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Law Offices of Eric Norstedt, P.A.
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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

Hawaii Securities Act

 

Sections included on the Hawaii Securities Act Page:

§485-1  Definitions. 

When used in this chapter the following terms, unless the text otherwise indicates, have the following meaning:

     (1)  "Commissioner" means the commissioner of securities of the State.

  • "Salesperson" means any individual other than a dealer who represents a dealer or issuer in effecting or attempting to effect purchases or sales of securities.  "Salesperson" does not include an individual who represents an issuer in (A) effecting transactions in a security exempted by clauses (1), (2), (3), or (10) of section 485-4, (B) effecting transactions exempted by section 485-6, 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, or a person occupying a similar status or performing similar functions, is a salesperson only if the partner, officer, director, or person otherwise comes within this definition.

 

  • "Dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for the person's own account.  "Dealer" does not include:

         (A)  A salesperson;
         (B)  An issuer;

  • A person who has no place of business in this State if:
  • The person effects transactions in this State exclusively with or through the issuers of the securities involved in the transactions; other dealers; or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees; or

 

  • During any period of twelve consecutive months the person does not direct more than fifteen offers to sell or to buy into this State in any manner to persons other than those specified in clause (i), whether or not the offeror or any of the offerees is then present in this State;

 

         (D)  Any person licensed as a real estate broker or real estate salesperson under the laws of the State while effecting transactions in a security exempted by section 485-6(14);

         (E)  A person who is a resident of Canada, has no office or other physical presence in this State, and:

              (i)  Only effects or attempts to effect transactions in securities with or through the issuers of securities involved in the transactions, broker dealers, banks, savings institutions, trust companies, insurance companies, investment companies (as defined in the Investment Company Act of 1940), pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees; with or for a person from Canada who is present temporarily in this State and with whom a bona fide business relationship existed before the person entered this State; or with or for a person from Canada who is present in this State, whose transactions are in a self-directed tax advantaged retirement plan in Canada of which the person is the holder or contributor;

             (ii)  Files a notice in the form of the person's current Canadian securities registration and a consent to service of process;

            (iii)  Is a member of a duly authorized self-regulatory organization or stock exchange in Canada;

             (iv)  Maintains the provincial or territorial registration and membership in a self-regulatory organization or stock exchange of the person in good standing;

              (v)  Discloses to the person's clients in this State that the person is not subject to the full regulatory requirements of this chapter; and

             (vi)  Does not violate this chapter; or

         (F)  A bank, savings institution, or trust company.

     (4)  "Fraud", "deceit", and "defraud" are not limited to common-law deceit.

     (5)  "Guaranteed" means guaranteed as to payment of principal, interest, or dividends.

     (6)  "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 a part of a regular business, issues or promulgates analyses or reports concerning securities.  "Investment adviser" does not include:

         (A)  A bank, savings institution, or trust company;

         (B)  A lawyer, accountant, engineer, or teacher whose performance of these services is solely incidental to the practice of the lawyer's, accountant's, engineer's, or teacher's profession;

         (C)  A dealer whose performance of these services is solely incidental to the conduct of the dealer's business as a dealer and who receives no special compensation for them;

         (D)  A publisher of any bona fide newspaper, news magazine, or business or financial publication of general, regular, and paid circulation;

         (E)  A person whose advice, analyses, or reports relate only to securities exempted by section 485-4(1);

         (F)  A person who has no place of business in this State if:

              (i)  The person's only clients in this State are other investment advisers, dealers, banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees; or

             (ii)  During any period of twelve consecutive months the person does not have more than five clients who are residents of this State other than those specified in clause (i);

         (G)  A person who is employed by an investment company that is registered under the Investment Company Act of 1940;

         (H)  A person who is excluded from the definition of "investment adviser" under section 202(a)(11) of the Investment Advisers Act of 1940;
         (I)  A federal covered adviser; or

         (J)  Other persons not within the intent of this paragraph as the commissioner by rule or order may designate.

