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PAG LIN 1 1 SENATE FILE 406 1 2 1 3 AN ACT 1 4 RELATING TO ENTITIES AND SUBJECT MATTER UNDER THE REGULATORY 1 5 AUTHORITY OF THE INSURANCE DIVISION, INCLUDING SECURITIES, 1 6 BUSINESS OPPORTUNITIES, FUNERAL MERCHANDISE, FUNERAL SERVICES, 1 7 CEMETERIES, CEMETERY MERCHANDISE AND RESIDENTIAL SERVICE CON- 1 8 TRACTS, PROVIDING FOR FEES, AND ESTABLISHING PENALTIES. 1 9 1 10 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 1 11 1 12 Section 1. Section 502.202, subsection 12, paragraph b, 1 13 unnumbered paragraph 1, Code 1999, is amended to read as 1 14 follows: 1 15 A mutual or cooperative organization, including a 1 16 cooperative association organized in good faith under and for 1 17 any of the purposes enumerated in chapters 497, 498,and499, 1 18 and 501 that deals in commodities or supplies goods or 1 19 services in transactions primarily with and for the benefit of 1 20 its members, if: 1 21 Sec. 2. Section 502.302, subsection 3, Code 1999, is 1 22 amended to read as follows: 1 23 3. Every applicant for initial or renewal registration as 1 24 a broker-dealer or investment adviser shall pay a filing fee 1 25 of two hundred dollars. Every applicant for initial or 1 26 renewal registration as an agent or investment adviser 1 27 representative shall pay a filing fee of thirty dollars. 1 28 However, an investment adviser representative is not required 1 29 to pay a filing fee, if the investment adviser is a sole 1 30 proprietorship or the substantial equivalent and the 1 31 investment adviser representative is the same individual as 1 32 the investment adviser. A filing fee is not refundable. 1 33 Every person acting as a federal covered adviser in this 1 34 state, except with respect to federal covered advisers whose 1 35 only clients are those described in section 502.301, 2 1 subsection 3, paragraph "b", shall pay an initial and renewal 2 2 notice filing fee of one hundred dollars. 2 3 Sec. 3. Section 502.304, subsection 5, Code 1999, is 2 4 amended to read as follows: 2 5 5. Withdrawal from registration as a broker-dealer, agent, 2 6 investment adviser, or investment adviser representative 2 7 becomes effective thirty days after receipt of an application 2 8 to withdraw or within such shorter period of time as the 2 9 administrator may by order determine, unless a proceeding to 2 10 deny, suspend, or revoke a registration is pending when the 2 11 application is filed or a proceeding to deny, suspend, or 2 12 revoke a registration, or to impose conditions upon the 2 13 withdrawal is instituted within thirty days after the 2 14 application is filed. If a proceeding is pending or 2 15 instituted, withdrawal becomes effective at such time and upon 2 16 such conditions as the administrator by order determines. If 2 17 no proceeding is pending or instituted and withdrawal 2 18 automatically becomes effective, the administrator may 2 19 nevertheless institute a revocation or suspension proceeding 2 20 under subsection 1, paragraph "b",within one year after 2 21 withdrawal became effective and enter a revocation or 2 22 suspension order as of the last date on which registration was 2 23 effective. 2 24 Sec. 4. Section 502.304, Code 1999, is amended by adding 2 25 the following new subsection: 2 26 NEW SUBSECTION. 5A. A person who directly or indirectly 2 27 controls a broker-dealer or agent is subject to the same 2 28 sanctions applicable to an applicant or registrant under this 2 29 section, unless the person proves that the person did not 2 30 know, and was not grossly negligent in failing to know, of the 2 31 existence of facts by reason of which the liability is alleged 2 32 to exist. 2 33 Sec. 5. Section 502.305, Code 1999, is amended to read as 2 34 follows: 2 35 502.305 EXAMINATION OF INVESTMENT ADVISER REPRESENTATIVE 3 1 AND EXEMPTION FROM EXAMINATION. 3 2 The administrator may adopt rules requiring the passage of 3 3 an examination by an individual who is required to be 3 4 registered under this chapter as an investment adviser 3 5 representative. However, a person who is registered as an 3 6 investment adviser representative between January 1, 1999, and 3 7 December 31,20001999, shall not be required to pass an 3 8 examination for as long as the person maintains a continuous 3 9 registration. 