Alabama Securities Act (Title 8 – Chapter 6, Article 5)

Section 8-6-110 Definitions.

The following words and phrases, as used in this article, shall have the following meanings:

(1) AUTHORIZING ACT. Any of the following statutes or acts:

a. Any of the following sections, as amended: Section 11-20-1 et seq., relating to industrial revenue bonds to be issued by counties; Section 11-54-20 et seq., relating to industrial revenue bonds to be issued by municipalities; Section 11-54-80 et seq., relating to industrial revenue bonds to be issued by municipal industrial development boards; Section 11-58-1 et seq., relating to industrial revenue bonds to be issued by municipal medical clinic boards, Section 22-21-170 et seq., relating to industrial revenue bonds to be issued by county and municipal hospital authorities; and Section 11-20-30 et seq., relating to industrial revenue bonds to be issued by county industrial development boards.

b. The following acts of the Alabama Legislature: Act No. 4, enacted at the 1956 Second Special Session of the Alabama Legislature (1956 Acts, p. 240 et seq.), relating to industrial revenue bonds to be issued by certain municipalities to finance hotel and motel projects and Act No. 337, enacted at the 1971 Third Extra Session of the Alabama Legislature (1971 Acts, p. 4625 et seq.), relating to industrial revenue bonds to be issued by certain municipalities to finance hotel and motel projects.

(2) COMMISSION. The Alabama Securities Commission existing under Article 2 (commencing with Section 8-6-50) of Chapter 6 of Title 8.

(3) DIRECTOR. The director appointed by the commission pursuant to Section 8-6-55 or, in the absence of the director or his or her inability to act, the deputy director appointed by the director as provided in Section 8-6-57.

(4) GOVERNING BODY. The county commission, council, board of commissioners, board of directors, or other governing body of any issuer.

(5) GUARANTOR. The guarantor of the performance by the lessee of its obligations under a lease or the guarantor of any industrial revenue bonds.

(6) IMPROVIDENT. With respect to any industrial revenue bonds the term means that there is a reasonable probability that the bonds will be deficient in one or more of the following respects:

a. The project may not be completed.

b. The principal of or interest on the industrial revenue bonds will not be paid when due.

c. The industrial revenue bonds may be sold or distributed by the parties or in a manner as to constitute a fraud on one or more purchasers of the bonds.

(7) INDUSTRIAL REVENUE BONDS. The bonds, warrants, notes, certificates of indebtedness, or other obligations issued by any issuer under the authority of the authorizing act to finance or refinance a project or to refund bonds, but does not include either of the following:

a. Any obligation unless the lessee is a lessee as defined in this section.

b. Any issue of bonds, warrants, notes, certificates of indebtedness, or other obligations, any of which has a stated maturity not more than 18 months from the date of its issuance and evidences a loan initially made by a bank to the issuer of the bonds, warrants, notes, certificates of indebtedness, or other obligations.

(8) ISSUER. Any county, city, town, municipality, or public corporation issuing industrial revenue bonds under the authorizing act.

(9) JUDICIAL VALIDATION. The procedure described in Section 8-6-119 by which industrial revenue bonds may be validated and culminating in a decree of the circuit court validating the bonds.

(10) LEASE. The lease, installment purchase, or other agreement by which the lessee obtains the right to use the project and agrees to make payments sufficient to pay the principal of and interest on the industrial revenue bonds issued to finance or refinance the project.

(11) LESSEE. The lessee, purchaser, or user of a project under the lease. The term does not include the State of Alabama, any county, any city, town, or municipality, any public corporation or any nonprofit corporation organized and operated exclusively for religious, charitable, or educational purposes, no part of the net earnings of which inures to the benefit of any private share holder, member, or individual.

(12) NOTIFICATION. The instrument or the procedure, or both, by which an issuer is required by this article to notify the director prior to the proposed issuance of industrial revenue bonds.

(13) PROJECT. Any land, plant, building, facilities, equipment, or other property proposed to be acquired with the proceeds of any industrial revenue bonds to be used by a lessee under a lease.

