Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 2003 Regular Session of the General Assembly.


HOUSE ENROLLED ACT No. 1229



     AN ACT to amend the Indiana Code concerning trade regulations; consumer sales and credit and to make an appropriation.

    Be it enacted by the General Assembly of the State of Indiana:

    SECTION 1. IC 4-4-3-8 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2005]: Sec. 8. (a) The department shall develop and promote programs designed to make the best use of the resources of the state so as to assure a balanced economy and continuing economic growth for Indiana and for those purposes may do the following:
        (1) Cooperate with federal, state, and local governments and agencies in the coordination of programs to make the best use of the resources of the state.
        (2) Receive and expend all funds, grants, gifts, and contributions of money, property, labor, interest accrued from loans made by the department, and other things of value from public and private sources, including grants from agencies and instrumentalities of the state and the federal government. The department:
            (A) may accept federal grants for providing planning assistance, making grants, or providing other services or functions necessary to political subdivisions, planning commissions, or other public or private organizations;
            (B) shall administer these grants in accordance with their

terms; and
            (C) may contract with political subdivisions, planning commissions, or other public or private organizations to carry out the purposes for which the grants were made.
        (3) Direct that assistance, information, and advice regarding the duties and functions of the department be given the department by any officer, agent, or employee of the state. The head of any other state department or agency may assign one (1) or more of the department's or agency's employees to the department on a temporary basis, or may direct any division or agency under the department's or agency's supervision and control to make any special study or survey requested by the director.
    (b) The department shall perform the following duties:
        (1) Disseminate information concerning the industrial, commercial, governmental, educational, cultural, recreational, agricultural, and other advantages of Indiana.
        (2) Plan, direct, and conduct research activities.
        (3) Develop and implement industrial development programs to encourage expansion of existing industrial, commercial, and business facilities within Indiana and to encourage new industrial, commercial, and business locations within Indiana.
        (4) Assist businesses and industries in acquiring, improving, and developing overseas markets and encourage international plant locations within Indiana. The director, with the approval of the governor, may establish foreign offices to assist in this function.
        (5) Promote the growth of minority business enterprises by doing the following:
            (A) Mobilizing and coordinating the activities, resources, and efforts of governmental and private agencies, businesses, trade associations, institutions, and individuals.
            (B) Assisting minority businesses in obtaining governmental or commercial financing for expansion, establishment of new businesses, or individual development projects.
            (C) Aiding minority businesses in procuring contracts from governmental or private sources, or both.
            (D) Providing technical, managerial, and counseling assistance to minority business enterprises.
        (6) Assist in community economic development planning and the implementation of programs designed to further this development.
        (7) Assist in the development and promotion of Indiana's tourist

resources, facilities, attractions, and activities.
        (8) Assist in the promotion and marketing of Indiana's agricultural products, and provide staff assistance to the director in fulfilling the director's responsibilities as commissioner of agriculture.
        (9) Perform the following energy related functions:
            (A) Assist in the development and promotion of alternative energy resources, including Indiana coal, oil shale, hydropower, solar, wind, geothermal, and biomass resources.
            (B) Encourage the conservation and efficient use of energy, including energy use in commercial, industrial, residential, governmental, agricultural, transportation, recreational, and educational sectors.
            (C) Assist in energy emergency preparedness.
            (D) Not later than January 1, 1994, establish:
                (i) specific goals for increased energy efficiency in the operations of state government and for the use of alternative fuels in vehicles owned by the state; and
                (ii) guidelines for achieving the goals established under item (i).
            (E) Establish procedures for state agencies to use in reporting to the department on energy issues.
            (F) Carry out studies, research projects, and other activities required to:
                (i) assess the nature and extent of energy resources required to meet the needs of the state, including coal and other fossil fuels, alcohol fuels produced from agricultural and forest products and resources, renewable energy, and other energy resources;
                (ii) promote cooperation among government, utilities, industry, institutions of higher education, consumers, and all other parties interested in energy and recycling market development issues; and
                (iii) promote the dissemination of information concerning energy and recycling market development issues.
        (10) Implement any federal program delegated to the state to effectuate the purposes of this chapter.
        (11) Promote the growth of small businesses by doing the following:
            (A) Assisting small businesses in obtaining and preparing the permits required to conduct business in Indiana.


            (B) Serving as a liaison between small businesses and state agencies.
            (C) Providing information concerning business assistance programs available through government agencies and private sources.
        (12) Assist the Indiana commission for agriculture and rural development in performing its functions under IC 4-4-22.
        (13) Develop and promote markets for the following recyclable items:
            (A) Aluminum containers.
            (B) Corrugated paper.
            (C) Glass containers.
            (D) Magazines.
            (E) Steel containers.
            (F) Newspapers.
            (G) Office waste paper.
            (H) Plastic containers.
            (I) Foam polystyrene packaging.
            (J) Containers for carbonated or malt beverages that are primarily made of a combination of steel and aluminum.
        (14) Produce an annual recycled products guide and at least one (1) time each year distribute the guide to the following:
            (A) State agencies.
            (B) The judicial department of state government.
            (C) The legislative department of state government.
            (D) State educational institutions (as defined in IC 20-12-0.5-1).
            (E) Political subdivisions (as defined in IC 36-1-2-13).
            (F) Bodies corporate and politic created by statute.
        A recycled products guide distributed under this subdivision must include a description of supplies and other products that contain recycled material and information concerning the availability of the supplies and products.
         (15) Beginning July 1, 2005, the department shall identify, promote, assist, and fund home ownership education programs conducted throughout Indiana by nonprofit counseling agencies certified by the department using funds appropriated under IC 4-4-3-23(e). The department shall adopt rules under IC 4-22-2 governing certification procedures and counseling requirements for nonprofit home

ownership counselors. The attorney general and the entities listed in IC 4-6-12-4(a)(1) through IC 4-6-12-4(a)(10) shall cooperate with the department in implementing this subdivision.
    (c) The department shall submit a report to the general assembly before October 1 of each year concerning the availability of and location of markets for recycled products in Indiana. The report must include the following:
        (1) A priority listing of recyclable materials to be targeted for market development. The listing must be based on an examination of the need and opportunities for the marketing of the following:
            (A) Paper.
            (B) Glass.
            (C) Aluminum containers.
            (D) Steel containers.
            (E) Bi-metal containers.
            (F) Glass containers.
            (G) Plastic containers.
            (H) Landscape waste.
            (I) Construction materials.
            (J) Waste oil.
            (K) Waste tires.
            (L) Coal combustion wastes.
            (M) Other materials.
        (2) A presentation of a market development strategy that:
            (A) considers the specific material marketing needs of Indiana; and
            (B) makes recommendations for legislative action.
        (3) An analysis that examines the cost and effectiveness of future market development options.
    SECTION 2. IC 4-4-3-23 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2005]: Sec. 23. (a) The home ownership education account within the state general fund is established to support the home ownership education programs established under section 8(b)(15) of this chapter. The account is administered by the department.
    (b) The home ownership education account consists of fees collected under IC 24-9-9.
    (c) The expenses of administering the home ownership

education account shall be paid from money in the fund.
    (d) The treasurer of state shall invest the money in the home ownership education account not currently needed to meet the obligations of the account in the same manner as other public money may be invested.
    (e) Money in the account may be spent only after appropriation by the general assembly.

