House Bill 4009

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    Florida House of Representatives - 1998                HB 4009

        By Representatives Tamargo, Culp, Peaden, Livingston,
    Westbrook, Spratt, Byrd, Brennan, Jacobs, Morroni, Goode,
    Frankel, Safley and King




  1                      A bill to be entitled

  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         authorizing the Department of Banking and

11         Finance to adopt rules; creating s. 517.1204,

12         F.S.; creating the Investment Fraud Restoration

13         Financing Corporation; providing purposes;

14         providing for a board of directors; providing

15         powers and duties of the corporation;

16         authorizing the department and the corporation

17         to enter into service contracts for certain

18         purposes; authorizing the corporation to issue

19         evidences of indebtedness for payment of

20         certain claims; providing requirements and

21         limitations; authorizing the corporation to

22         validate bond obligations; exempting the

23         corporation from certain taxes and assessments;

24         providing application; prohibiting benefits or

25         earnings of the corporation from inuring to

26         private persons; providing for reversion of

27         corporate property to the Securities Guaranty

28         Fund upon dissolution of the corporation;

29         providing for the State Board of Administration

30         to be trustee of the corporation's securities;

31         amending s. 517.131, F.S.; providing a

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  1         limitation on allocations from the Securities

  2         Guaranty Fund under certain circumstances;

  3         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

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  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

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  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:

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  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

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  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

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  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

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  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         (5)  The department shall adopt any rules necessary to

31  implement this section.

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  1         Section 3.  Section 517.1204, Florida Statutes, is

  2  created to read:

  3         517.1204  Investment Fraud Restoration Financing

  4  Corporation.--

  5         (1)  The Investment Fraud Restoration Financing

  6  Corporation is hereby created as a nonprofit public benefit

  7  corporation for the purpose of financing the remedial measures

  8  instituted by the Legislature with respect to the victims of

  9  GIC Government Securities, Inc., and the payment of approved

10  claims pursuant to s. 517.1203. The fulfillment of the

11  purposes of the corporation promotes the health, safety, and

12  general welfare of the people of the state and serves

13  essential governmental functions and a paramount public

14  purpose. The corporation shall terminate on July 1, 2021, or

15  upon fulfillment of all of the purposes of this section,

16  whichever occurs earlier.

17         (2)  The corporation shall be governed by a board of

18  directors consisting of the assistant comptroller, the

19  Secretary of Elderly Affairs or the secretary's designee and

20  the executive director of the Department of Veterans' Affairs

21  or the executive director's designee. The executive director

22  of the State Board of Administration shall be the chief

23  executive officer of the corporation and shall direct and

24  supervise the administrative affairs of the corporation and

25  shall control, direct, and supervise the operation of the

26  corporation.  The corporation shall also have such other

27  officers as may be determined by the board of directors.

28         (3)  The corporation shall have all the powers of a

29  corporate body under the laws of this state to the extent not

30  inconsistent with or restricted by the provisions of this

31  section, including, but not limited to, the power to:

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  1         (a)  Adopt, amend, and repeal bylaws not inconsistent

  2  with this section.

  3         (b)  Sue and be sued.

  4         (c)  Adopt and use a common seal.

  5         (d)  Acquire, purchase, hold, lease, and convey such

  6  real and personal property as may be proper or expedient to

  7  carry out the purposes of the corporation and this section,

  8  and to sell, lease, or otherwise dispose of such property.

  9         (e)  Elect or appoint and employ such officers, agents,

10  and employees as the corporation deems advisable to operate

11  and manage the affairs of the corporation, which officers,

12  agents, and employees may be officers or employees of the

13  department and the state agencies represented on the board of

14  directors of the corporation.

15         (f)  Borrow money and issue notes, bonds, certificates

16  of indebtedness, or other obligations or evidences of

17  indebtedness necessary to pay claims approved pursuant to s.

18  517.1203 payable from the Securities Guaranty Fund.

