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statutes Iowa. Laws.

Iowa law relating to inspection of stocks, bonds and securities to prevent fraud and providing penalties for violation thereof commonly known as the Blue sky law ... Passed by the 36th General assembly, 1915; in effect April 28, 1915 online

. (page 1 of 2)
Online Librarystatutes Iowa. LawsIowa law relating to inspection of stocks, bonds and securities to prevent fraud and providing penalties for violation thereof commonly known as the Blue sky law ... Passed by the 36th General assembly, 1915; in effect April 28, 1915 → online text (page 1 of 2)
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GIFT OF




GIFT

MAR 27 t

I IOWA LAW

Relating to

Inspection of Stocks, Bonds
and Securities

TO

Prevent Fraud and Providing Penalties for
Violation Thereof

Commonly Known as the

"BLUE SKY LAW"

House File No. 351



Passed by the 36th General Assembly, 1915

In Effect April 28, 1915




Compilled by
W. S. ALLEN

Secretary of State

ff



Contents



Sec. 1. Repeals Chap. 13-B, Title IX enacts
substitute therefor securing per-
mit.

Sec. 2. Exemptions.

Sec. 3. What to file papers verified.

Sec. 4. Fees for filing annual fees.

Sec. 5. Secretary of State keep account of
fees report to governor and legis-
lature.

Sec. 6. Resolution authorizing service of
process.

Sec. 7. Statements examined conditions for
granting or refusing permit.

Sec. 8. Changes in articles or plan of busi-
ness approval of.

Sec. 9. Annual report filed when pay an-
nual fee.

Sec. 10. Failure to file annual reports pen-
alty collection of.

Sec. 11. Accounts how kept subject to exami-
nation fees for.

Sec. 12. Permit cancelled when.

Sec. 13. Fees accounted for compensation of
clerks fixed by executive council.

Sec. 14. Bona fide owner of stocks may sell
conditions.

Sec. 15. Form of permit.

Sec. 16. Agents license for how secured.

Sec. 17. Brokers fees for give bond.

Sec. 18. Appeal to executive council when
and how made.

Sec. 19. Supersedeas in appeal when and
how.

Sec. 2O. Penalty for false statement.
Sec. 21. Penalty for sale without permit.

Sec. 22. False statement misdemeanor pen-
alty.

Sec. 23. Decision of courts effect.
Sec. 24. Publication clause.



House File No. 351



AN ACT to repeal the law as it appears in chap-
ter (13-B), title IX, Supplement to the Code,
1913, and to enact a substitute therefor, to
prevent fraud in the sale and disposition of
stocks, bonds and other securities within this
state, by requiring an inspection of such
stocks, bonds and other securities, and an
inspection of the business of such persons,
firms, associations, companies or corporations,
including their agents and representatives,
and the payment of an inspection fee.

Be it Enacted by the General Assembly of the
State of Iowa:

Section 1. That the law as it appears in chap.
13-B, title IX, supplement to the code, 1913,
be and the same is hereby repealed, and the
following enacted in lieu thereof:

Every person, firm, association, company or
corporation that shall either directly or through
representatives or agents, sell, offer or negotiate
for sale, within this state, any stocks, bonds or
other securities, shall be subject to the provi-
sions of this act, except as herein otherwise
provided; and shall, before doing or offering to
do any such business in this state, be required
to secure a permit of the secretary of state of
the state of Iowa.

Section 2. The provisions of this act shall not
apply to

(a) Securities of this state, or of the United
States, or of any state or territory thereof, or of
any foreign government, or of any district,
county, township, city, town or other public
taxing subdivision of any state or territory of
the United States, including all drainage, county,
school or other municipal bonds of this state;

(b) Securities of state, savings or nationai
banks of any state or territory of the Uni*<-"



States, or of trust companies or building and
loan associations of this state, including the
unsecured commercial paper of such institu-
tions;

(c) Securities of public or quasi-public cor-
porations, the issue of which securities is regu-
lated by any public board or commission now
or hereafter created by the laws of this state;

(d) Promissory notes and the mortgages,
contracts, collateral or other things, if any, se-
curing the same, when said notes and securities
have, in a bona fide way, been issued, given or
acquired in the 'ordinary course of legitimate
business, trade or commerce.

