A BILL TO BE ENTITLED
AN ACT to strengthen the laws to prevent securities fraud, TO PROHIBIT THE STATE FROM CONTRACTING WITH BUSINESSES THAT HAVE ANY OFFICERS OR DIRECTORS WHO HAVE BEEN CONVICTED OF SECURITIES FRAUD, and TO PROHIBIT THE STATE FROM CONTRACTING WITH VENDORS THAT ARE INCORPORATED IN A TAX HAVEN COUNTRY BUT THE UNITED STATES IS THE PRINCIPAL MARKET FOR THE PUBLIC TRADING OF THEIR CORPORATION'S STOCK.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 78A‑12 reads as rewritten:
"§ 78A‑12.  Manipulation of market.
(a)	In addition to the prohibitions of G.S. 78A‑8, it is unlawful for any person to do any of the following:
(1)	Willfully quote a fictitious price with respect to a security.
(2)	Effect a transaction in a security which involves no change in the beneficial ownership of the security, for the purpose of creating a false or misleading appearance of active trading in a security, or a false or misleading appearance of activity with respect to the market for the security.
(3)	Enter an order for the purchase of a security with the knowledge that, at substantially the same time, an order of substantially the same size, and at substantially the same price, for the sale of the security has been, or will be, entered by or for the same person, or an affiliated person, for the purpose of creating a false or misleading appearance of active trading in a security, or a false or misleading appearance of activity with respect to the market for the security.
(4)	Enter an order for the sale of a security with knowledge that, at substantially the same time, an order of substantially the same size, and at substantially the same price, for the purchase of the security has been, or will be, entered by or for the same person, or an affiliated person, for the purpose of creating a false or misleading appearance of active trading in a security, or a false or misleading appearance of activity with respect to the market for the security.
(5)	Employ any other deceptive or fraudulent device, scheme, or artifice to manipulate the market in a security, including the issuance of analyses, reports, or financial statements that are false or misleading in any material respect.
(b)	A transaction effected in compliance with the applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder is not manipulation of the market under subsection (a) of this section."
SECTION 2.  G.S. 78A‑25(a)(1)b. reads as rewritten:
"b.	The issuer and any predecessors during the past three fiscal years have had average net earnings, determined in accordance with generally accepted accounting principles, (i) which are applicable to all securities without a fixed maturity or a fixed interest or dividend or distribution provision outstanding at the date the registration statement is filed and equal at least five percent (5%) of the amount of such outstanding securities (as measured by the maximum offering price or the market price on a day, selected by the registrant, within 30 days before the date of filing the registration statement, whichever is higher, or book value on a day, selected by the registrant, within 90 days of the date of filing the registration statement to the extent that there is neither a readily determinable market price nor a cash offering price), or (ii) which, if the issuer and any predecessors have not had any security of the type specified in clause (i) outstanding for three full fiscal years, equal at least five percent (5%) of the amount (as measured in clause (i)) of all securities which will be outstanding if all the securities being offered or proposed to be offered (whether or not they are proposed to be registered or offered in this State) are issued;".
SECTION 3.  G.S. 78A‑49(c) reads as rewritten:
"(c)	The Administrator may by rule or order prescribe (i) the form and content of financial statements required under this Chapter, (ii) the circumstances under which consolidated financial statements shall be filed, and (iii) whether any required financial statements shall be certified by independent or certified public accountants. All financial statements required to be filed with the Administrator shall be audited and shall be prepared in accordance with generally accepted accounting principles, except where the Administrator shall by rule or order provide otherwise."
SECTION 4.  G.S. 78A‑56(a) reads as rewritten:
"(a)	Any person who:
(1)	Offers or sells a security in violation of G.S. 78A‑8(1), 78A‑8(3), 78A‑10(b), 78A‑13, 78A‑14, 78A‑24, or 78A‑36(a), or of any rule or order under G.S. 78A‑49(d) which requires the affirmative approval of sales literature before it is used, or of any condition imposed under G.S. 78A‑27(d) or 78A‑28(g), or
(2)	Offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of the untruth or omission), and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission,
is liable to the person purchasing the security from him, who may sue either at law or in equity to recover the consideration paid for the security, together with interest at the legal rate from the date of payment, costs, and reasonable attorneys' fees, less the amount of any income received on the security, upon the tender of the security, or for damages if he no longer owns the security, together with punitive damages consistent with Chapter 1D of the General Statutes. Damages are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it and interest at the legal rate as provided by G.S. 24‑1 from the date of disposition."
