The Florida Senate
                  BILL ANALYSIS AND FISCAL IMPACT STATEMENT
              (This document is based on the provisions contained in the legislation as of the latest date listed below.)
                         Prepared By: The Professional Staff of the Committee on Fiscal Policy
BILL:           CS/SB 180
INTRODUCER:     Banking and Insurance Committee and Senator Gruters
SUBJECT:        Regulation of Securities
DATE:           April 24, 2023                  REVISED:
           ANALYST                    STAFF DIRECTOR                 REFERENCE                                 ACTION
1. Johnson                          Knudson                               BI              Fav/CS
2. Sanders                          Betta                                AEG              Favorable
3. Johnson                          Yeatman                               FP              Favorable
                     Please see Section IX. for Additional Information:
                                   COMMITTEE SUBSTITUTE - Substantial Changes
  I.    Summary:
        CS/SB 180 revises provisions of ch. 517, F.S., the Securities and Investor Protection Act (Act),
        which regulates securities transactions. The Office of Financial Regulation (OFR) regulates and
        registers the offer and sale of securities in, to, or from Florida by firms, branch offices, and
        individuals associated with these firms in accordance with the act. The Division of Securities
        within the OFR is responsible for administering the act.
        The bill provides many technical, clarifying, and conforming changes to ch. 517, F.S. Many
        provisions of ch. 517, F.S., are outdated or do not incorporate recent model acts or federal rule
        changes, which are designed to promote capital formation for small businesses and provide more
        investment opportunities for investors.
        The bill decreases the $1,000 filing fee to $200 for offerings that do not exceed the maximum
        amount provided in s. 3(b) of the Securities Act of 1933 (Act of 1933). The maximum amount
        currently provided in s. 3(b) of the Act of 1933 is five million dollars.
        The bill eliminates the requirement for an issuer to register with the OFR. Currently, issuers are
        required to disclose all material facts about themselves when registering an offering of securities.
        The bill incorporates provisions of the following model acts and rules:
BILL:     CS/SB 180                                                                                               Page 2
              The North American Securities Administrators Association’s (NASAA’s) Model Rule to
               Require Continuing Education by Investment Adviser Representatives. An associate or
               representative would be required to complete 12 hours of continuing education content.
              The Uniform Securities Act of the Uniform Law Commission.
           The bill adds failure to pay, or attempting to avoid paying, certain final judgments, arbitration
           awards, fines, and civil penalties, orders of restitution and disgorgement, or similar monetary
           payment obligations as grounds for denying, suspending, or revoking a registration.
           The bill has an insignificant negative impact on state revenues and expenditures. See Section V.
           Fiscal Impact Statement.
           The bill takes effect October 1, 2023.
    II.    Present Situation:
           Federal Regulation of Securities
           Securities Act of 1933 (Act of 1933)
           Following the stock market crash of 1929, the Act of 19331 was enacted to regulate the offers
           and sales of securities. The Act of 1933 requires issuers to disclose financial and other significant
           information on securities offered for public sale and prohibits deceit, misrepresentations, and
           other kinds of fraud in the sale of securities. The Act of 1933 requires issuers to disclose
           information deemed germane to investors as part of the mandatory United States Securities and
           Exchange Commission (SEC) registration of the securities that those companies offer for sale to
           the public.2 For example, potential investors must be given an offering prospectus containing
           registration data. Registered securities offerings, often called public offerings, are available to all
           types of investors and have more rigorous disclosure requirements.
           By contrast, securities offerings that are exempt from the SEC registration are referred to as
           private offerings and are mainly available to more sophisticated investors. The SEC exempts
           certain small offerings from registration requirements to foster capital formation by lowering the
           cost of offering securities to the public. Examples of exempt offerings3 include:
            Rule 506(b) Private Placement Offerings allow companies to raise unlimited capital from
               investors with whom the company has a relationship and who meet certain wealth thresholds
               or have certain professional credentials;4
            Rule 506(c) General Solicitation Offerings allow companies to raise unlimited capital by
               broadly soliciting investors who meet certain wealth thresholds or have certain professional
               credentials;5
1
   Public Law 73-22, as amended through P.L. 117-268, enacted December 23, 2022.
