Chapter 270 Oregon Laws 2003

AN ACT

SB 194

Relating to securities; amending ORS 59.015, 59.049, 59.065, 59.165, 59.175, 59.185 and 59.205.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 59.015 is amended to read:

59.015. As used in the Oregon Securities Law, unless the context otherwise requires:

(1) “Broker-dealer” means a person who engages, all or part of the time, in effecting transactions in securities for the account of others or for the person’s own account. “Broker-dealer” does not include:

(a) An issuer effecting sales in its own securities;

(b) The following institutions:

(A) A financial institution or trust company, as defined in ORS 706.008; or

(B) A financial holding company or a bank holding company, as defined in ORS 706.008, holding an institution described in subparagraph (A) of this paragraph; a savings and loan holding company as defined in section 408 of the National Housing Act, 12 U.S.C. section 1730a, holding an association described in subparagraph (A) of this paragraph; the subsidiaries and affiliates of the financial holding company, bank holding company or savings and loan holding company; or subsidiaries and affiliates of institutions described in subparagraph (A) of this paragraph, if the appropriate statutory regulatory authority is exercising control over, or is regulating or supervising the person in the sale of securities in accord with the purposes of the Oregon Securities Law;

(c) A person who has no place of business in this state effecting transactions in this state exclusively with broker-dealers;

(d) A person effecting sales exempted by ORS 59.035;

(e) A salesperson;

(f) A person effecting sales of securities owned by the person registered for sale pursuant to ORS 59.065;

(g) A person effecting sales of securities exempted by ORS 59.025 (7);

(h) A person licensed as a mortgage banker or a mortgage broker under ORS 59.840 to 59.980 when effecting sales of securities involving real estate paper registered for sale pursuant to ORS 59.065; or

(i) A person designated by rule or order by the director.

(2) “Control” means the possession, directly or indirectly, of 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.

(3) “Director” means the Director of the Department of Consumer and Business Services.

(4) “Federal covered investment adviser” means a person who is registered as an investment adviser pursuant to section 203 of the Investment Advisers Act of 1940, as amended.

(5) “Federal covered security” means any security that is a covered security under section 18 of the Securities Act of 1933, as amended, and for which such Act provides that the director may require filing of a notice and payment of a fee.

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

(7) “Guaranteed” means guaranteed as to payment of principal, interest or dividends.

(8)(a) “Investment adviser representative” means any partner, officer, director or person occupying a similar status or performing a similar function, or other individual, except clerical or ministerial personnel, who is employed by or associated with:

(A) A state investment adviser that is licensed or required to be licensed in this state and who does any of the following:

(i) Makes any recommendations or otherwise renders advice regarding securities;

(ii) Manages accounts or portfolios of clients;

(iii) Determines which recommendation or advice regarding securities should be given;

(iv) Solicits, offers or negotiates for the sale of or sells investment advisory services; or

(v) Supervises employees acting under this subparagraph; or

(B) A federal covered investment adviser, subject to the limitations of section 203A of the Investment Advisers Act of 1940, as amended, as the director may designate by rule or order.

(b) “Investment adviser representative” does not include a person designated by rule or order of the director.

(9) “Issuer” means a person who issues, proposes to issue or has issued a security and includes an issuer to be formed. 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 “issuer” is the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other instrument or agreement under which the security is issued.

(10) “License” means a license as provided under the Oregon Securities Law.

(11) “Mortgage banker” means a mortgage banker as defined in ORS 59.840.

(12) “Mortgage broker” means a mortgage broker as defined in ORS 59.840.

(13) “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. 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.

(14) “Person” includes an individual, a joint venture, a partnership, a cooperative, a limited liability company, an association, a joint stock company, a corporation, a trust, an unincorporated organization or a government or political subdivision of a government.

(15) “Real estate paper” means any obligation secured or purportedly secured by an interest in real property. Real estate paper includes, but is not limited to, mortgage-backed securities, collateralized mortgage obligations, and real estate mortgage investment conduits.

(16) “Registered” means registered as provided in the Oregon Securities Law.

(17)(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. Any security given or delivered with, or as a bonus on account of, a purchase of securities or any other thing shall constitute a part of the subject of the purchase and shall have been offered and sold for value. A gift of assessable stock by or for any issuer or promoter shall constitute a sale.

(b) For purposes of the authority of the director under ORS 59.245 and 59.255, the terms “sale” and “sell” include the terms “offer” and “offer to sell.”

