New Jersey Statutes Title 49. Sale of Securities 49 § 3-49

When used in this act, unless the context requires otherwise:

(a) “Bureau” means the agency designated in subsection (a) of section 19 of P.L.1967, c. 93 ( C.49:3-66 );

(b) “Agent” means any individual other than a broker-dealer, who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.  “Agent” does not include an individual who represents an issuer in (1) effecting transactions in a security exempted by paragraph (1), (2), (3), or (11) of subsection (a) of section 3 of P.L.1967, c. 93 ( C.49:3-50 );  (2) effecting transactions exempted by subsection (b) of section 3 of P.L.1967, c. 93 ( C.49:3-50 );  (3) effecting transactions with existing employees, partners, or directors of the issuer, if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this State;  or (4) a broker-dealer in effecting transactions in this State limited to those transactions described in paragraph (2) of subsection (h) of section 15 of the “Securities Exchange Act of 1934,” 15 U.S.C. s.78o(h)(2) ;  or (5) such other persons not otherwise within the intent of this subsection (b), as the bureau chief may by rule or order designate.  A partner, officer, or director of a broker-dealer or issuer, or a person occupying a similar status or performing similar functions, is an agent only if he otherwise comes within this definition.  The bureau chief may by rule or order, as to any transaction, waive the requirement of agent registration.  The bureau chief may by rule define classes of persons as “agents,” if those persons are regulated as “agents” by the Securities and Exchange Commission or any self-regulatory organization established pursuant to the laws of the United States;

(c) “Broker-dealer” means any person engaged in the business of effecting or attempting to effect transactions in securities for the accounts of others or for his own account.  “Broker-dealer” does not include (1) an agent, (2) an issuer, (3) a person who effects transactions in this State exclusively in securities described in paragraphs (1) and (2) of subsection (a) of section 3 of P.L.1967, c. 93 ( C.49:3-50 ), (4) a bank, savings institution, or trust company, or (5) a person who effects transactions in this State exclusively with or through (i) the issuers of the securities involved in the transactions, (ii) other broker-dealers, (iii) banks, savings institutions, trust companies, insurance companies, investment companies as defined in the “Investment Company Act of 1940,”  1 pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees or (iv) such other persons not otherwise within the intent of this subsection (c), as the bureau chief may by rule or order designate;

(d) “Capital” shall mean net capital, as defined and adjusted under the formula established by the Securities and Exchange Commission in Rule 15c3-1, 17 C.F.R. s.240.15c3-1 , made pursuant to the “Securities Exchange Act of 1934,”  2 prescribing a minimum permissible ratio of aggregate indebtedness to net capital as such formula presently exists or as it may hereafter be amended;

(e) “Fraud,” “deceit,” and “defraud” are not limited to common-law fraud or deceit.  “Fraud,” “deceit” and “defraud” in addition to the usual construction placed on these terms and accepted in courts of law and equity, shall include the following, provided, however, that any promise, representation, misrepresentation or omission be made with knowledge and with intent to deceive or with reckless disregard for the truth and results in a detriment to the purchaser or client of an investment adviser:

(1) Any misrepresentation by word, conduct or in any manner of any material fact, either present or past, and any omission to disclose any such fact;

(2) Any promise or representation as to the future which is beyond reasonable expectation or is unwarranted by existing circumstances;

(3) The gaining of, or attempt to gain, directly or indirectly, through a trade in any security, a commission, fee or gross profit so large and exorbitant as to be unconscionable, unreasonable or in violation of any law, regulation, rule, order or decision of the Securities and Exchange Commission, or the bureau chief;  or to the extent that such law, regulation, rule or order directly applies to the person involved, the gaining of, or attempt to gain, directly or indirectly, through a trade in any security, a commission, fee or gross profit so large and exorbitant as to be in violation of any law, regulation, rule, order or decision of any other state or Canadian securities administrator, or any self-regulatory organization established pursuant to the laws of the United States;

(4) Generally any course of conduct or business which is calculated or put forward with intent to deceive the public or the purchaser of any security or investment advisory services as to the nature of any transaction or the value of such security;

(5) Any artifice, agreement, device or scheme to obtain money, profit or property by any of the means herein set forth or otherwise prohibited by this act;

(f) “Guaranteed” means guaranteed as to payment of principal, interest or dividends;

(g)(1) “Investment adviser” means:

(i) any person who, for direct or indirect compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, selling or holding securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities;  and

(ii) any financial planner and other person who provides investment advisory services to others for compensation and as part of a business or who holds himself out as providing investment advisory services to others for compensation.

