Senate Bill 2122er
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1
2 An act relating to securities transactions;
3 amending s. 517.12, F.S.; limiting certain
4 assessment fee reductions under certain
5 circumstances; amending s. 517.1203, F.S.;
6 providing for allocations from the Securities
7 Guaranty Fund for certain purposes; providing
8 for certain additional disbursements from the
9 fund; extending the period for filing claims;
10 creating s. 517.1204, F.S.; creating the
11 Investment Fraud Restoration Financing
12 Corporation; providing purposes; providing for
13 a board of directors; providing powers and
14 duties of the corporation; authorizing the
15 department and the corporation to enter into
16 service contracts for certain purposes;
17 authorizing the corporation to issue evidences
18 of indebtedness for payment of certain claims;
19 providing requirements and limitations;
20 authorizing the corporation to validate bond
21 obligations; exempting the corporation from
22 certain taxes and assessments; providing
23 application; prohibiting benefits or earnings
24 of the corporation from inuring to private
25 persons; providing for reversion of corporate
26 property to the Securities Guaranty Fund upon
27 dissolution of the corporation; providing for
28 the State Board of Administration to be trustee
29 of the corporation's securities; authorizing
30 the Auditor General to conduct an audit of the
31 corporation; amending s. 517.131, F.S.;
1
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 providing a limitation on allocations from the
2 Securities Guaranty Fund under certain
3 circumstances; providing an effective date.
4
5 WHEREAS, it is a fundamental regulatory duty of the
6 Division of Securities and Investor Protection of the
7 Department of Banking and Finance to ensure the integrity of
8 the Florida securities market in accordance with chapter 517,
9 Florida Statutes, and
10 WHEREAS, it is the duty of the Division of Securities
11 and Investor Protection to successfully conduct investigations
12 of fraudulent securities transactions and to discover
13 falsification or concealment of facts for the benefit of the
14 investing public, and
15 WHEREAS, during the period beginning in April 1985
16 through October 1985, personnel in the Division of Securities
17 and Investor Protection, with regard to investors doing
18 business with GIC Government Securities, Inc., were remiss in
19 permitting the sale of securities which should not have been
20 allowed to be sold pursuant to chapter 517, Florida Statutes,
21 and failed to prevent the falsification or concealment of
22 facts, and
23 WHEREAS, as a result of that failure, over 1,300
24 Florida citizens, many of whom were elderly, lost their life
25 savings or suffered devastating monetary losses because of
26 doing business with GIC Government Securities, Inc., which at
27 the time was inadequately regulated by the Division of
28 Securities and Investor Protection, and
29 WHEREAS, the victimization by GIC Government
30 Securities, Inc., of investors has harmed the integrity of the
31
2
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 Florida securities market as well as the trust vested in the
2 state to regulate this market, and
3 WHEREAS, such harm threatens the viability of these
4 markets and consequently the economic welfare of the state and
5 its citizens, and
6 WHEREAS, the Legislature has sought to repair the harm
7 these fraudulent securities activities have inflicted on the
8 integrity of the Florida securities market and the trust
9 vested in the state to regulate this market by establishing a
10 program to reimburse these victims for unrecoverable losses
11 due to unsatisfied judgments and unrecompensable bankruptcy
12 claims, and
13 WHEREAS, many of the victims of GIC Government
14 Securities, Inc., were unable to obtain adequate reimbursement
15 for claims filed with the Securities Guaranty Fund under s.
