PRIOR PRINTER'S NO. 2560                      PRINTER'S NO. 2861

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 1970 Session of 1972


        INTRODUCED BY MESSRS. GOODMAN, FRANK, DOMBROWSKI, ARTHURS,
           KOWALYSHYN, FINEMAN, SCANLON, CROWLEY, HETRICK, J. J.
           JOHNSON, BIXLER, ENGLEHART, HOPKINS, WARGO, PRENDERGAST,
           IRVIS, O'BRIEN, F. M. ALLEN, MANBECK AND R. O. DAVIS,
           FEBRUARY 28, 1972

        AS REPORTED FROM COMMITTEE ON BUSINESS AND COMMERCE, HOUSE OF
           REPRESENTATIVES, AS AMENDED, MAY 16, 1972

                                     AN ACT

     1  Relating to securities; prohibiting fraudulent practices in
     2     violation RELATION thereto; requiring the registration of      <--
     3     broker-dealers, agents, investment advisers, and securities;
     4     and making uniform the law with reference thereto.

     5     The General Assembly of the Commonwealth of Pennsylvania
     6  hereby enacts as follows:
     7                               PART I
     8                      SHORT TITLE; DEFINITIONS
     9     Section 101.  Short Title.--This act shall be known and may
    10  be cited as the "Pennsylvania Securities Act of 1972."
    11     Section 102.  Definitions.--When used in this act, the
    12  following definitions shall be applicable, unless the context
    13  otherwise requires:
    14     (a)  "Advertisement" means any publicly disseminated, written
    15  or printed communication, including without limitation,
    16  communication by radio, television, or other public media, used
    17  in connection with a sale or purchase or an offer to sell or

     1  purchase a security.
     2     (b)  "Affiliate" means any person controlled by controlling    <--
     3  "AFFILIATE OF," OR A PERSON "AFFILIATED WITH," A SPECIFIED        <--
     4  PERSON, MEANS A PERSON THAT DIRECTLY, OR INDIRECTLY THROUGH ONE
     5  OR MORE INTERMEDIARIES, CONTROLS, IS CONTROLLED BY, or IS under   <--
     6  common control with, whether directly or indirectly THE PERSON    <--
     7  SPECIFIED.
     8     (c)  "Agent" means any person INDIVIDUAL, other than a         <--
     9  broker-dealer, who represents a broker-dealer or issuer in
    10  effecting or attempting to effect purchases or sales of
    11  securities. "Agent" does not include a person AN INDIVIDUAL who   <--
    12  represents an issuer in effecting transactions in securities
    13  exempted by section 202 or in effecting transactions exempted by
    14  section 203 and does not include a person AN INDIVIDUAL who has   <--
    15  no place of business in this State if he effects transactions in
    16  this State exclusively with broker-dealers. An officer,
    17  director, or partner OR EMPLOYE of a broker-dealer or issuer, or  <--
    18  a person AN INDIVIDUAL occupying a similar status or performing   <--
    19  similar functions, is an agent only if he otherwise comes within
    20  this definition and receives compensation directly or indirectly
    21  related to purchases or sales of securities.
    22     (d)  "Bank" means any bank, baking BANKING and trust company,  <--
    23  savings bank, trust company or private bank, as defined in the
    24  Banking Code of 1965, act of November 30, 1965 (P.L.847), or any
    25  savings and loan association, as defined in the Savings
    26  Association Code of 1967, act of December 14, 1967 (P.L.746), or
    27  any successor statutes thereto, or any banking institution,
    28  trust company or savings and loan institution organized under
    29  the laws of the United States, or a receiver, conservator or
    30  other liquidating agent of any of the foregoing.
    19720H1970B2861                  - 2 -

     1     (e)  "Broker-dealer" means any person engaged in the business
     2  of effecting transactions in securities for the account of
     3  others or for his own account. "Broker-dealer" does not include:
     4     (i)  An agent;
     5     (ii)  An issuer;
     6     (iii)  A bank, when effecting transactions for its own
     7  account or as agent FOR THE ACCOUNT OF ANOTHER under section 302  <--
     8  (c);
     9     (iv)  An executor, administrator, guardian, conservator or
    10  pledgee;
    11     (v)  A person who has no place of business in this State if
    12  he effects transactions in this State exclusively with or
    13  through (A) the issuers of the securities involved in the
    14  transactions, (B) other broker-dealers, or (C) OR (B) persons     <--
    15  ENGAGING IN TRANSACTIONS exempt by section 203 (c);               <--
    16     (vi)  A person licensed as a real estate broker OR AGENT       <--
    17  under the Real Estate Brokers License Act of one thousand nine
    18  hundred and twenty-nine, act of May 1, 1929 (P.L.1216), as
    19  amended, and whose transactions in securities are isolated
    20  transactions incidental to that business;
    21     (vii)  A person whose dealings in securities are limited to
    22  transactions exempt by section 203 (j); or
    23     (viii)  Other persons not within the intent of this
    24  subsection whom the commission by rule or order REGULATION        <--
    25  designates.
    26     (f)  "Commission" means the Pennsylvania Securities
    27  Commission.
    28     (g)  "Control" (including the terms "controlling,"
    29  "controlled by" and "under common control with") means the
    30  possession, directly or indirectly, of the power to direct or
    19720H1970B2861                  - 3 -

     1  cause the direction of the management and policies of a person,
     2  whether through the ownership of voting securities, by contract,
     3  or otherwise.
     4     (h)  "Fraud," "deceit" and "defraud" are not limited to
     5  common law fraud or deceit.
     6     (i)  "Guaranteed" means guaranteed as to payment of
     7  principal, interest, purchase price, dividend or call premium.
     8  or as to the identity of any security to be delivered upon the    <--
     9  exercise of an option.
    10     (j)  "Investment adviser" means any person who, for
    11  compensation, engages in the business of advising others, either
    12  directly or through publications or writings, as to the value of
    13  securities or as to the advisability of investing in, purchasing
    14  or selling securities, or who, for compensation and as a part of
    15  a regular business, issues or promulgates analyses or reports
    16  concerning securities. "Investment adviser" does not include:
    17     (i)  A bank;
    18     (ii)  A lawyer, accountant, engineer or teacher whose
    19  performance of these services is solely incidental to the
    20  practice of his profession;
    21     (iii)  A broker-dealer whose performance of these services is  <--
    22  solely incidental to the conduct of his business as a broker-
    23  dealer and who receives no special compensation for them;
    24  REGISTERED UNDER THIS ACT WITHOUT THE IMPOSITION OF THE           <--
    25  CONDITION REFERRED TO IN SECTION 305 (B) (V);
    26     (iv)  A publisher of any bona fide newspaper, news magazine
    27  or business or financial publication of general, regular and
    28  paid circulation WHICH IS NOT SOLELY ENGAGED IN THE RENDERING OF  <--
    29  INVESTMENT ADVICE; and the agents and servants thereof IN THE     <--
    30  PERFORMANCE OF THEIR REGULAR DUTIES ON BEHALF OF SUCH
    19720H1970B2861                  - 4 -

     1  PUBLICATION;
     2     (v)  A person whose advice, analyses or reports relate only
     3  to securities exempted under section 202 (a);
     4     (vi)  A person who has no place of business in this State if
     5  his only clients in this State are other investment advisers or
     6  persons ENGAGING IN TRANSACTIONS exempt under section 203 (c);    <--
     7     (vii)  Other persons not within the intent of this subsection
     8  whom the commission by rule or order REGULATION designates.       <--
     9     (k)  "Institutional investor" means any bank, insurance
    10  company, pension or profit sharing plan or trust, investment
    11  company, as defined in the Investment Company Act of 1940, other
    12  financial institution or any person, OTHER THAN AN INDIVIDUAL,    <--
    13  which is the sole owner of CONTROLS any of the foregoing, the     <--
    14  FEDERAL GOVERNMENT, State or any agency or political subdivision  <--
    15  thereof or any other person so designated by rule or order        <--
    16  REGULATION of the commission.                                     <--
    17     (l)  "Issuer" means any person who issues or proposes to
    18  issue any security, and any promoter who acts for an issuer
    19  proposed to be formed. With respect to certificates of deposit,
    20  voting trust certificates or collateral-trust certificates, or
    21  with respect to certificates of interest or shares in an
    22  unincorporated investment trust not having a board of directors
    23  or persons performing similar functions or of the fixed,
    24  restricted management or unit type, the term "issuer" means the
    25  person or persons performing the acts and assuming the duties of
    26  depositor or manager pursuant to the provisions of the trust or
    27  other agreement or instrument under which the security is
    28  issued; except that with respect to equipment-trust certificates
    29  or like securities, the term "issuer" means the person by whom
    30  the equipment or property is or is to be used. With respect to
    19720H1970B2861                  - 5 -

     1  certificates of interest or participation in oil, gas or mining
     2  titles or leases or in payments out of production under such
     3  titles or leases, the term "issuer" means the person or persons
     4  in active control of ACTIVELY MANAGING the exploration or         <--
     5  development of the property who sell such interests or
     6  participations or payments or any person or persons who
     7  subdivide and sell such interests or participations or payments.
     8  The determination of the person or persons in active control of   <--
     9  ACTIVELY MANAGING the exploration or development of the property  <--
    10  shall be made on the basis of the actual relationship of the
    11  parties and not on the basis of the legal designation of a
    12  person's interest. In the case of an unincorporated association   <--
    13  which is permitted by statute, rule or order or which provides
    14  by its articles or governing instruments or by resolution for
    15  limited liability of any or all of its members, or in the case
    16  of a trust, committee, or other legal entity, the trustees or
    17  members thereof shall not be individually liable as issuers of
    18  any security issued by the association, trust, committee, or
    19  other legal entity. MEMBERS OF UNINCORPORATED ASSOCIATIONS,       <--
    20  WHICH MEMBERS HAVE LIMITED LIABILITY, AND ANY TRUSTEE OR MEMBER
    21  OF A TRUST, COMMITTEE OR OTHER LEGAL ENTITY SHALL NOT BE DEEMED
    22  TO BE AN "ISSUER" FOR THE PURPOSES OF THIS ACT.
    23     (m)  "Nonissuer "NON-ISSUER transaction" means any             <--
    24  transaction not directly or indirectly for the benefit of the
    25  issuer. A transaction is indirectly for the benefit of the        <--
    26  issuer if any portion of the purchase price of any securities
    27  involved in the transaction will be received indirectly by the
    28  issuer.
    29     (n)  "Person" means an individual, corporation, partnership,
    30  association, joint stock company, syndicate, trust where the
    19720H1970B2861                  - 6 -

     1  interests of the beneficiaries are evidenced by a security, an
     2  unincorporated organization, government, political subdivision
     3  of a government, or any other entity.
     4     (O)  "PROMOTER" INCLUDES (I) ANY PERSON WHO, ACTING ALONE OR   <--
     5  IN CONJUNCTION WITH ONE OR MORE OTHER PERSONS, DIRECTLY OR
     6  INDIRECTLY TAKES INITIATIVE IN FOUNDING AND ORGANIZING THE
     7  BUSINESS OR ENTERPRISE OF AN ISSUER; AND (II) ANY PERSON WHO, IN
     8  CONNECTION WITH THE FOUNDING AND ORGANIZING OF THE BUSINESS OR
     9  ENTERPRISE OF AN ISSUER, DIRECTLY OR INDIRECTLY RECEIVES IN
    10  CONSIDERATION OF SERVICES OR PROPERTY, OR BOTH SERVICES AND
    11  PROPERTY, TEN PER CENT OR MORE OF ANY CLASS OF SECURITIES OF THE
    12  ISSUER OR TEN PER CENT OR MORE OF THE PROCEEDS FROM THE SALE OF
    13  ANY CLASS OF SECURITIES. HOWEVER, A PERSON WHO RECEIVES SUCH
    14  SECURITIES OR PROCEEDS EITHER SOLELY AS UNDERWRITING COMMISSIONS
    15  OR SOLELY IN CONSIDERATION OF PROPERTY SHALL NOT BE DEEMED A
    16  PROMOTER WITHIN THE MEANING OF THIS CLAUSE IF SUCH PERSON DOES
    17  NOT OTHERWISE TAKE PART IN FOUNDING AND ORGANIZING THE
    18  ENTERPRISE.
    19     (o) (P)  "Publish" means publicly to issue or circulate by     <--
    20  newspaper, mail, radio or television, or otherwise to
    21  disseminate to the public.
    22     (p) (Q)  "Reporting company" means any person which is         <--
    23  required to file, and has for at least ninety days prior to the
    24  time of application of this definition filed, all periodic
    25  reports plus the most recent annual report with the Securities
    26  and Exchange Commission pursuant to the requirements of section
    27  13 or 15 (d) of the Securities Exchange Act of 1934 or of
    28  section 8 of the Investment Company Act of 1940, and the
    29  regulations adopted thereunder, or for whom there is publicly
    30  available the information concerning such person which is
    19720H1970B2861                  - 7 -

     1  specified in CLAUSES (1) THROUGH (14) INCLUSIVE, AND CLAUSE (16)  <--
     2  OF paragraph (a) (4) of Rule 15 c2-11 adopted under the
     3  Securities Exchange Act of 1934, or if the issuer PERSON is an    <--
     4  insurance company the information specified in section 12 (g)
     5  (2)(G) (i) of that act. Information shall ALSO be deemed          <--
     6  "publicly available" under this section if it has been filed in
     7  such places or with such persons as the commission may specify
     8  by rule or order REGULATION.                                      <--
     9     (q) (R)  (i)  "Sale" or "sell" includes every sale,            <--
    10  disposition or exchange, and every contract of sale of, or
    11  contract to sell, a security or interest in a security for value
    12  or any issuance of securities pursuant to any merger,
    13  consolidation, sale of assets or other corporate reorganization,
    14  INVOLVING THE EXCHANGE OF SECURITIES, IN WHOLE OR IN PART, FOR    <--
    15  THE SECURITIES OF ANY OTHER PERSON.
    16     (ii)  "Offer" or "offer to sell" includes every direct or
    17  indirect attempt or offer to sell or dispose of, or solicitation
    18  of an offer to purchase, a security or interest in a security
    19  for value.
    20     (iii)  Any security given or delivered with, or as a bonus on
    21  account of, any purchase of securities or any other thing is
    22  considered to constitute part of the subject of the purchase and
    23  to have been offered and sold for value.
    24     (iv)  Every sale or offer of a warrant or right to purchase
    25  or subscribe to another security of the same or another issuer,
    26  as well as every sale or offer of a security which gives the
    27  holder a present or future right or privilege to convert into
    28  another security of the same or another issuer, is considered to
    29  include an offer of the other security.
    30     (v)  A purported gift of assessable stock (for which the
    19720H1970B2861                  - 8 -

     1  statutory consideration has not been paid) involves an offer and
     2  sale.
     3     (vi)  An offer OF rescission made pursuant to section 504 (E)  <--
     4  involves an offer and sale.
     5     (vii)  The terms defined in this subsection "SALE," "SELL,"    <--
     6  "OFFER" AND "OFFER TO SELL" do not include: (A) any bona fide
     7  secured transaction in, or loan of, outstanding securities; or
     8  (B) any dividend payable with respect to the securities of a
     9  corporation in the same or any other class of securities of such
    10  corporation. so long as the security distributed as a dividend    <--
    11  does not constitute an offer to purchase a security of the
    12  corporation or any other person.
    13     (viii)  A dividend or distribution by any person to all or
    14  any class of its security holders of the securities of any other
    15  person, whether or not such dividend or distribution is for
    16  value, involves a sale.
    17     (r) (S)  "Securities Act of 1933," "Securities Exchange Act    <--
    18  of 1934," "Public Utility Holding Company Act of 1935," "Trust
    19  Indenture Act of 1939," "Investment Advisers Act of 1940,"
    20  "Investment Company Act of 1940" and "Internal Revenue Code of
    21  1954" mean the Federal statutes of those names as amended before
    22  or after the effective date of this act, or any successor
    23  statutes thereto. Section numbers of such statutes or
    24  regulations adopted thereunder and referred to herein include
    25  such amendments thereto as may be adopted before or after the
    26  effective date of this act. "Securities and Exchange Commission"
    27  means the "United States Securities and Exchange Commission."
    28     (s) (T)  "Security" means any note; stock; treasury stock;     <--
    29  bond; debenture; evidence of indebtedness; share of beneficial
    30  interest in a business trust; certificate of interest or
    19720H1970B2861                  - 9 -

     1  participation in any profit-sharing agreement; collateral trust
     2  certificate; preorganization certificate or subscription;
     3  transferable share; investment contract; voting trust
     4  certificate; certificate of deposit for a security; limited
     5  partnership interest; certificate of interest or participation
     6  in an oil, gas or mining title or lease or in payments out of
     7  production under such a title or lease; any beneficial interest   <--
     8  or other security issued in connection with a funded employes'
     9  pension, profit-sharing, stock bonus, or similar benefit plan;
    10  or, in general, any interest or instrument commonly known as or
    11  having the incidents of a "security"; any ownership interest in   <--
    12  a condominium or cooperative apartment project, as such terms
    13  are commonly used; or any certificate of interest or
    14  participation in, temporary or interim certificate for, receipt
    15  for, guarantee of, or warrant or right to subscribe to or
    16  purchase, any of the foregoing. All of the foregoing are
    17  securities whether or not evidenced by written document.
    18  "Security" does not include: (i) any beneficial interest in any
    19  voluntary inter vivos trust which is not created for the purpose
    20  of carrying on any business, or (ii) any beneficial interest in
    21  any testamentary trust, or (iii) any insurance or endowment
    22  policy or annuity contract under which an insurance company
    23  admitted in this State promises to pay a sum of money (whether
    24  or not based upon the investment performance of a segregated
    25  fund) either in a lump sum or periodically for life or some
    26  other specified period, or (iv) any certificate issued under
    27  section 809 of The Insurance Company Law of 1921, act of May 17,
    28  1921 (P.L.682), as amended.
    29     (t) (U)  "State" means any state, territory or possession of   <--
    30  the United States, the District of Columbia and Puerto Rico.
    19720H1970B2861                 - 10 -

     1     (u)  "Underwriter" means a person who has purchased from an    <--
     2  issuer or an affiliate of an issuer with a view to, or offers or
     3  sells for an issuer or an affiliate of an issuer in connection
     4  with, the distribution of any security, or participates or has a
     5  direct or indirect participation in any such undertaking, or
     6  participates or has a participation in the direct or indirect
     7  underwriting of any such undertaking; but such term shall not
     8  include a person whose interest is limited to a commission from
     9  an underwriter not in excess of the usual and customary
    10  distributors' or sellers' commission.
    11     (V)  "UNDERWRITER" MEANS A PERSON WHO HAS AGREED WITH AN       <--
    12  ISSUER OR OTHER PERSON ON WHOSE BEHALF A DISTRIBUTION IS TO BE
    13  MADE (I) TO PURCHASE SECURITIES FOR DISTRIBUTION OR (II) TO
    14  DISTRIBUTE SECURITIES FOR OR ON BEHALF OF SUCH ISSUER OR OTHER
    15  PERSON OR (III) TO MANAGE OR SUPERVISE A DISTRIBUTION OF
    16  SECURITIES FOR OR ON BEHALF OF SUCH ISSUER OR OTHER PERSON.
    17                              PART II
    18                     REGISTRATION OF SECURITIES
    19     Section 201.  Registration Requirement.--It is unlawful for
    20  any person to offer or sell any security in this State unless
    21  the security is registered under this act or the security or
    22  transaction is exempted under section 202 or 203 hereof.
    23     Section 202.  Exempt Securities.--The following securities
    24  are exempted from section 201:
    25     (a)  Any security issued or guaranteed by the United States,
    26  any state OR CANADIAN PROVINCE, any political subdivision of a    <--
    27  state OR CANADIAN PROVINCE, foreign government with which the     <--
    28  United States currently maintains diplomatic relations, or any
    29  agency or corporate or other instrumentality of any of the
    30  foregoing, or any certificate of deposit for any of the
    19720H1970B2861                 - 11 -