SECTION 5.  G.S. 78A‑56(b) reads as rewritten:
"(b)	Any person who purchases a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading (the seller not knowing of the untruth or omission), and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission, shall be liable to the person selling the security to him, who may sue either at law or in equity to recover the security, plus any income received by the purchaser thereon, upon tender of the consideration received, or for damages if the purchaser no longer owns the security, together with punitive damages consistent with Chapter 1D of the General Statutes. Damages are the excess of the value of the security when the purchaser disposed of it, plus interest at the legal rate from the date of disposition, over the consideration paid for the security."
SECTION 6.  G.S. 78A‑56 is amended by adding a new subsection to read:
"(b1)	A person who willfully participates in an act or transaction in violation of G.S. 78A-12 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, unless the person sustains the burden of proof 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. Damages are the difference between the price at which the securities were purchased or sold and the market value the securities would have had at the time of the person's purchase or sale in the absence of the act or transaction, plus interest at the legal rate of this State from the date of the act or transaction, costs, and reasonable attorneys' fees determined by the court, together with punitive damages consistent with Chapter 1D of the General Statutes."
SECTION 7.  G.S. 78A‑56(c) reads as rewritten:
"(c)	Every person who directly or indirectly controls a person liable under subsection (a), (b), or (b1), every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee or agent of such a person who materially aids in the act or transaction, and every dealer or salesman who materially aids in the sale are also liable jointly and severally with and to the same extent as such person, unless the person who is so liable sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There is contribution as in cases of contract among the several persons so liable."
SECTION 8.  G.S. 78A‑56(f) reads as rewritten:
"(f)	No person may sue under this section more than five years after the sale or contract of sale."
SECTION 9.  G.S. 78A‑57 reads as rewritten:
"(a)	Any person who willfully violates any provision of this Chapter except G.S. 78A‑8, 78A‑9, 78A‑11, 78A‑12, 78A‑13, or 78A‑14 or who willfully violates any rule or order under this Chapter shall be guilty of a Class I felony, but no person may be imprisoned for the violation of any rule or order if he proves that he had no knowledge of the rule or order.
(a1)	Any person who willfully violates G.S. 78A‑8, 78A‑11, 78A‑12, 78A‑13, or 78A‑14 shall be guilty of a felony. If the total value of the consideration involved in a single act or for a series of related acts in a common scheme or plan is one hundred thousand dollars ($100,000) or more, the person is guilty of a Class C felony. If the total value of the consideration involved in a single act or for a series of related acts in a common scheme or plan is less than one hundred thousand dollars ($100,000), the person is guilty of a Class H felony.
(a2)	Any person who willfully violates G.S. 78A-9 knowing the statement made to be false or misleading in any material respect shall be guilty of a Class H felony. Any other willful violation of G.S. 78A-9 shall constitute a Class 2 misdemeanor.
(b)	The Administrator may refer such evidence as is available concerning violations of this Chapter or of any rule or order hereunder to the proper district attorney, who may, with or without such a reference, institute the appropriate criminal proceedings under this Chapter. Upon receipt of such reference, the district attorney may request that a duly employed attorney of the Administrator prosecute or assist in the prosecution of such violation or violations on behalf of the State. Upon approval of the Administrator, such employee may be appointed a special prosecutor for the district attorney to prosecute or assist in the prosecution of such violations without receiving compensation from the district attorney. Such special prosecutor shall have all the powers and duties prescribed by law for district attorneys and such other powers and duties as are lawfully delegated to such special prosecutor by the district attorney for violations of this Chapter.
(c)	Nothing in this Chapter limits the power of the State to punish any person for any conduct which constitutes a crime by statute or at common law.
(d)	As used in this section, the phrase "total value of consideration" means in the case of a sale of securities, the value of consideration received, directly or indirectly, by the seller, and in the case of a purchase of securities, the value of the securities purchased."
SECTION 10.  Article 7 of Chapter 78A of the General Statutes is amended by adding a new section to read:
"§ 78A-58.  Obstruction of investigation.
Any person who, for the purpose of interfering with the performance of any audit, examination, or investigation by the Administrator under this Chapter, willfully makes or causes to be made to the Administrator or the Administrator's designated representative any false, misleading, or unfounded oral or written statement, or who shall willfully (i) create, cause to be made, or produce any record, report, or document that is false or misleading in any material respect; (ii) destroy or alter any record, report or document; (iii) conceal or secrete any record, report, or document; or who shall hinder or obstruct the Administrator or the Administrator's designated representative in the performance of the Administrator's duties under this Chapter, shall be guilty of a Class H felony."
