The purpose and effect is to amend the existing rules to incorporate by reference the current versions of general industry standards, to include Regulation Best Interest (17 C.F.R. §240.15l-1) as an incorporated industry ....

 

DEPARTMENT OF FINANCIAL SERVICES

Securities

RULE NO.: RULE TITLE:

69W-200.001: Definitions

69W-200.002: General Industry Standards Incorporated by Reference

PURPOSE AND EFFECT: The purpose and effect is to amend the existing rules to incorporate by reference the current versions of general industry standards, to include Regulation Best Interest (17 C.F.R. §240.15l-1) as an incorporated industry standard, to update cross-references, to keep capitalization consistent, to clarify where the definitions are applicable, to move definitions to the rule to which they pertain, and to delete unnecessary definitions.

SUMMARY: The rules are amended to incorporate by reference the current versions of general industry standards, to include Regulation Best Interest (17 C.F.R. §240.15l-1) as an incorporated industry standard, to update cross-references, to keep capitalization consistent throughout the rule chapters, to clarify that the definitions are applicable to chapter 517, F.S., and the rules promulgated thereunder, to move definitions to the rule to which they pertain (when the term is only used in one rule), and to delete unnecessary definitions.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: The Agency expressly relies on an analysis of potential economic impact conducted by persons with subject matter knowledge of these rules.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 517.03, 517.1215, 517.1217, FS.

LAW IMPLEMENTED: 517.07, 517.12, 517.021, 517.051, 517.061, 517.081, 517.1215, 517.1217, 517.161, FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE SCHEDULED AND ANNOUNCED IN THE FAR.

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Ryann White, Office of General Counsel [phone], [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

69W-200.001 Definitions.

As used in the Rules and Regulations of the Financial Services Commission and Office of Financial Regulation, pursuant to Chapter 517, F.S., and the rules promulgated thereunder, unless the context otherwise specifically requires:

(1) No change.

(2) “Advertising” means any circular, prospectus, advertisement or other material or any communication by radio, television, internet Internet, pictures or similar means used in connection with a sale or purchase or an offer to sell or purchase any security.

(3) No change.

(4) The term “Applicant” shall mean a person natural or otherwise, executing or submitting an application for registration.

(5) “Application” means all information required by the forms prescribed by the Financial Services Commission and any additional information required by the Financial Services Commission or Office of Financial Regulation together with all required statutory fees.

(5)(a) (6)(a) “Associated person” as defined in Section 517.021(3), F.S., shall include any person who for compensation refers, solicits, offers, or negotiates for the purchase or sale of securities and/or of investment advisory services. A person whose activities fall within this definition is required to register with the Office of Financial Regulation as an associated person pursuant to Section 517.12(1) or (3), F.S.

(b) Notwithstanding the provisions of paragraph (a), an associated person registered with the Office of Financial Regulation and operating in compliance with paragraph 69W-600.0034(4)(b), F.A.C., shall not be deemed an associated person of any investment adviser other than the investment adviser or dually registered dealer/investment adviser with which such associated person is registered.

(c) A natural person receiving compensation from a federal covered adviser or an investment adviser acting in compliance with S.E.C. Rule 206(4)-1 (17 C.F.R. §275.206(4)-1), which is incorporated by reference in Rule 69W-200.002, F.A.C., shall not be deemed an associated person of such investment adviser or federal covered adviser.

(6) (7) No change.

(7)(a) (8)(a) Except as otherwise provided in this subsection, the term “Branch Office” shall mean any location in this state of a dealer or investment adviser at which one or more associated persons regularly conduct the business of rendering investment advice or effecting any transactions in, or inducing or attempting to induce the purchase or sale of, any security or any location that is held out as such. Pursuant to Section 517.021(5), F.S., the Financial Services Commission may adopt exceptions to this definition. The following locations shall not be deemed branch offices for purposes of Section 517.12(4), F.S., and are considered exceptions to the definition of a branch office under Section 517.021(5), F.S.:

1. through 9. No change.

(b) through (c) No change.

(8) (9) “Carrying Dealer” means any dealer maintaining a fully/principally disclosed agreement/arrangement with an introducing dealer, whereby the carrying dealer is responsible for customer monies and securities, and confirms transactions to the customer accounts introduced; such dealer who carries accounts for Florida residents must be registered pursuant to the provisions of Section 517.12, F.S.

(9) (10) “Developmental Stage Entities” shall be defined as those entities which are devoting substantially all of their efforts to establishing a new business and for which either of the following conditions exists:

(a) Planned principal operations have not commenced; or

(b) Planned principal operations have commenced but whose annual net earnings for each of the last two (2) consecutive fiscal years or whose average annual net earnings for the last five (5) fiscal years prior to the public offering have been less than five percent (5%) of the aggregate public offering.

