted or orderissued under this article may establish minimum financialrequirements for broker-dealers registered or required to beregistered under this article and investment advisers registered orrequired to be registered under this article.
(b) Subject to Section 15(h) of the Securities Exchange Act of1934 (15 U.S.C. 78o(h)) or Section 222(b) of the InvestmentAdvisers Act of 1940 (15 U.S.C. 80b-18a(b)), a broker-dealerregistered or required to be registered under this article and aninvestment adviser registered or required to be registered under thisarticle shall file such financial reports as are required by a ruleadopted or order issued under this article. If the informationcontained in a record filed under this subsection is or becomesinaccurate or incomplete in a material respect, the registrant shallpromptly file a correcting amendment.
(c) Subject to Section 15(h) of the Securities Exchange Act of1934 (15 U.S.C. 78o(h)) or Section 222 of the Investment AdvisersAct of 1940 (15 U.S.C. 80b-18a):
(1) a broker-dealer registered or required to be registered underthis article and an investment adviser registered or required tobe registered under this article shall make and maintain theaccounts, correspondence, memoranda, papers, books, and other
records required by rule adopted or order issued under thisarticle;
(2) broker-dealer records required to be maintained undersubdivision (1) may be maintained in any form of data storageacceptable under Section 17(a) of the Securities Exchange Actof 1934 (15 U.S.C. 78q(a)) if they are readily accessible to thecommissioner; and
(3) investment adviser records required to be maintained undersubdivision (1) may be maintained in any form of data storagerequired by rule adopted or order issued under this article.
(d) The records of a broker-dealer registered or required to beregistered under this article and of an investment adviser registeredor required to be registered under this article are subject to suchreasonable periodic, special, or other audits or inspections by arepresentative of the commissioner, within or outside this state, asthe commissioner considers necessary or appropriate in the publicinterest and for the protection of investors. An audit or inspectionmay be made at any time and without prior notice. The commissionermay copy, and remove for audit or inspection copies of, all recordsthe commissioner reasonably considers necessary or appropriate toconduct the audit or inspection. The commissioner may assess areasonable charge for conducting an audit or inspection under thissubsection.
(e) Subject to Section 15(h) of the Securities Exchange Act of1934 (15 U.S.C. 78o(h)) or Section 222 of the Investment AdvisersAct of 1940 (15 U.S.C. 80b-18a), a rule adopted or order issuedunder this article may require a broker-dealer or investment adviserthat has custody of or discretionary authority over funds or securitiesof a customer or client to obtain insurance or post a bond or othersatisfactory form of security in an amount not to exceed fiftythousand dollars ($50,000). The commissioner may determine therequirements of the insurance, bond, or other satisfactory form ofsecurity. Insurance or a bond or other satisfactory form of securitymay not be required of a broker-dealer registered under this articlewhose net capital exceeds, or of an investment adviser registeredunder this article whose minimum financial requirements exceed, theamounts required by rule or order under this article. The insurance,bond, or other satisfactory form of security must permit an action bya person to enforce any liability on the insurance, bond, or othersatisfactory form of security if instituted within the time limitationsin IC 23-19-5-9(g).
(f) Subject to Section 15(h) of the Securities Exchange Act of1934 (15 U.S.C. 78o(h)) or Section 222 of the Investment AdvisersAct of 1940 (15 U.S.C. 80b-18a), an agent may not have custody offunds or securities of a customer except under the supervision of abroker-dealer and an investment adviser representative may not havecustody of funds or securities of a client except under the supervisionof an investment adviser or a federal covered investment adviser. Arule adopted or order issued under this article may prohibit, limit, orimpose conditions on a broker-dealer regarding custody of funds or
securities of a customer and on an investment adviser regardingcustody of securities or funds of a client.
(g) With respect to an investment adviser registered or required tobe registered under this article, a rule adopted or order issued underthis article may require that information or other records be furnishedor disseminated to clients or prospective clients in this state asnecessary or appropriate in the public interest and for the protectionof investors and advisory clients.