SECTION 11.  G.S. 78A‑63(a) reads as rewritten:
"(a)	Sections 78A‑8, 78A‑10, 78A-12, 78A‑13, 78A‑14, 78A‑24, 78A‑31, 78A‑36(a), and 78A‑56 apply to persons who sell or offer to sell when (i) an offer to sell is made in this State, or (ii) an offer to buy is made and accepted in this State."
SECTION 12.  G.S. 78A‑63(b) reads as rewritten:
"(b)	Sections 78A‑8, 78A‑10, 78A-12, 78A‑36(a) and 78A‑56(b) apply to persons who buy or offer to buy when (i) an offer to buy is made in this State, or (ii) an offer to sell is made and accepted in this State."
SECTION 13.  G.S. 78A‑28(b) reads as rewritten:
"(b)	Every person filing a registration statement shall pay a filing fee of two thousand dollars ($2,000). When a registration statement is withdrawn before the effective date or a pre‑effective stop order is entered under G.S. 78A‑29, the Administrator shall retain the filing fee. A registration statement relating to redeemable securities to be offered for a period in excess of one year, other than securities covered under federal law, must be renewed annually by payment of a renewal fee of two hundred dollars ($200.00) and by filing any documents or reports that the Administrator may by rule or order require."
SECTION 14.  G.S. 78A‑28(j) reads as rewritten:
"(j)	A registration statement filed in accordance with subsection (b) of this section may be amended after its effective date to increase the securities specified as proposed to be offered. Such an amendment becomes effective when the Administrator so orders. Every person filing such an amendment shall pay a filing fee of one hundred dollars ($100.00) with respect to the additional securities proposed to be offered."
SECTION 15.  G.S. 78A‑31(a) reads as rewritten:
"(a)	The Administrator, by rule or order, may require the filing of any of the following documents with regard to a security covered under section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. § 77r(b)(2)):
(1)	Prior to the initial offer of the security in this State, all documents that are part of a federal registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, or, in lieu thereof, a form prescribed by the Administrator, together with a consent to service of process signed by the issuer and with the payment of a notice filing fee of two thousand dollars ($2,000).
(2)	After the initial offer of the security in this State, all documents that are part of an amendment to a federal registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, or, in lieu thereof, a form prescribed by the Administrator, which shall be filed concurrently with the Administrator.
(3)	A report of the value of securities covered under federal law that are offered or sold in this State.
(4)	A notice filing pursuant to this section shall expire on December 31 of each year or some other date not more than one year from its effective date as the Administrator may by rule or order provide. A notice filing of the offer of securities covered under federal law that are to be offered for a period in excess of one year shall be renewed annually by payment of a renewal fee of two hundred dollars ($200.00) and by filing any documents and reports that the Administrator may by rule or order require consistent with this section. The renewal shall be effective upon the expiration of the prior notice period.
(5)	A notice filed in accordance with this section may be amended after its effective date to increase the securities specified as proposed to be offered. An amendment becomes effective upon receipt by the Administrator. Every person submitting an amended notice filing shall pay a filing fee of one hundred dollars ($100.00) with respect to the additional securities proposed to be offered."
SECTION 16.  G.S. 78A‑37(a) reads as rewritten:
"(a)	A dealer or salesman may obtain an initial or renewal registration by filing with the Administrator an application together with a consent to service of process pursuant to G.S. 78A‑63(f). The application shall contain whatever information the Administrator by rule requires concerning such matters as (i) the applicant's form and place of organization; (ii) the applicant's proposed method of doing business; (iii) the qualifications and business history of the applicant; in the case of a dealer, the qualifications and business history of any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the dealer, and a representation that the applicant dealer is duly registered as a dealer under the Securities Exchange Act of 1934; (iv) any injunction or administrative order or conviction of a misdemeanor involving a security or any aspect of the securities business and any conviction of a felony; and (v) the applicant's financial condition and history. If no denial order is in effect and no proceeding is pending under G.S. 78A‑39, registration becomes effective at noon of the thirtieth day after an application is filed. The Administrator may by rule or order specify an earlier effective date, and he may by order defer the effective date until noon of the thirtieth day after the filing of any amendment. Registration of a dealer automatically constitutes registration of any salesman who is a partner, executive officer, or director, or a person occupying a similar status or performing similar functions. If the Administrator institutes a proceeding under G.S. 78A-39 to postpone or deny an application for registration, withdrawal of the application shall be allowed only at such time and under such conditions as the Administrator may by order determine."
