GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2003
SESSION LAW 2003-413
SENATE BILL 925
AN ACT to strengthen the laws to prevent securities fraud and TO clarify the PROHIBITion on sTATE CONTRACTs WITH VENDORS THAT ARE INCORPORATED IN A TAX HAVEN COUNTRY BUT THE UNITED STATES IS THE PRINCIPAL MARKET FOR THE PUBLIC TRADING OF THEIR CORPORATION'S STOCK.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 78A-12 reads as rewritten:
"§ 78A-12. Manipulation of market.
(a) In addition to the
prohibitions of G.S. 78A-8, it is unlawful for any person to:to do
any of the following:
(1) Willfully quote a
fictitious price with respect to a security;security.
(2) Effect a transaction
in a security which involves no change in the beneficial ownership of the
security, for the purpose of creating a false or misleading appearance of
active trading in a security, or a false or misleading appearance of activity
with respect to the market for the security;security.
(3) Enter an order for the
purchase of a security with the knowledge that, at substantially the same time,
an order of substantially the same size, and at substantially the same price,
for the sale of the security has been, or will be, entered by or for the same person,
or an affiliated person, for the purpose of creating a false or misleading
appearance of active trading in a security, or a false or misleading appearance
of activity with respect to the market for the security;security.
(4) Enter an order for the
sale of a security with knowledge that, at substantially the same time, an
order of substantially the same size, and at substantially the same price, for
the purchase of the security has been, or will be, entered by or for the same
person, or an affiliated person, for the purpose of creating a false or
misleading appearance of active trading in a security, or a false or misleading
appearance of activity with respect to the market for the security; orsecurity.
(5) Employ any other
deceptive or fraudulent device, scheme, or artifice to manipulate the market in
a security.security, including the issuance, with the intent to
deceive or defraud, of analyses, reports, or financial statements that are
false or misleading in any material respect.
(b) A transaction effected in compliance with the applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder is not manipulation of the market under subsection (a) of this section."
SECTION 2. G.S. 78A-25(a)(1)b. reads as rewritten:
"b. The issuer
and any predecessors during the past three fiscal years have had average net
earnings, determined in accordance with generally accepted accounting practices,principles,
(i) which are applicable to all securities without a fixed maturity or a fixed
interest or dividend or distribution provision outstanding at the date the
registration statement is filed and equal at least five percent (5%) of the
amount of such outstanding securities (as measured by the maximum offering
price or the market price on a day, selected by the registrant, within 30 days
before the date of filing the registration statement, whichever is higher, or
book value on a day, selected by the registrant, within 90 days of the date of
filing the registration statement to the extent that there is neither a readily
determinable market price nor a cash offering price), or (ii) which, if the
issuer and any predecessors have not had any security of the type specified in
clause (i) outstanding for three full fiscal years, equal at least five percent
(5%) of the amount (as measured in clause (i)) of all securities which will be
outstanding if all the securities being offered or proposed to be offered
(whether or not they are proposed to be registered or offered in this State)
are issued;".
SECTION 3. G.S. 78A-37(a) reads as rewritten:
"(a) A dealer or salesman
may obtain an initial or renewal registration by filing with the Administrator
an application together with a consent to service of process pursuant to G.S.
78A-63(f). The application shall contain whatever information the Administrator
by rule requires concerning such matters as (i) the applicant's form and place
of organization; (ii) the applicant's proposed method of doing business; (iii)
the qualifications and business history of the applicant; in the case of a
dealer, the qualifications and business history of any partner, officer, or
director, any person occupying a similar status or performing similar
functions, or any person directly or indirectly controlling the dealer, and a
representation that the applicant dealer is duly registered as a dealer under
the Securities Exchange Act of 1934; (iv) any injunction or administrative
order or conviction of a misdemeanor involving a security or any aspect of the
securities business and any conviction of a felony; and (v) the applicant's
financial condition and history. If no denial order is in effect and no
proceeding is pending under G.S. 78A-39, registration becomes effective at noon
of the thirtieth day after an application is filed. The Administrator may by
rule or order specify an earlier effective date,date and he may
by order defer the effective date until noon of the thirtieth day after the
filing of any amendment. Registration of a dealer automatically constitutes
registration of any salesman who is a partner, executive officer, or director,
or a person occupying a similar status or performing similar functions. After
the Administrator institutes a proceeding under G.S. 78A-39 to postpone or deny
an application for registration, withdrawal of the application shall be allowed
only at such time and under such conditions as the Administrator may by order
determine."
