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Law Offices of Eric Norstedt, P.A.
2924 Davie Road, Suite 200
Davie, Florida, 33314
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Securities Law
FEDERAL SECURITIES LAW
 - Securities Act of 1933
 - Securities Act of 1934
    - Rules Promulgated under
      the Securities Act of 1934

STATE SECURITIES LAW

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Selected Sections of the

Colorado Securities Act

 

Sections included on this page:

Sections included on this page:

Commodities Code

SHORT TITLE AND PURPOSE

(1) This article shall be known and may be cited as the “Colorado Securities Act”.
(2) The purposes of this article are to protect investors and maintain public confidence in securities markets while avoiding unreasonable burdens on participants in capital markets. This article is remedial in nature and is to be broadly construed to effectuate its purposes.
(3) The provisions of this article and rules made under this article shall be coordinated with the federal acts and statutes to which references are made in this article and rules and regulations promulgated under those federal acts and statutes, to the extent coordination is consistent with both the purposes and the provisions of this article.

DEFINITIONS

As used in this article, unless the context otherwise requires:

(1)  “Bank” means a banking institution organized under the laws of the United States, a member bank of the federal reserve system, any other banking institution or trust company, whether incorporated or not, doing business under the laws of any state or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers similar to those permitted to national banks under the authority of the comptroller of the currency, which is supervised and examined by a state or federal authority having supervision over banks, and which is not operated for the purpose of evading the provisions of the federal “Securities Act of 1933”, and a receiver, conservator, or other liquidating agent of any institution or firm described in this subsection (1).

(2)  “Broker-dealer” means a person engaged in the business of effecting purchases or sales of securities for the accounts of others or in the business of purchasing and selling securities for the person’s own account. The term does not include the following:

(a)  A sales representative;

(b)  An issuer with respect to purchasing and selling the issuer’s own securities;

(c)  A bank; or

(d)  Any other person or class of persons the securities commissioner designates by rule or order.

(3)  “Central registration depository” means the computer registration system known as the central registration depository which is maintained by the national association of securities dealers and the states that participate in that system or any successor system.

(4)  “Commodity futures trading commission” means the commission established by the federal “Commodity Exchange Act”.

(5)  “Depository institution” means:
 
(a)  A person that is organized or chartered, or is doing business or holds an authorization certificate, under the laws of a state or of the United States which authorize the person to receive deposits, including deposits in savings, share, certificate, or other deposit accounts, and that is supervised and examined for the protection of depositors by an official or agency of a state or the United States; and

(b)  A trust company or other institution that is authorized by federal or state 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 of 1940”;

(e)  A business development company as defined in the federal “Investment Company Act of 1940”; examined by an official or agency of a state or the United States. The term does not include an insurance company or other organization primarily engaged in the insurance business.
 
(5.5) (a) “Federal covered adviser” means a person who is registered or required to be registered under section 203 of the federal “Investment Advisers Act of 1940”.
(b)  “Federal covered adviser” does not include either a person excepted from the definition of “investment adviser” or exempt from registration under the federal “Investment Advisers Act of 1940” solely by reason of the fact such person advises a local government investment pool trust fund under article 75 of title 24, C.R.S.
 
(6)  “Financial or institutional investor” means any of the following, whether acting for itself or others in a fiduciary capacity:
 
(a)  A depository institution;

(b)  An insurance company;

(c)  A separate account of an insurance company;

(d)  An investment company registered under the federal “Investment Company Act

(f)   Any private business development company as defined in the federal “Investment Advisers Act of 1940”;

(g)  An employee pension, profit-sharing, or benefit plan if the plan has total assets in excess of five million dollars or its investment decisions are made by a named fiduciary, as defined in the federal “Employee Retirement Income Security Act of 1974”, that is a broker-dealer registered under the federal “Securities Exchange Act of 1934”, an investment adviser registered or exempt from registration under the federal “Investment Advisers Act of 1940”, a depository institution, or an insurance company;

(h)  An entity, but not an individual, a substantial part of whose business activities consist of investing, purchasing, selling, or trading in securities of more than one issuer and not of its own issue and that has total assets in excess of five million dollars as of the end of its latest fiscal year;

(i)   A small business investment company licensed by the federal small business administration under the federal “Small Business Investment Act of 1958”; and

(j)   Any other institutional buyer.

(7)  “Fraud”, “deceit”, and “defraud” are not limited to common-law deceit.

(8)  “Fraudulent conduct” means, for the purposes of section 11-51-410, conduct within this state which constitutes a willful violation of section 11-51-501 or conduct outside this state which would constitute a willful violation of section 11-51-501 if it had occurred within this state.
(9)  “Guaranteed” means guaranteed as to payment of principal, interest, or dividends.
 