SECTION 17.  G.S. 78C‑2(1) reads as rewritten:
"(1)	"Investment adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities. "Investment adviser" also includes financial planners and other persons who, as an integral component of other financially related services, provide the foregoing investment advisory services to others for compensation and as a part of a business or who hold themselves out as providing the foregoing investment advisory services to others for compensation. "Investment adviser" does not include:
a.	An investment adviser representative or a person excluded from the definition of investment adviser representative pursuant to G.S. 78C-2(3)c.
b.	A bank, savings institution, or trust company.
c.	A lawyer, accountant, engineer, or teacher whose performance of any such services is solely incidental to the practice of his profession.
d.	A dealer or its salesman whose performance of these services is solely incidental to the conduct of its business as a dealer and who receives no special compensation for them.
e.	A publisher of any newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, or by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client.
f.	A person solely by virtue of such person's services to or on behalf of any "business development company" as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 provided the business development company is not an "investment company" by reason of Section 3(c)(1) of the Investment Company Act of 1940, as both acts were in effect on June 1, 1988.
g.	A personal representative of a decedent's estate, guardian, conservator, receiver, attorney in fact, trustee in bankruptcy, trustee of a testamentary trust, or a trustee of an inter vivos trust, not otherwise engaged in providing investment advisory services, and the performance of these services is not a part of a plan or scheme to evade registration or the substantive requirements of this Chapter.
h.	A licensed real estate agent or broker whose only compensation is a commission on real estate sold.
i.	An individual or company primarily engaged in acting as a business broker whose only compensation is a commission on the sale of a business.
j.	An individual who, as an employee, officer or director of, or general partner in, another person and in the course of performance of his duties as such, provides investment advice to such other person, or to entities that are affiliates of such other person, or to employee benefit plans of such other person or its affiliated entities, or, with respect to such employee benefit plans, to employees of such other person or its affiliated entities.
	l.	An employee of a person described in subdivision b., e., f., g., h., or j. of G.S. 78C‑2(1) acting on behalf of such person within the scope of his employment.
l 1.	An investment adviser who is covered under federal law as defined in subdivision (4) of this section.
m.	Such other persons not within the intent of this subsection as the Administrator may by rule or order designate."
SECTION 18.  G.S. 78C‑16(a) reads as rewritten:
"(a)	It is unlawful for any person to transact business in this State as an investment adviser unless:
(1)	The person is registered under this Chapter;
(2)	The person's only clients in this State are investment companies as defined in the Investment Company Act of 1940, other investment advisers, investment advisers covered under federal law, dealers, banks, trust companies, savings institutions, savings and loan associations, insurance companies, employee benefit plans with assets of not less than one million dollars ($1,000,000), and governmental agencies or instrumentalities, whether acting for themselves or as trustees with investment control, or other institutional investors as are designated by rule or order of the Administrator; 
(3)	The person has no place of business in this State, and during the preceding 12‑month period has had not more than five clients, other than those specified in subdivision (2) of this subsection, who are residents of the State; or
(4)	The person is described in Section 203(b)(3) of the Investment Advisers Act of 1940."
SECTION 19.  G.S. 78C‑16(a1) reads as rewritten:
"(a1)	It is unlawful for any person to transact business in this State as an investment adviser representative unless:
(1)	The person is registered under this Chapter; or
(2)	The person is an investment adviser representative employed by or associated with an investment adviser exempt from registration under subdivision (2), (3), or (4) of subsection (a) of this section; or
(3)	The person is an investment adviser representative employed by or associated with an investment adviser covered under federal law that is exempt from the notice filing requirements of G.S. 78C‑17(a1)."
SECTION 20.  G.S. 78C‑17(a) reads as rewritten:
"(a)	An investment adviser, or investment adviser representative may obtain an initial or renewal registration by filing with the Administrator or the Administrator's designee an application together with a consent to service of process pursuant to G.S. 78C‑46(b) and paying any reasonable costs charged by the designee for processing the filings. The application shall contain whatever information the Administrator by rule requires concerning such matters as:
(1)	The applicant's form and place of organization;
(2)	The applicant's proposed method of doing business;
(3)	The qualifications and business history of the applicant; in the case of an investment adviser, the qualifications and business history of any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the investment adviser;
(4)	Any injunction or administrative order or conviction of a misdemeanor involving a security or any aspect of the securities business and any conviction of a felony;
(5)	The applicant's financial condition and history; and
(6)	Any information to be furnished or disseminated to any client or prospective client.
