INDIANA SECURITIES DIVISION UPDATE
MAY 18, 2017
THE INDIANA SECURITIES DIVISION
ALEX GLASS
INDIANA SECURITIES COMMISSIONER
THE INDIANA SECURITIES DIVISION
DISCLAIMER:
This presentation is intended for educational purposes only.
Statements of fact and opinions expressed are those of the
presenter individually and not the opinion or position of the
Secretary of State’s office. The actual state laws should be
thoroughly reviewed and an attorney specializing in securities law
should be consulted before taking action in this area.
THE INDIANA SECURITIES DIVISION
Mission
Investor protection and maintaining the integrity of
the securities industry in Indiana
THE INDIANA SECURITIES DIVISION
Mission is Comprised of Three Components
• Investor Education
• Registration/Compliance
• Enforcement
THE INDIANA SECURITIES DIVISION
Investor Education
• Dual message of financial literacy and fraud
prevention
• Achieved through Secretary Lawson’s
Moneywise Program
THE INDIANA SECURITIES DIVISION
Registration/Compliance
• All securities products and individuals selling the
securities products must be registered in Indiana
unless an exemption is met
• The Division’s examination programs fall under
this component
THE INDIANA SECURITIES DIVISION
Enforcement
• Administrative cases are handled at the Division
• Criminal cases are handled by a prosecutor at the
county level or in partnership with the US
Attorney
• Civil cases (asset freezes and receiverships) are
handled in conjunction with the Attorney
General’s office
THE INDIANA SECURITIES DIVISION
Regulate
• Investment Advisers / Investment Adviser
Representatives
• Broker-Dealers / Broker-Dealer Agents
• Security Products
THE INDIANA SECURITIES DIVISION
Additional Areas of Responsibility
• Collection Agencies
• Franchisors
• Continuing Care Retirement Communities
• Mortgage Loan Brokers
2017 LEGISLATIVE UPDATE
HB 1526
• Author: Representative Robert Heaton
• Sponsor: Senator Travis Holdman
• Signed by Governor Holcomb on April 24, 2017
• Effective July 1, 2017
2017 LEGISLATIVE UPDATE
HB 1526
• Makes five changes to the Indiana Code:
• 1. Mortgage Lending and Fraud Prevention
Task Force
• 2. Federal Crowdfunding and Regulation A,
Tier 2 Notice Filings
2017 LEGISLATIVE UPDATE
HB 1526
• Makes five changes to the Indiana Code:
• 3. Securities Registration Fees
• 4. Criminal Statute of Limitations
• 5. Senior Savings Protection Act
2017 LEGISLATIVE UPDATE
HB 1526
• Securities Registrations Fees
• Changes from complicated fee calculation
involving sales reports to flat fee
• Eliminates unnecessary and costly reporting
• Simplifies registration for both the Division
and Industry
2017 LEGISLATIVE UPDATE
HB 1526
• Criminal Statute of Limitations
• Changes from 5 years after the offer or sale of
a security to 5 years after discovery by the state
or the state could have discovered the violation
with the exercise of due diligence.