2
   Id.
3
  .Security offerings of municipal, state, and the federal government are exempt from registration. U.S. Securities and
Exchange Commission (SEC), The Laws That Govern the Securities Industry, https://www.sec.gov/about/about-securities-
laws (last visited April 12, 2023)
4
   17 C.F.R. s. 230.506(b).
5
   17 C.F.R. s. 230.506(c).
BILL:   CS/SB 180                                                                                                      Page 3
            Rule 504 Limited Offerings allow companies to raise up to $10 million in a 12-month period,
             in many cases from investors with whom the company has a relationship;6
            Regulation Crowdfunding Offerings allow eligible companies to raise up to five million
             dollars in investment capital in a 12-month period from investors via an online portal;7
            Intrastate offerings8 allow companies to raise capital within a single state according to state
             law. Many states limit the offering to between one million dollars and five million dollars in
             a 12-month period; and
            Regulation A Offerings allow eligible companies to raise up to $20 million in a 12-month
             period in a Tier I offering and up to $75 million through a similar, but less extensive
             registered offering.9
         Securities and Exchange Act of 1934 (Act of 1934)
         The Act of 1934 created the SEC as an independent agency to enforce federal securities laws.10
         The SEC oversees federal securities laws11 broadly aimed at (1) protecting investors; (2)
         maintaining fair, orderly, and efficient markets; and (3) facilitating capital formation.12 The SEC
         has broad regulatory authority over significant parts of the securities industry, including stock
         exchanges, mutual funds, investment advisers, brokerage firms, as well as securities self-
         regulatory organizations (SROs).
         Besides regulating market participants, the SEC plays an important role in the regulation of other
         regulatory bodies, such as the Financial Industry Regulatory Authority, Inc. (FINRA), which is a
         SRO13 registered with the SEC as a national securities association, the Municipal Securities
         Rulemaking Board (MSRB), the Securities Investor Protection Corporation, the Public Company
         Accounting Oversight Board, and the Financial Accounting Standards Board. With regard to
         broader marketplace regulation, the SEC coordinates with the Commodity Futures Trading
         Commission (CFTC), a separate federal financial regulator overseeing derivatives and
         commodities markets, regarding issues involving securities-based derivatives.14
         Florida Regulation of Securities
         The federal securities acts expressly allow for concurrent state regulation under blue sky laws,15
         which are designed to protect investors against fraudulent sales practices and activities. Most
6
  17 C.F.R. s. 230.504.
7
  17 C.F.R. s. 227.100. Florida’s intrastate crowdfunding law, s. 517.0611, F.S., has not been updated since it was created to
reflect to reflect the increase in the maximum offering from one million dollars to five million dollars.
8
  17 C.F.R. s. 230.147 and 17 C.F.R. s. 230.147A
9
  17 C.F.R. s. 230.251, et seq.
10
   Public Law 73-291, as amended through P.L. 117-328, enacted December 29, 2022.
11
   Section 15, Securities and Exchange Act of 1934.
12
   The SEC, What We Do, https://www.sec.gov/about/what-we-do (last visited April 12, 2023).
13
   National securities exchanges (e.g., the New York Stock Exchange) and clearing and settlement systems may register as
self-regulatory organizations (SROs) with the SEC or Commodities Futures Trading Commission (CFTC), making them
subject to the SEC or the CFTC oversight. The SEC maintains a list of registered SROs. available at
https://www.sec.gov/rules/sro.shtml (last visited April 12, 2023).
14
   The CFTC, The Commission, https://www.cftc.gov/About/AboutTheCommission (last visited April 12, 2023).
