HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 253 Regulation of Securities
SPONSOR(S): Commerce Committee, Insurance & Banking Subcommittee, Barnaby and others
TIED BILLS: IDEN./SIM. BILLS: CS/SB 180
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee 18 Y, 0 N, As CS Sellas Lloyd
2) Commerce Committee 15 Y, 0 N, As CS Sellas Hamon
SUMMARY ANALYSIS
In Florida, the Securities and Investor Protection Act (the Act) regulates securities issued, offered, and sold in
the state of Florida. The Florida 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 affiliated with these firms. The Act
currently prohibits dealers, associated persons, and issuers from offering or selling securities in this state
unless registered with the OFR or specifically exempted. Additionally, all securities in Florida must be
registered with the OFR unless they meet a statutory exemption or are federally covered (i.e., under the
exclusive jurisdiction of the United States Securities Exchange Commission (SEC)).
The bill:
Eliminates the requirement for an issuer to register with OFR when selling securities.
Reduces the issuer filing fee for certain security offerings.
Creates a continuing education requirement based on the North American Securities Administration
Association (NASAA) model rule applicable to associated persons of investment advisers and federal
covered advisers. Currently, 12 states have adopted continuing education rules based on the NASAA
model rule.
Creates a registration exemption for investment advisers to private funds based on a NASAA model
rule.
Repeals the authority of OFR to require the filing of escrow agreements and to hold escrow funds.
Makes technical, clarifying, and modernizing updates throughout the Act, especially in regard to
registration requirements and exemptions.
Introduces or amends various definitions, including adding regulation of limited liability companies,
when acting as an issuer, throughout the Act.
The bill has no impact on local government. It has an insignificant negative impact on state government
revenues and no impact on state government expenditures. The bill has an indeterminate, likely minimal,
negative fiscal impact on the private sector.
The bill provides an effective date of October 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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DATE: 4/12/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Federal Securities Regulation
The federal Securities Exchange Act of 1934 (1934 Act) requires registration of securities market
participants like broker-dealers and exchanges.1 Generally, any person acting as “broker” or “dealer” as
defined in the 1934 Act must be registered with the United States Securities and Exchange
Commission (SEC) and join a self-regulatory organization (SRO), like the Financial Industry Regulatory
Authority (FINRA) or a national securities exchange. The 1934 Act broadly defines “broker” as “any
person engaged in the business of effecting transactions in securities for the account of others,” which
the SEC has interpreted to include involvement in any of the key aspects of a securities transaction,
including solicitation, negotiation, and execution.2 A “dealer” is “any person engaged in the business of
buying and selling securities for such person’s own account through a broker or otherwise. 3
Certain entities in the securities industry are often referred to as “broker-dealers” because such entities
are considered “brokers” when executing trades on behalf of customers, but are “dealers” when
executing trades for their own account. In addition to being registered with the SEC, broker-dealers
must comply with state registration requirements.
State Securities Regulation
In addition to federal securities laws, “Blue Sky Laws” are state laws that protect the investing public
from fraudulent sales practices and activities.4 In Florida, the Securities and Investor Protection Act, ch.
517, F.S. (Act), regulates securities issued, offered, and sold in the state of Florida. The Florida Office
of Financial Regulation’s (OFR) Division of Securities (Division) regulates and registers the offer and
sale of securities in, to, or from Florida by firms, branch offices, and individuals affiliated with these
firms in accordance with the Act and Rule Chapter 69W, Florida Administrative Code. 5
As of December 31, 2022, the Division had total registrants in the following areas:
Dealers: 2,421
Investment advisers: 8,096
Branch offices: 11,435
Associated Persons: 361,2006
The Act prohibits dealers, associated persons, and issuers from offering or selling s ecurities in this
state unless registered with OFR or specifically exempted. 7 Additionally, all securities in Florida must
be registered with 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).8 Failure to meet the precise
1
15 U.S.C. §§ 78c(a)(4) and 78o; U.S. Securities and Exchange Commission, Guide to Brok er-Dealer Registration,
http://www.sec.gov/divisions/mark etreg/bdguide.htm#II (last visited Mar. 19, 2023).
2 Id.
3 15 U.S.C. § 78c(a)(5).
4 U.S. S ECURITIES & E XCHANGE COMMISSION, Blue Sk y Laws, http://www.sec.gov/answers/bluesky.htm (last visited Mar. 19,
2023).