If no denial order is in effect and no proceeding is pending under G.S. 78C‑19, registration becomes effective at noon of the 30th day after an application is filed. The Administrator may by rule or order specify an earlier effective date, and he may by order defer the effective date until noon of the 30th day after the filing of any amendment. Registration of an investment adviser automatically constitutes registration of any investment adviser representative who is a partner, executive officer, or director, or a person occupying a similar status or performing similar functions. If the Administrator institutes a proceeding under G.S. 78C-19 to postpone or deny an application for registration, withdrawal of the application shall be allowed only at such time and under such conditions as the Administrator may by order determine."
SECTION 21.  G.S. 78C‑30(c) reads as rewritten:
"(c)	The Administrator may by rule or order prescribe (i) the form and content of financial statements required under this Chapter, (ii) the circumstances under which consolidated financial statements shall be filed, and (iii) whether any required financial statements shall be certified by independent or certified public accountants. All financial statements required to be filed with the Administrator shall be audited and shall be prepared in accordance with generally accepted accounting principles, except where the Administrator shall by rule or order provide otherwise."
SECTION 22.  G.S. 78C‑38(a) reads as rewritten:
"(a)	Any person who:
(1)	Engages in the business of advising others, for compensation, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities, in violation of G.S. 78C‑8(b), G.S.78C‑16(a), (a1), or (b) (an action pursuant to a violation of G.S. 78C‑16(b) may not be maintained except by those persons who directly received advice from the unregistered investment adviser representative), G.S. 78C‑10(b), or of any rule or order under G.S. 78C‑30(d) which requires the affirmative approval of sales literature before it is used, or 
(2)	Receives, directly or indirectly, any consideration from another person for advice as to the value of securities or their purchase or sale, whether through the issuance of analyses, reports or otherwise and employs any device, scheme, or artifice to defraud such other person or engages in any act, practice or course of business which operates or would operate as a fraud or deceit on such other person, in violation of G.S. 78C‑8(a)(1) or (2),
is liable to any person who is given such advice in such violation, who may sue either at law or in equity to recover (i) the consideration paid for such advice together with interest thereon at the legal rate as provided in G.S. 24‑1 from the date of payment of the consideration, plus (ii) the actual damages to such person proximately caused by such violation, plus (iii) costs of the action and reasonable attorneys' fees, together with punitive damages consistent with Chapter 1D of the General Statutes. An action based on violation of G.S. 78C‑8(b) may not prevail where the person accused of the violation sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known of the existence of the facts by reason of which the liability is alleged to exist."
SECTION 23.  G.S. 78C‑38(b) reads as rewritten:
"(b)	Every person who directly or indirectly controls a person liable under subsection (a) of this section, including every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee or associate of such a person who materially aids in the conduct giving rise to the liability, and every agent of such person who materially aids in such conduct is liable jointly and severally with and to the same extent as such person, unless able to sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known of the existence of the facts by reason of which the liability is alleged to exist. There is contribution as in cases of contract among the several persons so liable and as provided among tort‑feasors pursuant to Chapter 1B of the General Statutes."
SECTION 24.  G.S. 78C‑39 reads as rewritten:
"§ 78C‑39.  Criminal penalties.
(a)	Any person who willfully violates any provision of this Chapter except G.S. 78C‑8(a)(1), 78C‑8(a)(2), 78C‑8(b), or 78C‑9 shall be guilty of a Class I felony.
(a1)	Any person who willfully violates G.S. 78C‑8(a)(1), 78C‑8(a)(2), or 78C‑8(b) shall be guilty of a felony. If the total consideration received, directly or indirectly, by the violator for a single act or for a series of related acts in a common scheme or plan is one hundred thousand dollars ($100,000) or more, the person is guilty of a Class C felony. If the total consideration received, directly or indirectly, by the violator for a single act or for a series of related acts in a common scheme or plan is less than one hundred thousand dollars ($100,000), the person is guilty of a Class H felony.