(10) (11) “Dilution” for purposes of Rules 69W-700.008 and 69W-700.015, F.A.C., shall be determined by subtracting the maximum sales commissions and expenses set forth in the prospectus from the gross proceeds of the offering and adding the net worth prior to the offering. Divide this sum by the total number of shares to be outstanding at the conclusion of the offering to determine book value. Subtract the book value from the proposed offering price and divide the result by the proposed offering price to arrive at the percentage of dilution. For the purpose of calculating “dilution” or “book value,” intangible assets such as patents, copyrights, franchises, trademarks, operating rights and goodwill are deducted from total assets.

Dilution Formula:

NP              =              Gross Proceeds minus Maximum Sales Commissions and Expenses

NW              =              Net Worth prior to the offering

TS              =              Total Number of shares to be outstanding after a successful offering

BV              =              Book Value

OP              =              Offering Price

Example:

NP + NW

________              =              BV

TS

 

OP – BV

_________              =              Dilution

OP

(12) “Established Market Price” for purposes of Rule 69W-700.015, F.A.C., shall be the price for a security published by in The Wall Street Journal in the Over-The-Counter Markets Section, Quotations from the NASDAQ System of such publication or the price for a security published on any stock exchange registered pursuant to the Securities Exchange Act of 1934.

(13) “Fair Value of the Equity Investment” for purposes of subsection 69W-700.005(1), F.A.C., of the promoters or insiders shall mean the total of all sums contributed to the issuer in cash together with the reasonable value of all tangible assets contributed to the issuer, and as adjusted by the earned surplus or deficit of the issuer subsequent to the dates of contribution. In determining the reasonable value of tangible assets contributed, the Office of Financial Regulation shall take into consideration any values as determined by independent appraisal.

(11) (14) “Independent Director” shall be defined as a member of the issuer’s board of directors Issuer’s Board of Directors who:

(a) Is not an officer or employee of the issuer Issuer, its subsidiaries, or their affiliates or associates and has not been an officer or employee of the Issuer, its subsidiaries or their affiliates or associates within the last two years; and,

(b) No change.

(c) Does not have a material business or professional relationship with the issuer or any of its affiliates or associates. For purposes of determining whether or not a business or professional relationship is material, the gross revenue derived by the independent director Independent Director from the issuer Issuer, its affiliates and associates shall be deemed material if it exceeds 5% of the independent director’s Independent Director’s;

1. through 2. No change.

(12) (15) “Introducing Dealer” means any dealer maintaining a formal agreement/arrangement with another dealer whereby the introducing dealer does not carry (i.e., holds funds or securities, or confirms transactions) customer accounts; such dealer who introduces Florida resident accounts must be registered pursuant to Section 517.12, F.S.

(13) (16) “Issuer” for purposes of in Rules 69W-400.001, 69W-500.005, 69W-500.006 and 69W-500.008, F.A.C., shall mean any person who proposes to issue or has issued or shall hereafter issue any securities. For purposes of this subsection only, the term “issuer” shall not include a promoter of the issuer for the purposes of these rules.

(17) “Issuers” Within the Meaning of Section 517.021(14), F.S.

(a) For the purposes of determining whether a person is an issuer within the meaning of Section 517.021(14), F.S., the term “promoter” shall be deemed to include:

1. Any person who, acting alone or in conjunction with one or more other persons, directly or indirectly initiates the founding or organizing of the business or enterprise of an issuer; or

2. Any person who, in connection with the founding and organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services, or a combination of services and property, 10% or more of any class of securities of the issuer or 10% or more of the proceeds from the sale of any class of securities of the issuer; provided that any person who receives securities or proceeds from the sale of securities either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter if such person does not otherwise take part in founding and organizing the enterprise of the issuer.

(b) Notwithstanding the provisions of subsection (1) of this rule, no person shall be deemed to be a promoter with respect to any issuer which is duly qualified to transact business under the laws of the jurisdiction in which it is organized and which has actively been engaged in business for a continuous period of one year.

(18) “Issuer/Dealer” means any issuer who through either persons directly or indirectly compensated or controlled by the issuer engages, either for all or part of his time, directly or indirectly, in the business of offering or selling securities which are issued or are proposed to be issued by said issuer.

(14) (19) “Principal Office” or “Home Office” shall mean the place where the chief or principal affairs and business of the applicant or registrant are transacted.

(20) “Promotional Securities” for purposes of Rule 69W-700.015, F.A.C., shall mean securities that are to be issued or were issued:

(a) By an issuer which is a development stage company to promoters for cash or other consideration, including services rendered, patents, copyrights, and other intangibles, that will be or was less than eighty-five percent (85%) of the proposed offering price; or

(b) Within three (3) years prior to the filing of an application to register securities with the Office of Financial Regulation by an issuer, which is not a development stage company, to promoters for cash or other considerations, including services rendered, patents, copyrights and other intangibles, that will be or was less than eighty-five percent (85%) of the proposed offering price. (Shares issued pursuant to conversion or exercise rights shall be included as promoters shares).