3 10 Sec. 6. Section 502.503, subsection 1, Code 1999, is 3 11 amended to read as follows: 3 12 1. Affiliates of a person liable under section 502.401, 3 13 502.501, 502.502,or502.502A, or 502.604, partners, principal 3 14 executive officers or directors of such person, persons 3 15 occupying a similar status or performing similar functions for 3 16 such person, persons (whether employees of such person or 3 17 otherwise) who materially aid and abet in the act or 3 18 transaction constituting the violation, and broker-dealers or 3 19 agents who materially aid and abet in the act or transaction 3 20 constituting the violation, are also liable jointly and 3 21 severally with and to the same extent as such person, unless 3 22 one of the following applies: 3 23 a. With respect to section 502.501, section 502.502, 3 24 subsections 1 and 5, or section 502.502A,anya person liable 3 25hereunderunder this subsection proves that the person did not 3 26 know, and in the exercise of reasonable care could not have 3 27 known, of the existence of the facts by reason of which the 3 28 liability is alleged to exist; and. 3 29 b. With respect to section 502.401, section 502.502, 3 30 subsections 2 and 3, and section 502.604anya person liable 3 31hereunderunder this subsection proves that the person did not 3 32 know, and was not grossly negligent in failing to know, of the 3 33 existence of the facts by reason of which the liability is 3 34 alleged to exist. 3 35 Sec. 7. Section 502.504, Code 1999, is amended by adding 4 1 the following new subsection: 4 2 NEW SUBSECTION. 7. This section shall not apply to 4 3 actions filed by the administrator pursuant to section 4 4 502.604. 4 5 Sec. 8. Section 502.604, subsection 2, Code 1999, is 4 6 amended to read as follows: 4 7 2. Bring an action in the district court to enjoin the act 4 8 or practice and to enforce compliance with this chapter or a 4 9 rule or order adopted or issued pursuant to this chapter. 4 10 Upon a proper showing, the court may do all of the following: 4 11 a. Grant a permanent or temporary injunction, restraining 4 12 order,orasset freeze, accounting, writ of attachment, writ 4 13 of general or special execution, writ of mandamusshall be4 14granted and a, or other equitable or ancillary relief. 4 15 b. Appoint a receiver or conservatormay be appointedfor 4 16 the defendant or the defendant's assets.In addition, upon a4 17proper showing by the administrator, the court may enter an4 18order of4 19 c. Order the administrator to take charge and control of a 4 20 party's property, including but not limited to managing rents 4 21 and profits, collecting debts, and acquiring and disposing of 4 22 property. 4 23 d. Order the rescission, restitution, or disgorgement 4 24 directed at any person who has engaged in an act constituting 4 25 a violation of this chapter, or a rule or order adopted or 4 26 issued pursuant to this chapter, and may order. 4 27 e. Order the payment of prejudgment and postjudgment 4 28 interest. 4 29 PARAGRAPH DIVIDED. The administrator shall not be required 4 30 to post a bond. 4 31 Sec. 9. Section 523A.5, subsection 2, Code 1999, is 4 32 amended by adding the following new paragraph: 4 33 NEW PARAGRAPH. e. "Prepaid contract" means a written 4 34 contract or other agreement executed by a seller in which the 4 35 seller promises to deliver merchandise or services upon the 5 1 future death of a person named or implied in the agreement. 5 2 Sec. 10. Section 523A.6, Code 1999, is amended to read as 5 3 follows: 5 4 523A.6 COMPLIANCE WITH OTHER LAWS. 5 5 The seller of a prepaid contract for the purchase of 5 6 funeral services or funeral merchandise shall comply with 5 7 chapter 555Awith respect to all contracts that are subject to5 8regulation under this chapter. Afailureperson failing to 5 9 comply with chapter 555A is subject to the remedies and 5 10 penalties provided in that chapter. 5 11 Sec. 11. Section 523B.2, subsection 10, paragraph a, 5 12 subparagraph (9), Code 1999, is amended to read as follows: 5 13 (9) The seller does not have a minimum net worth of 5 14twenty-fivefifty thousand dollars, as determined in 5 15 accordance with generally accepted accounting principles. A 5 16 seller may submit a surety bond in lieu of the net worth 5 17 requirement. The administrator may by rule or order increase 5 18 the amount of the net worth or bond for the protection of 5 19 purchasers and may require the seller to file reports of all 5 20 sales in this state to determine the appropriate amount of the 5 21 net worth requirement. The surety bond shall be for the 5 22 period of the registration, issued by a surety company 5 23 authorized to do business in this state and for the benefit of 5 24 any purchaser. 