(9.5) (a) (I) “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.
(II) “Investment adviser” includes financial planners or other persons who, as an integral component of other financially related services, provide investment advisory services to others for compensation and as a part of a business or who hold themselves out as providing investment advisory services to others for compensation.
(b) “Investment adviser” does not include:
(I)   A federal covered adviser;

(II)   A publisher of a bona fide newspaper, magazine, or business or financial publication with a regular paid circulation;

(III)  A publisher of a securities advisory newsletter with a regular and paid circulation who does not provide advice to subscribers on their specific investment situations;

(IV) An author of material included in a newspaper, magazine, publication, or newsletter who does not otherwise come within the definition of an investment adviser or investment adviser representative;

(V)  An investment adviser representative;

(VI) A licensed broker-dealer or sales representative for a licensed broker-dealer whose performance of investment advisory services is solely incidental to the conduct of the person’s business as a broker-dealer and who receives no special compensation for such services;
(VII)            A depository institution or a person employed by or directly associated with a depository institution;

(VIII)            Any lawyer, accountant, engineer, or teacher whose performance of such services is solely incidental to the practice of that person’s profession;

(IX) A person who provides investment advisory services solely while acting as an investment banker or business broker on behalf of one or more parties to, and in connection with, a transaction or proposed transaction for the transfer of a controlling interest in a business enterprise;

(X)  An official, employee, or representative of the United States, an individual state, a political subdivision of an individual state, or an agency or a corporate or other instrumentality of the United States or an individual state, while acting in such person’s official capacity on behalf of such entity;

(XI) A licensed real estate broker or salesperson whose advice to clients relates only to the investment or acquisition of real property or an interest in real property; or

(XII)            Any other person or class of persons excluded by rule or order of the securities commissioner.
 
(9.6) (a) “Investment adviser representative” with respect to an investment adviser means an individual who has a place of business in this state; who is a partner, officer, or director of an investment adviser; who occupies a status similar to or performs functions similar to those of a partner, officer, or director for an investment adviser; or who is employed or otherwise associated with an investment adviser who:
(I)   Makes recommendations or otherwise renders advice to clients regarding securities;

(II)   Manages securities accounts or portfolios for clients;

(III)  Determines which recommendation or advice regarding securities should be given to clients; or

(IV) Supervises employees of, or persons otherwise associated with, an investment adviser or a federal covered adviser who perform any of the duties specified in this paragraph (a).
 
(b) “Investment adviser representative” for a federal covered adviser means any individual with a place of business in this state who is an “investment adviser representative” as defined by the securities and exchange commission in rule 203A-3 promulgated under the federal “Investment Advisers Act of 1940”.

(c)  The term “investment adviser representative” does not include:
 
(I)   A licensed sales representative for a licensed broker-dealer whose performance of investment advisory services is solely incidental to the conduct of business as a sales representative and who receives no special consideration in connection with providing such services; or

(II)   Any other individual or class of individuals excluded by rule or order of the securities commissioner.
 
(9.7) “Investment advisory services” means those activities performed by a person in connection with such person’s engaging in any of the activities described in paragraph (a) of subsection (9.5) of this section, including such activities by a federal covered adviser or an investment adviser representative for a federal covered adviser.

(10) “Issuer” means any person who issues or proposes to issue any security; except that, with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors or persons performing similar functions or of the fixed, restricted management, or unit type, the term “issuer” means the person performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued; except that, in the case of an unincorporated association which provides by its articles for limited liability of any or all of its members or in the case of a trust, committee, or other legal entity, the trustees or members thereof shall not be individually liable as issuers of any security issued by the association, trust, committee, or other legal entity; except that, with respect to equipment-trust certificates or like securities, the term “issuer” means the person by whom the equipment or property is or is to be used; and except that, with respect to fractional undivided interests in oil, gas, or other mineral rights, the term “issuer” means the owner of any such right or of any interest in such right (whether whole or fractional) who creates fractional interests therein for the purpose of offering them for sale.

(11) “Nonissuer” means not directly or indirectly for the benefit of the issuer.

(12) “Person” means an individual, a corporation, a partnership, an association, an estate, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, a governmental subdivision or agency, or any other legal entity.
 
(12.5) “Place of business” for investment adviser representatives shall have the same meaning as defined by the securities and exchange commission in rule 203A-3 promulgated under the federal “Investment Advisers Act of 1940”.
(13) (a) “Sale” or “sell” includes every contract of sale of, contract to sell, or disposition of a security or interest in a security for value. “Offer to sell” includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
 
(b) “Purchase” or “buy” includes every contract of purchase of, contract to buy, or acquisition of a security or interest in a security for value. “Offer to purchase” includes every attempt or offer to acquire, or solicitation of an offer to sell, a security or interest in a security for value.
(c)  “Offer” means an offer to sell or an offer to purchase.

(d)  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, sold, and purchased for value.

(e)  A purported gift of assessable stock is considered to involve an offer, sale, and purchase.

(f)   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.