(14) SERVED UPON THE ISSUER. As applied to a stop order, notice of a reference to the commission, or of a hearing before the commission, the term means that it has been deposited in the United States mail in a sealed envelope with first class, certified postage prepaid, properly addressed to the issuer at the address shown in the notification, or delivered to the person who signed the notification on behalf of the issuer.

(15) STOP ORDER. An order issued by the director or by the commission in accordance with this article prohibiting the issuer from issuing the industrial revenue bonds described in the notification or any bonds in lieu of those bonds.

(Acts 1978, No. 586, p. 681, §1; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-111 Legislative findings; purpose of article.

(a) The Legislature finds and determines that unscrupulous promoters may take advantage of the authorizing act by inducing issuers to issue industrial revenue bonds which careful investigation by the issuer or other responsible parties would reveal to be improvident. The standing of all issuers could be impaired and the purposes of the Legislature in enacting the authorizing act could be thwarted by those improvident issues.

(b) The purpose of this article is to provide a procedure whereby the State of Alabama, acting through the director and the commission, may assist in developing facts to aid the issuer in the exercise of its authority under the authorizing act, and, to that end, to delay the issuance of industrial revenue bonds pending adequate investigation by the director or to prevent the issue of industrial revenue bonds found to be improvident.

(Acts 1978, No. 586, p. 681, §2; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-112 Powers of director of Securities Commission.

(a) The director shall have authority to:

(1) Consider and investigate proposed issues of industrial revenue bonds;

(2) Advise and consult with issuers with respect thereto;

(3) Publish such notices of proposed issues of industrial revenue bonds or proposed rules and regulations as are required by this article or the rules and regulations of the commission;

(4) Stop the issuance of industrial revenue bonds for the limited times and under the procedures provided in this article by issuing the orders and giving the notices herein required;

(5) Cause information concerning a proposed issue of industrial revenue bonds to be presented at any meeting of the governing body at which industrial revenue bonds are to be authorized or reauthorized or any hearing upon the judicial validation of such issue; and

(6) Perform such other functions and duties as may be required by this article or by order of the commission.

(b) The authority herein granted to the director is in addition to that granted under Section 8-6-50 et seq.

(Acts 1978, No. 586, p. 681, §3.)

Section 8-6-113 Powers of Securities Commission.

(a) The commission may:

(1) Stop the issuance of industrial revenue bonds under the procedures provided in this article.

(2) Issue rules and regulations necessary or desirable to prescribe the form and content of notifications, the conduct of investigations, the issuance of stop orders, appeals by issuers, or references by the director to the commission and the conduct of hearings thereon. No rule or regulation shall be adopted by the commission until the commission shall hold a public hearing on the proposed rules and regulations, notice of which shall be given by publication one time in a daily newspaper published in the City of Montgomery and in any other manner as the commission directs.

(b) The authority granted to the commission in this section is in addition to that granted under Section 8-6-50 et seq., or any other provided by law.

(Acts 1978, No. 586, p. 681, §4; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-114 Repealed.

Section 8-6-115 Notifications of intent to issue bonds.

On and after May 27, 1978, any issuer proposing to issue any industrial revenue bonds under authority of the authorizing act shall, at least 20 days prior to the date of delivery of the industrial revenue bonds, deliver to the director a notification in writing of its intention to issue the bonds. The director may for good cause shown, waive, shorten, or, with the consent of the issuer, extend the 20-day requirement. The notifications shall contain the name and address of the issuer, the lessee, the guarantor, if any, the trustee, the underwriter, purchaser, fiscal agent, or agents, legal counsel for each of the above named parties and bond counsel, the estimated face amount of the bond issue, the estimated capital budget for the project to the extent that the information is available to the issuer when it files the notification, and any other information prescribed by the rules and regulations issued by the commission to advise the director and the commission of the nature of the proposed transaction. Each notification shall be accompanied by a filing fee equal to one twentieth of one percent of the principal amount of industrial revenue bonds described in the notification. No filing fee shall be less than $25 nor greater than $1,000. All fees shall be deposited in a special account in the State Treasury to be withdrawn by the director for the use of the commission in the administration of this article. All notifications shall be available for public inspection during the normal business hours of the director.