SECTION 4. G.S. 78A-49(c) reads as rewritten:
"(c) The Administrator may
by rule or order prescribe (i) the form and content of financial statements
required under this Chapter, (ii) the circumstances under which consolidated
financial statements shall be filed, and (iii) whether any required financial
statements shall be certified by independent or certified public accountants.
All financial statements required to be filed with the Administrator shall
be audited and shall be prepared in accordance with generally accepted
accounting practices.principles, except where the Administrator may
by rule or order provide otherwise. In determining whether to permit the filing
of financial statements that have not been audited, the Administrator shall
consider all of the following factors:
(1) Whether lesser standards for financial statements will impair investor protection.
(2) The cost of preparation of audited financial statements relative to the proposed offering amount.
(3) Whether recently audited financial statements of the issuer are available in addition to current interim statements.
(4) Whether the issuer has commenced significant business operations.
(5) Any other factors that are relevant to the protection of the investing public."
SECTION 5. G.S. 78A-56(a) reads as rewritten:
"(a) Any person who:
(1) Offers or sells a
security in violation of G.S. 78A-8(1), 78A-8(3), 78A-10(b), 78A-12, 78A-13,
78A-14, 78A-24, or 78A-36(a), or of any rule or order under G.S. 78A-49(d)
which requires the affirmative approval of sales literature before it is used,
or of any condition imposed under G.S. 78A-27(d) or 78A-28(g), or
(2) Offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of the untruth or omission), and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission,
is liable to the person purchasing
the security from him, who may sue either at law or in equity to recover the
consideration paid for the security, together with interest at the legal rate
from the date of payment, costs, and reasonable attorneys' fees, less the
amount of any income received on the security, upon the tender of the security,
or for damages if he the purchaser no longer owns the security.
Damages are the amount that would be recoverable upon a tender less the value
of the security when the purchaser disposed of it and interest at the legal
rate as provided by G.S. 24-1 from the date of disposition."
SECTION 6. G.S. 78A-56(b) reads as rewritten:
"(b) Any person who
purchases a security by means of any untrue statement of a material fact or any
omission to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made, not
misleading (the seller not knowing of the untruth or omission), and who does
not sustain the burden of proof that he the person did not know,
and in the exercise of reasonable care could not have known, of the untruth or omission,
shall be liable to the person selling the security to him, who may sue either
at law or in equity to recover the security, plus any income received by the
purchaser thereon, upon tender of the consideration received, or for damages if
the purchaser no longer owns the security. Damages are the excess of the value
of the security when the purchaser disposed of it, plus interest at the legal
rate as provided by G.S. 24-1 from the date of disposition, over the
consideration paid for the security."
SECTION 7. G.S. 78A-56 is amended by adding a new subsection to read:
"(b1) A person who willfully violates G.S. 78A-12 is liable to a person who purchases or sells a security, other than a security traded on a national securities exchange or quoted on a national automated quotation system administered by a self-regulatory organization, at a price that was affected by the act or transaction for the damages sustained as a result of the act or transaction. Damages are the difference between the price at which the securities were purchased or sold and the value the securities would have had at the time of the person's purchase or sale in the absence of the act or transaction, plus interest at the legal rate as provided by G.S. 24-1 from the date of the purchase or sale, costs, and reasonable attorneys' fees determined by the court."