(g)  An “offer”, “offer to sell”, “offer to purchase”, “sale”, and “purchase” shall be deemed to be involved so far as the security holders of a corporation or other person are concerned where, pursuant to statutory provisions of the jurisdiction under which such corporation or other person is organized, or pursuant to provisions contained in its articles of incorporation or similar controlling instruments, or otherwise, there is submitted for the vote or consent of such security holders a plan or agreement for the following:

  • A reclassification of securities of such corporation or other person, other than a stock split, reverse stock split, or change in par value, which involves the substitution of a security for another security;

(II)   A statutory merger or consolidation or similar plan of acquisition in which securities of such corporation or other person held by such security holders will become or be exchanged for securities of any other person, except where the sole purpose of the transaction is to change an issuer’s domicile; or

(III)  A transfer of assets of such corporation or other person to another person, in consideration of the issuance of securities of such other person or any of its affiliates, if:
 
(A)  Such plan or agreement provides for dissolution of the corporation or other person whose security holders are voting or consenting;

(B)  Such plan or agreement provides for a pro rata or similar distribution of such securities to the security holders voting or consenting;

(C)  The board of directors or similar representative of such corporation or other person adopts resolutions relative to sub-subparagraph (A) or (B) of this subparagraph (III) within one year after taking of such vote or consent; or

(D)  The transfer of assets is a part of a preexisting plan for distribution of such securities, notwithstanding the provisions of sub-subparagraph (A), (B), or (C) of this subparagraph (III).

(h)  The terms defined in this subsection (13) do not include any bona fide pledge or loan or any dividend payable by an issuer only in its own securities if nothing of value is given by stockholders for the dividend.

(14) “Sales representative” means an individual, other than a broker-dealer, either authorized to act and acting for a broker-dealer in effecting or attempting to effect purchases or sales of securities or authorized to act and acting for an issuer in effecting or attempting to effect purchases or sales of the issuer’s own securities. An individual so acting for an issuer is not a sales representative if the individual primarily performs, or is intended primarily to perform upon completion of an offering of the issuer’s own securities, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in the issuer’s own securities and the individual’s compensation is not based, in whole or in part, upon the amount of purchases or sales of the issuer’s own securities effected for the issuer. A partner, officer, or director of a broker-dealer or issuer, or an individual occupying a similar status or performing similar functions, is a sales representative only if the individual otherwise comes within the definition.

(15) “Securities and exchange commission” means the commission established by the federal “Securities Exchange Act of 1934”.

(16) “Securities commissioner” means the commissioner of securities created by section 11-51-701.

(17) “Security” means 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 of subscription; transferable share; investment contract; viatical settlement investment; 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; or, in general, any interest or instrument commonly known as a “security” or any certificate of interest or participation in, temporary or interim certificate for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing. “Security” does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay a sum of money either in a lump sum or periodically for life or some other specified period. For purposes of this article, an “investment contract” need not involve more than one investor nor be limited to those circumstances wherein there are multiple investors who are joint participants in the same enterprise.

(18) “Self-regulatory organization” means a national securities exchange registered under section 6 of the federal “Securities Exchange Act of 1934”, a national securities association of broker-dealers registered under section 15A of the federal “Securities Exchange Act of 1934”, a clearing agency registered under section 17A of the federal “Securities Exchange Act of 1934”, the municipal securities rule-making board established under section 15B of the federal “Securities Exchange Act of 1934”, or a futures association registered under section 21 of the federal “Commodity Exchange Act”.

(19) “State” means any state, territory, or possession of the United States, the District of Columbia, or Puerto Rico.

(20) “Viatical settlement investment” means the contractual right to receive any portion of the death benefit or ownership of a life insurance policy or certificate, in exchange for consideration that is less than the expected death benefit of the life insurance policy or certificate. “Viatical settlement investment” does not include:
 
(a)  Any transaction between a viator and a viatical settlement provider as defined by section 10-7-602, C.R.S.;

(b)  Any transfer of ownership or beneficial interest in a life insurance policy from a viatical settlement provider to another viatical settlement provider as defined by section 10-7-602, C.R.S., or to any legal entity formed solely for the purpose of holding ownership or beneficial interest in a life insurance policy or policies;

(c)  The bona fide assignment of a life insurance policy to a bank, savings bank, savings and loan association, credit union, or other licensed lending institution as collateral for a loan; or

(d)  The exercise of accelerated benefits pursuant to the terms of a life insurance policy issued in accordance with title 10, C.R.S.

REFERENCES TO FEDERAL STATUTES

(1)  Each reference in this article to a federal act or statute means, unless the context otherwise requires, that act or statute as in effect on January 1, 1990, together with all rules and regulations under such act or statute as in effect on that date, except as subsequent amendments may become applicable under this article pursuant to subsection (2) of this section.

(2)  (a) Whenever an amendment to any federal act or statute to which reference is made in this article is enacted with an effective date on or after January 1, 1990, or whenever an amendment to any rule or regulation under any such federal act or statute is promulgated with an effective date on or after such date, the securities commissioner shall determine whether giving effect to such amendment is inconsistent with the purposes of this article set forth in section 11-51-101 (2), any other provision of this article, or any rule under this article. If the securities commissioner determines that an inconsistency exists, the securities commissioner shall commence rule-making proceedings for the purpose of making, amending, or rescinding such rules under this article as may be appropriate to carry out the policy stated in section 11-51-101 (3). If no rule-making proceeding with respect to such amendment is commenced within ninety days after the effective date of such amendment (or within ninety days after the effective date of this article as set forth in section 11-51-801, if later), such amendment shall apply to this article and the rules under this article. If a rule-making proceeding with respect to such amendment is commenced within ninety days after the effective date of such amendment (or within ninety days after the effective date of this article as set forth in section 11-51-801, if later), such amendment shall not apply to this article or any rule under this article except as may be provided by rule upon completion of such rule-making proceeding.
 