     (7)  "Investment adviser representative" means:

         (A)  With respect to an investment adviser, any individual other than an investment adviser who represents an investment adviser 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; and

         (B)  With respect to a federal covered adviser, any person defined as an "investment adviser representative" who has a "place of business" in this State as those terms are defined in rule 203A-3 of the Securities and Exchange Commission under the Investment Advisers Act of 1940.

     (8)  "Issuer" means any person who issues or proposes to issue any security, except that (A) 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 or persons 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 the security is issued; and (B) with respect to certificates of interest in oil, gas, or mining titles or leases, there is not considered to be any "issuer."

     (9)  "Nonissuer" means not directly or indirectly for the benefit of the issuer.

    (10)  "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.

     (11) (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.

         (B)  "Offer" or "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.

         (C)  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.

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

         (E)  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.

         (F)  The terms defined in this subsection do not include (i) any bona fide pledge or loan; (ii) any stock dividend, whether the corporation distributing the dividend is the issuer of the stock or not, if nothing of value is given by stockholders for the dividend other than the surrender of a right to a cash or property dividend when each stockholder may elect to take the dividend in cash or property or in stock; (iii) any act incident to a class vote by stockholders, pursuant to the articles of incorporation or the applicable corporation statute, on a merger, consolidation, reclassification of securities, or sale of corporate assets in consideration of the issuance of securities of another corporation; or (iv) any act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash.

    (12)  "Securities Act of 1933", "Securities Exchange Act of 1934", "Public Utility Holding Company Act of 1935", and "Investment Company Act of 1940" mean the federal statutes of those names as amended before or after June 7, 1957.

    (13)  "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 or subscription, transferable share, investment contract, variable annuity contract, voting trust certificate, certificate of deposit for a security, certificate of interest in an oil, gas, or mining title or lease, option on commodity futures contracts 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 fixed annuity contract.

    (14)  "State" means any state, territory, or possession of the United States, as well as the District of Columbia and Puerto Rico.

    (15)  "Federal covered adviser" means a person who is registered with the Securities and Exchange Commission under section 203 of the Investment Advisers Act of 1940.  "Federal covered adviser" does not include:

         (A)  A person who is excluded from the definition of "investment adviser" under section 485-1(6)(A) to [(H)]; or

         (B)  Other persons not within the intent of this definition as the commissioner by rule or order may designate.

    (16)  "Federal covered security" means any security that is a "covered security" under section 18(b) of the Securities Act of 1933 or the rules or regulations promulgated thereunder.

 

§485-20  Remedies. 

 (a)  Sales voidable when and by whom.  Every sale made in violation of this chapter shall be voidable at the election of the purchaser; and the person making the sale and every director, officer, or agent of or for the seller, if the director, officer, or agent has personally participated or aided in any way in making the sale, shall be jointly and severally liable to the purchaser in an action at law in any court of competent jurisdiction upon tender of the securities sold or of the contract made for the full amount paid by the purchaser, with interest, together with all taxable court costs (and reasonable attorney's fees); provided that notwithstanding any law to the contrary, no action shall be brought for the recovery of the purchase price after five years from the date of the sale or after two years from the discovery of facts constituting the violations, but in any event after seven years from the date of the sale; and provided further that no purchaser otherwise entitled shall claim or have the benefit of this section who has refused or failed within thirty days from the date thereof to accept an offer in writing of the seller to take back the security in question and to refund the full amount paid by the purchaser, together with interest on the amount for the period from the date of payment by the purchaser down to the date of repayment, such interest to be computed:

     (1)  In case the securities consist of interest-bearing obligations, at the same rate as provided in the obligations; and

     (2)  In case the securities consist of other than interest- bearing obligations, at the rate of ten per cent a year; less, in every case, the amount of any income from the securities that may have been received by the purchaser.