(h) A rule adopted or order issued under this article may requirean individual registered under section 2 or 4 of this chapter toparticipate in a continuing education program approved by theSecurities and Exchange Commission and administered by aself-regulatory organization or, in the absence of such a program, arule adopted or order issued under this article may require continuingeducation for an individual registered under section 4 of this chapter.
(i) Subject to section 11.5 of this chapter, the commissioner mayannually select as many as twenty-five percent (25%) of all Indianahome and branch offices of registered broker-dealers for completionof compliance reports. Subject to section 11.5 of this chapter, eachbroker-dealer office that is selected shall file its compliance reportaccording to rules adopted by the commissioner under this article notlater than forty-five (45) days after being notified of selection underthis subsection. No charges or other examination fees may beassessed against a registered broker-dealer as a result of theexamination of a compliance report filed under this subsection unlessthe examination results in an investigation or examination madeunder IC 23-19-6-2(a).
As added by P.L.27-2007, SEC.23. Amended by P.L.149-2009,SEC.1; P.L.156-2009, SEC.22; P.L.1-2010, SEC.94.
IC 23-19-4-11.5
Prohibit selection of broker-dealer for completion of compliancereport in consecutive years; prohibit selection of certain offices
Sec. 11.5. (a) As used in this section, "office of supervisoryjurisdiction" has the meaning set forth in the National Association ofSecurities Dealers Conduct Rule 3010(g) (as in effect on January 1,2009).
(b) A broker-dealer registered or required to be registered underthis article may not be selected for completion of a compliance reportunder section 11(i) of this chapter in consecutive years unless thecommissioner has reason to believe that the broker-dealer hascommitted a violation of this article.
(c) The commissioner may not select for completion of acompliance report under section 11(i) of this chapter any office that:
(1) reports to an office of supervisory jurisdiction locatedwithin Indiana;
(2) reflects the address of the office of supervisory jurisdictiondescribed in subdivision (1) on all of the office's business cards,stationery, advertisements, and other communications to thepublic; and (3) is included in the definition of branch office under theNational Association of Securities Dealers Conduct Rule3010(g) because the office:
(A) handles funds or securities as described under theNational Association of Securities Dealers Conduct Rule3010(g)(2)(A)(ii)(c); or
(B) uses the residential address on all business cards,stationery, advertisements, or other communications to thepublic under the National Association of Securities DealersConduct Rule 3010(g)(2)(A)(ii)(d).
As added by P.L.149-2009, SEC.2.
IC 23-19-4-12
Denial, condition, revocation, suspension, or limitation ofregistration; censure, bar, or civil penalty for violation; grounds;examination; procedure
Sec. 12. (a) If the commissioner finds that the order is in thepublic interest and subsection (d) authorizes the action, an orderissued under this article may deny an application, or may conditionor limit registration, of an applicant to be a broker-dealer, agent,investment adviser, or investment adviser representative and, if theapplicant is a broker-dealer or investment adviser, of a partner,officer, director, or person having a similar status or performingsimilar functions, or a person directly or indirectly in control of thebroker-dealer or investment adviser.
(b) If the commissioner finds that the order is in the public interestand subsection (d) authorizes the action, an order issued under thisarticle may revoke, suspend, condition, or limit the registration of aregistrant and, if the registrant is a broker-dealer or investmentadviser, of a partner, officer, director, or person having a similarstatus or performing similar functions, or a person directly orindirectly in control of the broker-dealer or investment adviser.However, the commissioner may not:
(1) institute a revocation or suspension proceeding under thissubsection based on an order issued under a law of another statethat is reported to the commissioner or a designee of thecommissioner more than one (1) year after the date of the orderon which it is based; or
(2) under subsection (d)(5)(A) and (d)(5)(B), issue an order onthe basis of an order issued under the securities act of anotherstate unless the other order was based on conduct for whichsubsection (d) would authorize the action had the conductoccurred in this state.