(b) No provision of this article imposing any liability upon a person or providing a basis for any sanction against a person applies to any act done or omitted by such person in good faith and in conformity with the provisions of this article and the rules under this article, as in effect prior to the effective date of any amendment to any federal act or statute to which reference is made in this article or any amendment to any rule or regulation under any such federal act or statute during the period commencing upon the effective date of such amendment and ending on the date determined by the following:
(I)  If no rule-making proceeding with respect to such amendment is commenced under this subsection (2) within ninety days after its effective date (or within ninety days after the effective date of this article as set forth in section 11-51-801, if later), ending on the ninetieth day after such effective date; or
 
 
(II) If such a rule-making proceeding is commenced within such period of ninety days, ending upon completion of such rule-making proceeding.
 
(3)  Each reference in this article to the federal “Investment Advisers Act of 1940” means that act in effect on April 30, 1998, together with all rules and regulations under such federal act as in effect on that date, except as subsequent amendments may become applicable under this article pursuant to subsection (2) of this section.
 

FRAUD AND OTHER PROHIBITED CONDUCT

(1)  It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly:

(a)  To employ any device, scheme, or artifice to defraud;

(b)  To 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

(c)  To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
 
(2)  It is unlawful for a custodian of the funds or securities of a local government investment pool trust fund organized under the provisions of part 7 of article 75 of title 24, C.R.S., to effect any transaction to relinquish possession of, distribute, expend, or transfer any of the assets of the trust fund without the prior written authorization of the board, except for:

(a)  The purchase or sale of authorized investments or the exchange of such assets for other assets of equal or greater value if such sale, purchase, or exchange is solely in the accounts of the trust fund;

(b)  Distributions to participating local governments; or

(c)  The payment of routine fees and expenses that have been authorized by the board of trustees in the annual budget of the trust fund.
 
(3)  It is unlawful for any investment adviser of a local government investment pool trust fund organized under the provisions of part 7 of article 75 of title 24, C.R.S., to:

(a)  Take custody or possession of the funds or securities of the trust fund;

(b)  Act as a principal in any transaction in securities with the trust fund unless the express prior written authorization of the board of trustees is obtained with regard to each such transaction and unless the transaction is effected without mark-up and at the fair market price of the securities purchased or sold; or

(c)  Deposit, convey, or maintain the funds or securities of the trust fund in any account that is in any other name than that of the trust fund.
 
(4)  It is unlawful for any broker-dealer or financial institution acting in an advisory capacity to a local government investment pool trust fund organized under the provisions of part 7 of article 75 of title 24, C.R.S., or any person employed by or directly associated with such broker-dealer or financial institution to:
 
(a)  Act as a principal in any transaction in securities with the trust fund unless the express prior written authorization of the board of trustees is obtained with regard to each such transaction and unless the transaction is effected without mark-up and at the fair market price of the securities purchased or sold; or

(b)  Deposit, convey, or maintain the funds or securities of the trust fund in any account that is in any other name than that of the trust fund.
 
(5)  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 of any purchase or sale thereof, whether through the issuance of analyses or reports or otherwise to:
 
(a)  Employ any device, scheme, or artifice to defraud any client or prospective client;

(b)  Make an untrue statement of a material fact to any client or prospective client or to omit to state to any client or prospective client any material fact necessary to make the statements made, in light of the circumstances under which they are made, not misleading, in the disclosure statement delivered to any client or prospective client pursuant to section 11-51-409.5 or a similar document under the federal “Investment Advisers Act of 1940” or during the solicitation of any such client or otherwise in connection with providing investment advisory services; or

(c)  Engage in any transaction, act, practice, or course of business that operates or would operate as a fraud or deceit upon any client or prospective client or that is fraudulent, deceptive, or manipulative.
 
(6)  It is unlawful for an investment adviser or investment adviser representative acting as principal for such person’s own account or on behalf of a third party to:
 
(a)  Sell a security to a client without disclosing in writing pursuant to section 11-51-409.5 the capacity in which the investment adviser or investment adviser representative is acting before the completion of the transaction; or

(b)  Fail to obtain the written consent of the client to such transaction after disclosure has been made and before completion of the transaction.
 
(7)  Nothing in subsection (5) or (6) of this section shall relieve an investment adviser, federal covered adviser, or investment adviser representative of liability under any other subsection of this section.

CRIMINAL PENALTIES

(1)  Any person who willfully violates the provisions of section 11-51-501 commits a class 3 felony and shall be punished as provided in section 18-1.3-401, C.R.S.

(2)  Any person who willfully violates any of the provisions of this article, except section 11-51-501, commits a class 6 felony and shall be punished as provided in section 18-1.3-401, C.R.S.