(c) “Sale” and “sell” do not include:

(A) A bona fide pledge or loan of securities;

(B) A bona fide security dividend, whether the corporation distributing the dividend is the issuer of the security or not, if nothing of value is given by the recipients for the dividend other than payments in connection with the elimination of fractional shares; or

(C) An 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.

(18)(a) “Salesperson” means[:]

[(A)] a person, other than a broker-dealer, who represents or purports to represent a broker-dealer, issuer or owner of securities in effecting or attempting to effect in any manner transactions in securities.

[(B) A person, other than a person licensed as a mortgage banker or mortgage broker under ORS 59.840 to 59.980, who represents or purports to represent the issuer, owner, or mortgage banker or mortgage broker licensed under ORS 59.840 to 59.980 in effecting sales of securities or involving real estate paper registered for sale pursuant to ORS 59.065.]

(b) “Salesperson” does not include:

(A) A person who represents an issuer in effecting sales in a security exempted by ORS 59.025;

(B) A person who represents an issuer in effecting sales exempted by ORS 59.035;

(C) A person who represents an issuer in effecting sales with existing 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;

(D) An employee of an institution or organization described in subsection (1)(b) of this section to the extent the employee is not a dual employee of the institution and a broker-dealer;

(E) A person effecting transactions in this state limited to those transactions described in section 15(h)(2) and (3) of the Securities Exchange Act of 1934, as amended; or

(F) A person designated by rule or order by the director.

(c) A person who is a partner, director or officer of a broker-dealer, issuer or owner of securities, or a person who occupies a similar status or performing similar functions, is a “salesperson” only if the person otherwise comes within this definition.

(19)(a) “Security” means a note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in a pension plan or 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 title or lease, real estate paper sold by a broker-dealer, mortgage banker, mortgage broker or a person described in subsection (1)(b) of this section to persons other than persons enumerated in ORS 59.035 (4), or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificates for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing.

(b) “Security” does not include:

(A) An insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed or variable sum of money either in a lump sum or periodically for life or some other specified period;

(B) A beneficial interest in a voluntary inter vivos trust unless the trust is created solely for the purpose of voting or is part of an attempt to evade the provisions of ORS 59.005 to 59.451; or

(C) A beneficial interest in a testamentary trust.

(20)(a) “State investment adviser” means a person who, for compensation:

(A) Engages all or part of the time of the person, in this state, in the business of advising others, either directly or by mail or through publication or writing, as to the value of securities or as to the advisability of investing in, purchasing or selling securities;

(B) Engages all or part of the time of the person, in this state, in the business of managing an investment or trading account in securities for other persons; or

(C) Issues or promulgates, as part of a regular business in this state, analyses or reports concerning securities.

(b) “State investment adviser” does not include:

(A) An investment adviser representative;

(B) An institution or organization described in subsection (1)(b) of this section;

(C) A licensed broker-dealer whose performance of investment advisory services is solely incidental to the conduct of business as a broker-dealer and who receives no special compensation for such services;

(D) A salesperson licensed to a broker-dealer whose performance of investment advisory services is solely incidental to that person’s activities as a salesperson and who receives no special compensation for such services;

(E) A publisher of or contributor to a bona fide newspaper, newsmagazine, investment manual or service, or business or financial publication of general, regular and paid circulation;

(F) A person whose only clients are federal covered investment advisers, state investment advisers, broker-dealers, mortgage bankers, mortgage brokers, banks, savings institutions or trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, as amended, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees;

(G) A duly licensed lawyer, engineer or accountant whose performance of investment advisory services is solely incidental to the practice of the profession;

(H) A person whose advice, analyses or reports relate only to securities exempted by ORS 59.025 (1);

(I) A federal covered investment adviser in compliance with ORS 59.165 (7);

(J) A person, advising others, that has no place of business in this state and during the preceding 12-month period has had fewer than six clients, other than those persons included in subparagraph (F) of this paragraph, who are residents of this state; or

(K) Such other persons as the director may by rule or order designate.

SECTION 2. ORS 59.049 is amended to read:

59.049. Federal covered securities may be offered and sold in this state without registration, subject to the following:

(1) Unless otherwise exempt from registration under ORS 59.025 or 59.035, any federal covered security that is subject to section 18(b)(2) of the Securities Act of 1933, as amended, may be offered and sold only upon a filing of a notice with, and the payment of the required fee to, the Director of the Department of Consumer and Business Services. In lieu of the notice, an issuer may file a copy of its registration statement as filed with the Securities and Exchange Commission together with fees required under this subsection. The form of notice shall be prescribed by the director. The required fee shall be $350 for all investment companies other than unit investment trusts, or $150 for unit investment trusts. The fee shall not be refundable. The effective date of the notice shall be the later of the date the notice is received by the director or the date specified by the filer of the notice.