(Acts 1978, No. 586, p. 681, §6; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-116 Action by director upon receipt of notification; stop orders.

Upon receipt of a notification, the director shall cause a preliminary investigation or inquiry to be made into the proposed issue to determine whether there exist circumstances which, in his or her opinion, indicate that the proposed issue of industrial revenue bonds may be an improvident issue. If he or she finds that the proposed issue may be improvident, he or she shall advise the issuer of the findings and shall issue a stop order or stop orders requiring that for a period of time not exceeding in the aggregate 90 days after the filing of the notification, the issuer shall not issue the industrial revenue bonds proposed in the notification or any industrial revenue bonds in lieu of the bonds proposed. When a stop order has been served upon the issuer, it shall be fully effective (a) unless lifted by the director or the commission for good cause shown, or (b) unless the proposed industrial revenue bonds described in the notification have been reauthorized by the governing body of the issuer at a meeting at which the governing body has considered any comments or objections presented by the director or his or her representative. Written notice of the meeting shall be given to the director. The notice shall also be published in a newspaper published or circulated in the county where the proposed issuer is located.

(Acts 1978, No. 586, p. 681, §7; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-117 Appeals or references to Securities Commission.

When a stop order has been issued by the director, the issuer shall have the right to appeal the matter to the commission by notice in writing of such appeal delivered to the director. The director shall have the right to refer to the commission the matter of any issue of industrial revenue bonds proposed in a notification as to which a stop order is then in effect or which have been reauthorized by the governing body of the issuer pursuant to Section 8-6-116, and to request that the commission issue a permanent stop order. Notice of such reference and request shall be given in writing and served upon the issuer. The director shall mail to each member of the council a copy of each notice required by this section as soon as it is delivered to him or prepared for service upon the issuer.

(Acts 1978, No. 586, p. 681, §8.)

Section 8-6-118 Proceedings before Securities Commission.

When the matter of any proposed industrial revenue bond issue has been appealed by the issuer to the commission or referred to the commission by the director with the request that the commission issue a permanent stop order, the director shall convene the commission. The commission shall conduct a hearing on the matter within 14 days after receipt by the director of the notice of appeal or service upon the issuer of the referral. At the request of the issuer, the date of the hearing may be postponed. Notice of the time, place, and purpose of the hearing shall be served upon the issuer at least three days before the date of the hearing. The issuer and other interested parties shall have the right to appear and be heard in person or by counsel. The commission shall render a decision within three days after the hearing. Pending the determination by the commission of any appeal or referral, the stop order previously issued by the director shall remain in effect until the commission renders a decision, or three days after the hearing, whichever is earlier. If, upon a hearing of the matter, the commission concludes that the proposed issue of industrial revenue bonds is improvident, the stop order previously issued by the director shall be made permanent and neither the proposed industrial revenue bonds nor any industrial revenue bonds in lieu of the bonds shall be issued until approved by judicial validation in proceedings instituted by the proposed issuer after the issuance of the stop order. If the commission concludes that the issue is not improvident, the commission shall lift the stop order and the issuer may proceed to issue the proposed industrial revenue bonds.

(Acts 1978, No. 586, p. 681, §9; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-119 Judicial validation proceedings.

Any judicial validation proceeding instituted under this article shall conform to and be conducted in accordance with either Section 6-6-750 et seq. or Section 11-81-220 et seq., whichever is applicable to the issuer. The petition shall allege that the issue of industrial revenue bonds proposed by the issuer is not improvident, and the director shall be served with notice of the proceeding in the same manner and for the same time as the district attorney, and may attend the hearing before the circuit court having jurisdiction of the matter in person or by attorney, present evidence, and be heard by the court. The court shall not validate unless, pursuant to evidence presented at the hearing, the court finds and determines that the issue is not improvident. No judicial validation proceedings shall be instituted under this article until the commission enters a stop order or until the expiration of 15 days after the proposed industrial revenue bond issue is appealed by the issuer or referred to the commission by the director without any stop order having been issued.