• Makes Indiana one of the strongest securities
states
2017 LEGISLATIVE UPDATE
HB 1526
• Senior Savings Protection
• Add investment advisers to the already
existing statutory framework for brokerdealers
• Changes the key definition in the statute from
“Financially Endangered Adult” to
“Financially Vulnerable Adult”
SENIOR SAVINGS PROTECTION
Financial Exploitation of Seniors
• Seniors lose an estimated $2.6 billion annually to
financial exploitation
• 1 in 5 seniors have been victims of financial fraud
– many times by close family and friends
• Only 1 in 44 cases of financial exploitation are
ever reported
SENIOR SAVINGS PROTECTION
Senior Savings Protection Basics
• Ind. Code § 23-19-4.1
• Effective July 1, 2016 / Amended July 1, 2017
• Indiana was only the fourth state to pass a law in
this area
• Additional Information:
http://www.in.gov/sos/securities/files/Senior_Sa
vings_info.pdf
SENIOR SAVINGS PROTECTION
Why Senior Protection Law is Necessary
• APS is not classified law enforcement in Indiana
so often have trouble getting records required to
do a proper investigation
• Firms worried about future liability for taking a
proactive step of reporting
• Senior exploitation is a huge issue and will only
continue to increase as the population ages
SENIOR SAVINGS PROTECTION
History [SB 221] (2016)
• Mandatory reporting of potential financial
exploitation
• Ability of broker-dealer to temporarily refuse
distribution from an account
• Ability of broker-dealer to release records to APS
• Immunity clauses for broker-dealers
SENIOR SAVINGS PROTECTION
History [HB 1526] (2017)
• Maintains statutory framework of SB 221
• Adds investment advisers to broker-dealers as
mandatory reporters
• Changes key definition in statute from
“financially endangered adult” to “financially
vulnerable adult”
SENIOR SAVINGS PROTECTION
Financial Exploitation
• Ind. Code § 23-19-1
• The wrongful or unauthorized taking,
withholding, appropriation, or use of money, real
property, or personal property of a financially
vulnerable adult
SENIOR SAVINGS PROTECTION
Financially Vulnerable Adult
• Ind. Code § 23-19-4.1-2.1
• Individual at least sixty-five (65) years of age
• Individual at least eighteen (18) years of age with a
mental incapacity
SENIOR SAVINGS PROTECTION
Who Reports?
• A qualified individual at a firm
• Qualified Individual as defined at Ind. Code § 2319-4.1-5, is an individual associated with a brokerdealer or investment adviser who serves in a
supervisory, compliance, or legal capacity as part
of the individual’s job
SENIOR SAVINGS PROTECTION
Who Must be Contacted?
• Ind. Code § 23-19-4.1-6
• Indiana Securities Division
• Indiana Adult Protective Services
• For information on how to contact:
http://www.in.gov/sos/securities/files/Senior_Sa
vings_info.pdf
SENIOR SAVINGS PROTECTION
Refusing a Distribution
• Ind. Code § 23-19-4.1-7
• Qualified Individual may refuse a request for a
distribution if there is reason to believe that the
requested distribution may result in the financial
exploitation of the financially vulnerable adult
SENIOR SAVINGS PROTECTION
Refusing a Distribution
• If a distribution is refused, the qualified
individual shall notify all parties on the account
within 2 business days*
• Notify Division and APS within 3 business days
• * Not required to notify an individual if reason to
believe the party has engaged in suspected
exploitation of the financially vulnerable adult
SENIOR SAVINGS PROTECTION
Refusing a Distribution
• Firm has 15 business days after the date of initial
refusal to investigate. (Time can be extended as
outlined in the statute)
• Firm must follow-up with Division, by email or
mail, with final action after refusing a
distribution
SENIOR SAVINGS PROTECTION
Releasing Records to APS
• Ind. Code § 23-19-4.1-9
• Firm may provide records to APS that are
relevant to the suspected financial exploitation
of a financially vulnerable adult
SENIOR SAVINGS PROTECTION
Immunity Provisions
• Ind. Code § 23-19-4.1-8
• Firms who in good faith report or hold a
distribution are immune from administrative or
civil liability
• Firms who in good faith release or do not
release documents to APS are immune from civil
liability
SENIOR SAVINGS PROTECTION
Statistics
• Since going live with broker-dealers on July 1,
2016
• 20 Reports
• 4 Distributions Held
• There are currently 20 states who have enacted or
proposed senior savings legislation
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund
• Ind. Code § 23-20
• Effective July 1, 2010
• 1 of only 2 states with a securities specific
restitution fund (Montana)
• Additional Information:
https://myweb.in.gov/SOS/RestitutionFund/App
lication/Default.aspx
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Initial Criteria
• Violation occurred after July 1, 2010
• Violation adjudicated in state/federal court or a
regulatory agency administrative proceeding
• Final order must have ordered restitution to
victim
• Party ordered to pay restitution has not paid full
amount
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Initial Criteria
• ** Important Note: FINRA arbitration awards are
not eligible for payment from the Securities
Restitution Fund
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Eligibility
• If victim is Indiana resident:
• Violation was committed in Indiana; OR
• Jurisdiction in which violation occurred does
not offer to Indiana residents who are victims
of securities violations in that jurisdiction
assistance that is substantially similar to the
assistance offered by the Indiana fund.