SECTION 8. G.S. 78A-56(c) reads as rewritten:
"(c)
(1) Every person
who directly or indirectly controls a person liable under subsection (a) or
(b), (a), (b), or (b1) of this section, every partner, officer, or
director of such athe person, every person occupying a similar
status or performing similar functions, every employee of such a person who
materially aids in the act or transaction, and every dealer or salesmandealer
or salesman who materially aids in the sale are is also
liable jointly and severally with and to the same extent as such the person,
unless the person who is so liable sustains able to sustain the
burden of proof that he the person did not know, and in the exercise
of reasonable care should could not have known, of the existence
of the facts by reason of which the liability is alleged to exist.
(2) Unless liable under subdivision (1) of this subsection, every employee of a person liable under subsection (a), (b), or (b1) of this section who materially aids in the transaction giving rise to the liability and every other person who materially aids in the transaction giving rise to the liability is also liable jointly and severally with and to the same extent as the person if the employee or other person actually knew of the existence of the facts by reason of which the liability is alleged to exist.
(3) There is
contribution as in cases of contract among the several persons so
liable.liable under subdivisions (1) and (2) of this subsection as
provided among tort-feasors pursuant to Chapter 1B of the General Statutes."
SECTION 9. G.S. 78A-56(f) reads as rewritten:
"(f) No person may sue under this section for a violation of G.S. 78A-24 or G.S. 78A-36 more than two years after the sale or contract of sale.
No person may sue under this section for any other violation of this Chapter more than three years after the person discovers facts constituting the violation, but in any case no later than five years after the sale or contract of sale, except that if a person who may be liable under this section engages in any fraudulent or deceitful act that conceals the violation or induces the person to forgo or postpone commencing an action based upon the violation, the suit may be commenced not later than three years after the person discovers or should have discovered that the act was fraudulent or deceitful."
SECTION 10. G.S. 78A-56(j) reads as rewritten:
"(j) The rights and remedies provided by this Chapter are in addition to any other rights or remedies that may exist at law or in equity, but this Chapter does not create any cause of action not specified in this section or G.S. 78A-37(d). If the requirements of Chapter 1D of the General Statutes are met, punitive damages are available to the extent provided in that Chapter."
SECTION 11. G.S. 78A-57 reads as rewritten:
"§ 78A-57. Criminal penalties.
(a) Any person who willfully violates any provision of this Chapter except G.S. 78A-8, 78A-9, 78A-11, 78A-12, 78A-13, or 78A-14 is guilty of a Class I felony.
(a1) Any person or who
willfully violates any rule or order under this Chapter, or who willfully
violates G.S. 78A-9 knowing the statement made to be false or misleading in any
material respect, shall upon conviction be punished as a Class I felon; but no Chapter
is guilty of a Class I felony. No person may be imprisoned for the
violation of any rule or order if he the person proves
that he the person had no knowledge of the rule or order.rule.
It is an affirmative defense to a charge of violating an order under this
Chapter that the person had no knowledge of the order.
(a2) Any person who willfully
violates G.S. 78A-8, 78A-11, 78A-12, 78A-13, or 78A-14 shall, upon conviction
be punished as a Class H felon.is guilty of a felony. If the losses
caused by a single act or a series of related acts in a common scheme or plan
are one hundred thousand dollars ($100,000) or more, the person is guilty of a
Class C felony. If the losses caused by a single act or a series of related
acts in a common scheme or plan are less than one hundred thousand dollars
($100,000), the person is guilty of a Class H felony.
(a3) Any person who willfully violates G.S. 78A-9 knowing the statement made to be false or misleading in any material respect is guilty of a Class H felony. Any other willful violation of G.S. 78A-9 constitutes a Class 2 misdemeanor.
(a4) Any person who willfully violates G.S. 78A-12 is guilty of a Class H felony.