     1  foregoing, provided that (i) IF THE ISSUER OR GUARANTOR IS A      <--
     2  FOREIGN GOVERNMENT OTHER THAN CANADA OR AN INSTRUMENTALITY OF A
     3  FOREIGN GOVERNMENT OTHER THAN CANADA, such security or
     4  certificate of deposit therefor is recognized as a valid
     5  obligation by the issuer or guarantor thereof or its or their
     6  successors; and (ii) if an industrial revenue obligation, AND     <--
     7  PROVIDED, THAT such obligation is exempt from registration under
     8  the Securities Act of 1933.
     9     (b)  Any security, the offer, sale, issuance or guarantee of
    10  which is (i) IS subject to regulation by the Interstate Commerce  <--
    11  Commission, the Comptroller of the Currency, the Federal Deposit
    12  Insurance Corporation or, with respect to banks, by the
    13  Pennsylvania Department of Banking; (ii) registered under the     <--
    14  Public Utility Holding Company Act of 1935; OR (II) IS            <--
    15  REGISTERED UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935,
    16  OR THE ACT OF MAY 28, 1937 (P.L.1053), KNOWN AS THE "PUBLIC
    17  UTILITY LAW"; or (iii) the issuer of which is regulated as to
    18  the issuance or guarantee of the SUCH security by a governmental  <--
    19  authority of the United States.
    20     (c)  Any commercial paper which arises out of a current
    21  transaction or the proceeds of which have been or are to be used
    22  for current transactions, and which evidences an obligation to
    23  pay cash within nine months of the date of AFTER issuance,        <--
    24  exclusive of days of grace, or any renewal of such paper which
    25  is likewise limited, or any guarantee of such paper or of any
    26  such renewal, except where such paper is proposed to be sold or
    27  offered to the public in units of less than ten thousand dollars  <--
    28  ($10,000) FIVE THOUSAND DOLLARS ($5,000) to any single person.    <--
    29     (d)  Any security issued or guaranteed by any Federal credit
    30  union or any credit union, industrial loan association or other
    19720H1970B2861                 - 12 -

     1  similar association organized and supervised under the laws of
     2  this State.
     3     (e)  Any security (except evidences of indebtedness, whether
     4  interest bearing or not) of an issuer (i) organized exclusively
     5  for educational, benevolent, fraternal, religious, charitable,
     6  social, athletic or reformatory purposes and not for pecuniary
     7  profit, if no part of the net earnings of the issuer inures to
     8  the benefit of any private shareholder or individual, or (ii)
     9  organized as a chamber of commerce or trade or professional
    10  association. The fact that amounts received from memberships, or
    11  dues, or both will or may be used to construct or otherwise
    12  acquire facilities for use by members of the nonprofit
    13  organization does not disqualify the organization from this
    14  exemption. This exemption shall not apply to the securities of
    15  any nonprofit organization if any promoter thereof expects or
    16  intends to make a profit directly or indirectly from any
    17  business or activity associated with the organization or
    18  operation of such nonprofit organization.
    19     (f)  Any security listed, or approved for listing upon notice
    20  of issuance, on a securities exchange or national securities      <--
    21  quotation service THE NEW YORK, AMERICAN, OR PHILADELPHIA-        <--
    22  BALTIMORE-WASHINGTON STOCK EXCHANGE OR ANY OTHER SECURITIES
    23  EXCHANGE OR QUOTED ON ANY NATIONAL QUOTATION SERVICE designated
    24  by rule REGULATION of the commission; or any other security or    <--
    25  class of securities which the commission may specify by rule or
    26  order; any other security of the same issuer which is of senior
    27  or substantially equal rank; any security called for by
    28  subscription rights or warrants so listed, or approved OR         <--
    29  QUOTED; and any warrant or right to purchase or subscribe to any
    30  of the foregoing.
    19720H1970B2861                 - 13 -

     1     (g)  Any investment contract issued in connection with an
     2  employe's stock option, purchase, savings, pension, profit
     3  sharing or similar benefit plan, provided, in the case of plans
     4  adopted after the effective date hereof which are not qualified
     5  under section 401 of the Internal Revenue Code of 1954 and which
     6  provide for contribution by employes, the commission is notified
     7  in writing thirty days before the commencement of the offering
     8  in this State.
     9     (h)  Any security of a licensed REGISTERED broker-dealer       <--
    10  issued to its officers, partners or employes, subject to such
    11  rules REGULATIONS as the commission may establish.                <--
    12     (I)  ANY SECURITY AS TO WHICH THE COMMISSION BY REGULATION OR  <--
    13  ORDER FINDS THAT REGISTRATION IS NOT NECESSARY OR APPROPRIATE
    14  FOR THE PROTECTION OF INVESTORS.
    15     Section 203.  Exempt Transactions.--The following
    16  transactions are exempted from section 201:
    17     (a)  Any transaction not NON-ISSUER TRANSACTION EXCEPT WHERE   <--
    18  directly or indirectly for the benefit of the issuer or an
    19  affiliate of the issuer.
    20     (b)  Any NON-ISSUER transaction directly or indirectly for     <--
    21  the benefit of an affiliate of the issuer (but not directly or    <--
    22  indirectly for the benefit of the issuer) which is exempted from
    23  section 5 of the Securities Act of 1933, excepting only the       <--
    24  OTHER THAN THOSE transactions exempted in or pursuant to section  <--
    25  3 (a) (11) or 3 (b) of the Securities Act of 1933, and the rules  <--
    26  and regulations now or hereafter adopted thereunder.
    27     (c)  Any offer or sale to an institutional investor or to a
    28  broker-dealer, whether the buyer is acting for itself or in some
    29  fiduciary capacity.
    30     (d)  Any sales by an issuer to not more than fifteen TWENTY-   <--
    19720H1970B2861                 - 14 -

     1  FIVE persons (excluding those designated in subsection (c)) in
     2  this State during a period of twelve consecutive months if (i)
     3  the issuer reasonably believes that each buyer in this State is   <--
     4  purchasing for his own account and without a present view to
     5  making a public distribution of such securities in this State
     6  within eighteen months after the payment of the full purchase
     7  price by the buyer for all of the securities purchased by him
     8  pursuant to this subsection; SHALL OBTAIN THE WRITTEN AGREEMENT   <--
     9  OF EACH SUCH PERSON NOT TO SELL THE SECURITY WITHIN TWELVE
    10  MONTHS AFTER THE DATE OF PURCHASE; (ii) no public MEDIA           <--
    11  advertisement is used or public solicitation MASS MAILING made    <--
    12  in connection with soliciting such sales; (iii) no commissions,   <--
    13  selling expenses (other than legal and accounting fees and
    14  printing costs) or promotional considerations are given, paid or
    15  incurred in connection therewith; and (iv) such sales are not
    16  part of a public offering of the securities of the issuer being
    17  made concurrently in this State and elsewhere. "Promotional
    18  consideration" means consideration paid in the form of cash or
    19  securities or both to any person for services in connection with
    20  founding and organizing the business or enterprise of the
    21  issuer. Promotional consideration shall not include any fee paid
    22  to any person in connection with any sale under section 203 (c).
    23  AND (III) NO CASH OR SECURITIES IS GIVEN OR PAID, DIRECTLY OR     <--
    24  INDIRECTLY, TO ANY PROMOTER IN CONNECTION THEREWITH. PURCHASERS
    25  OF SECURITIES REGISTERED UNDER THIS ACT OR SOLD IN RELIANCE UPON
    26  AN EXEMPTION UNDER THIS ACT OTHER THAN THIS SUBSECTION (D) OR
    27  SUBSECTION (F) SHALL NOT BE INCLUDED IN COMPUTING THE TWENTY-
    28  FIVE PERSONS FOR PURPOSES OF THIS EXEMPTION. A notice in the
    29  form prescribed by the commission, signed by the officers and/or  <--
    30  OR directors of the issuer under oath and stating the name,       <--
    19720H1970B2861                 - 15 -

     1  principal business address of the issuer, PROPOSED USE OF THE     <--
     2  PROCEEDS FROM THE SALE and such facts as are necessary to
     3  establish this exemption shall be filed, together with a copy of
     4  all ANY offering literature used in connection with such offer    <--
     5  or sale, with the commission not later than the day on which the
     6  securities are FIRST issued or the issuer FIRST receives          <--
     7  consideration from any person therefor, whichever is earlier.
     8     (e)  Any offer to not more than fifty persons during a period
     9  of twelve consecutive months if no sales result from such offer
    10  or if sales resulting from such offer are exempt by reason of
    11  subsection (d) hereof.
    12     (f)  Any offer or sale of a preorganization subscription to    <--
    13  not more than fifteen persons, if no commission or other
    14  remuneration is paid or given directly or indirectly for
    15  soliciting any subscriber in this State, and no payment is made
    16  by any subscriber until the securities subscribed for may be
    17  sold under this act. OR SECURITIES OF A NEWLY-FORMED PERSON AS    <--
    18  PART OF ITS INITIAL CAPITALIZATION TO NOT MORE THAN FIVE
    19  PERSONS.
    20     (g)  Any transaction between the issuer or other person on
    21  whose behalf the offering is made and an underwriter, or among
    22  underwriters.
    23     (h)  Any offer (but not a sale) of a security for which a
    24  registration statement has been filed under the Securities Act
    25  of 1933 if (i) no stop order or refusal order is in effect and
    26  no public proceeding or examination looking toward such an order
    27  is pending under the Securities Act of 1933 or this act; and
    28  (ii) no such offer is made until after such registration
    29  statement (including a prospectus) has been filed with or mailed
    30  to the commission.
    19720H1970B2861                 - 16 -

     1     (i)  Any sale of a security registered under section 5 of the
     2  Securities Act of 1933 or exempt from registration under section
     3  3 (b) if: (i) a copy of any prospectus or offering circular
     4  utilized or proposed to be utilized in connection therewith is
     5  filed with MAILED TO the commission within two BUSINESS days      <--
     6  after such prospectus or offering circular is filed with the
     7  Securities and Exchange Commission; (ii) the filing fee
     8  specified in section 602 (b) is paid with respect to such
     9  offering; (iii) the issuer of the security is a reporting
    10  company; and (iv) no stop order or refusal order is in effect
    11  and no public proceeding or investigation looking toward such an
    12  order is pending under the Securities Act of 1933 or this act.
    13     (j)  Any transaction in a bond or other evidence of
    14  indebtedness secured by a real or chattel mortgage or deed of
    15  trust, or by an agreement for the sale of real estate or
    16  chattels, if the entire mortgage, deed of trust, or agreement,
    17  together with all the bonds or other evidences of indebtedness
    18  secured thereby, is offered and sold as a unit.
    19     (k)  Any judicial sale or any transaction by an executor,
    20  administrator, sheriff, marshal, receiver, trustee in
    21  bankruptcy, guardian or conservator.
    22     (l)  Any transaction now or hereafter exempted from section 5
    23  of the Securities Act of 1933 by virtue of sections 3 (a) (9) or
    24  3 (a) (10) thereof;
    25     (m)  Any transaction incident to a judicially approved         <--
    26  reorganization in which a security is issued in exchange for one
    27  or more outstanding securities, claims or property interests, or
    28  partly in such exchange and partly for cash; provided, however,
    29  that the commission be given notice of and the right to appear
    30  at and intervene in any hearing on the terms of such
    19720H1970B2861                 - 17 -

     1  reorganization. PROVIDED, HOWEVER, THAT THE COMMISSION BE GIVEN   <--
     2  NOTICE OF ANY HEARING REFERRED TO IN SECTION 3 (A) (10).
     3     (n) (M)  Any transaction executed by a bona fide pledgee       <--
     4  without any purpose of evading this act.
     5     (o) (N)  Any transaction pursuant to an offer to existing      <--
     6  security holders of the issuer or of a corporation which, prior
     7  to the commencement of the offer, owned substantially all of the
     8  voting stock of the issuer or was organized for the purpose of
     9  the offer by persons in control of the issuer, if no commission
    10  or other remuneration other than a standby commission is paid or
    11  given directly or indirectly for soliciting any security holder
    12  in this State, and if the issuer first files a notice specifying
    13  the terms of the offer and all other information which the
    14  commission by rule REGULATION requires, and the commission does   <--
    15  not by order disallow the exemption within five days. "Security
    16  holders" include persons who at the time of the transaction are
    17  holders of convertible securities, nontransferable warrants, or
    18  transferable warrants exercisable within not more than ninety
    19  days of their issuance.
    20     (p) (O)  Any transaction incident to a vote by security        <--
    21  holders (or written consent of some or all security holders in
    22  lieu of such vote) pursuant to the articles of incorporation or
    23  the applicable corporation statute or other statute governing
    24  such person, or pursuant to a partnership agreement, a
    25  declaration of trust, trust indenture or any agreement among
    26  security holders on a merger, consolidation, sale of assets in
    27  consideration, in whole or part, of the issuance of securities
    28  of another person, RECLASSIFICATION OF SECURITIES, or             <--
    29  reorganization involving the exchange of securities, in whole or
    30  in part, for the securities of any other person if, but only if:
    19720H1970B2861                 - 18 -

     1  (i) in the case of a merger, consolidation, or sale of assets,    <--
     2  one party to the reorganization SUCH TRANSACTION is required or   <--
     3  permitted to file proxy materials pursuant to section 14 (a) of
     4  the Securities Exchange Act of 1934 OR SECTION 20 OF THE          <--
     5  INVESTMENT COMPANY ACT OF 1940 and does file such materials with
     6  the commission at least ten days prior to a meeting of security
     7  holders called for the purpose of approving such transaction;
     8  and such proxy materials with such additions or modifications as  <--
     9  the commission may direct, are distributed to the security
    10  holders of the person to be acquired; EACH PARTY TO SUCH          <--
    11  TRANSACTION; or (ii) such materials as may be specified by rule   <--
    12  or order REGULATION of the commission are prepared in connection  <--
    13  with the proposed transaction and, after review by the
    14  commission, distributed to the security holders of the person to  <--
    15  be acquired; EACH PARTY TO THE TRANSACTION; provided, however,    <--
    16  that clause (i) and (ii) of this subsection and section 602 (c)
    17  shall not be applicable to any PARTY TO A transaction where not   <--
    18  more than twenty-five per cent of the security holders of the     <--
    19  person to be acquired SUCH PARTY are residents of this State.     <--
    20     (q) (P)  Any offer or sale of an evidence of indebtedness of   <--
    21  an issuer either: organized exclusively for educational,
    22  benevolent, fraternal, religious, charitable, social, athletic
    23  or reformatory purposes and not for pecuniary profit, if no part
    24  of the net earnings of the issuer inures to the benefit of any
    25  private shareholder or individual; or organized as a chamber of
    26  commerce or trade or professional association if there has been
    27  filed with the commission a notice identifying the security and
    28  the basis of its qualification under this exemption together
    29  with such further information as the commission may by rule or    <--
    30  order REGULATION require, and if the commission does not by       <--
    19720H1970B2861                 - 19 -

     1  order disallow the exemption within ten days or such shorter
     2  period as it may permit. The security qualifies under this
     3  exemption: (i) if IF (I) the issuer and any predecessor have not  <--
     4  defaulted within the current fiscal year or AND the three         <--
     5  preceding fiscal years in any fixed interest or principal
     6  obligation; and (ii) the issuer complies with rules REGULATIONS   <--
     7  of the commission with respect to trust indentures and the use
     8  of a prospectus; and (iii) the security qualifies under either    <--
     9  of the following:
    10     (A)  The securities proposed to be sold are secured by a
    11  mortgage or deed of trust upon land and buildings, which
    12  mortgage or deed of trust is or will become a first lien at or
    13  prior to the issuance of such evidences of indebtedness, or
    14  provision satisfactory to the commission is made for escrowing
    15  the proceeds from their sale until such first lien is
    16  established, and the total amount of such securities does not
    17  exceed fifty SEVENTY-FIVE per cent of the then fair market value  <--
    18  of the land and buildings included in such mortgage or deed of
    19  trust, less the amount of any unpaid special assessment taxes. ;  <--
    20  or
    21     (B)  The issuer or its predecessors have had net revenues for
    22  each of the two fiscal years next preceding such offer or sale,
    23  or average net revenues for the last three fiscal years next
    24  preceding such offer or sale, of not less than one and one-half
    25  times the aggregate annual interest requirements on the issue of
    26  securities to be sold under this subsection and all securities
    27  of equal or prior rank to be outstanding immediately after such
    28  sale. "Net revenues" means the excess of revenues over all
    29  expenses of operation and maintenance, excluding from expenses
    30  provision for depreciation and excluding extraordinary,
    19720H1970B2861                 - 20 -

     1  nonrecurring items of revenue and expense. This exemption shall
     2  not apply to the securities of any nonprofit organization if any
     3  promoter thereof expects or intends to make a profit directly or
     4  indirectly from any business or activity associated with the
     5  organization or operation of such nonprofit organization.
     6     (r)  Any stock split and any stock dividend, whether the       <--
     7  corporation distributing the dividend is the issuer or not, if
     8  nothing of value is given by stockholders for the dividend other
     9  than the surrender of a right to a cash or property dividend in
    10  lieu of the stock and if the dividend is issued pro rata by
    11  class. In the case of a stock
    12     (Q)  ANY BONA FIDE DISTRIBUTION IN PARTIAL OR TOTAL            <--
    13  LIQUIDATION OF A PERSON, WHETHER OR NOT THE ASSETS BEING
    14  DISTRIBUTED INCLUDE SECURITIES OF ANY OTHER PERSON AND WHETHER
    15  OR NOT WHOLLY OR PARTIALLY IN EXCHANGE FOR THE SECURITIES OF THE
    16  PERSON MAKING THE DISTRIBUTION, AND ANY STOCK SPLIT AND ANY
    17  STOCK DIVIDEND, WHERE THE CORPORATION DISTRIBUTING THE DIVIDEND
    18  IS NOT THE ISSUER, IF NOTHING OF VALUE IS GIVEN BY STOCKHOLDERS
    19  FOR THE DIVIDEND OTHER THAN THE SURRENDER OF A RIGHT TO A CASH
    20  OR PROPERTY DIVIDEND IN LIEU OF THE STOCK AND IF THE DIVIDEND IS
    21  ISSUED PRO RATA BY CLASS; PROVIDED, HOWEVER, IN THE CASE OF A
    22  DISTRIBUTION OR dividend by a corporation not the issuer, such
    23  corporation may be required to SHALL file with the commission,    <--
    24  ten days prior to the intended date of THE distribution of the    <--
    25  OR dividend, a statement containing the facts and circumstances   <--
    26  surrounding the DISTRIBUTION OR dividend. to indicate whether     <--
    27  the dividend is for the purpose of avoiding the registration
    28  provisions of this act.
    29     (s) (R)  Any transaction or class of transactions as to which  <--
    30  the commission by rule REGULATION or order finds that             <--
    19720H1970B2861                 - 21 -

     1  registration is not necessary or appropriate for the protection
     2  of investors.
     3     Section 204.  Exemption Proceedings.--(a) The commission may
     4  by rule or REGULATION AS TO ANY TYPE OF SECURITY OR TRANSACTION,  <--
     5  OR BY order in a particular case, as to any security or
     6  transaction or any type of security or transaction, withdraw or   <--
     7  further condition exemptions under this section, or increase or
     8  decrease INCREASE the number of purchasers or offerees            <--
     9  permitted, or waive the conditions in either of section SECTIONS  <--
    10  202 or 203. and may require reports of sales under any such       <--
    11  exemption.
    12     (b)  The commission may by order deny or revoke any exemption
    13  specified in section 202 or 203 with respect to a specific
    14  security or transaction. No such order may be entered without
    15  appropriate prior notice to all interested parties, opportunity
    16  for hearing, and written findings of fact and conclusions of
    17  law, except that the commission may by order summarily deny or
    18  revoke any of the specified exemptions pending final
    19  determination of any proceeding under this section. Upon the
    20  entry of a summary order, the commission shall promptly notify
    21  all interested parties that it has been entered and reasons
    22  therefor and that within fifteen days of the receipt of a
    23  written request the matter will be set down for hearing. If no
    24  hearing is requested and none is ordered by the commission, the
    25  order will remain in effect until it is modified or vacated by
    26  the commission. If a hearing is requested or ordered, the
    27  commission, after notice of and opportunity for hearing to all
    28  interested persons, may modify or vacate the order or extend it
    29  until final determination. No order under this section may
    30  operate retroactively. No person may be considered to have
    19720H1970B2861                 - 22 -

     1  violated section 201 by reason of any offer or sale effected
     2  after the entry of an order under this section if he sustains
     3  the burden of proof that he did not know, and in the exercise of
     4  reasonable care could not have known, of the order.
     5     (c)  In any proceeding under this act, the burden of proving
     6  an exemption or an exception from a definition is upon the
     7  person claiming it.
     8     Section 205.  Registration by Coordination.--(a) Registration
     9  by coordination may be used for any offering for which a
    10  registration statement has been filed under the Securities Act
    11  of 1933 or for any proposed sale pursuant to the exemption
    12  contained in section 3 (b) of such act where such registration
    13  statement or notification of proposed sale has not become
    14  effective.
    15     (b)  A registration statement under this section shall
    16  contain the following information and be accompanied by the
    17  following documents in addition to the information specified in
    18  section 207 (b) and the consent to service of process required
    19  by section 701:
    20     (i)  Two copies of the preliminary prospectus or offering
    21  circular filed under the Securities Act of 1933;
    22     (ii)  If the commission by rule or order REGULATION requires,  <--
    23  a copy of the articles of incorporation and bylaws or their
    24  substantial equivalents currently in effect, a copy of any
    25  agreements with or among underwriters, a copy of any indenture
    26  or other instrument governing the issuance of the security to be
    27  registered, and a specimen or copy of the security;
    28     (iii)  If the commission BY REGULATION OR ORDER requires, any  <--
    29  other information, or copies of any documents, filed under the
    30  Securities Act of 1933; and
    19720H1970B2861                 - 23 -