    SECTION 3. IC 4-6-3-3, AS AMENDED BY P.L.2-2002, SECTION 24, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2005]: Sec. 3. If the attorney general has reasonable cause to believe that a person may be in possession, custody, or control of documentary material, or may have knowledge of a fact that is relevant to an investigation conducted to determine if a person is or has been engaged in a violation of IC 4-6-9, IC 4-6-10, IC 13-14-10, IC 13-14-12, IC 13-24-2, IC 13-30-4, IC 13-30-5, IC 13-30-6, IC 13-30-8, IC 23-7-8, IC 24-1-2, IC 24-5-0.5, IC 24-5-7, IC 24-5-8, IC 24-9, IC 25-1-7, IC 32-34-1, or any other statute enforced by the attorney general, only the attorney general may issue in writing, and cause to be served upon the person or the person's representative or agent, an investigative demand that requires that the person served do any combination of the following:
        (1) Produce the documentary material for inspection and copying or reproduction.
        (2) Answer under oath and in writing written interrogatories.
        (3) Appear and testify under oath before the attorney general or the attorney general's duly authorized representative.
    SECTION 4. IC 4-6-12 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2005]:
     Chapter 12. Homeowner Protection Unit
    Sec. 1. As used in this chapter, "unit" refers to the homeowner protection unit established under this chapter.
    Sec. 2. The attorney general shall establish a homeowner protection unit to enforce IC 24-9 and to carry out this chapter.
            Sec. 3. (a) Beginning July 1, 2005, the unit shall do the following:
        (1) Investigate deceptive acts in connection with mortgage lending.
        (2) Investigate violations of IC 24-9.
        (3) Institute appropriate administrative and civil actions to

redress:
            (A) deceptive acts in connection with mortgage lending; and
            (B) violations of IC 24-5-0.5 and IC 24-9.
        (4) Cooperate with federal, state, and local law enforcement agencies in the investigation of:
            (A) deceptive acts in connection with mortgage lending;
            (B) criminal violations involving deceptive acts in connection with mortgage lending; and
            (C) violations of IC 24-5-0.5 and IC 24-9.
    (b) The attorney general shall adopt rules under IC 4-22-2 to the extent necessary to organize the unit.
    Sec. 4. (a) The following may cooperate with the unit to implement this chapter:
        (1) The Indiana professional licensing agency and the appropriate licensing boards with respect to persons licensed under IC 25.
        (2) The department of financial institutions.
        (3) The department of insurance with respect to the sale of insurance in connection with mortgage lending.
        (4) The securities division of the office of the secretary of state.
        (5) The supreme court disciplinary commission with respect to attorney misconduct.
        (6) The Indiana housing finance authority.
        (7) The department of state revenue.
        (8) The state police department.
        (9) A prosecuting attorney.
        (10) Local law enforcement agencies.
        (11) The department of commerce.
    (b) Notwithstanding IC 5-14-3, the entities listed in subsection (a) may share information with the unit.
    Sec. 5. The attorney general may file complaints with any of the entities listed in section 4 of this chapter to carry out this chapter and IC 24-9.
    Sec. 6. The establishment of the unit and the unit's powers does not limit the jurisdiction of an entity described in section 4 of this chapter.
    Sec. 7. The attorney general and an investigator of the unit may do any of the following when conducting an investigation under section 3 of this chapter:


        (1) Issue and serve a subpoena for the production of records, including records stored in electronic data processing systems, for inspection by the attorney general or the investigator.
        (2) Issue and serve a subpoena for the appearance of a person to provide testimony under oath.
        (3) Apply to a court with jurisdiction to enforce a subpoena described in subdivision (1) or (2).
    Sec. 8. The unit shall cooperate with the department of commerce in the development and implementation of the home ownership education programs established under IC 4-4-3-8(b)(15).
    Sec. 9. (a) The homeowner protection unit account within the general fund is established to support the operations of the unit. The account is administered by the attorney general.
    (b) The homeowner protection unit account consists of fees collected under IC 24-9-9.
    (c) The expenses of administering the homeowner protection unit account shall be paid from money in the account.
    (d) The treasurer of state shall invest the money in the homeowner protection unit account not currently needed to meet the obligations of the account in the same manner as other public money may be invested.
    (e) Before July 1, 2007:
        (1) money in the homeowner protection unit account at the end of the state fiscal year does not revert to the state general fund; and
        (2) there is annually appropriated to the attorney general from the homeowner protection unit account money sufficient for carrying out the purposes of this chapter and IC 24-9.
    (f) After June 30, 2007:
        (1) money in the homeowner protection unit account at the end of a state fiscal year reverts to the state general fund; and
        (2) money in the homeowner protection unit account may only be spent after appropriation by the general assembly.

    SECTION 5. IC 23-2-1-2 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 2. (a) The following securities are exempted from the registration requirements of section 3 of this chapter:
        (1) A security (including a revenue obligation) issued or guaranteed by the United States, a state, a political subdivision of a state, or an agency or corporate or other instrumentality of one

(1) or more of the foregoing or a certificate of deposit for any of the foregoing.
        (2) A security issued or guaranteed by Canada, a Canadian province, a political subdivision of a Canadian province, an agency, or corporate or other instrumentality of one (1) or more of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor.
        (3) A security issued by and representing an interest in or a debt of, or guaranteed by a bank organized under the laws of the United States, a bank, savings institution, or trust company organized and supervised under the laws of a state, a federal savings association, a savings association organized under the laws of a state and authorized to do business in Indiana, a federal credit union or a credit union, industrial loan association, or similar association organized and supervised under the laws of this state, or a corporation or organization whose issuance of securities is required by any other law to be passed upon and authorized by the department of financial institutions or by a federal agency or authority.
        (4) A security issued or guaranteed by a railroad or other common or contract carrier, a public utility, or a common or contract carrier or public utility holding company. However, an issuer or guarantor must be subject to regulation or supervision as to the issuance of its own securities by a public commission, board, or officer of the government of the United States, of a state, territory, or insular possession of the United States, of a municipality located in a state, territory, or insular possession, of the District of Columbia, or of the Dominion of Canada or a province of Canada.
        (5) A security listed or approved for listing upon notice of issuance on the New York Stock Exchange, the American Stock Exchange, the Chicago Stock Exchange, or on any other exchange approved and designated by the commissioner, any other security of the same issuer that is of senior rank or substantially equal rank, a security called for by subscription rights or warrants so listed or approved, or a warrant or right to purchase or subscribe to any of the foregoing.
        (6) A promissory note, draft, bill of exchange, or banker's

acceptance that is evidence of:
            (A) an obligation;
            (B) a guarantee of an obligation;
            (C) a renewal of an obligation; or
            (D) a guarantee of a renewal of an obligation;
        to pay cash within nine (9) months after the date of issuance, excluding grace days, that is issued in denominations of at least fifty thousand dollars ($50,000) and receives a rating in one (1) of the three (3) highest rating categories from a nationally recognized statistical rating organization.
        (7) A security issued in connection with an employee stock purchase, savings, pension, profit-sharing, or similar benefit plan.
        (8) A security issued by an association incorporated under IC 15-7-1.
        (9) A security that is an industrial development bond (as defined in Section 103(b)(2) of the Internal Revenue Code of 1954) the interest of which is excludable from gross income under Section 103(a)(1) of the Internal Revenue Code of 1954 if, by reason of the application of paragraph (4) or (6) of Section 103(b) of the Internal Revenue Code of 1954 (determined as if paragraphs (4)(A), (5), and (7) were not included in Section 103(b)), paragraph (1) of Section 103(b) does not apply to the security.
        (10) A security issued by a nonprofit corporation that meets the requirements of Section 103(e) of the Internal Revenue Code of 1954 and is designated by the governor as the secondary market for guaranteed student loans under IC 20-12-21.2.
        (11) A security designated or approved for designation upon notice of issuance on the National Association of Securities Dealers Automatic Quotation National Market System or any other national market system approved and designated by the commissioner, any other security of the same issuer that is of senior rank or substantially equal rank, a security called for by subscription rights or warrants so listed or approved, or a warrant or right to purchase or subscribe to any of the foregoing.
        (12) A security that is a "qualified bond" (as defined in Section 141(e) of the Internal Revenue Code, as amended).
    (b) The following transactions are exempted from the registration requirements of section 3 of this chapter:
        (1) An isolated nonissuer offer or sale, whether effected through a broker-dealer or not.


        (2) A nonissuer sale effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy.
        (3) A nonissuer offer or sale by a registered broker-dealer, acting either as principal or agent, of issued and outstanding securities if the following conditions are satisfied:
            (A) The securities are sold at prices reasonably related to the current market price at the time of sale, and if the registered broker-dealer is acting as agent, the commission collected by the registered broker-dealer on account of the sale is not in excess of usual and customary commissions collected with respect to securities and transactions having comparable characteristics.
            (B) The securities do not constitute an unsold allotment to or subscription by the broker-dealer as a participant in the distribution of the securities by the issuer or by or through an underwriter.
            (C) Either:
                (i) information consisting of the names of the issuer's officers and directors, a balance sheet of the issuer as of a date not more than eighteen (18) months prior to the date of the sale, and a profit and loss statement for either the fiscal year preceding that date or the most recent year of operations is published in a securities manual approved by the commissioner;
                (ii) the issuer is required to file reports with the Securities and Exchange Commission pursuant to sections 13 and 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78m and 78o) and is not delinquent in the filing of the reports on the date of the sale; or
                (iii) information consisting of the names of the issuer's officers and directors, a balance sheet of the issuer as of a date not more than sixteen (16) months prior to the date of the sale, and a profit and loss statement for either the fiscal year preceding that date or the most recent year of operations is on file with the commissioner. The information required by this item to be on file with the commissioner must be on a form and made in a manner as the commissioner prescribes. The fee for the initial filing of the form shall be twenty-five dollars ($25). The fee for the annual renewal filing shall be fifteen dollars ($15). When a