(b) The Administrator may
refer such evidence as is available concerning violations of this Chapter or of
any rule or order hereunder to the proper district attorney, who may, with or
without such a reference, institute the appropriate criminal proceedings under
this Chapter. Upon receipt of such a reference, the district
attorney may request that a duly employed attorney of the Administrator
prosecute or assist in the prosecution of such the violation or
violations on behalf of the State. Upon approval of the Administrator, such the
employee may be appointed a special prosecutor for the district attorney to
prosecute or assist in the prosecution of such the violations
without receiving compensation from the district attorney. Such a special
prosecutor shall have all the powers and duties prescribed by law for district
attorneys and such other powers and duties as are lawfully delegated to such
the special prosecutor by the district attorney for violations of
this Chapter.
(c) Nothing in this Chapter limits the power of the State to punish any person for any conduct which constitutes a crime by statute or at common law."
SECTION 12. Article 7 of Chapter 78A of the General Statutes is amended by adding a new section to read:
"§ 78A-58. Obstruction of investigation.
A person is guilty of a Class H felony if the person willfully does any of the following for the purpose of interfering with the performance of any audit, examination, or investigation by the Administrator under this Chapter:
(1) Makes or causes to be made to the Administrator or the Administrator's designated representative any false or misleading oral or written statement.
(2) Creates, causes to be made, or delivers any record, report, or document knowing that it is false or misleading in any material respect.
(3) Destroys or alters any record, report, or document.
(4) Conceals or secretes any record, report, or document."
SECTION 13. G.S. 78A-63(a) reads as rewritten:
"(a) Sections G.S.
78A-8, 78A-10, 78A-13, 78A-14, 78A-24, 78A-31, 78A-36(a), and 78A-56 apply
to persons who sell or offer to sell when (i) an offer to sell is made in this
State, or (ii) an offer to buy is made and accepted in this State."
SECTION 14. G.S. 78A-63(b) reads as rewritten:
"(b) Sections G.S.
78A-8, 78A-10, 78A-36(a) and 78A-56(b) apply to persons who buy or offer to
buy when (i) an offer to buy is made in this State, or (ii) an offer to sell is
made and accepted in this State."
SECTION 15. G.S. 78A-63 is amended by adding a new subsection to read:
"(b1) G.S. 78A-12 applies when any act instrumental to effecting prohibited conduct is done in this State."
SECTION 16. G.S. 78C-2(1) reads as rewritten:
"(1) "Investment adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities. "Investment adviser" also includes financial planners and other persons who, as an integral component of other financially related services, provide the foregoing investment advisory services to others for compensation and as a part of a business or who hold themselves out as providing the foregoing investment advisory services to others for compensation. "Investment adviser" does not include:
a. An
investment adviser representative or a person excluded from the definition of
investment adviser representative pursuant to G.S. 78C-2(3)c.;G.S.
78C-2(3)c.
b. A bank,
savings institution, or trust company;company.
c. A lawyer,
accountant, engineer, or teacher whose performance of any such services is
solely incidental to the practice of his profession;profession.
d. A dealer or
its salesman whose performance of these services is solely incidental to the
conduct of its business as a dealer and who receives no special compensation
for them;them.
e. A publisher
of any newspaper, news column, newsletter, news magazine, or business or
financial publication or service, whether communicated in hard copy form, or by
electronic means, or otherwise, that does not consist of the rendering of
advice on the basis of the specific investment situation of each client;client.
f. A
person solely by virtue of such person's services to or on behalf of any
"business development company" as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940 provided the business development company
is not an "investment company" by reason of Section 3(c)(1) of the
Investment Company Act of 1940, as both acts were in effect on June 1, 1988;June
1, 1988.
g. A personal
representative of a decedent's estate, guardian, conservator, receiver,
attorney in fact, trustee in bankruptcy, trustee of a testamentary trust, or a
trustee of an inter vivos trust, not otherwise engaged in providing investment
advisory services, and the performance of these services is not a part of a
plan or scheme to evade registration or the substantive requirements of this Chapter;Chapter.
h. A licensed
real estate agent or broker whose only compensation is a commission on real
estate sold;sold.