     1     (iv)  An undertaking to forward TO THE COMMISSION all future   <--
     2  amendments to the Federal prospectus or offering circular, other
     3  than an amendment which merely delays the effective date of the
     4  registration statement, not later than the first business day
     5  after they are forwarded to or filed with the Securities and
     6  Exchange Commission, or such longer period as the commission
     7  permits.
     8     (c)  A registration statement under this section
     9  automatically becomes effective at the moment the Federal
    10  registration statement OR NOTIFICATION becomes effective if (i)   <--
    11  no stop order is in effect in this State and no proceeding is
    12  pending under section 208; (ii) and the registration statement
    13  has been on file with the commission for at least ten days;
    14  (iii) a statement of the maximum and minimum proposed offering
    15  prices and the maximum underwriting discounts and commissions
    16  has been on file for two full business days, or such shorter
    17  period as the commission permits; and (iv) the offering is made
    18  within these limitations.
    19     (d)  The registrant shall notify the commission promptly by
    20  telephone or telegram of the date and time when the Federal
    21  registration statement became effective and the content of the
    22  price amendment, if any, and shall file a post-effective
    23  amendment promptly containing the information and documents in
    24  the price amendment. "Price amendment" means the final Federal
    25  amendment which includes a statement of the offering price,
    26  underwriting and selling discounts or commissions, amount of
    27  proceeds, conversion rates, call prices and other matters
    28  dependent upon the offering price. Upon failure to receive the
    29  required notification and post-effective amendment with respect
    30  to the price amendment, the commission may enter a stop order,
    19720H1970B2861                 - 24 -

     1  without notice or hearing, retroactively denying effectiveness
     2  to the registration statement or suspending its effectiveness
     3  until compliance with this subsection is effected, if it
     4  promptly notifies the registrant by telephone or telegram of the
     5  issuance of such order. If the registrant proves compliance with
     6  the requirements of this subsection as to notice and post-
     7  effective amendment, the stop order shall be vacated as of the
     8  time of its entry. The commission may by rule REGULATION or       <--
     9  order waive any of the conditions specified in subsection (b) or
    10  (c).
    11     (e)  If the Federal registration statement becomes effective
    12  before all the conditions in this section are satisfied and they
    13  are not waived, the registration statement automatically becomes
    14  effective as soon as all the conditions are satisfied. If the
    15  registrant advises the commission of the date when the Federal
    16  registration statement is expected to become effective, the
    17  commission shall promptly advise the registrant by telephone or
    18  telegram, at the registrant's expense, whether all the
    19  conditions are satisfied and whether it then contemplates the
    20  institution of a proceeding under section 208; but this advice
    21  by the commission does not preclude the institution of such a
    22  proceeding at any time.
    23     Section 206.  Registration by Qualification.--(a) Any
    24  security may be registered by qualification.
    25     (b)  A registration statement under this section shall
    26  contain the information specified in section 207 (b), shall be
    27  accompanied by the consent to service of process required by
    28  section 701 and shall contain such further information and be     <--
    29  accompanied by such further documents as the commission by rule
    30  or otherwise requires. For this purpose the commission may
    19720H1970B2861                 - 25 -

     1  classify issuers and types of securities. AND SHALL CONTAIN THE   <--
     2  FOLLOWING INFORMATION AND BE ACCOMPANIED BY THE FOLLOWING
     3  DOCUMENTS:
     4     (1)  WITH RESPECT TO THE ISSUER AND ANY SIGNIFICANT
     5  SUBSIDIARY: ITS NAME, ADDRESS, AND FORM OF ORGANIZATION; THE
     6  STATE OR FOREIGN JURISDICTION AND DATE OF ITS ORGANIZATION; THE
     7  GENERAL CHARACTER AND LOCATION OF ITS BUSINESS; A DESCRIPTION OF
     8  ITS PHYSICAL PROPERTIES AND EQUIPMENT; AND A STATEMENT OF THE
     9  GENERAL COMPETITIVE CONDITIONS IN THE INDUSTRY OR BUSINESS IN
    10  WHICH IT IS OR WILL BE ENGAGED;
    11     (2)  WITH RESPECT TO EVERY DIRECTOR AND OFFICER OF THE
    12  ISSUER, OR PERSON OCCUPYING A SIMILAR STATUS OR PERFORMING
    13  SIMILAR FUNCTIONS: HIS NAME, ADDRESS, AND PRINCIPAL OCCUPATION
    14  FOR THE PAST FIVE YEARS; THE AMOUNT OF SECURITIES OF THE ISSUER
    15  HELD BY HIM AS OF A SPECIFIED DATE WITHIN THIRTY DAYS OF THE
    16  FILING OF THE REGISTRATION STATEMENT; THE AMOUNT OF THE
    17  SECURITIES COVERED BY THE REGISTRATION STATEMENT TO WHICH HE HAS
    18  INDICATED HIS INTENTION TO SUBSCRIBE; AND A DESCRIPTION OF ANY
    19  MATERIAL INTEREST IN ANY MATERIAL TRANSACTION WITH THE ISSUER OR
    20  ANY SIGNIFICANT SUBSIDIARY EFFECTED WITHIN THE PAST THREE YEARS
    21  OR PROPOSED TO BE EFFECTED;
    22     (3)  WITH RESPECT TO PERSONS COVERED BY CLAUSE (2): THE
    23  REMUNERATION PAID DURING THE PAST TWELVE MONTHS AND ESTIMATED TO
    24  BE PAID DURING THE NEXT TWELVE MONTHS, DIRECTLY OR INDIRECTLY,
    25  BY THE ISSUER (TOGETHER WITH ALL PREDECESSORS, PARENTS,
    26  SUBSIDIARIES, AND AFFILIATES) TO ALL THOSE PERSONS IN THE
    27  AGGREGATE;
    28     (4)  WITH RESPECT TO ANY PERSON OWNING OF RECORD, OR
    29  BENEFICIALLY IF KNOWN, TEN PER CENT OR MORE OF THE OUTSTANDING
    30  SHARES OF ANY CLASS OF EQUITY SECURITY OF THE ISSUER: THE
    19720H1970B2861                 - 26 -

     1  INFORMATION SPECIFIED IN CLAUSE (2) OTHER THAN HIS OCCUPATION;
     2     (5)  WITH RESPECT TO EVERY PROMOTER IF THE ISSUER WAS
     3  ORGANIZED WITHIN THE PAST THREE YEARS: THE INFORMATION SPECIFIED
     4  IN CLAUSE (2), ANY AMOUNT PAID TO HIM WITHIN THAT PERIOD OR
     5  INTENDED TO BE PAID TO HIM, AND THE CONSIDERATION FOR ANY SUCH
     6  PAYMENT;
     7     (6)  WITH RESPECT TO ANY PERSON ON WHOSE BEHALF ANY PART OF
     8  THE OFFERING IS TO BE MADE IN A NON-ISSUER DISTRIBUTION: HIS
     9  NAME AND ADDRESS; THE AMOUNT OF SECURITIES OF THE ISSUER HELD BY
    10  HIM AS OF THE DATE OF THE FILING OF THE REGISTRATION STATEMENT;
    11  A DESCRIPTION OF ANY MATERIAL INTEREST IN ANY MATERIAL
    12  TRANSACTION WITH THE ISSUER OR ANY SIGNIFICANT SUBSIDIARY
    13  EFFECTED WITHIN THE PAST THREE YEARS OR PROPOSED TO BE EFFECTED;
    14  AND A STATEMENT OF HIS REASONS FOR MAKING THE OFFERING;
    15     (7)  THE CAPITALIZATION AND LONG-TERM DEBT (ON BOTH A CURRENT
    16  AND PRO FORMA BASIS) OF THE ISSUER AND ANY SIGNIFICANT
    17  SUBSIDIARY, INCLUDING A DESCRIPTION OF EACH SECURITY OUTSTANDING
    18  OR BEING REGISTERED OR OTHERWISE OFFERED, AND A STATEMENT OF THE
    19  AMOUNT AND KIND OF CONSIDERATION (WHETHER IN THE FORM OF CASH,
    20  PHYSICAL ASSETS, SERVICES, PATENTS, GOODWILL, OR ANYTHING ELSE)
    21  FOR WHICH THE ISSUER OR ANY SUBSIDIARY HAS ISSUED ANY OF ITS
    22  SECURITIES WITHIN THE PAST TWO YEARS OR IS OBLIGATED TO ISSUE
    23  ANY OF ITS SECURITIES;
    24     (8)  THE KIND AND AMOUNT OF SECURITIES TO BE OFFERED; THE
    25  PROPOSED OFFERING PRICE OR THE METHOD BY WHICH IT IS TO BE
    26  COMPUTED; ANY VARIATION THEREFROM AT WHICH ANY PROPORTION OF THE
    27  OFFERING IS TO BE MADE TO ANY PERSON OR CLASS OF PERSONS OTHER
    28  THAN THE UNDERWRITERS, WITH A SPECIFICATION OF ANY SUCH PERSON
    29  OR CLASS; THE BASIS UPON WHICH THE OFFERING IS TO BE MADE IF
    30  OTHERWISE THAN FOR CASH; THE ESTIMATED AGGREGATE UNDERWRITING
    19720H1970B2861                 - 27 -

     1  AND SELLING DISCOUNTS OR COMMISSIONS AND FINDERS' FEES
     2  (INCLUDING SEPARATELY CASH, SECURITIES, CONTRACTS, OR ANYTHING
     3  ELSE OF VALUE TO ACCRUE TO THE UNDERWRITERS OR FINDERS IN
     4  CONNECTION WITH THE OFFERING) OR, IF THE SELLING DISCOUNTS OR
     5  COMMISSIONS ARE VARIABLE; THE BASIS OF DETERMINING THEM AND
     6  THEIR MAXIMUM AND MINIMUM AMOUNTS; THE ESTIMATED AMOUNTS OF
     7  OTHER SELLING EXPENSES, INCLUDING LEGAL, ENGINEERING, AND
     8  ACCOUNTING CHARGES; THE NAME AND ADDRESS OF EVERY UNDERWRITER
     9  AND EVERY RECIPIENT OF A FINDER'S FEE; A COPY OF ANY
    10  UNDERWRITING OR SELLING-GROUP AGREEMENT PURSUANT TO WHICH THE
    11  DISTRIBUTION IS TO BE MADE, OR THE PROPOSED FORM OF ANY SUCH
    12  AGREEMENT WHOSE TERMS HAVE NOT YET BEEN DETERMINED; AND A
    13  DESCRIPTION OF THE PLAN OF DISTRIBUTION OF ANY SECURITIES WHICH
    14  ARE TO BE OFFERED OTHERWISE THAN THROUGH AN UNDERWRITER;
    15     (9)  THE ESTIMATED CASH PROCEEDS TO BE RECEIVED BY THE ISSUER
    16  FROM THE OFFERING; THE PURPOSES FOR WHICH THE PROCEEDS ARE TO BE
    17  USED BY THE ISSUER; THE AMOUNT TO BE USED FOR EACH PURPOSE; THE
    18  ORDER OR PRIORITY IN WHICH THE PROCEEDS WILL BE USED FOR THE
    19  PURPOSES STATED; THE AMOUNTS OF ANY FUNDS TO BE RAISED FROM
    20  OTHER SOURCES TO ACHIEVE THE PURPOSES STATED; THE SOURCES OF ANY
    21  SUCH FUNDS; AND, IF ANY PART OF THE PROCEEDS IS TO BE USED TO
    22  ACQUIRE ANY PROPERTY (INCLUDING GOODWILL) OTHERWISE THAN IN THE
    23  ORDINARY COURSE OF BUSINESS, THE NAMES AND ADDRESSES OF THE
    24  VENDORS, THE PURCHASE PRICE, THE NAMES OF ANY PERSONS WHO HAVE
    25  RECEIVED COMMISSIONS IN CONNECTION WITH THE ACQUISITION, AND THE
    26  AMOUNTS OF ANY SUCH COMMISSIONS AND ANY OTHER EXPENSE IN
    27  CONNECTION WITH THE ACQUISITION (INCLUDING THE COST OF BORROWING
    28  MONEY TO FINANCE THE ACQUISITION);
    29     (10)  A DESCRIPTION OF ANY STOCK OPTIONS OR OTHER SECURITY
    30  OPTIONS OUTSTANDING, OR TO BE CREATED IN CONNECTION WITH THE
    19720H1970B2861                 - 28 -

     1  OFFERING, TOGETHER WITH THE AMOUNT OF ANY SUCH OPTIONS HELD OR
     2  TO BE HELD BY EVERY PERSON REQUIRED TO BE NAMED IN CLAUSE (2),
     3  (4), (5), (6), OR (8) AND BY ANY PERSON WHO HOLDS OR WILL HOLD
     4  TEN PER CENT OR MORE IN THE AGGREGATE OF ANY SUCH OPTIONS;
     5     (11)  THE DATES OF, PARTIES TO, AND GENERAL EFFECT CONCISELY
     6  STATED OF, EVERY MANAGEMENT OR OTHER MATERIAL CONTRACT MADE OR
     7  TO BE MADE OTHERWISE THAN IN THE ORDINARY COURSE OF BUSINESS IF
     8  IT IS TO BE PERFORMED IN WHOLE OR IN PART AT OR AFTER THE FILING
     9  OF THE REGISTRATION STATEMENT OR WAS MADE WITHIN THE PAST TWO
    10  YEARS, TOGETHER WITH A COPY OF EVERY SUCH CONTRACT; AND A
    11  DESCRIPTION OF ANY PENDING LITIGATION OR PROCEEDING TO WHICH THE
    12  ISSUER IS A PARTY AND WHICH MATERIALLY AFFECTS ITS BUSINESS OR
    13  ASSETS (INCLUDING ANY SUCH LITIGATION OR PROCEEDING KNOWN TO BE
    14  CONTEMPLATED BY GOVERNMENTAL AUTHORITIES);
    15     (12)  A COPY OF ANY PROSPECTUS, PAMPHLET, CIRCULAR, FORM
    16  LETTER, ADVERTISEMENT, OR OTHER SALES LITERATURE INTENDED AS OF
    17  THE EFFECTIVE DATE TO BE USED IN CONNECTION WITH THE OFFERING;
    18     (13)  A SPECIMEN OR COPY OF THE SECURITY BEING REGISTERED; A
    19  COPY OF THE ISSUER'S ARTICLES OF INCORPORATION AND BYLAWS, OR
    20  THEIR SUBSTANTIAL EQUIVALENTS, AS CURRENTLY IN EFFECT; AND A
    21  COPY OF ANY INDENTURE OR OTHER INSTRUMENT COVERING THE SECURITY
    22  TO BE REGISTERED;
    23     (14)  A SIGNED OR CONFORMED COPY OF AN OPINION OF COUNSEL AS
    24  TO THE LEGALITY OF THE SECURITY BEING REGISTERED (WITH AN
    25  ENGLISH TRANSLATION IF IT IS IN A FOREIGN LANGUAGE), WHICH SHALL
    26  STATE WHETHER THE SECURITY WHEN SOLD WILL BE LEGALLY ISSUED,
    27  FULLY PAID, AND NONASSESSABLE, AND, IF A DEBT SECURITY, A
    28  BINDING OBLIGATION OF THE ISSUER;
    29     (15)  THE WRITTEN CONSENT OF ANY ACCOUNTANT, ENGINEER,
    30  APPRAISER, OR OTHER PERSON WHOSE PROFESSION GIVES AUTHORITY TO A
    19720H1970B2861                 - 29 -

     1  STATEMENT MADE BY HIM, IF ANY SUCH PERSON IS NAMED AS HAVING
     2  PREPARED OR CERTIFIED A REPORT OR VALUATION (OTHER THAN A PUBLIC
     3  AND OFFICIAL DOCUMENT OR STATEMENT) WHICH IS USED IN CONNECTION
     4  WITH THE REGISTRATION STATEMENT;
     5     (16)  A BALANCE SHEET OF THE ISSUER AS OF A DATE WITHIN FOUR
     6  MONTHS PRIOR TO THE FILING OF THE REGISTRATION STATEMENT; A
     7  PROFIT AND LOSS STATEMENT AND ANALYSIS OF SURPLUS FOR EACH OF
     8  THE THREE FISCAL YEARS PRECEDING THE DATE OF THE BALANCE SHEET
     9  AND FOR ANY PERIOD BETWEEN THE CLOSE OF THE LAST FISCAL YEAR AND
    10  THE DATE OF THE BALANCE SHEET, OR FOR THE PERIOD OF THE ISSUER'S
    11  AND ANY PREDECESSORS' EXISTENCE IF LESS THAN THREE YEARS; AND,
    12  IF ANY PART OF THE PROCEEDS OF THE OFFERING IS TO BE APPLIED TO
    13  THE PURCHASE OF ANY BUSINESS, THE SAME FINANCIAL STATEMENTS
    14  WHICH WOULD BE REQUIRED IF THAT BUSINESS WERE THE REGISTRANT, OR
    15  SUCH OTHER FINANCIAL STATEMENTS AS MAY BE REQUIRED PURSUANT TO
    16  SECTION 609 (C); AND
    17     (17)  SUCH ADDITIONAL INFORMATION AS THE COMMISSION REQUIRES
    18  BY REGULATION OR ORDER.
    19     FOR PURPOSES OF THIS SECTION 206 (B) THE COMMISSION MAY
    20  CLASSIFY ISSUERS AND TYPES OF SECURITIES.
    21     (c)  Registration under this section becomes effective when
    22  the commission so orders. If a registration statement has been
    23  on file for at least thirty days and all information required by
    24  the commission has been furnished, the person filing the
    25  statement may at any time file a written request that the
    26  commission take action within ten days following the filing of
    27  such request. If a request is filed and the commission takes no
    28  action within the period, the registration becomes effective at
    29  the end of the ten-day period.
    30     (d)  The commission may by rule REGULATION or order require    <--
    19720H1970B2861                 - 30 -

     1  as a condition of registration under this section that a
     2  prospectus containing any designated part of the information
     3  contained in the registration statement or filed with it be sent
     4  or given to each person to whom an offer is made before or
     5  concurrently with: the first written offer made to him,
     6  otherwise than by means of a public advertisement, by or for the
     7  account of the issuer or any other person on whose behalf the
     8  offering is made, or by any underwriter or broker-dealer who is
     9  offering part of an unsold allotment or subscription taken by
    10  him as a participant in the distribution; or the confirmation of
    11  any sale made by or for the account of any person; or the
    12  payment pursuant to any sale; or the delivery of the security
    13  pursuant to any sale; whichever first occurs.
    14     Section 207.  General Registration Provisions.--(a) A
    15  registration statement may be filed by the issuer, any other
    16  person on whose behalf the offering is to be made or a licensed
    17  broker-dealer. but the commission may in specific cases require   <--
    18  that it be executed by the issuer.
    19     (b)  Every registration statement shall specify: (i) the
    20  amount of securities to be offered in this State; (ii) the
    21  states in which a registration statement or application in
    22  connection with the offering has been or is to be filed; (iii)
    23  any adverse order, judgment or decree entered in connection with
    24  the offering by the regulatory authorities in any state or by
    25  any court or the Securities and Exchange Commission, or any
    26  withdrawal with prejudice of a registration statement or
    27  application relating to the offering; AND (iv) the names of all   <--
    28  underwriters and broker-dealers selling or offering the
    29  securities in this State. and (v) such other information as may   <--
    30  be required by the form therefor adopted by the commission
    19720H1970B2861                 - 31 -

     1  pursuant to section 609.
     2     (c)  Any document filed under this act or a predecessor law
     3  within five years preceding the filing of a registration
     4  statement may be incorporated by reference in the registration
     5  statement.
     6     (d)  The commission may by rule REGULATION or otherwise        <--
     7  permit the omission of any item of information or document from
     8  any registration statement.
     9     (e)  The commission may by rule REGULATION or order require    <--
    10  as a condition of registration BY QUALIFICATION OR AS A           <--
    11  CONDITION OF REGISTRATION BY COORDINATION (IF MORE THAN SIXTY-
    12  SIX AND TWO-THIRDS PER CENT OF THE ISSUE OF SECURITIES PART OR
    13  ALL OF WHICH IS TO BE REGISTERED BY COORDINATION IS TO BE SOLD
    14  IN PENNSYLVANIA) that a report by an accountant, engineer,
    15  appraiser or other professional person be filed. The commission
    16  may also designate one of its employes to make an examination of
    17  the business and records of an issuer of securities for which a
    18  registration statement has been filed by qualification.
    19     (f)  In the case of a nonissuer distribution, information may
    20  not be required under section 206 (b) or section 207 (k) unless
    21  it is known to the person filing the registration statement or
    22  to the persons on whose behalf the distribution is to be made,
    23  or can be furnished by them without unreasonable effort or
    24  expense.
    25     (g)  The commission may by rule REGULATION or order require    <--
    26  as a condition of registration that any security issued within
    27  the past two years or to be issued to a promoter for a
    28  consideration substantially different from the public offering
    29  price, or to any person for a consideration other than cash, be
    30  deposited in escrow; or that the proceeds from the sale of the
    19720H1970B2861                 - 32 -