filing is withdrawn or is not completed by the issuer, the commissioner must retain the filing fee.
            (D) There has been compliance with section 6(l) of this chapter.
            (E) Unless the issuer is registered under the Investment Company Act of 1940, all the following must be true at the time of the transaction:
                (i) The security belongs to a class that has been in the hands of the public for at least ninety (90) days.
                (ii) The issuer of the security is a going concern, is actually engaged in business, and is not in bankruptcy or receivership.
                (iii) Except as permitted by order of the commissioner, the issuer and any predecessors have been in continuous operation for at least five (5) years. An issuer or predecessor is in continuous operation only if the issuer or predecessor has gross operating revenue in each of the five (5) years immediately preceding the issuer's or predecessor's claim of exemption and has had total gross operating revenue of at least two million five hundred thousand dollars ($2,500,000) for those five (5) years or has had gross operating revenue of at least five hundred thousand dollars ($500,000) in not less than three (3) of those five (5) years.
        The commissioner may revoke the exemption afforded by this subdivision with respect to any securities by issuing an order:
                (i) if the commissioner finds that the further sale of the securities in this state would work or tend to work a fraud on purchasers of the securities;
                (ii) if the commissioner finds that the financial condition of the issuer is such that it is in the public interest and is necessary for the protection of investors to revoke or restrict the exemption afforded by this subsection; or
                (iii) if the commissioner finds that, due to the limited number of shares in the hands of the public or due to the limited number of broker-dealers making a market in the securities, there is not a sufficient market for the securities so that there is not a current market price for the securities.
        (4) A transaction between the issuer or other person on whose behalf the offering is made by an underwriter, or among underwriters.


        (5) A transaction in a bond or other evidence of indebtedness secured by a real or chattel mortgage or deed of trust, or by agreement for the sale of real estate or chattels, if the entire mortgage, deed of trust, or agreement, together with all the bonds or other evidences of indebtedness, is offered and sold as a unit.
        (6) A transaction by an executor, administrator, personal representative, sheriff, marshal, receiver, trustee in bankruptcy, guardian, conservator, or a person acting in a trust or fiduciary capacity where the transaction is effected pursuant to the authority of or subject to approval by a court of competent jurisdiction.
        (7) A transaction executed by a bona fide pledgee without any purpose of evading this chapter.
        (8) An offer or sale to a bank, a savings institution, a trust company, an insurance company, an investment company (as defined in the Investment Company Act of 1940 (15 U.S.C. 80a-1 through 80a-52)), a pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in a fiduciary capacity.
        (9) The offer or sale of securities of an issuer:
            (i) to a person who is:
                (A) a director, an executive officer, a general partner, an administrator, or a person who performs similar functions for or who is similarly situated with respect to the issuer;
                (B) a director, an executive officer, or a general partner of a general partner of the issuer; or
                (C) any other natural person employed on a full-time basis by the issuer as an attorney or accountant if the person has been acting in this capacity for at least one (1) year immediately prior to the offer or sale;
            (ii) to an entity affiliated with the issuer;
            (iii) if the issuer is a corporation, to a person who is the owner of shares of the corporation or of an affiliated corporation representing and possessing ten percent (10%) or more of the total combined voting power of all classes of stock (of the corporation or affiliated corporation) issued and outstanding and who is entitled to vote; or
            (iv) if the issuer is a limited liability company, to a person who is the owner of an interest in the limited liability company representing and possessing at least ten percent (10%) of the total combined voting power of all classes of such interests (of

the limited liability company or affiliated limited liability company) issued and outstanding.
        (10) The offer or sale of a security by the issuer of the security if all of the following conditions are satisfied:
            (A) The issuer reasonably believes that either:
                (i) there are no more than thirty-five (35) purchasers of the securities from the issuer in an offering pursuant to this subsection, including purchasers outside Indiana; or
                (ii) there are no more than twenty (20) purchasers in Indiana.
            In either case, there shall be excluded in determining the number of purchasers a purchaser whom the issuer reasonably believes to be an accredited investor or who purchases the securities after they are registered under this chapter.
            (B) The issuer does not offer or sell the securities by means of a form of general advertisement or general solicitation.
            (C) The issuer reasonably believes that each purchaser of the securities is acquiring the securities for the purchaser's own investment and is aware of any restrictions imposed on transferability and resale of the securities. The basis for reasonable belief may include:
                (i) obtaining a written representation signed by the purchaser that the purchaser is acquiring the securities for the purchaser's own investment and is aware of any restrictions imposed on the transferability and resale of the securities; and
                (ii) placement of a legend on the certificate or other document that evidences the securities stating that the securities have not been registered under section 3 of this chapter, and setting forth or referring to the restrictions on transferability and sale of the securities.
            (D) The issuer:
                (i) files with the commissioner and provides to each purchaser in this state an offering statement that sets forth all material facts with respect to the securities; and
                (ii) reasonably believes immediately before making a sale that each purchaser who is not an accredited investor either alone or with a purchaser representative has knowledge and experience in financial and business matters to the extent that the purchaser is capable of evaluating the merits and

risks of the prospective investment.
            (E) If the aggregate offering price of the securities in an offering pursuant to this subdivision (including securities sold outside of Indiana) does not exceed five hundred thousand dollars ($500,000), the issuer is not required to comply with clause (D) if the issuer files with the commissioner and provides to each purchaser in Indiana the following information and materials:
                (i) copies of all written materials, if any, concerning the securities that have been provided by the issuer to any purchaser; and
                (ii) unless clearly presented in all written materials, a written notification setting forth the name, address, and form of organization of the issuer and any affiliate, the nature of the principal businesses of the issuer and any affiliate, and the information required in section 5(b)(1)(B), 5(b)(1)(C), 5(b)(1)(D), 5(b)(1)(E), 5(b)(1)(H), and 5(b)(1)(I) of this chapter.
            (F) The commissioner does not disallow the exemption provided by this subdivision within ten (10) full business days after receipt of the filing required by clause (D) or (E). The issuer may make offers (but not sales) before and during the ten (10) day period, if:
                (i) each prospective purchaser is advised in writing that the offer is preliminary and subject to material change; and
                (ii) no enforceable offer to purchase the securities may be made by a prospective purchaser, and no consideration in any form may be accepted or received (directly or indirectly) from a prospective purchaser, before the expiration of the ten (10) day period and the vacation of an order disallowing the exemption.
            (G) The issuer need not comply with clause (D), (E), or (F) if:
                (i) each purchaser has access to all the material facts with respect to the securities by reason of the purchaser's active involvement in the organization or management of the issuer or the purchaser's family relationship with a person actively involved in the organization or management of the issuer;
                (ii) there are not more than fifteen (15) purchasers in Indiana and each Indiana purchaser is an accredited investor or is a purchaser described in item (i); or


                (iii) the aggregate offering price of the securities, including securities sold outside Indiana, does not exceed five hundred thousand dollars ($500,000), the total number of purchasers, including purchasers outside of Indiana, does not exceed twenty-five (25) and each purchaser either receives all of the material facts with respect to the security or is an accredited investor or a purchaser described in item (i).
            (H) If the issuer makes or is required to make a filing with the commissioner under clause (D) or (E), the issuer must also file with the commissioner at the time of the filing the consent to service of process required by section 16 of this chapter. The issuer shall also file with the commissioner, at the times and in the forms as the commissioner may prescribe, notices of sales made in reliance upon this subdivision.
            (I) The commissioner may by rule deny exemption provided in this subdivision to a particular class of issuers, or may make the exemption available to the issuers upon compliance with additional conditions and requirements, if appropriate in furtherance of the intent of this chapter.
        (11) An offer or sale of securities to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants, or transferable warrants exercisable within not more than ninety (90) days of their issuance if no commission or other remuneration (other than a standby commission) is paid or given for soliciting a security holder in this state.
        (12) An offer (but not a sale) of a security for which registration statements or applications have been filed under this chapter and the Securities Act of 1933 (15 U.S.C. 77a-77aa), if no stop order or refusal order is in effect and no public proceeding or examination looking toward an order is pending under either law.
        (13) The deposit of shares under a voting-trust agreement and the issue of voting-trust certificates for the deposit.
        (14) The offer or sale of a commodity futures contract.
        (15) The offer or sale of securities to or for the benefit of security holders incident to a vote by the security holders pursuant to the articles of incorporation or applicable instrument, on a merger or share exchange under IC 23-1-40 or the laws of another state, reclassification of securities, exchange of securities under IC 28-1-7.5, or sale of assets of the issuer in consideration of the

