Pennsylvania Act 1921-176 — INVESTMENT BUSINESS LICENSING LAW

Act text

INVESTMENT BUSINESS LICENSING LAW
                  Act of May 5, 1921, P.L. 374, No. 176               Cl. 07
                                  AN ACT

     Providing for the licensing and regulation of corporations,
        copartnerships, associations, and individuals, engaged in the
        business of receiving payments or contributions to be held or
        used in any plan of accumulation or investment, or of
        issuing, negotiating, offering for sale, or selling any
        certificates, securities, contracts, or other choses in
        actions evidenced by writing on the partial payment or
        instalment plan, or of assuming fixed obligations, or
        issuing, in connection therewith, a contract based upon
        payments being made upon instalments or single payments,
        under which all or part of the total amount received is to be
        repaid at some future time, with or without profit; and
        imposing penalties.

        Section 1.  Be it enacted, &c., That wherever used in this
     act, the following words shall be construed as follows:
        "Corporation" shall mean a corporation formed, incorporated,
     or organized under the laws of this Commonwealth, or of any
     other state or territory, the District of Columbia, or any
     foreign country.
        "Person" shall mean an individual, firm, partnership, or
     association.
        "Contract" shall mean a bond, note, certificate, contract,
     obligation, agreement, pass book, or any other chose in action
     evidenced by writing.
        "Commission" shall mean the Pennsylvania Securities
     Commission.
        (1 amended May 15, 1933, P.L.788, No.113)
        Section 2.  After the first day of October, one thousand nine
     hundred and twenty-one, no corporation or person shall, whether
     or not operating under a declaration of trust or other
     agreement, engage or continue, either directly or indirectly, in
     the business, within this Commonwealth, of receiving single
     payments, regular instalment payments, or contributions to be
     held or used in any plan of accumulation or investment, or of
     issuing, negotiating, offering for sale, or selling any contract
     on the partial payment or instalment plan, or of assuming fixed
     obligations, or issuing, in connection therewith, a contract
     based upon payments being made upon instalments or single
     payment, under which all or part of the total amount received is
     to be repaid at some future time, either with or without profit,
     unless such corporation or person is licensed to transact such
     business within this Commonwealth by the commission in the
     manner hereinafter provided.
        (2 amended May 15, 1933, P.L.788, No.113)
        Section 3.  Every corporation or person, desiring to obtain a
     license under the provisions of this act, shall file with the
     commission, an application in writing in such form as may be
     prescribed by the commission. Before a license shall be issued
     by the commission, it shall make, or cause to be made, an
     investigation of the condition and affairs of the applicant and
     its general plan of operation. It shall investigate the moral
     character and general fitness of the applicant, if an
     individual, and of the members of a partnership or association,
     and of the directors, managers, trustees, and other officers of
     every applicant, to discharge the duties reposed in them, and
     may examine any or all of them under oath. It shall require the
     applicant to submit a mathematical chart or calculation, showing
     in detail the operation of the plan of investment carried on or
     proposed to be carried on, for the purpose of determining
     whether the same is financially and mathematically sound and the
     contracts or obligations issued or proposed to be issued
     possible of fulfillment.  Unless the commission is satisfied as
     to the character and general fitness of the managing officers of
     the applicant to honestly and efficiently carry on its business,
     and that the plan of operation is financially sound, and the
     contracts issued or proposed to be issued possible of
     fulfillment, it shall refuse the license, and forthwith notify
     the applicant of such refusal, and specify in the notice the
     cause or causes thereof. The commission may revoke such license
     at any time when conditions arise which in its judgment, if
     existing at the time when the license was granted, would have
     been sufficient cause for refusing to issue such license.