     (b)  Action on bond.  Any person having a right of action against a dealer or salesperson under this section shall have a right of action under the bond provided in section 485-14.

     (c)  Registration in good faith.  A registration by notification made in good faith and after the commissioner of securities, on application, has given tentative consent to such registration, shall not, as to sales made prior to revocation of the registration, result in the liabilities prescribed in this section, although the securities may not be entitled to such registration.

 

§485-20.5  Civil penalty. 

(a)  The commissioner may bring an action to recover a civil penalty against any person who violates this chapter or who has knowingly violated a rule or order of the commissioner made pursuant to this chapter.  A civil penalty of not more than $100,000 may be assessed for each violation.

     (b)  No civil action shall be brought under this chapter after the expiration of five years from the date of the violation or after expiration of two years from the discovery of facts constituting the violation, but in no event after the expiration of seven years from the date of the violation.

 

§485-21  Criminal penalties. 

(a)  Whoever violates this chapter shall be punished as follows:

     (1)  An offense in which the total value of all money and anything else of value paid by or lost by the victims pursuant to the same scheme, plan or representations, or to the same entity, amounts to under $5,000 shall be a class C felony as defined by the Hawaii Penal Code;

     (2)  An offense in which the total value of all money and anything else of value paid by or lost by the victims pursuant to the same scheme, plan, or representations, or to the same entity, amounts to $5,000 but less than $100,000 shall be a class B felony as defined by the Hawaii Penal Code;
     (3)  An offense in which the total value of all money and anything else of value paid or lost by the victims pursuant to the same scheme, plan, or representations, or to the same entity, amounts to $100,000 or more shall be a class A felony as defined by the Hawaii Penal Code.

     In addition to the above, whoever violates this chapter shall forfeit to the State (1) any interest or property the person has acquired or maintained in violation of this chapter, and (2) any interest in, security of, claim against, or property or contractual right of any kind affording a source of influence over, any enterprise which the person has established, operated, controlled, conducted, or participated in the conduct of, in violation of this chapter.

     (b)  The value of all money and anything else of value paid or lost by various victims pursuant to the same scheme, plan, or representations or to the same entity may be aggregated in determining the class or grade of the offense.

     (c)  Upon conviction of a person under this chapter, the circuit court shall authorize the county attorney or prosecutor, or the attorney general, to seize all property or other interest declared forfeited under this chapter upon such terms and conditions as the court shall deem proper.  The State shall dispose of all property or other interest seized under this chapter as soon as feasible making due provision for the rights of innocent persons.  If a property right or other interest is not exercisable or transferable for value by the State, it shall not revert to the convicted person and the commissioner shall dispose of said property as deemed proper by the commissioner.

     (d)  Notwithstanding any other law to the contrary, a person convicted of a felony under this chapter who has a prior conviction for felony under this chapter or a prior conviction for a crime which would constitute a felony under this chapter shall be sentenced to a mandatory minimum period of imprisonment of one year without possibility of parole.  Nothing in this subsection shall be construed to in any way limit the maximum term of imprisonment imposed pursuant to chapter 706.

     (e)  Notwithstanding any other laws to the contrary, the following period of limitations will apply to prosecutions for felony violations of this chapter:

     (1)  Prosecution for a felony under this chapter shall be commenced within five years after the offense is committed.

     (2)  If the period prescribed in paragraph (1) has expired, prosecution for a felony under this chapter may be commenced within two years after the discovery of the offense by an aggrieved party and who is himself not a party to the offense, but in no event more than seven years after the offense is committed. [L 1957, c 314, pt of §1; Supp, §199-17; HRS §485-21; am L 1985, c 100, §4; gen ch 1993]

 

§485-22  Statutory or common-law remedies. 

Nothing in this chapter shall limit any statutory or common-law right of any person to bring any action in any court for any act involved in the sale of securities, or the right of the State to punish any person for any violation of any law.

 

§485-25  Fraudulent and other prohibited practices. 