(2) Unless otherwise exempt from registration under ORS 59.025 or 59.035, any federal covered security that is subject to section 18(b)(3) or (4), other than section 18(b)(4)(D), of the Securities Act of 1933, as amended, may be offered and sold only upon a filing of a notice with, and the payment of the required fee to, the director. The form of notice shall be prescribed by the director. The required fee shall be equal to $1 per $1,000 of the aggregate price of the securities which are to be offered in this state on the first $100,000 or fraction thereof, 50 cents per $1,000 on the next $200,000 or fraction thereof and $25 per $100,000 for each additional $100,000 or fraction thereof, but in no case shall the fee be less than $25 or more than $500. The fee shall not be refundable. The effective date of the notice shall be the later of the date the notice is received by the director or the date specified by the filer of the notice.

(3) Unless otherwise exempt from registration under ORS 59.025 or 59.035, any federal covered security that is subject to section 18(b)(4)(D) of the Securities Act of 1933, as amended, may be offered and sold only upon a filing of a notice with, and the payment of the required fee to, the director, not later than 15 days after the first sale of such federal covered security in this state. The notice shall be filed on Securities and Exchange Commission Form D or on a form of notice prescribed by the director. The required fee shall be equal to $1 per $1,000 of the aggregate price of the securities which are to be offered in this state on the first $100,000 or fraction thereof, 50 cents per $1,000 on the next $200,000 or fraction thereof and $25 per $100,000 for each additional $100,000 or fraction thereof, but in no case shall the fee be less than $25 or more than $500. The fee shall not be refundable. The effective date of the notice shall be the later of the date the notice is received by the director or the date specified by the filer of the notice.

(4) The director may issue an order suspending the offer and sale of a federal covered security if the director finds that there is a failure to comply with any requirement under this section.

[(5) Notwithstanding the provisions of this section, until October 10, 1999, the director may require the registration of any federal covered security for which the fees required by this section have not been promptly paid following written notification from the director to the issuer of the nonpayment or underpayment of such fees. An issuer shall be considered to have promptly paid the fees if they are remitted to the director within 15 days following the delivery of written notification by the director.]

[(6)(a)] (5)(a) The filer of a notice under subsections (1) to (3) of this section shall amend the notice when there is a change in the name of the offering or, in the case of offerings for which notice is filed pursuant to subsection (2) or (3) of this section, when there is an increase in the aggregate price of the securities which are to be offered in this state. There is no fee required for an amendment that does not increase the aggregate offering amount. Notices amending the aggregate offering amount shall include fees calculated in accordance with subsection (2) or (3) of this section, less amounts previously paid under the prior notice filing but in no event shall the fee be less than $25. The fee shall not be refundable.

(b) If an issuer or person sells federal covered securities in this state for a price in excess of the aggregate price for which fees were initially paid under this section, the seller shall pay a fee of three times the difference between the initial fee paid and the fee required under this section for the federal covered securities sold in this state. However, the additional fee shall not be less than $25. The fee shall not be refundable.

[(7)] (6) The director, by rule or otherwise, may waive any or all of the provisions of this section.

SECTION 3. ORS 59.065 is amended to read:

59.065. (1) The Director of the Department of Consumer and Business Services by rule shall establish procedures for registering securities. The director may coordinate registration in this state with any federal securities Act or national registration system.

(2)[(a) Except as provided in paragraph (b) of this subsection,] Every registration application submitted shall be accompanied by a fee of $1 per $1,000 of the aggregate price of the securities [which] that are to be offered in this state on the first $100,000 or fraction thereof, and 50 cents per $1,000 on the next $200,000 or fraction thereof and $25 per $100,000 for each additional $100,000 or fraction thereof, but in no case shall the fee be less than $25 nor more than $500. The fee is not refundable.

[(b) Every registration application submitted pursuant to the provisions of ORS 59.049 (5) shall be accompanied by a fee equal to three times the amount of the fee otherwise required by ORS 59.049 (1), (2) or (3).]

(3) If a registrant sells securities in Oregon in excess of the quantity registered or for a price in excess of the aggregate price for which fees were initially paid, the registrant may obtain registration of the excess securities by paying three times the difference between the initial fee paid and the fee required under subsection (2) of this section for the securities sold in Oregon. However, the additional fee shall not be less than $25. Registration of the excess securities shall be effective retroactively to the date of sale.