     1  registered security in this State be escrowed until the issuer
     2  receives a specified amount from the sale of the security either
     3  in this State or elsewhere; or it may impose both such
     4  requirements. The commission may by rule REGULATION or order      <--
     5  determine the conditions of any escrow required hereunder, but
     6  may not reject a depository solely because of location in
     7  another state.
     8     (h)  The commission may by rule REGULATION require that DEBT   <--
     9  securities of designated classes TO BE REGISTERED BY              <--
    10  QUALIFICATION shall be issued under a trust indenture containing
    11  such provisions as it determines, BUT SUCH PROVISIONS SHALL NOT   <--
    12  BE IN ADDITION TO OR INCONSISTENT WITH THE TERMS REQUIRED OR
    13  PERMITTED BY THE TRUST INDENTURE ACT OF 1929.
    14     (i)  The commission may by rule or order REGULATION require    <--
    15  (I) WITH RESPECT TO REGISTRATION BY COORDINATION THAT A COPY OF   <--
    16  EACH FORM OF SUBSCRIPTION OR SALE CONTRACT USED OR PROPOSED TO
    17  BE USED IN THIS STATE BE FILED WITH THE COMMISSION PRIOR TO ITS
    18  USE IN THIS STATE; AND (II) WITH RESPECT TO REGISTRATION BY
    19  QUALIFICATION THAT, as a condition of registration, that any      <--
    20  security registered be sold only on a specified form of
    21  subscription or sale contract; and (III) that a signed or         <--
    22  conformed copy of each SUCH contract be filed with the            <--
    23  commission or preserved for any period up to three years.
    24     (j)  A registration statement is effective for one year from
    25  its effective date, or any longer period during which the
    26  security is being offered or distributed in a nonexempted
    27  transaction by or for the account of the issuer or other person
    28  on whose behalf the offering is being made, or by any
    29  underwriter or broker-dealer who is still offering part of an
    30  unsold allotment or subscription taken by him as a participant
    19720H1970B2861                 - 33 -

     1  in the distribution, provided that the commission has been
     2  notified of such continued offering and the period thereof. Any
     3  SUCH extension of the offering period FOR SECURITIES REGISTERED   <--
     4  BY QUALIFICATION shall be subject to rules REGULATIONS            <--
     5  established by the commission. The fact that a registration
     6  statement has been effective in this State with respect to any
     7  security does not permit sales of securities of the same class
     8  by the issuer or an affiliate of the issuer if such person did
     9  not file the registration statement, unless a separate
    10  registration statement is filed and declared effective with
    11  respect thereto, or absent an applicable exemption. AN EXEMPTION  <--
    12  FROM REGISTRATION IS AVAILABLE. A registration statement may not
    13  be withdrawn after its effective date if any of the securities
    14  registered have been sold in this State, unless permitted by
    15  rule REGULATION or order of the commission. No registration       <--
    16  statement is effective during the time a stop order is in effect
    17  under section 208.
    18     (k)  During the effective period of a registration statement,
    19  the commission may by rule or order REGULATION require the        <--
    20  person who filed the registration statement to file reports with
    21  the commission, not more often than quarterly, to keep
    22  reasonably current the information contained in the registration
    23  statement and to disclose the progress of the offering;
    24  provided, however, that any person may file with the commission   <--
    25  copies of reports filed NO PERSON NEED COMPLY WITH ANY SUCH       <--
    26  REGULATION OF THE COMMISSION IF SUCH PERSON FILES WITH THE
    27  COMMISSION COPIES OF ALL REPORTS SUCH PERSON IS REQUIRED TO FILE
    28  with the Securities and Exchange Commission including form SR in  <--
    29  lieu of the foregoing. AND IF SUCH REPORTS ARE FILED IN A TIMELY  <--
    30  MANNER. If any of the securities registered have been sold in
    19720H1970B2861                 - 34 -

     1  the State, the commission may by rule or order REGULATION extend  <--
     2  the period for filing the reports for an additional term not
     3  exceeding two years from the date the registration became
     4  effective or the date of its last amendment or extension.
     5     (l)  A registration statement relating to redeemable
     6  securities issued by an open-end management company or unit
     7  investment trust, as defined in the Investment Company Act of
     8  1940, or to securities issued by any class of financial
     9  institutions which the commission by rule determines, may be
    10  amended after its effective date so as to increase the specified
    11  amount of securities proposed to be offered. The amendment
    12  becomes effective when the commission so orders.
    13     (m)  No warrant or right to purchase or subscribe to another   <--
    14  security and no security convertible into another security shall
    15  be registered unless it appears to the commission that both the
    16  warrant or right or convertible security and the securities
    17  deliverable on the exercise of the warrant or right or
    18  conversion privilege comply with the provisions of this act.
    19     (n) (M)  Each person who accepts an offer to purchase          <--
    20  securities registered by qualification directly from an issuer
    21  or an affiliate of an issuer shall have the right to withdraw
    22  his acceptance without incurring any liability to the seller,
    23  underwriter (if any) or any other person, within two business
    24  days after he receives a final prospectus with respect            <--
    25  PROSPECTUS RELATING to the offering (WHICH IS NOT MATERIALLY      <--
    26  DIFFERENT FROM THE FINAL PROSPECTUS RELATING TO SUCH OFFERING)
    27  and a notice explaining the provisions of this subsection. As
    28  used herein, the term "final prospectus" shall mean the document
    29  prepared in accordance with such rules REGULATIONS as the         <--
    30  commission may provide, to be used by the seller in connection
    19720H1970B2861                 - 35 -

     1  with an offering of securities in this State after the
     2  registration of such securities has become effective under this
     3  act. Each person who accepts an offer to purchase securities
     4  exempted from registration by section 203 (d), (f), (q) or (s),   <--
     5  (P) OR (R), directly from an issuer or affiliate of an issuer     <--
     6  shall have the right to withdraw his acceptance without
     7  incurring any liability to the seller, underwriter (if any) or
     8  any other person, within two business days after he enters into
     9  a binding contract of purchase, or makes any payment for the
    10  securities being offered or the exemption becomes effective,
    11  whichever is later.
    12     Section 208.  Denial, Suspension, and Revocation of
    13  Registrations.--(a) The commission may issue a stop order
    14  denying effectiveness to, or suspending or revoking the
    15  effectiveness of, any registration statement if it finds that
    16  the order is in the public interest and that:
    17     (i)  The registration statement as of its effective date or
    18  as of any earlier date in the case of an order denying
    19  effectiveness, or any amendment filed under section 207 (l) as
    20  of its effective date, or any report under section 207 (k) is
    21  incomplete in any material respect or contains any statement
    22  which was, in the light of the circumstances under which it was
    23  made, false or misleading with respect to any material fact, or
    24  omits OMITTED to state a material fact necessary in order to      <--
    25  make the statements made, in the light of the circumstances
    26  under which they are made, not misleading;
    27     (ii)  Any provision of this act or any rule, REGULATION,       <--
    28  order or condition lawfully imposed under this act has been
    29  wilfully violated, in connection with the offering by: (A) the
    30  person filing the registration statement, (B) the issuer, (C)
    19720H1970B2861                 - 36 -

     1  any partner, officer or director of the issuer, (D) any person
     2  occupying a similar status or performing similar functions, (E)
     3  any affiliate of the issuer, but only if the person filing the
     4  registration statement is an affiliate of the issuer, or (F) any
     5  broker-dealer; or other person involved directly or indirectly    <--
     6  in the offering;
     7     (iii)  The securities are the subject of an administrative
     8  stop order or similar order or a permanent or temporary
     9  injunction of any court of competent jurisdiction entered under
    10  any other Federal or State act applicable to the offering, but
    11  the commission may not institute a proceeding against an
    12  effective registration statement under this section more than
    13  one year from the date of the order or injunction relied on, and
    14  it may not enter an order under this section on the basis of an
    15  order or injunction entered under any other state act unless
    16  that order or injunction was based on facts which would
    17  currently constitute a ground for a stop order under this act;
    18     (iv)  The issuer's enterprise or method of business includes
    19  or would include activities which are illegal where performed;
    20     (v)  The offering has been or would be made with unreasonable
    21  amounts of underwriters' and sellers' discounts, commissions or
    22  other compensation, or promoters' profits or participation, or
    23  unreasonable amounts or kinds of options, or has worked or
    24  tended to work a fraud upon purchasers or would so operate, or    <--
    25  involves an unreasonable distribution of voting rights; PROVIDED  <--
    26  THAT ANY UNDERWRITING COMPENSATION APPROVED BY A NATIONAL
    27  SECURITIES ASSOCIATION REGISTERED UNDER THE SECURITIES EXCHANGE
    28  ACT OF 1934 WITH RESPECT TO THE UNDERWRITING ACTIVITIES OF ITS
    29  MEMBERS SHALL NOT BE DEEMED UNREASONABLE UNDER THIS SECTION;
    30     (vi)  The applicant or registrant has failed to pay the
    19720H1970B2861                 - 37 -

     1  proper filing fee; but the commission may only enter a denial
     2  order under this subsection, and it shall vacate any such order
     3  when the deficiency has been corrected; OR                        <--
     4     (vii)  Advertising prohibited by section 606 (e) has been
     5  used in connection with the sale or offering of the securities.
     6  or                                                                <--
     7     (viii)  In the case of unsecured debt or preferred equity
     8  securities with a fixed dividend rate, the financial condition
     9  of the issuer affects or would affect the soundness of the
    10  securities.
    11     (b)  The commission may not institute a stop order proceeding
    12  against an effective registration statement on the basis of a
    13  fact or transaction known to it when the registration statement
    14  became effective unless the proceeding is instituted within
    15  thirty days after effectiveness.
    16     (c)  In a proceeding for registration by qualification, the    <--
    17  registrant has the burden of satisfying the requirements of
    18  subsection (a). In a proceeding for registration by
    19  coordination, the commission has the burden of establishing the
    20  existence of one of the grounds enumerated in subsection (a).
    21     (d) (C)  The commission may issue a summary order denying,     <--
    22  postponing, suspending or revoking the effectiveness of a
    23  registration statement pending final determination of any
    24  proceeding under this section. Upon the entry of the order, the
    25  commission shall promptly notify each person specified in
    26  subsection (e) (D) that it has been entered and the reasons       <--
    27  therefor and that within fifteen days after the receipt of a
    28  written request the matter will be set down for hearing. If no
    29  hearing is requested or ordered, the commission, after notice of
    30  and opportunity for hearing to each person specified in
    19720H1970B2861                 - 38 -

     1  subsection (e) (D); may modify or vacate the order or extend it   <--
     2  until final determination.
     3     (e) (D)  No stop order may be entered under this section       <--
     4  except under subsection (d) (C) without appropriate prior notice  <--
     5  to the applicant or registrant, the issuer and the person on
     6  whose behalf the securities are to be or have been offered;
     7  opportunity for hearing; and written findings of fact and
     8  conclusions of law.
     9     (f) (E)  The commission may vacate or modify a stop order if   <--
    10  it finds that the conditions which prompted its entry have
    11  changed or that it is otherwise in the public interest to do so.
    12     Section 209.  Books, Records and Accounts.--Every issuer
    13  qualifying REGISTERING securities for sale in this State or who   <--
    14  has sold securities in this State pursuant to an exemption
    15  contained in section 202 (e), 203 (d), 203 (q) (P) or 203 (s)     <--
    16  (R) shall at all times keep and maintain a complete set of        <--
    17  books, records, and accounts of such sales and the disposition
    18  of the proceeds thereof FOR A PERIOD OF THREE YEARS FOLLOWING     <--
    19  THE LAST SALE OF SECURITIES IN THIS STATE OR ONE YEAR AFTER THE
    20  DISPOSITION OF ALL PROCEEDS, WHICHEVER IS LONGER, and shall
    21  thereafter, at such times as are required by the commission,
    22  make and file in the office of the commission, a report, setting
    23  forth the securities sold by it under such qualification          <--
    24  REGISTRATION or exemption, the proceeds derived therefrom and     <--
    25  the disposition thereof.
    26                              PART III
    27               REGISTRATION OF BROKER-DEALERS, AGENTS
    28                      AND INVESTMENT ADVISERS
    29     Section 301.  Registration Requirement.--Unless exempted
    30  under section 302 hereof:
    19720H1970B2861                 - 39 -

     1     (a)  It is unlawful for any person to transact business in
     2  this State as a broker-dealer or agent unless he is registered
     3  under this act.
     4     (b)  It is unlawful for any broker-dealer or issuer to employ
     5  an agent to represent him in this State unless the agent is
     6  registered under this act. The registration of an agent is not
     7  effective during any period when he is not associated with a
     8  specified broker-dealer registered under this act or a specified
     9  issuer. No agent shall at any time represent more than one
    10  broker-dealer or issuer, except that where affiliated
    11  organizations operating at the same location are registered       <--
    12  broker-dealers, an agent may represent any such organization.
    13  When an agent begins or terminates a connection with a broker-
    14  dealer or issuer, or begins or terminates those activities which
    15  make him an agent, the agent as well as the broker-dealer or
    16  issuer shall promptly notify the commission. The commission may
    17  adopt a temporary registration procedure to permit agents to
    18  change employers without suspension of their registrations
    19  hereunder.
    20     (c)  It is unlawful for any person to transact business in
    21  this State as an investment adviser unless he is so registered
    22  or registered as a broker-dealer under this act or unless he is
    23  exempted under section 302 (d).
    24     (d)  It is unlawful for any licensed broker-dealer, agent or
    25  investment adviser, or any affiliate of such a broker-dealer or
    26  investment adviser, to transact business EFFECT A TRANSACTION IN  <--
    27  SECURITIES in this State if the registrant is in violation of
    28  this act, or any rule or REGULATION OR order promulgated under    <--
    29  this act of which he has notice, or IF SUCH VIOLATION (I) IS A    <--
    30  MATERIAL VIOLATION; (II) RELATES TO TRANSACTIONS EFFECTED IN
    19720H1970B2861                 - 40 -

     1  THIS STATE; AND (III) HAS BEEN COMMITTED BY SUCH REGISTRANT, OR
     2  if the information contained in his application for
     3  registration, as of the date of such transaction, is incomplete
     4  in any material respect or is false or misleading with respect
     5  to any material fact.
     6     (e)  Every registration expires two years from its effective
     7  date unless renewed. The commission by rule or order REGULATION   <--
     8  may prepare an initial schedule for registration renewals so
     9  that subsequent renewals of registrations effective April 1,
    10  1972 may be staggered. For this purpose the commission may
    11  adjust the registration fee proportionately. No registration is
    12  effective after its expiration, UNLESS A REGISTRATION             <--
    13  APPLICATION HAS BEEN FILED WITHIN THE TIME PERIOD SPECIFIED IN
    14  SECTION 305 and expiration of a registration for which no
    15  renewal application has been filed is deemed an application for
    16  withdrawal under section 306 305 (f).                             <--
    17     Section 302.  Exemptions.--The following persons shall be
    18  exempted from the registration provisions of section 301:
    19     (a)  A broker-dealer registered under the Securities Exchange
    20  Act of 1934, who has not previously had any certificate denied
    21  or revoked under this act or any predecessor statute, if he has
    22  no place of business in this State and, during any period of
    23  twelve consecutive months, he does not direct offers to sell or
    24  buy into this State in any manner to persons other than broker-
    25  dealers, institutional investors or governmental agencies or AND  <--
    26  OTHER instrumentalities designated by rule REGULATION of the      <--
    27  commission, or to more than five other customers having an        <--
    28  existing account with such broker-dealer prior to any offer made
    29  to them in this State, whether or not the offeror or any of the
    30  offerees is then present in this State.
    19720H1970B2861                 - 41 -

     1     (b)  An agent in so far as he effects transactions on behalf
     2  of a broker-dealer who is exempted by the provisions of
     3  subsection (a).
     4     (c)  A bank not licensed REGISTERED as a broker-dealer UNDER   <--
     5  THIS ACT executing orders for the purchase or sale of securities
     6  as agent for the ACCOUNT OF THE purchaser or seller thereof. in   <--
     7  accordance with rules which the commission establishes.
     8     (d)  A person registered under the Investment Advisers Act of
     9  1940, who has not previously had any certificate denied or
    10  revoked under this act or any predecessor statute, if he has no   <--
    11  place of business in this State and (i) his only clients in this
    12  State are other investment advisers, broker-dealers,
    13  institutional investors or governmental agencies or AND OTHER     <--
    14  instrumentalities designated by rule REGULATION of the            <--
    15  commission, or (ii) during any period of twelve consecutive
    16  months he does not direct business communications into this
    17  State in any manner to more than five clients other than those
    18  specified in clause (i) above, whether or not he or any of the
    19  persons to whom the communications are directed is then present
    20  in this State.
    21     (e)  Any bona fide officer or director of an issuer,           <--
    22  DIRECTOR, PARTNER OR EMPLOYE OF AN ISSUER, OR AN INDIVIDUAL       <--
    23  OCCUPYING SIMILAR STATUS OR PERFORMING SIMILAR FUNCTIONS, if
    24  such person does not receive any compensation, directly or
    25  indirectly, for his activities on behalf of an issuer in
    26  connection with any security or transaction not EXCEPT THOSE      <--
    27  exempted under section 202 or 203.
    28     (f)  The commission may by such rules REGULATIONS as it deems  <--
    29  necessary or appropriate in the public interest or for the
    30  protection of investors, either unconditionally or upon
    19720H1970B2861                 - 42 -

     1  specified terms and conditions or for specified periods, exempt
     2  from the provisions of section 301 any class of persons
     3  specified in such rules. REGULATIONS.                             <--
     4     Section 303.  Registration Procedure.--(a) (i) A broker-
     5  dealer, agent, or investment adviser may obtain an initial or
     6  renewal license by filing with the commission an application
     7  together with a consent to service of process pursuant to
     8  section 701. The application shall contain such information, and
     9  in such detail, as the commission by rule requires concerning
    10  the applicant's form and place of organization, proposed method
    11  of doing business, and financial condition, the qualifications
    12  and experience of the applicant, including, in the case of a
    13  broker-dealer or investment adviser, the qualifications and
    14  experience of any partner, officer, director, or affiliate, OR A  <--
    15  PERSON OCCUPYING A SIMILAR STATUS OR PERFORMING SIMILAR
    16  FUNCTIONS any injunction or administrative order or conviction
    17  referred to in section 305 (a) (ii), information about
    18  affiliates or predecessors of the applicant, and any other
    19  matters which the commission determines are relevant to the
    20  application. The commission may by rule or order require an       <--
    21  applicant for an initial license to publish an announcement of
    22  the application in one or more specified newspapers published in
    23  this State.
    24     (ii)  If no denial order is in effect and no proceeding is
    25  pending under section 305, the registration becomes effective
    26  thirty days ON THE THIRTIETH DAY after the filing of any          <--
    27  amendment. THE APPLICATION THEREFOR OR ANY MATERIAL AMENDMENT     <--
    28  THERETO, OR ON SUCH EARLIER DATE AS THE COMMISSION MAY ORDER.
    29  The commission is directed to cooperate with other securities
    30  administrators and regulatory authorities to simplify and
    19720H1970B2861                 - 43 -

     1  coordinate registration, application and renewal procedures.
     2     (b)  Before action on an application, the commission may       <--
     3  designate an employe to make an examination of the books,
     4  records and affairs of the applicant.
     5     (c) (B)  A registered broker-dealer or investment adviser may  <--
     6  file an application for registration of a successor, whether or
     7  not the successor is then in existence, for the unexpired
     8  portion of the registrant's term. There shall be no filing fee.
     9     (d) (C)  The commission may by rule REGULATION prescribe       <--
    10  standards of qualification with respect to training, experience
    11  and knowledge of the securities business and provide for an
    12  examination, which may be written or oral or both, to be taken
    13  by any class of or all applicants, as well as persons who
    14  represent or will represent an investment adviser, and the
    15  commission may by order require an examination of a licensed
    16  broker-dealer, agent or investment adviser for due cause.
    17     (e) (D)  The commission may by rule REGULATION require a       <--
    18  minimum capital for broker-dealers and investment advisers and
    19  establish limitations on aggregate indebtedness of broker-
    20  dealers in relation to net capital and may classify broker-
    21  dealers and investment advisers for purposes of such
    22  requirements. The commission may not, however, with respect to
    23  any broker-dealer who is a member of the National Association of
    24  Securities Dealers, Inc. or who is registered with the
    25  Securities and Exchange Commission require a higher minimum
    26  capital or lower ratio of aggregate indebtedness to net capital
    27  than is contained in the rules or regulations adopted by such
    28  association or commission.
    29     (f) (E)  The commission may by rule REGULATION require surety  <--
    30  bonds TO BE POSTED by any broker-dealer, investment adviser, and  <--
    19720H1970B2861                 - 44 -