(a)  It is unlawful for any person, in connection with the offer, sale, or purchase (whether in a transaction described in section 485-6 or otherwise) of any security (whether or not of a class described in section 485-4), in the State, directly or indirectly:

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

     (2)  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 the light of the circumstances under which they are made, not misleading;

     (3)  To engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any person;

 

     (4)  To issue, circulate, or publish any prospectus, circular, advertisement, printed matter, document, pamphlet, leaflet, or other literature (in this chapter sometimes referred to collectively as "advertising matter") that contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein made, in the light of the circumstances under which they are made, not misleading;

     (5)  To issue, circulate, or publish any advertising matter or make any written representation, unless the name of the person issuing, circulating, publishing, or making the same and the fact that the person is issuing, circulating, or making the same is clearly indicated thereon;

     (6)  To make any statement or representation, or issue, circulate, or publish any advertising matter containing any statement, to the effect that the security has been in any way approved or endorsed by the commissioner of securities; or

     (7)  To issue, circulate, or publish any advertising matter unless a copy thereof has been previously filed with the office of the commissioner, or unless the commissioner has by rule or order exempted the filing of any advertising material.

     (b)  It is unlawful for any person who receives any consideration from another person primarily 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; or

     (2)  To engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon the other person.

     (c)  It is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing:
     (1)  Except as provided in subsection (d), 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 the investment adviser without the consent of the other party to the contract;

     (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;

     (4)  That the investment adviser and investment adviser representative shall disclose to the client, in a separate disclosure statement, the capacity in which the investment adviser and investment adviser representative are acting and the compensation to be received in situations where:

         (A)  The investment adviser is acting as principal for the investment adviser's own account and knowingly sells any security to or purchases any security from a client for whom the investment adviser is acting as investment adviser; or

         (B)  The investment adviser is acting as broker for a person other than the client and knowingly effects any sale or purchase of securities, real estate, insurance contracts, annuities contracts, or any types of real or personal property for the account of the client; and

     (5)  That the investment adviser and investment adviser representative shall provide the disclosure statement described in subsection (c)(4) and obtain the written consent of the client to the transactions described in the disclosure statement prior to the closing of the transactions.

     (d)  Subsection (c)(1) does not prohibit an investment advisory contract that:

     (1)  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; or

     (2)  Provides for compensation to the investment adviser on the basis of a share of capital gains or capital appreciation of the funds of the client; provided that:

         (A)  The conditions and requirements as defined in rule 205-3 under the Investment Advisers Act of 1940 (17 C.F.R. section 275.205-3) are met; and

         (B)  Before entering into the advisory contract, and in addition to the requirements of United States Securities and Exchange Commission Form ADV, the investment adviser shall disclose in writing to the client or the client's independent agent all material information concerning the proposed advisory arrangement.

     (e)  "Assignment", as used in subsection (c)(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 use any scheme, device, or artifice to circumvent or attempt to circumvent the prohibitions or limitations in subsection (c).

     (g)  Subsection (a)(5) and (7) shall not apply to any advertising matter that is covered by section 18(a) of the Securities Act of 1933, which relates to or is used in connection with the offer or sale of a federal covered security.

 

§485-26  Additional administrative penalties for securities violations committed against elders. 

If a person commits a violation under this chapter and the violation is directed toward, targets, or is committed against a person who at the time of the violation is sixty-two years of age or older, the commissioner, in addition to any other administrative penalty, may impose an administrative penalty not to exceed $50,000 for each violation; provided that this section shall not apply to registered dealers for violations of 485-15(10).

§485-27  Additional civil penalties for securities violations committed against elders. 

 If a person commits a violation under this chapter and the violation is directed toward, targets, or is committed against a person who at the time of the violation is sixty-two years of age or older, a court, in addition to any other civil penalty, may impose a civil penalty not to exceed $50,000 for each violation; provided that this section shall not apply to registered dealers for violations of 485-15(10).

 


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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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