S3390

An Act concerning commodity futures trading and supplementing Title 49 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may cited as the “New Jersey Commodity Code Act.”

2. As used in this act:

“Board of trade” means any person or group of persons engaged in buying or selling any commodity or receiving a commodity for sale on consignment, whether the person or group of persons is characterized as a board of trade, exchange, or other form of marketplace.

“Bureau chief” means the chief of the Bureau of Securities in the Division of Community Affairs in the Department of Law and Public Safety.

“Commodity” means, except as otherwise specified by the bureau chief by rule, regulation or order, any agricultural, grain or livestock product or by-product, any metal or mineral, including a precious metal as set forth in this act, any gem or gemstone, whether characterized as precious, semi-precious or otherwise, any fuel, whether liquid, gaseous or otherwise, any foreign currency and all other goods, articles, products or items of any kind, provided that the term commodity shall not include:

(1) a numismatic coin whose fair market value is at least twenty percent higher than the value of the metal it contains;

(2) real property or any agricultural or livestock product grown or raised on real property and offered or sold by the lessee of the real property; or

(3) any work of art offered or sold by art dealers at public auction or offered or sold through a private sale by the owner of the art.

“Commodity contract” means any account, agreement or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities,, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract or otherwise. Any commodity contract offered or sold shall, in the absence of evidence to the contrary, be presumed to be offered or sold for speculation or investment purposes. A commodity contract shall not include any contract or agreement which requires, and under which the purchaser receives, within 28 calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement.

“Commodity Exchange Act” means the federal Commodity Exchange Act,” 7 U.S.C. s.1 et seq.

“Commodity Futures Trading Commission” means the regulatory agency established to administer the federal Commodity Exchange Act (7 U.S.C. s.2(a)(2)).

“Commodity Futures Trading Commission rule” means any rule, regulation or order of the federal Commodity Futures Trading Commission in effect on the effective date of this act.

“Commodity merchant” means any of the following, as defined or described in the Commodity Exchange Act or by the federal Commodity Futures Trading Commission regulation:

(1) futures commission merchant;

(2) commodity pool operator;

(3) commodity trading advisor;

(4) introducing broker;

(5) leverage transaction merchant;

(6) an associated person of any of the foregoing;

(7) floor broker; or

(8) any other person, other than a futures association, required to register with the Commodity Futures Trading Commission.

“Commodity option” means any account, agreement or contract giving a party to the contract the right to purchase or sell one or more commodities or one or more commodity contracts, whether characterized as an option, privilege, indemnity bid, offer, put, call advance guaranty, decline guaranty or otherwise, but it shall not include a commodity option traded on a national securities exchange registered with the federal Securities and Exchange Commission.

“Financial institution” means a bank, savings bank, savings and loan association, or trust company organized and supervised pursuant to the laws of the United States or of any state.

“Offer” or “offer to sell” includes every offer, every attempt to offer to dispose of, or disposition, for value.

“Person” means an individual, a corporation, a partnership, an association, a joint stock company, a trust where the interest of the beneficiaries are evidenced by a security, an unincorporated organization, a government or a political subdivision of a government, but shall not include a contract market designated by the Commodity Futures Trading Commission or any clearinghouse of the same or a national securities exchange registered with the federal Securities and Exchange Commission pursuant to 15 U.S.C. s.78d et seq., or any employee, officer or director of the contract market, clearinghouse or exchange acting solely in that capacity.

“Precious metal” means:

(1) silver, in either coin, bullion, or other form;

(2) gold, in either coin, bullion, or other form; and

(3) any other items as the bureau chief may specify by rule, regulation, or order.

3. a. Except as provided in paragraph (1) of subsection a. of section 5 of this act, no person shall offer to enter into, enter into or confirm the execution of any transaction for the delivery of any commodity under a commodity contract or any other contract, account, arrangement, scheme, or device that serves the same function or functions or is marketed or managed in substantially the same manner as the account or contract.

b. Except as provided in section 4 of this act, no person shall sell or purchase or offer to sell or purchase any commodity under any other commodity contract or under any commodity option or offer to enter into or enter into as the seller or purchaser of any other commodity contract or any commodity option.

