Legislature(2015 - 2016)GRUENBERG 120

04/05/2016 01:00 PM JUDICIARY

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved HB 339 Out of Committee
-- Public & Invited Testimony --
Scheduled but Not Heard
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 194(JUD) Out of Committee
        HB 194-AK SECURITIES ACT; PENALTIES; CRT. RULES                                                                     
1:15:08 PM                                                                                                                    
CHAIR LEDOUX announced  that the next order of  business would be                                                               
HOUSE BILL NO.  194, "An Act repealing and  reenacting the Alaska                                                               
Securities   Act,  including   provisions   relating  to   exempt                                                               
securities   and  transactions;   relating  to   registration  of                                                               
securities, firms, and  agents that offer or  sell securities and                                                               
investment  advice;   relating  to  administrative,   civil,  and                                                               
criminal enforcement provisions,  including restitution and civil                                                               
penalties for violations; allowing  certain civil penalties to be                                                               
used for an investor training  fund; establishing increased civil                                                               
penalties  for  harming   older  Alaskans;  retaining  provisions                                                               
concerning corporations organized under  the Alaska Native Claims                                                               
Settlement  Act; amending  Rules 4,  5,  54, 65,  and 90,  Alaska                                                               
Rules of Civil Procedure; and providing for an effective date."                                                                 
1:16:05 PM                                                                                                                    
REPRESENTATIVE  KREISS-TOMKINS   moved  to  adopt   Amendment  1,                                                               
Version 29-GH1060\N.1, Bannister, 4/5/16, which read:                                                                           
     Page 1, line 7, following "older persons":                                                                               
          Insert "and vulnerable adults"                                                                                      
     Page 79, line 29, following "older person":                                                                                
          Insert "or a vulnerable adult"                                                                                        
     Page 79, line 31, following "older person":                                                                                
          Insert "or a vulnerable adult"                                                                                        
     Page 80, line 5, following "older person":                                                                                 
          Insert "or a vulnerable adult"                                                                                        
     Page 80, line 6, following "older person":                                                                                 
          Insert "or a vulnerable adult"                                                                                        
     Page 81, line 27, following "older person":                                                                                
          Insert "or a vulnerable adult"                                                                                        
     Page 81, line 29, following "older person":                                                                                
          Insert "or a vulnerable adult"                                                                                        
     Page 82, line 1, following "older person":                                                                                 
          Insert "or a vulnerable adult"                                                                                        
     Page 82, line 3, following "person":                                                                                       
          Insert "or a vulnerable adult"                                                                                        
     Page 100, line 29, following "States":                                                                                     
          Insert ";                                                                                                             
               (36)  "vulnerable adult" means a person 19                                                                       
     years  of  age or  older  who,  because of  incapacity,                                                                    
     mental  illness, mental  deficiency, physical  illness,                                                                    
     physical  disability,  advanced  age,  chronic  use  of                                                                    
     drugs,  chronic  intoxication, fraud,  confinement,  or                                                                    
     disappearance,  is  unable  to meet  the  person's  own                                                                    
     needs or to seek help without assistance"                                                                                  
CHAIR LEDOUX objected.                                                                                                          
1:16:17 PM                                                                                                                    
REPRESENTATIVE   KREISS-TOMKINS   explained  that   Amendment   1                                                               
broadens the  bill's class  of vulnerable  persons and  creates a                                                               
definition  of   vulnerable  adult.     Therefore,   he  advised,                                                               
vulnerable people, if taken advantage  of, incur the ability that                                                               
treble damages to be awarded.                                                                                                   
REPRESENTATIVE  KELLER asked  whether  the  definition was  taken                                                               
from a statute because it looks familiar.                                                                                       
REPRESENTATIVE  KREISS-TOMKINS responded  that it  came from  the                                                               
National  Association of  Security or  other industry  regulatory                                                               
materials.  He then deferred to Kevin Anselm.                                                                                   
1:17:55 PM                                                                                                                    
KEVIN  ANSELM,  Director,  Division of  Banking  and  Securities,                                                               
Department  of   Commerce,  Community  &   Economic  Development,                                                               
responded  that the  definition  provided within  Amendment 1  is                                                               
contained within Alaska Statutes, AS 47.24.900(21).                                                                             
CHAIR LEDOUX  said she agrees  until line 9,  "or disappearance,"                                                               
in  that  she  does  not  understand  the  disappearance  wording                                                               
because if they've disappeared, they can't be sold securities.                                                                  
MS.  ANSELM  related that  she  had  not vetted  this  particular                                                               
CHAIR LEDOUX asked her to restate the citation.                                                                                 
MS. ANSELM replied AS 47.24.900(21).                                                                                            
1:19:46 PM                                                                                                                    
MS. ANSELM offered her interpretation that  when it comes up in a                                                               
