Text: SF00472                           Text: SF00474
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Bills and Amendments: General Index     Bill History: General Index

Senate File 473

Partial Bill History

Bill Text

PAG LIN
  1  1                                           SENATE FILE 473
  1  2 
  1  3                             AN ACT
  1  4 CONCERNING REGULATED INDUSTRIES UNDER THE JURISDICTION OF THE
  1  5    COMMISSIONER OF INSURANCE RELATING TO VARIOUS ISSUES RELATING
  1  6    TO INSURANCE, RELATING TO THE REGULATION OF SECURITIES, BY
  1  7    DEFINING THE TERMS "AGENT" AND "SECURITY", PROVIDING
  1  8    REGISTRATION REQUIREMENTS, PROVIDING FOR DISCIPLINARY ACTIONS,
  1  9    IMPOSING FEES AND CIVIL PENALTIES, PROVIDING FOR TESTIMONY
  1 10    AND THE PRODUCTION OF EVIDENCE, AUTHORIZING COOPERATION WITH
  1 11    LAW ENFORCEMENT ENTITIES, PROVIDING CRIMINAL PENALTIES, AND
  1 12    ELIMINATING REPORTING REQUIREMENTS, AND RELATING TO CEMETERY
  1 13    AND FUNERAL MERCHANDISE AND FUNERAL SERVICES, ESTABLISHING
  1 14    PERMIT AND PURCHASE AGREEMENT REQUIREMENTS, ESTABLISHING AND
  1 15    APPROPRIATING FEES, AND PROVIDING ADMINISTRATION, ENFORCEMENT,
  1 16    AND LIQUIDATION PROCEDURES, AND PENALTIES.   
  1 17  
  1 18 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  1 19  
  1 20    Section 1.  Section 502.102, subsection 3, paragraph a,
  1 21 subparagraph (3), Code 2001, is amended to read as follows:
  1 22    (3)  Effecting transactions in a federal covered security
  1 23 as described in sections 18(b)(3) and 18(b)(4)(D) of the
  1 24 Securities Act of 1933 as amended in Pub. L. No. 104-290, if a
  1 25 commission or other remuneration is not either directly or
  1 26 indirectly paid any person for soliciting in this state.
  1 27    Sec. 2.  Section 502.102, subsection 19, Code 2001, is
  1 28 amended to read as follows:
  1 29    19.  "Security" means any note; stock; treasury stock;
  1 30 bond; debenture; evidence of indebtedness; certificate of
  1 31 interest or participation in a profit sharing agreement;
  1 32 collateral trust certificate; preorganization certificate or
  1 33 subscription; transferable share; investment contract;
  1 34 viatical settlement contract, or any fractional or pooled
  1 35 interest in such contract; voting trust certificate;
  2  1 certificate of deposit for a security; fractional undivided
  2  2 interest in an oil, gas, or other mineral lease or in payments
  2  3 out of production under such a lease, right, or royalty; an
  2  4 interest in a limited liability company or in a limited
  2  5 liability partnership or any class or series of such interest,
  2  6 including any fractional or other interest in such interest;
  2  7 or, in general, any interest or instrument commonly known as a
  2  8 "security", or any certificate of interest or participation
  2  9 in, temporary or interim certificate for, receipt for,
  2 10 guarantee of, or warrant or right to subscribe to or purchase,
  2 11 any of the foregoing.  "Security" does not include an
  2 12 insurance or endowment policy or annuity contract under which
  2 13 an insurance company promises to pay money either in a lump
  2 14 sum or periodically for life or for some other specified
  2 15 period.  "Security" also does not include an interest in a
  2 16 limited liability company or a limited liability partnership
  2 17 if the person claiming that such an interest is not a security
  2 18 proves that all of the members of the limited liability
  2 19 company or limited liability partnership are actively engaged
  2 20 in the management of the limited liability company or limited
  2 21 liability partnership; provided that the evidence that members
  2 22 vote or have the right to vote, or the right to information
  2 23 concerning the business and affairs of the limited liability
  2 24 company or limited liability partnership, or the right to
  2 25 participate in management, shall not establish, without more,
  2 26 that all members are actively engaged in the management of the
  2 27 limited liability company or limited liability partnership.
  2 28 "Security" is any of the foregoing as provided in this
  2 29 subsection whether or not it is evidenced by a written
  2 30 instrument.
  2 31    Sec. 3.  Section 502.203, subsection 18, Code 2001, is
  2 32 amended to read as follows:
  2 33    18.  An offer or sale of securities which are exempt from
  2 34 registration under 15 U.S.C. } 77a-77aa pursuant to rule 801
  2 35 or 802 promulgated by the securities and exchange commission
  3  1 as provided in the Securities Act of 1933.
  3  2    19.  Any other security or transaction or offering or class
  3  3 of securities or transactions or offers exempted or
  3  4 requirements for exemption waived, by the administrator by
  3  5 rule or order, from requirements provided in section 502.201
  3  6 or 502.602.
  3  7    Sec. 4.  Section 502.207A, subsection 7, Code 2001, is
  3  8 amended to read as follows:
  3  9    7.  Notwithstanding any other provision of this chapter,
  3 10 the administrator shall not deny effectiveness to or suspend
  3 11 or revoke the effectiveness of a registration under this
  3 12 section on the basis of section 502.209, subsection 1,
  3 13 paragraph "h", and the administrator shall not impose the
  3 14 conditions specified in section 502.208, subsection 8,
  3 15 subsection 9, paragraph "b", or subsection 12.  The
  3 16 administrator may issue a stop order pursuant to section
  3 17 502.209 to filers under this section for any of the following
  3 18 additional reasons:
  3 19    a.  The issuer's principal place of business is not in this
  3 20 state.
  3 21    b.  At least fifty percent of the issuer's full-time
  3 22 employees are not located in this state.
  3 23    c.  At least eighty percent of the net proceeds of the
  3 24 offering are not going to be used in connection with the
  3 25 operations of the issuer in this state.
  3 26    d.  If the issuer is a seed or venture capital fund, at
  3 27 least fifty percent of the moneys received from the sale of
  3 28 the securities will not be used to make seed or venture
  3 29 capital investments in this state.
  3 30    Sec. 5.  Section 502.302, subsections 1 and 3, Code 2001,
  3 31 are amended to read as follows:
  3 32    1.  A broker-dealer, agent, investment adviser, or
  3 33 investment adviser representative may obtain an initial or
  3 34 renewal license by filing with the administrator, or an
  3 35 organization person which the administrator by rule designates
  4  1 assigns as a designee, an application together with a consent
  4  2 to service of process pursuant to section 502.609 and the
  4  3 appropriate filing fee as required in this section.  If the
  4  4 application is filed with a designee, the applicant must also
  4  5 pay any reasonable costs charged by the designee.  The
  4  6 applicant may transmit the fee to the administrator through
  4  7 the designee according to rules adopted by the administrator.
  4  8 The application shall contain information the administrator
  4  9 requires by rule concerning the applicant's form and place of
  4 10 organization, proposed method of doing business and financial
  4 11 condition, and the qualifications and experience of the
  4 12 applicant.  In the case of a broker-dealer or investment
  4 13 adviser, the application shall include the qualifications and
  4 14 experience of any partner, officer, director or controlling
  4 15 person, any injunction or administrative order or conviction
  4 16 of a misdemeanor involving securities and any conviction of a
  4 17 felony, and any other matters which the administrator
  4 18 determines are relevant to the application.  In addition, in
  4 19 the case of an investment adviser, the application shall
  4 20 include any information to be furnished or disseminated to any
  4 21 client or prospective client, and any other information which
  4 22 the administrator determines is relevant to the application.
  4 23 If no denial order is in effect and no proceeding is pending
  4 24 under section 502.304, registration becomes effective at noon
  4 25 of the sixtieth day after a completed application or an
  4 26 amendment completing the application is filed, unless waived
  4 27 by the applicant.  The administrator may by rule or order
  4 28 specify an earlier effective date.
  4 29    3.  Every applicant for initial or renewal registration as
  4 30 a broker-dealer or investment adviser shall pay a filing fee
  4 31 of two hundred dollars.  Every applicant for an initial or
  4 32 renewal registration as an investment adviser shall pay a
  4 33 filing fee of one hundred dollars.  Every applicant for
  4 34 initial or renewal registration as an agent or investment
  4 35 adviser representative shall pay a filing fee of thirty
  5  1 dollars.  However, an investment adviser representative is not
  5  2 required to pay a filing fee if the investment adviser is a
  5  3 sole proprietorship or the substantial equivalent and the
  5  4 investment adviser representative is the same individual as
  5  5 the investment adviser.  A filing fee is not refundable.
  5  6 Every person acting as a federal covered adviser in this
  5  7 state, except with respect to federal covered advisers whose
  5  8 only clients are those described in section 502.301,
  5  9 subsection 3, paragraph "b", shall pay an initial and renewal
  5 10 notice filing fee of one hundred dollars.
  5 11    Sec. 6.  Section 502.304, subsection 1, paragraph m,
  5 12 subparagraph (1), Code 2001, is amended to read as follows:
  5 13    (1)  Has willfully violated the law of a foreign
  5 14 jurisdiction governing or regulating any aspect of the
  5 15 business of securities, insurance, or banking.
  5 16    Sec. 7.  Section 502.304, subsection 1, Code 2001, is
  5 17 amended by adding the following new paragraph:
  5 18    NEW PARAGRAPH.  o.  Is the subject of a cease and desist
  5 19 order issued by the administrator under section 502.604,
  5 20 another state, or the securities and exchange commission.
  5 21    Sec. 8.  Section 502.304, subsection 8, Code 2001, is
  5 22 amended to read as follows:
  5 23    8.  A civil penalty levied imposed under subsection 1 shall
  5 24 not exceed one five thousand dollars per violation per person
  5 25 and shall not exceed one five hundred thousand dollars in a
  5 26 single proceeding against any one person.  All administrative
  5 27 fines Moneys received from the imposition of civil penalties
  5 28 shall be deposited in the general fund of the state.
  5 29    Sec. 9.  Section 502.603, subsection 3, Code 2001, is
  5 30 amended by striking the subsection and inserting in lieu
  5 31 thereof the following:
  5 32    3.  A person is not excused from attending or testifying in
  5 33 a proceeding required by this section, or from producing any
  5 34 evidence, including a document or record in obedience to a
  5 35 subpoena of the administrator or any officer designated by the
  6  1 administrator, on the ground that the testimony or evidence
  6  2 required, whether documentary or otherwise, may tend to
  6  3 incriminate such person or subject such person to a penalty or
  6  4 forfeiture.  If a person makes a claim against self-
  6  5 incrimination, the administrator may file a petition to compel
  6  6 compliance with this section in the district court for Polk
  6  7 county.  The court may make a threshold determination on the
  6  8 applicability of the self-incrimination privilege.  Any
  6  9 evidence compelled under order of the district court, or any
  6 10 information directly or indirectly derived from such evidence
  6 11 or other information, shall not be used against the person in
  6 12 any criminal case.  The limitation on the use of evidence in a
  6 13 criminal proceeding contained in this section does not apply
  6 14 to any prosecution or proceeding for perjury or contempt of
  6 15 court committed in the course of giving or producing
  6 16 information, documents, testimony, or other evidence.
  6 17    Sec. 10.  Section 502.604, unnumbered paragraph 1, Code
  6 18 2001, is amended to read as follows:
  6 19    If it appears to the administrator that a person has
  6 20 engaged or is about to engage in an act or practice
  6 21 constituting a violation of this chapter or any rule or order
  6 22 adopted or issued pursuant to this chapter, the administrator
  6 23 may do either or both any of the following:
  6 24    Sec. 11.  Section 502.604, Code 2001, is amended by adding
  6 25 the following new subsection:
  6 26    NEW SUBSECTION.  3.  Assess a civil penalty against the
  6 27 person, if the violation was made knowingly or recklessly.
  6 28 The penalty shall be assessed as an agency action provided for
  6 29 under chapter 17A.  The amount of the civil penalty shall not
  6 30 exceed five thousand dollars for each violation.
  6 31    Sec. 12.  NEW SECTION.  502.604B  LIMITED LAW ENFORCEMENT
  6 32 AUTHORITY.
  6 33    The administrator or designee, when carrying out the
  6 34 provisions of section 502.603, 502.603A, or 502.604, may
  6 35 develop, share, and receive information related to any law
  7  1 enforcement purpose, including any criminal investigation.
  7  2 The administrator or designee shall not have the authority to
  7  3 issue criminal subpoenas or make arrests.  The administrator
  7  4 or designee shall not be considered a peace officer, including
  7  5 as provided in chapter 801.
  7  6    Sec. 13.  Section 502.605, subsection 1, Code 2001, is
  7  7 amended to read as follows:
  7  8    1.  a.  Except as provided in paragraph "b", a person who
  7  9 willfully and knowingly violates any provision of this
  7 10 chapter, or any rule or order under this chapter, is guilty of
  7 11 a class "D" felony.
  7 12    b.  A person who willfully and knowingly violates section
  7 13 502.401, 502.402, or 502.403, or section 502.408, subsection 1
  7 14 or 2, resulting in a loss of more than ten thousand dollars is
  7 15 guilty of a class "C" felony.
  7 16    Sec. 14.  Section 502.605, Code 2001, is amended by adding
  7 17 the following new subsection:
  7 18    NEW SUBSECTION.  4.  In a criminal proceeding brought under
  7 19 this chapter, the applicability of any exemption, exception,
  7 20 exclusion from a definition, or preemption shall be an
  7 21 affirmative defense.  The defendant claiming such an
  7 22 exemption, exception, exclusion, or preemption has the burden
  7 23 of going forward with the evidence of the claim.
  7 24    Sec. 15.  Section 507B.4, subsection 10B, unnumbered
  7 25 paragraph 1, as enacted by 2001 Iowa Acts, Senate File 500,
  7 26 section 7, is amended to read as follows:
  7 27    Failure of an insurer to pay interest at the rate of ten
  7 28 percent per annum on all health insurance claims that the
  7 29 insurer fails to timely accept and pay pursuant to section
  7 30 507B.4A, subsection 1 2, paragraph "e" "d".  Interest shall
  7 31 accrue commencing on the thirty-first day after receipt of all
  7 32 properly completed proof of loss forms.
  7 33    Sec. 16.  Section 518.16, Code 2001, is amended to read as
  7 34 follows:
  7 35    518.16  QUALIFICATION OF AGENTS.
  8  1    A person shall not solicit any application for insurance
  8  2 for an association in this state without having procured from
  8  3 the commissioner of insurance a license authorizing the person
  8  4 to act as an agent insurance producer pursuant to chapter 522
  8  5 522B.  
  8  6                          SUBCHAPTER 1
  8  7                   SHORT TITLE AND DEFINITIONS
  8  8    Sec. 17.  NEW SECTION.  523A.101  SHORT TITLE.
  8  9    This chapter may be cited as the "Iowa Cemetery and Funeral
  8 10 Merchandise and Funeral Services Act".
  8 11    Sec. 18.  NEW SECTION.  523A.102  DEFINITIONS.
  8 12    For purposes of this chapter, unless the context otherwise
  8 13 requires:
  8 14    1.  "Authorized to do business within this state" means a
  8 15 person licensed, registered, or subject to regulation by an
  8 16 agency of the state of Iowa or who has filed a consent to
  8 17 service of process with the commissioner for purposes of this
  8 18 chapter.
  8 19    2.  "Beneficiary" means any natural person specified or
  8 20 included in a purchase agreement, upon whose future death
  8 21 cemetery merchandise, funeral merchandise, funeral services,
  8 22 or a combination thereof are to be provided under the purchase
  8 23 agreement.
  8 24    3.  "Burial account" means an account established by a
  8 25 person with a financial institution for the purpose of funding
  8 26 the future purchase of cemetery merchandise, funeral
  8 27 merchandise, or a combination thereof without any related
  8 28 trust agreement.
  8 29    4.  "Burial trust fund" means an irrevocable burial trust
  8 30 fund established by a person with a financial institution for
  8 31 the purpose of funding the future purchase of cemetery
  8 32 merchandise, funeral merchandise, funeral services, or a
  8 33 combination thereof upon the death of the person named in the
  8 34 burial trust fund's records or a related purchase agreement.
  8 35 "Burial trust fund" does not include or imply the existence of
  9  1 any oral or written purchase agreement for cemetery
  9  2 merchandise, funeral merchandise, funeral services, or a
  9  3 combination thereof between the person and a seller.
  9  4    5.  "Cemetery merchandise" means foundations, grave
  9  5 markers, tombstones, ornamental merchandise, memorials, and
  9  6 monuments sold under a purchase agreement that does not
  9  7 require installation within twelve months of the purchase.
  9  8    6.  "Commissioner" means the commissioner of insurance or
  9  9 the deputy administrator authorized in section 523A.801 to the
  9 10 extent the commissioner delegates functions to the deputy
  9 11 administrator.
  9 12    7.  "Common business enterprise" means a group of two or
  9 13 more business entities that share common ownership in excess
  9 14 of fifty percent.
  9 15    8.  "Credit sale" means a sale of goods, services, or an
  9 16 interest in land in which all of the following are applicable:
  9 17    a.  Credit is granted either under a seller credit card or
  9 18 by a seller who regularly engages as a seller in credit
  9 19 transactions of the same kind.
  9 20    b.  The buyer is a person other than an organization.
  9 21    c.  The goods, services, or interest in land are purchased
  9 22 primarily for a personal, family, or household purpose.
  9 23    d.  Either the debt is payable in installments or a finance
  9 24 charge is made.
  9 25    e.  For goods and services, the amount financed does not
  9 26 exceed twenty-five thousand dollars.
  9 27    9.  "Delivery" occurs when:
  9 28    a.  The cemetery merchandise, funeral merchandise, or the
  9 29 title document establishing an easement for burial rights is
  9 30 physically delivered to the purchaser or installed, except
  9 31 that burial of any item at the site of its ultimate use shall
  9 32 not constitute delivery for purposes of this chapter.
  9 33    b.  If authorized by a purchaser under a purchase
  9 34 agreement, cemetery merchandise has been permanently
  9 35 identified with the name of the purchaser or the beneficiary
 10  1 and delivered to a bonded warehouse or storage facility
 10  2 approved by the commissioner and both title to the merchandise
 10  3 and a warehouse receipt have been delivered to the purchaser
 10  4 or beneficiary and a copy of the warehouse receipt has been
 10  5 delivered to the establishment for retention in its files.
 10  6    c.  If authorized by a purchaser under a purchase
 10  7 agreement, a polystyrene or polypropylene outer burial
 10  8 container has been permanently identified with the name of the
 10  9 purchaser or the beneficiary and delivered to a bonded
 10 10 warehouse or storage facility approved by the commissioner and
 10 11 both title to the merchandise and a warehouse receipt have
 10 12 been delivered to the purchaser or beneficiary and a copy of
 10 13 the warehouse receipt has been delivered to the establishment
 10 14 for retention in its files.
 10 15    10.  "Doing business in this state" means issuing or
 10 16 performing wholly or in part any term of a purchase agreement
 10 17 executed within the state of Iowa.
 10 18    11.  "Establishment" means each business establishment that
 10 19 advertises, sells, promotes, or offers cemetery merchandise,
 10 20 funeral merchandise, funeral services, or a combination
 10 21 thereof prior to the death of the person named or implied in a
 10 22 purchase agreement.
 10 23    12.  "Financial institution" means a state or federally
 10 24 insured bank, savings and loan association, credit union,
 10 25 trust department thereof, or a trust company authorized to do
 10 26 business within this state and which has been granted trust
 10 27 powers under the laws of this state or the United States,
 10 28 which holds funds under a trust agreement.  "Financial
 10 29 institution" does not include:
 10 30    a.  A seller.
 10 31    b.  Anyone employed by or directly involved with the seller
 10 32 in the seller's cemetery merchandise, funeral merchandise, or
 10 33 funeral services business.