i. An
individual or company primarily engaged in acting as a business broker whose
only compensation is a commission on the sale of a business;business.
j. An
individual who, as an employee, officer or director of, or general partner in,
another person and in the course of performance of his duties as such, provides
investment advice to such other person, or to entities that are affiliates of
such other person, or to employee benefit plans of such other person or its
affiliated entities, or, with respect to such employee benefit plans, to
employees of such other person or its affiliated entities;entities.
k. Any
person who is exempt from registration under the Investment Advisers Act of
1940 by operation of Section 203(b)(3) of said act or by operation of any rule
or regulation promulgated by the United States Securities and Exchange
Commission under or related to said Section 203(b)(3) provided that any
reference in this sub-subsection to any statute, rule or regulation shall be
deemed to incorporate said statute, rule or regulation (and any statute, rule
or regulation referenced therein) as in effect on June 1, 1988;
l. An
employee of a person described in subdivision b., e., f., g., h., or j. of G.S.
78C-2(1) acting on behalf of such person within the scope of his employment;employment.
l 1. An investment adviser who is covered under federal law as defined in subdivision (4) of this section.
m. Such other persons not within the intent of this subsection as the Administrator may by rule or order designate."
SECTION 17. G.S. 78C-16(a) reads as rewritten:
"(a) It is unlawful for any person to transact business in this State as an investment adviser unless:
(1) The person is registered under this Chapter;
(2) The person's only
clients in this State are investment companies as defined in the Investment
Company Act of 1940, other investment advisers, investment advisers covered
under federal law, dealers, banks, trust companies, savings institutions,
savings and loan associations, insurance companies, employee benefit plans with
assets of not less than one million dollars ($1,000,000), and governmental
agencies or instrumentalities, whether acting for themselves or as trustees
with investment control, or other institutional investors as are designated by
rule or order of the Administrator; or
(3) The person has no
place of business in this State, and during the preceding 12-month period has
had not more than five clients, other than those specified in subdivision (2)
of this subsection, who are residents of the State.State; or
(4) The person is exempt from registration under the Investment Advisers Act of 1940 by operation of section 203(b)(3) of that act or by operation of any rule or regulation promulgated by the United States Securities and Exchange Commission under or related to section 203(b)(3) provided that any reference in this subsection to any statute, rule, or regulation shall be deemed to incorporate the statute, rule, or regulation (and any statute, rule, or regulation referenced therein) as in effect June 1, 1988."
SECTION 18. G.S. 78C-16(a1) reads as rewritten:
"(a1) It is unlawful for any person to transact business in this State as an investment adviser representative unless:
(1) The person is registered under this Chapter; or
(2) The person is an
investment adviser representative employed by or associated with an investment
adviser exempt from registration under subdivision (2) or (3) subdivision
(2), (3), or (4) of subsection (a) of this section; or
(3) The person is an investment adviser representative employed by or associated with an investment adviser covered under federal law that is exempt from the notice filing requirements of G.S. 78C-17(a1)."
SECTION 19. G.S. 78C-17(a) reads as rewritten:
"(a) An investment adviser, or investment adviser representative may obtain an initial or renewal registration by filing with the Administrator or the Administrator's designee an application together with a consent to service of process pursuant to G.S. 78C-46(b) and paying any reasonable costs charged by the designee for processing the filings. The application shall contain whatever information the Administrator by rule requires concerning such matters as:
(1) The applicant's form and place of organization;
(2) The applicant's proposed method of doing business;
(3) The qualifications and business history of the applicant; in the case of an investment adviser, the qualifications and business history of any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the investment adviser;
(4) Any injunction or administrative order or conviction of a misdemeanor involving a security or any aspect of the securities business and any conviction of a felony;
(5) The applicant's financial condition and history; and
(6) Any information to be furnished or disseminated to any client or prospective client.
If no denial order is in effect and no proceeding is pending
under G.S. 78C-19, registration becomes effective at noon of the 30th day after
an application is filed. The Administrator may by rule or order specify an
earlier effective date,date and he may by order defer the
effective date until noon of the 30th day after the filing of any amendment.