issuance of securities of the same or another issuer.
        (16) A limited offering transactional exemption, which may be created by rule adopted by the commissioner. The exemption must further the objectives of compatibility with federal exemptions and uniformity among the states.
    (c) The commissioner may consider and determine if a proposed sale, transaction, issue, or security is entitled to an exemption accorded by this section. The commissioner may decline to exercise the commissioner's authority as to a proposed sale, transaction, issue, or security. An interested party desiring the commissioner to exercise the commissioner's authority must submit to the commissioner a verified statement of all material facts relating to the proposed sale, transaction, issue, or security, which must be accompanied by a request for a ruling as to the particular exemption claimed, together with a filing fee of one hundred dollars ($100). After notice to the interested parties as the commissioner determines is proper and after a hearing, if any, the commissioner may enter an order finding the proposed sale, transaction, issue, or security entitled or not entitled to the exemption claimed. An order entered, unless an appeal is taken from it in the manner prescribed in section 20 of this chapter, is binding upon the commissioner and upon all interested parties, provided that the proposed sale, transaction, issue, or security when consummated or issued conforms in every relevant and material particular with the facts as set forth in the verified statement submitted.
    (d) The commissioner may by order deny or revoke an exemption specified in subsection (a)(6), (a)(7), or (b) with respect to a specific security or transaction, if the commissioner finds that the securities to which the exemption applies would not qualify for registration under sections 4 and 5 of this chapter. No order may be entered without appropriate prior notice to all interested parties, opportunity for hearing, and written findings of fact and conclusions of law, except that the commissioner may by order summarily deny or revoke any of the specific exemptions pending final determination of a proceeding under this subsection. Upon the entry of a summary order, the commissioner shall promptly notify all interested parties that it has been entered, of the reasons for the order, and that within fifteen (15) days of the receipt of a written request the matter will be set down for hearing. If no hearing is requested and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner,

after notice of and opportunity for hearing to all interested persons, may modify or vacate the order or extend it until final determination. No order under this subsection may operate retroactively. No person may be considered to have violated section 3 of this chapter by reason of an offer or sale effected after the entry of an order under this subsection if 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 order.
    (e) If, with respect to an offering of securities, any notices or written statements are required to be filed with the commissioner under subsection (b)(10), the first filing made with respect to the offering must be accompanied by a filing fee of one hundred dollars ($100).
     (f) A condition, stipulation, or provision requiring a person acquiring a security to waive compliance with this chapter or a rule or order under this chapter is void.
    SECTION 6. IC 23-2-1-6 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 6. (a) An application for registration may be filed by:
        (1) the issuer;
        (2) any other person on whose behalf the offering is to be made; or
        (3) a registered broker-dealer.
    (b) A person filing an application for registration shall pay a filing fee of one-twentieth of one percent (0.05%) of the maximum aggregate offering price at which the registered securities are to be offered in Indiana, but the fee may not be less than two hundred fifty dollars ($250) and may not be more than one thousand dollars ($1,000).
    (c) When an application for registration under subsection (b) is withdrawn before the effective date or a preeffective stop order is entered under section 7 of this chapter, the commissioner shall retain two hundred fifty dollars ($250) of the fee.
    (d) A person filing an amendment to an effective registration which requires an order of the commissioner shall pay a twenty-five dollar ($25) filing fee.
    (e) An application for registration shall specify:
        (1) the amount of securities to be offered in this state;
        (2) the states in which a registration statement or similar document in connection with the offering has been or is to be filed; and
        (3) an adverse order, judgment, or decree entered in connection

with the offering by the regulatory authorities in each state or by a court or the Securities and Exchange Commission.
    (f) A document filed under this chapter within five (5) years preceding the filing of an application for registration may be incorporated by reference in the application for registration if the document is currently accurate.
    (g) The commissioner may by rule or otherwise permit the omission of an item of information or document from an application for registration.
    (h) In the case of a nonissuer distribution, any part of the information that might otherwise be required under section 5 of this chapter or subsection (i) need not be furnished if the person filing the application for registration produces evidence to the reasonable satisfaction of the commissioner that the person, or the persons on whose behalf the distribution is to be made, cannot furnish that part of the required information without unreasonable effort or expense.
    (i) A registration is effective for:
        (1) two (2) years from its effective date; or
        (2) a shorter period during which the security is being offered or distributed in a nonexempted transaction by or for the account of the issuer or the person on whose behalf the offering is being made or by an underwriter or broker-dealer who is still offering part of an unsold allotment or subscription taken by the underwriter or broker-dealer as a participant in the distribution, except during the time a stop order is in effect under section 7 of this chapter.
    (j) So long as a registration is effective, the commissioner may by rule or order require the person who filed the application for registration to file reports, not more often than quarterly, to keep reasonably current the information contained in the application for registration and to disclose the progress of the offering.
    (k) The commissioner may by rule or order require as a condition of registration by qualification or coordination:
        (1) that a security issued within the past three (3) years or to be issued to a promoter for a consideration substantially different from the public offering price, or to a person for a consideration other than cash, be deposited in escrow; and
        (2) that the proceeds from the sale of the registered security be impounded until the issuer receives a specified amount.
The commissioner may by rule or order determine the conditions of an

escrow or impounding required under this subsection, but the commissioner may not reject a depository solely because of location in another state.
    (l) No transferable share is exempt from registration under section 2(b)(3) of this chapter or is qualified for registration under sections 4 or 5 of this chapter unless the issuer has designated a qualified transfer agent to handle all transfers. The commissioner may adopt rules to implement this subsection. The commissioner may by rule or order exempt an issuer, wholly or partially, from the requirements of this subsection.
    (m) A registration statement may be amended after its effective date to increase the securities specified to be offered and sold if the public offering price and underwriters' discounts and commissions are not changed from the amounts reported to the commissioner. An amendment becomes effective upon an order of the commissioner. A person filing an amendment must pay a late registration fee of twenty-five dollars ($25) and a filing fee under subsection (b) for the additional securities proposed to be offered. An amendment relates back to the date of the sale of additional securities being registered if the amendment is filed within three (3) months after the date of the sale and the additional filing fee and late registration fee are paid.
    (n) As permitted by Section 106(c) of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r-1(c)), securities that are offered and sold pursuant to Section 4(5) of the Securities Act of 1933 or that are mortgage-related securities (as that term is defined in Section 3(a)(41) of the Securities Exchange Act of 1934, 15 U.S.C. 78c(a)(41)):
        (1) must comply with all applicable:
            (A) registration and qualification requirements of this chapter; and
            (B) rules adopted by the commissioner; and
        (2) shall not be treated as obligations issued by the United States for the purposes of this chapter.
     (o) If:
        (1) the division:
            (A) does not approve an application for registration by coordination or qualification; and
            (B) notifies the applicant not later than ten (10) days after the date the application was not approved of a deficiency in the application that, if satisfied, would allow the

approval of the application;
        the applicant may satisfy the deficiency within sixty (60) days after the date described in clause (B); and
        (2) an applicant does not satisfy the deficiency described in subdivision (1):
            (A) the application is considered abandoned;
            (B) the issuer does not receive a refund of the application fee; and
            (C) no further action is required by the division.

