A Law Office Focusing on Representing Investors who were Victims of Alabama Stock Broker Fraud
Selected Sections of the
Alabama Securities Act
Sections included on this page:
When used in this article, unless the context otherwise requires, the following terms shall have the meanings respectively ascribed to them by this section:
(1) COMMISSION or SECURITIES COMMISSION. The securities commission.
(2) AGENT. Any individual other than a dealer who represents a dealer or issuer in effecting or attempting to effect sales of securities, but such term does not include an individual who represents an issuer in:
a. Effecting a transaction in a security exempted by subdivisions (1), (2), (3), (4), (9) or (10) of Section 8-6-10;
b. Effecting transactions exempted by Section 8-6-11; or
c. Effecting transactions with existing employees, partners, or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state.
A partner, officer, or director of a dealer or issuer is an agent if he otherwise comes within this definition.
(3) DEALER. Any person engaged in the business of effecting transactions in securities for the account of others or for his own account. Such term does not include:
a. An agent, issuer, bank, savings institution, savings and loan association, credit union, or trust company, or
b. A person who has no place of business in this state if he effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions and other dealers.
(4) GUARANTEED. Guaranteed as to payment of principal, interest, or dividends.
(5) ISSUER. Every person who proposes to issue, has issued, or shall hereafter issue any security. Any person who acts for a compensation or a consideration as a promoter for or on behalf of a corporation, trust, unincorporated association, or partnership of any kind to be formed shall be deemed to be an issuer.
(6) NONISSUER. Not directly or indirectly for the benefit of the issuer.
(7) PERSON. Such term shall include a natural person, a corporation created under the laws of this or any other state, country, sovereignty, or political subdivision thereof, a partnership, an association, a joint-stock company, a trust, and any unincorporated organization. As used herein the term "trust" shall not include a trust created or appointed under or by virtue of a last will and testament, by instrument of declaration or appointment by any person for the benefit of himself, relatives, friends, servants, or employees, by a court or any public charitable trust.
(8) SALE, SELL, OFFER and OFFER TO SELL. "Sale" and "sell" includes every contract of sale of, contract to sell, or disposition of a security or interest in a security for value. "Offer" or "offer to sell" includes every attempt to offer or dispose of, or solicitation of an offer to buy, a security or interest in a security for value. Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value. A purported gift of assessable stock is considered to involve an offer and sale. Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security.
(9) SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT COMPANY ACT OF 1940, and INVESTMENT ADVISERS ACT OF 1940. The federal statutes of those names as amended at any time.
(10) SECURITY. Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under such a title or lease, annuity contract unless issued by an insurance company, bankers' shares, trustees' shares, investment participating bonds, investment trust debentures, units, shares, bonds and certificates in, for, respecting, or based upon any form of securities or collateral, subscriptions and contracts covering or pertaining to the sale or purchase on the installment plan of any security as herein defined, or subscription or contracts covering or pertaining to the sale or purchase of beneficial interest in title to property, profits or earnings, or any right to subscribe to any of the foregoing, or any instrument of any kind commonly known as a security.
(11) STATE. Any state, territory, or possession of the United States, as well as the District of Columbia and Puerto Rico.
(12) UNDERWRITER. A person who agrees to take or contracts to dispose of a stipulated amount of securities, or a portion thereof, at a fixed price.
(13) BROKER. A dealer, as hereinabove defined.
(14) SUSPEND. When used in relation to the registration of either a security, a dealer, an investment adviser, an agent, or an investment adviser representative, such term shall mean the temporary cessation or inoperativeness of such registration, whether by reason of operation of law or by reason of an order of the securities commission.
(15) REVOKE. To vacate the registration of either a security, a dealer, an investment adviser, an agent, or an investment adviser representative for cause by order of the securities commission.
(16) CANCEL. To terminate the registration of either a security, a dealer, an investment adviser, an agent, or an investment adviser representative upon application filed therefore as follows:
a. In the case of a security, upon application therefore filed by the issuer thereof or the person who secured the registration of said security;
b. In the case of a dealer, upon the application therefore filed by such dealer;
c. In the case of an investment adviser, upon the application therefore filed by such investment adviser;
d. In the case of an agent, upon the application therefore filed by either the issuer or dealer employing such agent; and
e. In the case of an investment adviser representative, upon application therefore filed by the investment adviser employing such investment adviser representative.