5 25 Sec. 12. Section 523C.6, Code 1999, is amended to read as 5 26 follows: 5 27 523C.6 NET WORTH REQUIREMENT. 5 28 A service company that has issued or renewed in the 5 29 aggregate one thousand or less residential service contracts 5 30 during the preceding calendar year shall maintain a minimum 5 31 net worth of forty thousand dollars, and the minimum net worth 5 32 to be maintained shall be increased by an additional twenty 5 33 thousand dollars for each additional five hundred contracts or 5 34 fraction thereof issued or renewed, up to a maximum required 5 35 net worth of four hundred thousand dollars. At least twenty 6 1 thousand dollars of net worth shall consist of paid-in 6 2 capital. 6 3For purposes of this chapter, "net worth" means the excess6 4of all assets over all liabilities including required reserves6 5computed in accordance with generally accepted accounting6 6principles. At least twenty thousand dollars of net worth6 7shall consist of paid-in capital.6 8 Sec. 13. Section 523C.8, Code 1999, is amended to read as 6 9 follows: 6 10 523C.8 REBATES AND COMMISSIONS. 6 11 1.AExcept as provided in subsection 2, a service company 6 12 shall not pay a commission or any other consideration to any 6 13 person as an inducement or compensation for the issuance, 6 14 purchase, or acquisition of a residential service contract. 6 15However, this6 16 2. This section does not prohibit any of the following: 6 17 a. The payment of an override commission or marketing fee 6 18 to an employee or commission sales agent who is a marketing or 6 19 sales representative of the service company or its parent 6 20 company, subsidiary, or affiliate on the sale or marketing of 6 21 a residential service contract, provided the employee or 6 22 commission sales agent is not a real estate licensee sharing 6 23 in or entitled to share in, or affiliated with, a company or 6 24 organization which is entitled to share in any real estate 6 25 commission generated by the underlying real property 6 26 transaction.This section also does not prohibit fees,6 27 b. Fees, payments, or reimbursements for a bona fide 6 28inspectionsinspection, if an inspection of the property to be 6 29 the subject of a residential service contract is required by a 6 30 service company and if the inspection fee is reasonably 6 31 related to the services performed. 6 32 3. The division may adopt rules identifying types of fees, 6 33 payments, or reimbursements that do not constitute an 6 34 inducement or compensation for the issuance, purchase, or 6 35 acquisition of a residential service contract. 7 1 Sec. 14. Section 523E.1, subsection 6, Code 1999, is 7 2 amended to read as follows: 7 3 6. This section does not apply to payments for merchandise 7 4 delivered to the purchaser. Delivery includes storage in a 7 5 warehouseunder the control of the seller or any other7 6warehouseor storage facility approved by the commissioner 7 7when a receipt of ownership in the name of the purchaser is7 8delivered to the purchaser, the merchandise is insured against7 9loss, the merchandise is protected against damage, title has7 10been transferred to the purchaser, the merchandise is7 11appropriately identified and described in a manner that it can7 12be distinguished from other similar items of merchandise7 13unless this identification requirement with respect to bronze7 14merchandise is waived by the commissioner by rule, the method7 15of storage allows for visual audits of the merchandise, and7 16the annual reporting requirements of section 523E.2,7 17subsection 1, are satisfied. 7 18 Sec. 15. Section 523I.6, Code 1999, is amended by adding 7 19 the following new subsection: 7 20 NEW SUBSECTION. 4. A cemetery shall provide services 7 21 necessary for the installation or burial of vaults or other 7 22 similar merchandise sold by the cemetery. This subsection 7 23 shall not require the cemetery to provide for opening or 7 24 closing interment or entombment space, unless an agreement 7 25 executed by the cemetery expressly provides otherwise. 7 26 7 27 7 28 7 29 MARY E. KRAMER 7 30 President of the Senate 7 31 7 32 7 33 7 34 BRENT SIEGRIST 7 35 Speaker of the House 8 1 8 2 I hereby certify that this bill originated in the Senate and 8 3 is known as Senate File 406, Seventy-eighth General Assembly. 8 4 8 5 8 6 8 7 MICHAEL E. MARSHALL 8 8 Secretary of the Senate 8 9 Approved , 1999 8 10 8 11 8 12 8 13 THOMAS J. VILSACK 8 14 Governor
Text: SF00405 Text: SF00407 Text: SF00400 - SF00499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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