    SECTION 7. IC 23-2-1-15, AS AMENDED BY P.L.270-2003, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 15. (a) This chapter shall be administered by a division of the office of the secretary of state. The secretary of state shall appoint a securities commissioner who shall be responsible for the direction and supervision of the division and the administration of this chapter under the direction and control of the secretary of state. The salary of the securities commissioner shall be paid out of the funds appropriated for the administration of this chapter. The commissioner shall serve at the will of the secretary of state.
    (b) The secretary of state:
        (1) shall employ a chief deputy, a senior investigator, a senior accountant, and other deputies, investigators, accountants, clerks, stenographers, and other employees necessary for the administration of this chapter; and
        (2) shall fix their compensation with the approval of the budget agency.
The chief deputy, other deputies, the senior investigator, and the senior accountant, once employed under this chapter, may be dismissed only for cause by the secretary of state upon ten (10) days notice in writing stating the reasons for dismissal. Within fifteen (15) days after dismissal, the chief deputy, other deputies, the senior investigator, and the senior accountant may appeal to the state personnel board. The state personnel board shall hold a hearing, and if it finds that the appealing party was dismissed for a political, social, religious, or racial reason, the appealing party shall be reinstated to the appealing party's position without loss of pay. In all other cases, if the decision is favorable to the appealing party, the secretary of state shall follow the findings and recommendations of the board, which may include reinstatement and payment of salary or wages lost. The hearing and any subsequent proceedings or appeals shall be governed by the provisions

of IC 4-15-2 and IC 4-21.5.
    (c) Fees and funds of whatever character accruing from the administration of this chapter shall be accounted for by the secretary of state and shall be deposited with the treasurer of state to be deposited by the treasurer of state in the general fund of the state. Expenses incurred in the administration of this chapter shall be paid from the general fund upon appropriation being made for the expenses in the manner provided by law for the making of those appropriations. However, costs of investigations recovered under sections 16(d) and 17.1(c) of this chapter shall be deposited with the treasurer of state to be deposited by the treasurer of state in a separate account to be known as the securities division enforcement account. The funds in the account shall be available, with the approval of the budget agency, to augment and supplement the funds appropriated for the administration of this chapter. The funds in the account do not revert to the general fund at the end of any fiscal year.
    (d) In connection with the administration and enforcement of the provisions of this chapter, the attorney general shall render all necessary assistance to the securities commissioner upon the commissioner's request, and to that end, the attorney general shall employ legal and other professional services as are necessary to adequately and fully perform the service under the direction of the securities commissioner as the demands of the securities division shall require. Expenses incurred by the attorney general for the purposes stated in this subsection shall be chargeable against and paid out of funds appropriated to the attorney general for the administration of the attorney general's office.
    (e) Neither the secretary of state, the securities commissioner, nor an employee of the securities division shall be liable in their individual capacity, except to the state, for an act done or omitted in connection with the performance of their respective duties under this chapter.
    (f) The commissioner, subject to the approval of the secretary of state, may adopt rules, orders, and forms necessary to carry out this chapter, including rules and forms concerning registration statements, applications, reports, and the definitions of any terms if the definitions are consistent with this chapter. The commissioner may by rule or order allow for exemptions from registration requirements under sections 3 and 8 of this chapter if the exemptions are consistent with the public interest and this chapter.
    (g) The provisions of this chapter delegating and granting power to

the secretary of state, the securities division, and the securities commissioner shall be liberally construed to the end that:
        (1) the practice or commission of fraud may be prohibited and prevented;
        (2) disclosure of sufficient and reliable information in order to afford reasonable opportunity for the exercise of independent judgment of the persons involved may be assured; and
        (3) the qualifications may be prescribed to assure availability of reliable broker-dealers, investment advisers, and agents engaged in and in connection with the issuance, barter, sale, purchase, transfer, or disposition of securities in this state.
It is the intent and purpose of this chapter to delegate and grant to and vest in the secretary of state, the securities division, and the securities commissioner full and complete power to carry into effect and accomplish the purpose of this chapter and to charge them with full and complete responsibility for its effective administration.
    (h) It is the duty of a prosecuting attorney, as well as of the attorney general, to assist the securities commissioner upon the commissioner's request in the prosecution to final judgment of a violation of the penal provisions of this chapter and in a civil proceeding or action arising under this chapter. If the commissioner determines that an action based on the securities division's investigations is meritorious:
        (1) the commissioner or a designee empowered by the commissioner shall certify the facts drawn from the investigation to the prosecuting attorney of the judicial circuit in which the crime may have been committed;
        (2) the commissioner and the securities division shall assist the prosecuting attorney in prosecuting an action under this section, which may include a securities division attorney serving as a special deputy prosecutor appointed by the prosecuting attorney;
        (3) a prosecuting attorney to whom facts concerning fraud are certified under subdivision (1) may refer the matter to the attorney general; and
        (4) if a matter has been referred to the attorney general under subdivision (3), the attorney general may:
            (A) file an information in a court with jurisdiction over the matter in the county in which the offense is alleged to have been committed; and
            (B) prosecute the alleged offense.


    (i) The securities commissioner shall take, prescribe, and file the oath of office prescribed by law. The securities commissioner, senior investigator, and each deputy are police officers of the state and shall have all the powers and duties of police officers in making arrests for violations of this chapter, or in serving any process, notice, or order connected with the enforcement of this chapter by whatever officer or authority or court issued. The securities commissioner, the deputy commissioners for enforcement, and the investigators comprise the enforcement department of the division and are considered a criminal justice agency for purposes of IC 5-2-4 and IC 10-13-3.
    (j) The securities commissioner and each employee of the securities division shall be reimbursed for necessary hotel and travel expenses when required to travel on official duty. Hotel and travel reimbursements shall be paid in accordance with the travel regulations prescribed by the budget agency.
    (k) It is unlawful for the secretary of state, the securities commissioner, or the securities division's employees to use for personal benefit information that is filed with or obtained by the securities division and that is not made public. No provision of this chapter authorizes the secretary of state, the securities commissioner, or the employees of the securities division to disclose information except among themselves, or when necessary or appropriate, in a proceeding or investigation under this chapter. No provision of this chapter either creates or derogates from a privilege that exists at common law or otherwise when documentary or other evidence is sought under a subpoena directed to the secretary of state, the securities commissioner, or the securities division or its employees.
    (l) The commissioner may honor requests from interested persons for interpretative opinions and from interested persons for determinations that the commissioner will not institute enforcement proceedings against specified persons for specified activities. A determination not to institute enforcement proceedings must be consistent with this chapter. A person may not request an interpretive opinion concerning an activity that:
        (1) occurred before; or
        (2) is occurring on;
the date that the opinion is requested.
The commissioner shall charge a fee of one hundred dollars ($100) for an interpretative opinion or determination.
    SECTION 8. IC 23-2-1-19 IS AMENDED TO READ AS

FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 19. (a) A person who offers or sells a security in violation of this chapter, and who does not sustain the burden of proof that the person did not know and in the exercise of reasonable care could not have known of the violation, is liable to any other party to the transaction who did not knowingly participate in the violation or who did not have, at the time of the transaction, knowledge of the violation, who may sue either at law or in equity to rescind the transaction or to recover the consideration paid, together, in either case, with interest as computed in subsection (g)(1), plus costs, and reasonable attorney's fees, less the amount of any cash or other property received on the security upon the tender of the security by the person bringing the action or for damages if the person no longer owns the security. Damages are the amount that would be recoverable upon a tender less:
        (1) the value of the security when the buyer disposed of the security; and
        (2) the interest as computed in subsection (g)(1) on the value of the security from the date of disposition.
    (b) A person who purchases a security in violation of this chapter, and who does not sustain the burden of proof that the person did not know and in the exercise of reasonable care could not have known of the violation, is liable to any other party to the transaction who did not knowingly participate in the violation or who did not have, at the time of the transaction, knowledge of the violation. The other party to the transaction may bring an action to rescind the transaction or for damages, together, in either case, with reasonable attorney's fees, upon the tender of the consideration received by the person bringing the action.
    (c) A 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 a part of a regular business, issues analyses or reports concerning securities and:
        (1) violates section 8, 12.1(b), or 14, or 26 of this chapter;
        (2) employs a device, scheme, or artifice to defraud a person; or
        (3) engages in an act that operates or would operate as fraud or deceit upon a person;
is liable to the other person, who may bring an action to recover any consideration paid for advice, any loss due to advice, interest at eight

percent (8%) each year from the date consideration was paid, costs, and reasonable attorney's fees less the value of cash or property received due to the advice. It is a defense to an action brought for a violation of section 12.1(b) or 26 of this chapter that the person accused of the violation did not know of the violation and, exercising reasonable care, could not have known of the violation.
    (d) A person who directly or indirectly controls a person liable under subsection (a), (b), or (c), a partner, officer, or director of the person, a person occupying a similar status or performing similar functions, an employee of a person who materially aids in the conduct creating the liability, and a broker-dealer or agent who materially aids in the conduct are also liable jointly and severally with and to the same extent as the person, unless the person who is liable 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 reason of which the liability is alleged to exist. There is contribution as in cases of contract among the several persons liable.
    (e) A tender specified in this section may be made at any time before entry of judgment.
    (f) A cause of action under this statute survives the death of a person who might have been a plaintiff or defendant.
    (g) Action under this section shall be commenced within three (3) years after discovery by the person bringing the action of a violation of this chapter, and not afterwards. No person may sue under this section:
        (1) if that person received a written offer, before suit and at a time when the person owned the security, to refund the consideration paid together with interest on that amount from the date of payment to the date of repayment, with interest on:
            (A) interest-bearing obligations to be computed at the same rate as provided on the security; and
            (B) all other securities at the rate of eight percent (8%) per year;
        less the amount of any income received on the security, and the person failed to accept the offer within thirty (30) days of its receipt; or
        (2) if the person received an offer before suit and at a time when the person did not own the security, unless the person rejected the offer in writing within thirty (30) days of its receipt.
    (h) No person who has made or engaged in the performance of a contract in violation of this chapter or a rule or order under this