4. The prohibition in subsection b. of section 3 of this act shall not apply to any of the following persons, or any employee, officer or director who is acting solely in that capacity:

a. a person registered with the Commodity Futures Trading Commission as a futures commission merchant or as a leverage transaction merchant whose activities require that registration;

b. a person registered with the federal Securities and Exchange Commission as a broker-dealer whose activities require this registration;

c. a person affiliated with, and whose obligations and liabilities are guaranteed by, a person referred to in subsection a. or b. of this section;

d. a person who is a member of a contract market designation by the Commodity Futures Trading Commission or any clearinghouse of the commission;

e. a financial institution; or

f. a person registered under the laws of this State as a securities broker-dealer whose activities require that registration.

5. a. The prohibitions established by section 3 of this act shall not apply to the following:

(1) a transaction within the exclusive jurisdiction of the Commodity Futures Trading Commission as granted under the “Commodity Exchange Act,” 7 U.S.C. s.1 et seq.;

(2) a commodity contract for the purchase of a precious metal which requires, and under which the purchaser receives, within seven calendar days from the payment in good funds or any portion of the purchase price, physical delivery of the quantity of the precious metals purchased by the payment, provided that, for the purposes of this paragraph, physical delivery shall be deemed to have occurred if, within the seven-day period, the quantity of precious metals purchased by the payment is delivered, whether in specifically segregated or fungible bulk form, into the possession of a depository other than the seller which is either:

(a) a financial institution;

(b) a depository in which the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the Commodity Futures Trading Commission;

(d) a depository institution designated by the bureau chief or other person which qualifies as a depository, issues and the purchaser receives, a certificate, document of title, confirmation or other instrument evidencing that the quantity of precious metals has been delivered to the depository and is being held by the depository on the purchaser’s behalf, free and clear of all liens and encumbrances, other than liens of the purchaser, tax liens, liens agreed to by the purchaser or liens of the depository for fees and expenses which have previously been disclosed to the purchaser;

(3) a commodity contract for the sale of a cash commodity for deferred shipment or delivery entered into solely between persons engaged in, processing, using commercially or handling as merchants, each commodity subject to the contract or any by-product of the commodity;

(4) a commodity contract under which the offeree or the purchaser is a person referred to in section 4 of this act, an insurance company, an investment company as defined in the “Investment Company Act of 1940,” 15 U.S.C. s.80a-1 et seq., or an employee pension and profit-sharing or benefit plan, other than a self-employed individual retirement plan or individual retirement account.

b. The bureau chief may issue rules, regulations or orders prescribing the terms and conditions of all transactions and contracts covered by the provisions of this act which are not within the exclusive jurisdiction of the Commodity Futures Trading Commission, exempting any person or transaction from any provision of this act conditionally or unconditionally and otherwise implementing the provisions of this act for the protection of purchasers and sellers of commodities.

6. a. No person shall engage in a trade or business or otherwise act as a commodity merchant unless the person:

(1) is registered or temporarily licensed with the Commodity Futures Trading Commission for each activity constituting the person as a commodity merchant and the registration or temporary license has not have expired, suspended or revoked; or

(2) is exempt from the registration by virtue of the federal Commodity Exchange Act or of a Commodity Futures Trading Commission rule.

b. No board of trade shall trade, or provide a place for the trading of, any commodity contract or commodity option required to be traded on or subject to the rules of a contract market designated by the Commodity Futures Trading Commission unless the board of trade has been designated for the commodity contract or commodity option and the designation has not been vacated, suspended, or revoked.

