New Michigan Securities Act Takes Effect

Businesses wishing to raise capital by issuing and selling securities (typically "stock") face a complex maze of laws, rules and regulations, both at the federal level and in each state where the securities are to be offered and sold. These laws govern the process for the registration of the securities, set forth the criteria which must be met in order for the securities to be exempt from registration, regulate the conduct of those involved in the offer and sale, provide for enforcement and set forth fines, penalties, and both civil and criminal liability for violations.

This regulatory landscape changed in Michigan on October 1, 2009 when the new Michigan Uniform Securities Act became effective ("MUSA" for short.) MUSA replaces former Michigan law dating back to 1965. In enacting MUSA, Michigan became one of 17 states that have so far revamped their securities laws based upon the Model Uniform Security Act issued in 2002 by the National Conference of Commissioners on Uniform State Laws. One of the purposes of the model act is to provide a more efficient system of regulatory and enforcement authority that more closely follows federal law, all with the intent of protecting investors. Some of the key changes found in MUSA pertain to the registration of "investment adviser representatives," changes pertaining to exempt securities and exempt transactions, enhanced enforcement powers and enhanced penalties for violations, particularly where violations involve individuals over 60 years of age or individuals who are deemed unable to protect their own interests due to such things as disability or illiteracy.

The Michigan Office of Financial and Insurance Regulation ("OFIR") is charged with the responsibility of administering MUSA, including enforcement. Although MUSA went into effect on October 1, 2009, the exhaustive rules and regulations that OFIR will use in interpreting, applying and enforcing MUSA are not expected to be finalized until sometime in 2010.

Any business seeking to raise capital or attract investors, and any person involved in the offer and sale of securities, needs to be aware that this activity raises securities laws considerations under the new Michigan Uniform Securities Act.