(a2)	Any person who willfully violates G.S. 78C-9 knowing the statement made to be false or misleading in any material respect shall be guilty of a Class H felony. Any other willful violation of G.S. 78C-9 shall constitute a Class 2 misdemeanor.
(a3)	Any person who, for the purpose of interfering with the performance of any audit, examination, or investigation by the Administrator under this Chapter, willfully makes or causes to be made to the Administrator or the Administrator's designated representative any false, misleading, or unfounded oral or written statement, or who shall willfully (i) create, cause to be made, or produce any record, report, or document that is false or misleading in any material respect; (ii) destroy or alter any record, report, or document; (iii) conceal or secrete any record, report, or document; or who shall hinder or obstruct the Administrator or the Administrator's designated representative in the performance of the Administrator's duties under this Chapter, shall be guilty of a Class H felony.
(b)	The Administrator may refer such evidence as is available concerning violations of this Chapter or of any rule or order hereunder to the proper district attorney, who may, with or without such a reference, institute the appropriate criminal proceedings under this Chapter. Upon receipt of such reference, the district attorney may request that a duly employed attorney of the Administrator prosecute or assist in the prosecution of such violation or violations on behalf of the State. Upon approval of the Administrator, such employee may be appointed a special prosecutor for the district attorney to prosecute or assist in the prosecution of such violations without receiving compensation from the district attorney. Such special prosecutor shall have all the powers and duties prescribed by law for district attorneys and such other powers and duties as are lawfully delegated to such special prosecutor by the district attorney for violations of this Chapter.
(c)	Nothing in this Chapter limits the power of the State to punish any person for any conduct which constitutes a crime by statute or at common law."
SECTION 25.  G.S. 78D‑24(a) reads as rewritten:
"(a)	Any person who willfully violates any provision of this Chapter shall be guilty of a felony. If the actual losses caused by the violation or violations are one hundred thousand dollars ($100,000) or more, the person is guilty of a Class C felony. If the actual losses caused by the violation or violations are less than one hundred thousand dollars ($100,000), the person is guilty of a Class H felony."
SECTION 26.  G.S. 53B‑4 reads as rewritten:
"§ 53B‑4.  Access to financial records.
Notwithstanding any other provision of law, no government authority may have access to a customer's financial record held by a financial institution unless the financial record is described with reasonable specificity and access is sought pursuant to:
(1)	Customer authorization that meets the requirements of the Right to Financial Privacy Act § 1104, 12 U.S.C. § 3404, provided, however, a customer authorization received by a State agency or a county department of social services for the purpose of determining eligibility for the programs of public assistance under Chapter 108A of the General Statutes, or for purposes of a government inquiry concerning these same programs of public assistance, cannot be revoked and shall remain valid for 12 months unless a shorter period is specified in the authorization, or a customer authorization that is given by a licensed attorney with respect to an account in which the attorney holds funds as a fiduciary;
(2)	Authorization under G.S. 105‑251, 105‑251.1, or 105‑258;
(3)	Search warrant as provided in Article 11 of Chapter 15A of the General Statutes;
(4)	Statutory authority of a supervisory agency to examine or have access to financial records in the exercise of its supervisory, regulatory, or monetary functions with respect to a financial institution;
(5)	The authority granted under G.S. 116B‑72 and G.S. 116B‑75;
(6)	Examination and review by the State Auditor or his authorized representative under G.S. 147‑64.6(c)(9) or G.S. 147‑64.7(a);
(7)	Request by a government authority authorized to buy and sell student loan notes under Article 23 of Chapter 116 of the General Statutes for financial records relating to insured student loans;
(7a)	Investigations conducted by the Securities Administrator pursuant to G.S. 78A-46(a), 78C-27(a), and 78D-21(a);
(8)	Pending litigation to which the government authority and the customer are parties;
(9)	Subpoena or court order in connection with a grand jury proceeding;
(10)	A writ of execution under Article 28 of Chapter 1 of the General Statutes; or
(11)	Other court order or administrative or judicial subpoena authorized by law if the requirements of G.S. 53B‑5 are met.
As used in this section, the term "reasonable specificity" means that degree of specificity reasonable under all the circumstances, and, with respect to requests under G.S. 116B‑72 and G.S. 116B‑75, may include designation by general type or class."