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Eligibility
• If victim is not an Indiana resident:
• Violation was committed in Indiana; AND
• Jurisdiction in which the victim resides offers
to Indiana residents who are victims of
securities violations in that jurisdiction
assistance that is substantially similar to the
assistance offered by the Indiana fund
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Eligibility
• Who can claim a Restitution Fund Award:
• The victim
• Surviving spouse
• Dependent child
• Any other person legally dependent for
principal support
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Eligibility
• Limitations on Restitution Fund awards:
• Victim sustained the monetary injury as a
result of participating or assisting in or
attempting to commit or committing a
securities violation; OR
• Victim profited or would have profited from
the securities violation
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Awards
• An award may not exceed the lesser of:
• Fifteen thousand dollars ($15,000);or
• Twenty-five percent (25%) or the amount of the
victim’s net loss*
• Net loss is determined by subtracting amount
received from the party ordered to pay from the
total restitution ordered to be paid
SECURITIES DIVISION PROGRAMS
Securities Restitution Fund – Statistics
• Since going live July 1, 2010:
• 63 Hoosier securities victims have received
nearly $630,000 in Restitution Fund awards
• Key point to remember is that the Securities
Restitution Fund is not funded by taxpayer
dollars – the funds come from payments of
violators of the Indiana Uniform Securities Act
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards
• Ind. Code § 23-19-7
• Effective July 1, 2012
• 1 of only 2 state that have a provision (Utah)
• Additional information:
http://www.in.gov/sos/securities/4020.htm
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards - Eligibility
• Who can make a claim:
• Anyone who provides original information
concerning a violation of the Indiana Uniform
Securities Act
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards - Eligibility
• Not eligible:
• Journalist or other member of news media
acquires original information covering a story
• Employee of the Securities Division
• Individual convicted of a crime in connection
with the violation of the information
uncovered
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards - Eligibility
• Not eligible:
• Individual who uncovered information during
the course of required examination or audit
• Individual who provides false information or
knowingly relies on false documents
• Individual who has a legal duty to disclose the
information
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards - Information
• What is original information:
• Ind. Code § 23-19-7-6
• Derived from the independent knowledge or
analysis of the informant; AND
• Would not otherwise be known to the Division
if the informant had not provided the
information to the Division
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards - Claims
• How a claim is made to the Division:
• Information and/or analysis provided
voluntarily in writing
• Must include a signed statement from
informant that they believe the act is a
violation of the IUSA
• ** Must lead to successful action
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards – Max Amount
• Commissioner may provide an award to one or
more informants in any single action. However,
the aggregate amount of the awards cannot exceed
10% of the monetary sanctions* imposed or
ordered in the action
• * Monetary sanctions do not include amounts
ordered or identified as Restitution
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards - Funding
• Awards are paid out of the Securities Restitution
Fund
• Like Restitution Fund awards – Whistleblower
awards are paid from funds collected from
violators of the IUSA and not taxpayer dollars
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards – Factors
• Factors used by Commissioner to determine
amount:
• Significance of information
• Whistleblower cooperation
• Programmatic interests in deterring the type of
violation the information uncovers
SECURITIES DIVISION PROGRAMS
Securities Whistleblower Awards – Statistics
• Since going live July 1, 2012:
• There has been an award to 1 individual of
$95,000
• JPMorgan case from August 2016.
Whistleblower awarded the maximum of
$95,000 from the $950,000 settlement
CONTACTS
INDIANA SECURITIES DIVISION
302 WEST WASHINGTON STREET
ROOM E-111
INDIANAPOLIS, IN 46204
Phone: (317) 232-6681
Fax: (317) 233-3675
Website: www.sos.in.gov
Securities Commissioner
Alex Glass
Phone: (317) 232-6681
Email: [email protected]
Chief Deputy Securities Commissioner
Noelle Sykes
Phone: (317) 234-2741
Email: [email protected]
Senior Enforcement Counsel
Aleks Cirulis
Phone: (317) 232-1018
Email: [email protected]
QUESTIONS?