        (3 amended May 15, 1933, P.L.788, No.113)
        Section 4.  No corporation or person shall be licensed under
     the provisions of this act unless and until it has deposited
     with the commission in cash or bonds of the United States or of
     the State of Pennsylvania or of cities, counties, boroughs, or
     school districts of this Commonwealth, or of any authority
     created by the State or any political subdivision or any other
     state of the United States, approved by the commission of the
     clear market value of one hundred thousand dollars ($100,000),
     as security for the fulfillment of its contracts made heretofore
     or hereafter with residents of Pennsylvania. Exchanges of such
     bonds may be made from time to time with the approval of the
     commission. If any of said bonds are called for payment, the
     proceeds thereof shall remain in the hands of the commission
     until other bonds of the character described in this section
     shall be substituted in like amount for the bonds so paid. The
     corporation or person making such deposit shall be entitled to
     the income thereon.
        (4 amended May 3, 1956, 1955 P.L.1527, No.502)
        Section 5.  Every corporation or person licensed under the
     provisions of this act shall, before such license is issued, pay
     to the commission a fee of one hundred dollars ($100) at the
     time such license is issued, and twenty-five dollars ($25) on or
     before the first day of October annually thereafter. All fees
     paid to the commission under the provisions of this act shall be
     paid by it, through the Department of Revenue, into the State
     Treasury.
        (5 amended May 15, 1933, P.L.788, No.113)
        Section 6.  Every corporation or person licensed under the
     provisions of this act shall annually, on or before the
     fifteenth day of January, file in the office of the commission a
     report, which shall exhibit its financial condition on the
     thirty-first day of December of the previous year and its
     business of that year, and shall, at any other time upon written
     request of the commission, file a supplemental report of its
     financial condition and business done. For cause the commission
     may extend the time for filing the annual report, but not to a
     date later than the fifteenth day of February. Such report shall
     be in such form as may be established from time to time by the
     commission, and shall be sworn to by the president and secretary
     of the corporation or person, or, in their absence, by two of
     its principal officers empowered to act in their stead. A
     corporation or person which neglects to file its annual report
     with the commission within the time required shall be liable to
     a penalty of one hundred dollars ($100) for each day during
     which such neglect continues. Such penalty shall be collected by
     the Attorney General as debts due the Commonwealth are
     collected.
        (6 amended May 15, 1933, P.L.788, No.113)
        Section 7.  The commission may require every corporation or
     person licensed under the provisions of this act to set apart a
     fund, no portion of which shall be applied to the expense of
     such corporation or person, which shall consist of not less than
     ten per centum of the amount designated in each contract issued
     as applicable to the payment of the expenses of conducting the
     business of such corporation or person. Such fund shall be
     invested at the close of each calendar year, or oftener if the
     commission may require, in bonds of the character described in
     section four of this act, and forthwith deposited with the
     commission, in the same manner and under the same terms as
     prescribed by said section, as additional security for the
     fulfillment of its contracts, provided such corporations or
     person may deposit cash with the commission in lieu of
     securities.
        (7 amended May 15, 1933, P.L.788, No.113)
        Section 8.  The commission, or its duly authorized
     representative, shall have free access to all the books and
     papers of the corporation or person which relate to its business
     and to the books and papers kept by any of its agents, and may
     administer oaths to and examine as witnesses the directors,
     officers, and agents of said corporation or person, and any
     individual or the members of any copartnership or association
     licensed hereunder, and any other person, relative to its
     affairs, transactions and condition.
        (8 amended May 15, 1933, P.L.788, No.113)
        Section 9.  Whenever any corporation or person licensed under
     the provisions of this act shall desire to discontinue with this
     Commonwealth the business of the nature hereinbefore set forth
     and described, it may make application by petition to the court
     setting forth its resources and liabilities within and without
     this Commonwealth, and particularly an itemized and complete
     list of the holders or owners of the outstanding contracts
     issued by such corporation or person, together with the last
     known address of such holders or owners, and, in each case, the
     total amount of the liability of such corporation or person
     thereon, if any, and thereupon the said court, after due
     hearing, of which the commission shall have such notice as the
     court may determine, may make such order as will permit the
     withdrawal of said cash or bonds deposited with the commission,
     or a part thereof, and will, at the same time, fully protect the
     rights of all persons owning or holding the contracts issued by
     such corporation or person.