7. For any commodity contract or commodity option that is subject to the provisions of section 3 of this act, no person shall directly or indirectly:

a. cheat or defraud or attempt to cheat or defraud, any other person or employ any device, scheme or artifice to defraud any other person;

b. make any false report, enter any false record or make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, except the provisions of this subsection shall not apply in the case of a commodity contract covered by paragraph (3) of subsection a. of section 5 of this act;

c. engage in any transaction, act, practice or course of business, including, without limitation, any form of advertising or solicitation that operates or would operate as a fraud or deceit upon any person; or

d. misappropriate or convert the funds, security, or property of any other person, in or in connection with the purchase or sale of the offer to sell, to the offer to enter into or the entry into a contract.

8. a. The act, omission or failure of any official, agent, or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office shall be deemed the act, omission or failure of the individual, association, partnership, corporation, including a limited liability company and a subchapter S corporation, trust, as well as that of the official, agent or other person.

b. A person who directly or indirectly controls another person under any provision of this act, a partner, officer, or director of the other person, a person occupying a similar status or performing similar functions, and an employee of the other person who materially aids in the violation shall be liable jointly and severally with and to the same extent as the other, unless the person who is also liable by virtue of this provision sustains the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist.

9. Nothing in this act shall impair, derogate or otherwise affect the authority or powers of the bureau chief under the “Uniform Securities Law (1997),” P.L.1997, c.276 (C.49:3-47 et seq.), or the application of any provision of that act to any person or transaction subject to that act.

10. This act may be construed and implemented to effectuate its general purpose to protect investors, to prevent and prosecute illegal and fraudulent schemes involving commodities and to maximize coordination with federal laws and the laws of other states and the administration and enforcement of those laws.

11. a. The bureau chief may make investigations, within or without this State, as he finds necessary and appropriate to:

(1) determine whether any person has violated, or is about to violate, any provision of this act or any rule or order of the bureau chief; or

(2) aid in enforcement of this act.

b. The bureau chief may publish information concerning any violation of this act or any rule or order of the bureau chief, consistent with the laws of this State.

c. For the purposes of any investigation or proceeding under this act, the bureau chief or any officer or employee designated by rule or order may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, agreements or other documents or records which the bureau chief finds to be relevant or material to the inquiry.

d. (1) If a person does not give testimony or produce the documents required by the bureau chief or a designated employee pursuant to an administrative subpoena, the bureau chief or designated employee may apply for a court order compelling compliance with the subpoena or the giving of the required testimony.

(2) The request for order of compliance may be addressed to either:

(a) the Superior Court where service may be obtained on the person refusing to testify or produce, if the person is within this State, or

(b) if the person is outside this State, the appropriate court of the state having jurisdiction over the person refusing to testify or produce.

12. a. If the bureau chief believes that any person has engaged, or is about to engage in any act or practice constituting a violation of any provision of this act or any rule or order under the act, the bureau chief may:

(1) issue a cease and desist order;

(2) take disciplinary action against a licensed person as specified in this act;

(3) issue an order imposing a civil penalty in an amount which may not exceed $10,000 for any single violation or $100,000 for multiple violations of a single proceeding or a series of related proceedings;

(4) initiate any of the actions specified in subsection b. of this section.

b. The director may institute any of the following actions in the appropriate court of this State or in the appropriate courts of another state, in addition to any legal or equitable remedies otherwise available:

(1) a declaratory judgement;

(2) an action for a prohibitory or mandatory injunction to enjoin the violation and to ensure compliance with this act or any rule or order of the bureau chief;

(3) an action for disgorgement;

(4) an action for restitution; or

(5) an action for appointment of a receiver or conservator for the defendant or the defendant’s assets.

13. a. (1) Upon a proper showing by the bureau chief that a person has violated, or is about to violate, any provision of this act, or a rule or order of the bureau chief, the Superior Court may grant appropriate remedies.

(2) Upon the showing of a violation of this act or a rule or order of the bureau chief, the court, in addition to traditional remedies, including temporary restraining orders, permanent or temporary prohibitory or mandatory injunctions and actions in lieu of prerogative writs may grant the following remedies:

(a) imposition of a civil penalty in an amount which may not exceed $10,000 for any single violation or $100,000 for multiple violations in a single proceeding or a series of related proceedings;

(b) disgorgement;

(d) restitution to investors wishing restitution; and

(e) appointment of a receiver or conservator for the defendant or the defendant’s assets.