Registration of an investment adviser automatically constitutes registration of
any investment adviser representative who is a partner, executive officer, or
director, or a person occupying a similar status or performing similar
functions. After the Administrator institutes a proceeding under G.S. 78C-19
to postpone or deny an application for registration, withdrawal of the
application shall be allowed only at such time and under such conditions as the
Administrator may by order determine."
SECTION 20. G.S. 78C-30(c) reads as rewritten:
"(c) The Administrator may
by rule or order prescribe (i) the form and content of financial statements
required under this Chapter, (ii) the circumstances under which consolidated
financial statements shall be filed, and (iii) whether any required financial
statements shall be certified by independent or certified public accountants.
All financial statements required to be filed with the Administrator shall
be audited and shall be prepared in accordance with generally accepted
accounting practices.principles, except where the Administrator shall
by rule or order provide otherwise."
SECTION 21. G.S. 78C-38(a) reads as rewritten:
"(a) Any person who:
(1) Engages in the
business of advising others, for compensation, either directly or through
publications or writings, as to the value of securities or as to the
advisability of investing in, purchasing, or selling securities, or who, for
compensation and as a part of a regular business, issues or promulgates
analyses or reports concerning securities, in violation of G.S. 78C-8(b), G.S.
78C-16(a)G.S. 78C-16(a), (a1), or (b) (an action pursuant to a
violation of G.S. 78C-16(b) may not be maintained except by those persons who
directly received advice from the unregistered investment adviser
representative), G.S. 78C-10(b), or of any rule or order under G.S. 78C-30(d)
which requires the affirmative approval of sales literature before it is used,
or
(2) Receives, directly or indirectly, any consideration from another person for advice as to the value of securities or their purchase or sale, whether through the issuance of analyses, reports or otherwise and employs any device, scheme, or artifice to defraud such other person or engages in any act, practice or course of business which operates or would operate as a fraud or deceit on such other person, in violation of G.S. 78C-8(a)(1) or (2),
is liable to any person who is given such advice in such violation, who may sue either at law or in equity to recover (i) the consideration paid for such advice together with interest thereon at the legal rate as provided in G.S. 24-1 from the date of payment of the consideration, plus (ii) the actual damages to such person proximately caused by such violation, plus (iii) costs of the action and reasonable attorneys' fees. An action based on violation of G.S. 78C-8(b) may not prevail where the person accused of the violation sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known of the existence of the facts by reason of which the liability is alleged to exist."
SECTION 22. G.S. 78C-38(b) reads as rewritten:
"(b)
(1) Every person
who directly or indirectly controls a person liable under subsection (a) of
this section, including every partner, officer, or director of such athe
person, every person occupying a similar status or performing similar
functions, every employee or associate of such a person who materially aids
in the conduct giving rise to the liability, and every dealer or
salesmandealer or salesman who materially aids in such the
conduct giving rise to the liability is liable jointly and severally
with and to the same extent as such the person, unless able to
sustain the burden of proof that he the person did not know, and
in the exercise of reasonable care should could not have known
known, of the existence of the facts by reason of which the
liability is alleged to exist.
(2) Unless liable under subdivision (1) of this subsection, every employee or associate of a person liable under subsection (a) of this section who materially aids in the conduct giving rise to the liability and every other person who materially aids in the conduct giving rise to the liability is liable jointly and severally with and to the same extent as the person if the employee or associate or other person actually knew of the existence of the facts by reason of which the liability is alleged to exist.
(3) There is
contribution as in cases of contract among the several persons so liable
under subdivisions (1) and (2) of this subsection and as provided
among tort-feasors pursuant to Chapter 1B of the General Statutes."