15
   The term “blue sky” derives from the characterization of baseless and broad speculative investment schemes, which such
laws targeted. Cornell Law School, Blue Sky Laws,
BILL:   CS/SB 180                                                                                                Page 4
         state laws typically require companies making offerings of securities to register their offerings
         before they can be sold in a particular state, unless a specific state exemption is available. The
         laws also license brokerage firms, their brokers, and investment adviser representatives.16
         The Office of Financial Regulation (OFR) regulates and registers the offer and sale of securities
         in, to, or from Florida by firms, branch offices, and individuals associated with these firms in
         accordance with the Securities and Investor Protection Act (Act).17 The Division of Securities
         (Division) within the OFR is responsible for administering the Act.18
         The Act prohibits dealers, associated persons, and issuers from offering or selling securities in
         this state unless registered with the OFR or specifically exempted.19 Additionally, all securities
         in Florida must be registered with the OFR unless they meet one of the exemptions in
         ss. 517.051 or 517.061, F.S., or are federally covered (i.e., under the exclusive jurisdiction of the
         SEC).
         The chart below provides the category and number of registrants registered with the Division as
         of December 31, 2022.20
                                Registrant Category               Number of Registrants
                           Dealers                               2,421
                           Investment Advisers                   8,096
                           Branches                              11,435
                           Associated Persons                    361,200
         Model Acts and Model Rules
         Uniform Securities Act21
         The Uniform Law Commission (ULC, also known as the National Conference of Commissioners
         on Uniform State Laws), established in 1892, provides states with non-partisan uniform model
         acts.22 In 2002, the ULC updated the Uniform Securities Act,23 which provides basic investor
https://www.law.cornell.edu/wex/blue_sky_law#:~:text=In%20the%20early%201900s%2C%20decades,schemes%20which
%20such%20laws%20targeted (last visited April 12, 2023).
16
   U.S. Securities and Exchange Commission, Blue Sky Laws, http://www.sec.gov/answers/bluesky.htm (last visited
Mar. 1, 2023).
17
   Pursuant to s. 20.121(3)(a), F.S., the Financial Services Commission (commission), comprised of the Governor and
Cabinet, serves as the Office of Financial Regulation’s (OFR) agency head for purposes of rulemaking and appoints the
OFR’s commissioner, who serves as the agency head for purposes of final agency action for all areas within the OFR’s
regulatory authority.
18
   Chapter 517, F.S.
19
   Section 517.12, F.S.
20
   Office of Financial Regulation, Senate Bill 180 Agency Legislative Bill Analysis (Jan. 25, 2023) (on file with Senate
Committee on Banking and Insurance).
21
   Uniform Law Commission (ULC), Securities Act, https://www.uniformlaws.org/committees/community-
home?CommunityKey=8c3c2581-0fea-4e91-8a50-27eee58da1cf (last visited April 12, 2023).
22
   The ULC, About Us, https://www.uniformlaws.org/aboutulc/overview (last visited April 12, 2023).
23
   National Conference of Commissioners on Uniform State Laws, Uniform Securities Act, Approved by the American Bar
Association (Feb. 10, 2003), https://higherlogicdownload.s3-external-1.amazonaws.com/UNIFORMLAWS/2540665f-9320-
6d13-dda3-
BILL:   CS/SB 180                                                                                                Page 5
         protection from securities fraud, complementing the federal Securities and Exchange Act, and
         only applies to securities not regulated by the SEC.