(3) Appropriate remedies when the defendant is shown only about to violate this act or a rule or order of the bureau chief shall be limited to:

(a) a temporary restraining order;

(b) a temporary or permanent injunction;

(d) an order appointing a receiver or conservator for the defendant or the defendant’s assets;

b. The court shall not require the bureau chief to post a bond in any official action under this act.

c. (1) Upon a proper showing by the bureau chief or securities or commodity agency of another state that a person other than a government or governmental agency or instrumentality has violated, or is about to violate, any provision of the commodity code of that state or any rule or order of the administrator or securities or commodity agency of that state, the Superior Court may grant appropriate legal remedies.

(2) Upon a showing of a violation of the securities or commodity act of the foreign state, the court, in addition to traditional legal remedies including temporary restraining orders, permanent or temporary prohibitory or mandatory injunctions and a proceeding in lieu of prerogative writ, may grant the following special remedies:

(a) disgorgement; and

(b) appointment of a receiver, conservator, or ancillary receiver or conservator or ancillary receiver or conservator of the defendant or the defendant’s assets located in this State.

(3) Appropriate remedies when the defendant is shown only about to violate the securities or commodity act of the foreign state or a rule or order of the administrator or securities or commodity agency of the foreign state shall be limited to:

(a) a temporary restraining order;

(b) a temporary or permanent injunction;

(d) an order appointing a receiver, conservator, or ancillary receiver or conservator for the defendant or the defendant’s assets located in this State.

14. a. Any person who willfully violates any provision of this act is guilty of a crime of the third degree.

b. Any person who willfully and knowingly violates any rule or order of the bureau chief under this act is guilty of a crime of the third degree.

c. The bureau chief may refer any evidence as available concerning violations if this act or any rule or order of the bureau or the Attorney General who may, with or without a reference from the director, institute the appropriate criminal proceedings under the act.

15. a. The act shall be administered by the bureau chief.

b. Neither the bureau chief nor any employee of the bureau shall use any information which is filed with or obtained by the bureau chief which is not public information for personal gain or benefit, nor shall the bureau chief or any employees of the bureau conduct any securities or commodity dealings whatsoever based upon any upon any such information, even though public, if there has not been a sufficient period of time for the securities or commodity markets to assimilate such information.

c. (1) Except as provided in paragraph (2) of this subsection, all information collected, assembled, or maintained by the bureau chief is public information and shall be available for the examination of the public as provided in P.L.1963, c.73 (C.47:1A-1 et seq.).

(2) The following are exceptions to paragraph (1) of this subsection, which shall be deemed to be confidential:

(a) information obtained in private investigations pursuant to section 11 of this act;

(b) information made confidential by the provisions of P.L.1963, c.73 (C.47:1A-1 et seq.); and

(3) The bureau chief, in his discretion, may disclose any information made confidential subparagraph (a) of paragraph (2) of this subsection to persons identified in section 16 of this act.

(4) No provision of this act either creates or derogates any privilege which exists at common law, by statute or otherwise when any documentary or other evidence is sought under subpoena directed to the bureau or any employee of the bureau.

16. a. To encourage uniform application and interpretation of this act and securities regulation and enforcement in general, the bureau chief and the employees of the bureau chief may cooperate, including bearing the expense of the cooperation with the securities agencies or administrator of another jurisdiction, Canadian province or territory or other agencies, the Commodity Futures Trading Commission, the Securities and Exchange Commission, any self-regulatory organization established under the Commodity Exchange Act or the Securities Exchange Act of 1934, any national or international organization of commodities or securities officials or agencies and any governmental law enforcement agency.

b. The cooperation authorized by this section shall include, but need not be limited to:

(1) making joint examinations or investigations;

(2) holding joint administrative hearings;

(3) filing and prosecuting joint litigation;

(4) sharing and exchanging personnel;

(5) sharing and exchanging information and documents;

(6) formulating and adopting mutual regulations, statements of policy, guidelines, proposed statutory changes, and

(7) issuing and enforcing subpoenas at the request of the agency administering the act in another jurisdiction, the securities agency of another jurisdiction, the Commodity Futures Trading Commission or the Securities and Exchange Commission if the information sought would also be subject to lawful subpoena for conduct occurring in this State.

