SB76 - Revises provisions relating to securities. (BDR 7-486)

- 83rd Session (2025) Senate Bill No. 76–Committee on Judiciary CHAPTER.......... AN ACT relating to securities; creating the Fund for the Compensation of Victims of Securities Fraud and prescribing the use of money in the Fund; authorizing certain persons to whom a court orders restitution to apply for compensation from the Fund; requiring the Administrator of the Securities Division of the Office of the Secretary of State to review applications for and award compensation from the Fund; making confidential certain information; requiring the Division to adopt regulations relating to the administration of the Fund; requiring the Administrator to submit to the Legislature a biennial report concerning the Fund; requiring a person who receives compensation from the Fund to reimburse the State for such compensation under certain circumstances; revising provisions relating to certain exempt securities and exempt transactions; revising provisions governing the deposit of certain money received by the Division or the Administrator; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law establishes the Uniform Securities Act, which sets forth provisions governing the sale and purchase of securities in this State in a manner consistent with federal laws and regulations. In general, the Act prohibits a person from engaging in certain deceptive acts, practices or courses of business in connection with the offer, sale or purchase of a security. (NRS 90.570-90.610) The Act also authorizes certain sanctions against a person who violates these prohibitions, including civil penalties, criminal fines and payment of restitution. (NRS 90.630- 90.650) The Nevada Constitution entitles a victim of a crime to full and timely restitution and requires all monetary payments, money and property collected from any person ordered to make restitution to be first applied to pay the amounts ordered as restitution to the victim. (Nev. Const. Art. 1, § 8A) Section 6 of this bill creates the Fund for the Compensation of Victims of Securities Fraud and requires that the money in the Fund be used for the compensation of certain victims to whom restitution is owed. Section 2 of this bill defines the term “Fund” to mean the Fund for the Compensation of Victims of Securities Fraud. Section 3 of this bill: (1) establishes the process by which certain persons to whom a court orders restitution may apply for and receive compensation from the Fund; (2) authorizes an applicant to appeal a determination made concerning an award of compensation from the Fund; and (3) makes confidential certain information and documentation submitted in connection with such an application. Section 11 of this bill makes a conforming change relating to the information made confidential pursuant to section 3. Section 4 of this bill requires the Securities Division of the Office of the Secretary of State to adopt certain regulations relating to the Fund, including regulations: (1) establishing eligibility requirements for an award of compensation from the Fund; (2) prescribing certain other requirements relating to the award of – 2 – - 83rd Session (2025) compensation from the Fund; and (3) establishing a procedure to appeal a determination made concerning an award of compensation from the Fund. Section 5 of this bill requires the Administrator of the Division to prepare and submit a biennial report to the Legislature that includes certain information relating to the Fund. Section 6 requires the Division to prepare certain quarterly estimates concerning the Fund and requires any money remaining in the Fund at the end of each fiscal year to be carried forward to the next fiscal year. Section 7 of this bill: (1) requires an applicant, as a condition of accepting an award of compensation from the Fund, to take certain action if the applicant recovers unpaid restitution after receiving such compensation; and (2) prescribes certain other conditions of accepting an award of compensation from the Fund. Existing law requires all money received by the Division or the Administrator pursuant to the Act to be deposited in the State General Fund. (NRS 90.630, 90.650, 90.710) Section 10 of this bill establishes certain exceptions to this requirement and instead requires the following to be deposited in the Fund for the Compensation of Victims of Securities Fraud: (1) certain gifts, grants and donations applied for and accepted by the Division; (2) interest and income earned on money in the Fund for the Compensation of Victims of Securities Fraud; and (3) money paid to the Division under right of subrogation for certain recoveries for unpaid restitution obtained by applicants who have received awards of compensation from the Fund for the Compensation of Victims of Securities Fraud. Existing law: (1) prohibits a person from offering to sell or selling any security in this State unless the security meets certain registration requirements; (2) exempts certain securities and certain transactions from the registration requirements under certain circumstances; and (3) authorizes the Administrator to disallow certain exemptions under certain circumstances. (NRS 90.460, 90.520, 90.530) Sections 8 and 9 of this bill remove a requirement that the Administrator disallow certain exemptions by order, thereby authorizing the Administrator to disallow any such exemption without issuing an order. EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Chapter 90 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 7, inclusive, of this act. Sec. 2. As used in sections 2 to 7, inclusive, of this act, unless the context otherwise requires, “Fund” means the Fund for the Compensation of Victims of Securities Fraud created by section 6 of this act. Sec. 3. 1. Except as otherwise provided in this subsection, a person to whom a court orders restitution pursuant to NRS 90.640 may, not later than 12 months after the date on which such restitution is ordered, apply to the Administrator for compensation from the Fund. The Administrator may waive the time limit prescribed by this subsection for good cause shown. – 3 – - 83rd Session (2025) 2. The Administrator or his or her designee shall review each application submitted pursuant to subsection 1 and determine whether to award compensation to the applicant in accordance with the regulations adopted pursuant to section 4 of this act. 3. An applicant aggrieved by a determination of the Administrator or his or her designee made pursuant to subsection 2 may appeal the determination in accordance with the regulations adopted pursuant to section 4 of this act. 4. The Administrator or his or her designee may request that an applicant submit to the Division any additional information or documentation necessary to enable the Administrator or his or her designee to make the determination required by subsection 2. As soon as practicable after receiving such a request, the applicant shall submit to the Division any information or documentation requested. 