(e) The stock of any corporation organized
under the laws of this or any other state or
territory of the United States, or of the federal
government, provided that under the laws of
such state or territory or federal government
no capital stock of a corporation can be legally
issued unless the par value of said stock is paid
for in full in either cash or property at its actual
value before the issuance of such stock and
where all property and any other thing given
in exchange for such stock other than cash must
be valued at not more than its actual cash value
by some duly appointed officer or commission
of such state, territory or federal government
under the laws of which such corporation is or-
ganized and where such stock has been issued
in accordance with the provisions of such laws.

(f) The sale of stocks, bonds or other securi-
ties at judicial sale or by administrators or
executors.

Section 3. Before any person, firm, association,
company or corporation, subject to the provisions
of this act, shall secure a permit from the secre-
tary of state of the state of Iowa to sell, offer
or negotiate for sale any stocks, bonds or other
securities, in this state, such person, firm, asso-
ciation, company or corporation shall pay to the
secretary of state of the state of Iowa a filing
fee of $2.00 and an annual inspection fee of
$20.00 and file in the office of said secretary of



state the following papers and documents, to-
wit:

1. A copy of its constitution and by-laws,
or articles of co-partnership or association.

2. An itemized statement of its actual finan-
cial condition and the amount of its properties
and liabilities.

3. A statement showing in full detail the
plan upon which it proposes to transact busi-
ness.

4. A copy of all bonds or other securities
which it proposes to make with or sell to its
contributors, including the price at which such
stocks, bonds or other securities are to be sold
or offered for sale.

5. Sample copies of all literature or adver-
tising matter used or to be used by such person,
firm, association, company or corporation.

C. A statement showing the name and loca-
tion of its principal office of business and the
names and addresses of its officers and directors.

7. If said person, firm, association, company
or corporation is chartered to do business under
the laws of any other state or territory than the
state of Iowa, it shall file a copy of its charter
or other instrument or documents authorizing
it to do business in said state or territory, which
copy shall bear the certificate of the secretary
of state or other officer of such state having
custody of such records to the effect that the
same is a correct, true and complete copy of
said charter or other instrument, together with
the seal of such officer attached thereto, if such
officer is possessed of a seal.

All of the above described papers shall be
verified by the oath of the person receiving the
permit, if the business is carried on by an indi-
vidual, or by the oath of a member of a co-
partnership or association, or by the president
and secretary of a corporation, if the concern
be incorporated; provided, however, that the
secretary of state may, if in his judgment it
becomes necessary in order to prevent fraud in



the sale of any stocks, bonds or other securities
in this state, require of such person, firm, asso-
ciation or corporation, or any of the offcers,
agents or representatives thereof, additional in-
formation in the form of reports or otherwise,
duly verified.

Section 4. If any person, firm, association, com-
pany or corporation, subject to the provisions
of this act, desires to transact business in this
state and does not desire to pay the annual in-
spection fee of twenty dollars ($20.00) by reason
of the limited amount of business to be trans-
acted, or otherwise, said person, firm, associ-
ation, company or corporation shall have the op-
tion of paying to the secretary of state the filing
fee of two dollars incident to the cost of filing
and recording said papers and documents and an
inspection fee of one-tenth of one per cent upon
the face value of the securities for the sale of
which application is made to the secretary of
state of the state of Iowa; provided further,
however, that any person, firm, association,
company or corporation, paying the inspection
fee of one-tenth of one per cent upon the face
value of the securities which it is proposed to
sell within the state of Iowa, shall not be re-
quired to pay in the aggregate more than twenty
dollars ($20.00) inspection fees to the said secre-
tary of state in any one year.

Section 5. The secretary of state shall keep an
accurate account of all moneys received from
each person, firm, association, company or cor-
poration as filing and inspection fees under the
provisions of this act, and a record of all money
expended in the enforcement of the provisions
of this act, and at the end of the biennial period
a report shall be made to the governor and
legislature showing the amount of fees received
and the amount of the money expended in the
administration of this act, and if from said re-
port it shall appear that the inspection fees are
in substantial excess of the cost of inspection
and all expenses incidental thereto, the succeed-
ing legislature shall then reduce the amount of



said inspection fees in proportion to the amount
of such excess collected hereunder.