 10 34    13.  "Funeral merchandise" means personal property used for
 10 35 the final disposition of a dead human body, including but not
 11  1 limited to clothing, caskets, vaults, urns, and interment
 11  2 receptacles.  "Funeral merchandise" does not include easements
 11  3 for burial rights in a completed space or cemetery
 11  4 merchandise.
 11  5    14.  "Funeral services" means services provided for the
 11  6 final disposition of a dead human body, including but not
 11  7 limited to services necessarily or customarily provided for a
 11  8 funeral, or for the interment, entombment, or cremation of a
 11  9 dead human body, or any combination thereof.  "Funeral
 11 10 services" does not include perpetual care or maintenance.
 11 11    15.  "Inner burial container" means a container in which
 11 12 human remains are placed for burial or entombment.  Where only
 11 13 one container is used for burial or entombment, "inner burial
 11 14 container" includes a container serving as a burial vault, urn
 11 15 vault, grave box, grave liner, or lawn crypt.
 11 16    16.  "Insolvent" means the inability to pay debts as they
 11 17 become due in the usual course of business.
 11 18    17.  "Interest or income" means unrealized net appreciation
 11 19 or loss in the fair value of cemetery merchandise, funeral
 11 20 merchandise, and funeral services trust assets for which a
 11 21 market value may be determined with reasonable certainty, plus
 11 22 the return in money or property derived from the use of trust
 11 23 principal or income, net of investment losses, taxes, and
 11 24 expenses incurred in the sale of trust assets, any cost of the
 11 25 operation of the trust, and any annual audit fee.  "Interest
 11 26 or income" includes but is not limited to:
 11 27    a.  Rent of real or personal property, including sums
 11 28 received for cancellation or renewal of a lease and any
 11 29 royalties.
 11 30    b.  Interest on money lent, including sums received as
 11 31 consideration for prepayment of principal.
 11 32    c.  Cash dividends paid on corporate stock.
 11 33    d.  Interest paid on deposit funds or debt obligations.
 11 34    e.  Gain realized from the sale of trust assets.
 11 35    18.  "Next of kin" means the surviving spouse and heirs at
 12  1 law of the deceased.
 12  2    19.  "Nonguaranteed" means that the price of the
 12  3 merchandise and services selected has not been fixed or
 12  4 guaranteed and will be determined by existing prices at the
 12  5 time the merchandise and services are delivered or provided.
 12  6    20.  "Outer burial container" means a container used for
 12  7 the burial of human remains that is used exclusively to
 12  8 surround or enclose an inner burial container and to support
 12  9 the earth above the container, commonly known as a burial
 12 10 vault, urn vault, grave box, or grave liner, but not including
 12 11 a lawn crypt.
 12 12    21.  "Parent company" means a corporation that has a
 12 13 controlling interest in an establishment.
 12 14    22.  "Person" means an individual, business, corporation,
 12 15 trust, firm, partnership, association, or any other legal
 12 16 entity.
 12 17    23.  "Personal representative" means a personal
 12 18 representative as defined in section 633.3.
 12 19    24.  "Provider" means a person that provides funeral
 12 20 services, funeral merchandise, or cemetery merchandise
 12 21 purchased in a purchase agreement.
 12 22    25.  "Purchase agreement" means an agreement to furnish
 12 23 cemetery merchandise, funeral merchandise, funeral services,
 12 24 or a combination thereof when performance or delivery may be
 12 25 more than one hundred twenty days following the initial
 12 26 payment on the account.
 12 27    26.  "Purchase price" means the negotiated price for the
 12 28 item of merchandise or service, if itemized in the purchase
 12 29 agreement, or the price of the item listed in the seller's
 12 30 general price list at the time the purchase agreement is
 12 31 signed.
 12 32    27.  "Purchaser" means a person who purchases cemetery
 12 33 merchandise, funeral merchandise, funeral services, or a
 12 34 combination thereof.  The purchaser need not be a beneficiary
 12 35 of the agreement.
 13  1    28.  "Seller" means a person doing business within this
 13  2 state, including a person doing business within this state who
 13  3 sells insurance, who advertises, sells, promotes, or offers to
 13  4 furnish cemetery merchandise, funeral merchandise, funeral
 13  5 services, or a combination thereof when performance or
 13  6 delivery may be more than one hundred twenty days following
 13  7 the initial payment on the account whether the transaction is
 13  8 completed or offered in person, through the mail, over the
 13  9 telephone, by the internet, or through any other means of
 13 10 commerce.  "Seller" includes any person performing any term of
 13 11 a purchase agreement executed within this state, and any
 13 12 person identified under a burial account as the provider of
 13 13 cemetery merchandise, funeral merchandise, funeral services,
 13 14 or a combination thereof.
 13 15    29.  "Total purchase price" means the aggregate amount the
 13 16 purchaser is obligated to pay for merchandise or services
 13 17 pursuant to the purchase agreement, excluding any taxes,
 13 18 administrative charges, or financing charges.  
 13 19                          SUBCHAPTER 2
 13 20          ESTABLISHMENT OF TRUSTS, DEPOSIT, INVESTMENT,
 13 21                   AND REPORTING REQUIREMENTS
 13 22    Sec. 19.  NEW SECTION.  523A.201  ESTABLISHMENT OF TRUST
 13 23 FUNDS.
 13 24    Unless proceeding under section 523A.401, 523A.402, or
 13 25 523A.403, a seller must establish a trust fund prior to
 13 26 advertising, selling, promoting, or offering cemetery
 13 27 merchandise, funeral merchandise, funeral services, or a
 13 28 combination thereof in this state as follows:
 13 29    1.  The trust fund must be established at a financial
 13 30 institution.
 13 31    2.  If a seller agrees to furnish cemetery merchandise,
 13 32 funeral merchandise, funeral services, or a combination
 13 33 thereof and performance or delivery may be more than one
 13 34 hundred twenty days following the initial payment on the
 13 35 account, a minimum of eighty percent of all payments made
 14  1 under the purchase agreement shall be placed and remain in
 14  2 trust until the person for whose benefit the funds were paid
 14  3 dies.
 14  4    3.  If a purchase agreement for cemetery merchandise,
 14  5 funeral merchandise, funeral services, or a combination
 14  6 thereof provides that payments are to be made in installments,
 14  7 the seller shall deposit eighty percent of each payment in the
 14  8 trust fund until the full amount required to be placed in
 14  9 trust has been deposited.  If the purchase agreement is
 14 10 financed with or sold to a financial institution, the purchase
 14 11 agreement shall be considered paid in full and the trust
 14 12 requirements shall be satisfied within fifteen days after the
 14 13 close of the month in which the seller receives funds from the
 14 14 financial institution.
 14 15    4.  A seller shall not invade the trust principal for any
 14 16 purpose.
 14 17    5.  A seller who lacks insurance coverage which protects
 14 18 against the loss of purchaser payments not placed in trust
 14 19 within the time period required by this section and section
 14 20 523A.202 shall not commingle these payments with any other
 14 21 seller funds.  A seller who lacks insurance coverage may use
 14 22 one or more of the following methods to dispose of these
 14 23 payments:
 14 24    a.  Deposit purchaser funds into an escrow account until
 14 25 the required amount has been deposited into a trust account at
 14 26 a financial institution.
 14 27    b.  Make a prior delivery or warehouse cemetery or funeral
 14 28 merchandise or a combination thereof as provided by this
 14 29 chapter.
 14 30    c.  Make a prior filing of a surety bond in lieu of
 14 31 establishing a trust fund as required by this section.
 14 32    d.  Make a simultaneous, same-day deposit of the
 14 33 purchaser's payments into the seller's bank account and the
 14 34 required amount into the seller's trust fund.
 14 35    6.  Payments otherwise subject to this section are not
 15  1 exempt merely because they are held in certificates of
 15  2 deposit.
 15  3    7.  Commingling of trust funds with other funds of the
 15  4 seller is prohibited.
 15  5    8.  Interest or income earned on amounts deposited in trust
 15  6 shall remain in trust under the same terms and conditions as
 15  7 payments made under the purchase agreement, except that the
 15  8 seller may withdraw so much of the interest or income as
 15  9 represents the difference between the amount needed to adjust
 15 10 the trust funds for inflation as set by the commissioner based
 15 11 on the consumer price index and the interest or income earned
 15 12 during the preceding year not to exceed fifty percent of the
 15 13 total interest or income on a calendar-year basis.  The early
 15 14 withdrawal of interest or income under this provision does not
 15 15 affect the purchaser's right to a credit of such interest or
 15 16 income in the event of a nonguaranteed price agreement,
 15 17 cancellation, or nonperformance by the seller.
 15 18    9.  The commissioner may require amendments to a trust
 15 19 agreement not in accord with the provisions of this chapter.
 15 20    10.  If a seller voluntarily or involuntarily ceases doing
 15 21 business and the seller's obligation to provide merchandise or
 15 22 services has not been assumed by another establishment holding
 15 23 a current establishment permit, all trust funds, including
 15 24 accrued interest or income, shall be repaid to the purchaser
 15 25 within one hundred twenty days following the seller's
 15 26 cessation of business or, in the event of circumstances where
 15 27 a payment is not possible within one hundred twenty days, as
 15 28 soon as is reasonably practicable.
 15 29    Sec. 20.  NEW SECTION.  523A.202  TRUST FUND DEPOSIT
 15 30 REQUIREMENTS.
 15 31    1.  All funds held in trust pursuant to section 523A.201
 15 32 shall be deposited in a financial institution, within fifteen
 15 33 days after the close of the month a seller receives the funds.
 15 34 The financial institution shall hold the funds for the
 15 35 designated beneficiary until released.
 16  1    2.  All funds required to be deposited by the purchaser for
 16  2 a purpose described in section 523A.201 shall be deposited
 16  3 consistent with one of the following methods:
 16  4    a.  The payments shall be deposited directly into an
 16  5 interest-bearing burial account in the purchaser's name.
 16  6    b.  The purchaser shall deposit payments directly into a
 16  7 separate trust account in the purchaser's name.  The account
 16  8 may be made payable to the seller upon the death of the
 16  9 purchaser or the designated beneficiary, provided that, until
 16 10 death, the purchaser retains the exclusive power to hold,
 16 11 manage, pledge, and invest the trust account funds and may
 16 12 revoke the trust and withdraw the funds, in whole or in part,
 16 13 at any time during the term of the agreement.
 16 14    c.  The purchaser or the seller shall deposit payments
 16 15 directly into a separate trust account in the name of the
 16 16 purchaser, as trustee, for the named beneficiary, to be held,
 16 17 invested, and administered as a trust account for the benefit
 16 18 and protection of the beneficiary.  The depositor shall notify
 16 19 the financial institution of the existence and terms of the
 16 20 trust, including at a minimum, the name of each party to the
 16 21 agreement, the name and address of the trustee, and the name
 16 22 and address of the beneficiary.  The account may be made
 16 23 payable to the seller upon the beneficiary's death.
 16 24    d.  The payments shall be deposited in the name of the
 16 25 trustee, as trustee, under the terms of a master trust
 16 26 agreement and the trustee may invest, reinvest, exchange,
 16 27 retain, sell, and otherwise manage the trust fund for the
 16 28 benefit and protection of the named beneficiary.
 16 29    3.  The commissioner may by rule authorize other methods of
 16 30 deposit upon a finding that such methods provide equivalent
 16 31 safety of the principal and interest or income and the seller
 16 32 lacks access to the proceeds prior to performance.
 16 33    4.  This section does not prohibit moving trust funds from
 16 34 one financial institution to another.
 16 35    Sec. 21.  NEW SECTION.  523A.203  FINANCIAL INSTITUTION
 17  1 TRUSTEE QUALIFICATION AND INVESTMENT REQUIREMENTS.
 17  2    1.  A financial institution may serve as a trustee if
 17  3 granted those powers under the laws of this state or of the
 17  4 United States.  A financial institution acting as a trustee of
 17  5 trust funds under this chapter shall invest the funds in
 17  6 accordance with applicable law.
 17  7    2.  A financial institution acting as a trustee of trust
 17  8 funds under this chapter has a fiduciary duty to make
 17  9 reasonable investment decisions and to properly oversee and
 17 10 manage the funds entrusted to it.  The trustee shall use the
 17 11 judgment and care under the circumstances then prevailing that
 17 12 persons of prudence, discretion, and intelligence exercise in
 17 13 the management of their own affairs, not in regard to
 17 14 speculation but in regard to the permanent disposition of
 17 15 their funds, considering the probable income as well as the
 17 16 probable safety of their capital.  The commissioner may take
 17 17 enforcement action against a financial institution in its
 17 18 capacity as trustee for a breach of fiduciary duty proven
 17 19 under this chapter.
 17 20    3.  Moneys deposited under a master trust agreement may be
 17 21 commingled by the financial institution for investment
 17 22 purposes if each deposit includes a detailed listing of the
 17 23 amount deposited in trust for each beneficiary and maintenance
 17 24 of a separate accounting of each purchaser's principal,
 17 25 interest, and income.
 17 26    4.  Subject to a master trust agreement, the seller may
 17 27 appoint an independent investment adviser to advise the
 17 28 financial institution about investment of the trust funds.
 17 29    5.  Subject to agreement between the parties, the financial
 17 30 institution may receive a reasonable fee from the trust funds
 17 31 for services rendered as trustee.  The trust shall pay the
 17 32 trust operation costs and any annual audit fees.
 17 33    6.  The seller or any officer, director, agent, employee,
 17 34 or affiliate of the seller shall not serve as trustee.  A
 17 35 financial institution holding trust funds shall not do any of
 18  1 the following:
 18  2    a.  Be owned, under the control of, or affiliated with a
 18  3 seller.
 18  4    b.  Use any funds required to be held in trust under this
 18  5 chapter or chapter 566A to purchase an interest in any
 18  6 contract or agreement to which a seller is a party.
 18  7    c.  Otherwise invest, directly or indirectly, in a seller's
 18  8 business operations.
 18  9    Sec. 22.  NEW SECTION.  523A.204  ESTABLISHMENT ANNUAL
 18 10 REPORTING REQUIREMENTS.
 18 11    1.  An establishment shall file with the commissioner not
 18 12 later than March 1 of each year an annual report on a form
 18 13 prescribed by the commissioner containing all of the
 18 14 following:
 18 15    a.  The seller's name and address and the name and address
 18 16 of the establishment that will provide the cemetery
 18 17 merchandise, funeral merchandise, funeral services, or a
 18 18 combination thereof.
 18 19    b.  The balance of each trust account as of the end of the
 18 20 preceding calendar year, identified by purchaser or
 18 21 beneficiary name.
 18 22    c.  A report of any amounts withdrawn from the trust
 18 23 account including the reason for each withdrawal.
 18 24    d.  A detailed listing of the insurance funding outstanding
 18 25 at the end of the preceding calendar year, identified by the
 18 26 name of the purchaser or the beneficiary.
 18 27    e.  A complete inventory of the cemetery merchandise,
 18 28 funeral merchandise, or a combination thereof delivered in
 18 29 lieu of trust fund requirements under section 523A.401,
 18 30 including the following:
 18 31    (1)  The location of the merchandise.
 18 32    (2)  Merchandise serial numbers or warehouse receipt
 18 33 numbers identified by the name of the purchaser or the
 18 34 beneficiary.
 18 35    (3)  A verified statement of a certified public accountant
 19  1 on a form prescribed by the commissioner that all of the
 19  2 following have occurred:
 19  3    (a)  A physical inventory of the cemetery merchandise or
 19  4 funeral merchandise has been conducted.
 19  5    (b)  Each item of that merchandise is in the seller's
 19  6 possession at the specified location.
 19  7    f.  The purchaser and beneficiary names, the amount of each
 19  8 purchase agreement made in the preceding year, and the date
 19  9 the purchase agreement was made.
 19 10    g.  A summary of any purchase agreements converted from
 19 11 trust-funded benefits to insurance-funded or annuity benefits
 19 12 during the preceding year which shall include, as of the
 19 13 conversion date, the following information, as well as
 19 14 aggregated totals for each of the following categories of
 19 15 information, if appropriate:
 19 16    (1)  Insured's name.
 19 17    (2)  Insured's policy number.
 19 18    (3)  Original prepaid purchase agreement amount.
 19 19    (4)  Amount paid in.
 19 20    (5)  Unpaid balance of the prepaid purchase agreement.
 19 21    (6)  Unpaid balance of the purchase agreement.
 19 22    (7)  Amount retained by the establishment.
 19 23    (8)  Amount applied to the purchase of the insurance policy
 19 24 or annuity.
 19 25    (9)  Initial cash surrender value and initial death benefit
 19 26 under the insurance policy.
 19 27    The establishment shall include a notarized statement
 19 28 attesting that the insurance policies or annuities have been
 19 29 issued and funded on behalf of the purchasers listed in the
 19 30 summary and that all notices required under this section have
 19 31 been given.
 19 32    h.  A summary of any purchase agreements converted from
 19 33 trust-funded benefits to a surety bond during the preceding
 19 34 year which shall include, as of the conversion date, the
 19 35 following information, as well as aggregated totals for each
 20  1 of the following categories of information, if appropriate:
 20  2    (1)  Name of the purchaser and beneficiary.
 20  3    (2)  Original prepaid purchase agreement amount.
 20  4    (3)  Amount paid in.
 20  5    (4)  Unpaid balance of the prepaid purchase agreement.
 20  6    (5)  Unpaid balance of the purchase agreement.
 20  7    (6)  Amount retained by the establishment.
 20  8    (7)  Amount applied to the purchase of the surety bond.
 20  9    (8)  A description of the surety bond and the applicable
 20 10 amount of coverage.
 20 11    i.  Any other information the commissioner deems necessary
 20 12 for the administration of this chapter.
 20 13    2.  A person holding multiple establishment permits may
 20 14 elect to file only one annual report after noting all
 20 15 establishments on the report.
 20 16    3.  An establishment shall make a good faith effort to
 20 17 complete the annual report.  The establishment shall note on
 20 18 the annual report any information not reasonably available to
 20 19 the establishment as an exception or variance.  Account
 20 20 balances within twelve months of the date of the filing of the
 20 21 annual report shall be accepted if the actual date of the
 20 22 account balances is noted.
 20 23    4.  In lieu of the annual report form described in
 20 24 subsection 1, the commissioner may authorize an establishment
 20 25 to file a short form annual report on a form prescribed by the
 20 26 commissioner.  The short form annual report may incorporate by
 20 27 reference information readily available to the establishment.
 20 28 The commissioner may certify and decertify establishments
 20 29 authorized to file the short form based upon:
 20 30    a.  The establishment's recordkeeping system.
 20 31    b.  The number of purchase agreements which the
 20 32 establishment has sold that are subject to regulation under
 20 33 chapter 523A.
 20 34    c.  The availability and accessibility of information at
 20 35 the establishment for purchase agreements subject to
 21  1 regulation.
 21  2    d.  Whether the establishment places one hundred percent of
 21  3 funds received pursuant to its purchase agreements in trust.
 21  4    e.  The findings of the commissioner concerning audits and
 21  5 consumer complaints.
 21  6    The commissioner shall retain the authority to require
 21  7 establishments permitted to file the short form annual report
 21  8 to provide all of the information required in the annual
 21  9 report form required by subsection 1 for audit purposes or
 21 10 otherwise.
 21 11    5.  An establishment filing an annual report shall pay a
 21 12 filing fee of ten dollars per purchase agreement sold during
 21 13 the year covered by the report.  The fee does not apply to any
 21 14 of the following:
 21 15    a.  A purchase agreement where the beneficiary dies in the
 21 16 same year the agreement was sold.
 21 17    b.  Any modifications or additions, such as payments, for
 21 18 an existing purchase agreement sold in a previous year.
 21 19    c.  An additional agreement purchased and already reported
 21 20 to the commissioner by the purchaser.
 21 21    d.  A purchase agreement canceled or revoked in the same
 21 22 year it was sold.
 21 23    All purchase agreement changes for which a filing fee is
 21 24 not required must be reported to the commissioner on the
 21 25 annual report for the year covered.