SECTION 4. ORS 59.165 is amended to read:

59.165. (1) It is unlawful for any person to transact business in this state as a broker-dealer or salesperson unless the person is licensed under the Oregon Securities Law.

(2) No broker-dealer or state investment adviser shall be licensed in this state unless the broker-dealer or state investment adviser has at least one salesperson licensed in this state.

(3) It is unlawful for a broker-dealer[, state investment adviser, mortgage banker, mortgage broker] or issuer or owner of securities to employ a salesperson [or investment adviser representative] to act in this state unless the salesperson [or investment adviser representative] is licensed under the Oregon Securities Law to the broker-dealer[, state investment adviser, mortgage banker, mortgage broker] or issuer or owner of securities. Only a natural person may be licensed as a salesperson [or investment adviser representative].

(4) It is unlawful for:

(a) A state investment adviser to employ an investment adviser representative in this state unless the investment adviser representative is licensed under the Oregon Securities Law to the state investment adviser;

(b) A federal covered investment adviser to employ an investment adviser representative who has a place of business in this state to act in this state unless the investment adviser representative is licensed under the Oregon Securities Law to the federal covered investment adviser[.]; or

(c) An individual, except as otherwise provided in subsection (8) of this section, to transact business in this state as an investment adviser representative unless the individual is licensed as an investment adviser representative. Only a natural person may be licensed as an investment adviser representative.

(5) No person:

(a) May be licensed as a salesperson or investment adviser representative for more than one broker-dealer, federal covered investment adviser, state investment adviser[, mortgage banker, mortgage broker,] or issuer or owner of securities at the same time, except as may be allowed by rule or order of the Director of the Department of Consumer and Business Services.

(b) May be licensed as a salesperson or investment adviser representative unless the person is employed by a broker-dealer, federal covered investment adviser, state investment adviser[, mortgage banker, mortgage broker,] or issuer or owner of securities.

(6) It is unlawful for any person to transact business in this state as a state investment adviser unless the person:

(a) Is licensed as such under the Oregon Securities Law; or

(b) Is licensed as a broker-dealer without the imposition of a condition under ORS 59.215 (4).

(7) Except for federal covered investment advisers whose activities are described by ORS 59.015 (20)(b) and licensed broker-dealers transacting business as federal covered investment advisers in this state, it is unlawful for any federal covered investment adviser to conduct an advisory business in this state unless such person makes notice filings with the director of such documents filed with the Securities and Exchange Commission as the director may by rule or otherwise require and pays the fee, including the notice filing fee, specified in ORS 59.175. The director may issue an order suspending the conduct of an investment advisory business in this state if the director finds that there is a failure to comply with any requirement under this section.

[(8)(a) Notwithstanding any other provision of this section, until October 10, 1999, the director may require the licensing as a state investment adviser of any person, otherwise meeting the definition of federal covered investment adviser, who has failed to promptly pay the fees required by ORS 59.175 (8)(g) and (h) after being notified in writing by the director of the nonpayment or underpayment of such fees. A person shall be considered to have promptly paid such fees if the fees are remitted to the director within 15 days following the delivery of written notification by the director.]

[(b) It is unlawful for any federal covered investment adviser to conduct an investment advisory business in this state if such person fails to obtain the license required by the director under paragraph (a) of this subsection.]

[(9)] (8) Notwithstanding any other provision of this section, an individual performing the activities of an investment adviser representative and who would otherwise be required to be licensed as an investment adviser representative shall not be required to be separately licensed as an investment adviser representative if:

(a) The individual is licensed to a licensed broker-dealer, the broker-dealer is transacting business as a federal covered investment adviser or a state investment adviser under the provisions of subsection (6)(b) of this section and the person is performing investment adviser activities on behalf of the broker-dealer; or

(b) The individual is licensed to a licensed broker-dealer and the broker-dealer directly receives all compensation otherwise earned by the person in connection with the investment advisory activities being transacted in this state. The broker-dealer may or may not further distribute any or all compensation received to the licensed salesperson.

SECTION 5. ORS 59.175 is amended to read:

59.175. (1) The Director of the Department of Consumer and Business Services by rule shall establish procedures for notice filings required of federal covered investment advisers as well as procedures for licensing broker-dealers, state investment advisers, investment adviser representatives and salespersons. The director may coordinate notice filings or licensing with any national registration, licensing or notice filing system.

