Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Consumer Protection & Commerce and Judiciary, to which was referred S.B. No. 743, S.D. 2, entitled:

beg leave to report as follows:

The purpose of this bill is to repeal Hawaii's current uniform securities law and adopt the 2002 Uniform Securities Act (USA) in its place.

Your Committees received testimony in support of this measure from the Department of Commerce and Consumer Affairs, Commission to Promote Uniform Legislation, AARP Hawaii, and Hawaii Bankers Association. The Investment Company Institute supported this bill in part. Testimony in opposition was received from the Securities Industry Association and American Council of Life Insurers. The National Association of Insurance and Financial Advisors opposed the bill in part. The Office of Information Practices provided comments.

Your Committees find that the 2002 USA will enhance the ability of state securities regulators to protect consumers engaged in security transactions. This measure will provide the State with more comprehensive regulatory oversight and will update and modernize Hawaii's securities law so that it better conforms to that of the federal government and other states.

Your Committees note that concerns were raised regarding the measure's inclusion in the definition of "security," of variable annuity contracts, which are hybrid investments offered by insurance companies that contain both securities and insurance features. Concerns were expressed that the inclusion was not consistent with the USA of 2002, and that oversight by both the Hawaii Insurance Division and the Hawaii Securities Division may be redundant, unnecessary, and discourage competition.

However, the Commissioner of Securities testified that including variable annuity contracts in the definition of securities in the 2002 USA, carries over Hawaii's current securities law, which also defines these products as securities.

Your Committees believe it is necessary to further examine the bill in light of these concerns, and have accordingly amended this measure by providing an effective date of July 1, 2099.

Technical, nonsubstantive amendments were also made for clarity, consistency, and style.

As affirmed by the records of votes of the members of your Committees on Consumer Protection & Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 743, S.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 743, S.D. 2, H.D. 1, and be referred to the Committee on Finance.