chapter, or who has acquired a purported right under a contract with knowledge of the facts by reason of which its making or performance was in violation, may base a suit on the contract.
    (i) A condition, stipulation, or provision binding a person acquiring a security to waive compliance with this chapter or a rule or order under this chapter is void.
    (j) The rights and remedies specifically prescribed by this chapter are the only rights and remedies created by this chapter, but are in addition to any other rights or remedies that exist at law or in equity.
    SECTION 9. IC 23-2-1-19.5 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 19.5. (a) If the commissioner determines, after notice and opportunity for a hearing, that any person has violated this chapter, the commissioner may, in addition to or in lieu of all other remedies, impose a civil penalty upon any person who has violated this chapter. This penalty may not exceed ten thousand dollars ($10,000) for each violation of this chapter found to have been committed. An appeal from the decision of the commissioner imposing a civil penalty under this subsection may be taken by any aggrieved party pursuant to section 20 of this chapter.
    (b) The commissioner may bring any action in the circuit or superior court of Marion County to enforce payment of any penalty imposed under subsection (a).
    (c) Penalties collected under this section shall be deposited in the securities division enforcement account established under section 15(c) of this chapter.
    SECTION 10. IC 23-2-1-26 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 26. (a) This section applies to a person engaged in the business of providing advice to others, directly or by means of analyses, reports, or other publications, concerning:
        (1) the value of securities; or
        (2) the advisability of:
            (A) investing in;
            (B) purchasing; or
            (C) selling;
        securities.
    (b) A person described in subsection (a) may not:
        (1) employ a device, a scheme, or an artifice to defraud a person; or
        (2) engage in an act, a practice, or a course of business that

operates or would operate as fraud or deceit upon a person.
    SECTION 11. IC 23-2-1-27 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 27. An administrative action under this chapter survives the death of a person who might have been a respondent.
    SECTION 12. IC 23-2-5-3, AS AMENDED BY P.L.115-2001, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 3. (a) As used in this chapter, "certificate of registration" means a certificate issued by the commissioner authorizing an individual to engage in origination activities on behalf of a licensee.
    (b) As used in this chapter, "creditor" means a person:
        (1) that loans funds of the person in connection with a loan; and
        (2) to whom the loan is initially payable on the face of the note or contract evidencing the loan.
    (c) As used in this chapter, "license" means a license issued by the commissioner authorizing a person to engage in the loan brokerage business.
    (d) As used in this chapter, "licensee" means a person that is issued a license under this chapter.
    (e) As used in this chapter, "loan broker" means any person who, in return for any consideration from any source procures, attempts to procure, or assists in procuring a loan from a third party or any other person, promises to procure a loan for any person or assist any person in procuring a loan from any third party, or who promises to consider whether or not to make a loan to any person. whether or not the person seeking the loan actually obtains the loan. "Loan broker" does not include:
        (1) any bank, savings bank, trust company, savings association, credit union, or any other financial institution that is:
            (A) regulated by any agency of the United States or any state; and
            (B) regularly actively engaged in the business of making consumer loans that are not secured by real estate or taking assignment of consumer sales contracts that are not secured by real estate;
        (2) any person authorized to sell and service loans for the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, issue securities backed by the Government National Mortgage Association, make loans insured by the United

States Department of Housing and Urban Development, act as a supervised lender or nonsupervised automatic lender of the United States Department of Veterans Affairs, or act as a correspondent of loans insured by the United States Department of Housing and Urban Development;
        (3) (2) any insurance company; or
        (4) (3) any person arranging financing for the sale of the person's product.
    (f) As used in this chapter, "loan brokerage business" means a person acting as a loan broker.
    (g) As used in this chapter, "origination activities" means establishing the terms or conditions of a loan with a borrower or prospective borrower communication with or assistance of a borrower or prospective borrower in the selection of loan products or terms.
    (h) As used in this chapter, "originator" means a person engaged in origination activities. The term "originator" does not include a person who performs origination activities for any entity that is not a loan broker under subsection (e).
     (i) As used in this chapter, "person" means an individual, a partnership, a trust, a corporation, a limited liability company, a limited liability partnership, a sole proprietorship, a joint venture, a joint stock company, or another group or entity, however organized.
    (i) (j) As used in this chapter, "registrant" means an individual who is registered to engage in origination activities under this chapter.
    (j) (k) As used in this chapter, "ultimate equitable owner" means a person who, directly or indirectly, owns or controls any ownership interest in a person, regardless of whether the person owns or controls the ownership interest through one (1) or more other persons or one (1) or more proxies, powers of attorney, or variances.
    SECTION 13. IC 23-2-5-19, AS AMENDED BY P.L.230-1999, SECTION 11, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 19. (a) The following persons are exempt from the requirements of sections 4, 5, 6, 9, 10, 17, and 18, and 21 of this chapter:
        (1) Any attorney while engaging in the practice of law.
        (2) Any certified public accountant, public accountant, or accountant practitioner holding a certificate or registered under IC 25-2.1 while performing the practice of accountancy (as defined by IC 25-2.1-1-10).


        (3) Any person licensed as a real estate broker or salesperson under IC 25-34.1 to the extent that the person is rendering loan related services in the ordinary course of a transaction in which a license as a real estate broker or salesperson is required.
        (4) Any broker-dealer, agent, or investment advisor registered under IC 23-2-1.
        (5) Any person that:
            (A) procures;
            (B) promises to procure; or
            (C) assists in procuring;
        a loan that is not subject to the Truth in Lending Act (15 U.S.C. 1601 through 1667e).
        (6) Any community development corporation (as defined in IC 4-4-28-2) acting as a subrecipient of funds from the Indiana housing finance authority established by IC 5-20-1-3.
        (7) The Indiana housing finance authority.
        (8) Any person authorized to:
            (A) sell and service a loan for the Federal National Mortgage Association or the Federal Home Loan Mortgage Association;
            (B) issue securities backed by the Government National Mortgage Association;
            (C) make loans insured by the United States Department of Housing and Urban Development or the United States Department of Agriculture Rural Housing Service;
            (D) act as a supervised lender or nonsupervised automatic lender of the United States Department of Veterans Affairs; or

             (E) act as a correspondent of loans insured by the United States Department of Housing and Urban Development.
         (9) Any person who is a creditor, or proposed to be a creditor, for any loan.
    (b) As used in this chapter, "bona fide third party fee" includes fees for the following:
        (1) Credit reports, investigations, and appraisals performed by a person who holds a license or certificate as a real estate appraiser under IC 25-34.1-8.
        (2) If the loan is to be secured by real property, title examinations, an abstract of title, title insurance, a property survey, and similar purposes.
        (3) The services provided by a loan broker in procuring possible business for a lending institution if the fees are paid by the lending institution.
    (c) As used in this section, "successful procurement of a loan" means that a binding commitment from a creditor to advance money has been received and accepted by the borrower.
    (d) The burden of proof of any exemption or classification provided in this chapter is on the party claiming the exemption or classification.
    SECTION 14. IC 23-15-8-3, AS ADDED BY P.L.277-2001, SECTION 12, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 3. (a) If the department of financial institutions determines that a business entity has violated IC 28-1-20-4, the department of financial institutions shall notify the secretary of state of the violation.
    (b) The secretary of state shall commence a proceeding under this section to administratively dissolve a business entity if:
        (1) the name of the business entity contains the word "bank", " banc", or "banco"; and
        (2) the department of financial institutions determines that the business entity violates IC 28-1-20-4.
    (c) If the secretary of state commences an administrative dissolution under subsection (b), the secretary of state shall serve the business entity with written notice of the determination under subsection (b)(2). The secretary of state shall, at the same time notice is sent to the business entity, provide a copy of the notice to the department of financial institutions.
    (d) If a business entity that receives a notice under subsection (c) does not:
        (1) correct the grounds for dissolution; or
        (2) demonstrate to the reasonable satisfaction of the department of financial institutions that the grounds for dissolution do not exist;
at any time after sixty (60) days after service of the notice is perfected, the department of financial institutions shall notify the secretary of state in writing of the continuing violation. After receiving the written notice from the department of financial institutions, the secretary of state shall administratively dissolve the business entity by signing a certificate of dissolution that recites the grounds for dissolution and the effective date of the dissolution. The secretary of state shall file the original certificate of dissolution and serve a copy of the certificate of