17. In addition to specific authority granted elsewhere in this act, the bureau chief may make, amend, and rescind rules, forms and orders as are necessary to carry out the provisions of the act and may classify commodities and commodity contracts. Any rule, form, or order may be adopted, amended or rescinded if the bureau chief finds that the action is: (1) necessary or appropriate in the public interest or for the protection of investors; and (2) consistent with the purposes of the provisions of this act.

18. a. (1) Sections 3, 6, and 7 of this act shall apply to persons who sell or offer to sell when an offer to sell is made in this State, or an offer to buy is made and accepted in this State.

(2) Sections 3, 6, and 7 of this act shall apply to persons who buy or offer to buy when an offer to buy is made in this State, or an offer to sell is made and accepted in this State.

(3) For the purposes of this section, an offer to sell or to buy is made in this State, whether or not either party is then present in this State, when the offer originates from this State, or is directed by the offeror to this State and received at the place to which it is directed or at any post office in this State in the case of a mailed offer.

(4) For the purpose of this section, an offer to buy or to sell is accepted in this State when acceptance is communicated to the offeror in this State, and has not previously been communicated to the offeror, whether or not either party is then present in this State, when the offeree directs it to the offeror in this State reasonably believing the offeror to be in this State and it is received at the place to which it is directed or at any post office in this State in the case of a mailed acceptance.

b. (1) For the purposes of subsection a. of this section, an offer to sell or to buy is not made in this State when the publisher circulates or there is circulated on his behalf in this State any bona fide newspaper or other publication of general, regular and paid circulation which is not published in this State, or which is published in this State but had more than two-thirds of its circulation outside this State during the past twelve months.

(2) For the purposes of paragraph (1) of this subsection, when a publication is published in editions, each edition shall be considered a separate publication except for material common to all editions.

c. (1) For the purposes of subsection a. of this section, an offer to sell or to buy is not made in this State when a radio or television program or other electronic communication originating outside this State is received in this State.

(2) For the purpose of paragraph (1) of this subsection, a radio or television program or other electronic communication shall be considered having originated from this State if either the broadcast studio or means of transmission are located within this State, unless:

(a) the program or communication is syndicated and distributed from outside this State for redistribution to the general public in this State;

(b) the program or communication is supplied by a radio, television or other electronic network with the electronic signal originating from outside this State for redistribution to the general public in this State;

(c) the program or communication is an electronic signal that originates outside this State and is captured for redistribution to the general public in this State by a community antenna or cable radio, television, or other electronic system; or

(d) the program or communication consists of an electronic signal which originates from within this State but which is not intended for redistribution to the general public in this State.

(3) Paragraph (2) of this subsection shall not apply to any changes, alterations or additions made locally to a radio or television program or other electronic communication.

19. a. The bureau chief shall commence an administrative proceeding under this act by entering either a notice of intent to do a contemplated act or a summary order. The notice of intent or summary order may be entered without notice, without opportunity for a hearing, and need not be supported by findings of fact or conclusions of law, and shall be in writing.

b. Upon entry of a notice of intent or summary order, the bureau chief shall promptly notify all interested parties that the notice or summary order has been entered and the reasons therefor. If the proceeding is pursuant to a notice of intent, the bureau chief shall inform all interested parties of the date, time, and place set for the hearing on the notice. If the proceeding is pursuant to a summary order, the bureau chief shall inform all interested parties that they have 30 business days from the entry of the order to file a written request for a hearing on the matter with the bureau chief and that the hearing will be scheduled to commence within 30 business days after the receipt of the written request.