Section 6. Every non-resident person, firm, asso-
ciation, company or corporation subject to the
provisions of this act shall, before receiving a
certificate as provided for in section 1 hereof,
file in the office of the secretary of state an
agreement in writing signed by the person re-
ceiving the permit, if the business is to be
carried on by an individual, and by the signature
of a member of a co-partnership or company, if
it be a co-partnership or company, and by the
signatures of the president and secretary of the
incorporated or unincorporated company or asso-
ciation, if it be a company or association, authen-
ticated by the seal of said company, if possessed
of a seal, and shall be accompanied by a duly
certified copy of the order or resolution of the
board of directors, trustees or managers of the
corporation, authorizing the said president and
secretary to execute the same; that thereafter
service of notice of any action or process of any
kind against such non-resident person, firm, asso-
ciation, company or corporation, growing out
of the transaction of any business of said per-
son, firm, association, company or corporation
in this state may be made on the secretary of
state of the state of Iowa, and when so made,
such service of notice or process of any kind
shall be valid, binding and effective for all pur-
poses as if served upon said non-resident person,
firm, association, company or corporation accord-
ing to the laws of this or any other state, and
waiving all claims or right to claim error by
reason of such acknowledgment of service. Such
notice or process, with a copy thereof, shall be
mailed to the secretary of state of the state of
Iowa at Des Homes, Iowa, in a registered letter
addressed to him by his official title, and he
shall immediately upon its receipt acknowledge
service thereon on behalf of the non-resident
person, firm, association, company or corpora-
tion to which the same is directed by writing
thereon, giving the date thereof, and shall im-
mediately return such notice or process in a



registered letter to the clerk of the court in
which the suit is pending, addressed to him by
his official title, and shall also forthwith mail
such copy, with a copy of his acknowledgment
of service written thereon, in a registered letter
addressed to each person, firm, association or
corporation who shall be named or designated
as defendant in such written instrument.

Section 7. It shall be the duty of the secretary
ol state to examine the statements and docu-
ments so filed in his office and secure such
further information as he deems necessary, if
any, and if from such examination of all papers
and documents submitted to him and from such
other information as he may obtain, he finds
that the sale within this state of stocks, bonds
or other securities by any such person, firm,
company, association or corporation would work
a fraud upon the purchasers thereof, then and
in that event he shall refuse to grant such per-
mit; otherwise he shall grant such permit.

Section 8. Every person, firm, association, com-
pany or corporation having submitted to said
secretary of state a detailed plan of its business,
together with such other information required
by section 3 of this act, and thereafter desiring
to change its articles of association or incorpora-
tion or its proposed plaji of business, or its
proposed contract, the character of its securities
or method of advertisement, shall, before such
change is made, submit the same to the secre-
tary of state of the state of Iowa, in writing,
showing in full detail the new plan of transact-
ing business, together with all changes made
either in articles of association or corporation,
by-laws, plan of business, proposed contract, or
in the character of securities, and if the secre-
tary of state after examination shall find that
the proposed change will not work a fraud upon
the purchasers of its stocks, bonds or other
securities in this state, then he shall approve
the same; otherwise he shall refuse to approve
such change or amendment and require such a
modification thereof as may be necessary to pro-
tect the people of this state against fraud, and

8



if and in the event such person, firm, associa-
tion, company or corporation submitting such
proposed change shall refuse to so modify the
plan of his business, including the character of
securities sold, as to conform to the require-
ments of the secretary of state and to the end
that no fraud may be perpetrated upon the pur-
chasers of the stocks, bonds or other securities
sold in this state, then said secretary of state
shall be required and he is hereby directed to
cancel the permit of said person, firm, associa-
tion, company or corporation, and said person,
firm, association, company or corporation shall
be denied the right to transact business in this
state, unless and until said person, firm, associ-
ation, company or corporation shall so modify
and change its business that the transaction of
business in this state will not work a fraud upon
the purchasers thereof.