dissolution on the business entity.
    (e) A business entity administratively dissolved under this section may carry on only those activities necessary to wind up and liquidate the business entity's affairs.
    SECTION 15. IC 24-4.5-1-102, AS AMENDED BY P.L.258-2003, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2004 (RETROACTIVE)]: Sec. 102. Purposes; Rules of Construction.(1) This article shall be liberally construed and applied to promote its underlying purposes and policies.
    (2) The underlying purposes and policies of this article are:
        (a) to simplify, clarify, and modernize the law governing retail installment sales, consumer credit, small loans, and usury;
        (b) to provide rate ceilings to assure an adequate supply of credit to consumers;
        (c) to further consumer understanding of the terms of credit transactions and to foster competition among suppliers of consumer credit so that consumers may obtain credit at reasonable cost;
        (d) to protect consumer buyers, lessees, and borrowers against unfair practices by some suppliers of consumer credit, having due regard for the interests of legitimate and scrupulous creditors;
        (e) to permit and encourage the development of fair and economically sound consumer credit practices;
        (f) to conform the regulation of consumer credit transactions to the policies of the Federal Consumer Credit Protection Act; and
        (g) to make uniform the law including administrative rules among the various jurisdictions.
    (3) A reference to a requirement imposed by this article includes reference to a related rule of the department adopted pursuant to this article.
    (4) A reference to a federal law in IC 24-4.5 is a reference to the law in effect December 31, 2002. 2003.
    SECTION 16. IC 24-4.5-1-202 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 202. This article does not apply to the following:
        (1) Extensions of credit to government or governmental agencies or instrumentalities.
        (2) The sale of insurance by an insurer, except as otherwise provided in the chapter on insurance (IC 24-4.5-4).
        (3) Transactions under public utility, municipal utility, or

common carrier tariffs if a subdivision or agency of this state or of the United States regulates the charges for the services involved, the charges for delayed payment, and any discount allowed for early payment.
        (4) The rates and charges and the disclosure of rates and charges of a licensed pawnbroker established in accordance with a statute or ordinance concerning these matters.
        (5) A sale of goods, services, or an interest in land in which the goods, services, or interest in land are purchased primarily for a purpose other than a personal, family, or household purpose.
        (6) A loan in which the debt is incurred primarily for a purpose other than a personal, family, or household purpose.
        (7) An extension of credit primarily for a business, a commercial, or an agricultural purpose.
        (8) An installment agreement for the purchase of home fuels in which a finance charge is not imposed.
        (9) Loans made, insured, or guaranteed under a program authorized by Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.).
        (10) Transactions in securities or commodities accounts in which credit is extended by a broker-dealer registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission.
         (11) A loan made:
            (A) in compliance with the requirements of; and
            (B) by a community development corporation (as defined in IC 4-4-28-2) acting as a subrecipient of funds from;
        the Indiana housing finance authority established by IC 5-20-1-3.

    SECTION 17. IC 24-4.5-7-104, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 104. "Small loan" means a loan:
        (a) with a principal loan amount that is more than at least fifty dollars ($50) and less than four not more than five hundred one dollars ($401); ($500); and
        (b) in which the lender holds the borrower's check or receives the borrower's written authorization to debit the borrower's account under an agreement, either express or implied, for a specific period before the lender:
            (i) offers the check for deposit or presentment; or


            (ii) seeks exercises the authorization to transfer or withdraw funds from debit the borrower's account.
    SECTION 18. IC 24-4.5-7-105, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 105. "Principal" means the total of:
        (a) the net amount paid to, receivable by, or paid or payable from the account of the consumer; borrower; and
        (b) to the extent that the payment is deferred, the additional charges permitted by this chapter that are not included in subdivision (a).
    SECTION 19. IC 24-4.5-7-107, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 107. "Renewal" refers to a small loan that takes the place of an existing small loan by:
        (a) renewing;
        (b) repaying;
        (c) refinancing; or
        (d) consolidating;
a small loan with the proceeds of another small loan made to the same consumer borrower by a lender.
    SECTION 20. IC 24-4.5-7-108, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 108. "Consecutive small loan" means a new small loan agreement that the lender enters with the same consumer borrower not later than seven (7) calendar days after a previous small loan made to that customer borrower is paid in full.
    SECTION 21. IC 24-4.5-7-109, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 109. "Paid in full" means the termination of a small loan through:
         (1) the payment of the consumer's borrower's check by the drawee bank or authorized electronic transfer;
         (2) the return of a check to a consumer borrower who redeems it for consideration;
         (3) the authorized debiting of the borrower's account; or
         (4) any other method of termination.
    SECTION 22. IC 24-4.5-7-110, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 110. "Monthly net gross income" means the income received by the consumer borrower in the four (4) week thirty

(30) day period preceding the consumer's borrower's application for a small loan under this chapter and exclusive of any income other than regular net gross pay received, or as otherwise determined by the department.
    SECTION 23. IC 24-4.5-7-201, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 201. (1) Finance charges on the first one two hundred fifty dollars ($100) ($250) of a small loan are limited to fifteen percent (15%) of the principal.
    (2) Finance charges on the amount of a small loan greater than one two hundred fifty dollars ($100) ($250) and less than or equal to four hundred dollars ($400) are limited to ten thirteen percent (10%) (13%) of the amount over one two hundred fifty dollars ($100). ($250) and less than four hundred dollars ($400).
    (3) The total amount of finance charges may not exceed thirty-five dollars ($35). Finance charges on the amount of the small loan greater than four hundred dollars ($400) and less than or equal to five hundred dollars ($500) are limited to ten percent (10%) of the amount over four hundred dollars ($400) and less than five hundred dollars ($500).
    SECTION 24. IC 24-4.5-7-202, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 202. (1) Notwithstanding any other law, only the following fees the only fee that may be contracted for and received by the lender on a small loan or subsequent refinancing:
        (a) The parties may contract for a delinquency charge of not more than five dollars ($5) on any installment not paid in full within ten (10) days after its scheduled due date.
        (b) A delinquency charge under this section may be collected only once on an installment, however long it remains in default. A delinquency charge may be collected any time after it accrues.
    (2) an additional charge may be made is a charge, not to exceed twenty dollars ($20), for each:
         (a) return by a bank or other depository institution of a:
             (i) dishonored check;
             (ii) negotiable order of withdrawal; or
             (iii) share draft issued by the consumer; borrower; or
         (b) time an authorization to debit the borrower's account is dishonored.
This additional charge may be assessed one (1) time regardless of how

many times a check or an authorization to debit the borrower's account may be submitted by the lender and dishonored.
    SECTION 25. IC 24-4.5-7-301, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 301. (1) For purposes of this section, the lender shall disclose to the consumer borrower to whom credit is extended with respect to a small loan the information required by the Federal Consumer Credit Protection Act.
    (2) In addition to the requirements of subsection (1), the lender must conspicuously display in bold type a notice to the public both in the lending area of each business location and in the loan documents the following statement:
        "WARNING: A small loan is not intended to meet long term financial needs. A small loan should be used only to meet short term cash needs. Renewing the small loan rather than paying the debt in full will require additional finance charges. The cost of your small loan may be higher than loans offered by other lending institutions. Small loans are regulated by the State of Indiana Department of Financial Institutions.
        A consumer borrower may rescind a small loan without cost not later than the end of the business day immediately following the day on which the small loan was made. To rescind a small loan, a consumer borrower must inform the lender that the consumer borrower wants to rescind the small loan, and the consumer borrower must return the cash amount of the principal of the small loan to the lender.".
    (3) The statement required in subsection (2) must be in:
        (a) 14 point bold face type in the loan documents; and
        (b) not less than one (1) inch bold print in the lending area of the business location.
     (4) When a borrower enters into a small loan, the lender shall provide the borrower with a pamphlet approved by the department that describes:
        (a) the availability of debt management and credit counseling services; and
        (b) the borrower's rights and responsibilities in the transaction.