SECTION 27.  G.S. 150B‑21.1(a2) reads as rewritten:
"(a2)	Notwithstanding the provisions of subsection (a) of this section, the Secretary of State may adopt temporary rules to implement the certification technology provisions of Article 11A of Chapter 66 of the General Statutes, to adopt uniform Statements of Policy that have been officially adopted by the North American Securities Administrators Association for the purpose of promoting uniformity of state securities regulation, and to adopt rules governing the conduct of hearings pursuant to this Chapter. After having the proposed temporary rule published in the North Carolina Register and at least 30 days prior to adopting a temporary rule pursuant to this subsection, the Secretary shall:
(1)	Notify persons on its mailing list maintained pursuant to G.S. 150B‑21.2(d) and any other interested parties of its intent to adopt a temporary rule;
(2)	Accept oral and written comments on the proposed temporary rule; and
(3)	Hold at least one public hearing on the proposed temporary rule.
When the Secretary adopts a temporary rule pursuant to this subsection, the Secretary must submit a reference to this subsection as the Secretary's statement of need to the Codifier of Rules.
Notwithstanding any other provision of this Chapter, the Codifier of Rules shall publish in the North Carolina Register a proposed temporary rule received from the Secretary in accordance with this subsection."
SECTION 28.  Article 3 of Chapter 143 is amended by adding a new section to read:
"§ 143-59.2.  Certain vendors prohibited from contracting with State.
(a)	Unauthorized Vendors. – A vendor is not entitled to enter into a contract for goods or services with any department, institution, or agency of the State government subject to the provisions of this Article if the vendor has an officer, director, or owner of an unincorporated business entity, who within 10 years immediately prior to the date of the bid solicitation, has been convicted of any violation of Chapter 78A of the General Statutes or the Securities Act of 1933 or the Securities Exchange Act of 1934.
(b)	Bid Certification. – The Director of Administration shall require each vendor submitting a bid to certify that none of its officers, directors, or owners of an unincorporated business entity has been convicted of any violation referenced in subsection (a) of this section within 10 years immediately prior to the date of the bid solicitation. False certification is a Class I felony. 
(c)	Void Contracts. – A contract entered into in violation of this section is void. A contract that is void under this section may continue in effect until an alternative can be arranged when: (i) immediate termination would result in harm to the public health or welfare, and (ii) the continuation is approved by the Director of Administration. Approval of continuation of contracts under this subsection shall be given for the minimum period necessary to protect the public health or welfare.
(d)	No Duty to Investigate. – Nothing in this section imposes a duty on any department, institution, or agency of the State government to investigate or verify the information contained in a vendor's certification."
SECTION 29.  G.S. 143‑59.1 reads as rewritten:
"§ 143‑59.1.  Contracts with certain foreign vendors.
(a)	Ineligible Vendors. – The Secretary of Administration and other entities to which this Article applies shall not contract for goods or services with either of the following:
(1)	A vendor if the vendor or an affiliate of the vendor meets one or more of the conditions of G.S. 105‑164.8(b) but refuses to collect the use tax levied under Article 5 of Chapter 105 of the General Statutes on its sales delivered to North Carolina. The Secretary of Revenue shall provide the Secretary of Administration periodically with a list of vendors to which this section applies. 
(2)	A vendor or an affiliate of the vendor that is incorporated in a tax haven country, but the United States is the principal market for the public trading of the corporation's stock.
(b)	Definitions. – The following definitions apply in this section:
(1)	Affiliate. – As defined in G.S. 105‑163.010.
(2)	Tax haven country. – Means each of the following: Barbados, Bermuda, British Virgin Islands, Cayman Islands, Commonwealth of the Bahamas, Cyprus, Gibraltar, Isle of Man, the Principality of Liechtenstein, the Principality of Monaco, and the Republic of the Seychelles."
SECTION 30.  There is hereby appropriated to the Office of the Secretary of State for the 2002‑2003 fiscal year the sum of two hundred twenty‑six thousand six hundred ninety‑two dollars ($226,692) for recurring expenses and fifteen thousand nine hundred ninety dollars ($15,990) for nonrecurring expenses for three additional unsworn securities investigators in the Securities Division.
SECTION 31.  Sections 9, 10, 24, and 25 of this act become effective December 1, 2002, and apply to acts committed on or after that date.  Sections 13, 14, and 15 of this act become effective October 1, 2002, and apply to fees assessed on or after that date.  Sections 28 and 29 of this act become effective October 1, 2002, and apply to contracts entered into on or after that date.  Section 30 of this act became effective July 1, 2002.  The remainder of this act is effective when it becomes law.