        (9 amended May 15, 1933, P.L.788, No.113 and repealed in part
     Apr. 28, 1978, P.L.202, No.53)
        Compiler's Note:  Section  of Act 53 of 1978 provided that
            the reference to the "court" in section 9 shall be deemed
            a reference to a court of competent jurisdiction.
        Section 10.  Any corporation or person violating any of the
     provisions of this act, or failing to comply with any
     requirement imposed upon it by the commission pursuant to any of
     the provisions of this act, is guilty of a misdemeanor, and,
     upon conviction, shall be sentenced to pay a fine of not less
     than five hundred dollars ($500) nor more than five thousand
     dollars ($5,000). Each transaction carried on in violation of
     this act shall constitute a separate offense.
        (10 amended May 15, 1933, P.L.788, No.113)
        Section 11.  Any individual who sells or attempts to sell
     within this Commonwealth any contracts of or issued by any
     corporation or person subject to the requirements of this act,
     unless such corporation or person is licensed as herein
     provided, is guilty of a misdemeanor, and, upon conviction,
     shall be sentenced to pay a fine of not less than one hundred
     dollars ($100) nor more than one thousand dollars ($1,000), or
     to undergo imprisonment for not more than one year, or both.
        Section 12.  The provisions of this act shall not apply to
     any person or corporation engaged entirely in the business of
     issuing, negotiating, offering for sale, or selling contracts
     which at the time of issuance, negotiation, offering for sale,
     or sale are secured by adequate property, real or personal, nor
     to any domestic or foreign banks, banking companies, cooperative
     banking associations, trust, safe deposit, real estate,
     mortgage, title insurance, guaranty, surety and indemnity
     companies, savings institutions, savings banks, and provident
     institutions, or to mutual savings funds, employes' savings
     funds, building and loan associations, or corporations doing a
     safe deposit business only, nor to national banking
     associations, nor to any corporation, copartnership,
     association, exchange, society, or order, subject to the
     supervision of the Insurance Commissioner of the Commonwealth,
     nor to contracts issued by a corporation or person for the
     purpose of raising money for its principal business, if its
     principal business is other than the issuing or selling of
     contracts or obligations described in section two of this act.
        The provisions of this act shall not be construed to affect
     in any way the act, approved the thirteenth day of April, one
     thousand nine hundred twenty-seven (Pamphlet Laws, two hundred
     seventy-three), entitled "An act for the registration and
     regulation of certain individuals and entities selling, offering
     for sale or delivery, soliciting subscriptions to, or orders
     for, or undertaking to dispose of, inviting offers for, or
     inquiries about, or dealing in any manner in, securities defined
     herein, including securities issued by them; conferring powers
     and imposing duties on the Pennsylvania Securities Commission
     and otherwise providing for the administration of this act;
     providing for appeals to the court of common pleas of Dauphin
     County and to the Supreme Court of Pennsylvania; prescribing
     penalties; and making appropriations," its amendments and
     supplements.
        All books, papers, records, securities, and moneys of or
     relating to corporations and persons subject to the provisions
     of this act, which are in the office of the Department of
     Banking, shall be transferred by the Department of Banking to
     the commission.
        (12 amended May 15, 1933, P.L.788, No.113)
        Section 13.  The act, approved the sixteenth day of July, one
     thousand nine hundred and nineteen (Pamphlet Laws, nine hundred
     and eighty-nine), entitled "An act providing that unincorporated
     organizations, associations, societies, partnerships, or
     individuals, creating funds derived from periodical payments by
     members or other persons, as well as from fees, forfeiture,
     incidental fees, and payment of premiums and interest, which
     fund is to be loaned or advanced to members or to other persons
     for the purpose of enabling them to acquire real estate,
     personal property, or to construct buildings, or for any other
     purpose, shall be deemed to be building and loan associations
     for the purpose of making them subject to the supervision and
     control of the Banking Department," is hereby repealed.
        All other acts or parts of acts inconsistent herewith are
     hereby repealed.