case, it would  extend the opportunity for treble  damages to not                                                               
only persons  60 years or  older, but also to  vulnerable adults.                                                               
A vulnerable adult can be  someone who has disappeared, according                                                               
to  this  definition,  but  she   said  she  does  not  know  the                                                               
underlying  information about  the  disappearance.   She said  it                                                               
could  be  that  someone  who  has  disappeared  fits  into  this                                                               
definition and  then the  estate would  be able  to go  after the                                                               
treble  damages, but  perhaps the  sponsor of  the amendment  has                                                               
other thoughts on that.                                                                                                         
1:20:46 PM                                                                                                                    
REPRESENTATIVE KREISS-TOMKINS  said he does not  have thoughts on                                                               
CHAIR LEDOUX  asked whether Kristy  Naylor or Renee  Wardlaw have                                                               
thoughts  regarding  the  reason   the  term  "disappearance"  is                                                               
MS.  ANSELM  offered  that  the  term  "disappearance"  is  taken                                                               
directly from Alaska Statute.                                                                                                   
CHAIR LEDOUX stated  that she understands that, but  if there has                                                               
been a mistake  the first time around it will  be repeated in all                                                               
of the other statutes from here  on out.  She reiterated that she                                                               
wants to understand why the term "disappearance" is included.                                                                   
REPRESENTATIVE CLAMAN suggested  a brief at ease  to research the                                                               
1:21:57 PM                                                                                                                    
The committee took an at-ease from 1:21 p.m. to 1:28 p.m.                                                                       
1:28:22 PM                                                                                                                    
CHAIR LEDOUX  announced she  is setting  Amendment 1  aside until                                                               
Representative Kreiss-Tomkins returns.                                                                                          
1:28:29 PM                                                                                                                    
REPRESENTATIVE  CLAMAN moved  to adopt  Amendment 2,  Version 29-                                                               
GH1060\N.2, Bannister, 4/5/16, which read:                                                                                      
     Page 27, line 12:                                                                                                          
          Delete "$5,000"                                                                                                       
          Insert "$10,000"                                                                                                      
REPRESENTATIVE KELLER objected.                                                                                                 
1:28:39 PM                                                                                                                    
REPRESENTATIVE  CLAMAN  explained  that Amendment  2  relates  to                                                               
crowdfunding and the  limit on a single investor  or purchaser on                                                               
what   is  technically   called  "Small   Intra-state  Securities                                                               
Offerings," or crowdfunding.  Amendment  2 raises the limit for a                                                               
single investor from $5,000 to $10,000,  he said.  He opined that                                                               
the $10,000  amount is  more entrepreneur  friendly and  makes it                                                               
easier for  someone with a  start-up business to work  within the                                                               
limits   of  the   $1  million   that  can   be  raised   through                                                               
crowdfunding.  He related that  the $5,000 limit is paternalistic                                                               
in suggesting that people should only  be able to invest in these                                                               
on  an  individual  basis  at  a $5,000  level.    Otherwise,  he                                                               
explained, the entrepreneur  must go to a  different structure to                                                               
create  their investment  framework. He  opined that  Amendment 2                                                               
does not put the investor at  any greater risk than they would be                                                               
at the $5,000 level.                                                                                                            
1:31:08 PM                                                                                                                    
REPRESENTATIVE  KELLER   inquired  where   Representative  Claman                                                               
looked to  choose the number  $10,000.  He  noted that he  is not                                                               
familiar  with  this  process  and  asked  why  not  just  delete                                                               
paragraph (4).                                                                                                                  
REPRESENTATIVE  CLAMAN deferred  to  Kevin Anselm  to answer  the                                                               
question  regarding  deleting paragraph  (4).    He related  that                                                               
people from Fairbanks had seen  other states with limits such as,                                                               
$2,000,  $7,500  and  $10,000.   He  offered  that  he  concluded                                                               
$10,000 made more  sense, both in terms of  being more supportive                                                               
of the  entrepreneur attempting to  obtain the  crowdfunding, and                                                               
also  the  typical person  being  approached  with the  means  to                                                               
invest  $10,000  is  an  area  the person  would  be  capable  of                                                               
performing their  own due diligence.   He opined that  the $5,000                                                               
limit would create more limits than necessary.                                                                                  
MS.  ANSELM said  the division  has no  objection to  the $10,000                                                               
1:32:46 PM                                                                                                                    
REPRESENTATIVE KELLER  asked why  include paragraph (4),  what is                                                               
the background and  concern, what is the  state protecting itself                                                               
from that the  highest number in the nation is  $10,000, and what                                                               
are the ramifications of it.                                                                                                    
MS. ANSELM responded  that the crowdfunding piece  is designed to                                                               
fall under  a federal  exemption, it  is an  instate crowdfunding                                                               
wherein  investors  can invest  small  amounts  of money  into  a                                                               