Section. 9. Every person, firm, association, com-
pany or corporation doing business within this
state pursuant to the provisions of this act shall,
on or before December 31st of each year, or at
such time as they make their annual statement
to their directors, but not less than once each
year, file with the secretary of state a statement
properly verified by the officers of said company,
if a company or corporation, or by a member of
a partnership, if a firm or co-partnership, or by
the owner of said business, if the same is trans-
acted by an individual, which statement shall
set forth its financial condition, the amount of
its assets and liabilities and such other informa-
tion concerning its financial affairs or its plan
of business, including the character of securities
sold, as the secretary of state may require in
order to determine whether said person, firm,
association, company or corporation is doing a
legitimate and honest business within this state.
Said statement shall be for the information of
the secretary of state, the attorney general or
any public officer who may be interested in an
official way in receiving said information and
shall not be open to public inspection, nor shall
it be published or used for private purposes, but

9



may be used in an official, legitimate way if
need be. Said annual statement shall be ac-
companied by an annual inspection fee of twenty
dollars for the year next succeeding; provided,
however, that any person not desiring to pay the
annual inspection fee of twenty dollars may pay
the inspection fee of one-tenth of one per cent
on the amount of securities proposed to be sold
as provided under the terms and conditions set
forth in sections 3 & 4 of this act.

Section 10. Any person, firm, association, com-
pany or corporation failing to file said statement
for the preceding year, or failing to pay the in-
spection fee as provided by this act, shall, in
addition to the criminal punishment otherwise
imposed in this act, be liable to a penalty of
ten dollars per day for each and every day which
said person, firm, association, company or cor-
poration transacts business in this state in vio-
lation of the provisions of this act. Said pen-
alty may be collected by a suit in the name of
the state of Iowa upon the relation of the attor-
ney general, instituted in any court of competent
jurisdiction, and when collected shall be paid
over to the secretary of state who shall cover
the same into the general revenues of the state.

Section 11. The general accounts of every per-
son, firm, association, company or corporation
doing business in this state pursuant to the pro-
visions of this act shall be kept in a business-
like and intelligent manner and in sufficient
detail that the secretary of state can ascertain
at any time upon inspection and examination
Hs financial condition, and any person, firm, asso-
ciation, company or corporation engaged in the
business of buying or selling stocks, bonds or
other securities and subject to the provisions of
this act, shall keep its books of account during
business hours, except Sundays and legal holi-
days, open to its members, stockholders and
investors and to the secretary of state or his
duly authorized agents or representatives, and
the said secretary of state shall have the right
to make an examination and inspection of the
books, accounts and financial condition of any

10



such person, firm, association, company or cor-
poration engaged in the business of dealing in
stocks, bonds and other securities pursuant to
the provisions of this act. The right, powers
and privileges of the secretary of state in con-
nection with such examination shall be the same
as is now provided with reference to examination
of state and savings banks, and such person,
firm, association, company or corporation so ex-
amined shall pay a fee to the secretary of state
for each of such examinations not to exceed six
dollars per day, or fraction thereof, spent by
said secretary of state or his duly authorized
representative while absent from the seat of
government in making such examination, and
shall further pay the actual traveling and hotel
expenses of said examiner. Upon failure or
refusal of any person, firm, association, com-
pany or corporation to pay the fees required by
this act, UDon the demand of the secretary of
state or his duly authorized representative, the
secretary of state may suspend its right to sell,
offer or negotiate for sale any of its stocks, bonds
or other securities in this state until such fee
or fees are paid.

Section 12. If from such examination it shall
appear that said person, firm, association, com-
pany or corporation is doing an illegitimate and
fraudulent business in this state, that its plan
of business is fraudulent or that the sale of its
stocks, bonds, or other securities would work
a fraud upon the purchasers in this state, said
secretary of state shall have the right to cancel
the certificate of such person, firm, association,
company, or corporation, and deny it the right
to further transact business in this state until
it changes its plan of business, including the
character of its securities, so that the citizens
and residents of this state or others dealing with
it therein shall not be defrauded thereby.