(17) FRAUD, DECEIT and DEFRAUD. These terms are not limited to common-law deceit.
(18) INVESTMENT ADVISER. 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 a 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 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;
b. A depository institution, which term includes a person organized, chartered, or holding an authorization certificate under the laws of this state or the United States which authorizes the person to receive deposits including a savings, share, certificate, or deposit account, and which is supervised and examined for the protection of depositors by an official or agency of this state or the United States; and a trust company or other institution authorized by federal or Alabama law to exercise fiduciary powers of the type a national bank is permitted to exercise under the authority of the Comptroller of the Currency and is supervised and examined by an official or agency of this state or the United States; but which does not include an insurance company or other organization primarily engaged in the insurance business, or a Morris Plan bank, industrial loan company, or a similar bank or company unless its deposits are insured by a federal agency;
c. A lawyer, accountant, engineer, or teacher whose performance of investment advisory services is solely incidental to the practice of that person's profession;
d. A broker-dealer or its agent whose performance of investment advisory services is solely incidental to the conduct of its business as a broker-dealer and who receives no special compensation for the investment advisory services;
e. A publisher, employee, or columnist of a newspaper, news magazine, or business or financial publication, or an owner, operator, producer, or employee of a cable, radio or television network, station, or production facility if the financial or business news published or disseminated is made available to the general public and the content does not consist of rendering advice on the basis of the specific investment situation of each client;
f. An insurance company, its employees, or agents who are engaged exclusively in the sale or distribution of life, health, or casualty insurance or insurance related products.
(19) INVESTMENT ADVISER REPRESENTATIVE. Any partner, officer, director of (or a person occupying a similar status or performing similar functions) or other individual employed by or associated with an investment adviser, except clerical or ministerial personnel, who:
a. Makes any recommendation or otherwise renders advice regarding securities,
b. Manages accounts or portfolios of clients,
c. Determines which recommendation or advice regarding securities should be given,
d. Solicits, offers, or negotiates for the sale of or sells investment advisory services, unless the solicitation, offering, or selling activities are solely incidental to his or her profession and such person is a dealer or salesman registered under Section 8-6-3 and the person would not be an investment adviser representative except for the performance of activities described in subdivision (18)d. of this section, or
e. Supervises employees who perform any of the foregoing.
(20) OFFICER. A president, vice-president, treasurer, secretary, comptroller, or any other person performing similar functions with respect to any organization whether incorporated or unincorporated.
(21) APPLICANT. A person, natural or otherwise, executing or submitting an application for registration.
(22) REGISTRANT. An applicant for whom a registration has been declared effective by the commission.
(23) AFFILIATE. A person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, an applicant or registrant.
(24) CONTROLLING PERSON, CONTROL, CONTROLLING, CONTROLLED BY, UNDER COMMON CONTROL WITH. The possession, directly, or indirectly, or the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.
(25) SALESMAN. An agent, as hereinabove defined.
(Acts 1959, No. 542, p. 1318, &sect;9; Acts 1975, No. 1044, p. 2095, &sect;1; Acts 1990, No. 90-527, p. 772, &sect;1.)
Prohibited acts regarding offer, sale, or purchase of securities.
a) It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, to:
(1) Employ any device, scheme, or artifice to defraud;
(2) Make any untrue statement of a material fact or to omit 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; or
(3) Engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.
(b) It is unlawful for any person who receives, directly or indirectly, any consideration from another person for advising the other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise,
(1) to employ any device, scheme, or artifice to defraud the other person,
(2) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the other person,
(3) acting as principal for his own account, knowingly to sell any security to or purchase any security from a client, or acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining the consent of the client to such transaction. The prohibitions of this subdivision shall not apply to any transaction with a customer of a dealer if such dealer is not acting as an investment adviser in relation to such transaction; or
(4) to engage in dishonest or unethical practices as the commission may define by rule.
(c) In the solicitation of advisory clients, it is unlawful for any person to make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading.
(d) Except as may be permitted by rule or order of the commission, it is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing,
(1) that the investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;
(2) that no assignment of the contract may be made by adviser without the consent of the other party to the contract; and
(3) that the investment adviser, if a partnership, shall notify the other party to the contract of any change in the membership of the partnership within a reasonable time after the change.
