South Carolina Lawyer
SC Lawyer, January 2006, #4.
South Carolina Uniform Securities Act of 2005
South Carolina LawyerJanuary 2006South Carolina Uniform Securities Act of 2005By Daryl L. Williams, E. Russell Jeter Jr., Martin C. McWilliams Jr. and George S. King Jr.With little public fanfare, the last session of the S.C. General Assembly passed, and the governor signed, Senate Bill 588. Effective January 1, 2006, S. 588 repeals in its entirety the existing South Carolina Uniform Securities Act found in Title 35 of the South Carolina Code of Laws Annotated and replaces it with a new statutory scheme drawn in large part from the model Uniform Securities Act of 2002 (2002 USA). South Carolina is one of the first states to enact a version of this model act. As evidenced by the widespread public impact of the failures of the Homegold/Carolina Investors investments, this change in South Carolina's laws regulating securities is of interest well beyond the relatively small circle of securities law specialists. The South Carolina Uniform Securities Act of 2005 (SC Act), which will be codified in Title 35, affects capital formation, particularly for small business ventures in this state as well as the rights of investors to recover losses. These are both areas of interest for the general practitioner. A new (and nonuniform) cause of action for aider and abettor liability can impose liability on those who knowingly participate in securities related fraud, including lawyers and accountants. The SC Act also strengthens the investigative and preventive powers of the attorney general, who, as is the case with the current law, will administer the SC Act as securities commissioner.
The SC Act is the result of events that occurred both nationally and in South Carolina. In response to the passage of the National Markets Improvement Act of 1996, P.L. 104-290, (NSMIA), the National Conference of Commissioners on Uniform State Laws formed a committee to draft a new model securities act, taking into account the substantially broader federal preemption that NSMIA creates. That committee used the opportunity to modernize the previous efforts of the National Conference at drafting uniform state securities laws, the 1954 version of which formed the basis for South Carolina's own regulatory scheme. The result of that committee's...