(c) If the commissioner finds that the order is in the public interestand subsection (d)(1), (d)(2), (d)(3), (d)(4), (d)(5), (d)(6), (d)(8),(d)(9), (d)(10), (d)(12), or (d)(13) authorizes the action, an orderunder this article may censure, impose a bar, or impose a civilpenalty in an amount not to exceed a maximum of ten thousanddollars ($10,000) per violation on a registrant, and, if the registrantis a broker-dealer or investment adviser, a partner, officer, director,
or person having a similar status or performing similar functions, ora person directly or indirectly in control of the broker-dealer orinvestment adviser.
(d) A person may be disciplined under subsections (a) through (c)if the person:
(1) has filed an application for registration in this state underthis article or the predecessor act within the previous ten (10)years, which, as of the effective date of registration or as of anydate after filing in the case of an order denying effectiveness,was incomplete in any material respect or contained a statementthat, in light of the circumstances under which it was made, wasfalse or misleading with respect to a material fact;
(2) knowingly violated or knowingly failed to comply with thisarticle or the predecessor act or a rule adopted or order issuedunder this article or the predecessor act within the previous ten(10) years;
(3) has been convicted of a felony or within the previous ten(10) years has been convicted of a misdemeanor involving asecurity, a commodity future or option contract, or an aspect ofa business involving securities, commodities, investments,franchises, insurance, banking, or finance;
(4) is enjoined or restrained by a court with jurisdiction in anaction instituted by the commissioner under this article or thepredecessor act, a state, the Securities and ExchangeCommission, or the United States from engaging in orcontinuing an act, practice, or course of business involving anaspect of a business involving securities, commodities,investments, franchises, insurance, banking, or finance;
(5) is the subject of an order, issued after notice and opportunityfor hearing, by:
(A) the securities, depository institution, insurance, or otherfinancial services regulator of a state or by the Securities andExchange Commission or other federal agency denying,revoking, barring, or suspending registration as abroker-dealer, agent, investment adviser, federal coveredinvestment adviser, or investment adviser representative;
(B) the securities regulator of a state or the Securities andExchange Commission against a broker-dealer, agent,investment adviser, investment adviser representative, orfederal covered investment adviser;
(C) the Securities and Exchange Commission or aself-regulatory organization suspending or expelling theregistrant from membership in the self-regulatoryorganization;
(D) a court adjudicating a United States Postal Service fraudorder;
(E) the insurance regulator of a state denying, suspending, orrevoking registration as an insurance agent;
(F) a depository institution regulator suspending or barringthe person from the depository institution business; or (G) any state regulatory body or organization governing realestate brokers or sales persons denying, suspending, orrevoking a person's registration or license in the real estateindustry;
(6) is the subject of an adjudication or determination, afternotice and opportunity for hearing, by the Securities andExchange Commission, the Commodity Futures TradingCommission, the Federal Trade Commission, a federaldepository institution regulator, or a depository institution,insurance, or other financial services regulator of a state that theperson willfully violated the Securities Act of 1933, theSecurities Exchange Act of 1934, the Investment Advisers Actof 1940, the Investment Company Act of 1940, or theCommodity Exchange Act, the securities or commodities law ofa state, or a federal or state law under which a businessinvolving investments, franchises, insurance, banking, orfinance is regulated;
(7) is insolvent, either because the person's liabilities exceed theperson's assets or because the person cannot meet the person'sobligations as they mature, but the commissioner may not enteran order against an applicant or registrant under this subdivisionwithout a finding of insolvency as to the applicant or registrant;
(8) refuses to allow or otherwise impedes the commissionerfrom conducting an audit or inspection under section 11(d) ofthis chapter or refuses access to a registrant's office to conductan audit or inspection under section 11(d) of this chapter;
(9) has failed to reasonably supervise an agent, investmentadviser representative, or other individual, if the agent,investment adviser representative, or other individual wassubject to the person's supervision and committed a violation ofthis article or the predecessor act or a rule adopted or orderissued under this article or the predecessor act within theprevious ten (10) years;