     1  any issuer who employs agents in connection with any security or
     2  transaction not exempted by section 202 or 203 in an amount not
     3  exceeding ten thousand dollars ($10,000), and all bonds required
     4  shall provide for suit thereon by injured customers, clients or
     5  purchasers, but no bond may be required of any registered
     6  broker-dealer or investment adviser whose net capital exceeds
     7  the amount prescribed by rule IN THIS SECTION 303 OR BY           <--
     8  REGULATION for this purpose. Such bond, unless cancelled as
     9  provided herein, shall be in effect during the entire period
    10  that a registration is in effect. Every bond shall contain a
    11  provision that such bond is not cancellable, except on thirty-
    12  days prior written notice to the person for BY whom the bond was  <--
    13  issued POSTED and the commission, provided that such              <--
    14  cancellation shall not affect any liability incurred or accrued
    15  prior to the effective date of such cancellation.
    16     (g)  The commission may by rule or order impose other          <--
    17  conditions in connection with the issuance of licenses under
    18  this act as it deems appropriate in the public interest and for
    19  the protection of investors.
    20     Section 304.  Post-Registration Provisions.--(a) Every
    21  registered broker-dealer and investment adviser shall make and
    22  keep all accounts, correspondence, memoranda, papers, books and
    23  other records which the commission by rule REGULATION             <--
    24  prescribes. All records required shall be preserved for three
    25  years unless the commission by rule REGULATION prescribes         <--
    26  otherwise for particular types of records. All required records
    27  shall be kept within this State or shall, at the request of the
    28  commission, be made available at any time for examination by it
    29  either in the principal office of the registrant or by
    30  production of exact copies thereof in this State.
    19720H1970B2861                 - 45 -

     1     (b)  Every registered broker-dealer and investment adviser
     2  shall file such FINANCIAL reports as the commission by rule       <--
     3  REGULATION prescribes.                                            <--
     4     (c)  If the information contained in any document filed with
     5  the commission is or becomes inaccurate or incomplete in any
     6  material respect, the registrant shall promptly file a
     7  correcting amendment.
     8     (d)  The commission shall make periodic examinations, within
     9  or without this State, of each broker-dealer and investment
    10  adviser at such REASONABLE times and in such scope as it          <--
    11  determines. REASONABLE SCOPE. These examinations may be made      <--
    12  without prior notice to the broker-dealer or investment adviser.
    13  For the purpose of avoiding unnecessary duplication of
    14  examinations, the commission, in so far as it deems it
    15  practicable in administering this subsection, may SHALL           <--
    16  cooperate with securities administrators of other states, the
    17  Securities and Exchange Commission, and any national securities
    18  exchange or national securities association registered under the
    19  Securities Exchange Act of 1934 or any other department or
    20  agency of this State.
    21     (e)  The commission may by rule REGULATION prohibit            <--
    22  unreasonable charges, commissions or other compensation of
    23  broker-dealers and investment advisers, provided that any
    24  commission rate CHARGES, COMMISSIONS, OR OTHER COMPENSATION       <--
    25  CONSISTENT WITH RATES set by a national securities exchange,
    26  when applied to transactions on that exchange, and any            <--
    27  commission rate set OR by the Securities and Exchange Commission  <--
    28  OR NATIONAL SECURITIES ASSOCIATION REGISTERED UNDER THE           <--
    29  SECURITIES EXCHANGE ACT OF 1934, shall not be deemed
    30  unreasonable under this section. Any underwriting compensation
    19720H1970B2861                 - 46 -

     1  approved PERMITTED by a national securities association           <--
     2  registered under the Securities Exchange Act of 1934 with
     3  respect to the underwriting activities of its members shall not
     4  be deemed unreasonable under this section.
     5     (f)  The commission may prescribe rules WHICH IT FINDS         <--
     6  APPROPRIATE IN THE PUBLIC INTEREST AND FOR THE PROTECTION OF
     7  INVESTORS for the conduct of business by broker-dealers and
     8  investment advisers which it finds appropriate in the public      <--
     9  interest and for the protection of investors. WHO ARE NOT         <--
    10  MEMBERS OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
    11  OR ANY OTHER NATIONAL SECURITIES ASSOCIATION REGISTERED UNDER
    12  THE SECURITIES EXCHANGE ACT OF 1934, WHICH ASSOCIATION HAS
    13  ADOPTED RULES OF CONDUCT.
    14     (g)  All broker-dealers and investment advisers registered
    15  hereunder shall display copies of their currently effective
    16  registration certificates, LICENSES, bearing the seal of the      <--
    17  commission, prominently in each place of business within this
    18  State. Each such certificate shall contain the names of such
    19  persons as the commission shall by rule provide.
    20     Section 305.  Denial, Suspension and Revocation of
    21  Registration.--(a) The commission may, by order, deny, suspend,
    22  or revoke any registration or may censure any registrant if it
    23  finds that such order is in the public interest and that such
    24  registrant or applicant, or in the case of any broker-dealer or
    25  investment adviser, any affiliate thereof, whether prior or
    26  subsequent to becoming associated with such person:
    27     (i)  Has, in any application for registration or in any
    28  report required to be filed with the commission under this act,
    29  or in any proceeding before the commission, wilfully made or
    30  caused to be made any statement which was at the time and in the
    19720H1970B2861                 - 47 -

     1  light of the circumstances under which it was made false or
     2  misleading with respect to any material fact, or has wilfully
     3  omitted to state in any such application, report or proceeding,
     4  any material fact which is required to be stated therein or
     5  necessary in order to make the statements made, in the light of
     6  the circumstances under which they are made, not misleading, or
     7  has wilfully failed to amend or supplement such an application,
     8  report or statement in a timely manner in accordance with rules
     9  which may be adopted by the commission; or
    10     (ii)  Has, within ten years of the date of the commission's
    11  action, been either (A) convicted of a felony or misdemeanor, or
    12  (B) held liable in a civil action by final judgment of a court
    13  based upon conduct showing moral turpitude, and the commission
    14  finds that any such felony, misdemeanor or civil action (I)
    15  involved the purchase or sale of any security, or any other
    16  aspect of the securities business, (II) arose out of the conduct
    17  of the business of a broker-dealer, investment adviser or issuer
    18  with respect to a security or transaction not exempt under
    19  section 202 or 203, (III) involved embezzlement, fraudulent
    20  conversion or misappropriation of property, funds or securities,
    21  or (IV) involved the violation of section 1341, 1342 or 1343 of
    22  Title 18 of the United States Code; or
    23     (iii)  Is permanently or temporarily enjoined by any court of
    24  competent jurisdiction from engaging in or continuing any
    25  conduct or practice involving any aspect of the securities
    26  BUSINESS OR INVOLVING FRAUDULENT CONDUCT IN THE banking or        <--
    27  insurance business; or
    28     (iv)  Is subject to any currently effective order or order
    29  entered within the past five years of the Securities and
    30  Exchange Commission or the securities administrator of any other
    19720H1970B2861                 - 48 -

     1  state denying registration to or revoking or suspending the
     2  registration of such person as a broker-dealer, agent or
     3  investment adviser or is subject to any currently effective
     4  order of any national securities association or national
     5  securities exchange (as defined in the Securities Exchange Act
     6  of 1934) suspending or expelling such person from membership in
     7  such association or exchange, or is the subject of a currently
     8  effective United States Postal Service fraud order; but the
     9  commission may not institute a revocation or suspension
    10  proceeding under this subsection on the basis of an order under
    11  another state law MORE THAN ONE YEAR AFTER TERMINATION OF THE     <--
    12  EFFECTIVENESS OF THE ORDER RELIED ON AND unless the order was
    13  based on facts which would currently constitute grounds for an
    14  order under this section; or
    15     (v)  Has wilfully violated any provision of the Securities
    16  Act of 1933, the Securities Exchange Act of 1934, the Trust
    17  Indenture Act of 1939, the Investment Advisers Act of 1940, the
    18  Investment Company Act of 1940 or this act, or any predecessor
    19  law, or of any rule or regulation under any of such statutes; or
    20     (vi)  Has wilfully aided, abetted, counseled, commanded,
    21  induced, or procured the violation by any other person of any of
    22  the statutes or rules or regulations referred to in subsection
    23  (v); or
    24     (vii)  Has failed reasonably to supervise his agents, if he
    25  is a broker-dealer, or his employes, if he is an investment
    26  adviser, but no person shall be deemed to have failed in such
    27  supervision if there have been established procedures, and a
    28  system for applying such procedures, which would reasonably be
    29  expected to prevent and detect, in so far as practicable, any
    30  violation of statutes, rules or orders described in subsection
    19720H1970B2861                 - 49 -

     1  (v) and if such person has reasonably discharged the duties and
     2  obligations incumbent upon him by reason of such procedures and
     3  system without reasonable cause to believe that such procedures
     4  and system were not being complied with; or
     5     (viii)  Is the subject of a currently effective order of the
     6  commission denying, suspending or revoking his registration in
     7  any other capacity under this act; or
     8     (ix)  Has engaged in dishonest or unethical practices in the
     9  securities business or has taken unfair advantage of a customer;
    10  or
    11     (x)  Is insolvent, either in the sense that his liabilities
    12  exceed his assets or in the sense that he cannot meet his
    13  obligations as they mature, or is in such financial condition
    14  that he cannot continue in business with safety to his
    15  customers, or has not sufficient financial responsibility to
    16  carry out the obligations incident to his operations PROVIDED     <--
    17  THAT THE COMMISSION HAS MADE A SPECIFIC FINDING OF INSOLVENCY,
    18  ABSENCE OF SAFETY OR INSUFFICIENT FINANCIAL RESPONSIBILITY; or
    19     (xi)  Is not qualified on the basis of such factors as
    20  training, experience and knowledge of the securities business;
    21  EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (B); or                <--
    22     (xii)  Is selling or has sold, or is offering or has offered
    23  for sale, in this State securities through any unlicensed agent   <--
    24  UNREGISTERED AGENT REQUIRED TO BE REGISTERED UNDER THIS ACT or    <--
    25  for any broker-dealer or issuer with knowledge that such broker-
    26  dealer or issuer had not or has not complied with this act; or
    27     (xiii)  Has made any material misrepresentation to or
    28  withheld or concealed from or omitted to state to the commission
    29  or any of its representatives any material fact necessary in
    30  order to make the statements made, in the light of the
    19720H1970B2861                 - 50 -

     1  circumstances under which they are made, not misleading, or has
     2  refused to furnish information reasonably requested by the
     3  commission.
     4     (b)  The enumeration of the causes stated in subsection (a)    <--
     5  shall not be exclusive, and the commission may deny, suspend or
     6  revoke any registration or censure any registrant or applicant
     7  for any cause, whether similar to or different from these
     8  causes, when necessary or appropriate in the public interest or
     9  for the protection of investors.
    10     (B)  THE FOLLOWING PROVISIONS GOVERN THE APPLICATION OF        <--
    11  SECTION 305 (A) (XI):
    12     (I)  THE COMMISSION MAY NOT ENTER AN ORDER AGAINST A BROKER-
    13  DEALER ON THE BASIS OF THE LACK OF QUALIFICATION OF ANY PERSON
    14  OTHER THAN (A) THE BROKER-DEALER HIMSELF IF HE IS AN INDIVIDUAL,
    15  OR (B) AN AGENT OF THE BROKER-DEALER.
    16     (II)  THE COMMISSION MAY NOT ENTER AN ORDER AGAINST AN
    17  INVESTMENT ADVISER ON THE BASIS OF THE LACK OF QUALIFICATION OF
    18  ANY PERSON OTHER THAN (A) THE INVESTMENT ADVISER HIMSELF IF HE
    19  IS AN INDIVIDUAL, OR (B) ANY OTHER PERSON WHO REPRESENTS THE
    20  INVESTMENT ADVISER IN DOING ANY OF THE ACTS WHICH MAKE HIM AN
    21  INVESTMENT ADVISER.
    22     (III)  THE COMMISSION MAY NOT ENTER AN ORDER SOLELY ON THE
    23  BASIS OF LACK OF EXPERIENCE IF THE APPLICANT OR REGISTRANT IS
    24  QUALIFIED BY TRAINING OR KNOWLEDGE OR BOTH.
    25     (IV)  THE COMMISSION SHALL CONSIDER THAT AN AGENT WHO WILL
    26  WORK UNDER THE SUPERVISION OF A REGISTERED BROKER-DEALER NEED
    27  NOT HAVE THE SAME QUALIFICATIONS AS A BROKER-DEALER.
    28     (V)  THE COMMISSION SHALL CONSIDER THAT AN INVESTMENT ADVISER
    29  IS NOT NECESSARILY QUALIFIED SOLELY ON THE BASIS OF EXPERIENCE
    30  AS A BROKER-DEALER OR AGENT. WHEN IT FINDS THAT AN APPLICANT FOR
    19720H1970B2861                 - 51 -

     1  INITIAL OR RENEWAL REGISTRATION AS A BROKER-DEALER IS NOT
     2  QUALIFIED AS AN INVESTMENT ADVISER, IT MAY BY ORDER CONDITION
     3  THE APPLICANT'S REGISTRATION AS A BROKER-DEALER UPON HIS NOT
     4  TRANSACTING BUSINESS IN THIS STATE AS AN INVESTMENT ADVISER.
     5     (VI)  THE COMMISSION MAY BY RULE PROVIDE FOR AN EXAMINATION,
     6  WHICH MAY BE WRITTEN OR ORAL OR BOTH, TO BE TAKEN BY ANY CLASS
     7  OF OR ALL APPLICANTS, AS WELL AS PERSONS WHO REPRESENT OR WILL
     8  REPRESENT AN INVESTMENT ADVISER IN DOING ANY OF THE ACTS WHICH
     9  MAKE HIM AN INVESTMENT ADVISER.
    10     (c)  The commission may not institute a suspension or
    11  revocation proceeding on the basis of a fact or transaction
    12  known to it when the registration became effective unless the
    13  proceeding is instituted within thirty days after such effective
    14  date.
    15     (d)  The commission may by order summarily deny, postpone or
    16  suspend an application for registration pending final
    17  determination of any proceeding under this section. Upon the
    18  entry of the order, the commission shall promptly notify the
    19  applicant or registrant, as well as the employer or prospective
    20  employer if the applicant or registrant is an agent, that it has
    21  been entered and of the reasons therefor and that within fifteen
    22  days after the receipt of a written request the matter will be
    23  set down for hearing. If no hearing is requested and none is
    24  ordered by the commission, the order will remain in effect until
    25  it is modified or vacated by the commission. If a hearing is
    26  requested or ordered, the commission, after notice of and
    27  opportunity for hearing, may modify or vacate the order or
    28  extend it until final determination.
    29     (e)  If the commission finds that any registrant or applicant
    30  is no longer in existence or has ceased to do business as a
    19720H1970B2861                 - 52 -

     1  broker-dealer, agent or investment adviser, or is subject to an
     2  adjudication of mental incompetence or to the control of a
     3  committee, conservator or guardian, or cannot be located after
     4  reasonable search, the commission may by order revoke the
     5  registration or deny the application.
     6     (f)  Withdrawal from the status of a registered broker-
     7  dealer, agent or investment adviser becomes effective thirty      <--
     8  days ON THE THIRTIETH DAY after receipt of an application to      <--
     9  withdraw, or within such shorter period as the commission
    10  determines, unless a revocation or suspension proceeding is
    11  pending before the commission when the application is filed or a
    12  proceeding to revoke or suspend or to impose conditions upon the
    13  withdrawal is instituted before the commission within thirty
    14  days after the application is filed. If a proceeding is SO        <--
    15  pending or instituted, withdrawal becomes effective at such time
    16  and upon such conditions as the commission by order determines.
    17  If no proceeding is SO pending or instituted and withdrawal       <--
    18  automatically becomes effective, the commission may institute a
    19  revocation or suspension proceeding under subsection (a) (ii)
    20  within one year after withdrawal became effective and enter a
    21  revocation or suspension order as of the last date on which the
    22  registration was in effect.
    23     (g)  No order may be entered under this section except under
    24  subsection (d) without appropriate prior notice to the applicant
    25  or registrant as well as the employer or prospective employer if
    26  the applicant or registrant is an agent, opportunity for hearing
    27  and written findings of fact and conclusions of law. In cases of
    28  denial orders, such findings and conclusions shall be provided
    29  only if requested by the applicant.
    30     Section 306.  Prohibited Employment.--(a) It is unlawful for
    19720H1970B2861                 - 53 -

     1  any person, as to whom an order suspending or revoking his
     2  registration is in effect, willfully to become or to be employed
     3  in any capacity by any broker-dealer or investment adviser or in
     4  the position of agent for an issuer without the consent of the
     5  commission; and it is unlawful for any broker-dealer, investment
     6  adviser or issuer (when such employment is in connection with a   <--
     7  security or transaction not exempted under section 202 or 203)
     8  to permit such a person to become or to remain a person employed
     9  by him without the consent of the commission if such broker-
    10  dealer, investment adviser or issuer knew, or in the exercise of
    11  reasonable care should have known, of such order.
    12     (b)  No issuer (except for a broker-dealer registered
    13  hereunder) shall employ any person as an agent hereunder if such
    14  ISSUER KNEW, OR IN THE EXERCISE OF REASONABLE CARE SHOULD HAVE    <--
    15  KNOWN, THAT SUCH person has at any time within the twelve
    16  previous months participated in this State as an agent, officer
    17  or director of an ANOTHER issuer in the sale of securities of     <--
    18  that issuer, which securities were registered under section 205
    19  or 206.
    20                              PART IV
    21                FRAUDULENT AND PROHIBITED PRACTICES
    22     Section 401.  Sales and Purchases.--It is unlawful for any
    23  person, in connection with the offer, sale or purchase of any
    24  security in this State, directly or indirectly:
    25     (a)  To employ any device, scheme or artifice to defraud;
    26     (b)  To make any untrue statement of a material fact or to
    27  omit to state a material fact necessary in order to make the
    28  statements made, in the light of the circumstances under which
    29  they are made, not misleading; or
    30     (c)  To engage in any act, practice or course of business
    19720H1970B2861                 - 54 -

     1  which operates or would operate as a fraud or deceit upon any
     2  person.
     3     Section 402.  Market Manipulation.--It is unlawful for any
     4  person, directly or indirectly, in this State:
     5     (a)  For the purpose of creating a false or misleading
     6  appearance of active trading in a security or a false or
     7  misleading appearance with respect to the market for a security:
     8     (i)  to effect any transaction in the security which involves
     9  no change in the beneficial ownership thereof; or
    10     (ii)  to enter any order or orders for the purchase (or sale)  <--
    11  of the security with the knowledge that an order or orders of
    12  substantially the same size, at substantially the same time, and
    13  at substantially the same price for the sale (or purchase) of     <--
    14  the security, have been or will be entered by or for the same or
    15  affiliated persons;
    16     (b)  To effect, alone or with one or more other persons, a
    17  series of transactions in any security creating actual or
    18  apparent active trading in the security or raising or depressing
    19  the price of the security for the purpose of inducing the
    20  purchase or sale of the security by others; or
    21     (c)  To induce the purchase or sale of any security by the
    22  circulation or dissemination of information to the effect that
    23  the price of the security will or is likely to rise or fall
    24  because of market operations of any one or more persons
    25  conducted for the purpose of raising or depressing the price of
    26  the security, if he is selling or offering to sell or purchasing
    27  or offering to purchase the security or is receiving a
    28  consideration, directly or indirectly, from any such person.
    29     Section 403.  Prohibited Transactions; Broker-dealers and
    30  Agents.--(a) No broker-dealer or agent shall effect any           <--
    19720H1970B2861                 - 55 -