 21 26    6.  As part of the annual filing with the commissioner, an
 21 27 establishment shall file an authorization for the commissioner
 21 28 or a designee to investigate, audit, and verify all funds,
 21 29 accounts, safe deposit boxes, and other evidence of
 21 30 establishment trust funds held by or in a financial
 21 31 institution.
 21 32    7.  Forms may be obtained at cost from the commissioner
 21 33 upon request.  The commissioner may accept annual reports
 21 34 submitted in an electronic format, including but not limited
 21 35 to computer diskettes.
 22  1    8.  Notwithstanding chapter 22, all records maintained by
 22  2 the commissioner under this section shall be confidential and
 22  3 shall not be made available for inspection or copying except
 22  4 upon approval of the commissioner or the attorney general.
 22  5    Sec. 23.  NEW SECTION.  523A.205  FINANCIAL INSTITUTION
 22  6 ANNUAL REPORTING REQUIREMENTS.
 22  7    1.  A financial institution shall file with the
 22  8 commissioner not later than March 1 of each year an annual
 22  9 report on a form prescribed by the commissioner showing all
 22 10 funds deposited by an establishment under a trust agreement
 22 11 during the previous year.  Each report shall contain all
 22 12 information requested.
 22 13    2.  Forms may be obtained from the commissioner upon
 22 14 request.  The commissioner may accept annual reports submitted
 22 15 in an electronic format, including but not limited to computer
 22 16 diskettes.
 22 17    3.  Notwithstanding chapter 22, all records maintained by
 22 18 the commissioner under this section shall be confidential and
 22 19 shall not be made available for inspection or copying except
 22 20 upon approval of the commissioner or the attorney general.
 22 21    Sec. 24.  NEW SECTION.  523A.206  AUDITS.
 22 22    1.  The commissioner may make audits of the establishment
 22 23 and of the records of a seller, at the times and in the scope
 22 24 the commissioner determines.  The audits may be made without
 22 25 prior notice to the seller.  The commissioner may copy all
 22 26 records the commissioner feels are necessary to conduct the
 22 27 audit.  The commissioner may require an audit of a seller or
 22 28 other person by a certified public accountant to verify
 22 29 compliance with this chapter, implementing rules, or orders.
 22 30    2.  A seller or other person shall pay for the audit unless
 22 31 the commissioner waives this requirement.  The cost of an
 22 32 audit involving multiple sellers or other persons shall be
 22 33 prorated among them upon any reasonable basis as determined by
 22 34 the commissioner.  The accountant shall deliver the audit
 22 35 report to the commissioner and to the seller or other persons.
 23  1    3.  The commissioner shall not make public the information
 23  2 obtained in the course of an audit, except when a duty under
 23  3 this chapter requires the commissioner to take action against
 23  4 a seller or to cooperate with another enforcement or
 23  5 regulatory agency, or except when the commissioner is called
 23  6 as a witness in a civil or criminal proceeding.  
 23  7                          SUBCHAPTER 3
 23  8         DISBURSEMENT OF REMAINING BURIAL ACCOUNT FUNDS,
 23  9      BURIAL TRUST FUNDS, AND INSURANCE OR ANNUITY PROCEEDS
 23 10            UNDER THE REQUIREMENTS OF SECTION 249A.5
 23 11    Sec. 25.  NEW SECTION.  523A.301  DEFINITION.
 23 12    As used in sections 523A.302 and 523A.303, "director" means
 23 13 the director of human services.
 23 14    Sec. 26.  NEW SECTION.  523A.302  IDENTIFICATION OF
 23 15 MERCHANDISE AND SERVICE PROVIDER.
 23 16    If a burial trust fund identifies, either in the trust fund
 23 17 records or in a related purchase agreement, the seller who
 23 18 will provide the cemetery merchandise, funeral merchandise,
 23 19 funeral services or a combination thereof, the trust fund
 23 20 records or the related purchase agreements must contain a
 23 21 statement signed by an authorized representative of the seller
 23 22 agreeing to furnish the cemetery merchandise, funeral
 23 23 merchandise, funeral services, or a combination thereof upon
 23 24 the death of the beneficiary.  The burial trust fund shall not
 23 25 identify a specific seller as payee unless the trust fund
 23 26 records or the related purchase agreements, if any, contain
 23 27 the signature of an authorized representative of the seller
 23 28 and, if the agreement is for funeral services as defined in
 23 29 chapter 156, the name of a funeral director licensed to
 23 30 deliver those services.  A person may enter into agreements
 23 31 authorizing the establishment of more than one burial trust
 23 32 fund and agreeing to furnish the applicable merchandise and
 23 33 services.
 23 34    Sec. 27.  NEW SECTION.  523A.303  DISBURSEMENT OF REMAINING
 23 35 FUNDS.
 24  1    1.  If funds remain in a nonguaranteed irrevocable burial
 24  2 trust fund or from the proceeds of an insurance policy or
 24  3 annuity made payable or assigned to the seller or a provider
 24  4 after the payment of funeral and burial expenses in accordance
 24  5 with the conditions and terms of the purchase agreement for
 24  6 cemetery merchandise, funeral merchandise, or funeral
 24  7 services, the seller shall comply with all of the following:
 24  8    a.  The seller shall provide written notice by mail to the
 24  9 director under subsection 2.
 24 10    b.  At least sixty days after mailing notice to the
 24 11 director, the seller shall disburse any remaining funds from
 24 12 the burial trust fund as follows:
 24 13    (1)  If within the sixty-day period the seller receives a
 24 14 claim from the personal representative of the deceased, any
 24 15 remaining funds shall be disbursed to the personal
 24 16 representative, notwithstanding any claim by the director.
 24 17    (2)  If within the sixty-day period the seller has not
 24 18 received a claim from the personal representative of the
 24 19 deceased but receives a claim from the director, the seller
 24 20 shall disburse the remaining funds up to the amount of the
 24 21 claim to the director.
 24 22    (3)  Any remaining funds not disposed of pursuant to
 24 23 subparagraphs (1) and (2) shall be disbursed to any person who
 24 24 is identified as the next of kin of the deceased in an
 24 25 affidavit submitted in accordance with subsection 5.
 24 26    2.  The notice mailed to the director shall meet all of the
 24 27 following requirements and is subject to all of the following
 24 28 conditions:
 24 29    a.  The notice shall be mailed with postage prepaid.
 24 30    b.  If the notice is sent by regular mail, the sixty-day
 24 31 period for receipt of a response is deemed to commence three
 24 32 days following the date of mailing.
 24 33    c.  If the notice is sent by certified mail, the sixty-day
 24 34 period for receipt of a response is deemed to commence on the
 24 35 date of mailing.
 25  1    d.  The notice shall provide all of the following
 25  2 information:
 25  3    (1)  Current name, address, and telephone number of the
 25  4 seller.
 25  5    (2)  Full name of the deceased.
 25  6    (3)  Date of the deceased's death.
 25  7    (4)  Amount of funds remaining in the burial trust fund.
 25  8    (5)  Statement that any claim by the director must be
 25  9 received by the seller within sixty days after the date of
 25 10 mailing of the notice.
 25 11    e.  A notice in substantially the following form complies
 25 12 with this subsection:
 25 13    "TO:  THE DIRECTOR OF HUMAN SERVICES
 25 14    FROM:  (SELLER'S NAME, CURRENT ADDRESS, AND TELEPHONE
 25 15 NUMBER)
 25 16    YOU ARE HEREBY NOTIFIED THAT (NAME OF DECEASED), WHO HAD AN
 25 17 IRREVOCABLE BURIAL TRUST FUND, HAS DIED, THAT FINAL PAYMENT
 25 18 FOR CEMETERY MERCHANDISE, FUNERAL MERCHANDISE, AND FUNERAL
 25 19 SERVICES HAS BEEN MADE, AND THAT (REMAINING AMOUNT) REMAINS IN
 25 20 THE IRREVOCABLE BURIAL TRUST FUND.
 25 21    THE ABOVE-NAMED SELLER MUST RECEIVE A WRITTEN RESPONSE
 25 22 REGARDING ANY CLAIM BY THE DIRECTOR WITHIN SIXTY DAYS AFTER
 25 23 THE MAILING OF THIS NOTICE TO THE DIRECTOR.
 25 24    IF THE ABOVE-NAMED SELLER DOES NOT RECEIVE A WRITTEN
 25 25 RESPONSE REGARDING A CLAIM BY THE DIRECTOR WITHIN SIXTY DAYS
 25 26 AFTER THE MAILING OF THIS NOTICE, THE SELLER MAY DISPOSE OF
 25 27 THE REMAINING FUNDS IN ACCORDANCE WITH SECTION 523A.303, CODE
 25 28 OF IOWA."
 25 29    3.  Upon receipt of the seller's written notice, the
 25 30 director shall determine if a debt is due the department of
 25 31 human services pursuant to section 249A.5.  If the director
 25 32 determines that a debt is owing, the director shall provide a
 25 33 written response to the seller within sixty days after the
 25 34 mailing of the seller's notice.  If the director does not
 25 35 respond with a claim within the sixty-day period, any claim
 26  1 made by the director shall not be enforceable against the
 26  2 seller, the trust, or a trustee.
 26  3    4.  A personal representative who wishes to make a claim
 26  4 shall send written notice of the claim to the seller.  If the
 26  5 seller does not receive any claim from a personal
 26  6 representative within the sixty-day period provided for
 26  7 response by the director regarding a claim, the claim of the
 26  8 personal representative shall not be enforceable against the
 26  9 seller, the trust, or a trustee.
 26 10    5.  Any person other than a personal representative or the
 26 11 director claiming an interest in the remaining funds shall
 26 12 submit an affidavit claiming an interest which provides the
 26 13 following information:
 26 14    a.  Full name, current address, and telephone number of the
 26 15 claimant.
 26 16    b.  Claimant's relationship to the deceased.
 26 17    c.  Name of any surviving next of kin of the deceased, and
 26 18 the relationship of any named surviving next of kin.
 26 19    d.  That the claimant has no knowledge of the existence of
 26 20 a personal representative for the deceased's estate.
 26 21    6.  The seller may retain not more than fifty dollars of
 26 22 the remaining funds in the burial trust fund for the
 26 23 administrative expenses associated with the requirements of
 26 24 this section.
 26 25    7.  If the funds remaining in a burial trust fund are
 26 26 disbursed under the requirements of this section, the seller,
 26 27 the provider, the burial trust fund, and any trustee shall not
 26 28 be liable to the director, the estate of the deceased, any
 26 29 personal representative, or any other interested person for
 26 30 the remaining funds and any lien imposed by the director shall
 26 31 be unenforceable against the seller, the burial trust fund, or
 26 32 any trustee.  
 26 33                          SUBCHAPTER 4
 26 34                      TRUSTING ALTERNATIVES
 26 35    Sec. 28.  NEW SECTION.  523A.401  PURCHASE AGREEMENTS
 27  1 FUNDED BY INSURANCE PROCEEDS.
 27  2    1.  A purchase agreement may be funded by insurance
 27  3 proceeds derived from a new or existing insurance policy
 27  4 issued by an insurance company authorized to do business and
 27  5 doing business within this state.
 27  6    2.  Such funding may be in lieu of the trusting
 27  7 requirements of this chapter when the purchaser assigns the
 27  8 proceeds of an existing insurance policy.
 27  9    3.  Such funding may be in lieu of the trusting
 27 10 requirements of this chapter when a new insurance policy is
 27 11 purchased to fund the purchase agreement, with a face amount
 27 12 equal to or greater than the current retail price of the
 27 13 cemetery merchandise, funeral merchandise, and funeral
 27 14 services to be delivered under the purchase agreement or, if
 27 15 less, a face amount equal to the total of all payments to be
 27 16 submitted by the purchaser pursuant to the purchase agreement.
 27 17    4.  The premiums of any new insurance policy shall be fully
 27 18 paid within thirty days after execution of the purchase
 27 19 agreement or, with respect to a purchase agreement that
 27 20 provides for periodic payments, the premiums shall be paid
 27 21 directly by the purchaser to the insurance company issuing the
 27 22 policy.
 27 23    5.  Any new insurance policy shall satisfy the following
 27 24 conditions:
 27 25    a.  Except as necessary and appropriate to satisfy the
 27 26 requirements regarding burial trust funds under Title XIX of
 27 27 the federal Social Security Act, the policy shall not be owned
 27 28 by the establishment, the policy shall not be irrevocably
 27 29 assigned to the establishment, and the assignment of proceeds
 27 30 from the insurance policy to the establishment shall be
 27 31 limited to the establishment's interests as they appear in the
 27 32 purchase agreement, and conditioned on the establishment's
 27 33 delivery of cemetery merchandise, funeral merchandise, and
 27 34 funeral services pursuant to a purchase agreement.
 27 35    b.  The policy shall provide that any assignment of
 28  1 benefits is contingent upon the establishment's delivery of
 28  2 cemetery merchandise, funeral merchandise, and funeral
 28  3 services pursuant to a purchase agreement.
 28  4    c.  The policy shall have an increasing death benefit or
 28  5 similar feature that provides some means for increasing the
 28  6 funding as the cost of funeral and cemetery goods and services
 28  7 increases.
 28  8    6.  With the written consent of the purchaser, an existing
 28  9 prepaid purchase agreement with trust-funded benefits may be
 28 10 converted to a prepaid purchase agreement with insurance-
 28 11 funded benefits provided the establishment and the insurance
 28 12 benefits comply with the following provisions:
 28 13    a.  The transfer of the trust funds to the insurance
 28 14 company must be at least equal to the full sum required to be
 28 15 deposited as trust principal under the trust-funded prepaid
 28 16 purchase agreement plus all net earnings accumulated with
 28 17 respect thereto, as of the transfer date.  Commissions,
 28 18 allowances, surrender charges or other forms of compensation
 28 19 or expense loads, premium expense, administrative charges or
 28 20 expenses, or policy fees shall not be deducted from the trust
 28 21 funds transferred pursuant to the conversion.
 28 22    b.  The face amount of any insurance policy issued on an
 28 23 individual must be no less than the amount of principal and
 28 24 interest transferred for that individual to the insurance
 28 25 company, and any supplemental insurance policy issued to cover
 28 26 the unfunded portion of the purchase agreement must have a
 28 27 face amount that is at least as great as the unfunded
 28 28 principal balance.  The face amount of the insurance purchased
 28 29 shall not, under any circumstances, be less than the total of
 28 30 all payments made by the purchaser pursuant to the agreement
 28 31 plus all net earnings accumulated with respect thereto, as of
 28 32 the transfer date.
 28 33    c.  The insurance policy shall not allow for contesting
 28 34 coverage, limit death benefits in the case of suicide, refer
 28 35 to physical examination, or otherwise operate as an exclusion,
 29  1 limitation, or condition other than requiring submission of
 29  2 proof of death or surrender of policy at the time the prepaid
 29  3 purchase agreement is funded, matures, or is canceled, as the
 29  4 case may be.
 29  5    d.  The establishment shall maintain a copy of any prepaid
 29  6 trust-funded purchase agreement that was converted to a
 29  7 prepaid insurance-funded purchase agreement and retain the
 29  8 payment history records for each converted purchase agreement
 29  9 prior to conversion until the cemetery merchandise, funeral
 29 10 merchandise, and funeral services have been delivered.
 29 11    7.  The seller of a purchase agreement subject to this
 29 12 chapter which is to be funded by insurance proceeds shall
 29 13 obtain all permits required to be obtained and comply with all
 29 14 reporting requirements under this chapter.
 29 15    8.  An insurance company issuing policies funding purchase
 29 16 agreements subject to this chapter shall file an annual report
 29 17 with the commissioner on a form prescribed by the
 29 18 commissioner.  The report shall list the applicable insurance
 29 19 policies outstanding for each establishment.  Computer
 29 20 printouts may be submitted so long as each legibly provides
 29 21 the same information required in the prescribed form.
 29 22    Sec. 29.  NEW SECTION.  523A.402  PURCHASE AGREEMENTS
 29 23 FUNDED BY ANNUITY PROCEEDS.
 29 24    1.  A purchase agreement may be funded by proceeds derived
 29 25 from a new or existing annuity issued by an insurance company
 29 26 authorized to do business and doing business within this
 29 27 state.
 29 28    2.  Such funding may be in lieu of the trust requirements
 29 29 of this chapter when the purchaser assigns the proceeds of an
 29 30 existing annuity.
 29 31    3.  Such funding may be in lieu of the trust requirements
 29 32 of this chapter when a new annuity is purchased to fund the
 29 33 purchase agreement, with a face amount equal to or greater
 29 34 than the current retail price of the cemetery merchandise,
 29 35 funeral merchandise, and funeral services to be delivered
 30  1 under the purchase agreement or, if less, a face amount equal
 30  2 to the total of all payments to be submitted by the purchaser
 30  3 pursuant to the purchase agreement.
 30  4    4.  The premiums of any new annuity shall be fully paid
 30  5 within thirty days after execution of the purchase agreement
 30  6 or, with respect to a purchase agreement that provides for
 30  7 periodic payments, the premiums shall be paid directly by the
 30  8 purchaser to the insurance company issuing the annuity.
 30  9    5.  The annuity shall satisfy the following conditions:
 30 10    a.  Except as necessary and appropriate to satisfy the
 30 11 requirements regarding burial trust funds under Title XIX of
 30 12 the federal Social Security Act, the annuity shall not be
 30 13 owned by the establishment or irrevocably assigned and any
 30 14 designation of the establishment as a beneficiary shall not be
 30 15 made irrevocable.
 30 16    b.  The annuity shall provide that any assignment of
 30 17 benefits is contingent upon the establishment's delivery of
 30 18 cemetery merchandise, funeral merchandise, and funeral
 30 19 services pursuant to a purchase agreement.
 30 20    c.  The annuity shall have an increasing death benefit or
 30 21 similar feature that provides some means for increasing the
 30 22 funding as the cost of cemetery merchandise, funeral
 30 23 merchandise, and funeral services increases.
 30 24    6.  With the written consent of the purchaser, an existing
 30 25 prepaid purchase agreement with trust-funded benefits may be
 30 26 converted to a prepaid purchase agreement with annuity-funded
 30 27 benefits provided the establishment and the annuity benefits
 30 28 comply with the following provisions:
 30 29    a.  The transfer of the trust funds to the insurance
 30 30 company must be at least equal to the full sum required to be
 30 31 deposited as trust principal under the trust-funded prepaid
 30 32 purchase agreement plus all net earnings accumulated with
 30 33 respect thereto, as of the transfer date.  Commissions,
 30 34 allowances, surrender charges or other forms of compensation
 30 35 or expense loads, premium expense, administrative charges or
 31  1 expenses, or fees shall not be deducted from the trust funds
 31  2 transferred pursuant to the conversion.
 31  3    b.  The face amount of any annuity issued on an individual
 31  4 must be no less than the amount of principal and interest
 31  5 transferred for that individual to the insurance company, and
 31  6 any supplemental annuity issued to cover the unfunded portion
 31  7 of the purchase agreement must have a face amount that is at
 31  8 least as great as the unfunded principal balance.  The face
 31  9 amount of the annuity purchased shall not, under any
 31 10 circumstances, be less than the total of all payments made by
 31 11 the purchaser pursuant to the agreement plus all net earnings
 31 12 accumulated with respect thereto, as of the transfer date.
 31 13    c.  The annuity shall not allow for contesting coverage,
 31 14 limit death benefits in the case of suicide, refer to physical
 31 15 examination, or otherwise operate as an exclusion, limitation,
 31 16 or condition other than requiring submission of proof of death
 31 17 or surrender of the annuity at the time the prepaid purchase
 31 18 agreement is funded, matures, or is canceled, as the case may
 31 19 be.
 31 20    d.  The establishment shall maintain a copy of any prepaid
 31 21 trust-funded purchase agreement that was converted to a
 31 22 prepaid annuity-funded purchase agreement and retain the
 31 23 payment history records for each converted purchase agreement
 31 24 prior to conversion until the cemetery merchandise, funeral
 31 25 merchandise, and funeral services have been delivered.
 31 26    7.  The seller of a purchase agreement subject to this
 31 27 chapter which is to be funded by annuity proceeds shall obtain
 31 28 all permits required to be obtained and comply with all
 31 29 reporting requirements under this chapter.