(Acts 1978, No. 586, p. 681, §10; Acts 1992, No. 92-124, p. 224, §3.)

Section 8-6-120 Certificate of notification; representation that industrial revenue bonds have been approved prohibited.

In the event that (1) 20 days shall have expired after the filing by an issuer of the notification required by Section 8-6-115 describing proposed industrial revenue bonds to be issued by it, or the director shall have waived, shortened or, with the consent of the issuer, extended such waiting period and (2) no stop order shall then be effective as to the proposed industrial revenue bonds, the director shall provide such issuer with a certificate substantially as follows:

CERTIFICATE OF NOTIFICATION

The _____ of _____ (the issuer) has filed in my office a notification under Act No. 586 of the 1978 Regular Session of the Alabama Legislature stating its intention to issue $_____ of its _____ Industrial Revenue Bonds and no stop order is effective as to the issue of such bonds. This certificate is not an approval of said bonds, and it is unlawful for any person to represent that such bonds have been approved by the director, the commission or any other agency of the state.

This _____ day of _____, 2__

_______________________________
Director

It shall be unlawful for any issuer to issue any industrial revenue bonds under the authority of the authorizing act unless the foregoing certificate with respect to such industrial revenue bonds shall have been issued by the director or unless the proposed industrial revenue bonds shall have been reauthorized by the governing body of the issuer pursuant to Section 8-6-116 or shall have been judicially validated pursuant to Sections 8-6-118 and 8-6-119. When a certificate of notification shall have been issued by the director, no stop order thereafter issued either by the director or the commission with respect to the industrial revenue bonds described in such certificate shall be effective unless, prior to the issuance of the industrial revenue bonds described in such certificate, such stop order shall have been served personally upon the person who signed the notification in behalf of the issuer and upon each bond counsel named in the notification with respect to the industrial revenue bonds described in such certificate. When the industrial revenue bonds described in a certificate of notification shall have been issued, such certificate shall be conclusive evidence of formal compliance by the issuer with this article, and the failure of the issuer to comply with any requirement of this article in issuing the industrial revenue bonds described in such certificate shall not affect the validity of such industrial revenue bonds. In the event that any industrial revenue bonds shall be issued without a certificate of notification having been issued with respect thereto, the holder of any such bonds shall, in addition to any other right he may have by statute or law, have the right of rescission as to such bonds; provided, that such right shall be exercised within 12 months of the date on which such bonds shall have been delivered by the issuer and paid for; and provided further, that any right of recovery against the issuer shall be limited to the then unexpended proceeds of such bonds. In the event that the director shall refuse to issue a certificate of notification to any issuer entitled thereto, an appeal shall lie to the commission or the Circuit Court of Montgomery County, which shall have jurisdiction to require the director forthwith to issue any certificate wrongfully withheld.

It shall be unlawful for any issuer or any person, firm, or corporation to represent that an issue of industrial revenue bonds has been approved by the director or the commission or any agency of the state, whether the certificate herein provided for shall have been issued or not.

(Acts 1978, No. 586, p. 681, §11.)

Section 8-6-121 Criminal penalties.

Any lessee, any guarantor, or any officer of any issuer, lessee, or guarantor or any other person, firm, or corporation who:

shall be guilty of a felony and upon conviction shall be fined not more than $10,000 or shall be imprisoned for a period not exceeding 10 years or both so fined and so imprisoned, as the trial court shall determine. No prosecution under this section shall be commenced more than five years after the occurrence of the alleged violation.

(Acts 1978, No. 586, p. 681, §12.)

Section 8-6-122 Article remedial; certain statutes not repealed.

This article is remedial in nature and shall not be construed so as to repeal any provision of Section 8-6-1 et seq. or Section 8-6-50 et seq.

(Acts 1978, No. 586, p. 681, §13.)

Code of Alabama

PRE-ISSUANCE PROCEDURE FOR INDUSTRAL REVENUE BONDS