SECTION 23. G.S. 78C-38(d) reads as rewritten:
"(d) No person may sue
under this section more than three years after the rendering of investment
advice in violation of this Chapter, except that in the case of a violation
of G.S. 78C-8(a)(1) or (2) a person may sue under this section within two years
after such person discovers or should have discovered, the facts constituting
the violation. G.S. 78C-16.
No person may sue under this section for any other violation of this Chapter more than three years after the person discovers facts constituting the violation, but in any case no later than five years after the rendering of investment advice, except that if a person who may be liable under this section engages in any fraudulent or deceitful act that conceals the violation or induces the person to forgo or postpone commencing an action based upon the violation, the suit may be commenced not later than three years after the person discovers or should have discovered that the act was fraudulent or deceitful."
SECTION 24. G.S. 78C-38(g) reads as rewritten:
"(g) The rights and remedies provided by this Chapter are in addition to any other rights or remedies that may exist at law or in equity, but this Chapter does not create any cause of action not specified in this section or G.S. 78C-17(e). If the requirements of Chapter 1D of the General Statutes are met, punitive damages are available to the extent provided in that Chapter."
SECTION 25. G.S. 78C-39 reads as rewritten:
"§ 78C-39. Criminal penalties.
(a) Any person who
willfully violates any provision of this Chapter except G.S. 78C-8(a)(1), 78C-8(a)(2),
78C-8(b), or 78C-9 is guilty of a Class I felony. or who willfully
violates G.S. 78C-9 knowing the statement made to be false or misleading in any
material respect, shall upon conviction be punished as a Class I felon.
(a1) Any person who willfully violates any rule or order under this Chapter is guilty of a Class I felony. No person may be imprisoned for the violation of any rule if the person proves that the person had no knowledge of the rule. It is an affirmative defense to a charge of violating an order under this Chapter that the person had no knowledge of the order.
(a2) Any person who willfully
violates G.S. 78C-8(a)(1), 78C-8(a)(2), or 78C-8(b) shall, upon conviction,
be punished as a Class H felon.is guilty of a felony. If the losses
caused, directly or indirectly, by the violator for a single act or for a
series of related acts in a common scheme or plan is one hundred thousand
dollars ($100,000) or more, the person is guilty of a Class C felony. If the
losses caused, directly or indirectly, by the violator for a single act or for
a series of related acts in a common scheme or plan is less than one hundred
thousand dollars ($100,000), the person is guilty of a Class H felony.
(a3) Any person who willfully violates G.S. 78C-9 knowing the statement made to be false or misleading in any material respect is guilty of a Class H felony. Any other willful violation of G.S. 78C-9 constitutes a Class 2 misdemeanor.
(a4) A person is guilty of a Class H felony if the person willfully does any of the following for the purpose of interfering with the performance of any audit, examination, or investigation by the Administrator under this Chapter:
(1) Makes or causes to be made to the Administrator or the Administrator's designated representative any false or misleading oral or written statement.
(2) Creates, causes to be made, or delivers any record, report, or document knowing that it is false or misleading in any material respect.
(3) Destroys or alters any record, report, or document.
(4) Conceals or secretes any record, report, or document.
(b) The Administrator may
refer such evidence as is available concerning violations of this Chapter or of
any rule or order hereunder to the proper district attorney, who may, with or
without such a reference, institute the appropriate criminal proceedings under
this Chapter. Upon receipt of such a reference, the district
attorney may request that a duly employed attorney of the Administrator
prosecute or assist in the prosecution of such the violation or
violations on behalf of the State. Upon approval of the Administrator, such the
employee may be appointed a special prosecutor for the district attorney to
prosecute or assist in the prosecution of such the violations without
receiving compensation from the district attorney. Such a special
prosecutor shall have all the powers and duties prescribed by law for district
attorneys and such other powers and duties as are lawfully delegated to such
the special prosecutor by the district attorney for violations of
this Chapter.
(c) Nothing in this Chapter limits the power of the State to punish any person for any conduct which constitutes a crime by statute or at common law."
