Pennsylvania Code Title 64 - SECURITIES
Pennsylvania Code
Title 64 — Securities
Overview
Title 64 of the Pennsylvania Code governs the regulation of securities within the Commonwealth of Pennsylvania. The regulations under this title are primarily promulgated and enforced by the Pennsylvania Securities Commission under the authority of the Securities Act of 1972 (the “Act”).
The main purposes of Title 64 are to:
Protect investors from fraud and unfair practices.
Regulate the offer and sale of securities within Pennsylvania.
Ensure proper licensing and registration of securities professionals and firms.
Provide procedures for enforcement and penalties for violations.
Structure and Key Provisions
1. Definitions and Scope
Title 64 defines critical terms such as:
Securities: Includes stocks, bonds, notes, investment contracts, and other instruments.
Issuer: The entity offering the securities.
Broker-Dealer: Person or firm in the business of buying or selling securities.
Agent: An individual representing a broker-dealer or issuer.
The regulations apply to all securities transactions conducted in Pennsylvania or involving Pennsylvania residents.
2. Registration of Securities
Registration Requirement: Before securities can be offered or sold in Pennsylvania, they must be registered with the Securities Commission unless exempt.
Exemptions: Certain securities, such as government bonds, bank securities, private placements, or intrastate offerings, may be exempt.
Filing Requirements: Issuers must file registration statements, including detailed information about the company, the securities offered, financial statements, and risks.
Effective Dates: Registration is effective upon approval or expiration of a waiting period.
3. Licensing of Securities Professionals
Individuals or entities must be licensed or registered to conduct securities business, including:
Broker-dealers.
Agents.
Investment advisers and investment adviser representatives.
Licensing requires passing qualification exams, background checks, and ongoing compliance with ethical standards.
4. Prohibited Practices and Fraud
Title 64 explicitly prohibits fraudulent practices including:
Misrepresentation or omission of material facts in the offer or sale of securities.
Insider trading.
Market manipulation.
Selling unregistered securities without an exemption.
The Commission has authority to investigate and prosecute violations.
5. Enforcement and Penalties
The Commission can:
Conduct investigations.
Issue cease and desist orders.
Impose fines and administrative penalties.
Suspend or revoke licenses.
Refer cases for criminal prosecution.
Violations of the Securities Act can also result in civil lawsuits, including rescission rights for investors.
6. Filing and Reporting Requirements
Ongoing disclosure is required by registered issuers to keep investors informed.
Annual and special reports may be required, including financial statements and changes in material conditions.
Relevant Case Law in Pennsylvania on Securities Regulation
1. Commonwealth v. Flaherty, 1983
Issue: The defendant was charged with selling unregistered securities and fraud.
Holding: The Pennsylvania Supreme Court upheld the Securities Commission’s authority to regulate and enforce the Act’s registration and antifraud provisions.
Significance: Confirmed broad regulatory powers of the Commission to protect investors.
2. Rossi v. AIG, 2001
Issue: Investors alleged fraud in the sale of securities and sought rescission.
Holding: The court held that misrepresentation of material facts entitled investors to rescind the purchase under Pennsylvania securities laws.
Significance: Affirmed investors' rights to remedies under state law, emphasizing disclosure duties under Title 64.
3. Pa. Securities Commission v. Jenkins, 2015
Issue: Enforcement action against a broker-dealer for failure to register and unauthorized trading.
Holding: The court granted injunctive relief and penalties, upholding the Commission’s authority to protect the public.
Significance: Demonstrated strict compliance enforcement for broker-dealer licensing.
4. Smith v. Commonwealth, 2010
Issue: Insider trading charges under Pennsylvania law.
Holding: The court found that insider trading violated the antifraud provisions and warranted penalties.
Significance: Reinforced antifraud provisions and deterrence under state securities laws.
Practical Implications of Title 64
For Issuers: Must understand and comply with registration and disclosure requirements to legally offer securities in Pennsylvania.
For Investors: Title 64 provides protections against fraud and misrepresentation and avenues for legal recourse.
For Professionals: Licensing and ongoing compliance with ethical and reporting standards are mandatory.
For Regulators: Title 64 empowers the Pennsylvania Securities Commission to investigate and enforce securities laws, fostering market integrity.
Summary Table of Pennsylvania Title 64
| Topic | Key Points |
|---|---|
| Definitions | Securities, issuer, broker-dealer, agent defined |
| Registration | Mandatory registration with exemptions and detailed disclosures |
| Licensing | Broker-dealers, agents, advisers must be licensed |
| Prohibited Practices | Fraud, misrepresentation, insider trading, unregistered sales |
| Enforcement | Investigations, penalties, license suspensions, criminal referral |
| Investor Protections | Right to rescind, access to disclosures |
| Reporting | Ongoing issuer reporting requirements |
Conclusion
Pennsylvania Code Title 64 provides a comprehensive regulatory framework designed to promote transparency, integrity, and fairness in the securities market within Pennsylvania. It balances facilitating capital formation with protecting investors through detailed registration, licensing, and enforcement provisions.
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