(e) Subdivision (d)(1) does not prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates or taken as of a definite date. "Assignment," as used in subdivision (d)(2), includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor; but, if the investment adviser is a partnership, no assignment of an investment advisory contract is considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment adviser of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.
(f) It is unlawful for any investment adviser to take or have custody of any securities or funds of any client if,
(1) the commission by rule prohibits custody; or
(2) in the absence of rule, the investment adviser fails to notify the commission that he has or may have custody.
(g) The commission may by rule or order adopt exemptions from subdivision (b)(3) and subdivisions (d)(1), (d)(2) and (d)(3) where such exemptions are consistent with the public interest and within the purposes fairly intended by the policy and provisions of this act.
(Acts 1959, No. 542, p. 1318, §1; Acts 1990, No. 90-527, p. 772, §1.)
Criminal penalties for violations of article: limitation on prosecution; enforcement of article; proof of scienter not required in certain proceedings.
(a) Any person who willfully violates any provisions of this article shall, upon conviction, be guilty of a Class C felony. No prosecution may be commenced under this article more than five years after the alleged violation.
(b) Any person who willfully violates any rule or order under this article shall, upon conviction, be guilty of a Class A misdemeanor.
(c) The enforcement of the provisions of this article shall be vested in the Securities Commission. It shall be the duty of the commission to see that its provisions are at all times obeyed and to take such measures and to make such investigations as will prevent or detect the violation of any provision thereof. The commission shall at once lay before the district attorney of the proper county any evidence which shall come to its knowledge of criminality under this article. In the event of the neglect or refusal of the district attorney to institute and prosecute such violation, the commission shall be authorized to proceed therein with all the rights, privileges, and powers conferred by law upon district or court attorneys including the power to appear before grand juries and to interrogate witnesses before such grand juries.
(d) Nothing in this article limits the power of the state to punish any person for any conduct which constitutes a crime by statute or at common law.
(e) In any proceeding under this article, scienter need not be alleged and proved in prosecutions involving the sale of unregistered securities or in the failure to register as a dealer, agent, investment adviser, or investment adviser representative under this article.
(Acts 1959, No. 542, p. 1318, §17; Acts 1969, No. 605, p. 1093, §7; Acts 1971, No. 2243, p. 3598, §3; Acts 1979, No. 79-462, p. 827, §6; Acts 1990, No. 90-527, p. 772, §1.)
Civil liabilities of sellers, agents, etc. : remedies of purchasers.
(a) Any person who:
(1) Sells or offers to sell a security in violation of any provision of this article or of any rule or order imposed under this article or of any condition imposed under this article, or
(2) Sells or offers to sell 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 buyer 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 buying the security from him who may bring an action to recover the consideration paid for the security, together with interest at six percent per year from the date of payment, court 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 no longer owns the security. Damages are the amount that would be recoverable upon a tender less the value of the security when the buyer disposed of it and interest at six percent per year from the date of disposition.
(b)(1) Any person who 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 part of a regular business, issues or promulgates analyses or reports concerning securities in violation of subsection (b), (c), (d), (e), or (f) of Section 8-6-17, subsection (b) or (c) of Section 8-6-3, Section 8-6-14, is liable to that person, who may bring an action to recover the consideration paid for such advice and any loss due to such advice, together with interest at six percent per year from the date of payment of the consideration plus costs and reasonable attorney's fees, less the amount of any income received from such advice.
No person may maintain an action hereunder pursuant to a violation of subsection (c) of Section 8-6-3 based solely on the fact that an investment adviser representative other than the one from whom the person received advice is unregistered.
(2) Any person who 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, is liable to that person, who may bring an action to recover the consideration paid for such advice and any loss due to such advice, together with interest at six percent per year from the date of payment of the consideration plus costs and reasonable attorney's fees, less the amount of any income received from such advice.
An action based on a violation of subsection (c) of Section 8-6-17 and this section 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.
(c) Every person who directly or indirectly controls a person liable under subsections (a) or (b) of this section, including every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee of such a person who materially aids in the conduct giving rise to the liability, and every dealer or agent who materially aids in such conduct is also liable jointly and severally with and to the same extent as the person liable under subsection (a) or (b), unless he is able to sustain the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist.