     1  transaction in, or induce or attempt to induce the purchase or
     2  sale of, any security in this State by means of any
     3  manipulative, deceptive or other fraudulent scheme, device, or
     4  contrivance. The commission may, by rule, define such schemes,    <--
     5  devices or contrivances as are manipulative, deceptive, or
     6  otherwise fraudulent.
     7     (b)  No broker-dealer or agent shall effect any transaction
     8  in, or induce or attempt to induce the purchase or sale of any
     9  security in this State in connection with which such broker-
    10  dealer or agent engages in any fraudulent, deceptive or
    11  manipulative act or practice or makes any fictitious quotation.
    12  The commission may, by rule, define and prescribe means
    13  reasonably designed to prevent such acts and practices as are
    14  fraudulent, deceptive, or manipulative and such quotations as
    15  are fictitious.
    16     (c)  No broker-dealer or agent shall effect any transaction
    17  in, or induce or attempt to induce the purchase or sale of, any
    18  security in this State in contravention of such rules as the
    19  commission may prescribe as necessary or appropriate in the
    20  public interest or for the protection of investors to provide
    21  safeguards with respect to the financial responsibility of
    22  broker-dealers.
    23     (d)  No broker-dealer or agent shall effect or attempt to
    24  effect in this State, in contravention of such rules as the
    25  commission may prescribe as necessary or appropriate in the
    26  public interest or for the protection of investors, (i) any
    27  transaction in connection with any security whereby any party to
    28  such transaction acquires any put, call, straddle, or other
    29  option or privilege of buying or selling the security, or (ii)
    30  any transaction in connection with any security with relation to
    19720H1970B2861                 - 56 -

     1  which he has, directly or indirectly, any interest in any such
     2  put, call, straddle, option, or privilege, or (iii) any
     3  transaction in any security for the account of any person who he
     4  has reason to believe has, and who actually has, directly or
     5  indirectly, any interest in any such put, call, straddle,
     6  option, or privilege with relation to such security.
     7     (e)  No broker-dealer registered under this act shall effect
     8  any transaction in or induce or attempt to induce the purchase
     9  or sale of any security in this State in contravention of such
    10  rules as the commission may prescribe designed to promote just
    11  and equitable principles of trade, to provide safeguards against
    12  unreasonable profits or unreasonable rates of commissions or
    13  other charges, and in general to protect investors and the
    14  public interest, and to remove impediments to and protect the
    15  mechanism of a free and open market. CONTRIVANCE, FICTITIOUS      <--
    16  QUOTATION, OR IN VIOLATION OF THIS ACT OR ANY REGULATION OR
    17  ORDER HEREUNDER.
    18     Section 404.  Prohibited Activities; Investment Advisers.--It
    19  is unlawful for any investment adviser, directly or indirectly,
    20  in this State:
    21     (a)  To employ any device, scheme, or artifice to defraud any
    22  client or prospective client.
    23     (b)  To engage in any transaction, practice, or course of
    24  business which operates or would operate as a fraud or deceit     <--
    25  upon any client or prospective client.
    26     (c)  Acting as principal for his own account, knowingly to
    27  sell any security to or purchase any security from a client for
    28  whom he is acting as investment adviser, or, acting as broker
    29  for a person other than such client, knowingly to effect any
    30  sale or purchase of any security for the account of such client,
    19720H1970B2861                 - 57 -

     1  without disclosing to such client in writing before the
     2  completion of the transaction the capacity in which he is acting
     3  and obtaining the written consent of the client to such
     4  transaction.
     5     (d)  To engage in any act, practice, or course of business
     6  which is fraudulent, deceptive, or manipulative. The commission   <--
     7  may, by rule, define and prescribe means reasonably designed to
     8  prevent such acts, practices, and courses of business as are
     9  fraudulent, deceptive, or manipulative.
    10     (e)  To represent that he is an investment counsel or to use
    11  the name "investment counsel" as descriptive of his business
    12  unless his principal business consists of acting as investment
    13  adviser and a substantial part of his business consists of
    14  rendering investment advisory services on the basis of the
    15  individual needs of his clients.
    16     (f)  To UNLESS AN ADVISOR IS REGISTERED AS A BROKER-DEALER     <--
    17  UNDER THIS ACT, TO take and have custody of any securities or
    18  funds of any client if he fails to meet such requirements
    19  therefor as may be prescribed by the commission by rule           <--
    20  REGULATION.                                                       <--
    21     Section 405.  Contract Requirements.--(a) No investment        <--
    22  adviser shall in this State enter into, extend or renew any
    23  investment advisory contract entered into, extended or renewed
    24  on or after the effective date of this act, if such contract:
    25     (i)  Provides for compensation to the investment adviser on
    26  the basis of a share of capital gains upon or capital
    27  appreciation of the funds or any portion of the funds of the
    28  client, except (A) where the investment adviser has not
    29  registered and is not required to register under this act, (B)
    30  where such contract is for the rendering of investment advisory
    19720H1970B2861                 - 58 -

     1  services to an institutional investor, and (C) as may be
     2  otherwise permitted by rule of the commission;
     3     (ii)  Fails to provide, in writing, that no assignment of
     4  such contract shall be made by the investment adviser without
     5  the consent of the other party to the contract; or
     6     (iii)  Fails to provide, in writing, that the investment
     7  adviser, if a partnership, will notify the other party to the
     8  contract of any change in the membership of such partnership
     9  within a reasonable time after such change.
    10     (b)  As used in this section, "investment advisory contract"
    11  means any contract or agreement whereby a person agrees to act
    12  as investment adviser or to manage any investment or trading
    13  account for a person other than an investment company. Clause
    14  (i) of subsection (a) does not prohibit an investment advisory
    15  contract which provides for compensation based upon the total
    16  value of a fund averaged over a definite period, or as of
    17  definite dates, or taken as of a definite date. "Assignment," as
    18  used in clause (ii) of subsection (a), includes any direct or
    19  indirect transfer or hypothecation of an investment advisory
    20  contract by the assignor or of a controlling block of the
    21  assignor's outstanding voting securities by a security holder of
    22  the assignor; but if the investment adviser is a partnership, no
    23  assignment of an investment advisory contract is considered to
    24  result from the death or withdrawal of a minority of the members
    25  of the investment adviser having only a minority interest in the
    26  business of the investment adviser, or from the admission to the
    27  investment adviser of one or more members who, after admission,
    28  will be only a minority of the members and will have only a
    29  minority interest in the business.
    30     SECTION 405.  CONTRACT REQUIREMENTS.--IT IS UNLAWFUL FOR ANY   <--
    19720H1970B2861                 - 59 -

     1  INVESTMENT ADVISER TO ENTER INTO, EXTEND, OR RENEW ANY
     2  INVESTMENT ADVISORY CONTRACT UNLESS IT PROVIDES IN WRITING:
     3     (1)  THAT THE INVESTMENT ADVISER SHALL NOT BE COMPENSATED ON
     4  THE BASIS OF A SHARE OF CAPITAL GAINS UPON OR CAPITAL
     5  APPRECIATION OF THE FUNDS OR ANY PORTION OF THE FUNDS OF THE
     6  CLIENT;
     7     (2)  THAT NO ASSIGNMENT OF THE CONTRACT MAY BE MADE BY THE
     8  INVESTMENT ADVISER WITHOUT THE CONSENT OF THE OTHER PARTY TO THE
     9  CONTRACT; AND
    10     (3)  THAT THE INVESTMENT ADVISER, IF A PARTNERSHIP, SHALL
    11  NOTIFY THE OTHER PARTY TO THE CONTRACT OF ANY CHANGE IN THE
    12  MEMBERSHIP OF THE PARTNERSHIP WITHIN A REASONABLE TIME AFTER THE
    13  CHANGE.
    14     CLAUSE (1) DOES NOT PROHIBIT AN INVESTMENT ADVISORY CONTRACT
    15  WHICH PROVIDES FOR COMPENSATION BASED UPON THE TOTAL VALUE OF A
    16  FUND AVERAGED OVER A DEFINITE PERIOD, OR AS OF DEFINITE DATES OR
    17  TAKEN AS OF A DEFINITE DATE, OR IN ANY OTHER MANNER PERMITTED BY
    18  THE INVESTMENT ADVISERS ACT OF 1940, AND THE RULES AND
    19  REGULATIONS PROMULGATED THEREUNDER OR ANY CONTRACT FOR THE
    20  RENDERING OF INVESTMENT ADVISORY SERVICES TO AN INSTITUTIONAL
    21  INVESTOR. "ASSIGNMENT," AS USED IN CLAUSE (2), INCLUDES ANY
    22  DIRECT OR INDIRECT TRANSFER OR HYPOTHECATION OF AN INVESTMENT
    23  ADVISORY CONTRACT BY THE ASSIGNOR OR OF A CONTROLLING BLOCK OF
    24  THE ASSIGNOR'S OUTSTANDING VOTING SECURITIES BY A SECURITY
    25  HOLDER OF THE ASSIGNOR; BUT, IF THE INVESTMENT ADVISOR IS A
    26  PARTNERSHIP, NO ASSIGNMENT OF AN INVESTMENT ADVISORY CONTRACT IS
    27  CONSIDERED TO RESULT FROM THE DEATH OR WITHDRAWAL OF A MINORITY
    28  OF THE MEMBERS OF THE INVESTMENT ADVISER HAVING ONLY A MINORITY
    29  INTEREST IN THE BUSINESS OF THE INVESTMENT ADVISER, OR FROM THE
    30  ADMISSION TO THE INVESTMENT ADVISER OF ONE OR MORE MEMBERS WHO,
    19720H1970B2861                 - 60 -

     1  AFTER ADMISSION, WILL BE ONLY A MINORITY OF THE MEMBERS AND WILL
     2  HAVE ONLY A MINORITY INTEREST IN THE BUSINESS.
     3     Section 406.  Inside Information.--It is unlawful for an
     4  issuer or any person who is an officer, director, or affiliate
     5  of an issuer or any other person whose relationship to the
     6  issuer gives him access, directly or indirectly, to material
     7  information about the issuer not generally available to the
     8  public, to purchase or sell any security of the issuer in this
     9  State at a time when he knows material information about the
    10  issuer gained from such relationship, which information (a)
    11  would significantly affect the market price of that security;
    12  (b) is not generally available to the public; and (c) he knows
    13  is not intended to be so available, unless he has reason to
    14  believe that the person selling to or buying from him is also in
    15  possession of the information.
    16     Section 407.  Misleading Filings; Misrepresentations of
    17  Commission Approval.--(a) It is unlawful for any person to make
    18  or cause to be made, in any document filed with the commission
    19  or in any proceeding under this act, any statement which is, at
    20  the time and in the light of the circumstances under which it is
    21  made, false or misleading in any material respect or, in
    22  connection with such statement, to omit to state a material fact
    23  necessary in order to make the statements made, in the light of
    24  the circumstances under which they are made, not misleading.
    25     (b)  It is unlawful for any person registered as a broker-
    26  dealer, agent or investment adviser under this act to represent
    27  or imply in any manner whatsoever that such person has been
    28  sponsored, recommended, or approved or that his abilities or
    29  qualifications have in any respect been passed upon by the
    30  commission. Nothing in this section prohibits a statement (other
    19720H1970B2861                 - 61 -

     1  than in a paid advertisement) that a person is registered under
     2  this act, if such statement is true in fact and if the effect of
     3  such registration is not misrepresented.
     4     (c)  (i)  Neither the fact that an application for
     5  registration of securities under this act has been filed nor the
     6  fact that such application becomes effective constitutes a
     7  finding by the commission that any document filed under this act
     8  is true, complete or not misleading. Neither any such fact nor
     9  the fact that an exemption is available for a security or a
    10  transaction means that the commission has passed upon the merits
    11  or qualifications of, or recommended or given approval to any
    12  person, security or transaction.
    13     (ii)  It is unlawful to make, or cause to be made, to any
    14  prospective purchaser or any other person, any representation
    15  inconsistent with clause (i) of this subsection.
    16                               PART V
    17                            ENFORCEMENT
    18     Section 501.  Civil Liabilities.--(a) Any person who: (i)
    19  offers or sells a security in violation of section 301 or 407
    20  (c) or any rule REGULATION relating thereto, or any order under   <--
    21  this act of which he has notice; or (ii) offers or sells a
    22  security in violation of sections 401, 403, 404 or otherwise by
    23  means of any untrue statement of a material fact or any omission
    24  to state a material fact necessary in order to make the
    25  statements made, in the light of the circumstances under which
    26  they are made, not misleading, the purchaser not knowing of the
    27  untruth or omission, and who does not sustain the burden of
    28  proof that he did not know and in the exercise of reasonable
    29  care could not have known of the untruth or omission, shall be
    30  liable to the person purchasing the security from him, who may
    19720H1970B2861                 - 62 -

     1  sue either at law or in equity to recover the consideration paid
     2  for the security, together with interest at the legal rate from
     3  the date of payment, less the amount of any income OR             <--
     4  DISTRIBUTIONS, IN CASH OR IN KIND, received on the security,
     5  upon the tender of the security, or for damages if he no longer
     6  owns the security. Damages are the amount that would be
     7  recoverable upon a tender less the value of the security when
     8  the purchaser disposed of it, plus interest at the legal rate
     9  from the date of disposition. Tender shall require only notice
    10  of willingness to exchange the security for the amount
    11  specified. Any notice may be given by service as in civil
    12  actions or by certified mail addressed to the last known address
    13  of the person liable.
    14     (b)  Any person who purchases a security in violation of
    15  sections 401, 403, 404 or otherwise by means of any untrue
    16  statement of a material fact or any omission to state a material
    17  fact necessary in order to make the statements made, in light of
    18  the circumstances under which they are made, not misleading,
    19  shall be liable to the person selling the security to him, who
    20  may sue either at law or in equity to recover the security, plus
    21  any income OR DISTRIBUTIONS, IN CASH OR IN KIND, received by the  <--
    22  purchaser thereon, upon tender of the consideration received, or
    23  for damages if the purchaser no longer owns the security.
    24  Damages are the excess of the value of the security when the
    25  purchaser disposed of it, plus interest at the legal rate from
    26  the date of disposition, over the consideration paid for the
    27  security. Tender requires only notice of willingness to pay the
    28  amount specified in exchange for the security. Any notice may be
    29  given by service as in civil actions or by certified mail to the
    30  last known address of the person liable.
    19720H1970B2861                 - 63 -

     1     (c)  Any person who wilfully participates in any act or
     2  transaction in violation of section 402 shall be liable to any
     3  other person who purchases or sells any security at a price
     4  which was affected by the act or transaction for the damages
     5  sustained as a result of such act or transaction. Damages shall
     6  be the difference between the price at which the other person
     7  purchased or sold securities and the market value which the
     8  securities would have had at the time of his purchase or sale in
     9  the absence of the act or transaction, plus interest at the
    10  legal rate.
    11     (d)  Any investment adviser who violates section 405 shall be
    12  liable to the other party to the investment advisory contract
    13  for all fees paid under such contract to the investment adviser,
    14  less any profits earned by such party through transactions
    15  effected as a result of advice given under the contract, plus
    16  interest at the legal rate. In addition, either party may, at
    17  any time, avoid the terms of the contract. DECLARE THE CONTRACT   <--
    18  NULL AND VOID AS OF THE DATE OF SUCH DECLARATION.
    19     (e)  Any person who violates section 406 shall be liable to
    20  the person who purchases a security from him or sells a security
    21  to him IN VIOLATION OR SECTION 406, for damages equal to the      <--
    22  difference between the price at which such security was
    23  purchased or sold and the market value which such security would
    24  have had at the time of the purchase or sale if the information
    25  known to the defendant had been publicly disseminated prior to
    26  that time and a reasonable time had elapsed for the market to
    27  absorb the information, plus interest at the legal rate, unless
    28  the defendant proves that the plaintiff knew the information or
    29  that the plaintiff would have purchased or sold at the same
    30  price even if the information had been revealed to him.
    19720H1970B2861                 - 64 -

     1     Section 502.  Violation of Registration Requirements.--Any
     2  person who violates section 201 or any MATERIAL condition         <--
     3  imposed under section 206 or 207 shall be liable to the person
     4  purchasing the security OFFERED OR SOLD IN VIOLATION OF SECTION   <--
     5  201 from him who may sue at law or in equity to recover the
     6  consideration paid for the security, together with interest at
     7  the legal rate from the date of payment, less the amount of any
     8  income OR DISTRIBUTIONS, IN CASH OR IN KIND, received on the      <--
     9  security, upon the tender of the security, or for damages if he
    10  no longer owns the security. Damages shall be the amount that
    11  would be recoverable upon a tender less the value of the
    12  security when the purchaser disposed of it and interest at the
    13  legal rate from the date of disposition. Any person on whose
    14  behalf an offering is made and any underwriter of the offering,
    15  whether on a best efforts or a firm commitment basis, shall be
    16  jointly and severally liable under this section, but in no event
    17  shall any underwriter (unless such underwriter shall have         <--
    18  knowingly received from the issuer for acting as an underwriter
    19  some benefit, directly or indirectly, in which all other
    20  underwriters similarly situated did not share in proportion to
    21  their respective interest in the underwriting) be liable in any
    22  suit or suits authorized under this section for damages in
    23  excess of the total price at which the securities underwritten
    24  by him and distributed to the public were offered to the public.
    25  Tender requires only notice of willingness to exchange the
    26  security for the amount specified. Any notice may be given by
    27  service as in civil actions or by certified mail addressed to
    28  the last known address of the person liable. No person shall be
    29  liable under this section if the sale of the security is
    30  registered prior to the payment or receipt of any part of the
    19720H1970B2861                 - 65 -

     1  consideration for the security sold, even though an offer to
     2  sell or a contract of sale may have been made or entered into
     3  without registration.
     4     Section 503.  Joint and Several Liability; Contribution;
     5  Corporation's Right of Indemnification.--(a) Every affiliate of
     6  a person liable under section 501 or 502, every partner,
     7  principal executive officer or director of such person, every
     8  person occupying a similar status or performing similar
     9  functions, every employe of such person who materially aids in
    10  the act or transaction constituting the violation, and every
    11  broker-dealer or agent who materially aids in the act or
    12  transaction constituting the violation, are also liable jointly
    13  and severally with and to the same extent as such person, unless
    14  the person liable hereunder proves that he did not know, and in
    15  the exercise of reasonable care could not have known, of the
    16  existence of the facts by reason of which the liability is
    17  alleged to exist. There is contribution as in cases of contract   <--
    18  among the several persons so liable.
    19     (b)  A corporation which is liable under this act shall have
    20  a right of indemnification against any of its affiliates whose
    21  wilful violation of any provision of this act gave rise to such
    22  liability. All persons CIVILLY liable under this act shall have   <--
    23  a right of contribution against all other persons similarly
    24  liable, based upon each person's proportionate share of the
    25  total liability, except that no person whose wilful violation of
    26  any provision of this act has given rise to any CIVIL liability   <--
    27  shall have any right of contribution against any other person
    28  guilty merely of a negligent violation. and except that no        <--
    29  affiliate whose wilful violation has given rise to any liability
    30  shall have any right of contribution against the corporation to
    19720H1970B2861                 - 66 -

     1  which he sustains that relationship.
     2     Section 504.  Time Limitations on Rights of Action.--(a) No
     3  action shall be maintained to enforce any liability created
     4  under section 501 (or section 503 in so far as it relates to
     5  that section) unless brought before the expiration of six THREE   <--
     6  years after the act or transaction constituting the violation or
     7  the expiration of one year after the plaintiff receives actual
     8  notice or upon the exercise of reasonable diligence should have
     9  known of the facts constituting the violation, and of the         <--
    10  remedies provided for herein, whichever shall first expire.
    11     (b)  No action shall be maintained to enforce any liability
    12  created under section 502 (or section 503 in so far as it
    13  relates to that section) unless brought before the expiration of
    14  two years after the violation upon which it is based or the
    15  expiration of one year after the plaintiff receives actual
    16  notice or upon the exercise of reasonable diligence should have
    17  known of the facts constituting such violation, and of the        <--
    18  remedies provided for herein, whichever shall first expire.
    19     (c)  No action shall be maintained to enforce any right of
    20  indemnification or contribution created by section 504 503        <--
    21  unless brought before the expiration of one year after final
    22  judgment based upon the liability for which the right of
    23  indemnification or contribution exists.
    24     (d)  No purchaser may commence an action under section 501,
    25  502 or 503 if, before suit is commenced, the purchaser has
    26  received a written offer: (i) stating the respect in which
    27  liability under such section may have arisen and fairly advising
    28  the purchaser of his rights; offering to repurchase the security
    29  for cash, payable on delivery of the security, equal to the
    30  consideration paid, together with interest at the legal rate
    19720H1970B2861                 - 67 -