c. If the proceeding is pursuant to a summary order, the bureau chief, whether or not a written request for a hearing is received from any interested party, may set the matter down for hearing on the bureau chief’s own motion.

d. If no hearing is requested and none is ordered by the bureau chief, the summary order shall automatically become a final order after 30 business days.

e. If a hearing is requested or ordered, the bureau chief, after notice of and opportunity for hearing to all interested persons, may modify or vacate the order or extend it until final determination.

f. No final order or order after hearing shall be returned without the following:

(1) appropriate notice to all interested persons;

(2) opportunity for hearing by all interested parties; and

(3) entry of written findings of fact and conclusions of law.

g. Every hearing in an administrative proceeding under this act shall be public unless the bureau chief grants a request joined in by all the respondents that the hearing be conducted privately.

20. a. Any person aggrieved by a final order of the bureau chief may obtain a review of the order in Superior Court.

b. The filing of an appeal pursuant to subsection a. of this section shall not, unless specifically ordered by the court, operate as a stay of the bureau chief’s order, and he may enforce or ask the court to enforce the order pending the outcome of the review proceedings.

21. It shall be a defense to any action brought pursuant to this act alleging a violation based solely on the failure in an individual case to make physical delivery within the applicable time period specified in this act if:

a. failure to make physical delivery was due solely to factors beyond the control of the seller, the seller’s officers, directors, partners, agents, servants, or employees, every person occupying a similar status or performing similar functions, every person who directly or indirectly controls or is controlled by the seller, or any of the seller’s affiliates, subsidiaries, or successors; and

b. physical delivery was completed within a reasonable time under the applicable circumstances.

22. It shall not be necessary to negate any of the exemptions of this act in any complaint, information or indictment, or any proceeding brought under the act, and the burden of proof of any such exemption shall be upon the party claiming the exemption.

23. This act shall take effect on the first day of the ninth month next following enactment, except the bureau chief may take any anticipatory administrative action in advance as shall be necessary for the implementation of this act.

STATEMENT

This act, the “New Jersey Commodity Code Act,” establishes a framework in the State for the regulation of commodities futures trading.

Under the bill, “commodities” are agricultural, grain or livestock products or by-products, metals or minerals, gems, fuel, foreign currency and all other goods, articles, products or items of any kind. The term commodity does not include certain numismatic coins, real property and certain agricultural or livestock products grown or raised on real property, or certain works of art.

Under the bill, a “commodity contract” means any account, agreement or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract or otherwise. The bill provides that any commodity contract offered or sold shall, in the absence of evidence to the contrary, be presumed to be offered or sold for speculation or investment purposes. A commodity contract shall not include any contract or agreement which requires, and under which the purchaser receives, within 28 calendar days from the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement.

The bill provides that the chief of the Bureau of Securities in the Division of Community Affairs in the Department of Law and Public Safety is responsible for the enforcement of the provisions of the bill.

The bill generally prohibits persons from offering to enter into, entering into or confirming the execution of any transaction for the delivery of any commodity under a commodity contract or other substantially similar contract, except for the following:

(1) a person registered with the Commodity Futures Trading Commission as a futures commission merchant or as a leverage transaction merchant whose activities require that registration;

(2) a person registered with the federal Securities and Exchange Commission as a broker-dealer whose activities require this registration;

(3) a person affiliated with, and whose obligations and liabilities are guaranteed by a futures commission merchant, leverage transaction merchant, or broker-dealer ;

(4) a person who is a member of a contract market designated by the Commodity Futures Trading Commission or any clearinghouse of the commission;

(5) a financial institution; or

(6) a person registered under the laws of this State as a securities broker-dealer whose activities require that registration.

The bill provides that no person shall engage in a trade or business or otherwise act as a commodity merchant unless the person:

(2) is exempt from the registration by virtue of the federal Commodity Exchange Act or of a Commodity Futures Trading Commission rule.