(d) Any tender specified in this section may be made at any time before entry of judgment.
(e) Every cause of action under this section survives the death of any person who might have been a plaintiff or defendant.
(f) No person may obtain relief under this section in an action involving the failure to register unless suit is brought within two years from the date of sale. All other actions for relief under this section must be brought within the earlier of two years after discovery of the violation or two years after discovery should have been made by the exercise of reasonable care. No person may bring an action under subsection (a) of this section:
(1) If the buyer received a written offer, before the action and at a time when he owned the security, to refund the consideration paid together with interest at six percent per year from the date of payment, less the amount of any income received on the security, and he failed to accept the offer within 30 days of its receipt, or
(2) If the buyer received such an offer before the action and at a time when he did not own the security, unless he rejected the offer in writing within 30 days of its receipt.
(g) No person who has made or engaged in the performance of any contract in violation of any provision of this article or any rule or order hereunder or who has acquired any purported right under any such contract with knowledge of the facts by reason of which its making or performance was in violation, may base any action on the contract.
(h) Any condition, stipulation, or provision binding any person acquiring any security or receiving any investment advice to waive compliance with any provision of this article or any rule or order hereunder is void.
(i) The rights and remedies provided by this article are in addition to any other rights or remedies that may exist.
(j)(1) The commission may by order, if it finds such order to be in the public interest, impose an administrative assessment upon any person who violates any provision of this article or any rule or order issued under this article.
(2) Any administrative assessment imposed under this section shall not exceed $5,000 for each act or omission that constitutes the basis for an order issued under this section, except that the amount of the administrative assessment may not exceed $50,000 for any person subject to the order.
(3) For the purposes of determining the amount or extent of an administrative assessment, if any, to be imposed under this section, the commission shall consider among other factors, the frequency, persistence, and willfulness of the conduct constituting a violation of any provision of this article or any rule or order issued under this article, and the number of persons adversely affected by the conduct.
(4) The administrative assessment under this section is in addition to any other penalty, remedy, or sanction that may be imposed under this article.
(5) All assessments collected under this subsection (j) of Section 8-6-19 shall be deposited in the general fund of the state.
(k)(1) The commission may charge, in addition to any administrative assessment, fine, penalty, remedy, or sanction imposed under this article, the actual cost of any investigation resulting from any violation of any provision of this article or any violation of any rule or order issued under this article or the actual cost of any examination made by the commission pursuant to this article, to the party or parties subject to such investigation or examination. Such charge may include, but is not limited to, a per diem prorated upon the salary cost of any employee of the commission together with actual travel, housing and any and all other reasonable expenses incurred as a result of such investigation or examination.
(2) All charges assessed for costs involved pursuant to subdivision (1) of subsection (k) of Section 8-6-19 shall be deposited in the Alabama Securities Commission Fund in the State Treasury to be drawn upon by the commission for its use in the administration of this article.
(Acts 1959, No. 542, p. 1318, &sect;18; Acts 1990, No. 90-527, p. 772, &sect;1.)
Liabilities for acts done or omitted in good faith under rules, forms, or orders.
No provision of this article imposing any liability applies to any act done or omitted in good faith in conformity with any rule, form, or order of the Securities Commission, notwithstanding that the rule or form may later be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.
(Acts 1959, No. 542, p. 1318, §20; Acts 1990, No. 90-527, p. 772, §1.)
Commission may issue warnings to public and publish information regarding orders.
The Securities Commission may issue and give warnings to the public concerning securities being sold in this state and may in its discretion cause to be published information regarding any orders or rules issued by the commission in the implementation of its duties, including, without limitation, information pertaining to specific orders denying registration or prohibiting the sale of securities.
(Acts 1959, No. 542, p. 1318, §25; Acts 1990, No. 90-527, p. 772, §1.)
The above is not the complete act. This page contains only certain sections of the statute which we believe you may find informative. We do not and cannot guarantee the above sections are current law in this state. Legislatures may enact revised statutes at any time. Moreover these sections are presented for informational purposes only and are presented "as is" with all faults and with no warranties or guarantees as to the accuracy. Further, The content on these pages is not offered or intended to be legal advice by this firm for any purpose or manner whatsoever. If you require the current and complete version of the Law in your state, you should visit the Legislature home page of the particular state for more information or contact an attorney for advice on obtaining such information.