Publications: A new Alaska Securities Act? - Alaska Law Firm - Wohlforth, Brecht, Cartledge & Brooking, A Professional Corporation

The law firm of Wohlforth, Brecht, Cartledge & Brooking, A Professional Corporation was founded in 1967 and has built a diverse and comprehensive practice in the areas of public finance, business, securities, banking, commercial, environmental, real estate, labor, employment, municipal and state agency law, and civil litigation. With our offices based in Alaska, we are vitally interested in, and maintain a keen awareness of, the current status of Alaska law and economic and governmental conditions. The firm is nationally recognized for its municipal and public finance practices and has deep grounding in Alaska. Clients include banks, trust companies, investment banks, securities issuers, corporations, various enterprises, non-profit corporations, rural Alaska communities and municipalities and state agencies. Its members have served as Commissioner of Revenue, Director of Banking, Securities and Corporations, Director of Petroleum Revenue, Chair of the Alaska Permanent Fund Corporation and other Alaska governmental positions. Representation is comprehensive, as the firm has an active trial and appellate civil litigation practice, and regularly appears before numerous state and municipal administrative and regulatory agencies.

Publications: Articles Authored by Julius J. Brecht

A new Alaska Securities Act?
By Julius J. Brecht [1]
For The Alaska Journal of Commerce

The State of Alaska Division of Banking, Securities and Corporations is considering proposing a replacement of the present Alaska Securities Act. Immediate questions arise – Why the change? To what will the act be changed? How does such a change affect the Alaska entrepreneur? What is a security?

In 1959, Alaska became a state and was the first state to adopt the Uniform Securities Act of 1956 ("1956 Act").

Since Alaska's enactment, approximately 37 states have subscribed to that 1956 Act in one form or another. Several other states subscribe to a related, later update to the 1956 Act proposed in 1985.

In essence, a state securities act, such as the Alaska Securities Act, regulates the offer and sale of securities, e.g., a stock or a bond. It also regulates those who are involved in that offer and sale, e.g., an agent, a broker-dealer, or an investment adviser.

If you want to form a small business and raise capital for that purpose through the sale of stock in your company or if you are with an established company wishing to increase its capital through such a sale, that transaction is subject to the Alaska Securities Act. The offer of that stock must be registered under the act unless the security or the securities transaction is exempt under it. Furthermore, the persons through whom the offer is made are subject to the registration provisions of the act as an agent, broker-dealer, or investment adviser, unless there is a clear exemption available to the person.

In 1996, Congress saw fit to preempt several segments of securities registration provisions set forth in the laws of the various states. It accomplished this feat through enactment of the National Securities Markets Improvement Act of 1996 ("1996 Act"). Congress later took similar preemptive action regarding litigation procedures in enacting the Securities Litigation Uniform Standards Act of 1998. These preemptive acts had the purpose of providing a uniform approach throughout the country in handling certain registration and litigation matters. Previously, these matters had been handled in varying ways by the various states. Presumably these actions were taken in the best interest of the investing public.

While admirable in purpose, the consequence of the preemptive acts have been to cause the states to resort to patch-quilt approaches in adjusting their respective laws. In Alaska's case, the Alaska Securities Act was significantly revised in 1999 to function under the new preemption provisions.

In the meantime, in 2002 the National Conference of Commissioners on Uniform State Laws ("National Conference") approved a new Uniform Securities Act (2002) ("New Act"). The New Act was drafted starting from the premise that the 1956 Act needed to be modernized as a consequence of the preemptive acts, as well as significant technological changes in the securities industry and the trend to expand securities transactions interstate and internationally. The drafters also sought to fashion a new securities act that would gain broad support among the states, thus promoting uniformity of approach in state securities regulation across the country.

The New Act is grounded in the 1956 Act, drawing on its substance and vocabulary. At the same time, the New Act takes into consideration the provisions of the 1985 act and federal preemption of certain securities laws accomplished through the 1996 Act.

The official prefatory note of the New Act states there are three overall themes embodied in it:

•	promoting objectives of uniformity and cooperation among states and with federal securities regulators
•	achieving consistency with the 1996 Act
•	facilitating electronic records, signatures and filings

The New Act makes several other changes in comparison to the 1956 Act, including the following:

•	modernizing the definition of a security
•	adding numerous other definitions reflecting modern securities transactions and those involved with them
•	providing limited change to securities registration requirements
•	substantially revising regulation of agents, broker-dealers, investment advisers, investment adviser representatives, and federal covered investment advisers to reflect the provisions of the 1996 Act, dividing the regulation of these persons between state and federal regulators, in part, based upon the volume of business handled
•	providing limited changes on anti-fraud and liability requirements
•	preserving ability through the New Act to include later amendments of specified federal statutes and rules, to the extent they are preempted or the law of a given state otherwise permits such change to state law without formal action by state government (enacting legislation into law)

The New Act does not codify regulations or guidelines. That arena would remain the responsibility of the state securities regulator. However, it does provide that such a regulator may adopt further exemptions without statutory amendment. This approach is different from that in the Alaska Securities Act.

Under the Alaska act, numerous exemptions are expressly set forth, some self-executing and others requiring a filing with the state by the issuer, or other person, seeking the exemption. The state regulator presently has only limited authority under the Alaska act to consider other exemptions not specifically set forth in it.

The 1956 Act was prepared by the National Conference. The conference has been responsible for preparing numerous uniform laws which have been adopted by many states throughout the country.

To date, the New Act has been adopted by six states (Idaho, Iowa, Kansas, Missouri, Oklahoma, and South Dakota). In addition, as many as a dozen more have it under consideration. Most have adopted it with little amendment.

The New Act may provide the basis for an approach to securities regulation in Alaska that takes into consideration protecting the investing public while at the same time providing a reasonable mechanism for the offer and sale of securities in this state and thereby encouraging economic development.

After more than 45 years service, the Alaska Securities Act may be in need of more than upgrade or revision. It may be time for Alaska to consider whether the New Act would be an appropriate starting point for considering a replacement for the Alaska act.

[1] Mr. Brecht is an attorney in private practice and shareholder with the law firm of Wohlforth, Brecht, Cartledge & Brooking, A Professional Corporation, with offices in Anchorage, Alaska. Mr. Brecht's concentration of practice is in state and federal securities law and corporate and finance law. The content of this article was not prepared as, and must not be construed as, legal or investment advice to anyone. He may be reached at .

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