(2) The director may require an applicant for a license as a broker-dealer[,] or state investment adviser [or federal covered investment adviser for whom a license is required under ORS 59.165 (8)], including the applicant’s partners, directors, officers or any person occupying a similar status or performing similar functions, and any person directly or indirectly controlling such applicant and a person for whom application for a license as a salesperson or investment adviser representative is made, to pass an examination on such person’s knowledge and understanding of the Oregon Securities Law and the securities business. The director may establish by rule a fee for the examination.

(3) The director may make such further examination of the applicant and the applicant’s affairs as the director deems advisable and may require by rule or order that the applicant publish an announcement of the application in such manner as the director may specify.

(4)(a) Except as otherwise provided in paragraph (b) or (c) of this subsection, every applicant for a license as a broker-dealer or state investment adviser shall file with the director a corporate surety bond or irrevocable letter of credit issued by an insured institution as defined in ORS 706.008 or such other security as the director may approve by rule running to the State of Oregon in a sum to be established by rule of the director, but in no event more than $100,000.

(b) Licensed broker-dealers subject to section 15 of the Securities Exchange Act of 1934, as amended, are not required to comply with paragraph (a) of this subsection, nor are such licensed broker-dealers required to comply with any net capital requirements imposed by the director by rule or otherwise.

(c) A licensed state investment adviser who has its principal place of business in a state other than this state shall be exempt from the requirements of paragraph (a) of this subsection and shall be further exempt from any net capital requirements imposed by the director by rule or otherwise, provided that any such licensed state investment adviser is registered or licensed as a state investment adviser in the state where it maintains its principal place of business and is in compliance with such state’s bonding or net capital requirements.

(5)(a) Subject to paragraph (b) of this subsection, if the application, surety bond, irrevocable letter of credit or other security and fees are in order and the director is satisfied that the application should not be denied upon one or more of the grounds specified in ORS 59.205 to 59.225, the director shall license the broker-dealer, state investment adviser, salesperson or investment adviser representative.

(b) If the director determines under ORS 59.205 or 59.215 that a condition or restriction should apply to the license, the director, at the time the license is issued, shall specify in writing to the licensee the condition or restriction applicable to the license.

(6) A licensee under ORS 59.165 shall amend the license application when there are material changes in the information contained in the original application.

(7) An applicant for or a person holding a license issued under ORS 59.005 to 59.451 may file with the director a trade name, as defined in ORS 647.005, or an assumed business name, as defined in ORS 648.005. The trade name or assumed business name shall be filed in a form and manner established by rule by the director. If the application is complete and the fee set forth in subsection (8) of this section is paid, the director shall issue an order authorizing the licensee to operate under the trade name or assumed business name. The order shall remain in effect until canceled, suspended or revoked.

(8) The director shall charge and collect for:

(a) An application for a license as a broker-dealer or state investment adviser, a fee of $100;

(b) An application to renew a license as a broker-dealer or state investment adviser, a fee of $50;

(c) An application for a license as a salesperson, a fee of $15;

(d) An application to renew a license as a salesperson, a fee of $15;

(e) An application for a license as an investment adviser representative, a fee of $15;

(f) An application to renew a license as an investment adviser representative, a fee of $15;

(g) A notice filing for a federal covered investment adviser, a fee of $100;

(h) A notice filing renewal for a federal covered investment adviser, a fee of $50; and

(i) A filing for use of a trade name or an assumed business name, a fee of $50.

(9) Except as provided in this subsection, the fees under this section are not refundable. The director may provide for a method of equitably adjusting the payment of fees for broker-dealers, federal covered investment advisers, state investment advisers, salespersons and investment adviser representatives when the director determines that the changes in filing periods and expiration dates under ORS 59.185 are not equitable for the person making the payment.

SECTION 6. ORS 59.185 is amended to read:

59.185. (1) Every license of a broker-dealer or state investment adviser expires one year after the date of issuance unless the Director of the Department of Consumer and Business Services establishes a different expiration date for purposes of coordination with any national registration or licensing system.

[(2) Every license of a mortgage banker’s or mortgage broker’s salesperson expires one year after the date of issuance unless the director establishes a different expiration date for the purposes of coordination with any national registration or licensing system.]

[(3)(a)] (2)(a) Every license of an issuer’s or owner’s salesperson expires when the securities are no longer authorized for sale or one year after the date of issuance, whichever is sooner.

(b) Unless the director establishes a different expiration date for the purposes of coordination with any national registration or licensing system, every license of a salesperson licensed to a broker-dealer and every license of an investment adviser representative licensed to a state investment adviser expires on the same date that the license of the broker-dealer or state investment adviser expires.