The bill provides that no board of trade shall trade, or provide a place for the trading of, any commodity contract or commodity option required to be traded on or subject to the rules of a contract market designated by the Commodity Futures Trading Commission unless the board of trade has been designated for the commodity contract or commodity option and the designation has not been vacated, suspended, or revoked.

The bill provides that no person shall directly or indirectly:

(1) cheat or defraud or attempt to cheat or defraud, any other person or employ any device, scheme or artifice to defraud any other person;

(2) make any false report, enter any false record or make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading;

(3) engage in any transaction, act, practice or course of business, including, without limitation, any form of advertising or solicitation that operates or would operate as a fraud or deceit upon any person; or

(4) misappropriate or convert the funds, security, or property of any other person, in or in connection with the purchase or sale of the offer to sell, to the offer to enter into or the entry into, any commodity contract or commodity option that is subject to certain provisions of the bill.

The bill provides that the bureau chief may make investigations, within or without this State, as he finds necessary and appropriate to determine whether any person has violated, or is about to violate, any provision of the bill or to aid in enforcement of the bill.

The bill provides that the bureau chief may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, agreements or other documents or records which the bureau chief finds to be relevant or material to the inquiry. If a person does not give testimony or produce the documents required by the bureau chief pursuant to an administrative subpoena, the bureau chief may apply for a court order compelling compliance with the subpoena or the giving of the required testimony.

The bill provides that if the bureau chief believes that any person has engaged, or is about to engage in any act or practice constituting a violation of any provision of the bill, the bureau chief may:

(1) issue a cease and desist order;

(2) take disciplinary action against a licensed person;

(3) issue an order imposing a civil penalty in an amount which may not exceed $10,000 for any single violation or $100,000 for multiple violations; or

(4) initiate certain actions as specified in the bill.

Under the bill, neither the bureau chief nor any employee of the bureau may use any information which is filed with or obtained by the bureau chief which is not public information for personal gain or benefit, nor shall the bureau chief or any employees of the bureau conduct any securities or commodity dealings whatsoever based upon any upon any such information, even though public, if there has not been a sufficient period of time for the securities or commodity markets to assimilate such information.

The bill provides that all information collected, assembled, or maintained by the bureau chief is public information and shall be available for the examination of the public, with certain exceptions.

To encourage uniform application and interpretation of the bill, the bureau chief and the employees of the bureau chief may cooperate, including bearing the expense of the cooperation with the securities agencies or administrator of another jurisdiction, Canadian province or territory or other agencies, the Commodity Futures Trading Commission, the Securities and Exchange Commission, any self-regulatory organization established under the Commodity Exchange Act or the Securities Exchange Act of 1934, any national or international organization of commodities or securities officials or agencies and any governmental law enforcement agency.

The cooperation authorized by the bill shall include, but need not be limited to:

(1) making joint examinations or investigations;

(2) holding joint administrative hearings;

(3) filing and prosecuting joint litigation;

(4) sharing and exchanging personnel;

(5) sharing and exchanging information and documents;

(6) formulating and adopting mutual regulations, statements of policy, guidelines, proposed statutory changes; and

In addition to specific authority granted in the bill, the bureau chief may make, amend, and rescind rules, forms and orders as are necessary to carry out the provisions of the bill and may classify commodities and commodity contracts. Any rule, form, or order adopted, amended or rescinded if the bureau chief finds that the action is: (1) necessary or appropriate in the public interest or for the protection of investors; and (2) consistent with the purposes of the provisions of the bill.

The bill provides that it is a defense to any action brought pursuant to the bill alleging a violation based solely on the failure in an individual case to make physical delivery within the applicable time period specified in the bill if:

(1) failure to make physical delivery was due solely to factors beyond the control of the seller, the seller’s officers, directors, partners, agents, servants, or employees, every person occupying a similar status or performing similar functions, every person who directly or indirectly controls or is controlled by the seller, or any of the seller’s affiliates, subsidiaries, or successors; and

(2) physical delivery was completed within a reasonable time under the applicable circumstances.