    SECTION 26. IC 24-4.5-7-401, AS AMENDED BY P.L.258-2003, SECTION 2, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 401. (1) Except as provided in subsection (2), A

small loan may not be made for a term of less than fourteen (14) days.
    (2) After the consumer's third borrower's fifth consecutive small loan, another small loan may not be made to that consumer borrower within seven (7) days after the due date of the third fifth consecutive small loan. unless the new small loan is for a term of twenty-eight (28) days or longer. After the borrower's fifth consecutive small loan, the balance must be paid in full. However, the borrower and lender may agree to enter into a simple interest loan, payable in installments, under IC 24-4.5-3 within seven (7) days after the due date of the fifth consecutive small loan.
    SECTION 27. IC 24-4.5-7-402, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 402. (1) A lender is prohibited from making a small loan to a consumer borrower if the total payable amount of the small loan exceeds twenty fifteen percent (20%) (15%) of the consumer's borrower's monthly net gross income.
    (2) A small loan may be secured by only one (1) check or electronic authorization to debit the borrower's account per small loan. The check or electronic debit may not exceed the amount advanced to or on behalf of the consumer borrower plus loan finance charges contracted for and permitted.
    (3) A consumer borrower may make partial payments in any amount on the small loan without charge at any time before the due date of the small loan. After each payment is made on a small loan, whether the payment is in part or in full, the lender shall give a signed and dated receipt to the consumer borrower making a payment showing the amount paid and the balance due on the small loan.
    (4) The lender shall provide to each consumer borrower a copy of the required loan documents before the disbursement of the loan proceeds.
    (5) A consumer borrower may rescind a small loan without cost not later than the end of the business day immediately following the day on which the small loan was made. To rescind a small loan, a consumer borrower must:
        (a) inform the lender that the consumer borrower wants to rescind the small loan; and
        (b) return the cash amount of the principal of the small loan to the lender.
     (6) A lender shall not enter into a renewal with a borrower. If a loan is paid in full, a subsequent loan is not a renewal.


    SECTION 28. IC 24-4.5-7-404, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 404. (1) As used in this section, "commercially reasonable method of verification" means one (1) or more private consumer credit reporting services that the department determines to be capable of providing a lender with adequate verification information necessary to ensure compliance with subsection (4).
    (2)
With respect to a small loan, or subsequent refinancing, no lender may permit a person to become obligated under more than one (1) loan agreement with the lender at any time.
    (2) (3) A lender shall not make a small loan or subsequent refinancing that, when combined with another outstanding small loan owed to another lender, exceeds a total of four five hundred dollars ($400) ($500) when the face amounts of the checks written or debits authorized in connection with each loan are combined into a single sum. A lender shall not make a small loan to a consumer borrower who has two (2) or more small loans outstanding, regardless of the total value of the small loans.
    (3) (4) A lender complies with subsection (2) (3) if the consumer borrower represents in writing that the consumer borrower does not have any outstanding small loans with the lender, or with any other another lender, an affiliate of the lender or another lender, or a separate entity involved in a business association with the lender or another lender in making small loans, and the lender independently verifies the accuracy of the consumer's borrower's written representation through a commercially reasonable means. method of verification. A lender's method of verifying whether a consumer borrower has any outstanding small loans will be considered commercially reasonable if the method includes a manual investigation or an electronic query of:
        (a) the lender's own records, including both records maintained at the location where the consumer borrower is applying for the transaction and records maintained at other locations within the state that are owned and operated by the lender; and
        (b) available department approved third party databases.
     (5) The department shall monitor the effectiveness of private consumer credit reporting services in providing the verification information required under subsection (4). If the department determines that one (1) or more commercially reasonable methods of verification are available, the department shall:
        (a) provide reasonable notice to all lenders identifying the commercially reasonable methods of verification that are available; and
        (b) require each lender to use one (1) of the identified commercially reasonable methods of verification as a means of complying with subsection (4).

    (4) (6) The excess amount of loan finance charge provided for in agreements in violation of this section is an excess charge for purposes of the provisions concerning effect of violations on rights of parties (IC 24-4.5-5-202) and the provisions concerning civil actions by the department (IC 24-4.5-6-113).
    SECTION 29. IC 24-4.5-7-406, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 406. An agreement with respect to a small loan may not provide for charges as a result of default by the consumer borrower other than those authorized by this chapter. A provision in violation of this section is unenforceable.
    SECTION 30. IC 24-4.5-7-409, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 409. (1) This section applies to licensees and unlicensed persons.
    (2) The following apply to small loans only when a check or an authorization to debit a borrower's account is used to defraud another person:
        (a)
IC 26-1-3.1-502.5 (surcharge after dishonor).
         (b) IC 26-2-7 (penalties for stopping payments or permitting dishonor of checks and drafts).
         (c) IC 34-4-30 (before its repeal).
         (d) IC 34-24-3 and (treble damages allowed in certain civil actions by crime victims).
        (e) IC 35-43-5 apply to small loans only when a check is used to defraud another person. (forgery, fraud, and other deceptions).
         (f) IC 24-4.5-3-404 (attorney's fees) does not apply to a small loan.
    (3) A contractual agreement in a small loan transaction must include the language of subsection (2) in 14 point bold type.
    (4) A person who violates this chapter:
        (a) is subject to a civil penalty up to one two thousand dollars ($1,000) ($2,000) imposed by the department;
        (b) is subject to the remedies provided in IC 24-4.5-5-202;
        (c) commits a deceptive act under IC 24-5-0.5 and is subject to the penalties listed in IC 24-5-0.5;
        (d) has no right to collect, receive, or retain any principal, interest, or other charges from a small loan; however, this subdivision does not apply if the violation is the result of an accident or bona fide error of computation; and
        (e) is liable to the consumer borrower for actual damages, statutory damages of one two thousand dollars ($1,000) ($2,000) per violation, costs, and attorney's fees; however, this subdivision does not apply if the violation is the result of an accident or bona fide error of computation.
    (5) The department may sue:
        (a) to enjoin any conduct that constitutes or will constitute a violation of this chapter; and
        (b) for other equitable relief.
    (6) The remedies provided in this section are cumulative but are not intended to be the exclusive remedies available to a consumer. borrower. A consumer borrower is not required to exhaust any administrative remedies under this section or any other applicable law.
    SECTION 31. IC 24-4.5-7-410, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 410. A lender making small loans shall not commit nor cause to be committed any of the following acts:
        (a) Threatening to use or using the criminal process in any state to collect on a small loan.
        (b) Threatening to take action against a consumer borrower that is prohibited by this chapter.
        (c) Making a misleading or deceptive statement regarding a small loan or a consequence of taking a small loan.
        (d) Contracting for and collecting attorney's fees on small loans made under this chapter.
        (e) Altering the date or any other information on a check or an authorization to debit the borrower's account held as security.
        (f) Using a device or agreement that the department determines would have the effect of charging or collecting more fees, charges, or interest than allowed by this chapter, including, but not limited to:
            (i) entering a different type of transaction with the consumer; borrower;
            (ii) entering into a sales/leaseback arrangement;
            (iii) catalog sales; or
            (iv) entering into transactions in which a customer receives a purported cash rebate that is advanced by someone offering Internet content services, or some other product or service, when the cash rebate does not represent a discount or an adjustment of the purchase price for the product or service; or
             (v) entering any other transaction with the consumer borrower that is designed to evade the applicability of this chapter.
        (g) Engaging in unfair, deceptive, or fraudulent practices in the making or collecting of a small loan.
        (h) Charging to cash a check representing the proceeds of a small loan.
        (i) Except as otherwise provided in this chapter:
            (i) accepting the proceeds of a new small loan as payment of an existing small loan provided by the same lender; or
            (ii) renewing, refinancing, or consolidating a small loan with the proceeds of another small loan made by the same lender.
        (j) Including any of the following provisions in a loan document:
            (i) A hold harmless clause.
            (ii) A confession of judgment clause.
            (iii) A mandatory arbitration clause, unless the terms and conditions of the arbitration have been approved by the director of the department.
            (iv) An assignment of or order for payment of wages or other compensation for services.
            (v) A provision in which the consumer borrower agrees not to assert a claim or defense arising out of contract.
            (vi) A waiver of any provision of this chapter.
        (k) Selling insurance of any kind in connection with the making or collecting of a small loan.
         (l) Entering into a renewal with a borrower.
    SECTION 32. IC 24-4.5-7-412, AS ADDED BY P.L.38-2002, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2004]: Sec. 412. Upon the receipt of a check from a consumer borrower for a small loan, the lender shall immediately stamp the back of the check with an endorsement that states:
        "This check is being negotiated as part of a small loan under IC 24-4.5, and any holder of this check takes it subject to the

claims and defenses of the maker.".
    SECTION 33. IC 24-9 IS ADDED TO THE INDIANA CODE AS A NEW ARTICLE TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2005]:
     ARTICLE 9. HOME LOAN PRACTICES
    Chapter 1. Application
    Sec. 1. Except for IC 24-9-3-7(3), this article does not apply to:
        (1) a loan made or acquired by a person organized or chartered under the laws of this state, any other state, or