     1  from the date of payment, less the amount of any income OR        <--
     2  DISTRIBUTIONS, IN CASH OR IN KIND, received thereon or, if the
     3  purchaser no longer owns the security, offering to pay the
     4  purchaser upon acceptance of the offer an amount in cash equal
     5  to the damages computed in accordance with section 501 (a); and
     6  (ii) stating that the offer may be accepted by the purchaser at
     7  any time within a specified period of not less than thirty days
     8  after the date of receipt thereof, or such shorter period as the
     9  commission may by rule prescribe; and the purchaser has failed
    10  to accept such offer in writing within the specified period.
    11     (e)  No seller may commence an action under section 501, 502
    12  or 503 if, before suit is commenced, the seller has received a
    13  written offer: (i) stating the respect in which liability under
    14  such section may have arisen and fairly advising the seller of
    15  his rights; (ii) offering to return the security plus the amount
    16  of any income OR DISTRIBUTIONS, IN CASH OR IN KIND, received      <--
    17  thereon upon payment of the consideration received, or, if the
    18  purchaser no longer owns the security, offering to pay the
    19  seller upon acceptance of the offer an amount in cash equal to
    20  the damages computed in accordance with section 501 (b); and
    21  (iii) providing that the offer may be accepted by the seller at
    22  any time within a specified period of not less than thirty days
    23  after the date of receipt thereof; OR SUCH SHORTER PERIOD AS THE  <--
    24  COMMISSION MAY BY REGULATION PRESCRIBE and the seller has failed
    25  to accept the offer in writing within the specified period.
    26     (f)  Offers UNDER SUBSECTION (D) OR (E) OF THIS SECTION 504    <--
    27  shall be in the form and contain the information the commission
    28  by rule prescribes. Every offer under this subsection shall be
    29  delivered to the offeree personally or sent by certified mail
    30  addressed to him at his last known address. If an offer is not
    19720H1970B2861                 - 68 -

     1  performed in accordance with its terms, suit by the offeree
     2  under section 501, 502 or 503, shall be permitted without regard
     3  to SUBSECTIONS (D) AND (E) OF this section 504.                   <--
     4     Section 505.  Death of Plaintiff or Defendant.--Every cause
     5  of action under this act survives the death of any person who
     6  might have been a plaintiff or defendant.
     7     Section 506.  Limitation of Liability.--Except as explicitly
     8  provided in this act, no civil liability in favor of any private
     9  party shall arise against any person by implication from or as a
    10  result of the violation of any provision of this act or any rule
    11  or order hereunder. Nothing in this act shall limit any
    12  liability which might exist by virtue of any other statute or
    13  under common law if this act were not in effect.
    14     Section 507.  No Waiver of Right of Action.--Any condition,
    15  stipulation or provision binding any person acquiring any
    16  security to waive compliance with any provision of this act or
    17  any rule or order hereunder is void.
    18     Section 508.  Limitation on Plaintiffs.--No person may base
    19  any suit on any contract in violation of this act or any rule or
    20  order hereunder if he has made or engaged in the performance of
    21  such contract or has acquired any purported right under any such
    22  contract with knowledge of the facts by reason of which its
    23  making or performance was in violation.
    24     Section 509.  Right of Commission to Bring Action; Class
    25  Actions.--(a) Whenever it appears to the commission that any
    26  person has engaged or is about to engage in any act or practice
    27  constituting a violation of any provision of this act or any
    28  rule or order hereunder, it may in its discretion bring an
    29  action in the name of the people of the Commonwealth of
    30  Pennsylvania in the Commonwealth Court or in any of the several
    19720H1970B2861                 - 69 -

     1  courts of common pleas of Pennsylvania to enjoin the acts or
     2  practices or to enforce compliance with this act or any rule or
     3  order hereunder. Upon a proper showing, a permanent or
     4  preliminary injunction, restraining order, or writ of mandate     <--
     5  MANDAMUS shall be granted, and a receiver or conservator may be   <--
     6  appointed for the defendant or the defendant's assets. The court
     7  may not require the commission to post a bond.
     8     (b)  The commission may, with the approval of the Attorney
     9  General, include in any action authorized by subsection (a) a
    10  claim for restitution or damages under section 501, 502 or 503
    11  on behalf of the persons injured by the act or practice
    12  constituting the subject matter of the action, and the court
    13  shall have jurisdiction to award appropriate relief to such
    14  persons, if the court finds that enforcement of the rights of
    15  such persons by private civil action, whether by class action or
    16  otherwise, would be so burdensome or expensive as to be
    17  impractical.
    18     Section 510.  Investigations and Subpoenas.--(a) The
    19  commission in its discretion:
    20     (i)  May make such public or private investigations within or
    21  without this State as it deems necessary to determine whether
    22  any person has violated or is about to violate this act or any
    23  rule or order hereunder, or to aid in the enforcement of this
    24  act or in the prescribing of rules and forms hereunder;
    25     (ii)  May, for a reasonable time not exceeding thirty days,
    26  take possession of the books, records, accounts and other papers
    27  pertaining to the business of any broker-dealer or investment
    28  adviser or pertaining to the activities of any issuer in
    29  connection with any security or transaction, TRANSACTION IN A     <--
    30  SECURITY, whether or not exempted under section 202 or 203 and
    19720H1970B2861                 - 70 -

     1  the use of any proceeds obtained therefrom, and place a keeper
     2  in exclusive charge of them in the place where they are usually
     3  kept. During such possession no person shall remove or attempt
     4  to remove any of the books, records, accounts, or other papers
     5  except pursuant to a court order or with the consent of the
     6  commission; but the directors, officers, partners, and employes
     7  of the broker-dealer, investment adviser or issuer may examine
     8  them, and employes shall be permitted to make entries therein
     9  reflecting current transactions.
    10     (iii)  May require or permit any person to file a statement
    11  in writing, under oath or otherwise as the commission
    12  determines, as to all the facts and circumstances concerning the
    13  matter being investigated;
    14     (iv)  May publish information concerning any violation of
    15  this act or any rule or order hereunder or concerning
    16  securities, or practices in the sale thereof, which appear or
    17  tend to be unfair, inequitable or fraudulent, but only where it
    18  deems such publication to be in the public interest and for the
    19  protection of investors; and
    20     (v)  May hold hearings, upon reasonable notice, in respect of
    21  any matters arising out of the administration of this act.
    22     (b)  For the purpose of any investigation, hearing or
    23  proceeding under this act, the commission or any officer
    24  designated by it may administer oaths and affirmations, subpoena
    25  witnesses, compel their attendance, take evidence and require
    26  the production of any books, papers, correspondence, memoranda,
    27  agreements or other documents or records which the commission
    28  deems relevant or material to the inquiry.
    29     (c)  In case of contumacy by, or refusal to obey a subpoena
    30  issued to, any person, the Commonwealth Court or any of the
    19720H1970B2861                 - 71 -

     1  several courts of common pleas of Pennsylvania, upon application
     2  by the commission, may issue to the person an order requiring
     3  him to appear before the commission, or the officer designated
     4  by it, there to produce documentary evidence, if so ordered, or
     5  to give evidence touching the matter under investigation or in
     6  question. Failure to obey the order of the court may be punished
     7  by the court as a contempt.
     8     (d)  (i)  If, in a proceeding before the commission, any
     9  person shall refuse to testify or to produce evidence of any
    10  other kind on the ground that his testimony or evidence may tend
    11  to incriminate him, that person may be ordered to give such
    12  testimony. The order to testify shall not be given except upon
    13  an order of court after a hearing in which the Attorney General
    14  has established a need for the grant of immunity, as hereinafter
    15  provided;
    16     (ii)  The Attorney General may petition the Commonwealth
    17  Court or the court of common pleas of the county in which such
    18  person resides (if he is a resident of this State) for an order
    19  requiring any person to testify or produce evidence, which
    20  petition may be joined in by the district attorney of such
    21  county. Such petition shall set forth the nature of the
    22  investigation and the need for the immunization of the witness;
    23     (iii)  No such witness shall be prosecuted or subjected to
    24  any penalty or forfeiture, nor shall there be any liability on
    25  the part of and no cause of action of any nature shall arise
    26  against, any such witness for or on account of any transaction,
    27  matter or thing concerning which he is compelled, after having
    28  claimed his privilege against self-incrimination, to testify or
    29  produce evidence, nor shall testimony so compelled be used as
    30  evidence in any criminal proceeding against him in any court;
    19720H1970B2861                 - 72 -

     1     (iv)  No person so ordered to testify or to produce evidence,
     2  shall be exempt from any punishment or forfeiture for perjury
     3  committed by him while so testifying. Such testimony shall be
     4  admissible against him in any criminal action or other
     5  proceeding concerning such perjury;
     6     (v)  Any person who shall refuse or decline to testify or
     7  produce evidence of any other kind after being granted immunity
     8  and ordered by the court shall be guilty of criminal contempt
     9  and, upon conviction thereof, shall be sentenced to pay a fine
    10  of not exceeding one thousand dollars ($1,000), or to undergo
    11  imprisonment for a period not exceeding one year, or both.
    12     Section 511.  Criminal Penalties.--(a) Any person who          <--
    13  wilfully violates any MATERIAL provision of this act, except      <--
    14  section 407 (a), or any rule under this act, or any order of
    15  which he has notice, or who violates section 407 (a) knowing or   <--
    16  having reasonable cause to believe that the statement made was
    17  false or misleading in any material respect, may be fined not
    18  more than five thousand dollars ($5,000) or imprisoned not more
    19  than five years, or both. Each of the acts specified shall
    20  constitute a separate offense and a prosecution or conviction
    21  for any one of such offenses shall not bar prosecution or
    22  conviction for any other offense. No indictment or information
    23  may be returned under this act more than six FIVE years after     <--
    24  the alleged violation.
    25     (b)  Any person who wilfully employs, directly or indirectly,  <--
    26  any device, scheme, or artifice to defraud in connection with
    27  the offer, purchase, or sale of any security or wilfully
    28  engages, directly or indirectly, in any act, practice, or course
    29  of business which operates or would operate as a fraud or deceit
    30  upon any person in connection with the offer, purchase, or sale
    19720H1970B2861                 - 73 -

     1  of any security shall upon conviction be fined not more than
     2  five thousand dollars ($5,000), or imprisoned for not more than
     3  five years, or both.
     4                              PART VI
     5                           ADMINISTRATION
     6     Section 601.  Administration.--(a) This act shall be
     7  administered by the commission, which shall consist of three
     8  commissioners appointed by the Governor with the advice and
     9  consent of the Senate. The commissioners shall hold office at
    10  the pleasure of the Governor and until their successors are duly
    11  appointed and qualified. A quorum of the commission shall be a
    12  majority of the commissioners then serving. Any action taken at
    13  a meeting at which a quorum of the commission is present shall
    14  be the lawful act of the commission for all purposes.
    15     (b)  The commission shall also employ a secretary, who shall
    16  certify to all actions of the commission and shall make and keep
    17  all files and records of proceedings before it.
    18     (c)  It is unlawful for the commission or any of its officers
    19  or employes to use for personal benefit any information which is
    20  filed with or obtained by the commission and which is not
    21  generally available to the public. Nothing in this act
    22  authorizes the commission or any of its officers or employes to
    23  disclose any SUCH confidential information except among           <--
    24  themselves or to other securities administrators, regulatory
    25  authorities or governmental agencies, or when necessary or
    26  appropriate in a proceeding or investigation under this act or
    27  any other law of this State. No provision of this act either
    28  creates or derogates from any privilege which exists at common
    29  law or otherwise when documentary or other evidence is sought
    30  under a subpoena directed to the commission or any of its
    19720H1970B2861                 - 74 -

     1  officers or employes.
     2     (d)  The principal office of the commission shall be in
     3  Harrisburg. It shall establish and maintain offices in such
     4  other towns or cities throughout the State as it may, from time
     5  to time, determine.
     6     (e)  The commission shall adopt a seal bearing the
     7  inscription: "Pennsylvania Securities Commission." The seal
     8  shall be affixed to or imprinted on all orders or certificates
     9  issued by it and such other instruments as the commission
    10  directs. All courts shall take judicial notice of the seal.
    11     Section 602.  Fees.--(a) The commission shall charge and
    12  collect the fees fixed in this section and remit them to the
    13  General Fund.
    14     (b)  There shall be a minimum filing fee of one hundred        <--
    15  dollars ($100) for every registration statement filed under
    16  section 205 or 206 and for every exemption under section 203
    17  (i). There shall be an additional fee of one-tenth of one per
    18  cent of the maximum aggregate offering price at which such
    19  securities are to be offered in this State, and the maximum
    20  filing fee shall in no case be more than one thousand dollars
    21  ($1,000). A fee of fifty dollars ($50) shall be charged for
    22  filing a post-effective amendment other than a price amendment
    23  under section 205 (d) to an application to register securities
    24  or to an application for exemption under section 203 (i). In
    25  addition, there shall be paid any fee which would have been
    26  required to be paid with the original application if the matters
    27  stated in the amendment had been contained in the original
    28  application. If the registration statement or exemption under
    29  section 203 (i) relates to securities issued by an open-end or
    30  closed-end investment company, face-amount certificate company
    19720H1970B2861                 - 75 -

     1  or unit investment trust, as such terms are defined in the
     2  Investment Company Act of 1940, the additional fee shall be one-
     3  twentieth of one per cent of the maximum aggregate offering
     4  price at which the securities are to be offered in this State,
     5  and there shall be no maximum fee. When a registration statement
     6  is withdrawn before the effective date or a pre-effective stop
     7  order is entered under section 208, the minimum fee shall be
     8  retained.
     9     (B)  THE FILING FEES FOR SALES OF SECURITIES UNDER THIS ACT    <--
    10  SHALL BE AS FOLLOWS:
    11     (1)  ONE HUNDRED DOLLARS ($100) FOR EXEMPTION FILINGS UNDER
    12  SECTION 203 (I), EXCEPT AS PROVIDED IN CLAUSE (4) BELOW;
    13     (2)  TWO HUNDRED FIFTY DOLLARS ($250) FOR EVERY REGISTRATION
    14  STATEMENT FILED UNDER SECTION 205, EXCEPT AS PROVIDED IN CLAUSE
    15  (4) BELOW;
    16     (3)  ONE HUNDRED DOLLARS ($100) PLUS ONE-TWENTIETH OF ONE PER
    17  CENT OF THE MAXIMUM AGGREGATE OFFERING PRICE AT WHICH SUCH
    18  SECURITIES ARE OFFERED IN THIS STATE FOR EVERY REGISTRATION
    19  STATEMENT FILED UNDER SECTION 206, EXCEPT THAT THE MAXIMUM
    20  FILING FEE SHALL BE ONE THOUSAND DOLLARS ($1,000);
    21     (4)  IN THE CASE OF AN OFFERING OF SECURITIES BY AN OPEN-END
    22  OR CLOSED-END INVESTMENT COMPANY, FACE AMOUNT CERTIFICATE
    23  COMPANY OR UNIT INVESTMENT TRUST, AS SUCH TERMS ARE DEFINED IN
    24  THE INVESTMENT COMPANY ACT OF 1940, THE FILING FEE SHALL BE THE
    25  SAME AS SPECIFIED IN CLAUSE (3) ABOVE; AND
    26     (5)  WHEN A REGISTRATION STATEMENT IS WITHDRAWN BEFORE THE
    27  EFFECTIVE DATE OR A PRE-EFFECTIVE STOP ORDER IS ENTERED UNDER
    28  SECTION 208, THE COMMISSION SHALL RETAIN ONE HUNDRED DOLLARS
    29  ($100) FROM THE FILING FEE.
    30     (c)  The fee for filing an application for exemption from
    19720H1970B2861                 - 76 -

     1  registration under section 203 (n) (O) (ii) shall be fifty        <--
     2  dollars ($50). TWO HUNDRED FIFTY DOLLARS ($250). There shall be   <--
     3  no filing fee for an application under section 203 (n) (O) (i).   <--
     4     (d)  Every applicant for an initial or renewal license under
     5  section 301 shall pay a filing fee of two hundred fifty dollars
     6  ($250) in the case of a broker-dealer, fifty dollars ($50) in
     7  the case of an agent and two hundred dollars ($200) in the case
     8  of an investment adviser. The term of an agent's registration
     9  hereunder shall be concurrent with that of his employer, if a
    10  broker-dealer. When an agent changes employers, there shall be a
    11  ten dollar ($10) fee; no additional registration fee shall be
    12  paid unless the term of registration of his new employer (if a
    13  broker-dealer) expires after the term of his present
    14  registration, in which case an additional fee, prorated to allow
    15  for the time of expiration of his new employer's registration,
    16  shall be paid. A broker-dealer maintaining any office within
    17  this State shall pay an additional filing fee of eighty dollars
    18  ($80) for each office. When an application is denied or
    19  withdrawn or a registration revoked, the filing fee shall be
    20  retained.
    21     (e)  The fee for the commission's acting as an escrow holder
    22  for securities under section 207 is fifty dollars ($50). In       <--
    23  addition, a fee of two dollars fifty cents ($2.50) shall be paid
    24  for the deposit with the commission of each new certificate or
    25  other document resulting from a transfer in escrow.
    26     (f)  For the purpose of determining the fees fixed in
    27  subsection (b):
    28     (i)  The value of the securities shall be the price at which
    29  the issuer or seller proposes to sell the securities, or the
    30  value, as alleged in the application, or the actual value, as
    19720H1970B2861                 - 77 -

     1  determined by the commission, of the consideration (if other
     2  than money) to be received in exchange therefor, or of the
     3  securities when sold, whichever is greater.
     4     (ii)  Interim or voting trust certificates shall have a value
     5  equal to the aggregate value of the securities to be represented
     6  by the interim or voting trust certificates.
     7     (iii)  The value of a warrant or right to purchase or
     8  subscribe to another security of the same or another issuer
     9  shall be an amount equal to the consideration to be paid for
    10  such warrant or right plus an amount equal to the consideration
    11  to be paid upon purchase of the additional securities, provided
    12  that if such latter amount is not determinable at the time of
    13  qualification, such amount shall be the then value of such
    14  additional securities as determined by the commission.
    15     (iv)  The maximum aggregate offering price for securities of
    16  companies registered under the Investment Company Act of 1940
    17  shall be determined by multiplying the number of shares or
    18  interests offered by the average between the high and low
    19  "market price" for such securities on the fifteenth business day
    20  prior to the effective date of registration (or the applicable
    21  exemption) hereunder. The market prices shall be the amounts
    22  quoted on the securities exchange or quotation service on which
    23  such securities are listed. If the market prices for such
    24  securities cannot be determined in accordance with the
    25  foregoing, then the market price shall be the average of the
    26  high "Bid" and low "Asked" prices for such securities on such
    27  date, as quoted by any three market makers therefor or such
    28  other persons as the commission may, by order, specify. If there
    29  is no market for such securities, then the fee provided herein
    30  shall be based on the initial offering price for such
    19720H1970B2861                 - 78 -

     1  securities.
     2     (g) SEVENTY-FIVE DOLLARS ($75).                                <--
     3     (F)  The fee for any examination, audit, or investigation is
     4  the actual amount of all salary costs and other compensation
     5  paid to the persons making the examination, audit, or
     6  investigation, plus the actual amount of expenses reasonably
     7  incurred in the performance of the work. Such fee shall only be
     8  payable by a registrant, applicant for registration, issuer or
     9  other person in connection with an investigation by the
    10  commission where it has reason to believe that such person has    <--
    11  violated, or is about to violate, BEEN FOUND GUILTY OF A          <--
    12  VIOLATION OF the provisions of this act.
    13     (h) (G)  The commission may fix by rule REGULATION a           <--
    14  reasonable charge for any publication issued under its
    15  authority.
    16     (i) (H)  The commission may fix by rule REGULATION reasonable  <--
    17  charges for THE COST OF administering examinations required for   <--
    18  registration under this act by section 301.
    19     Section 603.  Administrative Files.--(a) A document is filed
    20  when it is received by the commission.
    21     (b)  The commission shall keep a register of all registrants
    22  and registration statements which are or have ever been
    23  effective under this act and predecessor laws and all denial,
    24  suspension or revocation orders which have been entered under
    25  this act and predecessor laws. The register shall be open for
    26  public inspection except with respect to summary suspensions
    27  under sections 208 (d) and 305 (d).
    28     (c)  The information contained in or filed with any
    29  registration statement, application or report shall be made
    30  available to the public in accordance with rules REGULATIONS      <--
    19720H1970B2861                 - 79 -