16 517.131, Florida Statutes, and
17 WHEREAS, many of the victims of GIC Government
18 Securities, Inc., obtained judgments which were unsatisfied,
19 failed to be recompensed by the bankruptcy courts, and were
20 unable to obtain adequate reimbursement from the Securities
21 Guaranty Fund under s. 517.131, Florida Statutes, and
22 WHEREAS, the Legislature created s. 517.1203, Florida
23 Statutes, for the purpose of reimbursing victims of GIC
24 Government Securities, Inc., for the full amount of their
25 monetary losses, and
26 WHEREAS, annual revenues allocated to reimburse victims
27 of GIC Government Securities, Inc., are limited and have
28 proven insufficient to meet claims as they are approved, and
29 WHEREAS, many of the victims of GIC Government
30 Securities, Inc., are elderly and may not live long enough to
31 have funds sufficient to reimburse them become available, and
3
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 WHEREAS, it is necessary to fulfill the intent and
2 purposes of chapter 517, Florida Statutes, and further it is
3 hereby determined to be in the best interest of, and necessary
4 for the protection of, the public health, safety, and general
5 welfare of the residents of this state, and therefore a
6 paramount public purpose, to provide for the creation of a
7 nonprofit public benefit corporation to assist in reimbursing
8 the victims of GIC Government Securities, Inc., and to
9 authorize the department to enter into one or more service
10 contracts with such corporation for the provision of financing
11 services related to such functions and to make payments
12 thereunder from the amount on deposit in the Securities
13 Guaranty Fund, subject to annual appropriation by the
14 Legislature, and
15 WHEREAS, to achieve these purposes and in order to
16 facilitate and expedite the remedial measures instituted by
17 the Legislature with respect to the victims of GIC Government
18 Securities, Inc., it is in the best interest of the residents
19 of this state to authorize such corporation to issue evidences
20 of indebtedness payable from amounts paid by the Department of
21 Banking and Finance under any such service contract entered
22 into between the department and such corporation, and
23 WHEREAS, the Legislature is taking this action only
24 after balancing all the competing needs of the state, NOW,
25 THEREFORE,
26
27 Be It Enacted by the Legislature of the State of Florida:
28
29 Section 1. Subsection (10) of section 517.12, Florida
30 Statutes, is amended to read:
31
4
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 517.12 Registration of dealers, associated persons,
2 investment advisers, and branch offices.--
3 (10) An applicant for registration shall pay an
4 assessment fee of $200, in the case of a dealer or investment
5 adviser, or $40, in the case of an associated person. The
6 assessment fee of an associated person shall be reduced to $30
7 but only after the department determines upon a determination,
8 by final order of the department, that sufficient funds have
9 been allocated to the Securities Guaranty Fund pursuant to s.
10 517.1203 to satisfy all valid claims filed in accordance with
11 s. 517.1203(2) and after all amounts payable under any service
12 contract entered into by the department pursuant to s.
13 517.1204, and all notes, bonds, certificates of indebtedness,
14 other obligations, or evidences of indebtedness secured by
15 such notes, bonds, certificates of indebtedness, or other
16 obligations, have been paid or provision has been made for the
17 payment of such amounts, notes, bonds, certificates of
18 indebtedness, other obligations, or evidences of indebtedness.
19 An associated person not having current fingerprint cards
20 filed with the National Association of Securities Dealers or a
21 national securities exchange registered with the Securities
22 and Exchange Commission shall be assessed an additional fee to
23 cover the cost for said fingerprint cards to be processed by
24 the department. Such fee shall be determined by rule of the
25 department. Each dealer and each investment adviser shall pay
26 an assessment fee of $100 for each office in this state,
27 except its designated principal office. Such fees become the
28 revenue of the state, except for those assessments provided
29 for under s. 517.131(1) until such time as the Securities
30 Guaranty Fund satisfies the statutory limits, and are not
31
5
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 returnable in the event that registration is withdrawn or not
2 granted.
3 Section 2. Section 517.1203, Florida Statutes, is
4 amended to read:
5 517.1203 Allocation and disbursement of assessment
6 fees.--
7 (1) Notwithstanding s. 517.131(1) and until the
8 department determines by final order that sufficient funds
9 have been allocated to the Securities Guaranty Fund pursuant
10 to this section to satisfy all valid claims filed in
11 accordance with subsection (2), an additional amount equal to
12 25 percent of all revenues received as assessment fees
13 pursuant to s. 517.12(10) and (11) from persons applying for
14 or renewing registrations as associated persons shall be
15 allocated to the Securities Guaranty Fund and disbursed as
16 provided in this section. This allocation shall continue until
17 the department determines, by final order, that sufficient
18 funds have been allocated to the Securities Guaranty Fund
19 pursuant to this section to satisfy all valid claims filed in
20 accordance with subsection (2) and until all amounts payable
21 under any service contract entered into by the department
22 pursuant to s. 517.1204, and all notes, bonds, certificates of
23 indebtedness, other obligations, or evidences of indebtedness
24 secured by such notes, bonds, certificates of indebtedness or
25 other obligations, have been paid or provision has been made
26 for the payment of such amounts, notes, bonds, certificates of
27 indebtedness, other obligations, or evidences of indebtedness.