(3)  The securities commissioner may refer such evidence as is available to the securities commissioner under authority of this article concerning any violation which constitutes the commission of any felony or misdemeanor, including any violation of subsection (1) or (2) of this section, to the attorney general or the proper district attorney, who may, with or without such a reference, prosecute the appropriate criminal proceedings under this article or otherwise as authorized by law, or the securities commissioner may refer such evidence to the proper United States attorney.

(4)  Nothing in this article limits the power of the state to punish any person for any conduct which constitutes a crime by statute.

(5)  No person shall be prosecuted, tried, or punished for any criminal violation of this article unless the indictment, information, complaint, or action for the same is found or instituted within five years after the commission of the offense.

 

CONCURRENT ENFORCEMENT BY ATTORNEY GENERAL—LEGISLATIVE DECLARATION

 
(1)  To facilitate the attorney general’s enforcement of criminal violations under this article as contemplated by section 11-51-603 (3), the general assembly finds that the investigation of criminal violations under this article is the primary responsibility of the attorney general, concurrently with the district attorneys of this state.

(2)  For the purpose of providing adequate funding to the department of law for the investigation and prosecution of allegations of securities fraud, a portion of the fees collected under this article shall be allocated to the department of law for the investigation and prosecution of criminal violations under this article.

CIVIL LIABILITIES

(1)  To facilitate the attorney general’s enforcement of criminal violations under this article as contemplated by section 11-51-603 (3), the general assembly finds that the investigation of criminal violations under this article is the primary responsibility of the attorney general, concurrently with the district attorneys of this state.

(2)  For the purpose of providing adequate funding to the department of law for the investigation and prosecution of allegations of securities fraud, a portion of the fees collected under this article shall be allocated to the department of law for the investigation and prosecution of criminal violations under this article.

BURDEN OF PROOF

In any proceeding under this article, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

_____________________________________________________________________________

COLORADO COMMODITY CODE

SHORT TITLE

This article shall be known and may be cited as the “Colorado Commodity Code”.

DEFINITIONS

As used in this article, unless the context otherwise requires:
(1)  “Board of trade” means any person or group of persons engaged in buying or selling any commodity or receiving the same for sale on consignment, whether such person or group of persons is characterized as a board of trade, exchange, or other form of marketplace.

(2)  “CFTC rule” means any rule, regulation, or order of the commodity futures trading commission in effect on July 1, 1989, and all subsequent amendments, additions, or other revisions thereto, unless the commissioner, within ten days following the effective date of any such amendment, addition, or revision, disallows the application thereof to this article or to any provisions thereof by rule.
(3)  “Commissioner” means the commissioner of securities created by section 11-51-701.

(4)  “Commodity” means, except as otherwise specified by the commissioner by rule, regulation, or order, any agricultural, grain, or livestock product or by-product, any metal or mineral (including a precious metal as defined in subsection (13) of this section), any gem or gemstone (whether characterized as precious, semi-precious, or otherwise), any foreign currency, and all other goods, articles, products, or items of any kind. The term “commodity” shall not include:
 
(a)  A numismatic coin whose fair market value is at least fifteen percent higher than the value of the metal it contains;

(b)  Real property or any timber, agricultural, or livestock product grown or raised on real property and offered or sold by the owner or lessee of such property; or

(c)  Any work of art offered or sold by art dealers, at public auction or offered or sold through a private sale by the owner thereof.
 
(5)  “Commodity contract” means any account, agreement, or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract, or otherwise. A commodity contract shall not include any contract or agreement which requires, and under which the purchaser receives, within twenty-eight calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement.

(6)  “Commodity exchange act” means the federal “Commodity Exchange Act”, as amended, unless the commissioner, within ten days following the effective date of any amendment, addition, or revision thereto, disallows the application thereof to this article or to any provisions thereof by rule.

(7)  “Commodity futures trading commission” means the federal commission established by the commodity exchange act.

(8)  “Commodity merchant” means any of the following as defined or described in the commodity exchange act or by CFTC rule:
 
(a)  Futures commission merchant;

(b)  Commodity pool operator;

(c)  Commodity trading advisor;

(d)  Introducing broker;

(e)  Leverage transaction merchant;

(f)   An associated person of any of the foregoing;

(g)  Floor broker; and

(h)  Any other person (other than a futures association) required to register with the commodity futures trading commission.
 
(9)  “Commodity option” means any account, agreement, or contract giving a party thereto the right but not the obligation to purchase or sell one or more commodities or one or more commodity contracts, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise, but shall not include an option traded on a national securities exchange registered with the securities and exchange commission.

(10) “Financial institution” means a bank, savings institution, or trust company organized under, or supervised pursuant to, the laws of the United States or of any state.

(11) “Offer” includes every offer to sell, offer to purchase, or offer to enter into a commodity contract or commodity option.

(12) “Person” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government but does not include the commodity futures trading commission or any clearinghouse thereof or a national securities exchange registered with the securities and exchange commission (or any employee, officer or director of such contract market, clearinghouse, or exchange acting solely in that capacity).