     1  prescribed by the commission; provided that, upon proper showing
     2  of the registrant or issuer, the commission may SHALL treat       <--
     3  certain filings as confidential. The commission may publish any   <--
     4  information filed with or obtained by it if, in the judgment of
     5  the commission, such action is in the public interest.
     6     (d)  The commission upon request shall furnish to any person,
     7  at a reasonable charge, photostatic or other copies, certified
     8  under seal of the commission if certification is requested, of
     9  any entry in the register or any order or other document on file  <--
    10  in its office. MADE AVAILABLE TO THE PUBLIC UNDER SUBSECTION (C)  <--
    11  ABOVE.
    12     Section 604.  Interpretive Opinions of Commission.--The
    13  commission in its discretion may honor requests from interested
    14  persons for interpretive opinions AND MAY MAKE SUCH OPINIONS      <--
    15  AVAILABLE TO THE PUBLIC UNDER SECTION 603 (C).
    16     Section 605.  Commissioners and Commission Employes;
    17  Relationship with Licensed Persons or Qualified Organizations.--
    18  (a)  Neither the commissioners nor any employe, clerk or servant
    19  of the commission, during their respective terms of employment,
    20  shall be interested as a director, officer, shareholder, member,
    21  partner, agent, or employe of any person who, during the period
    22  of such official's or employe's association with the commission,
    23  (i) was licensed or applied for license as a broker-dealer,
    24  agent or investment adviser under this act, or (ii) applied for
    25  or secured the registration of securities under this act.
    26     (b)  Nothing contained in subsection (a) shall prohibit the
    27  holding or purchasing of any securities by any employe, clerk,
    28  or servant in accordance with such rules REGULATIONS as the       <--
    29  commission shall adopt for the purpose of protecting the public
    30  interest and avoiding conflicts of interest with respect to such
    19720H1970B2861                 - 80 -

     1  employes, clerks and servant.
     2     (c)  Nothing contained in subsection (a) shall prohibit the
     3  holding or purchasing of any securities by any commissioner if;
     4  either (i) the commissioner, together with his spouse, minor
     5  children and parents or other relatives who are members of his
     6  household, owns less than one-tenth of one per cent of any class
     7  of outstanding securities of any issuer described in subsection
     8  (a) (ii); or (ii) such security is held or purchased through a
     9  management account or trust administered by a bank or trust
    10  company authorized to do business in this State which has sole
    11  investment discretion regarding the holding, purchase and sale
    12  of securities, and (A) the commissioner did not, directly or
    13  indirectly, advise, counsel, command or suggest the holding,
    14  purchase or sale of any such security or furnish any information
    15  relating to any such security to such bank or trust company, and
    16  (B) such account or trust does not at any time have more than
    17  ten per cent of its total assets invested in the securities of
    18  any one issuer or hold more than five per cent of the
    19  outstanding shares or units of any class of securities of any
    20  one issuer. Each commissioner shall report to the Governor not
    21  less often than quarterly all holdings, purchases, and sales of
    22  securities by him as authorized in this subsection, which         <--
    23  reports shall be retained by the Governor's office as public
    24  documents.
    25     Section 606.  Miscellaneous Powers of Commission.--(a) The
    26  commission may, by rule or order, REGULATION, require any issuer  <--
    27  of securities registered under this act or exempted from
    28  registration under section 203 (d), (p), or (r), WHICH ISSUER IS  <--
    29  NOT A REPORTING COMPANY, to distribute specified financial        <--
    30  information to its shareholders at least annually.
    19720H1970B2861                 - 81 -

     1     (b)  If the commission has reason to believe that any sale of  <--
     2  an unregistered security is unfair, inequitable or fraudulent,
     3  it may, by order, prohibit further sales of such security in
     4  this State until it is registered under this act.
     5     (c) (B)  If in its opinion the public interest and the         <--
     6  protection of investors, so require, the commission may , by      <--
     7  order, summarily suspend APPLY TO A COURT OF COMPETENT            <--
     8  JURISDICTION FOR AN ORDER, SUSPENDING all trading in this State
     9  by broker-dealers and agents in any security for any period.
    10  which it specifies. No broker-dealer or agent shall effect any    <--
    11  transaction in, or induce or attempt to induce the purchase or
    12  sale of, any security in this State in which trading is so
    13  suspended, except in performance of a contract previously
    14  entered into. At any time after the issuance of an order under
    15  this subsection, any interested person may, in writing, request
    16  that the suspension of trading be vacated. Upon the receipt of a
    17  written request, the matter shall be set down for hearing with
    18  fifteen days after such receipt. After the hearing, the
    19  commission may order the suspension to be continued until
    20  modified or vacated by further order if it finds that trading in
    21  the security will be unfair or inequitable or will tend to work
    22  a fraud upon the purchasers or sellers of the security.
    23  Otherwise, it shall vacate the suspension of trading and no
    24  further order may be entered under this subsection with respect
    25  to the same security in the absence of changed circumstances
    26  justifying an order.
    27     (d)  Every domestic corporation, business, trust, limited
    28  partnership or other similar entity, and every such foreign
    29  company licensed to do business in this State, shall, within
    30  twenty days after receipt of written request from the
    19720H1970B2861                 - 82 -

     1  commission, furnish it with a list of all or part of its
     2  stockholders, partners or other holders of ownership interests
     3  as the commission may request, showing the amount of stock or
     4  other ownership interest held by each, which list shall be duly
     5  verified by the president or secretary of the corporation, or
     6  officer or managing agent of such entity, if not a corporation.
     7     (e) (C)  No person shall publish in this State any             <--
     8  advertisement concerning any security (OTHER THAN TOMBSTONE       <--
     9  ADVERTISEMENTS PERMITTED UNDER THE SECURITIES ACT OF 1933 AND
    10  THE INVESTMENT COMPANY ACT OF 1940 AND THE RULES AND REGULATIONS
    11  PROMULGATED THEREUNDER) except in accordance with such rules as
    12  the commission may promulgate from time to time. No person shall
    13  publish any advertisement concerning any security in this State
    14  after the commission finds that the advertisement contains any
    15  statement that is false or misleading or omits to make any
    16  statement necessary in order to make the statements made, in the
    17  light of the circumstances under which they are made, not
    18  misleading and so notifies the person in writing. Such
    19  notification may be given summarily without notice of OR          <--
    20  hearing. At any time after the issuance of a notification under
    21  this section, the person desiring to use the advertisement may
    22  request in writing that the order be rescinded. Upon the receipt
    23  of such a written request, the matter shall be set down for
    24  hearing to commence within thirty days after such receipt unless
    25  the person making the request consents to a later date. After
    26  such hearing, the commission shall determine whether to affirm
    27  and continue or to rescind such order.
    28     (f) (D)  The commission may, by rule, REGULATION, delegate     <--
    29  any powers specified herein IN THIS ACT to be exercised by the    <--
    30  commission to members of the commission's staff, except for
    19720H1970B2861                 - 83 -

     1  powers related to hearings.
     2     Section 607.  Hearings and Judicial Review.--(a) Within
     3  thirty days after any order has become effective without a
     4  hearing, any interested party may apply to the commission for a
     5  hearing in respect to any matters determined by the order, and a
     6  hearing shall be held within thirty days after the application
     7  is filed. After the hearing the commission may modify the order
     8  as it deems appropriate.
     9     (b)  Within thirty days after any order has become effective
    10  after a hearing, any interested party may apply to the
    11  commission for a rehearing. The commission may grant and hold a
    12  rehearing if in its judgment sufficient reasons therefor appear.
    13  After rehearing, the commission may vacate or modify the order,
    14  and any order vacating the original order shall have the same
    15  effect as an original order. Failure to grant an application for
    16  rehearing within thirty days from the date of the filing shall
    17  constitute a denial; and failure, within fifteen days after the
    18  conclusion of a rehearing, to issue an order affirming, vacating
    19  or modifying the original order shall constitute an affirmation
    20  of the original order.
    21     (c)  Disciplinary hearings and rehearings shall be public
    22  unless the commission grants a request joined in by all parties
    23  that the hearing be conducted privately. Investigatory hearings
    24  shall not be open to members of the general public unless all
    25  parties to the hearing agree otherwise.
    26     (d)  Orders of the commission shall be subject to judicial
    27  review in accordance with law, but orders originally entered
    28  without a hearing may be reviewed only if the party seeking
    29  review has requested a hearing within the time provided by
    30  subsection (a).
    19720H1970B2861                 - 84 -

     1     Section 608.  Injunction Procedure.--(a) No injunction shall
     2  issue in any proceeding under this act suspending or staying any
     3  order of the commission, except upon application to the
     4  Commonwealth Court of Pennsylvania or the presiding judge
     5  thereof, notice of which shall be given to the commission and
     6  other parties to the proceeding, and except after an opportunity
     7  for a hearing thereon. No injunction shall issue in any other
     8  proceeding or action, in any court, which shall have the effect
     9  of delaying or preventing any such order from becoming
    10  effective, unless the parties to the proceeding before the
    11  commission are also parties to the court proceeding or action
    12  and except after notice and opportunity for a hearing.
    13     (b)  No injunction shall issue in any proceeding under
    14  section 607 or in any other proceeding or action suspending or
    15  staying any order of the commission or having the effect of
    16  delaying or preventing any such order from becoming effective
    17  unless an undertaking is entered into on the part of the
    18  petitioner or plaintiff, with a surety and in the sum the court
    19  or the presiding judge thereof directs or approves, to the
    20  effect that the petitioner or plaintiff will pay all damages
    21  which any party sustains by the suspension or stay of the order
    22  or the delay or prevention of the order's becoming effective,
    23  and to such other effect as the court or judge directs, and no
    24  order or judgment in any proceeding or action shall be stayed on
    25  appeal therefrom unless a like undertaking is entered into by
    26  the petitioner or plaintiff.
    27     Section 609.  Rules, REGULATIONS, Forms and Orders.--(a) The   <--
    28  commission may make, amend and rescind any rules, REGULATIONS,    <--
    29  forms and orders that are necessary to carry out this act,
    30  including rules REGULATIONS and forms governing registration      <--
    19720H1970B2861                 - 85 -

     1  statements, applications and reports, and defining any terms,
     2  whether or not used in this act, insofar as the definitions are
     3  not inconsistent with this act. All rules REGULATIONS of the      <--
     4  commission (other than those relating solely to its internal
     5  administration) shall BE OF GENERAL APPLICATION AND FUTURE        <--
     6  EFFECT AND SHALL be made, amended or rescinded in accordance
     7  with the act of June 4, 1945 (P.L.1388), known as the
     8  "Administrative Agency Law." LAW," AND THE ACT OF JULY 31, 1968   <--
     9  (P.L.240), KNOWN AS THE "COMMONWEALTH DOCUMENTS LAW," AND NO
    10  REGULATION SHALL BE EFFECTIVE UNTIL A PUBLIC HEARING IS HELD
    11  THEREON OR UNTIL THIRTY DAYS AFTER THE REGULATION IS PUBLISHED
    12  PURSUANT TO SUCH "COMMONWEALTH DOCUMENTS LAW." For the purpose
    13  of rules and forms, the commission may classify securities,
    14  persons and matters within its jurisdiction, and prescribe
    15  different requirements for different classes. The commission
    16  may, in its discretion, waive any requirement of any rule         <--
    17  REGULATION or form in situations where, in its opinion, such      <--
    18  requirement is not necessary in the public interest or for the
    19  protection of investors.
    20     (b)  No rule, REGULATION, form or order may be made, amended   <--
    21  or rescinded unless the commission finds that the action is
    22  necessary or appropriate in the public interest and for the
    23  protection of investors AND CONSISTENT WITH THE PURPOSES FAIRLY   <--
    24  INTENDED BY THE POLICY AND PROVISIONS OF THIS ACT.
    25     (c)  The commission may by rule or order prescribe the form    <--
    26  and content of financial statements required under this act, the
    27  circumstances under which consolidated financial statements
    28  shall be filed, and whether any required financial statements
    29  shall be certified by independent or certified public
    30  accountants. All financial statements shall be prepared in
    19720H1970B2861                 - 86 -

     1  accordance with generally accepted accounting principles
     2  consistently applied, unless otherwise permitted by rule or
     3  order.
     4     (C)  THE COMMISSION MAY BY REGULATION OR ORDER PRESCRIBE THE   <--
     5  KIND, FORM AND CONTENT OF FINANCIAL STATEMENTS REQUIRED UNDER
     6  THIS ACT, THE FISCAL OR OTHER PERIODS AND DATES FOR SUCH
     7  STATEMENTS, THE CIRCUMSTANCES UNDER WHICH CONSOLIDATED OR OTHER
     8  COMBINING FINANCIAL STATEMENTS SHALL BE FILED, OR OTHER
     9  REQUIREMENTS IT DEEMS NECESSARY FOR FINANCIAL STATEMENT
    10  PRESENTATION PURPOSES, AND WHETHER ANY REQUIRED FINANCIAL
    11  STATEMENTS SHALL BE CERTIFIED BY INDEPENDENT PUBLIC OR CERTIFIED
    12  ACCOUNTANTS IN GOOD STANDING WITH THIS STATE. ALL FINANCIAL
    13  STATEMENTS SHALL BE PREPARED REFLECTING CONFORMITY WITH
    14  GENERALLY ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED,
    15  UNLESS VARIANCE THEREFROM IS DISCLOSED IN AN ACCEPTABLE MANNER,
    16  AND SHALL REFLECT PERTINENT DISCLOSURES BY FINANCIAL NOTES OR
    17  OTHER FORM, WHERE REQUIRED FOR THAT DATA IN COMPLIANCE WITH
    18  PRONOUNCEMENTS BY RECOGNIZED AUTHORITATIVE ACCOUNTING BODIES OR
    19  IF APPLICABLE, BY GOVERNMENTAL AGENCIES, AND UNLESS OTHERWISE
    20  PERMITTED BY REGULATION OR ORDER.
    21     (d)  No provision of this act imposing any liability applies
    22  to any act done or omitted in good faith in conformity with any
    23  rule, REGULATION, form or order of the commission,                <--
    24  notwithstanding that the rule, REGULATION, form or order may      <--
    25  later be amended or rescinded or be determined to be invalid for
    26  any reason.
    27     (E)  THE COMMISSION MAY PROPOSE AND ADOPT REGULATIONS UNDER    <--
    28  THIS ACT PRIOR TO ITS EFFECTIVE DATE, PROVIDED THAT SUCH
    29  REGULATIONS DO NOT TAKE EFFECT UNTIL ON OR AFTER THE EFFECTIVE
    30  DATE OF THIS ACT.
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     1     Section 610.  Destruction of Documents and Records.--The
     2  commission may make such regulations with respect to record
     3  retention as it may deem appropriate and desirable, consistent
     4  with law.
     5                              PART VII
     6                         GENERAL PROVISIONS
     7     Section 701.  Service of Process.--(a) Every applicant for
     8  registration under this act, and every issuer which proposes to
     9  offer a security in this State through any person acting as
    10  agent, shall file with the commission, in such form as it by
    11  rule REGULATION prescribes, an irrevocable consent appointing     <--
    12  the secretary of the commission, or his successor in office, to
    13  be his attorney to receive service of any lawful process in any
    14  noncriminal suit, action or proceeding against him or his
    15  successor, executor or administrator which arises under this act
    16  or any rule REGULATION or order hereunder after the consent has   <--
    17  been filed, with the same validity as if served personally on
    18  the person filing the consent. The consent need not be filed by
    19  a person who has filed a consent in connection with a previous
    20  registration or license which is then in effect. Service may be
    21  made by leaving a copy of the process in the office of the
    22  commission, but it is not effective unless the plaintiff
    23  promptly sends notice of the service and a copy of the process
    24  by registered or certified mail to the defendant or respondent
    25  at his last address on file with the commission, and the
    26  plaintiff's affidavit of compliance with this subsection is
    27  filed in the case on or before the return day of the process, or
    28  within such time as the court allows.
    29     (b)  When any person, including any nonresident of this
    30  State, engages in conduct prohibited or made actionable by this
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     1  act or any rule REGULATION or order hereunder, and he has not     <--
     2  filed a consent to service of process under subsection (a) and
     3  personal jurisdiction over him cannot otherwise be obtained in
     4  this State, that conduct shall be considered equivalent to his
     5  appointment of the secretary of the commission to be his
     6  attorney to receive service of any lawful process in any
     7  noncriminal suit, action or proceeding against him or his
     8  successor, executor or administrator which arises out of that
     9  conduct and which is brought under this act or any rule           <--
    10  REGULATION or order hereunder, with the same validity as if       <--
    11  served on him personally. Service may be made by leaving a copy
    12  of the process in the office of the commission, but it is not
    13  effective unless the plaintiff, who may be the commission in a
    14  suit, action or proceeding instituted by it, promptly sends
    15  notice of the service and a copy of the process by registered or
    16  certified mail to the defendant or respondent at his last known
    17  address or takes other steps which are reasonably calculated to
    18  give actual notice; and the plaintiff's affidavit of compliance
    19  with this subsection is filed in the case on or before the
    20  return day of the process or within such time as the court
    21  allows.
    22     (c)  When process is served under this section the court, or
    23  the commission in a proceeding before it, shall order such
    24  continuance as is necessary to afford the defendant or
    25  respondent reasonable opportunity to defend.
    26     Section 702.  Scope of Act.--(a) The provisions of this act
    27  concerning sales and offers to sell apply when TO PERSONS WHO     <--
    28  SELL OR OFFER TO SELL WHEN (I) a sale or offer to sell is made
    29  in this State or when (II) an offer to purchase is made and       <--
    30  accepted in this State. The provisions concerning purchases and
    19720H1970B2861                 - 89 -

     1  offers to purchase apply when TO PERSONS WHO BUY OR OFFER TO BUY  <--
     2  WHEN (I) a purchase or offer to purchase is made in this State
     3  or WHEN (II) an offer to sell is made and accepted in this        <--
     4  State.
     5     (b)  For the purpose of this section, an offer to sell or to
     6  purchase is made in this State, whether or not either party is
     7  then present in this State, when the offer originates from this
     8  State or is directed by the offeror to this State and received
     9  by the offeree in this State , but ; PROVIDED, HOWEVER, for the   <--
    10  purpose of section 201 an offer to sell which is not directed to
    11  or received by the offeree in this State is not made in this
    12  State.
    13     (c)  For the purpose of this section, an offer to purchase or
    14  to sell is accepted in this State when acceptance is
    15  communicated to the offeror in this State, and has not
    16  previously been communicated to the offeror, orally or in
    17  writing, outside this State; and acceptance is communicated to
    18  the offeror in this State, whether or not either party is then
    19  present in this State, when the offeree directs it to the
    20  offeror in this State reasonably believing the offeror to be in
    21  this State, and it is received by the offeror in this State.
    22     (d)  An offer to sell or to purchase is not made in this
    23  State when the publisher circulates, or there is circulated on
    24  his behalf in this State, any bona fide newspaper or other
    25  publication of general, regular and paid circulation which is
    26  not published in this State, or a radio or television program
    27  originating outside this State is received in this State.
    28     Section 703.  Statutory Policy.--(a) This act shall be so
    29  construed as to effectuate its general purpose to make uniform
    30  the law of those states which enact the "Uniform Securities Act"
    19720H1970B2861                 - 90 -

     1  and to coordinate the interpretation and administration of this
     2  act with related Federal regulation.
     3     (b)  If any provision of this act or the application thereof
     4  to any person or circumstance is held invalid, the invalidity
     5  shall not affect other provisions or applications of this act
     6  which can be given effect without the invalid provision or
     7  application, and to this end the provisions of this law are
     8  declared to be severable.
     9     Section 704.  Prior Law.--(a) Except as expressly provided in
    10  this section, prior law exclusively governs all suits, actions,
    11  prosecutions or proceedings which are pending or may be
    12  initiated on the basis of facts or circumstances occurring
    13  before the effective date of this act.
    14     (b)  No civil suit or action may be maintained to enforce any
    15  liability or to establish that any securities are void under      <--
    16  prior law unless brought within any period of limitation which
    17  applied when the cause of action accrued.
    18     (c)  All effective certificates, orders, consents, and
    19  registrations under prior law, all administrative orders
    20  relating to the same and all conditions imposed upon the same
    21  remain in effect so long as they would have remained in effect
    22  if this act had not been enacted. They are considered to have
    23  been filed, entered, or imposed under this act, but are governed
    24  by prior law.
    25     (D)  PRIOR LAW APPLIES IN RESPECT OF ANY OFFER OR SALE MADE    <--
    26  WITHIN SIX MONTHS AFTER THE EFFECTIVE DATE OF THIS ACT PURSUANT
    27  TO AN OFFERING BEGUN IN GOOD FAITH BEFORE ITS EFFECTIVE DATE ON
    28  THE BASIS OF AN EXEMPTION AVAILABLE UNDER PRIOR LAW.
    29     (d) (E)  Judicial review of all administrative orders as to    <--
    30  which review proceedings have not been instituted by the
    19720H1970B2861                 - 91 -

     1  effective date of this act are governed by section 607, except
     2  that no review proceeding may be instituted unless the petition
     3  is filed within any period of limitation which applied to a
     4  review proceeding when the order was entered AND IN ANY EVENT     <--
     5  WITHIN SIXTY DAYS AFTER THE EFFECTIVE DATE OF THIS ACT.
     6     Section 705.  Effective Date.--This act shall take effect
     7  January 1, 1973. OCTOBER 1, 1972.                                 <--
















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