(c) Unless the director establishes a different expiration date for the purposes of coordination with any national registration or licensing system, every license of an investment adviser representative licensed on behalf of a federal covered investment adviser expires the earlier of one year after the date of issuance or the date the notice of the federal covered investment adviser expires.

[(4)] (3) The director by rule shall establish procedures for renewing licenses of broker-dealers, state investment advisers, investment adviser representatives and salespersons, and for the annual renewal of [licenses or] notice filings made on behalf of federal covered investment advisers.

[(5)] (4) If there is a change in the partners, directors, officers, persons occupying similar positions or performing similar functions, or persons directly or indirectly controlling a broker-dealer or state investment adviser, written notification of such change shall promptly be filed with the director. No fee shall be required for such notification. An examination may be required of any such individual who is newly connected with or interested in the licensee.

SECTION 7. ORS 59.205 is amended to read:

59.205. Except as provided in ORS 59.215, the Director of the Department of Consumer and Business Services may by order deny, suspend or revoke, or impose conditions or restrictions on, a license of a person as a broker-dealer, [federal covered investment adviser that has failed to comply with the provisions of ORS 59.165,] state investment adviser, investment adviser representative or salesperson if the director finds that the applicant or licensee:

(1) Is insolvent, either in the sense that the liabilities of the applicant or licensee exceed the assets of the applicant or licensee or that the applicant or licensee cannot meet the obligations of the applicant or licensee as they mature, or is in such financial condition that the applicant or licensee cannot continue in business with safety to the customers of the applicant or licensee.

(2) Has engaged in dishonest, fraudulent or illegal practices or conduct in any business or profession or unfair or unethical practices or conduct in connection with the purchase or sale of any security.

(3) Has willfully or repeatedly violated or failed to comply with any provision of the Oregon Securities Law, any condition or restriction imposed on a license or any rule or order of the director.

(4) Has been convicted of a misdemeanor an essential element of which is fraud or of a felony.

(5) Is not qualified to conduct a securities business on the basis of such factors as training, experience and knowledge of the securities business.

(6) Has filed an application for a license which as of the date the license was issued, or as of the date of an order conditioning, restricting, denying, suspending or revoking a license, 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.

(7) Has failed to account to persons interested for all money or property received.

(8) Has not delivered after a reasonable time, to persons entitled thereto, securities held or to be delivered.

(9) Is permanently or temporarily enjoined by a court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business.

(10) Is the subject of an order of the director conditioning, restricting, denying, suspending or revoking a license as a broker-dealer, [federal covered investment adviser,] state investment adviser, investment adviser representative or salesperson.

(11) Is the subject of an order of the director under:

(a) ORS chapter 645 involving a violation of any provision of the Oregon Commodity Code or any rule or order of the director adopted or entered under ORS chapter 645; or

(b) ORS 59.840 to 59.980 involving a violation of any provision of ORS 59.840 to 59.980 or any rule or order of the director adopted or entered under ORS 59.840 to 59.980.

(12) Is the subject of any of the following orders that are currently effective and were issued within the last five years:

(a) An order by the securities agency or administrator of another state or Canadian province or territory, or by the Securities and Exchange Commission, entered after notice and opportunity for hearing, denying, suspending or revoking the person’s registration or license as a broker-dealer, federal covered investment adviser, state investment adviser, investment adviser representative or salesperson, or the substantial equivalent of those terms as defined in the Oregon Securities Law;

(b) A suspension or expulsion from membership in or association with a member of a self-regulatory organization registered under the Securities Exchange Act of 1934, as amended, the Commodity Exchange Act or the Investment Advisers Act of 1940, as amended;

(c) A United States Postal Service fraud order;

(d) A cease and desist order entered after notice and opportunity for hearing by the director, the securities agency or administrator of another state or a Canadian province or territory, the Securities and Exchange Commission or the Commodity Futures Trading Commission; or

(e) An order by the Commodity Futures Trading Commission denying, suspending or revoking registration under the Commodity Exchange Act.

(13) Has failed, reasonably to supervise the salespersons or investment adviser representatives of the applicant or licensee.

(14) Has failed to comply with the requirements of ORS 59.195 to make and keep records prescribed by rule or order of the director, to produce such records required by the director or to file any financial reports or other information the director by rule or order may require.

Approved by the Governor June 10, 2003

Filed in the office of Secretary of State June 11, 2003

Effective date January 1, 2004

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