(13) “Precious metal” means the following in either coin, bullion, or other form:
 
(a)  Silver;
(b)  Gold;
(c)  Platinum;
(d)  Palladium;
(e)  Copper; and
(f)   Such other items as the commissioner may specify by rule, regulation, or order.

(14) “Sale” or “sell” includes every sale, contract of sale, contract to sell, or disposition, for value.

(15) “Securities and exchange commission” means the commission established by the “Securities Exchange Act of 1934”.

(16) “Securities Exchange Act of 1934” and “Investment Company Act of 1940” mean the federal statutes of those names as amended, unless the commissioner, within ten days following the effective date of any amendment, addition, or revision thereto, disallows the application thereof to this article or to any provision thereof by rule.

UNLAWFUL COMMODITY TRANSACTIONS.

Except as otherwise provided in section 11-53-104 or 11-53-105, no person shall sell or purchase or offer to sell or purchase any commodity under any commodity contract or under any commodity option or offer to enter into or enter into as seller or purchaser any commodity contract or any commodity option.

EXEMPT PERSON TRANSACTIONS.

(1) The prohibitions in section 11-53-103 shall not apply to any transaction offered by and in which any of the following persons (or any employee, officer, or director thereof acting solely in that capacity) is the purchaser or seller:

(a) A person registered with the commodity futures trading commission as a futures commission merchant or as a leverage transaction merchant whose activities require such registration;

(b) A person registered with the securities and exchange commission as a broker-dealer whose activities require such registration;

(c) A person affiliated with, and whose obligations and liabilities under the transaction are guaranteed by, a person referred to in paragraph (a) or (b) of this subsection (1);

(d) A person who is a member of a contract market designated by the commodity futures trading commission (or any clearinghouse thereof);

(e) A financial institution; or

(f) A person registered under the laws of this state as a securities broker or dealer whose activities require such registration.

(2) The exemption provided by subsection (1) of this section shall not apply to any transaction or activity which is prohibited by the commodity exchange act or CFTC rule.

EXEMPT TRANSACTIONS.

           
(1) The prohibitions in section 11-53-103 shall not apply to the following:

(a) An account, agreement, or transaction within the exclusive jurisdiction of the commodity futures trading commission as granted under the commodity exchange act;

(b) A commodity contract for the purchase of one or more precious metals which requires, and under which the purchaser receives, within twenty-eight calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased by such payment; except that, for purposes of this paragraph (b), physical delivery shall be deemed to have occurred if, within such twenty-eight-day period:

(I) Such quantity of precious metals purchased by such payment is delivered (whether in specifically segregated or fungible bulk form) into the possession of a depository (other than the seller) which is either:

(A) A financial institution;

(B) A depository the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the commodity futures trading commission;

(C) A storage facility licensed or regulated by the United States or any agency thereof; or

(D) A depository designated by the commission; and
           
(II) Such depository (or other person which itself qualifies as a depository as provided in said subparagraph (I)) or a qualified seller issues and the purchaser receives a certificate, document of title, confirmation, or other instrument evidencing that such quantity of precious metals has been delivered to the depository and is being and will continue to be held by the depository on the purchaser's behalf, free and clear of all liens and encumbrances, other than liens of the purchaser, tax liens, liens agreed to by the purchaser, or liens of the depository for fees and expenses, which have previously been disclosed to the purchaser;

(c) A commodity contract solely between persons engaged in producing, processing, using commercially, or handling as merchants, each commodity subject thereto, or any by-product thereof; or

(d) A commodity contract under which the offeree or the purchaser is a person referred to in section 11-53-104, an insurance company, an investment company as defined in the "Investment Company Act of 1940", or an employee pension and profit sharing or benefit plan (other than a self-employed individual retirement plan or individual retirement account).

(2) For the purposes of paragraph (b) of subsection (1) of this section, a "qualified seller" is a person who:

(a) Is a seller of precious metals and has a tangible net worth of at least five million dollars (or has an affiliate who has unconditionally guaranteed the obligations and liabilities of the seller, and the affiliate has a tangible net worth of at least five million dollars);

(b) Has stored precious metals with one or more depositories on behalf of customers for at least the previous three years;

(c) Prior to any offer, and annually thereafter, files with the commissioner a sworn notice of intent to act as a qualified seller under paragraph (b) of subsection (1) of this section, containing:

(I) The seller's name and address, names of its directors, officers, controlling shareholders, partners, principals, and other controlling persons;

(II) The address of its principal place of business, state and date of incorporation or organization, and the name and address of the seller's registered agent in this state;

 (III) A statement that the seller (or a person affiliated with the seller who has unconditionally guaranteed the obligations and liabilities of the seller) has a tangible net worth of at least five million dollars;

(IV) The name and address of the depository or depositories that the seller intends to use, and the name and address of each and every depository where the seller has stored precious metals on behalf of customers for the previous three years;

(V) Financial statements for the seller (or the person affiliated with the seller who has guaranteed the obligations and liabilities of the seller) for the past three years, including balance sheet and income statements which have been audited by an independent certified public accountant, together with the accountant's report;