 31 30    8.  An insurance company issuing annuities funding purchase
 31 31 agreements subject to this chapter shall file an annual report
 31 32 with the commissioner on a form prescribed by the
 31 33 commissioner.  The report shall list the applicable annuities
 31 34 outstanding for each establishment.  Computer printouts may be
 31 35 submitted so long as each legibly provides the same
 32  1 information required in the prescribed form.
 32  2    Sec. 30.  NEW SECTION.  523A.403  PURCHASE AGREEMENTS
 32  3 FUNDED BY CERTIFICATES OF DEPOSIT.
 32  4    1.  A purchase agreement may be funded by proceeds derived
 32  5 from a certificate of deposit in the name of the purchaser
 32  6 made payable to the seller upon the purchaser's death.
 32  7    2.  The seller of a purchase agreement subject to this
 32  8 chapter which is to be funded by a certificate of deposit
 32  9 shall obtain all permits required to be obtained and comply
 32 10 with all reporting requirements under this chapter,
 32 11 implementing rules, and orders.
 32 12    Sec. 31.  NEW SECTION.  523A.404  MERCHANDISE DELIVERED TO
 32 13 THE PURCHASER OR WAREHOUSED.
 32 14    1.  Trust requirements do not apply to payments for outer
 32 15 burial containers made of either polystyrene or polypropylene
 32 16 or cemetery merchandise delivered to the purchaser or stored
 32 17 in an independent third-party storage facility not owned or
 32 18 controlled by the seller when approved by the commissioner.
 32 19 The seller or the storage facility must demonstrate that they
 32 20 will do all of the following:
 32 21    a.  Issue a receipt of ownership in the name of the
 32 22 purchaser and deliver it to the purchaser.
 32 23    b.  Insure the merchandise against loss.
 32 24    c.  Protect the merchandise against damage.
 32 25    d.  Transfer title to the purchaser.
 32 26    e.  Appropriately identify and describe the merchandise in
 32 27 a manner that it can be distinguished from other similar
 32 28 items.
 32 29    f.  Use a method of storage that allows for visual audits
 32 30 of the merchandise.
 32 31    g.  Have adequate, computerized, recordkeeping systems in
 32 32 place to identify, describe, and count each item in storage,
 32 33 including the ownership of each item, and provide an aggregate
 32 34 listing with numerical totals.
 32 35    h.  File a consent to be audited and inspected by the
 33  1 commissioner.
 33  2    i.  Provide reports to the commissioner, annually, by an
 33  3 independent certified public accountant, which shall include a
 33  4 physical count of merchandise held in storage and a review of
 33  5 information, including the seller's revenue and sales records,
 33  6 as necessary to verify the adequacy of the number of items
 33  7 held at the storage facility.
 33  8    j.  Satisfy the annual reporting requirements of section
 33  9 523A.204.
 33 10    2.  Lawn crypts may be delivered in lieu of trusting.  For
 33 11 this purpose, delivery means installation in a grave owned by
 33 12 the purchaser.  The seller shall do all of the following:
 33 13    a.  Notify the administrator before the lawn crypts are
 33 14 installed.
 33 15    b.  Identify the intended location of the lawn crypts
 33 16 within the cemetery.
 33 17    c.  Provide documentation adequately demonstrating delivery
 33 18 has occurred.  Adequate documentation includes but is not
 33 19 limited to photographs and third-party certifications.
 33 20    3.  Cemetery merchandise and funeral merchandise shall not
 33 21 be deemed delivered to the purchaser or warehoused if the
 33 22 merchandise is subject to a lien or security interest by any
 33 23 party other than the seller.
 33 24    4.  An establishment is prohibited from requiring delivery
 33 25 as a condition of the sale.
 33 26    5.  A seller shall provide services necessary for the
 33 27 installation or burial of outer burial containers sold by the
 33 28 seller.  This subsection shall not require the seller to
 33 29 provide for the opening or closing of the interment or
 33 30 entombment space, unless the purchase agreement provides
 33 31 otherwise.
 33 32    Sec. 32.  NEW SECTION.  523A.405  BOND IN LIEU OF TRUST
 33 33 FUND.
 33 34    1.  In lieu of trust requirements, a seller may file with
 33 35 the commissioner a surety bond issued by a surety company
 34  1 authorized to do business and doing business within this
 34  2 state.  The bond must be conditioned upon the seller's
 34  3 faithful performance of purchase agreements subject to this
 34  4 chapter.  The surety's liability extends to each such
 34  5 agreement executed while the bond is in force and until
 34  6 performance or recision of the purchase agreement.  To the
 34  7 extent expressly agreed to in writing by the surety, the
 34  8 surety's liability extends to each such agreement subject to
 34  9 this chapter executed prior to the time the bond was in force
 34 10 and until performance or recision of the agreement.  A
 34 11 purchaser aggrieved by a breach of a condition of the bond
 34 12 covering the purchaser's agreement may maintain an action
 34 13 against the bond.  If, at the time of the breach, the
 34 14 purchaser is aware of the purchaser's rights under the bond
 34 15 and how to file a claim against the bond, the surety shall not
 34 16 be liable for any breach of condition unless the surety
 34 17 receives notice of a claim within sixty days following
 34 18 discovery of the acts, omissions, or conditions constituting
 34 19 the breach of condition, except as otherwise provided in this
 34 20 section.  A surety bond shall not be canceled by a surety
 34 21 except upon a written notice of cancellation given by the
 34 22 surety to the commissioner by restricted certified mail, and
 34 23 not prior to the expiration of sixty days after receipt of the
 34 24 notice by the commissioner.  The surety's liability shall
 34 25 extend to each purchase agreement subject to this chapter
 34 26 executed prior to cancellation of the surety bond until the
 34 27 seller has complied with section 3.
 34 28    2.  If a seller becomes insolvent or otherwise ceases to
 34 29 engage in business prior to or within sixty days after
 34 30 cancellation of a bond, the seller shall be deemed to have
 34 31 breached the bond conditions for outstanding agreements under
 34 32 this chapter as of the day prior to cancellation of the bond.
 34 33 The commissioner shall mail written notice by restricted
 34 34 certified mail to the purchaser under each outstanding
 34 35 purchase agreement of the seller that a claim against the bond
 35  1 must be filed with the surety company within sixty days after
 35  2 the mailing date of the notice.  The surety shall cease to be
 35  3 liable for all purchase agreements except those for which
 35  4 claims are filed with the surety company within sixty days
 35  5 after the date the commissioner mails the notices.
 35  6    3.  If a surety bond is canceled by a surety under any
 35  7 conditions other than those specified in subsection 2, the
 35  8 seller shall comply with all of the following:
 35  9    a.  The seller shall comply with the trust requirements of
 35 10 section 523A.201 for all purchase agreements subject to this
 35 11 chapter executed on or after the effective date of
 35 12 cancellation of the surety bond.  In the alternative, the
 35 13 seller may submit a substitute surety bond meeting the
 35 14 requirements of subsection 1, but the seller must comply with
 35 15 section 523A.201 for any purchase agreements executed on or
 35 16 after the effective cancellation date of the earlier surety
 35 17 bond and prior to the effective date of the later surety bond.
 35 18    b.  Within sixty days after the effective cancellation date
 35 19 of the surety bond, the seller shall submit to the
 35 20 commissioner an undertaking by another surety company that a
 35 21 substitute surety bond meeting the requirements of subsection
 35 22 1 is in effect and that the liability of the substitute surety
 35 23 bond extends to all outstanding purchase agreements of the
 35 24 seller that were executed but not performed or extinguished
 35 25 prior to the effective date of the substitute surety bond, or
 35 26 the seller shall submit to the commissioner a financial
 35 27 statement accompanied by an unqualified opinion based upon an
 35 28 audit performed by a certified public accountant licensed in
 35 29 this state certifying the total amount of outstanding
 35 30 liabilities of the seller on purchase agreements subject to
 35 31 this chapter and proof of deposit by the seller in trust under
 35 32 section 523A.201 of either the amount specified in section
 35 33 523A.201, including interest as set by the commissioner based
 35 34 on the interest which would have been earned had the funds
 35 35 been maintained in trust, with respect to all of those
 36  1 outstanding purchase agreements or, where applicable, that
 36  2 delivery of merchandise has been made in compliance with
 36  3 section 523A.404.  The surety may require such security as is
 36  4 necessary to comply with this section.  Upon compliance by the
 36  5 seller with this paragraph, the surety company canceling the
 36  6 surety bond shall cease to be liable with respect to any
 36  7 outstanding purchase agreements of the seller except those
 36  8 purchase agreements with respect to which a breach of
 36  9 condition occurred prior to cancellation and for which timely
 36 10 claims were filed.
 36 11    4.  Section 523A.202, and, to the extent it is applicable,
 36 12 section 523A.206, apply to sellers whose purchase agreements
 36 13 are covered by a surety bond maintained under this section,
 36 14 and section 523A.202 continues to apply to any purchase
 36 15 agreements of those sellers that are not covered by a surety
 36 16 bond maintained under this section.
 36 17    5.  Upon receiving a notice of cancellation of a surety
 36 18 bond, the commissioner shall notify the seller of the
 36 19 requirements of this chapter resulting from cancellation of
 36 20 the bond.  The notice may be in the form of a copy of this
 36 21 section and sections 523A.201 and 523A.202.
 36 22    6.  Upon receiving a notice of cancellation, unless the
 36 23 seller has complied with the requirements of this section, the
 36 24 attorney general shall seek an injunction to prohibit the
 36 25 seller from making further purchase agreements subject to this
 36 26 chapter.  The attorney general shall commence an action to
 36 27 attach and levy execution upon property of the seller when the
 36 28 seller fails to perform a purchase agreement subject to this
 36 29 chapter, to the extent necessary to secure compliance with
 36 30 this chapter.  The county attorney may bring criminal charges
 36 31 under subchapter 7.
 36 32    7.  The surety under this section shall not be owned, under
 36 33 the control of, or affiliated with the seller.
 36 34    8.  The amount of the surety bond shall equal eighty
 36 35 percent of the payments received pursuant to purchase
 37  1 agreements, or the applicable portion thereof, for cemetery
 37  2 merchandise, funeral merchandise, funeral services, or a
 37  3 combination thereof and the amount needed to adjust the amount
 37  4 of the surety bond for inflation as set by the commissioner
 37  5 based on the consumer price index.  The seller shall review
 37  6 the amount of the surety bond no less than annually and shall
 37  7 increase the bond as necessary to reflect additional payments.
 37  8 The amount needed to adjust for inflation shall be added
 37  9 annually to the surety bond during the first quarter of the
 37 10 establishment's fiscal year.
 37 11    9.  With the consent of the purchaser, an existing prepaid
 37 12 purchase agreement with trust-funded benefits may be converted
 37 13 to a prepaid purchase agreement funded by a surety bond
 37 14 provided the establishment and the surety bond comply with the
 37 15 following provisions:
 37 16    a.  The amount of the trust funds transferred to the surety
 37 17 company must be at least equal to the full sum required to be
 37 18 deposited as trust principal under the trust-funded prepaid
 37 19 purchase agreement plus all net earnings accumulated with
 37 20 respect thereto, as of the transfer date.  Commissions,
 37 21 allowances, surrender charges or other forms of compensation
 37 22 or expense loads, premium expense, administrative charges or
 37 23 expenses, or fees shall not be deducted from the trust funds
 37 24 transferred pursuant to the conversion.
 37 25    b.  The face amount of the surety bond issued on an
 37 26 individual must be no less than the amount of principal and
 37 27 interest transferred for that individual to the surety
 37 28 company, and any supplemental surety bond issued to cover the
 37 29 unfunded portion of the purchase agreement must have a face
 37 30 amount that is at least as great as the unfunded principal
 37 31 balance.  The face amount of the surety bond purchased shall
 37 32 not, under the circumstances, be less than the total of all
 37 33 payments made by the purchaser pursuant to the agreement plus
 37 34 all net earnings accumulated with respect thereto, as of the
 37 35 transfer date.
 38  1    c.  The establishment shall maintain a copy of any prepaid
 38  2 trust-funded agreement that was converted to a prepaid
 38  3 purchase agreement funded by a surety bond and retain the
 38  4 payment history records for each converted purchase agreement
 38  5 prior to conversion until the cemetery merchandise, funeral
 38  6 merchandise, and funeral services have been delivered.  
 38  7                          SUBCHAPTER 5
 38  8           PERMIT REQUIREMENTS FOR SELLERS OF CEMETERY
 38  9       MERCHANDISE, FUNERAL MERCHANDISE, FUNERAL SERVICES,
 38 10                    OR A COMBINATION THEREOF
 38 11    Sec. 33.  NEW SECTION.  523A.501  ESTABLISHMENT PERMITS.
 38 12    1.  A person shall not advertise, sell, promote, or offer
 38 13 to furnish cemetery merchandise, funeral merchandise, funeral
 38 14 services, or a combination thereof when performance or
 38 15 delivery may be more than one hundred twenty days following
 38 16 the initial payment on the account without an establishment
 38 17 permit.  Each establishment must have an establishment permit.
 38 18    2.  An application for an establishment permit shall be
 38 19 filed on a form prescribed by the commissioner, be accompanied
 38 20 by a fifty dollar filing fee, and include a copy of each
 38 21 purchase agreement the person will use for sales of cemetery
 38 22 merchandise, funeral merchandise, funeral services, or a
 38 23 combination thereof.
 38 24    3.  The application shall contain:
 38 25    a.  The name and address of the establishment.
 38 26    b.  The name and address of any additional provider of
 38 27 cemetery merchandise, funeral merchandise, funeral services,
 38 28 or a combination thereof.
 38 29    c.  The name and address of each owner, officer, or other
 38 30 official of the establishment, including when relevant the
 38 31 chief executive officer and the members of the board of
 38 32 directors.
 38 33    d.  A description of any common business enterprise or
 38 34 parent company.
 38 35    e.  The types of cemetery merchandise, funeral merchandise,
 39  1 funeral services, or a combination thereof to be sold.
 39  2    f.  The types of trust or trust alternatives utilized by
 39  3 the establishment and a list of the financial institutions,
 39  4 storage facilities, surety companies, and insurance companies
 39  5 utilized by the establishment on a regular basis.
 39  6    4.  A permit holder shall inform the commissioner of
 39  7 changes in the information required to be provided by
 39  8 subsection 3 within thirty days of the change.
 39  9    5.  An establishment permit is not assignable or
 39 10 transferable.  A permit holder selling all or part of an
 39 11 establishment shall cancel the permit and the purchaser shall
 39 12 apply for a new permit in the purchaser's name within thirty
 39 13 days of the sale.
 39 14    6.  The commissioner shall grant or deny a permit
 39 15 application within thirty days after receipt, but the
 39 16 commissioner's failure to act within that time period shall
 39 17 not be deemed approval of the application.  If the
 39 18 commissioner does not grant the permit, the commissioner shall
 39 19 notify the person in writing of the reasons for the denial.
 39 20 The permit shall disclose on its face the permit holder's
 39 21 employer or the establishment on whose behalf the applicant
 39 22 will be making or attempting to make sales, the permit number,
 39 23 and the expiration date.
 39 24    7.  An initial permit is valid for two years from the date
 39 25 the application is filed.  A permit may be renewed for two
 39 26 years by filing the form prescribed by the commissioner under
 39 27 subsection 2, accompanied by a ten dollar renewal fee.
 39 28 Submission of purchase agreements is not required for renewals
 39 29 unless the purchase agreements have been modified since the
 39 30 last filing.
 39 31    8.  The commissioner may by rule create or accept a
 39 32 multijurisdiction establishment permit.  If the establishment
 39 33 permit is issued by another jurisdiction, the rules shall
 39 34 require the filing of an application or notice form and
 39 35 payment of the applicable filing fee of fifty dollars for an
 40  1 initial application and ten dollars for a renewal application.
 40  2 The application or notice form utilized and the effective
 40  3 dates and terms of the permit may vary from the provisions set
 40  4 forth in subsections 2, 3, and 7.
 40  5    Sec. 34.  NEW SECTION.  523A.502  SALES PERMITS.
 40  6    1.  A person shall not advertise, sell, promote, or offer
 40  7 to furnish cemetery merchandise, funeral merchandise, funeral
 40  8 services, or a combination thereof when performance or
 40  9 delivery may be more than one hundred twenty days following
 40 10 initial payment on the account without a sales permit.  A
 40 11 permit holder must be an employee or agent of a person holding
 40 12 an establishment permit who can deliver the cemetery
 40 13 merchandise, funeral merchandise, funeral services, or a
 40 14 combination thereof being sold.  A person must have a sales
 40 15 permit for each establishment at which the person works.
 40 16 However, a person may apply for a sales permit covering
 40 17 multiple establishments, if the establishments have common
 40 18 ownership.  The establishment permit holder is liable for the
 40 19 acts of its employees and agents performed in advertising,
 40 20 selling, promoting, or offering to furnish, upon the future
 40 21 death of a person named or implied in a purchase agreement,
 40 22 cemetery merchandise, funeral merchandise, funeral services,
 40 23 or a combination thereof.
 40 24    2.  This chapter does not permit a person to practice
 40 25 mortuary science without a license.  A person holding a
 40 26 current sales permit may advertise, sell, promote, or offer to
 40 27 furnish a funeral director's services as an employee or agent
 40 28 of a funeral establishment furnishing the funeral services
 40 29 under chapter 156.
 40 30    3.  An application for a sales permit shall be filed on a
 40 31 form prescribed by the commissioner and be accompanied by a
 40 32 five dollar filing fee.
 40 33    4.  The application shall contain:
 40 34    a.  The name and address of the person.
 40 35    b.  The name and address of the person's employer and each
 41  1 establishment on whose behalf the person will be advertising,
 41  2 selling, promoting, or offering to furnish cemetery
 41  3 merchandise, funeral merchandise, funeral services, or a
 41  4 combination thereof.
 41  5    c.  The name and address of the provider who will provide
 41  6 the cemetery merchandise, funeral merchandise, funeral
 41  7 services, or a combination thereof if different from the
 41  8 person's employer.
 41  9    5.  An initial permit expires one year from the date the
 41 10 application is filed.  The permit may be renewed for four
 41 11 years by filing the form prescribed by the commissioner under
 41 12 subsection 3, accompanied by a twenty dollar filing fee.
 41 13    6.  A permit holder shall inform the commissioner of
 41 14 changes in the information required to be provided by
 41 15 subsection 4 within thirty days of the change.
 41 16    7.  A sales permit is not assignable or transferable.  A
 41 17 permit holder selling all or part of a business shall cancel
 41 18 the permit and the purchaser shall apply for a new permit in
 41 19 the purchaser's name within thirty days of the sale.
 41 20    8.  The commissioner shall grant or deny a permit
 41 21 application within thirty days after receipt, but the
 41 22 commissioner's failure to act within that time period shall
 41 23 not be deemed approval of the application.  If the
 41 24 commissioner does not grant the permit, the commissioner shall
 41 25 notify the applicant in writing of the reasons for the denial.
 41 26    9.  The commissioner may by rule create or accept a
 41 27 multijurisdiction sales permit.  If the sales permit is issued
 41 28 by another jurisdiction, the rules shall require the filing of
 41 29 an application or notice form and payment of the applicable
 41 30 filing fee of five dollars for each year.  The application or
 41 31 notice form utilized and the effective dates and terms of the
 41 32 permit may vary from the provisions set forth in subsections 3
 41 33 and 5.
 41 34    Sec. 35.  NEW SECTION.  523A.503  DENIAL, SUSPENSION,
 41 35 REVOCATION, AND SURRENDER OF PERMITS.
 42  1    1.  The commissioner may, pursuant to chapter 17A, deny any
 42  2 permit application or immediately suspend or revoke any permit
 42  3 issued under this chapter for several reasons, including but
 42  4 not limited to:
 42  5    a.  Committing a fraudulent act, engaging in a fraudulent
 42  6 practice, or violating any provision of this chapter or, any
 42  7 implementing rule or order issued under this chapter.