19         (g)  Make and execute any and all contracts, trust

20  agreements, and other instruments and agreements necessary or

21  convenient to accomplish the purposes of the corporation and

22  this section.

23         (h)  Select, retain, and employ professionals,

24  contractors, or agents, which may include the Division of Bond

25  Finance of the State Board of Administration, as is necessary

26  or convenient to enable or assist the corporation in carrying

27  out the purposes of the corporation and this section.

28         (i)  Do any act or thing necessary or convenient to

29  carry out the purposes of the corporation and this section and

30  the powers provided in this section.

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  1         (4)  The corporation is authorized to enter into one or

  2  more service contracts with the department pursuant to which

  3  the corporation shall provide services to the department in

  4  connection with financing the functions and activities

  5  provided for in s. 517.1203.  The department may enter into

  6  one or more such service contracts with the corporation and

  7  provide for payments under such contracts pursuant to s.

  8  517.1203(2)(a), subject to annual appropriation by the

  9  Legislature.  The proceeds from such service contracts may be

10  used for the costs and expenses of administration of the

11  corporation after payments as set forth in subsection (5).

12  Each service contract shall have a term not to exceed 15 years

13  and shall terminate no later than July 1, 2021.  The aggregate

14  amount payable from the Securities Guaranty Fund under all

15  such service contracts shall not exceed the amount provided by

16  s. 517.1203(1). In compliance with provisions of s. 287.0641

17  and other applicable provisions of law, the obligations of the

18  department under such service contracts shall not constitute a

19  general obligation of the state or a pledge of the faith and

20  credit or taxing power of the state nor shall such obligations

21  be construed in any manner as an obligation of the State Board

22  of Administration or entities for which it invests funds,

23  other than the department as provided in this section, but

24  shall be payable solely from amounts available in the

25  Securities Guaranty Fund, subject to annual appropriation.  In

26  compliance with this subsection and s. 287.0582, such service

27  contracts shall expressly include the following statement:

28  "The State of Florida's performance and obligation to pay

29  under this contract is contingent upon an annual appropriation

30  by the Legislature."

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  1         (5)  The corporation may issue and incur notes, bonds,

  2  certificates of indebtedness, or other obligations or

  3  evidences of indebtedness payable from and secured by amounts

  4  payable to the corporation by the department under a service

  5  contract entered into pursuant to subsection (4) for the

  6  purpose of the simultaneous payment of all claims approved

  7  pursuant to s. 517.1203. The term of any such note, bond,

  8  certificate of indebtedness, or other obligation or evidence

  9  of indebtedness shall not exceed 15 years. The corporation may

10  select a financing team and issue obligations through

11  competitive bidding or negotiated contracts, whichever is most

12  cost-effective.  Any such indebtedness of the corporation

13  shall not constitute a debt or obligation of the state or a

14  pledge of the faith and credit or taxing power of the state,

15  but shall be payable from and secured by payments made by the

16  department under the service contract pursuant to subsection

17  (4).

18         (6)  The corporation shall pay all claims approved

19  pursuant to s. 517.1203 as determined by and at the direction

20  of the department.

21         (7)  The corporation is exempt from taxation and

22  assessments of any nature whatsoever upon its income and any

23  property, assets, or revenues acquired, received, or used in

24  the furtherance of the purposes provided in this chapter.  The

25  obligations of the corporation incurred pursuant to subsection

26  (5) and the interest and income on such obligations and all

27  security agreements, letters of credit, liquidity facilities,

28  or other obligations or instruments arising out of, entered

29  into in connection with, or given to secure payment of such

30  obligations are exempt from all taxation, provided such

31  exemption does not apply to any tax imposed by chapter 220 on

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  1  the interest, income, or profits on debt obligations owned by

  2  corporations.