5 Pursuant to s. 20.121(3), F.S., the Financial Services Commission (the Governor and Cabinet) s erves as the OFR’s
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.
6 Office of Financial Regulation, Agency Analysis of 2023 House Bill 253, p. 2 (Mar. 1, 2023).
7 s. 517.12, F.S.
8 S. 517.07, F.S. If a security is registered with the SEC, s. 517.082, F.S., requires the broker or issuer to notify OFR that
the security is registered with the SEC.
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requirements of these exemptions can subject the issuer to civil, criminal, and administrative liability for
the sale of unregistered securities, which is a third-degree felony in Florida.9 Civil remedies under the
Act include rescission and damages.10 In addition, issuers must comply with disclosure requirements in
state and federal laws that provide potential investors with full and fair disclosures regarding the
securities.
The Act requires the following individuals or businesses to be registered with OFR under s. 517.12,
F.S., before selling or offering to sell any securities in or from offices in this state, or selling securities to
persons in this state from offices outside this state:11
Dealers, which include:12
o Any person, other than an associated person registered under ch. 517, F.S., who
engages as a broker or principal in the business of offering, buying, selling, or otherwise
dealing or trading in securities issued by another person.
o Any issuer who through persons directly compensated or controlled by the issuer
engages in the business of offering or selling securities which are issued (or proposed to
be issued) by the issuer.
Investment advisers, which include any person who receives compensation and engages in the
business of advising others as to the value of securities or as to the advisability of investments
in, purchasing of, or selling of securities, except a dealer whose performance of these services
is solely incidental to the conduct their business as a dealer and who receives no special
compensation for such services.13 Investment advisors do not include a “federal covered
adviser.”14
Associated persons, which include:15
o With respect to a dealer or investment adviser, any of the following:
Any partner, officer, director, or branch manager of a dealer or investment
adviser or any person occupying a similar status or performing similar functions;
Any individual directly or indirectly controlling or controlled by such dealer or
investment adviser, other than an employee whose function is only clerical or
ministerial; or
Any individual, other than a dealer, employed, appointed, or authorized by a
dealer, investment adviser, or issuer to sell securities in any manner or act as an
investment adviser as defined in s. 517.021, F.S.
o With respect to a federal covered adviser, any person who is an investment adviser
representative and who has a place of business in this state.
Self-Regulatory Organizations
Formed as a result of a 2007 merger between the National Association of Securities Dealers and
certain operational arms of the New York Stock Exchange,16 FINRA is the largest private self-regulatory
organization for all securities firms doing business in the United States. 17 In addition to operating the
largest securities arbitration forum in the United States, FINRA operates the Central Registration
Depository and the Investment Adviser Registration Depository, both which are central databases for
registration, reporting, and disclosure information for the securities industry. 18
9 S. 517.302(1), F.S.
10 S. 517.211(3-5), F.S.
11 S. 517.12(1), F.S.
12 S. 517.021(6)(a), F.S. The term “dealer”, as defined under Florida law, encompasses the definitions of “broker” and
“dealer” under federal law.
13 S. 517.021(14)(a), F.S.
14 S. 517.021(9), (14)(b)9., F.S. A federal covered adviser must be registered under federal law and must provide a
notice-filing to OFR. Ss. 517.021 and 517.1201, F.S.
15 S. 517.021(2), F.S.
16 FINRA, NASD and NYSE Member Regulation Combine to Form the Financial Industry Regulatory Authorit y,
https://www.finra.org/media-center/news-releases/2007/nasd-and-nyse-member-regulation-combine-form-financial-
industry (last visited Mar. 19, 2023).