 42  8    b.  Violating any other state or federal law applicable to
 42  9 the conduct of the applicant's or permit holder's business.
 42 10    c.  Insolvency or financial condition.
 42 11    d.  The permit holder, for the purpose of avoiding the
 42 12 trust requirement for funeral services, attributes amounts
 42 13 paid under the purchase agreement to cemetery merchandise or
 42 14 funeral merchandise that is delivered under section 523A.404
 42 15 rather than to funeral services sold to the purchaser.  The
 42 16 sale of funeral services at a lower price when the sale is
 42 17 made in conjunction with the sale of cemetery merchandise or
 42 18 funeral merchandise to be delivered under section 523A.404
 42 19 than the services are regularly and customarily sold for when
 42 20 not sold in conjunction with cemetery merchandise or funeral
 42 21 merchandise is evidence that the permit holder is acting with
 42 22 the purpose of avoiding the trust requirement for funeral
 42 23 services under section 523A.201.
 42 24    e.  Engaging in a deceptive act or practice or deliberately
 42 25 misrepresenting or omitting a material fact regarding the sale
 42 26 of cemetery merchandise, funeral merchandise, funeral
 42 27 services, or a combination thereof under this chapter.
 42 28    f.  Conviction of a criminal offense involving dishonesty
 42 29 or a false statement.
 42 30    g.  Inability to provide the cemetery merchandise, funeral
 42 31 merchandise, funeral services, or a combination thereof which
 42 32 the applicant or permit holder purports to sell.
 42 33    h.  The applicant or permit holder sells the business
 42 34 without filing a prior notice of sale with the commissioner.
 42 35 The permit shall be revoked thirty days following such sale.
 43  1    i.  Selling by a person who is not an employee or agent of
 43  2 the applicant or permit holder.
 43  3    2.  The commissioner may, for good cause shown, suspend any
 43  4 permit for a period not exceeding thirty days, pending
 43  5 investigation.
 43  6    3.  Except as provided in subsection 2, a permit shall not
 43  7 be revoked or suspended except after notice and hearing under
 43  8 chapter 17A.
 43  9    4.  Any permit holder may surrender a permit by delivering
 43 10 to the commissioner written notice that the permit holder
 43 11 surrenders the permit, but the surrender shall not affect the
 43 12 permit holder's civil or criminal liability for acts committed
 43 13 before the surrender.
 43 14    5.  Denial, revocation, suspension, or surrender of a
 43 15 permit does not impair or affect the obligation of any
 43 16 preexisting lawful agreement between the permit holder and any
 43 17 person.  
 43 18                          SUBCHAPTER 6
 43 19                 PURCHASE AGREEMENT REQUIREMENTS
 43 20    Sec. 36.  NEW SECTION.  523A.601  DISCLOSURES.
 43 21    1.  A purchase agreement for cemetery merchandise, funeral
 43 22 merchandise, funeral services, or a combination thereof shall
 43 23 be written in clear, understandable language, and shall be
 43 24 printed or typed in an easy-to-read font, size, and style, and
 43 25 shall:
 43 26    a.  Identify the seller, the salesperson's permit and
 43 27 establishment name and permit number, the expiration date of
 43 28 the salesperson's permit, the purchaser, and the person for
 43 29 whom the cemetery merchandise, funeral merchandise, funeral
 43 30 services, or a combination thereof is purchased, if other than
 43 31 the purchaser.
 43 32    b.  Specify the cemetery merchandise, funeral merchandise,
 43 33 funeral services, or a combination thereof, to be provided,
 43 34 and the cost of each merchandise item or service.
 43 35    c.  State clearly the conditions upon which substitution
 44  1 will be allowed.
 44  2    d.  State the total purchase price and the terms under
 44  3 which it is to be paid.
 44  4    e.  State clearly whether the purchase agreement is a
 44  5 guaranteed price agreement or a nonguaranteed price agreement.
 44  6 A nonguaranteed price agreement shall contain in twelve point
 44  7 bold-faced type an explanation of the consequences of such
 44  8 agreement in substantially the following language:
 44  9    THE PRICES OF MERCHANDISE AND SERVICES UNDER THIS AGREEMENT
 44 10 ARE SUBJECT TO CHANGE IN THE FUTURE.  ANY FUNDS PAID UNDER
 44 11 THIS AGREEMENT ARE ONLY A DEPOSIT TO BE APPLIED, TOGETHER WITH
 44 12 ACCRUED INCOME, TOWARD THE FINAL COSTS OF THE MERCHANDISE OR
 44 13 SERVICES AGREED UPON.  ADDITIONAL CHARGES MAY BE INCURRED WHEN
 44 14 ADDITIONAL MERCHANDISE OR SERVICES OR BOTH ARE PROVIDED OR
 44 15 WHEN PRICES HAVE INCREASED MORE THAN ACCRUED INCOME.
 44 16    f.  State that the purchase of the cemetery merchandise,
 44 17 funeral merchandise, and funeral services is revocable and
 44 18 specify the damages for cancellation, if any.
 44 19    g.  State clearly who has the authority to cancel, amend,
 44 20 or revoke the purchase agreement to purchase cemetery
 44 21 merchandise, funeral merchandise, and funeral services.
 44 22    h.  State clearly that the purchaser is entitled to rescind
 44 23 the purchase agreement under terms and conditions specified by
 44 24 section 523A.602.
 44 25    i.  Include an explanation of regulatory oversight by the
 44 26 insurance division in twelve point bold-faced type, in
 44 27 substantially the following language:
 44 28    THIS AGREEMENT IS SUBJECT TO RULES ADMINISTERED BY THE IOWA
 44 29 INSURANCE DIVISION.  YOU MAY CALL THE INSURANCE DIVISION AT
 44 30 (___) ________.  WRITTEN INQUIRIES OR COMPLAINTS SHOULD BE
 44 31 MAILED TO THE IOWA SECURITIES BUREAU, (STREET ADDRESS),
 44 32 (CITY), IOWA (ZIP CODE).
 44 33    2.  A purchase agreement that is funded by a trust shall
 44 34 also:
 44 35    a.  State the percentage of money to be placed in trust.
 45  1    b.  Explain the disposition of the income generated from
 45  2 investments and include a statement of the purchaser's
 45  3 responsibility for income taxes owed on the income if
 45  4 applicable.
 45  5    c.  State that if, after all payments are made under the
 45  6 conditions and terms of the purchase agreement for cemetery
 45  7 merchandise, funeral merchandise, funeral services, or a
 45  8 combination thereof, any funds remain in the nonguaranteed
 45  9 irrevocable burial trust fund, the seller shall disburse the
 45 10 remaining funds according to law.
 45 11    d.  State clearly the terms of the funeral and burial trust
 45 12 agreement and whether it is revocable or irrevocable.
 45 13    e.  State clearly that the purchaser is entitled to
 45 14 transfer the trust funding, insurance funding, or other trust
 45 15 assets or select another establishment to receive the trust
 45 16 funding, insurance funding, or any other trust assets.
 45 17    f.  State clearly who has the authority to amend or revoke
 45 18 the trust agreement, if revocable, and who has the authority
 45 19 to appoint successor trustees if the purchase agreement is
 45 20 canceled.
 45 21    3.  The commissioner may adopt rules establishing
 45 22 disclosure and format requirements to promote consumer
 45 23 understanding of the merchandise and services purchased and
 45 24 the available funding mechanisms for a purchase agreement
 45 25 under this chapter.
 45 26    4.  A purchase agreement shall be signed by the purchaser,
 45 27 the seller, and if the agreement is for funeral services as
 45 28 defined in chapter 156, a person licensed to deliver funeral
 45 29 services.
 45 30    5.  The seller shall disclose the following information
 45 31 prior to accepting the initial payment under a purchase
 45 32 agreement:
 45 33    a.  The specific method or methods (trust deposits,
 45 34 certificates of deposit, life insurance or an annuity, a
 45 35 surety bond, or warehousing) that will be used to fund the
 46  1 purchase agreement.
 46  2    b.  The relationship between the soliciting agent or
 46  3 agents, the provider of the cemetery merchandise, funeral
 46  4 merchandise, or funeral services, or combination thereof, the
 46  5 commissioner, and any other person.
 46  6    c.  The relationship of the life insurance policy or other
 46  7 trust assets to the funding of the purchase agreement and the
 46  8 nature and existence of any guarantees regarding the purchase
 46  9 agreement.
 46 10    d.  The impact on the purchase agreement of the following:
 46 11    (1)  Changes in the funding, including but not limited to
 46 12 changes in the assignment, beneficiary designation, trustee,
 46 13 or use of proceeds.
 46 14    (2)  Any penalties to be incurred by the purchaser as a
 46 15 result of the failure to make any additional payments
 46 16 required.
 46 17    (3)  Penalties to be incurred upon cancellation.
 46 18    e.  A list of cemetery merchandise, funeral merchandise,
 46 19 and funeral services which are agreed upon under the purchase
 46 20 agreement and all relevant information concerning the price of
 46 21 the cemetery merchandise, funeral merchandise, funeral
 46 22 services, or a combination thereof, including a statement that
 46 23 the purchase price is either guaranteed at the time of
 46 24 purchase or to be determined at the time of need.
 46 25    f.  All relevant information concerning what occurs and
 46 26 whether any entitlements or obligations arise if there is a
 46 27 difference between the funding and the amount actually needed
 46 28 to fund the purchase agreement.
 46 29    g.  Any penalties or restrictions including but not limited
 46 30 to geographic restrictions or the inability of the provider to
 46 31 perform, upon delivery of cemetery merchandise, funeral
 46 32 merchandise, or funeral services, or the purchase agreement
 46 33 guarantee.
 46 34    h.  If the funding is being transferred from another
 46 35 establishment, any material facts related to the revocation of
 47  1 the prior purchase agreement and the transfer of the existing
 47  2 trust funds.
 47  3    Sec. 37.  NEW SECTION.  523A.602  CONSUMER RECISION,
 47  4 CANCELLATION, AND REFUND RIGHTS, AND PURCHASE AGREEMENT
 47  5 COMPLIANCE WITH OTHER LAWS.
 47  6    1.  A seller shall furnish the purchaser with a completed
 47  7 copy of a purchase agreement pertaining to the sale at the
 47  8 time the purchase agreement is signed.  The seller shall
 47  9 comply with the following terms:
 47 10    a.  The same language shall be used in both the oral sales
 47 11 representation and the written purchase agreement.
 47 12    b.  The seller shall give notice in the purchase agreement
 47 13 of the purchaser's right to rescind after signing the purchase
 47 14 agreement.  The recision period must be but may be greater
 47 15 than three business days after the date of the purchase
 47 16 agreement.  The notice must:
 47 17    (1)  Be located close to the signature line.
 47 18    (2)  Be printed in twelve point bold-faced type.
 47 19    (3)  State that "YOU, THE PURCHASER, HAVE THE RIGHT TO
 47 20 RESCIND THIS AGREEMENT AT ANY TIME PRIOR TO MIDNIGHT OF THE
 47 21 (INSERT RELEVANT NUMBER, NOT LESS THAN THREE) BUSINESS DAYS
 47 22 AFTER THE DATE OF THIS AGREEMENT."
 47 23    c.  All moneys shall be refunded without penalty within ten
 47 24 days after recision.
 47 25    2.  CANCELLATION REFUND.
 47 26    a.  A purchase agreement must include a statement that the
 47 27 purchaser has the right to cancel the agreement for the
 47 28 purchase of cemetery merchandise, funeral merchandise, and
 47 29 funeral services upon written demand and designate or appoint
 47 30 a trustee to hold, manage, invest, and distribute the trust
 47 31 assets.
 47 32    b.  If a purchase agreement is canceled, a purchaser
 47 33 requests a transfer of the trust assets upon cancellation of a
 47 34 purchase agreement, or another establishment provides
 47 35 merchandise or services designated in a purchase agreement,
 48  1 the seller shall refund or transfer within thirty days of
 48  2 receiving a written demand no less than the purchase price of
 48  3 the applicable cemetery merchandise, funeral merchandise, and
 48  4 funeral services adjusted for inflation, using the consumer
 48  5 price index amounts announced by the commissioner annually,
 48  6 less any cancellation penalty set forth in the purchase
 48  7 agreement.  The amount of the cancellation penalty shall not
 48  8 exceed ten percent of the purchase price of the applicable
 48  9 cemetery merchandise, funeral merchandise, and funeral
 48 10 services.  The seller may also deduct the value of the
 48 11 cemetery merchandise, funeral merchandise, and funeral
 48 12 services already received by, delivered to, or warehoused for
 48 13 the purchaser.
 48 14    c.  A purchase agreement must include a statement that the
 48 15 purchaser is entitled to a refund of the purchase price of the
 48 16 applicable funeral merchandise adjusted for inflation, using
 48 17 the consumer price index amounts announced by the commissioner
 48 18 annually for any item of funeral merchandise that cannot be
 48 19 delivered to the location specified in the purchase agreement
 48 20 within forty-eight hours of notice of the individual's death,
 48 21 unless the delay is caused by weather conditions or a natural
 48 22 disaster.  The seller must return such refund to the purchaser
 48 23 within thirty days of receiving the written demand.
 48 24    3.  This section does not prohibit a purchaser who is or
 48 25 may become eligible for benefits under Title XIX of the
 48 26 federal Social Security Act from making a guaranteed price
 48 27 purchase agreement irrevocable to the extent that federal law
 48 28 or regulations require that such an agreement be irrevocable
 48 29 for purposes of a purchaser's eligibility for benefits under
 48 30 Title XIX of the federal Social Security Act, as permitted
 48 31 under federal law.  The seller of credit sale agreements shall
 48 32 comply with the requirements of chapter 537, the Iowa consumer
 48 33 credit code, and is subject to the remedies and penalties
 48 34 provided in that chapter for noncompliance.  
 48 35                          SUBCHAPTER 7
 49  1                      FRAUDULENT PRACTICES
 49  2    Sec. 38.  NEW SECTION.  523A.701  MISLEADING FILINGS.
 49  3    It is unlawful for a person to make or cause to be made, in
 49  4 any document filed with the commissioner, or in any proceeding
 49  5 under this chapter, any statement of material fact which is,
 49  6 at the time and in the light of the circumstances under which
 49  7 it is made, false or misleading, or, in connection with such
 49  8 statement, to omit to state a material fact necessary in order
 49  9 to make the statements made, in the light of the circumstances
 49 10 under which they are made, not misleading.
 49 11    Sec. 39.  NEW SECTION.  523A.702  MISREPRESENTATIONS OF
 49 12 GOVERNMENT APPROVAL.
 49 13    It is unlawful for a seller under this chapter to represent
 49 14 or imply in any manner that the seller has been sponsored,
 49 15 recommended, or approved, or that the seller's abilities or
 49 16 qualifications have in any respect been passed upon by the
 49 17 commissioner.
 49 18    Sec. 40.  NEW SECTION.  523A.703  FRAUDULENT PRACTICES.
 49 19    A person who commits any of the following acts commits a
 49 20 fraudulent practice and is punishable as provided in chapter
 49 21 714:
 49 22    1.  Knowingly fails to comply with any requirement of this
 49 23 chapter.
 49 24    2.  Knowingly makes, causes to be made, or subscribes to a
 49 25 false statement or representation in a report or other
 49 26 document required under this chapter, implementing rules, or
 49 27 orders, or renders such a report or document misleading
 49 28 through the deliberate omission of information properly
 49 29 belonging in the report or document.
 49 30    3.  Conspires to defraud in connection with the sale of
 49 31 cemetery merchandise, funeral merchandise, funeral services,
 49 32 or a combination thereof under this chapter.
 49 33    4.  Fails to deposit funds under sections 523A.201 and
 49 34 523A.202 or withdraws any funds in a manner inconsistent with
 49 35 this chapter.
 50  1    5.  Knowingly sells or offers cemetery merchandise, funeral
 50  2 merchandise, funeral services, or a combination thereof
 50  3 without an establishment permit.
 50  4    6.  Deliberately misrepresents or omits a material fact
 50  5 relative to the sale of cemetery merchandise, funeral
 50  6 merchandise, funeral services, or a combination thereof under
 50  7 this chapter.  When selling cemetery merchandise or funeral
 50  8 merchandise, a seller shall not exclude the funeral services
 50  9 necessary for the delivery, use, or installation of the
 50 10 cemetery merchandise or funeral merchandise at the time of the
 50 11 funeral or burial unless the purchase agreement expressly
 50 12 provides otherwise.  
 50 13                          SUBCHAPTER 8
 50 14                 ADMINISTRATION AND ENFORCEMENT
 50 15    Sec. 41.  NEW SECTION.  523A.801  ADMINISTRATION.
 50 16    1.  This chapter shall be administered by the commissioner.
 50 17 The deputy administrator appointed pursuant to section 502.601
 50 18 shall be the principal operations officer responsible to the
 50 19 commissioner for the routine administration of this chapter
 50 20 and management of the administrative staff.  In the absence of
 50 21 the commissioner, whether because of vacancy in the office due
 50 22 to absence, physical disability, or other cause, the deputy
 50 23 administrator shall, for the time being, have and exercise the
 50 24 authority conferred upon the commissioner.  The commissioner
 50 25 may by order from time to time delegate to the deputy
 50 26 administrator any or all of the functions assigned to the
 50 27 commissioner in this chapter.  The deputy administrator shall
 50 28 employ officers, attorneys, accountants, and other employees
 50 29 as needed for administering this chapter.
 50 30    2.  It is unlawful for the commissioner or any
 50 31 administrative staff to use for personal benefit any
 50 32 information which is filed with or obtained by the
 50 33 commissioner and which is not made public.  This chapter does
 50 34 not authorize the commissioner or any such staff member to
 50 35 disclose any such information except among themselves or to
 51  1 other cemetery and funeral administrators, regulatory
 51  2 authorities, or governmental agencies, or when necessary and
 51  3 appropriate in a proceeding or investigation under this
 51  4 chapter or as required by chapter 22.  This chapter neither
 51  5 creates nor derogates any privileges that exist at common law
 51  6 or otherwise when documentary or other evidence is sought
 51  7 under a subpoena directed to the commissioner or any
 51  8 administrative staff.
 51  9    Sec. 42.  NEW SECTION.  523A.802  SCOPE.
 51 10    1.  This chapter applies to any advertisement, sale,
 51 11 promotion, or offer made by a person to furnish, upon the
 51 12 future death of a person named or implied in a purchase
 51 13 agreement, cemetery merchandise, funeral merchandise, funeral
 51 14 services, or a combination thereof.  Burial accounts and
 51 15 insurance policies are included if the account records or
 51 16 related documents identify the establishment that will provide
 51 17 the cemetery merchandise, funeral merchandise, funeral
 51 18 services, or a combination thereof.
 51 19    2.  This chapter applies when a purchase agreement is
 51 20 executed within this state or an advertisement, promotion, or
 51 21 offer to furnish is made or accepted within this state.  An
 51 22 offer to furnish is made within this state, whether or not
 51 23 either party is then present in this state, when the offer
 51 24 originates from this state or is directed by the offeror to
 51 25 this state and received by the offeree in this state through
 51 26 the mail, over the telephone, by the internet, or through any
 51 27 other means of commerce.
 51 28    3.  If a foreign person does not have a registered agent or
 51 29 agents in the state of Iowa, doing business within this state
 51 30 shall constitute the person's appointment of the secretary of
 51 31 state of the state of Iowa to be its true and lawful attorney
 51 32 upon whom may be served all lawful process of original notice
 51 33 in actions or proceedings arising or growing out of any
 51 34 contract or tort.
 51 35    Sec. 43.  NEW SECTION.  523A.803  INVESTIGATIONS AND
 52  1 SUBPOENAS.
 52  2    1.  The commissioner may, for the purpose of discovering
 52  3 violations of this chapter, implementing rules, or orders
 52  4 issued under this chapter:
 52  5    a.  Make such public or private investigations within or
 52  6 outside of this state as the commissioner deems necessary to
 52  7 determine whether any person has violated or is about to
 52  8 violate this chapter, implementing rules, or orders issued
 52  9 under this chapter, or to aid in enforcement of this chapter
 52 10 or in the prescribing of rules and forms under this chapter.