5. Any information or documentation contained in an application submitted to the Administrator pursuant to subsection 1 or to the Division pursuant to subsection 4 is confidential and, unless the disclosure is otherwise prohibited by law, must not be disclosed except: (a) Upon the request of the applicant or the attorney of the applicant; (b) In the necessary administration of this chapter; or (c) Upon the lawful order of a court of competent jurisdiction. Sec. 4. The Division shall adopt any regulations necessary to carry out the provisions of sections 2 to 7, inclusive, of this act, including, without limitation, regulations: 1. Establishing eligibility requirements for an award of compensation from the Fund. 2. Establishing a form and procedure for applying for an award of compensation from the Fund. The form must include, without limitation, an indication of the amount of money the applicant has received or is likely to receive as restitution for the financial harm suffered as a result of the commission of a violation of this chapter or a regulation or order of the Administrator under this chapter, pursuant to NRS 90.640. 3. Establishing the order of priority in which the Administrator or his or her designee must: (a) Review applications submitted pursuant to section 3 of this act; and (b) Award compensation to an applicant, if applicable. 4. Prescribing standards for the amount of compensation the Administrator or his or her designee may award from the Fund. – 4 – - 83rd Session (2025) Such standards must include, without limitation, a requirement that such compensation must not exceed the lesser of $25,000 or an amount equal to 25 percent of the amount of unpaid restitution awarded by a court. 5. Establishing a procedure to appeal a determination made by the Administrator or his or her designee pursuant to section 3 of this act. Sec. 5. On or before January 1 of each odd-numbered year, the Administrator shall prepare and submit to the Director of the Legislative Counsel Bureau for transmittal to the Legislature a report relating to the Fund. The report must include, without limitation: 1. The total amount of compensation awarded from the Fund; 2. The number of applicants who applied for compensation from the Fund; 3. The number of applicants who were denied compensation from the Fund; and 4. The average length of time taken to award compensation from the Fund, from the date of receipt of the application to the date of the payment of compensation. Sec. 6. 1. Money for payment of compensation as awarded by the Administrator pursuant to section 3 of this act must be paid from the Fund for the Compensation of Victims of Securities Fraud, which is hereby created. Money in the Fund must be disbursed by the Division in the same manner as other claims against the State are paid, in accordance with the regulations adopted pursuant to section 4 of this act. 2. The Division shall prepare quarterly estimates of: (a) The money in the Fund which is available for the payment of compensation; and (b) The anticipated expenses of the Fund for the next fiscal quarter. 3. The interest and income earned on the money in the Fund, after deducting any applicable charges, must be credited to the Fund. 4. The Division may apply for and accept gifts, grants and donations from any source for deposit in the Fund. 5. Any money remaining in the Fund at the end of each fiscal year does not revert to the State General Fund and must be carried forward to the next fiscal year. Sec. 7. An applicant who accepts an award of compensation from the Fund does so under the following conditions: – 5 – - 83rd Session (2025) 1. The State of Nevada is immediately subrogated in the amount of the award to any right of action to recover any unpaid restitution, and that right of subrogation may be diminished for attorney’s fees and other costs of litigation in obtaining such recovery; and 2. If recovery is obtained for unpaid restitution, the applicant shall promptly notify the Administrator or his or her designee and shall promptly pay to the Division for deposit in the Fund the lesser of the amount of the award made from the Fund or the amount recovered, less attorney’s fees and costs. The duty of notice and payment pursuant to this subsection continues until the amount of the award has been repaid to the State of Nevada. Sec. 8. NRS 90.520 is hereby amended to read as follows: 90.520 1. As used in this section: (a) “Guaranteed” means guaranteed as to payment of all or substantially all of principal and interest or dividends. (b) “Insured” means insured as to payment of all or substantially all of principal and interest or dividends. 2. Except as otherwise provided in subsections 4 and 5, the following securities are exempt from NRS 90.460 and 90.560: (a) A security, including a revenue obligation, issued, insured or guaranteed by the United States, an agency or corporate or other instrumentality of the United States, an international agency or corporate or other instrumentality of which the United States and one or more foreign governments are members, a state, a political subdivision of a state, or an agency or corporate or other instrumentality of one or more states or their political subdivisions, or a certificate of deposit for any of the foregoing, but this exemption does not include a security payable solely from revenues to be received from an enterprise unless the: (1) Payments are insured or guaranteed by the United States, an agency or corporate or other instrumentality of the United States, an international agency or corporate or other instrumentality of which the United States and one or more foreign governments are members, a state, a political subdivision of a state, or an agency or corporate or other instrumentality of one or more states or their political subdivisions, or by a person whose securities are exempt from registration pursuant to paragraphs (b) to (e), inclusive, or (g), or the revenues from which the payments are to be made are a direct obligation of such a person; (2) Security is issued by this State or an agency, instrumentality or political subdivision of this State; or – 6 – - 83rd Session (2025) (3) Payments are insured or guaranteed by a person who, within the 12 months next preceding the date on which the securities are issued, has received a rating within one of the top four rating categories of either Moody’s Investors Service, Inc., or Standard and Poor’s Ratings Services. (b) A security issued, insured or guaranteed by Canada, a Canadian province or territory, a political subdivision of Canada or of a Canadian province or territory, an agency or corporate or other instrumentality of one or more of the foregoing, or any other foreign government or governmental combination or entity with which the United States maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer, insurer or guarantor. (c) A security issued by and representing an interest in or a direct obligation of a depository institution if the deposit or share accounts of the depository institution are insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund or a successor to an applicable agency authorized by federal la [Text truncated for display. Full text available on LegiScan.]