(VI) A statement describing the details of all civil, criminal, or administrative proceedings currently pending or adversely resolved against the seller or its directors, officers, controlling shareholders, partners, principals, or other controlling persons during the past ten years including:

(A) Civil litigation and administrative proceedings involving securities or commodities law violations, or fraud;

(B) Criminal proceedings;

(C) Denials, suspensions, or revocations of securities or commodities licenses or registrations;

(D) Suspensions or expulsions from membership in, or association with, self-regulatory organizations registered under the "Securities Exchange Act of 1934" or the commodity exchange act; or

(E) A statement that there were no such proceedings;

(d) Notifies the commissioner within fifteen days of any material changes in the information provided in the notice of intent; and

(e) Annually furnishes to each purchaser for whom the seller is then storing precious metals, and to the commissioner, a report by an independent certified public accountant of the accountant's examination of the seller's precious metals storage program.

 (3) The commissioner may, upon request by the seller, waive any of the exemption requirements in paragraph (b) of subsection (1) and subsection (2) of this section, conditionally or unconditionally.

(4) The commissioner may, by order, deny, suspend, revoke, or place limitations on the qualified seller exemption under paragraph (b) of subsection (1) and subsection (2) of this section if the commissioner finds that the order is in the public interest and that the seller, the seller's officers, directors, partners, agents, servants, or employees, any person occupying a similar status or performing a similar function to the seller, or any person who directly or indirectly controls or is controlled by the seller, or the seller's affiliates or subsidiaries:

(a) Has filed a notice of intention under subsection (2) of this section with the commissioner or the designee of the commissioner which was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact;

(b) Has violated or failed to comply with a provision of this article or is the subject of an adjudication or determination within the last five years by an agency, administrator, or court of competent jurisdiction of any other jurisdiction that the person has willfully violated the anti-fraud provisions of any state or federal securities or commodities law;

(c) Has, within the last ten years, pled guilty or nolo contendere to, or been convicted of any crime involving fraud or unlawful taking;

(d) Has been permanently or temporarily enjoined by any court of competent jurisdiction from engaging in, or continuing, any conduct or practice in violation of the anti-fraud provisions of any state or federal securities or commodities law;

(e) Is the subject of any of the following orders which are in effect and issued within the last five years:

(I) An order by the administrator of any jurisdiction administering a state commodity law or the commodity futures trading commission entered after notice and opportunity for hearing, denying, suspending, or revoking the person's registration as a futures commission merchant, commodity pool operator, commodity trading advisor, introducing broker, leverage transaction merchant, associated person, floor broker, or the substantial equivalent of those terms;

(II) A suspension or expulsion from membership in or association with a self-regulatory organization registered under the commodity exchange act;

(III) A United States postal service fraud order; or

(IV) An order entered by the commodity futures trading commission denying, suspending, or revoking registration under the commodity exchange act;

(f) Has failed reasonably to supervise its sales representatives or sales employees engaged in the investment commodities business.

(5) The commissioner may designate an administrative law judge, appointed pursuant to part 10 of article 30 of title 24, C.R.S., to conduct hearings pursuant to section 24-4-105, C.R.S.

(6) Any person aggrieved by a final order of the commissioner may obtain review of the order in the district court of the city and county of Denver pursuant to the provisions of section 24-4-106, C.R.S.

(7) If the commissioner finds that any applicant or qualified seller is no longer in existence or has ceased to do business or is subject to an adjudication of mental incompetence or to the control of a committee, conservator, or guardian, or cannot be located after reasonable search, the commissioner may, by order, revoke qualified seller status.

(8) By order or rule and subject to such terms and conditions prescribed therein, the commissioner may, from time to time, add any persons or transactions not within the exclusive jurisdiction of the commodity futures trading commission as granted by the commodity exchange act, to the persons and transactions exempted from the prohibitions set forth in section 11-53-103, if the commissioner finds that such prohibitions are not necessary in the public interest and for the protection of investors.

UNLAWFUL COMMODITY ACTIVITIES.

(1) No person shall engage in a trade or business of or otherwise act as a commodity merchant unless such person is either:

(a) Registered or temporarily licensed with the commodity futures trading commission for each activity constituting such person as a commodity merchant, and such registration or temporary license has not expired or been suspended or revoked; or

(b) Exempt from such registration by virtue of the commodity exchange act or a CFTC rule.

(2) No board of trade shall trade, or provide a place for the trading of, any commodity contract or commodity option required to be traded on or subject to the rules of a contract market designated by the commodity futures trading commission unless such board of trade has been so designated for such commodity contract or commodity option and such designation has not been vacated, suspended, or revoked.

11-53-107. FRAUDULENT CONDUCT.

