SECURITIES DEPARTMENT
[Authorized: NDCC Section 10-04-03]
Regulation of securities was handled by several different agencies and officials until 1913 and between 1913 and 1923 the Secretary of State and the State Examiner (head of the Department of Banking) were responsible for registration of securities and corporations. In 1923 the Securities Commission was established and consisted of the Governor, Attorney General, and the Secretary of State having authority for regulation of the securities industry. Known as the “Commission” it had duties to protect the investing public and authority to regulate the security industry and prevent fraud in the sale of securities, including stocks, shares, bonds, contract, debentures, and other investments. The Commission members appointed an executive officer who served full time as ex-officio secretary and held a two-year term. The Commission also employed extra assistants, accountants, and investigators whenever necessary (S. L. 1923, Ch. 182). A 1939 law made the State Examiner the executive officer of the Commission (S.L. 1939, Ch. 185).
The Securities Commission was abolished in 1951 and the State Examiner was designated the Securities Commissioner and the Office of the Securities Commissioner was created in 1951 (S. L. 1951, Ch. 106). The Commissioner was appointed by the Governor for a five-year term. (S. L. 1951, Ch. 106). As head of the state Securities Commission, the Commissioner had responsibility for protecting investors in the state through the regulation of all securities offered and sold and registration of securities dealers and companies operating in North Dakota. The Commissioner conducted investigations and initiated legal action against violators of securities laws, and administered the state franchise investment law [NDCC 51-19] and the Pre-need Funeral Contract Sale Act [NDCC 43-10.1]. In 1959, the State Examiner was authorized to appoint a special Deputy Examiner to serve as ex-officio Commissioner of Securities (S. L. 1959, Ch. 110).
In 1961 (S. L. 1961, Ch. 116) the Governor was empowered to appoint the state Commissioner of Securities who held a four-year term of office. The Senate had to approve the Governor’s selection. Legislation specified that the Commissioner’s term of office started on the first day of July following the national presidential election. Qualifications of the office holder included having knowledge of securities, not being employed in any other public office in the state, county, municipality, or public institution. The Commissioner could not own, hold, control any stocks, capital bonds, or securities regulated by the Commission. The Commissioner was also prohibited from serving as a trustee, assignee, officer, agent, or employee of a financial institution under the Commissioner’s jurisdiction. The Commissioner could not be an officer of any corporation engaged in the business of guaranteeing or insuring the fidelity or faithful performance involving duties or solvency of public officers or public depositaries (S. L. 1961, Ch. 116).
The North Dakota Security Act was supplemented in 1973 with provisions concerning revocation of transactional exemptions (S. L. 1973, Ch. 81), and in 1979 further amendments addressed legislation on registrations, fees, and securities criterion. Changes relating to the registration of dealers, salesman, and investment advisors were regulated under the Security Act (S. L. 1979, Ch.151). New session laws continue to keep the North Dakota securities act current.
The Commissioner of Securities became known as the Securities Commissioner in 1981 (1981, Ch. 535). Legislation did not allow the Commissioner to own or control securities registered under [NDCC 10-04]. The Century Code provided a registration list. Legislation allowed for the appointment of an interim Securities Commissioner to fulfill the term of the Commissioner according to the law. The major role of the Commissioner was to protect the investing public in North Dakota and to regulate all securities offered and sold in the state unless covered by the federal security law. This included dealers, salesmen and investment counselors, investment advisors, and others who distribute securities through the statutory registration process. It was unlawful to offer for sale any security unless the sales person was registered and the stock regulated. In the event of a violation the Commissioner was charged to conduct the investigation. The Commissioner also regulated the offer and sale of franchises in the state pursuant to the law [NDCC 51-19].
In 1983 legislation provided for revocation of investment charters for trust companies formed under legislation found in Chapters 6-11 of the 1983 North Dakota State Legislature session laws. During this session the Commissioner of the Department of Banking and Financial Institutions was appointed receivers to liquidate affairs (S. L. 1983, Ch. 127). Additional definitions regarding amendments, appeals, exemptions, orders, registration, and the Commissioner’s qualifications were addressed. Legislation in 1985 provided for the clarification of definitions and terms when the issuer was a successor for another issuer of securities (S. L. 1985, Ch. 140). In recent legislative sessions amendments and changes that protect the investing public through regulation of all securities offered and sold in this state continues. Salesmen and companies dealing in securities are required to comply with the statutory registration process. Legislation has charged the Commissioner with investigating and bringing injunctive civil and criminal action against persons who violate the North Dakota securities law. In 2005 legislation expanded to the requirement prohibiting the Commissioner from owning or controlling any security registered in the Century Code or any security exempt from the approval of the Securities Department (S. L. 2005, Ch. 97).
Created in 1959 the Securities Board of Review consisted of the Secretary of State, President of the Bank of North Dakota and the Attorney General (S. L. 1959, Ch. 110). The Board did reviews and considered appeals on behalf of individual protesting the Commissioner’s decision or final orders to revoke registrations. In 1983 the Securities Board of Review was repealed and anyone who wanted to petition a Securities Commission order could apply to the District Court (S.L. 1983, Ch. 128).