(15) “Promoter” shall not include a person with respect to an issuer which is duly qualified to transact business under the laws of the jurisdiction in which it is organized and which has actively been engaged in business for a continuous period of one year.

(21) “Publication” means advertising printed in any newspaper, magazine, periodical or other publication and mailed or delivered to its subscribers or addresses, or communicated by radio, television or similar means.

(16) (22) “Qualified Institutional Buyer” for purposes of Section 517.061(7), F.S., shall be defined as provided in Securities and Exchange Commission rule 144A(a) (17 C.F.R. §230.144A(a)), which is incorporated by reference in Rule 69W-200.002, F.A.C.

(23) “Reaffiliation” refers to those associated persons leaving one registered dealer or investment adviser and reaffiliating with another registered dealer or investment adviser.

(17) (24) “Registrant” shall mean an applicant for whom a registration has been declared effective by the Office of Financial Regulation.

(18) (25) “Reportable Act” shall mean:

(a) through (d) No change.

(26) “Renewal Applicant” shall mean an applicant who is a registrant who seeks a timely renewal of the license.

(19) (27) “Securities Act of 1933,” 15 U.S.C. §§77a through 77mm, “Securities Exchange Act of 1934,” 15 U.S.C. §§78a through 78oo, “Investment Company Act of 1940,” 15 U.S.C. §§80a-1 through 80a-64, “Investment Advisers Act of 1940,” 15 U.S.C. §§80b-1 through 80b-21, and “Internal Revenue Code,” 26 U.S.C. Subtitles A through K, means the federal statutes of those names.

(28) “State” means any state, territory or possession of the United States, the District of Columbia and Puerto Rico.

(29) “Total Equity Investment” for purposes of subsection 69W-700.005(1), F.A.C., shall mean the total of (1) par or stated values of all equity securities offered or proposed to be offered; and (2) the amount of surplus of any kind, regardless of description and whether or not restricted.

(30) “Wholesaler” is defined as any dealer conducting business exclusively with other dealers in this State, and such dealer need not be registered as a dealer under Section 517.12, F.S.

Rulemaking Authority 517.03(1) FS. Law Implemented 517.07, 517.12, 517.021, 517.051, 517.061, 517.081, 517.161 FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-200.01, Amended 12-8-87, 10-14-90, 7-31-91, 6-16-92, 1-10-93, 5-5-94, 10-20-97, 8-9-98, 8-19-99, 10-30-03, Formerly 3E-200.001, Amended 5-15-07, 9-30-10, 11-11-13, 9-22-14, 11-15-16, 1-18-21, 2-14-23,             .

 

69W-200.002 General Industry Standards Incorporated by Reference.

The following general industry standards as expressed in the statutes, rules and regulations of the various federal and self-regulatory agencies and regulatory associations and referenced in Division 69W, F.A.C., are hereby incorporated by reference and adopted by this rule. The material incorporated by reference in this rule may also be obtained from the Florida Office of Financial Regulation (Office), Division of Securities’ website at https://flofr.gov/sitePages/MaterialsDS.htm, except where noted for copyright restrictions. Materials subject to copyright restrictions may be inspected and examined by contacting the Florida Office of Financial Regulation, Division of Securities, at 200 E. Gaines Street, Tallahassee, Florida 32399, [phone] or the Florida Department of State at 500 S. Bronough Street, Tallahassee, Florida 32399, [phone].

(1) No change.

(2) Sections 2, 3, 4, 5, 6, 7, 8, and 10(a) of the Securities Act of 1933, (15 U.S.C. §§77b, 77c, 77d, 77e, 77f, 77g, 77h, and  77j) (7-6-23) (6-4-19), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-11282.

(3) Securities Exchange Act of 1934 (15 U.S.C. §§78a through 78qq) (7-6-23) (4-12-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15083.

(4) Investment Company Act of 1940 (15 U.S.C. §§80a-1 through 80a-64) (7-6-23) (4-3-19), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-11284.

(5) The Investment Advisers Act of 1940 (15 U.S.C. §§80b-1 through 80b-21) (7-6-23) (3-11-19), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-11285.

(6) through (13) No change.

(14) SEC Rules 134, 134a, 135a, 144, 156, 419, 481 and 482, (17 C.F.R. §§230.134, 230.134a, 230.135a, 230.144, 230.156, 230.419, 230.481 and 230.482) (4-1-22 4-1-21 edition as amended in 87 FR 72846-72847 (Nov. 25, 2022) and 88 FR 17710 (Mar. 24, 2023)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15085.

