ASSEMBLY, No. 589
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblymen LUSTBADER and RUSSO
An Act requiring the disclosure of certain information by financial professionals rendering services to public entities in connection with bond transactions and supplementing Title 52 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"bond counsel" means a person, firm or corporation of attorneys engaged by an issuer to advise and assist the issuer in legal, financial or tax matters relating to a bond transaction;
"bond transaction" means any financial transaction by an issuer with respect to bonds, notes, certificates or other instruments of debt;
"financial advisor" means a person, firm or corporation engaged by an issuer to perform origination tasks for any bond transaction such as structuring the maturity schedule, preparing the official statement, obtaining a rating, obtaining credit enhancement, timing a sale or providing other financial advice and assistance to an issuer;
"financial professional" means a bond counsel, financial advisor or underwriter;
"issuer" means the State or any agency or instrumentality of the State, including an independent State authority, and any political subdivision of the State or any agency or instrumentality of a political subdivision, including any independent authority created by one or more political subdivisions; and
"underwriter" means a person, firm or corporation through which an issuer sells or proposes to sell bonds.
2. Prior to engaging the services of a financial professional in connection with a bond transaction, an issuer shall require the financial professional to complete the report prescribed by section 3 of this act. The report shall be filed with the issuer, the State Treasurer, the Attorney General, the chairman of the Joint Budget Oversight Committee and the New Jersey Bond Review Board created pursuant P.L. , c. (C. )(now pending before the Legislature as Assembly Bill No. 1199 [3R]). A financial professional which is thereafter engaged by an issuer to render services in connection with a bond transaction shall file revised reports as changes occur to any information included in the original report and shall file a final report upon the completion of services. A report filed pursuant to this act shall be a public record which shall be available for public inspection and copying pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.). The form upon which a report is filed shall bear a notice to the effect that false statements made therein are punishable. The person completing the report shall certify the truth of its contents. Any person who makes a false or misleading statement in a report shall be subject to the penalties provided by N.J.S.2C:28-3.
Whenever an issuer determines, after notice and an opportunity for a hearing, that a financial professional has made a false or misleading statement in a report or has omitted therefrom any material information, the issuer shall bar the financial professional from rendering services in connection with any bond transaction by that issuer for a period of three years. A financial professional which has been so barred by an issuer shall, during that period, be ineligible to be engaged by any other issuer as a financial professional in connection with a bond transaction.
3. The State Treasurer shall prepare a form to be used by financial professionals for the purpose of filing the report required by section 2 of this act. The form shall elicit the following information:
a. the name and address of the financial professional;
b. the name and title of the individual completing the form on behalf of the financial professional;
c. a description of the financial professional's organizational structure (e.g., partnership, corporation, etc.), including a list of any controlling stockholders, general partners or principals;
d. a list of any subsidiaries, joint ventures, consultants, legislative agents, sub-contractors or agents which have a relationship with the financial professional and relate in any way to the financial professional's role or proposal role with the issuer;
e. the existence and terms of any agreements with any other financial professional, or other person, which relate to the bond issue, including joint accounts or similar arrangements for the division of fees;
f. the name and address of any person, firm or corporation, including attorneys, legislative agents, or public relations specialists engaged to promote selection of the financial professional;
g. a full accounting of all bonds sold and all commissions and fees earned and any other compensation paid or earned in connection with a bond sale; and
h. when a financial professional is involved in investing the proceeds of a bond sale on behalf of the issuer, a full accounting of all purchases, including copies of order tickets or copies of the summary of orders.
4. This act shall take effect on the 30th day after enactment but the State Treasurer may take such anticipatory administrative action in advance as shall be necessary for the implementation of the act.
STATEMENT
This bill requires a financial professional (bond counsel, financial advisor or underwriter) which renders services to any State or local government entity, including an independent authority, in connection with the sale of bonds to complete detailed reports which disclose business and financial information relevant to the bond transaction, including information on fee splitting and on commissions, fees and other compensation earned. Reports would be made on a form prescribed by the State Treasurer and filed with the issuer of the bonds, the State Treasurer, the Attorney General, the chairman of Joint Budget Oversight Committee and the New Jersey Bond Review Board (which is to be created by pending legislation). The bill requires a financial professional to revise its report as changes occur to any information included in its original report and to file a final report upon the completion of services. False statements made in a report would be punishable as a crime of the fourth degree which carries a maximum penalty of 18 months imprisonment and a $7,500 fine. In addition, a financial professional which is determined to have filed a report containing false or misleading information would be ineligible to render services in connection with any State or local government bond issue for a period of three years.
Requires financial professionals rendering services in connection with certain bond transactions to disclose business and financial information; imposes penalties for false or misleading statements.