(1) No person shall, directly or indirectly, in or in connection with the purchase or sale of, the offer to sell, the offer to purchase, the offer to enter into, or the entry into of any commodity contract or commodity option prohibited by section 11-53-103 or made pursuant to section 11-53-104 or 11-53-105 (1) (b) or (1) (d):

(a) Cheat or defraud, or attempt to cheat or defraud, any other person or employ any device, scheme, or artifice to defraud any other person;

(b) Make any false report, enter any false record, or make any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading;

(c) Engage in any transaction, act, practice, or course of business, including, without limitation, any form of advertising or solicitation, which operates or would operate as a fraud or deceit upon any person; or

(d) Misappropriate or convert the funds, security, or property of any other person.

11-53-108. MISLEADING FILINGS.

It is unlawful for any person to make or cause to be made, in any document filed with the commissioner or in any proceeding under this article, any statement which is, at the time and in the light of the circumstances under which it was made, false or misleading in any material respect.
           

LIABILITY OF PRINCIPALS, CONTROLLING PERSONS, AND OTHERS.

(1) The act, omission, or failure of any official, agent, or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office shall be deemed the act, omission, or failure of such individual, association, partnership, corporation, or trust, as well as of such official, agent, or other person.

(2) Every person who directly or indirectly controls another person liable under any provision of this article, every partner, officer, or director of such liable person, every person occupying a similar status or performing similar functions to such liable person, and every employee of such liable person who materially aids in the violation is also liable jointly and severally with and to the same extent as the person liable under the provisions of this article unless the person who is also liable by virtue of this subsection (2) sustains the burden of proof that the person 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.

SECURITIES LAW UNAFFECTED.

Nothing in this article shall impair, derogate, or otherwise affect the authority or powers of the commissioner under article 51 of this title or the application of any provision thereof to any person or transaction subject thereto.

 

PURPOSE

This article shall be construed and implemented to effectuate its general purpose to protect investors, to prevent and prosecute illegal and fraudulent schemes involving commodity contracts and commodity options, and to maximize coordination with federal law and other states’ laws and the administration and enforcement thereof. This article is not intended to create, abolish, or modify any rights or remedies upon which actions may be brought by private persons against persons who violate the provisions of this article.

 

POWER OF COURT TO GRANT RELIEF

(1)  Upon a proper showing by the commissioner that a person has violated any provision of this article or any rule or order under this article, the court may grant appropriate legal or equitable remedies including a temporary restraining order, a preliminary and permanent prohibitory or mandatory injunction, and writ or prohibition or mandamus. In addition, the court may grant the following special remedies:

(a)  Imposition of a civil penalty in an amount which may not exceed ten thousand dollars for any single violation or one hundred thousand dollars for multiple violations in a single proceeding or a series of related proceedings;

(b)  Disgorgement;

(c)  Declaratory judgment;

(d)  Restitution to investors wishing restitution; and

(e)  Appointment of a receiver or conservator for the defendant or the defendant’s assets.
 

(2)        In any such action, the commissioner shall not be required to plead or prove irreparable injury or the inadequacy of the remedy at law. Under no circumstances shall the court require the commissioner to post a bond.
                       
                       

CRIMINAL PENALTIES-STATUTE OF LIMITATIONS

 
(1) Any person who willfully violates any provision of this article, except section 11-53-108, or who willfully violates section 11-53-108 when the person knows or should know that the statement the person makes in violation of section 11-53-108 is false or misleading in any material respect commits a class 3 felony and shall be punished as provided in section 18-1.3-401, C.R.S.
(2) The commissioner may refer such evidence as is available concerning violations of this article to the attorney general, the proper district attorney or other criminal prosecutor, who may, with or without such a reference from the commissioner, prosecute the appropriate criminal proceedings.
 
(3) Nothing in this article limits the power of the state to punish any person for any conduct which constitutes a crime by statute.
 
(4) No person shall be prosecuted, tried, or punished for any criminal violation of this article unless the indictment, information, complaint, or action for the same is found or instituted within five years after the commission of the offense.

SCOPE OF ARTICLE

1) Sections 11-53-103, 11-53-106, and 11-53-107 apply to persons who sell or offer to sell when an offer to sell is made in this state or when an offer to buy is made and accepted in this state.
 
(2) Sections 11-53-103, 11-53-106, and 11-53-107 apply to persons who buy or offer to buy when an offer to buy is made in this state or when an offer to sell is made and accepted in this state.

PLEADING EXEMPTIONS

It shall not be necessary to plead in the negative any of the exemptions of this article in any complaint, information, or indictment or any writ or proceeding brought under this article; and the burden of proof of any such exemption shall be upon the party claiming the same.

AFFIRMATIVE DEFENSES

(1) It shall be an affirmative defense in any complaint, information, or indictment, or to any writ or proceeding brought under this article alleging a violation of section 11-53-103 based solely on the failure in an individual case to make physical delivery within the applicable time period under section 11-53-102 (5) or 11-53-105 (1) (b) if:
 
 (a) Failure to make physical delivery was due solely to factors beyond the control of the seller, the seller's officers, directors, partners, agents, servants, or employees, any person occupying a similar status or performing a similar function to the seller, or any person who directly or indirectly controls or is controlled by the seller, the seller's affiliates, subsidiaries, or successors; and
 
 (b) Physical delivery was completed within a reasonable time under the applicable circumstances.


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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 are 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.

 
 
 
 

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