28 This assessment fee shall be part of the regular license fee
29 and shall be transferred to or deposited into the Securities
30 Guaranty Fund. The moneys allocated to the Securities
31 Guaranty Fund under this section shall not be included in the
6
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 calculation of the allocation of the assessment fees referred
2 to in s. 517.131(1)(b). Moneys allocated under this section
3 in excess of the valid claims filed pursuant to subsection (2)
4 shall be allocated to the Anti-Fraud Trust Fund.
5 (2)(a) Notwithstanding the provisions of ss. 517.131
6 and 517.141, moneys allocated to in the Securities Guaranty
7 Fund under this section shall be used to pay amounts payable
8 under any service contract entered into by the department
9 pursuant to s. 517.1204, subject to annual appropriation by
10 the Legislature, and to pay investors who have filed claims
11 with the Department of Banking and Finance after October 1,
12 1996, and on or before December 31, 1998 1997, who have:
13 1. Received a final judgment against an associated
14 person of GIC Government Securities, Inc., based upon
15 allegations which would amount to a violation of s. 517.07 or
16 s. 517.301; or
17 2. Demonstrated to the department that the claimant
18 has suffered monetary damages as a result of the acts or
19 actions of GIC Government Securities, Inc., or any associated
20 person thereof, based upon allegations which would amount to a
21 violation of s. 517.07 or s. 517.301.
22 (b)1. Claims shall be paid in the order that they have
23 been filed with the department, unless the department has
24 noticed its intent to deny the claim in whole or in part. If
25 a notice of intent to deny a claim in whole or in part is
26 issued, the claim shall not be paid until a final order has
27 been entered which is not subject to an order staying its
28 effect.
29 2. If at any time the money in the Securities Guaranty
30 Fund allocated under this section is insufficient to satisfy
31 any valid claim or portion of a valid claim approved by the
7
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 department under this section, the department shall prorate
2 the payment based upon the ratio that the person's claim bears
3 to the total approved claims filed on the same day. The
4 department shall satisfy the unpaid claims as soon as a
5 sufficient amount of money has been deposited in or
6 transferred to the fund as provided in this section.
7 3. A claimant shall not be substantially affected by
8 the payment of another person's claim.
9 (c) Claims shall be limited to the amount of the
10 investment, reduced by any amounts received from a bankruptcy
11 proceeding or from any other source. If an investor is
12 deceased, the award shall be made to the surviving spouse. If
13 the investor and surviving spouse are both deceased, the award
14 shall be made pursuant to the laws of descent and
15 distribution. Neither the department nor the Investment Fraud
16 Restoration Financing Corporation shall make payment to
17 assignees, secured parties, lien creditors, or other such
18 entities.
19 (3) In rendering a determination, the department may
20 rely on records from the bankruptcy proceeding regarding GIC
21 Government Securities, Inc., unless there is good cause to
22 believe that the record is not genuine.
23 (4) Amounts deposited into the Securities Guaranty
24 Fund pursuant to this section shall be applied to or allocated
25 for payment of amounts payable by the department pursuant to
26 paragraph (2)(a), under a service contract entered into by the
27 department pursuant to s. 517.1204, subject to annual
28 appropriation by the Legislature, before making or providing
29 for any other disbursements from the fund.
30 Section 3. Section 517.1204, Florida Statutes, is
31 created to read:
8
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 517.1204 Investment Fraud Restoration Financing
2 Corporation.--
3 (1) The Investment Fraud Restoration Financing
4 Corporation is hereby created as a nonprofit public benefit
5 corporation for the purpose of financing the remedial measures
6 instituted by the Legislature with respect to the victims of
7 GIC Government Securities, Inc., and the payment of approved
8 claims pursuant to s. 517.1203. The fulfillment of the
9 purposes of the corporation promotes the health, safety, and
10 general welfare of the people of the state and serves
11 essential governmental functions and a paramount public
12 purpose. The corporation shall terminate on July 1, 2021, or
13 upon fulfillment of all of the purposes of this section,
14 whichever occurs earlier.
15 (2) The corporation shall be governed by a board of
16 directors consisting of the assistant comptroller, the
17 Secretary of Elderly Affairs or the secretary's designee and
18 the executive director of the Department of Veterans' Affairs
19 or the executive director's designee. The executive director
20 of the State Board of Administration shall be the chief
21 executive officer of the corporation and shall direct and
22 supervise the administrative affairs of the corporation and
23 shall control, direct, and supervise the operation of the
24 corporation. The corporation shall also have such other
25 officers as may be determined by the board of directors.