(2) “Investment adviser” does not include:

(i) a bank, savings institution, or trust company;

(ii) a lawyer, accountant, engineer, or teacher whose performance of these services is solely incidental to the practice or conduct of the profession and who does not hold himself out as providing investment advisory or financial planning services, and who receives no special compensation for those investment advisory or financial planning services;

(iii) a broker-dealer registered under this act;

(iv) a publisher of any bona fide newspaper, news magazine, or business or financial publication of general, regular, and paid circulation;

(v) a person whose advice, analyses, or reports relate only to securities exempted by paragraphs (1) and (2) of subsection (a) of section 3 of P.L.1967, c. 93 ( C.49:3-50 );

(vi) a person whose only clients in this State are other investment advisers, any person that is registered as an “investment adviser” under section 203 of the “Investment Advisers Act of 1940,” 15 U.S.C. s.80b-3 , or excluded from the definition of an “investment adviser” under paragraph (11) of subsection (a) of section 202 of the “Investment Advisers Act of 1940,” 15 U.S.C. s.80b-2(a)(11) , broker-dealers, banks, bank holding companies, savings institutions, trust companies, insurance companies, investment companies as defined in the “Investment Company Act of 1940,” pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustees;

(vii) any person that is registered as an “investment adviser” under section 203 of the “Investment Advisers Act of 1940,” 15 U.S.C. s.80b-3 , or excluded from the definition of an “investment adviser” under paragraph (11) of subsection (a) of section 202 of the “Investment Advisers Act of 1940,” 15 U.S.C. s.80b-2(a)(11) ;

(viii) an investment adviser representative;  or

(ix) such other persons not otherwise within the intent of this subsection (g) as the bureau chief may by rule or order designate.

Subject to applicable federal law, the bureau chief may by rule limit the exclusions set out in this paragraph (2), except for those exclusions provided in subparagraph (i) of paragraph (2).

For purposes of this act, “investment advisory services” means those services rendered by an “investment adviser” as defined in this subsection;

(h) “Issuer” means any person who issues or proposes to issue any security, except that (1) with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors (or persons performing similar functions) or of the fixed, restricted management, or unit type, the term “issuer” means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which the security is issued;  and (2) with respect to certificates of interest in oil, gas, or mining titles or leases, there is not considered to be any “issuer”;

(i) “Person” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government;

(j)(1) “Sale” or “sell” includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security or investment advisory services for value;

(2) “Offer” or “offer to sell” includes every attempt or offer to dispose of, or solicitation of any offer to buy, a security or interest in a security or investment advisory services for value;

(3) Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value;

(4) A purported gift of assessable stock is considered to involve an offer and sale;

(5) Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert into another security of the same or another issuer, is considered to include an offer of the other security;

(6) The terms defined in this subsection (j) do not include (i) any bona fide pledge or loan;  (ii) any stock dividend, whether the corporation distributing the dividend is the issuer of the stock or not, if nothing of value is given by stockholders for the dividend other than the surrender of a right to a cash or property dividend when each stockholder may elect to take the dividend in cash or property or in stock;  (iii) any act incident to a class vote by stockholders, pursuant to the certificate of incorporation or the applicable corporation statute, on a merger, consolidation, reclassification of securities, or sale of corporate assets in consideration of the issuance of securities of another corporation;  or (iv) any act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash;

(k) “Savings institutions” shall mean any savings and loan association or building and loan association operating pursuant to the “Savings and Loan Act (1963),” P.L.1963, c. 144 ( C.17:12B-2 et seq. ), and any federal savings and loan association and any association or credit union organized under the laws of the United States or of any state whose accounts are insured by a federal corporation or agency;

(l) “Securities Act of 1933,” 15 U.S.C. s.77a et seq. ;  “Securities Exchange Act of 1934,” 15 U.S.C. s.78a et seq. ;  “Public Utility Holding Company Act of 1935,” 15 U.S.C. s.79 et seq. ;  “Investment Advisers Act of 1940,” 15 U.S.C. s.80b-1 et seq. ;  “Investment Company Act of 1940,” 15 U.S.C. s.80a-1 et seq. ;  and “Commodity Exchange Act,” 7 U.S.C. s.1 et seq. mean the federal statutes of those names;

(m) “Security” means any note;  stock;  treasury stock;  bond;  debenture;  evidence of indebtedness;  certificate of interest or participation in any profit-sharing agreement, including, but not limited to, certificates of interest or participation in real or personal property;  collateral-trust certificate;  preorganization certificate or subscription;  transferable share;  investment contract;  voting-trust certificate;  certificate of deposit for a security;  certificate of interest in an oil, gas or mining title or lease;  a viatical investment;  or, in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.  “Security” does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed or variable number of dollars either in a lump sum or periodically for life or some other specified period;

(n) “State” means any state, territory, or possession of the United States, as well as the District of Columbia and Puerto Rico;

(o) “Nonissuer” means secondary trading not involving the issuer of the securities or any person in a control relationship with the issuer;

(p) “Accredited investor” means any person who is an “accredited investor” as defined by subsection (15) of section 2 of the “Securities Act of 1933,” 15 U.S.C. s.77b(a)(15) , and 17 C.F.R. s.230.215 and s.230.501 or any successor rule promulgated pursuant to that act.