 52 11    b.  Require or permit any person to file a statement in
 52 12 writing, under oath or otherwise as the commissioner or
 52 13 attorney general determines, as to all the facts and
 52 14 circumstances concerning the matter to be investigated.
 52 15    c.  Notwithstanding chapter 22, keep confidential the
 52 16 information obtained in the course of an investigation.
 52 17 However, if the commissioner determines that it is necessary
 52 18 or appropriate in the public interest or for the protection of
 52 19 the public, the commissioner may share information with other
 52 20 administrators, regulatory authorities, or governmental
 52 21 agencies, or may publish information concerning a violation of
 52 22 this chapter, implementing rules, or orders issued under this
 52 23 chapter.
 52 24    d.  Investigate the establishment and examine the books,
 52 25 accounts, papers, correspondence, memoranda, purchase
 52 26 agreements, files, or other documents or records used by every
 52 27 applicant and permit holder under this chapter.
 52 28    e.  Administer oaths and affirmations, subpoena witnesses,
 52 29 compel their attendance, take evidence, and require the
 52 30 production of any books, accounts, papers, correspondence,
 52 31 memoranda, purchase agreements, files, or other documents or
 52 32 records which the commissioner deems relevant or material to
 52 33 any investigation or proceeding under this chapter and
 52 34 implementing rules, all of which may be enforced under chapter
 52 35 17A.
 53  1    f.  Apply to the district court for an order requiring a
 53  2 person's appearance before the commissioner or attorney
 53  3 general, or a designee of either or both, in cases where the
 53  4 person has refused to obey a subpoena issued by the
 53  5 commissioner or attorney general.  The person may also be
 53  6 required to produce documentary evidence germane to the
 53  7 subject of the investigation.  Failure to obey a court order
 53  8 under this subsection constitutes contempt of court.
 53  9    2.  The commissioner may issue and bring an action in
 53 10 district court to enforce subpoenas within this state at the
 53 11 request of an agency or administrator of another state, if the
 53 12 activity constituting an alleged violation for which the
 53 13 information is sought would be a violation of this chapter had
 53 14 the activity occurred in this state.
 53 15    Sec. 44.  NEW SECTION.  523A.804  MEDIATION.
 53 16    The commissioner may order an establishment to participate
 53 17 in mediation in any dispute regarding a purchase agreement.
 53 18 Mediation performed under this section shall be conducted by a
 53 19 mediator appointed by the commissioner and shall comply with
 53 20 the provisions of chapter 679C.
 53 21    Mediation of these disputes shall include attendance at a
 53 22 mediation session with the mediator and the parties to the
 53 23 dispute, listening to the mediator's explanation of the
 53 24 mediation process, presentation of one party's view of the
 53 25 dispute, and listening to the response of the other party.
 53 26 Participation in mediation does not require that the parties
 53 27 reach a mediation agreement.
 53 28    Parties to the mediation shall have the right to advice and
 53 29 presence of counsel at all times.  The parties to the
 53 30 mediation shall present any mediation agreement reached
 53 31 through the mediation to the commissioner.  If a mediation
 53 32 agreement is not reached, the mediator shall file a report
 53 33 with the commissioner.  The costs of the mediation shall be
 53 34 approved by the commissioner and shall be borne by the
 53 35 insurance division's regulatory fund.
 54  1    Sec. 45.  NEW SECTION.  523A.805  CEASE AND DESIST ORDERS
 54  2 – INJUNCTIONS.
 54  3    If it appears to the commissioner that a person has engaged
 54  4 or is about to engage in an act or practice constituting a
 54  5 violation of this chapter, implementing rules, or orders
 54  6 issued under this chapter, the commissioner or the attorney
 54  7 general may do either or both of the following:
 54  8    1.  Issue a summary order directed at the person requiring
 54  9 the person to cease and desist from engaging in such act or
 54 10 practice.  A person may request a hearing within thirty days
 54 11 of issuance of the summary order.  If a hearing is not timely
 54 12 requested, the summary order shall become final by operation
 54 13 of law.  The order shall remain effective from the date of
 54 14 issuance until the date the order becomes final by operation
 54 15 of law or is overturned by a presiding officer following a
 54 16 request for hearing.  Section 17A.18A is inapplicable to
 54 17 summary cease and desist orders issued under this section.
 54 18    2.  Bring an action in the district court in any county of
 54 19 the state for an injunction to restrain a person subject to
 54 20 this chapter and any agents, employees, or associates of the
 54 21 person from engaging in conduct or practices deemed contrary
 54 22 to the public interest.  In any proceeding for an injunction,
 54 23 the commissioner or attorney general may apply to the court
 54 24 for a subpoena to require the appearance of a defendant and
 54 25 the defendant's agents and for any books, accounts, papers,
 54 26 correspondence, memoranda, purchase agreements, files, or
 54 27 other documents or records germane to the hearing upon the
 54 28 petition for an injunction.  Upon a proper showing, a
 54 29 permanent or temporary injunction, restraining order, or writ
 54 30 of mandamus shall be granted and a receiver may be appointed
 54 31 for the defendant or the defendant's assets.  The commissioner
 54 32 or attorney general shall not be required to post a bond.
 54 33    Sec. 46.  NEW SECTION.  523A.806  COURT ACTION FOR FAILURE
 54 34 TO COOPERATE.
 54 35    If a person fails or refuses to file any statement or
 55  1 report or to produce any books, accounts, papers,
 55  2 correspondence, memoranda, purchase agreements, files, or
 55  3 other documents or records, or to obey any subpoena issued by
 55  4 the commissioner, the commissioner may refer the matter to the
 55  5 attorney general, who may apply to a district court to enforce
 55  6 compliance.  The court may order any or all of the following:
 55  7    1.  Injunctive relief, restricting or prohibiting the offer
 55  8 or sale of cemetery merchandise, funeral merchandise, funeral
 55  9 services, or a combination thereof.
 55 10    2.  Revocation or suspension of any permit issued under
 55 11 this chapter.
 55 12    3.  Production of documents or records including but not
 55 13 limited to books, accounts, papers, correspondence, memoranda,
 55 14 purchase agreements, files, or other documents or records.
 55 15    4.  Such other relief as may be required.
 55 16    Such an order shall be effective until the person files the
 55 17 statement or report or produces the documents requested, or
 55 18 obeys the subpoena.
 55 19    Sec. 47.  NEW SECTION.  523A.807  PROSECUTION FOR
 55 20 VIOLATIONS OF LAW.
 55 21    1.  A violation of this chapter or rules adopted or orders
 55 22 issued under this chapter is a violation of section 714.16,
 55 23 subsection 2, paragraph "a".  The remedies and penalties
 55 24 provided by section 714.16, including but not limited to
 55 25 injunctive relief and penalties, apply to violations of this
 55 26 chapter.
 55 27    2.  If the commissioner believes that grounds exist for the
 55 28 criminal prosecution of persons subject to this chapter for
 55 29 violations of this chapter or any other law of this state, the
 55 30 commissioner may forward to the attorney general or the county
 55 31 attorney the grounds for the belief, including all evidence in
 55 32 the commissioner's possession, so that the attorney general or
 55 33 the county attorney may proceed with the matter as deemed
 55 34 appropriate.
 55 35    Sec. 48.  NEW SECTION.  523A.808  COOPERATION WITH OTHER
 56  1 AGENCIES.
 56  2    1.  To encourage uniform interpretation and administration
 56  3 of this chapter and effective regulation of the sale of
 56  4 cemetery merchandise, funeral merchandise, and funeral
 56  5 services, the commissioner may cooperate with any governmental
 56  6 law enforcement or regulatory agency.
 56  7    2.  This cooperation includes but is not limited to:
 56  8    a.  Making a joint examination or investigation.
 56  9    b.  Holding a joint administrative hearing.
 56 10    c.  Filing and prosecuting a joint civil or administrative
 56 11 proceeding.
 56 12    d.  Sharing and exchanging personnel.
 56 13    e.  Sharing and exchanging relevant information and
 56 14 documents.
 56 15    f.  Formulating, in accordance with chapter 17A, rules or
 56 16 proposed rules on matters such as statements of policy,
 56 17 regulatory standards, guidelines, and interpretive opinions.
 56 18    Sec. 49.  NEW SECTION.  523A.809  RULES, FORMS, AND ORDERS.
 56 19    1.  Under chapter 17A, the commissioner may from time to
 56 20 time make, amend, and rescind such rules, forms, and orders as
 56 21 are necessary or appropriate for the protection of purchasers
 56 22 and the public and to administer the provisions of this
 56 23 chapter, its implementing rules, and orders issued under this
 56 24 chapter.
 56 25    2.  A rule, form, or order shall not be made, amended, or
 56 26 rescinded unless the commissioner finds that the action is
 56 27 necessary or appropriate in the public interest or for the
 56 28 protection of purchasers and consistent with the purposes
 56 29 fairly intended by the policies and provisions of this
 56 30 chapter, its implementing rules, and orders issued under this
 56 31 chapter.
 56 32    3.  A provision of this chapter imposing any liability does
 56 33 not apply to any act done or omitted in good faith in
 56 34 conformity with any rules, form, or order of the commissioner,
 56 35 notwithstanding that the rule, form, or order may later be
 57  1 amended or rescinded or be determined by judicial or other
 57  2 authority to be invalid for any reason.
 57  3    Sec. 50.  NEW SECTION.  523A.810  DATE OF FILING AND
 57  4 INTERPRETIVE OPINIONS.
 57  5    1.  A document is filed when it is received by the
 57  6 commissioner.
 57  7    2.  Requests for interpretive opinions may be granted in
 57  8 the commissioner's discretion.
 57  9    Sec. 51.  NEW SECTION.  523A.811  RECEIVERSHIPS.
 57 10    1.  The commissioner shall notify the attorney general of
 57 11 the potential need for establishment of a receivership if the
 57 12 commissioner finds that a seller subject to this chapter meets
 57 13 one or more of the following conditions:
 57 14    a.  Is insolvent.
 57 15    b.  Has utilized trust funds for personal or business
 57 16 purposes in a manner inconsistent with this chapter.
 57 17    c.  The amount of funds currently held in trust for
 57 18 cemetery merchandise, funeral merchandise, and funeral
 57 19 services is less than eighty percent of all payments made
 57 20 under the purchase agreements referred to in section 523A.201.
 57 21    d.  Has refused to pay any just claim or demand based on a
 57 22 purchase agreement referred to in section 523A.201.
 57 23    e.  The commissioner finds upon investigation that a seller
 57 24 is unable to pay any claim or demand based on a purchase
 57 25 agreement which has been legally determined to be just and
 57 26 outstanding.
 57 27    2.  The commissioner or attorney general may apply to the
 57 28 district court in any county of the state for the
 57 29 establishment of a receivership.  Upon proof of any of the
 57 30 grounds for a receivership described in this section, the
 57 31 court may grant a receivership.
 57 32    Sec. 52.  NEW SECTION.  523A.812  INSURANCE DIVISION'S
 57 33 REGULATORY FUND.
 57 34    The insurance division may authorize the creation of a
 57 35 special revenue fund in the state treasury, to be known as the
 58  1 insurance division regulatory fund.  The commissioner shall
 58  2 allocate annually from the fees paid pursuant to section
 58  3 523A.204, two dollars for each purchase agreement reported on
 58  4 an establishment permit holder's annual report for deposit to
 58  5 the regulatory fund.  The remainder of the fees collected
 58  6 pursuant to section 523A.204 shall be deposited into the
 58  7 general fund of the state.  The moneys in the regulatory fund
 58  8 shall be retained in the fund.  The moneys are appropriated
 58  9 and, subject to authorization by the commissioner, may be used
 58 10 to pay auditors, audit expenses, investigative expenses, the
 58 11 expenses of mediation ordered by the commissioner, consumer
 58 12 education expenses, the expenses of a toll-free telephone line
 58 13 to receive consumer complaints, and the expenses of
 58 14 receiverships established under section 523A.811.  An annual
 58 15 allocation to the regulatory fund shall not be imposed if the
 58 16 current balance of the fund exceeds two hundred thousand
 58 17 dollars.
 58 18    Sec. 53.  NEW SECTION.  523A.813  LICENSE REVOCATION –
 58 19 RECOMMENDATION BY COMMISSIONER TO BOARD OF MORTUARY SCIENCE
 58 20 EXAMINERS.
 58 21    Upon a determination by the commissioner that grounds exist
 58 22 for an administrative license revocation or suspension action
 58 23 by the board of mortuary science examiners under chapter 156,
 58 24 the commissioner may forward to the board the grounds for the
 58 25 determination, including all evidence in the possession of the
 58 26 commissioner, so that the board may proceed with the matter as
 58 27 deemed appropriate.  
 58 28                          SUBCHAPTER 9
 58 29                     LIQUIDATION PROCEDURES
 58 30    Sec. 54.  NEW SECTION.  523A.901  LIQUIDATION.
 58 31    1.  GROUNDS FOR LIQUIDATION.  The commissioner may petition
 58 32 the district court for an order directing the commissioner to
 58 33 liquidate an establishment on either of the following grounds:
 58 34    a.  The establishment did not deposit funds pursuant to
 58 35 section 523A.201 or withdrew funds in a manner inconsistent
 59  1 with this chapter and is insolvent.
 59  2    b.  The establishment did not deposit funds pursuant to
 59  3 section 523A.201 or withdrew funds in a manner inconsistent
 59  4 with this chapter and the condition of the establishment is
 59  5 such that further transaction of business would be hazardous,
 59  6 financially or otherwise, to purchasers or the public.
 59  7    2.  LIQUIDATION ORDER.
 59  8    a.  An order to liquidate the business of an establishment
 59  9 shall appoint the commissioner as liquidator and shall direct
 59 10 the liquidator to immediately take possession of the assets of
 59 11 the establishment and to administer them under the general
 59 12 supervision of the court.  The liquidator is vested with the
 59 13 title to the property, contracts, and rights of action and the
 59 14 books and records of the establishment ordered liquidated,
 59 15 wherever located, as of the entry of the final order of
 59 16 liquidation.  The filing or recording of the order with the
 59 17 clerk of court and the recorder of deeds of the county in
 59 18 which its principal office or place of business is located,
 59 19 or, in the case of real estate with the recorder of deeds of
 59 20 the county where the property is located, is notice as a deed,
 59 21 bill of sale, or other evidence of title duly filed or
 59 22 recorded with the recorder of deeds.
 59 23    b.  Upon issuance of an order, the rights and liabilities
 59 24 of an establishment and of the establishment's creditors,
 59 25 purchasers, owners, and other persons interested in the
 59 26 establishment's estate shall become fixed as of the date of
 59 27 the entry of the order of liquidation, except as provided in
 59 28 subsection 14.
 59 29    c.  At the time of petitioning for an order of liquidation,
 59 30 or at any time after the time of petitioning, the
 59 31 commissioner, after making appropriate findings of an
 59 32 establishment's insolvency, may petition the court for a
 59 33 declaration of insolvency.  After providing notice and hearing
 59 34 as it deems proper, the court may make the declaration.
 59 35    d.  An order issued under this section shall require
 60  1 accounting to the court by the liquidator.  Accountings, at a
 60  2 minimum, must include all funds received or disbursed by the
 60  3 liquidator during the current period.  An accounting shall be
 60  4 filed within one year of the liquidation order and at such
 60  5 other times as the court may require.
 60  6    e.  Within five days after the initiation of an appeal of
 60  7 an order of liquidation, which order has not been stayed, the
 60  8 commissioner shall present for the court's approval a plan for
 60  9 the continued performance of the establishment's obligations
 60 10 during the pendency of an appeal.  The plan shall provide for
 60 11 the continued performance of purchase agreements in the normal
 60 12 course of events, notwithstanding the grounds alleged in
 60 13 support of the order of liquidation including the ground of
 60 14 insolvency.  If the defendant establishment's financial
 60 15 condition, in the judgment of the commissioner, will not
 60 16 support the full performance of all obligations during the
 60 17 appeal pendency period, the plan may prefer the claims of
 60 18 certain purchasers and claimants over creditors and interested
 60 19 parties as well as other purchasers and claimants, as the
 60 20 commissioner finds to be fair and equitable considering the
 60 21 relative circumstances of such purchasers and claimants.  The
 60 22 court shall examine the plan submitted by the commissioner and
 60 23 if it finds the plan to be in the best interests of the
 60 24 parties, the court shall approve the plan.  An action shall
 60 25 not lie against the commissioner or any of the commissioner's
 60 26 deputies, agents, clerks, assistants, or attorneys by any
 60 27 party based on preference in an appeal pendency plan approved
 60 28 by the court.
 60 29    3.  POWERS OF LIQUIDATOR.
 60 30    a.  The liquidator may do any of the following:
 60 31    (1)  Appoint a special deputy to act for the liquidator
 60 32 under this chapter, and determine the special deputy's
 60 33 reasonable compensation.  The special deputy shall have all
 60 34 the powers of the liquidator granted by this section.  The
 60 35 special deputy shall serve at the pleasure of the liquidator.
 61  1    (2)  Hire employees and agents, legal counsel, accountants,
 61  2 appraisers, consultants, and other personnel as the
 61  3 commissioner may deem necessary to assist in the liquidation.
 61  4    (3)  With the approval of the court, fix reasonable
 61  5 compensation of employees and agents, legal counsel,
 61  6 accountants, appraisers, and consultants.
 61  7    (4)  Pay reasonable compensation to persons appointed and
 61  8 defray from the funds or assets of the establishment all
 61  9 expenses of taking possession of, conserving, conducting,
 61 10 liquidating, disposing of, or otherwise dealing with the
 61 11 business and property of the establishment.  If the property
 61 12 of the establishment does not contain sufficient cash or
 61 13 liquid assets to defray the costs incurred, the commissioner
 61 14 may advance the costs so incurred out of the insurance
 61 15 division regulatory fund.  Amounts so advanced for expenses of
 61 16 administration shall be repaid to the insurance division
 61 17 regulatory fund for the use of the division out of the first
 61 18 available moneys of the establishment.
 61 19    (5)  Hold hearings, subpoena witnesses, and compel their
 61 20 attendance, administer oaths, examine a person under oath, and
 61 21 compel a person to subscribe to the person's testimony after
 61 22 it has been correctly reduced to writing, and in connection to
 61 23 the proceedings require the production of books, accounts,
 61 24 papers, correspondence, memoranda, purchase agreements, files,
 61 25 or other documents or records which the liquidator deems
 61 26 relevant to the inquiry.
 61 27    (6)  Collect debts and moneys due and claims belonging to
 61 28 the establishment, wherever located.  Pursuant to this
 61 29 subparagraph, the liquidator may do any of the following:
 61 30    (a)  Institute timely action in other jurisdictions to
 61 31 forestall garnishment and attachment proceedings against
 61 32 debts.
 61 33    (b)  Perform acts as are necessary or expedient to collect,
 61 34 conserve, or protect its assets or property, including the
 61 35 power to sell, compound, compromise, or assign debts for
 62  1 purposes of collection upon terms and conditions as the
 62  2 liquidator deems best.
 62  3    (c)  Pursue any creditor's remedies available to enforce
 62  4 claims.
 62  5    (7)  Conduct public and private sales of the property of
 62  6 the establishment.
 62  7    (8)  Use assets of the establishment under a liquidation
 62  8 order to transfer obligations of purchase agreements to a
 62  9 solvent establishment, if the transfer can be accomplished
 62 10 without prejudice to the applicable priorities under
 62 11 subsection 18.
 62 12    (9)  Acquire, hypothecate, encumber, lease, improve, sell,
 62 13 transfer, abandon, or otherwise dispose of or deal with
 62 14 property of the establishment at its market value or upon
 62 15 terms and conditions as are fair and reasonable.  The
 62 16 liquidator shall also have power to execute, acknowledge, and
 62 17 deliver deeds, assignments, releases, and other instruments
 62 18 necessary to effectuate a sale of property or other
 62 19 transaction in connection with the liquidation.