17 FINRA, https://www.finra.org/#/ (last visited Mar. 19, 2023).
18 NASAA, CRD & IARD, https://www.nasaa.org/industry-resourc es/crd-iard/ (last visited Mar. 19, 2023).
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NASAA’s Model Rule on Investment Adviser Representative Continuing Education
The North American Securities Administrators Association (NASAA) is a voluntary, international,
association whose membership consists of 67 state, provincial, and territorial securities
administrators.19 Formed in 1919, NASAA is the “oldest international organization devoted to investor
protection.”20 NASAA advocates on behalf of state securities agencies in North America that are
responsible for capital formation and investor protection. 21 NASAA also coordinates training and
education seminars for securities agency staff22 and creates model rules for implementation amongst
its members.23
On November 30, 2020, NASAA adopted a model rule for the implementation of continuing education
(CE) programs for investment adviser representatives (IARs). 24 Among other things, the model rule:
Requires IARs of both state-registered and federal covered investment advisers seeking
registration or renewal of IAR registration to complete 12 CE credits each year;
Provides that IARs must complete six credits of regulatory and ethics content and six credits of
compliance and practice content;
Allows IARs to select courses that appeal to their interests and suit their business models, so
long as such courses meet the credit requirements and are approved content for the CE
program;
Permits IARs to satisfy either some or all of the model rule’s CE requirements through
completion of the IAR’s home state’s CE requirements and completion of CE courses required
to be completed by IARs who maintain certain professional designations and those required to
be completed for registration as an agent of a dealer, provided certain criteria are met;
Provides that course providers and course content must be approved by NASAA; and
Requires an IAR who does not complete the CE requirement by the annual deadline to renew
as “CE inactive.”
Under the model rule, IARs are responsible for ensuring that completed CE credits are reported to
FINRA, NASAA’s vendor for program tracking. NASAA has implemented a course reporting fee of $3
per credit hour. Individual course costs will vary depending on the course and provider selected.
Currently, 12 NASAA member jurisdictions have adopted CE requirements similar to those proposed in
the rule, namely, Arkansas, Colorado, Kentucky, Maryland, Michigan, Mississippi, Oklahoma, Oregon,
South Carolina, Vermont, Washington, D.C., and Wisconsin.25
On October 8, 2013, NASAA adopted an amended model rule providing a registration exemption for
investment advisers to private funds. The model rule:
Requires that a private fund adviser:
o Is not subject to certain disqualifications;
o Must submit required reports and amendments to the state regulator; and
o Is required to pay relevant state fees.
19 NASAA, Welcome to NASAA, https://www.nasaa.org/about-us/ (last visited Mar. 19, 2023).
20 Id.
21 Id.
22 Id.
23 See NASAA, NASAA Model Rule on Investment Adviser Representative Continuing Education (Model Rule 2002-
411(h) or 1956-204(B)(6)-CE ), https://www.nasaa.org/wp-content/uploads/2020/10/ NASAA-IAR-CE-Model-Rule.pdf (last
visited, Mar. 19, 2023).
24 Id.
25 NASAA, https://www.nasaa.org/industry-resources/investment-advisers/investment-adviser-representative-continuing-
education/iar-ce-map/ (last visited, Mar. 19, 2023).
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Provides additional requirements for private fund advisers to “3(c)(1) funds.”26 This includes a
restriction where the beneficial owners of the fund must have a net worth which would meet the
standard of a “qualified client” under SEC rule.27
Effect of the Bill
Definitions
The bill creates the following definitions:
“Accredited investor” has the same definition as that in SEC Rule 501, 17 C.F.R. s. 230.501,
which includes:
o Any bank, savings and loan associations, other institutions defined in section 3(a) of the
federal Securities Act of 1933 (1933 Act), brokers or dealers, investment advisers,
insurance companies, or investment companies;
o Any private business development company as defined in section 202(a)(22) of the
Investment Advisers Act of 1940;
o Any organization described in section 501(c)(3) of the Internal Revenue Code that is not
formed for the specific purpose of acquiring securities offered with total assets in excess
of $5,000,000;
o Any director, executive officer, or general partner of the issuer of the securities being
offered or sold, or any director, executive officer, or general partner of a general partner
of that issuer; or
o Any natural person whose individual net worth, or joint net worth with that person’s
spouse or spousal equivalent, exceeds $1,000,000 (subject to specific calculation
restrictions).
The bill amends the following definitions:
“Associated person” is now defined by a party’s relation to a dealer or to an investment adviser.
o With respect to a dealer, an associated person is a natural person who is employed,
appointed, or authorized by a dealer and who represents the dealer in effecting the
purchase or sale of a security.
The term does not include a dealer or a partner, officer, or director of a dealer
unless such person is specified in the group above. The term also does not
include a dealer’s employee whose function is only clerical or ministerial.
o With respect to an investment adviser, an associated person is an individual, including,
but not limited to, a partner, officer, director, or branch manager who is employed by or
associated with, or is subject to the supervision or control