The bureau chief may rule, or order, waive or modify the conditions in this subsection (p) and shall interpret and apply this subsection (p) so as to effectuate greater uniformity and coordination in federal-state securities registration exemptions;

(q) “Direct participation security” means a security which provides for flow-through tax consequences (tax shelter), regardless of the structure of the legal entity or vehicle for distribution, including, but not limited to, a security representing an interest in gas, oil, real estate, agricultural property, cattle, a condominium, a Subchapter S corporation, a limited liability company and all other securities of a similar nature, regardless of the industry represented by the security, or any combination thereof.  Excluded from this definition are real estate investment trusts, tax qualified pension and profit-sharing plans pursuant to sections 401 and 403(a) of the Internal Revenue Code of 1986 , 26 U.S.C. ss.401 and 403(a), and individual retirement plans under section 408 of the Internal Revenue Code of 1986 , 26 U.S.C. s.408 , tax sheltered annuities pursuant to the provisions of section 403(b) of the Internal Revenue Code of 1986 , 26 U.S.C. s.403(b) , and any company including separate accounts registered pursuant to the “Investment Company Act of 1940;”

(r) “Blind pool” means an offering of securities in which, as to 65% or more of the proceeds of the offering, the prospectus discloses no specific purpose to which the proceeds of the offering will be put, or the prospectus discloses no specific assets to be purchased, projects to be undertaken, or business to be conducted, except for:

(1) an offering of securities to provide working capital for an operating company (as opposed to a development stage company);

(2) an offering of securities by an investment company registered under the “Investment Company Act of 1940,” including a business development company;  or

(3) an offering of securities by a small business investment company licensed by the Small Business Administration or a business development company within the meaning of the “Investment Advisers Act of 1940;”

(s) “Investment adviser representative” means any person, including, but not limited to, a partner, officer, or director, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, who is employed by or associated with an investment adviser registered under this act, or who has a place of business located in this State and is employed by or associated with a person registered or required to be registered as an investment adviser under section 203 of the “Investment Advisers Act of 1940,” 15 U.S.C. s.80b-3 ;  and who does any of the following:

(1) makes any recommendations or otherwise renders advice regarding securities if the person has direct advisory client contact;

(2) manages accounts or portfolios of clients;

(3) determines recommendations or advice regarding securities;

(4) solicits, offers or negotiates for the sale of or sells investment advisory services;  or

(5) directly supervises any investment adviser representative or the supervisors of those investment adviser representatives.  “Investment adviser representative” does not include a broker-dealer or an agent;

(t) “Institutional buyer” includes, but is not limited to, a “qualified institutional buyer” as defined in SEC Rule 144A, 17 C.F.R. s.230.144A ;

(u) “Willful” or “willfully” means a person who acts intentionally in the sense that the person is aware of what he is doing;

(v) “Federal covered security” means any security described as a covered security in subsection (b) of section 18 of the “Securities Act of 1933,” 15 U.S.C. s.77r(b) ;

(w) “Viatical investment” means the contractual right to receive any portion of the death benefit or ownership of a life insurance policy or certificate, for consideration that is less than the expected death benefit of the life insurance policy or certificate.  Viatical investment does not include:

(1) any transaction between a viator and a viatical settlement provider as defined by the “Viatical Settlements Act”, P.L.2005, c. 229 ( C.17B:30B-1 et al.);

(2) any transfer of ownership or beneficial interest in a life insurance policy from a viatical settlement provider to another viatical settlement provider as defined in the “Viatical Settlements Act”, P.L.2005, c. 229 ( C.17B:30B-1 et al.) or to any legal entity formed solely for the purpose of holding ownership or beneficial interest in a life insurance policy or policies;

(3) the bona fide assignment of a life insurance policy to a bank, savings bank, savings and loan association, credit union, or other licensed lending institution as collateral for a loan;

(4) the exercise of accelerated benefits pursuant to the terms of a life insurance policy issued in accordance with the provisions of Title 17B of the New Jersey Statutes;  or

(5) a loan by a life insurance company pursuant to the terms of the life insurance contract;

(x) “Internet site operator” means a business entity organized under the laws of this State and authorized to do business in this State which makes available to the public through an Internet website any offering pursuant to the exemption in paragraph (14) of subsection (b) of section 3 of P.L.1967, c. 93 ( C.49:3-50 ).  “Internet site operator” shall not include a broker-dealer.

1 15 U.S.C.A. § 80a-1 et seq.
2 15 U.S.C.A. § 78a et seq.

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