 62 20    (10)  Borrow money on the security of the establishment's
 62 21 assets or without security and execute and deliver documents
 62 22 necessary to that transaction for the purpose of facilitating
 62 23 the liquidation.  Money borrowed pursuant to this subparagraph
 62 24 shall be repaid as an administrative expense and shall have
 62 25 priority over any other class 1 claims under the priority of
 62 26 distribution established in subsection 18.
 62 27    (11)  Enter into contracts as necessary to carry out the
 62 28 order to liquidate and affirm or disavow contracts to which
 62 29 the establishment is a party.
 62 30    (12)  Continue to prosecute and to institute in the name of
 62 31 the establishment or in the liquidator's own name any and all
 62 32 suits and other legal proceedings, in this state or elsewhere,
 62 33 and to abandon the prosecution of claims the liquidator deems
 62 34 unprofitable to pursue further.
 62 35    (13)  Prosecute an action on behalf of the creditors,
 63  1 purchasers, or owners against an officer of the establishment
 63  2 or any other person.
 63  3    (14)  Remove records and property of the establishment to
 63  4 the offices of the commissioner or to other places as may be
 63  5 convenient for the purposes of efficient and orderly execution
 63  6 of the liquidation.
 63  7    (15)  Deposit in one or more banks in this state sums as
 63  8 are required for meeting current administration expenses and
 63  9 distributions.
 63 10    (16)  Unless the court orders otherwise, invest funds not
 63 11 currently needed.
 63 12    (17)  File necessary documents for recording in the office
 63 13 of the recorder of deeds or record office in this state or
 63 14 elsewhere where property of the establishment is located.
 63 15    (18)  Assert defenses available to the establishment
 63 16 against third persons including statutes of limitations,
 63 17 statutes of fraud, and the defense of usury.  A waiver of a
 63 18 defense by the establishment after a petition in liquidation
 63 19 has been filed shall not bind the liquidator.
 63 20    (19)  Exercise and enforce the rights, remedies, and powers
 63 21 of a creditor, purchaser, or owner, including the power to
 63 22 avoid transfer or lien that may be given by the general law
 63 23 and that is not included within subsections 7 through 9.
 63 24    (20)  Intervene in a proceeding wherever instituted that
 63 25 might lead to the appointment of a receiver or trustee, and
 63 26 act as the receiver or trustee whenever the appointment is
 63 27 offered.
 63 28    (21)  Exercise powers now held or later conferred upon
 63 29 receivers by the laws of this state which are not inconsistent
 63 30 with this chapter.
 63 31    b.  This subsection does not limit the liquidator or
 63 32 exclude the liquidator from exercising a power not listed in
 63 33 paragraph "a" that may be necessary or appropriate to
 63 34 accomplish the purposes of this chapter.
 63 35    4.  NOTICE TO CREDITORS AND OTHERS.
 64  1    a.  Unless the court otherwise directs, the liquidator
 64  2 shall give notice of the liquidation order as soon as possible
 64  3 by doing both of the following:
 64  4    (1)  Mailing notice, by first-class mail, to all persons
 64  5 known or reasonably expected to have claims against the
 64  6 establishment, including purchasers, at their last known
 64  7 address as indicated by the records of the establishment.
 64  8    (2)  Publication of notice in a newspaper of general
 64  9 circulation in the county in which the establishment has its
 64 10 principal place of business and in other locations as the
 64 11 liquidator deems appropriate.
 64 12    b.  Notice to potential claimants under paragraph "a" shall
 64 13 require claimants to file with the liquidator their claims
 64 14 together with proper proofs of the claim under subsection 13
 64 15 on or before a date the liquidator shall specify in the
 64 16 notice.  Claimants shall keep the liquidator informed of their
 64 17 changes of address, if any.
 64 18    c.  If notice is given pursuant to this subsection, the
 64 19 distribution of assets of the establishment under this chapter
 64 20 shall be conclusive with respect to claimants, whether or not
 64 21 a claimant actually received notice.
 64 22    5.  ACTIONS BY AND AGAINST LIQUIDATOR.
 64 23    a.  After issuance of an order appointing a liquidator of
 64 24 an establishment, an action at law or equity shall not be
 64 25 brought against the establishment within this state or
 64 26 elsewhere, and existing actions shall not be maintained or
 64 27 further presented after issuance of the order.  Whenever in
 64 28 the liquidator's judgment, protection of the estate of the
 64 29 establishment necessitates intervention in an action against
 64 30 the establishment that is pending outside this state, the
 64 31 liquidator may intervene in the action.  The liquidator may
 64 32 defend, at the expense of the estate of the establishment, an
 64 33 action in which the liquidator intervenes under this section.
 64 34    b.  Within two years or such additional time as applicable
 64 35 law may permit, the liquidator, after the issuance of an order
 65  1 for liquidation, may institute an action or proceeding on
 65  2 behalf of the estate of the establishment upon any cause of
 65  3 action against which the period of limitation fixed by
 65  4 applicable law has not expired at the time of the filing of
 65  5 the petition upon which the order is entered.  If a period of
 65  6 limitation is fixed by agreement for instituting a suit or
 65  7 proceeding upon a claim, or for filing a claim, proof of
 65  8 claim, proof of loss, demand, notice, or the like, or if in a
 65  9 proceeding, judicial or otherwise, a period of limitation is
 65 10 fixed in the proceeding or pursuant to applicable law for
 65 11 taking an action, filing a claim or pleading, or doing an act,
 65 12 and if the period has not expired at the date of the filing of
 65 13 the petition, the liquidator may, for the benefit of the
 65 14 estate, take any action or do any act, required of or
 65 15 permitted to the establishment, within a period of one hundred
 65 16 eighty days subsequent to the entry of an order for
 65 17 liquidation, or within a further period as is shown to the
 65 18 satisfaction of the court not to be unfairly prejudicial to
 65 19 the other party.
 65 20    c.  A statute of limitations or defense of laches shall not
 65 21 run with respect to an action against an establishment between
 65 22 the filing of a petition for liquidation against the
 65 23 establishment and the denial of the petition.  An action
 65 24 against the establishment that might have been commenced when
 65 25 the petition was filed may be commenced for at least sixty
 65 26 days after the petition is denied.
 65 27    6.  COLLECTION AND LIST OF ASSETS.
 65 28    a.  As soon as practicable after the liquidation order but
 65 29 not later than one hundred twenty days after such order, the
 65 30 liquidator shall prepare in duplicate a list of the
 65 31 establishment's assets.  The list shall be amended or
 65 32 supplemented as the liquidator may determine.  One copy shall
 65 33 be filed in the office of the clerk of court, and one copy
 65 34 shall be retained for the liquidator's files.  Amendments and
 65 35 supplements shall be similarly filed.
 66  1    b.  The liquidator shall reduce the assets to a degree of
 66  2 liquidity that is consistent with the effective execution of
 66  3 the liquidation.
 66  4    c.  A submission of a proposal to the court for
 66  5 distribution of assets in accordance with subsection 11
 66  6 fulfills the requirements of paragraph "a".
 66  7    7.  FRAUDULENT TRANSFERS PRIOR TO PETITION.
 66  8    a.  A transfer made and an obligation incurred by an
 66  9 establishment within one year prior to the filing of a
 66 10 successful petition for liquidation under this chapter is
 66 11 fraudulent as to then existing and future creditors if made or
 66 12 incurred without fair consideration, or with actual intent to
 66 13 hinder, delay, or defraud either existing or future creditors.
 66 14 A fraudulent transfer made or an obligation incurred by an
 66 15 establishment ordered to be liquidated under this chapter may
 66 16 be avoided by the liquidator, except as to a person who in
 66 17 good faith is a purchaser, lienor, or obligee for a present
 66 18 fair equivalent value.  A purchaser, lienor, or obligee, who
 66 19 in good faith has given a consideration less than present fair
 66 20 equivalent value for such transfer, lien, or obligation, may
 66 21 retain the property, lien, or obligation as security for
 66 22 repayment.  The court may, on due notice, order any such
 66 23 transfer, lien, or obligation to be preserved for the benefit
 66 24 of the estate, and in that event, the receiver shall succeed
 66 25 to and may enforce the rights of the purchaser, lienor, or
 66 26 obligee.
 66 27    b.  (1)  A transfer of property other than real property is
 66 28 made when it becomes perfected so that a subsequent lien
 66 29 obtainable by legal or equitable proceedings on a simple
 66 30 contract could not become superior to the rights of the
 66 31 transferee under subsection 9, paragraph "c".
 66 32    (2)  A transfer of real property is made when it becomes
 66 33 perfected so that a subsequent bona fide purchaser from the
 66 34 establishment could not obtain rights superior to the rights
 66 35 of the transferee.
 67  1    (3)  A transfer which creates an equitable lien is not
 67  2 perfected if there are available means by which a legal lien
 67  3 could be perfected.
 67  4    (4)  A transfer not perfected prior to the filing of a
 67  5 petition for liquidation is deemed to be made immediately
 67  6 before the filing of the successful petition.
 67  7    (5)  This subsection applies whether or not there are or
 67  8 were creditors who might have obtained a lien or persons who
 67  9 might have become bona fide purchasers.
 67 10    8.  FRAUDULENT TRANSFER AFTER PETITION.
 67 11    a.  After a petition for liquidation has been filed, a
 67 12 transfer of real property of the establishment made to a
 67 13 person acting in good faith is valid against the liquidator if
 67 14 made for a present fair equivalent value.  If the transfer is
 67 15 not made for a present fair equivalent value, then the
 67 16 transfer is valid to the extent of the present consideration
 67 17 actually paid for which amount the transferee shall have a
 67 18 lien on the property transferred.  The commencement of a
 67 19 proceeding in liquidation is constructive notice upon the
 67 20 recording of a copy of the petition for or order of
 67 21 liquidation with the recording or deeds in the county where
 67 22 any real property in question is located.  The exercise by a
 67 23 court of the United States or a state or jurisdiction to
 67 24 authorize a judicial sale of real property of the
 67 25 establishment within a county in a state shall not be impaired
 67 26 by the pendency of a proceeding unless the copy is recorded in
 67 27 the county prior to the consummation of the judicial sale.
 67 28    b.  After a petition for liquidation has been filed and
 67 29 before either the liquidator takes possession of the property
 67 30 of the establishment or an order of liquidation is granted:
 67 31    (1)  A transfer of the property, other than real property,
 67 32 of the establishment made to a person acting in good faith is
 67 33 valid against the liquidator if made for a present fair
 67 34 equivalent value.  If the transfer was not made for a present
 67 35 fair equivalent value, then the transfer is valid to the
 68  1 extent of the present consideration actually paid for which
 68  2 amount the transferee shall have a lien on the property
 68  3 transferred.
 68  4    (2)  If acting in good faith, a person indebted to the
 68  5 establishment or holding property of the establishment may pay
 68  6 the debt or deliver the property, or any part of the property,
 68  7 to the establishment or upon the establishment's order as if
 68  8 the petition were not pending.
 68  9    (3)  A person having actual knowledge of the pending
 68 10 liquidation is not acting in good faith.
 68 11    (4)  A person asserting the validity of a transfer under
 68 12 this subsection has the burden of proof.  Except as provided
 68 13 in this subsection, a transfer by or on behalf of the
 68 14 establishment after the date of the petition for liquidation
 68 15 by any person other than the liquidator is not valid against
 68 16 the liquidator.
 68 17    c.  A person receiving any property from the establishment
 68 18 or any benefit of the property of the establishment which is a
 68 19 fraudulent transfer under paragraph "a" is personally liable
 68 20 for the property or benefit and shall account to the
 68 21 liquidator.
 68 22    d.  This chapter does not impair the negotiability of
 68 23 currency or negotiable instruments.
 68 24    9.  VOIDABLE PREFERENCES AND LIENS.
 68 25    a.  (1)  A preference is a transfer of the property of an
 68 26 establishment to or for the benefit of a creditor for an
 68 27 antecedent debt made or suffered by the establishment within
 68 28 one year before the filing of a successful petition for
 68 29 liquidation under this chapter, the effect of which transfer
 68 30 may be to enable the creditor to obtain a greater percentage
 68 31 of this debt than another creditor of the same class would
 68 32 receive.  If a liquidation order is entered while the
 68 33 establishment is already subject to a receivership, then the
 68 34 transfers are preferences if made or suffered within one year
 68 35 before the filing of the successful petition for the
 69  1 receivership, or within two years before the filing of the
 69  2 successful petition for liquidation, whichever time is
 69  3 shorter.
 69  4    (2)  A preference may be avoided by the liquidator if any
 69  5 of the following exist:
 69  6    (a)  The establishment was insolvent at the time of the
 69  7 transfer.
 69  8    (b)  The transfer was made within four months before the
 69  9 filing of the petition.
 69 10    (c)  At the time the transfer was made, the creditor
 69 11 receiving it or to be benefited by the transfer or the
 69 12 creditor's agent acting with reference to the transfer had
 69 13 reasonable cause to believe that the establishment was
 69 14 insolvent or was about to become insolvent.
 69 15    (d)  The creditor receiving the transfer was an officer, or
 69 16 an employee, attorney, or other person who was in fact in a
 69 17 position of comparable influence in the establishment to an
 69 18 officer whether or not the person held the position of an
 69 19 officer, owner, or other person, firm, corporation,
 69 20 association, or aggregation of persons with whom the
 69 21 establishment did not deal at arm's length.
 69 22    (3)  Where the preference is voidable, the liquidator may
 69 23 recover the property.  If the property has been converted, the
 69 24 liquidator may recover its value from a person who has
 69 25 received or converted the property.  However, if a bona fide
 69 26 purchaser or lienor has given less than the present fair
 69 27 equivalent value, the purchaser or lienor shall have a lien
 69 28 upon the property to the extent of the consideration actually
 69 29 given.  Where a preference by way of lien or security interest
 69 30 is voidable, the court may on due notice order the lien or
 69 31 security interest to be preserved for the benefit of the
 69 32 estate, in which event the lien or title shall pass to the
 69 33 liquidator.
 69 34    b.  (1)  A transfer of property other than real property is
 69 35 made when it becomes perfected so that a subsequent lien
 70  1 obtainable by legal or equitable proceedings on a simple
 70  2 contract could not become superior to the rights of the
 70  3 transferee.
 70  4    (2)  A transfer of real property is made when it becomes
 70  5 perfected so that a subsequent bona fide purchaser from the
 70  6 establishment could not obtain rights superior to the rights
 70  7 of the transferee.
 70  8    (3)  A transfer which creates an equitable lien is not
 70  9 perfected if there are available means by which a legal lien
 70 10 could be created.
 70 11    (4)  A transfer not perfected prior to the filing of a
 70 12 petition for liquidation is deemed to be made immediately
 70 13 before the filing of the successful petition.
 70 14    (5)  This subsection applies whether or not there are or
 70 15 were creditors who might have obtained liens or persons who
 70 16 might have become bona fide purchasers.
 70 17    c.  (1)  A lien obtainable by legal or equitable
 70 18 proceedings upon a simple contract is one arising in the
 70 19 ordinary course of the proceedings upon the entry or docketing
 70 20 of a judgment or decree, or upon attachment, garnishment,
 70 21 execution, or like process, whether before, upon, or after
 70 22 judgment or decree and whether before or upon levy.  It does
 70 23 not include liens which under applicable law are given a
 70 24 special priority over other liens which are prior in time.
 70 25    (2)  A lien obtainable by legal or equitable proceedings
 70 26 may become superior to the rights of a transferee, or a
 70 27 purchaser may obtain rights superior to the rights of a
 70 28 transferee within the meaning of paragraph "b", if such
 70 29 consequences follow only from the lien or purchase itself, or
 70 30 from the lien or purchase followed by a step wholly within the
 70 31 control of the respective lienholder or purchaser, with or
 70 32 without the aid of ministerial action by public officials.
 70 33 However, a lien could not become superior and a purchase could
 70 34 not create superior rights for the purpose of paragraph "b"
 70 35 through an act subsequent to the obtaining of a lien or
 71  1 subsequent to a purchase which requires the agreement or
 71  2 concurrence of any third party or which requires further
 71  3 judicial action or ruling.
 71  4    d.  A transfer of property for or on account of a new and
 71  5 contemporaneous consideration, which is under paragraph "b"
 71  6 made or suffered after the transfer because of delay in
 71  7 perfecting it, does not become a transfer for or on account of
 71  8 an antecedent debt if any acts required by the applicable law
 71  9 to be performed in order to perfect the transfer as against
 71 10 liens or a bona fide purchaser's rights are performed within
 71 11 twenty-one days or any period expressly allowed by the law,
 71 12 whichever is less.  A transfer to secure a future loan, if a
 71 13 loan is actually made, or a transfer which becomes security
 71 14 for a future loan, shall have the same effect as a transfer
 71 15 for or on account of a new and contemporaneous consideration.
 71 16    e.  If a lien which is voidable under paragraph "a",
 71 17 subparagraph (2), has been dissolved by the furnishing of a
 71 18 bond or other obligation, the surety of which has been
 71 19 indemnified directly or indirectly by the transfer or the
 71 20 creation of a lien upon property of an establishment before
 71 21 the filing of a petition under this chapter which results in
 71 22 the liquidation order, the indemnifying transfer or lien is
 71 23 also voidable.
 71 24    f.  The property affected by a lien voidable under
 71 25 paragraphs "a" and "e" is discharged from the lien.  The
 71 26 property and any of the indemnifying property transferred to
 71 27 or for the benefit of a surety shall pass to the liquidator.
 71 28 However, the court may on due notice order a lien to be
 71 29 preserved for the benefit of the estate and the court may
 71 30 direct that the conveyance be executed to evidence the title
 71 31 of the liquidator.
 71 32    g.  The court shall have summary jurisdiction of a
 71 33 proceeding by a liquidator to hear and determine the rights of
 71 34 the parties under this section.  Reasonable notice of hearing
 71 35 in the proceeding shall be given to all parties in interest,
 72  1 including the obligee of a releasing bond or other like
 72  2 obligation.  Where an order is entered for the recovery of
 72  3 indemnifying property in kind or for the avoidance of an
 72  4 indemnifying lien, upon application of any party in interest,
 72  5 the court shall in the same proceeding ascertain the value of
 72  6 the property or lien.  If the value is less than the amount
 72  7 for which the property is indemnified or less than the amount
 72  8 of the lien, the transferee or lienholder may elect to retain
 72  9 the property or lien upon payment of its value, as ascertained
 72 10 by the court, to the liquidator within the time as fixed by
 72 11 the court.
 72 12    h.  The liability of a surety under a releasing bond or
 72 13 other like obligation is discharged to the extent of the value
 72 14 of the indemnifying property recovered or the indemnifying
 72 15 lien nullified and avoided by the liquidator.  Where the
 72 16 property is retained under paragraph "g", the liability of the
 72 17 surety is discharged to the extent of the amount paid to the
 72 18 liquidator.
 72 19    i.  If a creditor has been preferred for property which
 72 20 becomes a part of the establishment's estate, and afterward in
 72 21 good faith gives the establishment further credit without
 72 22 security of any kind, the amount of the new credit remaining
 72 23 unpaid at the time of the petition may be set off against the
 72 24 preference which would otherwise be recoverable from the
 72 25 creditor.
 72 26    j.  If within four months before the filing of a successful
 72 27 petition for liquidation under this chapter, or at any time in
 72 28 contemplation of a proceeding to liquidate, an establishment,
 72 29 directly or indirectly, pays money or transfers property to an
 72 30 attorney for services rendered or to be rendered, the
 72 31 transaction may be examined by the court on its own motion or
 72 32 shall be examined by the court on petition of the liquidator.
 72 33 The payment or transfer shall be held valid only to the extent
 72 34 of a reasonable amount to be determined by the court.  The
 72 35 excess may be recovered by the liquidator for the benefit of
 73  1 the estate.  However, where the attorney is in a position of
 73  2 influence in the establishment or an affiliate, payment of any
 73  3 money or the transfer of any property to the attorney for
 73  4 services rendered or to be rendered shall be governed by the
 73  5 provisions of paragraph "a", subparagraph (2), subparagraph
 73  6 subdivision (d).