CHRONOLOGY
1913 From 1913 to 1923 the Secretary of State and the State Examiner had authority to register security companies in the state.
1923 The Securities Commission was created and the terms “securities, speculative securities, and speculative enterprise” were defined. The Commission appointed an executive officer who served a two-year term (S. L. 1923, Ch. 182).
1939 Known as the State Securities Commission, the State Examiner was named ex-officio secretary and the executive officer. The Commission was given authority to employ assistant examiners, accountants, or investigators when necessary (S. L. 1939, Ch. 185).
1951 The State Securities Commission was abolished and the State Examiner became the ex-officio commissioner (S. L. 1951, Ch. 106).
1959 The State Examiner given was authority to appoint a special deputy examiner to serve as ex-officio commissioner of securities. Other legislation related to the administration of securities, the registration of securities for sale to the public, regulations for those selling securities, and investment counselors. Fraudulent practices were addressed and also the penalty for violation of securities laws (S. L. 1959, Ch. 110). The Securities Board of Review was established consisting of the Secretary of State, president of the Bank of North Dakota, and the office of the Attorney general (S. L. 1959, Ch. 110).
1961 The Governor with the approval of the Senate appointed a Commissioner. Legislation addressed securities laws concerning regulation, selling of securities, registration, and exemption (S. L. 1961, Ch. 116 & 117).
1973 Security laws were amended as they related to suspensions and revocation of transactional exemptions. The definition of the term security was amended and specific sections of the Century Code updated (S.L. 1973, Ch. 81).
1975 The Commissioner of Securities was given regulatory control of the sale of franchises in the state (S. L. 1975, Ch. 452).
1979 Fees collected under the Securities Act were turned over to the State Treasurer for deposit in the general fund (S. L. 1979, Ch. 151).
1981 The Commissioner of Securities was renamed the Securities Commissioner. Term of service changed from two to a four-year term. Detailed qualifications for the duties of the Commissioner were outlined (S. L. 1981, Ch. 535).
1983 Legislation provided for revocation of investment charters for trust companies formed under (S. L. 1983, Ch. 6-11). The commissioner of the Department of Banking and Financial Institutions appointed receivers to liquidate affairs (S. L. 1983, Ch. 127). Additional definitions related to exemptions and registration qualifications, appeals, and orders. The Securities Board of Review was repealed (S. L. 1983, Ch. 128).
1985 Clarification of definitions and terms as to when an issuer is considered a successor for another issuer of securities (S. L. 1985, Ch. 140).
1989 Legislation mandated that the Commissioner not be an investment advisor representative (S. L. 1989, Ch. 122). The Commissioner could honor requests from interested persons for the issuance of a statement or opinion concerning the applicability of securities laws. Under the Securities Act the Commissioner was required to make, amend, rescind rules and make other administrative changes when needed (S. L. 1989, Ch. 123).
1997 Amendments were related to the deposit of a security fee. Some fees for penalties were deposited in a special securities protection fund (S.L. 1997, Ch. 101).
1999 Legislation related to federal security filings with some changes in terminology (S.L. 1999, Ch. 92).
2001 Regulation and registration laws for stocks sold under [NDCC 10-04] were required to be regulated either by state or be a federal coverage (S. L. 2001, Ch. 109).
2003 Definitions were added to securities and procedures filing (S. L. 2003, Ch. 82).
2005 Requirements expanded to the qualifications of the securities commissioner (S.L. 2005, Ch. 97).
2007 Legislation included a one-time appropriation for a document storage and retrieval system (S.L. 2007, Ch. 38).
2009 A new subdivision to subsection 17 of [NDCC 10-04-06] was added relating to the sale of securities. Legislation also added other subdivisions, subsections, and sections some relating to the definitions of securities transactions exempt from registration, securities registration filing fees, institutional investors, and electronic filing (S. L. 2009, Ch. 38).
2011 The Legislative Council studied the structure and appropriateness of the level of fees charged by the Securities Commissioner during the 2009-2010 interim and submitted to the Council a report of findings and recommendations along with legislative measures for implementation (S. L. 2011, Ch. 11).
2017 Legislation added a new section to [NDCC 10-04] relating to the financial exploitation of vulnerable adults (S. L. 2017, Ch. 80). Additionally during the 2017-2018 interim a study was conducted by the Governor into the operations of the Securities Department and the State Department of Financial Institutions to determine the feasibility and desirability of combining the agencies into a single department. The report was to be submitted by July 1, 2018 to the Legislative Management with findings and recommendations (S. L. 2017, Ch 33).
SERIES
30599 Minutes.
30793 Dealer and Company Registration Files.
30705 Securities Dealers Register.
32104 Litigation Files.
32222 Administration. Press Releases.
SOURCES
Gray, David P. Guide to the North Dakota State Archives, 1985.
Legislative History of North Dakota State Agencies: Richard J. Wolfert State Librarian. State Library Commission, 1978.
North Dakota Century Code.
North Dakota Secretary of State Blue Book.
North Dakota Securities Department Website.
North Dakota State Legislature Session Laws.
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