(15) through (16) No change.

(17) SEC Rule 415 (17 C.F.R. §230.415) (4-1-22 4-1-21 edition as amended in 87 F.R. 70166, 70199 (Dec. 9, 2021)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX  http://www.flrules.org/Gateway/reference.asp?No=Ref-15088.

(18) through (29) No change.

(30) Regulation Best Interest (17 C.F.R. §240.15l-1) (4-1-22 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX.

(31) (30) SEC Rules 17a-3 and 17a-4 (17 C.F.R. §§240.17a-3 and 240.17a-4) (4-1-22 4-1-20 edition as amended in 88 F.R. 39994 (June 20, 2023)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-12531.

(32) (31) SEC Rules 17a-5 (17 C.F.R. §240.17a-5) (6-1-14) and 17a-10 (17 C.F.R. §240.17a-10) (12-9-81), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-04523.

(33) (32) SEC Rules 17a-11 and 17a-14 (17 C.F.R. §§240.17a-11 and 240.17a-14) (4-1-20 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-12532.

(34) (33) SEC Rule 17f-2 (17 C.F.R. §240.17f-2) (4-1-13 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-04533.

(35) (34) Regulation M (17 C.F.R. §§242.100 through 242.105) (4-1-22 4-1-21  edition as amended in 88 86 F.R. 39994 (June 20, 2023) 18596, 18809 (Apr. 9, 2021)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15093.

(36) (35) Regulation SHO (17 C.F.R. §§242.200-242.203) (4-1-22 4-1-21 edition as amended in 86 F.R. 18596, 18809 (Apr. 9, 2021)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15094.

(37) (36) SEC Rule 601 (17 C.F.R. §242.601) (4-1-14 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-04543.

(38) (37) Regulation S-P §248.30 (17 C.F.R. §248.30) (4-1-18 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-11294.

(39) (38) SEC Rules 204-1, 204-2, 204-3, 205-1, 205-2, 205-3, 206(3)-1, 206(3)-2, 206(4)-1 (17 C.F.R. §§275.204-1; 275.204-2; 275.204-3; 275.205-1; 275.205-2; 275.205-3; 275.206(3)-1; 275.206(3)-2; 275.206(4)-1 (4-1-21 edition as amended in 86 FR 13024, 13138-13142 (Mar. 5, 2021) and 87 F.R. 22444, 22447 (April 15, 2022)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-15095.

(40) (39) FASB Rule ASC 946-210-50 (existing as of 7-5-23 2-3-15), available for inspection at the Office due to copyright restrictions.

(41) (40) FINRA Rules 1020 and 1240 (existing as of 7-5-23 5-9-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15096.

(42) (41) FINRA Rule 2000 Series (2010 through 2370) (existing as of 7-5-23 5-9-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15097.

(43) (42) FINRA Rule 3000 Series (3110 through 3310) (existing as of 7-5-23 5-9-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15098.

(44) (43) FINRA Rule 4000 Series (4110 through 4590) (existing as of 7-5-23 5-9-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15099.

(45) (44) FINRA Rule 5000 Series (5110 through 5350) (existing as of 7-5-23 5-10-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15100.

(46) (45) FINRA Rule 6000 Series (6110 through 6898) (existing as of 7-5-23 5-10-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15101.

(47) (46) FINRA Rule 7000 Series (7110 through 7730) (existing as of 7-5-23 5-11-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15102.

(48) (47) FINRA Rule 11000 Series (11100 through 11900) (existing as of 7-5-23 5-11-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15103.

(49) (48) MSRB Definitional Rules D-1 to D-15, and General Rules G-1 to G-48 (existing as of 10-1-22 10-1-21), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15105.

(50) (49) NYSE American Rule 341A (existing as of 7-5-23 3-11-19), available for inspection at the Office due to copyright restrictions.

(51) (50) NYSE Rule 345A (existing as of 7-5-23 3-10-19), available for inspection at the Office due to copyright restrictions.

(52) (51) NYSE Rules 412 and 435 (existing as of 2-21-19), available for inspection at the Office due to copyright restrictions.

(53) (52) NYSE Chicago Inc. Article 6, Rule 11 (existing as of 7-5-23 3-11-19), available for inspection at the Office due to copyright restrictions.

Rulemaking Authority 517.03(1), 517.1215(2), 517.1217 FS. Law Implemented 517.081, 517.12(4), 517.1215, 517.1217, 517.161(1) FS. History–New 9-22-14, Amended 5-6-15, 11-26-19, 1-18-21, 2-14-23,               .

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Alisa G. Goldberg, Director, Division of Securities

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Financial Services Commission

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: December 19, 2023

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: August 10, 2023