26 (3) The corporation shall have all the powers of a
27 corporate body under the laws of this state to the extent not
28 inconsistent with or restricted by the provisions of this
29 section, including, but not limited to, the power to:
30 (a) Adopt, amend, and repeal bylaws not inconsistent
31 with this section.
9
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 (b) Sue and be sued.
2 (c) Adopt and use a common seal.
3 (d) Acquire, purchase, hold, lease, and convey such
4 real and personal property as may be proper or expedient to
5 carry out the purposes of the corporation and this section,
6 and to sell, lease, or otherwise dispose of such property.
7 (e) Elect or appoint and employ such officers, agents,
8 and employees as the corporation deems advisable to operate
9 and manage the affairs of the corporation, which officers,
10 agents, and employees may be officers or employees of the
11 department and the state agencies represented on the board of
12 directors of the corporation.
13 (f) Borrow money and issue notes, bonds, certificates
14 of indebtedness, or other obligations or evidences of
15 indebtedness necessary to pay claims approved pursuant to s.
16 517.1203 payable from the Securities Guaranty Fund.
17 (g) Make and execute any and all contracts, trust
18 agreements, and other instruments and agreements necessary or
19 convenient to accomplish the purposes of the corporation and
20 this section.
21 (h) Select, retain, and employ professionals,
22 contractors, or agents, which may include the Division of Bond
23 Finance of the State Board of Administration, as is necessary
24 or convenient to enable or assist the corporation in carrying
25 out the purposes of the corporation and this section.
26 (i) Do any act or thing necessary or convenient to
27 carry out the purposes of the corporation and this section and
28 the powers provided in this section.
29 (4) The corporation is authorized to enter into one or
30 more service contracts with the department pursuant to which
31 the corporation shall provide services to the department in
10
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 connection with financing the functions and activities
2 provided for in s. 517.1203. The department may enter into
3 one or more such service contracts with the corporation and
4 provide for payments under such contracts pursuant to s.
5 517.1203(2)(a), subject to annual appropriation by the
6 Legislature. The proceeds from such service contracts may be
7 used for the costs and expenses of administration of the
8 corporation after payments as set forth in subsection (5).
9 Each service contract shall have a term not to exceed 15 years
10 and shall terminate no later than July 1, 2021. The aggregate
11 amount payable from the Securities Guaranty Fund under all
12 such service contracts shall not exceed the amount provided by
13 s. 517.1203(1). In compliance with provisions of s. 287.0641
14 and other applicable provisions of law, the obligations of the
15 department under such service contracts shall not constitute a
16 general obligation of the state or a pledge of the faith and
17 credit or taxing power of the state nor shall such obligations
18 be construed in any manner as an obligation of the State Board
19 of Administration or entities for which it invests funds,
20 other than the department as provided in this section, but
21 shall be payable solely from amounts available in the
22 Securities Guaranty Fund, subject to annual appropriation. In
23 compliance with this subsection and s. 287.0582, such service
24 contracts shall expressly include the following statement:
25 "The State of Florida's performance and obligation to pay
26 under this contract is contingent upon an annual appropriation
27 by the Legislature."
28 (5) The corporation may issue and incur notes, bonds,
29 certificates of indebtedness, or other obligations or
30 evidences of indebtedness payable from and secured by amounts
31 payable to the corporation by the department under a service
11
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 contract entered into pursuant to subsection (4) for the
2 purpose of the simultaneous payment of all claims approved
3 pursuant to s. 517.1203. The term of any such note, bond,
4 certificate of indebtedness, or other obligation or evidence
5 of indebtedness shall not exceed 15 years. The corporation may
6 select a financing team and issue obligations through
7 competitive bidding or negotiated contracts, whichever is most
8 cost-effective. Any such indebtedness of the corporation
9 shall not constitute a debt or obligation of the state or a
10 pledge of the faith and credit or taxing power of the state,
11 but shall be payable from and secured by payments made by the
12 department under the service contract pursuant to subsection
13 (4).
14 (6) The corporation shall pay all claims approved
15 pursuant to s. 517.1203 as determined by and at the direction
16 of the department.
