Corporate Securities Reform in Ohio

Governor Bob Taft signed House Bill 7 ("H.B. 7") into law on June 17, 2003. H.B. 7 is a corporate and securities law reform measure designed to enhance investor confidence in the securities marketplace by changing Ohio's law. The three major thrusts of H.B. 7 are: to help in the prevention of investors from being victimized by violations of the Ohio securities laws, to assist in providing additional assistance to those who have been victimized by violations of the Ohio securities laws, and finally, to help improve enforcement of the Ohio securities laws. The changes in the Ohio Securities Act increase the regulatory authority of the Ohio Department of Commerce's Division of Securities and took effect on September 16, 2003.

In an effort to protect and prevent investors from being victimized by violations of the Ohio securities laws, the new provisions clarify that an investment opportunity need not be in writing in order to be a "security" under Ohio law; prohibit the Division of Securities from accepting the registration of securities of companies that have no business plan (sometimes referred to as "blank check offerings"); establish limits on and require disclosures of affiliate transactions in companies that register securities; establish limits on and require disclosures of loans to insiders of companies that register securities; require corporate representatives to certify financial records at the time securities are registered; permit the effective date for registration of securities by description to seven business days after the Division receives the registration; adds a new provision which prohibits improper influence on accountants who prepare financial statements to be used in connection with the purchase or sale of securities; and (8) adds a new provision which codifies a recent federal court decision.

In an attempt to assist those who have been victimized by violations of the Ohio securities laws, H.B. 7 makes the following changes: (1) adds a new section which provides that if the Division obtains an injunction against a defendant for violating the Ohio securities laws, the Division may ask the court to order the defendant to make restitution or rescission to investors damaged by the violations of Ohio securities laws; and (2) lengthens the statute of limitations for private civil actions to two or five years.

To improve enforcement, H.B. 7 makes the following changes: increases white collar crime penalties; (2) clarifies that the remedies contained in the Ohio Securities Act are cumulative and concurrent; and (3) lengthens the enforcement statute of limitations from three to five years, and to clarify that the limitations period applies to all enforcement actions.

For more information concerning corporate securities reform in Ohio, please contact Jennifer L. Stueber: jlstue@climacolaw.com