project that  is no larger than  $1 million.  She  explained that                                                               
there are lesser requirements for  disclosures, not a requirement                                                               
for audited  financial statements,  and the  disclosure documents                                                               
do not  have to be as  extensive as other investments  that would                                                               
allow a higher  investment.  It must coordinate  with the federal                                                               
law  which  is a  limit  of  $1  million  and anything  above  $1                                                               
million,  and  anything  that  reaches  outside  of  the  state's                                                               
borders, is  covered under federal  acts.   She noted there  is a                                                               
federal  crowdfunding now  that is  available  as of  May but  it                                                               
requires  that an  entrepreneur can't  just offer  the securities                                                               
themselves in  any sort of  public solicitation, it must  be done                                                               
through a  portal or  a stock  brokerage.   She related  that the                                                               
design of the crowdfunding has  evolved through the states due to                                                               
provisions  in  the  Dodd-Frank   Act,  and  the  Securities  and                                                               
Exchange Commission had  not come up with the rules  yet to allow                                                               
intrastate  crowdfunding.    Therefore,   the  fact  that  it  is                                                               
supposed to be  small investment amounts to reduce  the risk fits                                                               
under that federal ceiling.                                                                                                     
1:35:05 PM                                                                                                                    
REPRESENTATIVE KELLER removed his objection.                                                                                    
REPRESENTATIVE  KREISS-TOMKINS  asked Representative  Claman  how                                                               
$10,000 compares to limits that may exist in other states.                                                                      
1:35:36 PM                                                                                                                    
REPRESENTATIVE  CLAMAN offered  that  what was  explained by  Ms.                                                               
Anselm  with the  administration, that  when they  looked at  the                                                               
crowdfunding limits on  a per investor basis  the most protective                                                               
states of investors were at the  $2,000 level, and the maximum in                                                               
other  states   was  $10,000.     He  reiterated   that  Alaska's                                                               
crowdfunding investors are  typically sophisticated investors and                                                               
the investor  looking at  these projects would  be good  on their                                                               
own due  diligence.  He  opined that limiting an  entrepreneur to                                                               
$5,000 may hinder their ability to raise funds.                                                                                 
CHAIR LEDOUX  asked whether the  division has a position  on this                                                               
MS. ANSELM answered that the division does not object.                                                                          
1:36:41 PM                                                                                                                    
CHAIR LEDOUX removed  her objection to Amendment 2.   There being                                                               
no objection, Amendment 2 was adopted.                                                                                          
1:36:59 PM                                                                                                                    
CHAIR LEDOUX returned the committee to Amendment 1.                                                                             
CHAIR LEDOUX  reminded the  committee that  it was  attempting to                                                               
determine the  origin of the  term "disappearance."   She related                                                               
that she likes the amendment and does  not see a need to hold the                                                               
bill while  trying to  determine the  above in  the event  no one                                                               
objects to  the inclusion of Amendment  1 in the bill  and moving                                                               
forward.  Chair LeDoux  directed Representative Kreiss-Tomkins to                                                               
follow  through and  research why  the  word "disappearance"  was                                                               
included,  whether it  makes  sense  to be  included,  and if  it                                                               
doesn't make sense to see whether  in its latter stages it can be                                                               
1:37:44 PM                                                                                                                    
REPRESENTATIVE    KREISS-TOMKINS   responded    absolutely,   and                                                               
apologized  for  personifying  the  meaning of  that  word.    He                                                               
suggested amending  out the term "disappearance"  and then adding                                                               
it in later in a different committee if necessary.                                                                              
CHAIR LEDOUX pointed  out that the term has been  used in statute                                                               
and  she  feels comfortable  leaving  it  in with  Representative                                                               
Kreiss-Tompkins determining why it was there in the first place.                                                                
REPRESENTATIVE KREISS-TOMKINS agreed and said he will eagerly                                                                   
report back to the committee with the results.                                                                                  
1:38:31 PM                                                                                                                    
CHAIR LEDOUX removed her objection to Amendment 1.  There being                                                                 
no objection, Amendment 1 was adopted.                                                                                          
1:38:50 PM                                                                                                                    
REPRESENTATIVE CLAMAN moved to report CSHB 194(L&C), Version 29-                                                                
GH1060\N,   as  amended,   out  of   committee  with   individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no  objection,  CSHB 194(JUD)  passed  from  the House  Judiciary                                                               
Standing Committee.                                                                                                             

Document Name Date/Time Subjects
HB 339 - Fiscal Note - LAW-CRIM-03-25-16.pdf HJUD 4/5/2016 1:00:00 PM
HB 339
HB 339 - Version W.pdf HJUD 4/5/2016 1:00:00 PM
HB 339
HB 339 - Letter of Support - Alaska Fire Chiefs Association.pdf HJUD 4/5/2016 1:00:00 PM
HB 339
HB 339 - Letter of Support - Alaska Association of Fire & Arson Investigators.pdf HJUD 4/5/2016 1:00:00 PM
HB 339
HB 339 - Fiscal Note - DOA-PDA-03-30-16.pdf HJUD 4/5/2016 1:00:00 PM
HB 339
HB 339 - Sponsor Statement.pdf HJUD 4/5/2016 1:00:00 PM
HB 339
HB 194 - Supporting Documents - NASAA Model Act Overview.pdf HJUD 4/5/2016 1:00:00 PM
HB 194
HB 194 - Supporting Documents - NASAA Model Seniors Act.pdf HJUD 4/5/2016 1:00:00 PM
HB 194
HB 194 - Amendment #1.pdf HJUD 4/5/2016 1:00:00 PM
HB 194
HB 194 - Amendment #2.pdf HJUD 4/5/2016 1:00:00 PM
HB 194