17 (7) The corporation is exempt from taxation and
18 assessments of any nature whatsoever upon its income and any
19 property, assets, or revenues acquired, received, or used in
20 the furtherance of the purposes provided in this chapter. The
21 obligations of the corporation incurred pursuant to subsection
22 (5) and the interest and income on such obligations and all
23 security agreements, letters of credit, liquidity facilities,
24 or other obligations or instruments arising out of, entered
25 into in connection with, or given to secure payment of such
26 obligations are exempt from all taxation, provided such
27 exemption does not apply to any tax imposed by chapter 220 on
28 the interest, income, or profits on debt obligations owned by
29 corporations.
30 (8) The corporation may validate any bonds issued
31 pursuant to this section, as provided in chapter 75. The
12
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 validation complaint shall be filed only in the circuit court
2 for Leon County. The notice required under s. 75.06 shall be
3 published in Leon County and the complaint and order of the
4 circuit court shall be served only on the State Attorney for
5 the Second Judicial Circuit. The provisions of ss. 75.04(2)
6 and 75.06(2) shall not apply to a validation complaint filed
7 as authorized in this subsection. The validation of the first
8 bonds issued pursuant to this section may be appealed to the
9 Supreme Court and such appeal shall be handled on an expedited
10 basis.
11 (9) The corporation shall not take any action which
12 will materially and adversely affect the rights of holders of
13 any obligations issued under this section as long as such
14 obligations are outstanding.
15 (10) The corporation shall not be deemed to be a
16 special district for purposes of chapter 189 or a unit of
17 local government for purposes of part III of chapter 218. The
18 provisions of chapters 120 and 215, except the limitation on
19 interest rates provided by s. 215.84 which applies to
20 obligations of the corporation issued pursuant to this
21 section, and part I of chapter 287, except ss. 287.0582 and
22 287.0641, shall not apply to this section, the corporation
23 created in this section, the service contracts entered into
24 pursuant to this section, or debt obligations issued by the
25 corporation as provided in this section.
26 (11) In no event shall any of the benefits or earnings
27 of the corporation inure to the benefit of any private person,
28 except those persons identified pursuant to s. 517.1203.
29 (12) Upon dissolution of the corporation, title to all
30 property owned by the corporation shall revert to the
31 Securities Guaranty Fund.
13
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 (13) The corporation may contract with the State Board
2 of Administration to serve as trustee with respect to debt
3 obligations issued by the corporation as provided by this
4 section and to hold, administer, and invest proceeds of such
5 debt obligations and other funds of the corporation and to
6 perform other services required by the corporation. The State
7 Board of Administration may perform such services and may
8 contract with others to provide all or a part of such services
9 and to recover the costs and expenses of providing such
10 services.
11 (14) The Auditor General may conduct a financial audit
12 of the accounts and records of the corporation.
13 Section 4. Paragraph (a) of subsection (1) of section
14 517.131, Florida Statutes, is amended to read:
15 517.131 Securities Guaranty Fund.--
16 (1)(a) The Treasurer shall establish a Securities
17 Guaranty Fund. An amount not exceeding 20 percent of all
18 revenues received as assessment fees pursuant to s. 517.12(10)
19 and (11) for dealers and investment advisers and an amount not
20 exceeding 10 percent of all revenues received as assessment
21 fees pursuant to s. 517.12(10) and (11) for associated persons
22 shall be allocated to the fund. An additional amount not
23 exceeding 3.5 percent of all revenues received as assessment
24 fees for associated persons pursuant to s. 517.12(10) and (11)
25 shall be allocated to the Securities Guaranty Fund but only
26 after the department determines upon a determination, by final
27 order of the department, that sufficient funds have been
28 allocated to the fund pursuant to s. 517.1203 to satisfy all
29 valid claims filed in accordance with s. 517.1203(2) and after
30 all amounts payable under any service contract entered into by
31 the department pursuant to s. 517.1204, and all notes, bonds,
14
CODING: Words stricken are deletions; words underlined are additions.
ENROLLED
1998 Legislature SB 2122, 1st Engrossed
1 certificates of indebtedness, other obligations, or evidences
2 of indebtedness secured by such notes, bonds, certificates of
3 indebtedness or other obligations, have been paid or provision
4 has been made for the payment of such amounts, notes, bonds,
5 certificates of indebtedness, other obligations, or evidences
6 of indebtedness. This assessment fee shall be part of the
7 regular license fee and shall be transferred to or deposited
8 in the Securities Guaranty Fund.
9 Section 5. This act shall take effect upon becoming a
10 law.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
15