(10) has not paid the proper filing fee within thirty (30) daysafter having been notified by the commissioner of a deficiency,but the commissioner shall vacate an order under thissubdivision when the deficiency is corrected;
(11) after notice and opportunity for a hearing, has been foundwithin the previous ten (10) years:
(A) by a court with jurisdiction to have willfully violated thelaws of a foreign jurisdiction under which the business ofsecurities, commodities, investment, franchises, insurance,banking, or finance is regulated;
(B) to have been the subject of an order of a securitiesregulator of a foreign jurisdiction denying, revoking, orsuspending the right to engage in the business of securitiesas a broker-dealer, agent, investment adviser, investmentadviser representative, or similar person; or
(C) to have been suspended or expelled from membership byor participation in a securities exchange or securities
association operating under the securities laws of a foreignjurisdiction;
(12) is the subject of a cease and desist order issued by theSecurities and Exchange Commission or issued under thesecurities, commodities, investment, franchise, banking,finance, or insurance laws of a state;
(13) has engaged in dishonest or unethical practices in thesecurities, commodities, investment, franchise, banking,finance, or insurance business within the previous ten (10)years;
(14) is not qualified on the basis of factors such as training,experience, and knowledge of the securities business. However,in the case of an application by an agent for a broker-dealer thatis a member of a self-regulatory organization or by anindividual for registration as an investment adviserrepresentative, a denial order may not be based on thissubdivision if the individual has successfully completed allexaminations required by subsection (e). The commissionermay require an applicant for registration under section 2 or 4 ofthis chapter who has not been registered in a state within thetwo (2) years preceding the filing of an application in this stateto successfully complete an examination; or
(15) is on the most recent tax warrant list supplied to thecommissioner by the department of state revenue.
(e) A rule adopted or order issued under this article may requirethat an examination, including an examination developed orapproved by an organization of securities regulators, be successfullycompleted by a class of individuals or all individuals. An orderissued under this article may waive, in whole or in part, anexamination as to an individual and a rule adopted under this articlemay waive, in whole or in part, an examination as to a class ofindividuals if the commissioner determines that the examination isnot necessary or appropriate in the public interest and for theprotection of investors.
(f) The commissioner may suspend or deny an applicationsummarily; restrict, condition, limit, or suspend a registration; orcensure, bar, or impose a civil penalty on a registrant before finaldetermination of an administrative proceeding. Upon the issuance ofan order, the commissioner shall promptly notify each person subjectto the order that the order has been issued, the reasons for the action,and that within fifteen (15) days after the receipt of a request in arecord from the person the matter will be scheduled for a hearing. Ifa hearing is not requested and none is ordered by the commissionerwithin thirty (30) days after the date of service of the order, the orderbecomes final by operation of law. If a hearing is requested orordered, the commissioner, after notice of and opportunity forhearing to each person subject to the order, may modify or vacate theorder or extend the order until final determination.
(g) An order may not be issued under this section, except undersubsection (f), without: (1) appropriate notice to the applicant or registrant;
(2) opportunity for hearing; and
(3) findings of fact and conclusions of law in a record.
(h) A person that controls, directly or indirectly, a person not incompliance with this section may be disciplined by order of thecommissioner under subsections (a) through (c) to the same extent asthe noncomplying person, unless the controlling person did notknow, and in the exercise of reasonable care could not have known,of the existence of conduct that is a ground for discipline under thissection.
(i) The commissioner may not institute a proceeding undersubsection (a), (b), or (c) based solely on material facts actuallyknown by the commissioner unless an investigation or the proceedingis instituted within one (1) year after the commissioner actuallyacquires knowledge of the material facts.
(j) All fines and penalties collected under this section shall bedeposited into the securities division enforcement account asestablished by IC 23-19-6-1(f).
As added by P.L.27-2007, SEC.23.