It is enacted by the General Assembly as follows

SECTION 1. Sections 7-11-212 and 7-11-605 of the General Laws in Chapter 7-11 entitled "Sale of Securities" are hereby amended to read as follows:

7-11-212. Grounds for denial, suspension, and revocation. -- (a) The director, by order, may deny, suspend, or revoke a license; may limit the securities activities that an applicant or licensed person may perform in this state; may bar a broker dealer or investment adviser {ADD from conducting any securities activities in this state; ADD} may bar an applicant or licensed person from association with a licensed broker dealer or investment adviser; or may bar from employment with a licensed broker dealer or investment adviser a person who is a partner, officer, director, or a person occupying a similar status or performing a similar function for an applicant or licensed person. These actions may be taken only if the director finds that the order is in the public interest and that the applicant or licensed person or, in the case of a broker dealer or investment adviser, a partner, officer, or director, a person occupying a similar status or performing similar functions, or a person directly or indirectly controlling the broker dealer or investment adviser who has done any of the following:

(1) Has filed an application for licensing with the director which, as of its effective date or any date after filing in the case of an order denying effectiveness, contained any untrue statement of material fact or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

(2) Has willfully violated or willfully failed to comply with this chapter, a predecessor act, or a rule or order under this chapter or a predecessor act;

(3) Is the subject of an adjudication or determination, after notice and opportunity for hearing, within the last five (5) years by a securities agency or administrator of another state or a court of competent jurisdiction that the person has willfully violated the Securities Act of 1933 [15 U.S.C. section 77a et seq.], the Securities Exchange Act of 1934 [15 U.S.C. section 77b et seq.], the Investment Advisers Act of 1940 [15 U.S.C. section 80b-1 et seq.], the Investment Company Act of 1940 [15 U.S.C. sections 80a-1 -- 80a-64], or the Commodity Exchange Act [7 U.S.C. sections 2-26], or the securities law of any other state but only if the acts constituting the violation of that state's law would constitute a violation of this chapter had the acts occurred in this state;

(4) Within the last ten (10) years, has been convicted of a felony or misdemeanor which the director finds:

(i) Involves the purchase or sale of a security; the taking of a false oath, the making of a false report, bribery, perjury, burglary, robbery, or attempt or conspiracy to commit any of the foregoing offenses;

(ii) Arises out of the conduct of business as a broker dealer, investment adviser, depository institution, insurance company, or fiduciary; or

(iii) Involves the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities or attempt or conspiracy to commit any of the foregoing offenses;

(5) Is permanently or temporarily enjoined by a court of competent jurisdiction from acting as an investment adviser, underwriter, broker-dealer, or as an affiliated person or employee of an investment company, depository institution, or insurance company, or from engaging in or continuing conduct or practice in connection with any of the foregoing activities, or in connection with the purchase or sale of a security;

(6) Is the subject of an order of the director denying, suspending or revoking the person's license as a broker dealer, sales representative, investment adviser, or investment adviser representative;

(7) Is the subject of any of the following orders that are currently effective and were issued within the last five (5) years:

(i) An order by the securities agency or administrator of another state or Canadian province or territory, or by the Securities and Exchange Commission, entered after notice and opportunity for hearing, denying, suspending, or revoking the person's license as a broker dealer, sales representative, investment adviser, or investment adviser representative, or the substantial equivalent of those terms as defined in this chapter;

(ii) A suspension or expulsion from membership in or association with a member of a self regulatory organization registered under the Securities Exchange Act of 1934 [15 U.S.C. section 77b et seq.] or the Commodity Exchange Act [7 U.S.C. section 2-26];

(iii) A United State Postal Service fraud order;

(iv) A cease and desist order entered after notice and opportunity for hearing by the director, the securities agency or administrator of another state, or a Canadian province or territory, the Securities and Exchange Commission, or the Commodity Futures Trading Commission; or

(v) An order by the Commodity Futures Trading Commission denying, suspending, or revoking registration under the Commodity Exchange Act [7 U.S.C. sections 2-26];

(8) Has engaged in unethical or dishonest practices in the securities business;

(9) Is insolvent, either in the sense that liabilities exceed assets, or in the sense that obligations cannot be met as they mature, but the director may not enter an order against a broker dealer or investment adviser under this subsection without a finding of insolvency as to the broker dealer or investment adviser;

(10) Is determined by the director in compliance with section 7-11-213 not to be qualified on the basis of the lack of training, experience, and knowledge of the securities business;

(11) Has failed reasonably to supervise a sales representative, investment adviser representative, or an employee; or

(12) Has failed to pay the proper filing fee within thirty (30) days after being notified by the director of a deficiency, but the director shall vacate an order under this subsection when the deficiency is corrected.

(b) The director may not begin a proceeding on the basis of a fact or transaction known to the director when the license became effective unless the proceeding is begun within the ninety (90) days after issuance of the license.

(c) If the director finds that an applicant or licensed person is no longer in existence, has ceased to do business as a broker-dealer, sales representatives, investment adviser, or investment adviser representative, is adjudicated mentally incompetent or subjected to the control of a committee, conservator, or guardian, or cannot be located after reasonable search, the director, by order, may deny the application or revoke the license.

7-11-605. Civil liability. -- (a) A person who offers or sells a security in violation of section {ADD 7-11-201, 7-11-301, ADD} 7-11-305(k), 7-11-501, 7-11-503, or 7-11-505(b) is liable to the purchaser of the security from that person. Upon tender of the security, the purchaser may recover the consideration paid for the security and interest at the legal rate of this state from the date of payment, costs, and reasonable attorney's fees as determined by the court, less the amount of income received on the security. Tender requires only notice of willingness to exchange the security for the amount specified. If that purchaser no longer owns the security, the purchaser may recover damages. Damages are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it, plus interest at the legal rate of this state from the date of disposition of the security, costs, and reasonable attorney's fees as determined by the court.

(b) A person who offers or sells a security in violation of section 7-11-501 or 7-11-503 is not liable under subsection (a) if:

(1) The purchaser knew of the untrue statement of a material fact or omission of a statement of a material fact; or

(2) The seller did not know and in the exercise of reasonable care could not have known of the untrue statement or misleading omission.

(c) A person who willfully participates in an act or transaction in violation of section 7-11-502 is liable to a person who purchases or sells a security, other than a security traded on a national securities exchange or quoted on a national automated quotation system administered by a self regulatory organization, at a price that was affected by the act or transaction for the damages sustained as a result of the act or transaction. Damages are the amount that would be recoverable upon a tender less the value of the security when the purchaser or seller disposed of it, plus interest at the legal rate of this state from the date of disposition of the security, costs, and reasonable attorney's fees as determined by the court.

(d) A person who directly or indirectly controls another person who is liable under subsection (a) or (c) of this section, a partner, officer, or director of the person liable, a person occupying a similar status or performing similar functions, an employee of the person liable if the employee materially aids in the act, omission or transaction constituting the violation, and a broker dealer or sales representative who materially aids in the act, omission, or transaction constituting the violation, are also liable jointly and severally with and to the same extent as the other person, but it is a defense that the person did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by which the liability is alleged to exist. With respect to a person who, directly or indirectly, controls another person who is liable under subsection (c) of this section, it is also a defense that the controlling person acted in good faith and did not, directly or indirectly, induce the act, omission, or transaction constituting the violation. Contribution among the several persons liable is the same as in cases arising out of breach of contract.

SECTION 2. This act shall take effect upon passage.