         Model Rule to Require Continuing Education by Investment Adviser Representatives
         The North American Securities Administrators Association (NASAA) is a voluntary,
         international, association whose membership consists of 67 state, provincial, and territorial
         securities administrators in the 50 states, Puerto Rico, the District of Columbia, the U.S. Virgin
         Islands, Canada and Mexico.24 The NASAA advocates on behalf of state securities agencies in
         North America that are responsible for capital formation and investor protection.25 The NASAA
         also coordinates training and education seminars for securities agency staff26 and creates model
         rules for implementation amongst its members.27
         In 2020, the North American Securities Administrators Association (NASAA) approved the
         Model Rule to Require Continuing Education by Investment Adviser Representatives (Model
         Rule).28 Twelve states have adopted the Model Rule.29 The Model Rule establishes parameters
         for NASAA members to implement continuing education programs for investment adviser
         representatives (IAR). The Model Rule incorporates a product and practices component and an
         ethics component and is compatible with other continuing education programs.30
         Under the Model Rule, IARs are responsible for ensuring completed continuing education credits
         are reported to FINRA, the NASAA’s vendor for program tracking.31 The NASAA has instituted
         a three dollar course reporting fee per credit hour.32 Individual course costs will vary depending
         upon the course and provider selected.
         Chapter 517 Task Force of The Florida Bar Business Law Section
         In 2022, the Business Law Section of The Florida Bar created the Chapter 517 Task Force. The
         Task Force is tasked with reviewing and making legislative recommendations to ch. 517, F.S. In
         particular, the Task Force’s mission is to review Florida’s securities laws and to propose a
f31c7eac656d_file.pdf?AWSAccessKeyId=AKIAVRDO7IEREB57R7MT&Expires=1681304682&Signature=nr4k5xSDIA
%2BX9mu%2BBDpKuSJZvbQ%3D (last visited April 12, 2023).
24
   North American Securities Administrators Association (NASAA), Welcome to NASAA, https://www.nasaa.org/about-us/
(last visited April 12, 2023).
25
   Id.
26
   Id.
27
   NASAA Model Rule on Investment Adviser Representative Continuing Education, Model Rule 2002-411(h) or 1956-
204(b)(6)-CE (adopted November 24, 2020), available at https://www.nasaa.org/wp-content/uploads/2020/10/NASAA-IAR-
CE-Model-Rule.pdf (last visited April 12, 2023).
28
   Id.
29
   Arkansas, Colorado, Kentucky, Maryland, Michigan, Mississippi, Oklahoma, Oregon, South Carolina, Vermont,
Wisconsin, and the District of Columbia; NASAA, Jurisdictions, https://www.nasaa.org/industry-resources/investment-
advisers/investment-adviser-representative-continuing-education/iar-ce-map/ (last visited April 12, 2023).
30
   NASSA, Frequently Asked Questions: Investment Adviser Representative Continuing Education,
https://www.nasaa.org/industry-resources/investment-advisers/resources/iar-ce-faq/ (last visited April 12, 2023).
31
   Frequently Asked Questions: Investment Adviser Representative Continuing Education, General, Is there a reporting fee?
https://www.nasaa.org/industry-resources/investment-advisers/resources/iar-ce-faq/ (last visited April 12, 2023).
32
   Frequently Asked Questions: Investment Adviser Representative Continuing Education, General, Who Reports Course
Completion? https://www.nasaa.org/industry-resources/investment-advisers/resources/iar-ce-faq/ (last visited April 12,
2023). The IAR continuing education reporting fee is also referred to as the roster fee.
BILL:   CS/SB 180                                                                                       Page 6
         revision with the purpose of bringing Chapter 517 in line with the Uniform Securities Act and
         address current issues presented by the existing statutes.
III.     Effect of Proposed Changes:
         Section 1 reorders and amends s. 517.021, F.S., to revise the following definitions:
          “Accredited investor” is currently defined each time it is used throughout ch. 517, F.S. The
            purpose of the change is to eliminate redundancy and maintain consistency. Subsection (1)
            directs the Financial Services Commission to define by rule the definition of “accredited
            investor” in accordance with the Securities and Exchange Commission Rule 501,
            17 C.F.R. s. 230.501;
          “Associated person” is clarified to define what “associated person” means as the term relates
            to a dealer or to an investment