Section 13. All fees herein provided for shall be
collected by the secretary of state and by him
covered into the state treasury on the first
secular day of each month; and the secretary
of state shall keep a record of the receipts and

11



expenditures incurred in carrying out the pro-
visions of this act. The secretary of state is
hereby authorized to appoint such clerks and
deputies as the executive council deeme actually
necessary to carry this act into full force and
effect. The compensation of such clerks and
deputies shall be fixed by the executive council.
Before the salary and expenses of any such clerk
or deputy shall be paid, a detailed and itemized
statement of account shall be prepared by such
claimant and duly verified, which verification
shall aver that such claim is just, reasonable
and wholly unpaid and that the amount therein
stated is due such claimant. When said claim
has been approved by the secretary of state and
audited and allowed by the executive council,
it shall be paid by warrant drawn by the auditor
of state upon the state treasurer, and there is
hereby appropriated out of any money in the
state treasury, not otherwise appropriated, an
amount sufficient to meet said salaries and ex-
penses.

Section 14. Nothing in this act shall be con-
strued as to prohibit a bona fide owner of any
stocks, bonds or other securities from selling,
exchanging or otherwise disposing of the same
when not made in the course of continuing or
repeated transactions of a similar nature, or
when said securities, including negotiable prom-
issory notes, have been issued or given for goods,
wares or merchandise purchased or dealt in by
the issuer in the ordinary course of his business,
or when sold, exchanged or otherwise disposed
of to a bank subject to governmental supervi-
sion, trust company, insurance company, build-
ing and loan association, or to a person who
has duly received a permit to transact business
within this state pursuant to the provisions of
this act, provided that the same are sold by
said owner in good faith and not for the pur-
pose of evading the provisions of this act; and
the secretary of state may authorize in writing
any such bona fide owner of any stocks, bonds,
or other securities to sell in this state any other
securities not included in the provisions set forth

12



ill the preceding portion of this section; pro-
vided said securities were acquired and held by
the owner in good faith and not for the purpose
of evading the provisions of this act, but before
such authorization shall issue for the sale of
such additional securities, the owner of such se-
curities shall register in a book kept for such
purpose by the secretary of state a list of the
stocks, bonds and other securities desired to be
sold giving the character of the security, the par
value thereof, the price at which such securities
are to be sold, the date of issue and any other
data concerning the same which the secretary of
state may require in order to determine whether
or not the sale thereof will work a fraud upon
the purchaser; and provided further that the
said secretary of state may, if he have reason
to believe said securities will work a fraud upon
the purchasers thereof, require the owner to file
in his office a bond in the penal sum of not to
exceed five thousand dollars ($5000.00) running
to the State of Iowa, conditioned that said owner
thereof will not in the sale and disposition of
said securities, knowingly make any false or
fraudulent representations concerning the nature
and character of such securities. Such owner
shall pay to the secretary of state an inspection
fee as is provided for in Section 4 of this act.

Section 15. Each and every certificate granted
by the secretary of state under the provisions of
this act shall be in substantially the following
form:

"This is to certify that the

has this date been given permission

to sell $ of its

stocks, bonds or securities within the state of

Iowa.

The Secretary of State Does Not Recommend

the Purchase of This or Any Other Security.

Dated at Des Moines, Iowa, this

day of

IN WITNESS WHEREOF, I have hereunto af-
fixed -the corporate seal of the Secretary of State.



(Seal) Secretary of State."

13



The words "THE SECRETARY OF STATE
DOES NOT RECOMMEND THE PURCHASE OF
THIS OR ANY OTHER SECURITY" shall be
printed in larger, bolder faced type than the
other part of the said certificate.

Any person, firm, association, company or cor-
poration that makes any reference in any state-
ment, advertisement or printed matter to the
fact that a permit has been received from the
secretary of state to transact business in this
state shall, with equal prominence, state in the
same circular, advertisement or printed matter


1

Online Librarystatutes Iowa. LawsIowa law relating to inspection of stocks, bonds and securities to prevent fraud and providing penalties for violation thereof commonly known as the Blue sky law ... Passed by the 36th General assembly, 1915; in effect April 28, 1915 → online text (page 1 of 2)