  3         (8)  The corporation may validate any bonds issued

  4  pursuant to this section, as provided in chapter 75. The

  5  validation complaint shall be filed only in the circuit court

  6  for Leon County. The notice required under s. 75.06 shall be

  7  published in Leon County and the complaint and order of the

  8  circuit court shall be served only on the State Attorney for

  9  the Second Judicial Circuit. The provisions of ss. 75.04(2)

10  and 75.06(2) shall not apply to a validation complaint filed

11  as authorized in this subsection. The validation of the first

12  bonds issued pursuant to this section may be appealed to the

13  Supreme Court and such appeal shall be handled on an expedited

14  basis.

15         (9)  The corporation shall not take any action which

16  will materially and adversely affect the rights of holders of

17  any obligations issued under this section as long as such

18  obligations are outstanding.

19         (10)  The corporation shall not be deemed to be a

20  special district for purposes of chapter 189 or a unit of

21  local government for purposes of part III of chapter 218.  The

22  provisions of chapters 120 and 215, except the limitation on

23  interest rates provided by s. 215.84 which applies to

24  obligations of the corporation issued pursuant to this

25  section, and part I of chapter 287, except ss. 287.0582 and

26  287.0641, shall not apply to this section, the corporation

27  created in this section, the service contracts entered into

28  pursuant to this section, or debt obligations issued by the

29  corporation as provided in this section.

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  1         (11)  In no event shall any of the benefits or earnings

  2  of the corporation inure to the benefit of any private person,

  3  except those persons identified pursuant to s. 517.1203.

  4         (12)  Upon dissolution of the corporation, title to all

  5  property owned by the corporation shall revert to the

  6  Securities Guaranty Fund.

  7         (13)  The corporation may contract with the State Board

  8  of Administration to serve as trustee with respect to debt

  9  obligations issued by the corporation as provided by this

10  section and to hold, administer, and invest proceeds of such

11  debt obligations and other funds of the corporation and to

12  perform other services required by the corporation.  The State

13  Board of Administration may perform such services and may

14  contract with others to provide all or a part of such services

15  and to recover the costs and expenses of providing such

16  services.

17         Section 4.  Paragraph (a) of subsection (1) of section

18  517.131, Florida Statutes, is amended to read:

19         517.131  Securities Guaranty Fund.--

20         (1)(a)  The Treasurer shall establish a Securities

21  Guaranty Fund.  An amount not exceeding 20 percent of all

22  revenues received as assessment fees pursuant to s. 517.12(10)

23  and (11) for dealers and investment advisers and an amount not

24  exceeding 10 percent of all revenues received as assessment

25  fees pursuant to s. 517.12(10) and (11) for associated persons

26  shall be allocated to the fund.  An additional amount not

27  exceeding 3.5 percent of all revenues received as assessment

28  fees for associated persons pursuant to s. 517.12(10) and (11)

29  shall be allocated to the Securities Guaranty Fund but only

30  after the department determines upon a determination, by final

31  order of the department, that sufficient funds have been

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  1  allocated to the fund pursuant to s. 517.1203 to satisfy all

  2  valid claims filed in accordance with s. 517.1203(2) and after

  3  all amounts payable under any service contract entered into by

  4  the department pursuant to s. 517.1204, and all notes, bonds,

  5  certificates of indebtedness, other obligations, or evidences

  6  of indebtedness secured by such notes, bonds, certificates of

  7  indebtedness or other obligations, have been paid or provision

  8  has been made for the payment of such amounts, notes, bonds,

  9  certificates of indebtedness, other obligations, or evidences

10  of indebtedness. This assessment fee shall be part of the

11  regular license fee and shall be transferred to or deposited

12  in the Securities Guaranty Fund.

13         Section 5.  This act shall take effect upon becoming a

14  law.

15

16            *****************************************

17                          HOUSE SUMMARY

18
      Creates the Investment Fraud Restoration Financing
19    Corporation to provide for financing payments of claims
      from the Securities Guaranty Fund to indemnify losses of
20    investors in securities of GIC Government Securities,
      Inc. Provides for allocations from the Securities
21    Guaranty Fund to pay such claims. Provides for continuing
      assessments to fund payment of such claims. See bill for
22    details.

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