 73  7    k.  (1)  An officer, manager, employee, shareholder,
 73  8 subscriber, attorney, or other person acting on behalf of the
 73  9 establishment who knowingly participates in giving any
 73 10 preference when the person has reasonable cause to believe the
 73 11 establishment is or is about to become insolvent at the time
 73 12 of the preference is personally liable to the liquidator for
 73 13 the amount of the preference.  There is an inference that
 73 14 reasonable cause exists if the transfer was made within four
 73 15 months before the date of filing of this successful petition
 73 16 for liquidation.
 73 17    (2)  A person receiving property from the establishment or
 73 18 the benefit of the property of the establishment as a
 73 19 preference voidable under paragraph "a" is personally liable
 73 20 for the property and shall account to the liquidator.
 73 21    (3)  This subsection shall not prejudice any other claim by
 73 22 the liquidator against any person.
 73 23    10.  CLAIMS OF HOLDER OF VOID OR VOIDABLE RIGHTS.
 73 24    a.  A claim of a creditor who has received or acquired a
 73 25 preference, lien, conveyance, transfer, assignment, or
 73 26 encumbrance, voidable under this chapter, shall not be allowed
 73 27 unless the creditor surrenders the preference, lien,
 73 28 conveyance, transfer, assignment, or encumbrance.  If the
 73 29 avoidance is effected by a proceeding in which a final
 73 30 judgment has been entered, the claim shall not be allowed
 73 31 unless the money is paid or the property is delivered to the
 73 32 liquidator within thirty days from the date of the entering of
 73 33 the final judgment.  However, the court having jurisdiction
 73 34 over the liquidation may allow further time if there is an
 73 35 appeal or other continuation of the proceeding.
 74  1    b.  A claim allowable under paragraph "a" by reason of a
 74  2 voluntary or involuntary avoidance, preference, lien,
 74  3 conveyance, transfer, assignment, or encumbrance may be filed
 74  4 as an excused late filing under subsection 12, if filed within
 74  5 thirty days from the date of the avoidance or within the
 74  6 further time allowed by the court under paragraph "a".
 74  7    11.  LIQUIDATOR'S PROPOSAL TO DISTRIBUTE ASSETS.
 74  8    a.  From time to time as assets become available, the
 74  9 liquidator shall make application to the court for approval of
 74 10 a proposal to disburse assets out of marshaled assets.
 74 11    b.  The proposal shall at least include provisions for all
 74 12 of the following:
 74 13    (1)  Reserving amounts for the payment of all the
 74 14 following:
 74 15    (a)  Expenses of administration.
 74 16    (b)  To the extent of the value of the security held, the
 74 17 payment of claims of secured creditors.
 74 18    (c)  Claims falling within the priorities established in
 74 19 subsection 18, paragraphs "a" and "b".
 74 20    (2)  Disbursement of the assets marshaled to date and
 74 21 subsequent disbursement of assets as they become available.
 74 22    c.  Action on the application may be taken by the court
 74 23 provided that the liquidator's proposal complies with
 74 24 paragraph "b".
 74 25    12.  FILING OF CLAIMS.
 74 26    a.  Proof of all claims shall be filed with the liquidator
 74 27 in the form required by subsection 13 on or before the last
 74 28 day for filing specified in the notice required under
 74 29 subsection 4.
 74 30    b.  The liquidator may permit a claimant making a late
 74 31 filing to share in distributions, whether past or future, as
 74 32 if the claimant were not late, to the extent that the payment
 74 33 will not prejudice the orderly administration of the
 74 34 liquidation under any of the following circumstances:
 74 35    (1)  The existence of the claim was not known to the
 75  1 claimant and the claimant filed the claim as promptly as
 75  2 reasonably possible after learning of it.
 75  3    (2)  A transfer to a creditor was avoided under subsections
 75  4 7 through 9, or was voluntarily surrendered under subsection
 75  5 10, and the filing satisfies the conditions of subsection 10.
 75  6    (3)  The valuation under subsection 17 of security held by
 75  7 a secured creditor shows a deficiency, which is filed within
 75  8 thirty days after the valuation.
 75  9    c.  The liquidator may consider any claim filed late and
 75 10 permit the claimant to receive distributions which are
 75 11 subsequently declared on any claims of the same or lower
 75 12 priority if the payment does not prejudice the orderly
 75 13 administration of the liquidation.  The late-filing claimant
 75 14 shall receive at each distribution the same percentage of the
 75 15 amount allowed on the claim as is then being paid to claimants
 75 16 of any lower priority.  This shall continue until the claim
 75 17 has been paid in full.
 75 18    13.  PROOF OF CLAIM.
 75 19    a.  Proof of claim shall consist of a statement signed by
 75 20 the claimant that includes all of the following that are
 75 21 applicable:
 75 22    (1)  The particulars of the claim, including the
 75 23 consideration given for it.
 75 24    (2)  The identity and amount of the security on the claim.
 75 25    (3)  The payments, if any, made on the debt.
 75 26    (4)  A statement that the sum claimed is justly owing and
 75 27 that there is no setoff, counterclaim, or defense to the
 75 28 claim.
 75 29    (5)  Any right of priority of payment or other specific
 75 30 right asserted by the claimant.
 75 31    (6)  A copy of the written instrument which is the
 75 32 foundation of the claim.
 75 33    (7)  The name and address of the claimant and the attorney
 75 34 who represents the claimant, if any.
 75 35    b.  A claim need not be considered or allowed if it does
 76  1 not contain all the information identified in paragraph "a"
 76  2 which is applicable.  The liquidator may require that a
 76  3 prescribed form be used and may require that other information
 76  4 and documents be included.
 76  5    c.  At any time the liquidator may request the claimant to
 76  6 present information or evidence supplementary to that required
 76  7 under paragraph "a", and may take testimony under oath,
 76  8 require production of affidavits or depositions, or otherwise
 76  9 obtain additional information or evidence.
 76 10    d.  A judgment or order against an establishment entered
 76 11 after the date of filing of a successful petition for
 76 12 liquidation, or a judgment or order against the establishment
 76 13 entered at any time by default or by collusion need not be
 76 14 considered as evidence of liability or of the amount of
 76 15 damages.  A judgment or order against an establishment before
 76 16 the filing of the petition need not be considered as evidence
 76 17 of liability or of the amount of damages.
 76 18    14.  SPECIAL CLAIMS.
 76 19    a.  A claim may be allowed even if contingent, if it is
 76 20 filed pursuant to subsection 12.  The claim may be allowed and
 76 21 the claimant may participate in all distributions declared
 76 22 after it is filed to the extent that it does not prejudice the
 76 23 orderly administration of the liquidation.
 76 24    b.  Claims that are due except for the passage of time
 76 25 shall be treated as absolute claims are treated.  However, the
 76 26 claims may be discounted at the legal rate of interest.
 76 27    c.  Claims made under employment contracts by directors,
 76 28 principal officers, or persons in fact performing similar
 76 29 functions or having similar powers are limited to payment for
 76 30 services rendered prior to the issuance of an order of
 76 31 liquidation under subsection 2.
 76 32    15.  DISPUTED CLAIMS.
 76 33    a.  If a claim is denied in whole or in part by the
 76 34 liquidator, written notice of the determination shall be given
 76 35 to the claimant or the claimant's attorney by first-class mail
 77  1 at the address shown in the proof of claim.  Within sixty days
 77  2 from the mailing of the notice, the claimant may file
 77  3 objections with the liquidator.  Unless a filing is made, the
 77  4 claimant shall not further object to the determination.
 77  5    b.  If objections are filed with the liquidator and the
 77  6 liquidator does not alter the denial of the claim as a result
 77  7 of the objections, the liquidator shall ask the court for a
 77  8 hearing as soon as practicable and give notice of the hearing
 77  9 by first-class mail to the claimant or the claimant's attorney
 77 10 and to any other persons directly affected.  The notice shall
 77 11 be given not less than ten nor more than thirty days before
 77 12 the date of hearing.  The matter shall be heard by the court
 77 13 or by a court-appointed referee.  The referee shall submit
 77 14 findings of fact along with a recommendation.
 77 15    16.  CLAIMS OF OTHER PERSON.  If a creditor, whose claim
 77 16 against an establishment is secured in whole or in part by the
 77 17 undertaking of another person, fails to prove and file that
 77 18 claim, then the other person may do so in the creditor's name
 77 19 and shall be subrogated to the rights of the creditor, whether
 77 20 the claim has been filed by the creditor or by the other
 77 21 person in the creditor's name to the extent that the other
 77 22 person discharges the undertaking.  However, in the absence of
 77 23 an agreement with the creditor to the contrary, the other
 77 24 person is not entitled to any distribution until the amount
 77 25 paid to the creditor on the undertaking plus the distributions
 77 26 paid on the claim from the establishment's estate to the
 77 27 creditor equal the amount of the entire claim of the creditor.
 77 28 An excess received by the creditor shall be held by the
 77 29 creditor in trust for the other person.
 77 30    17.  SECURED CREDITOR'S CLAIMS.
 77 31    a.  The value of the security held by a secured creditor
 77 32 shall be determined in one of the following ways, as the court
 77 33 may direct:
 77 34    (1)  By converting the security into money according to the
 77 35 terms of the agreement pursuant to which the security was
 78  1 delivered to the creditors.
 78  2    (2)  By agreement, arbitration, compromise, or litigation
 78  3 between the creditor and the liquidator.
 78  4    b.  The determination shall be under the supervision and
 78  5 control of the court with due regard for the recommendation of
 78  6 the liquidator.  The amount so determined shall be credited
 78  7 upon the secured claim.  A deficiency shall be treated as an
 78  8 unsecured claim.  If the claimant surrenders the security to
 78  9 the liquidator, the entire claim shall be allowed as if
 78 10 unsecured.
 78 11    18.  PRIORITY OF DISTRIBUTION.  The priority of
 78 12 distribution of claims from the establishment's estate shall
 78 13 be in accordance with the order in which each class of claims
 78 14 is set forth.  Claims in each class shall be paid in full or
 78 15 adequate funds retained for the payment before the members of
 78 16 the next class receive any payment.  Subclasses shall not be
 78 17 established within a class.  The order of distribution of
 78 18 claims is as follows:
 78 19    a.  CLASS 1.  The costs and expenses of administration,
 78 20 including but not limited to the following:
 78 21    (1)  Actual and necessary costs of preserving or recovering
 78 22 the assets of the establishment.
 78 23    (2)  Compensation for all authorized services rendered in
 78 24 the liquidation.
 78 25    (3)  Necessary filing fees.
 78 26    (4)  Fees and mileage payable to witnesses.
 78 27    (5)  Authorized reasonable attorney fees and other
 78 28 professional services rendered in the liquidation.
 78 29    b.  CLASS 2.  Reasonable compensation to employees for
 78 30 services performed to the extent that they do not exceed two
 78 31 months of monetary compensation and represent payment for
 78 32 services performed within one year before the filing of the
 78 33 petition for liquidation.  Officers and directors are not
 78 34 entitled to the benefit of this priority.  The priority is in
 78 35 lieu of other similar priority which may be authorized by law
 79  1 as to wages or compensation of employees.
 79  2    c.  CLASS 3.  Claims under purchase agreements.
 79  3    d.  CLASS 4.  Claims of general creditors.
 79  4    e.  CLASS 5.  Claims of the federal or of any state or
 79  5 local government.  Claims, including those of a governmental
 79  6 body for a penalty or forfeiture, are allowed in this class
 79  7 only to the extent of the pecuniary loss sustained from the
 79  8 act, transaction, or proceeding out of which the penalty or
 79  9 forfeiture arose, with reasonable and actual costs incurred.
 79 10 The remainder of such claims shall be postponed to the class
 79 11 of claims under paragraph "g".
 79 12    f.  CLASS 6.  Claims filed late or any other claims other
 79 13 than claims under paragraph "g".
 79 14    g.  CLASS 7.  The claims of shareholders or other owners.
 79 15    19.  LIQUIDATOR'S RECOMMENDATIONS TO THE COURT.
 79 16    a.  The liquidator shall review claims duly filed in the
 79 17 liquidation and shall make further investigation as necessary.
 79 18 The liquidator may compound, compromise, or in any other
 79 19 manner negotiate the amount for which claims will be
 79 20 recommended to the court except where the liquidator is
 79 21 required by law to accept claims as settled by a person or
 79 22 organization.  Unresolved disputes shall be determined under
 79 23 subsection 15.  As soon as practicable, the liquidator shall
 79 24 present to the court a report of the claims against the
 79 25 establishment with the liquidator's recommendations.  The
 79 26 report shall include the name and address of each claimant and
 79 27 the amount of the claim finally recommended.
 79 28    b.  The court may approve, disapprove, or modify the report
 79 29 on claims by the liquidator.  Reports not modified by the
 79 30 court within sixty days following submission by the liquidator
 79 31 shall be treated by the liquidator as allowed claims, subject
 79 32 to later modification or to rulings made by the court pursuant
 79 33 to subsection 15.  A claim under a policy of insurance shall
 79 34 not be allowed for an amount in excess of the applicable
 79 35 policy limits.
 80  1    20.  DISTRIBUTION OF ASSETS.  Under the direction of the
 80  2 court, the liquidator shall pay distributions in a manner that
 80  3 will ensure the proper recognition of priorities and a
 80  4 reasonable balance between the expeditious completion of the
 80  5 liquidation and the protection of unliquidated and
 80  6 undetermined claims, including third-party claims.
 80  7 Distribution of assets in kind may be made at valuations set
 80  8 by agreement between the liquidator and the creditor and
 80  9 approved by the court.
 80 10    21.  UNCLAIMED AND WITHHELD FUNDS.
 80 11    a.  Unclaimed funds subject to distribution remaining in
 80 12 the liquidator's hands when the liquidator is ready to apply
 80 13 to the court for discharge, including the amount distributable
 80 14 to a creditor, owner, or other person who is unknown or cannot
 80 15 be found, shall be deposited with the treasurer of the state,
 80 16 and shall be paid without interest, except as provided in
 80 17 subsection 18, to the person entitled or to the person's legal
 80 18 representative upon proof satisfactory to the treasurer of
 80 19 state of the right to the funds.  Any amount on deposit not
 80 20 claimed within six years from the discharge of the liquidator
 80 21 is deemed to have been abandoned and shall become the property
 80 22 of the state without formal escheat proceedings and be
 80 23 transferred to the insurance division regulatory fund.
 80 24    b.  Funds withheld under subsection 14 and not distributed
 80 25 shall upon discharge of the liquidator be deposited with the
 80 26 treasurer of state and paid pursuant to subsection 18.  Sums
 80 27 remaining which under subsection 18 would revert to the
 80 28 undistributed assets of the establishment shall be transferred
 80 29 to the insurance division regulatory fund and become the
 80 30 property of the state as provided under paragraph "a", unless
 80 31 the commissioner in the commissioner's discretion petitions
 80 32 the court to reopen the liquidation pursuant to subsection 23.
 80 33    c.  Notwithstanding any other provision of this chapter,
 80 34 funds as identified in paragraph "a", with the approval of the
 80 35 court, shall be made available to the commissioner for use in
 81  1 the detection and prevention of future insolvencies.  The
 81  2 commissioner shall hold these funds in the insurance division
 81  3 regulatory fund and shall pay without interest, except as
 81  4 provided in subsection 18, to the person entitled to the funds
 81  5 or to the person's legal representative upon proof
 81  6 satisfactory to the commissioner of the person's right to the
 81  7 funds.  The funds shall be held by the commissioner for a
 81  8 period of two years at which time the rights and duties to the
 81  9 unclaimed funds shall vest in the commissioner.
 81 10    22.  TERMINATION OF PROCEEDINGS.
 81 11    a.  When all assets justifying the expense of collection
 81 12 and distribution have been collected and distributed under
 81 13 this chapter, the liquidator shall apply to the court for
 81 14 discharge.  The court may grant the discharge and make any
 81 15 other orders, including an order to transfer remaining funds
 81 16 that are uneconomical to distribute, as appropriate.
 81 17    b.  Any other person may apply to the court at any time for
 81 18 an order under paragraph "a".  If the application is denied,
 81 19 the applicant shall pay the costs and expenses of the
 81 20 liquidator in resisting the application, including a
 81 21 reasonable attorney fee.
 81 22    23.  REOPENING LIQUIDATION.  At any time after the
 81 23 liquidation proceeding has been terminated and the liquidator
 81 24 discharged, the commissioner or other interested party may
 81 25 petition the court to reopen the proceedings for good cause
 81 26 including the discovery of additional assets.  The court shall
 81 27 order the proceeding reopened if it is satisfied that there is
 81 28 justification for the reopening.
 81 29    24.  DISPOSITION OF RECORDS DURING AND AFTER TERMINATION OF
 81 30 LIQUIDATION.  If it appears to the commissioner that the
 81 31 records of an establishment in the process of liquidation or
 81 32 completely liquidated are no longer useful, the commissioner
 81 33 may recommend to the court and the court shall direct what
 81 34 records shall be retained for future reference and what
 81 35 records shall be destroyed.
 82  1    25.  EXTERNAL AUDIT OF LIQUIDATOR'S BOOKS.  The court may
 82  2 order audits to be made of the books of the commissioner
 82  3 relating to a liquidation established under this chapter, and
 82  4 a report of each audit shall be filed with the commissioner
 82  5 and with the court.  The books, records, and other documents
 82  6 of the liquidation shall be made available to the auditor at
 82  7 any time without notice.  The expense of an audit shall be
 82  8 considered a cost of administration of the liquidation.
 82  9    Sec. 55.  Section 537A.10, subsection 1, paragraph c,
 82 10 subparagraph (3), Code 2001, is amended to read as follows:
 82 11    (3)  "Franchise" also does not include any contract under
 82 12 which a petroleum retailer or petroleum distributor is
 82 13 authorized or permitted to occupy leased marketing premises,
 82 14 which premises are to be employed in connection with the sale,
 82 15 consignment, or distribution of motor fuel under a trademark
 82 16 which is owned or controlled by a refiner which is regulated
 82 17 by the federal Petroleum Marketing Practices Act, 15 U.S.C. }
 82 18 2801 et seq.  The term "refiner" means any person engaged in
 82 19 the refining of crude oil to produce motor fuel, and includes
 82 20 any affiliate of such person.  "Franchise" also does not
 82 21 include a contract entered into by any person regulated under
 82 22 chapter 123, 322, 322A, 322B, 322C, 322D, 322F, 522 522B, or
 82 23 543B, or a contract establishing a franchise relationship with
 82 24 respect to the sale of construction equipment, lawn or garden
 82 25 equipment, or real estate.
 82 26    Sec. 56.  2001 Iowa Acts, Senate File 500, section 39, is
 82 27 amended to read as follows:
 82 28    SEC. 39.  EFFECTIVE DATE.  Sections 4, 5, 7 through 11, 13
 82 29 through 22, 34, and 38 of this Act take effect January 1,
 82 30 2002.
 82 31    Sec. 57.  Chapters 523A and 523E, Code 2001, are repealed.
 82 32    Sec. 58.  Section 502.207B, Code 2001, is repealed.  
 82 33 
 82 34 
 82 35                                                             
 83  1                               MARY E. KRAMER
 83  2                               President of the Senate
 83  3 
 83  4 
 83  5                                                             
 83  6                               BRENT SIEGRIST
 83  7                               Speaker of the House
 83  8 
 83  9    I hereby certify that this bill originated in the Senate and
 83 10 is known as Senate File 473, Seventy-ninth General Assembly.
 83 11 
 83 12 
 83 13                                                             
 83 14                               MICHAEL E. MARSHALL
 83 15                               Secretary of the Senate
 83 16 Approved                , 2001
 83 17 
 83 18 
 83 19                                
 83 20 THOMAS J. VILSACK
 83 21 Governor
     
Text: SF00472                           Text: SF00474
Text: SF00400 - SF00499                 Text: SF Index
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