SECTION 26. G.S. 78D-24(a) reads as rewritten:
"(a) Any person who
willfully violates any provision of this Chapter shall, upon conviction, be
punished as a Class I felon.is guilty of a felony. If the losses caused
by the violation or violations are one hundred thousand dollars ($100,000) or
more, the person is guilty of a Class C felony. If the losses caused by the
violation or violations are less than one hundred thousand dollars ($100,000),
the person is guilty of a Class H felony."
SECTION 27. G.S. 150B-21.1(a2) reads as rewritten:
"(a2) Notwithstanding the provisions
of subsection (a) of this section, the Secretary of State may adopt temporary
rules to implement the certification technology provisions of Article 11A of
Chapter 66 of the General Statutes and Statutes, to adopt uniform
Statements of Policy that have been officially adopted by the North American
Securities Administrators Association Association, Inc., for the
purpose of promoting uniformity of state securities regulation.regulation,
and to adopt rules governing the conduct of hearings pursuant to this Chapter.
After having the proposed temporary rule published in the North Carolina
Register and at least 30 days prior to adopting a temporary rule pursuant to
this subsection, the Secretary shall:
(1) Notify persons on its mailing list maintained pursuant to G.S. 150B-21.2(d) and any other interested parties of its intent to adopt a temporary rule;
(2) Accept oral and written comments on the proposed temporary rule; and
(3) Hold at least one public hearing on the proposed temporary rule.
When the Secretary adopts a temporary rule pursuant to this subsection, the Secretary must submit a reference to this subsection as the Secretary's statement of need to the Codifier of Rules.
Notwithstanding any other provision of this Chapter, the Codifier of Rules shall publish in the North Carolina Register a proposed temporary rule received from the Secretary in accordance with this subsection."
SECTION 28. G.S. 143-59.1 reads as rewritten:
"§ 143-59.1. Contracts with certain foreign vendors.
(a) Ineligible Vendors. - The Secretary of Administration and other entities to which this Article applies shall not contract for goods or services with either of the following:
(1) A vendor if the vendor or an affiliate of the vendor meets one or more of the conditions of G.S. 105-164.8(b) but refuses to collect the use tax levied under Article 5 of Chapter 105 of the General Statutes on its sales delivered to North Carolina. The Secretary of Revenue shall provide the Secretary of Administration periodically with a list of vendors to which this section applies.
(2) A vendor if the
vendor or an affiliate of the vendor that is incorporated incorporates
or reincorporates in a tax haven country after December 31, 2001, but the
United States is the principal market for the public trading of the corporation's
stock.stock of the corporation incorporated in the tax haven country.
(b) Vendor Certification. - The Secretary of Administration shall require each vendor submitting a bid or contract to certify that the vendor is not an ineligible vendor as set forth in subsection (a) of this section. Any person who submits a certification required by this subsection known to be false shall be guilty of a Class I felony.
(c) Definitions. - The following definitions apply in this section:
(1) Affiliate. - As defined in G.S. 105-163.010.
(2) Tax haven country. -
Means each of the following: Barbados, Bermuda, British Virgin Islands, Cayman Islands,
Commonwealth of the Bahamas, Cyprus, Gibraltar, Isle of Man, the
Principality of Liechtenstein, the Principality of Monaco, and the Republic
of the Seychelles."
SECTION 29. Sections 11, 12, 25, and 26 of this act become effective December 1, 2003, and apply to acts committed on or after that date. Section 28 of this act becomes effective October 1, 2003, and applies to contracts entered into on or after that date. The remainder of this act is effective when it becomes law. If House Bill 1151, 2003 Regular Session, becomes law, then the amendment to G.S. 150B-21.1(a2) made by Section 27 of this act is instead made to G.S. 150B-21.1(a)(8).
In the General Assembly read three times and ratified this the 14th day of July, 2003.
s/ Beverly E. Perdue
President of the Senate
s/ Richard T. Morgan
Speaker of the House of Representatives
s/ Michael F. Easley
Governor
Approved 10:59 a.m. this 14th day of August, 2003