HB2005.DOC

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

Mid-pacific securities and commodities exchange

§ -101 Purpose. The mid-pacific securities and commodities exchange is established to provide an international marketplace for the exchange of securities and commodities during the off hours of the world's other securities and commodities exchanges and for the exchange of securities and commodities that are not traded on the world's other securities and commodities exchanges.

§ -102 Definitions. As used in this chapter:

"Administrator" means the chief executive officer of the mid-pacific securities and commodities exchange.

"Board" means the board of directors of the mid-pacific securities and commodities exchange.

"Exchange" means the mid-pacific securities and commodities exchange.

§ -103 Mid-pacific securities and commodities exchange, established. (a) The mid-pacific securities and commodities exchange is established as an independent corporation to provide an international marketplace for the sale and purchase of securities and commodities during the off hours of the world's other securities and commodities exchanges, as determined by the board. In addition to the types of securities and commodities offered for sale and purchase through the world's other securities and commodities, exchanges, the exchange shall also provide for the sale and exchange of securities and commodities that are not readily available through those other securities and commodities exchanges, as determined by the board.

(b) The exchange shall be organized and operated as a domestic profit corporation. The exchange shall comply with, unless specifically excluded, all requirements relating to the Hawaii business corporation act under chapter 414. The exchange may be reorganized as a nonprofit corporation under chapter 414D. The exchange shall not be an agency of the State. The exchange or its liabilities shall not be deemed to constitute debts or liabilities of the State of Hawaii or pledges of the full faith and credit of the State.

(c) The exchange's assets shall consist of real and personal property and shall include any moneys paid to the exchange, all property, and other income acquired, earned, or otherwise gained by the use of moneys paid to the exchange by deposits, investments, exchanges, and other transactions. The exchange's assets shall be the sole property of the exchange and shall be used exclusively by the exchange for the operation and obligations of the exchange.

§ -104 Board of directors; established. (a) The board of directors of the exchange shall be responsible for the organization, management, policies, and activities of the exchange. The board shall consist of nine voting members and one nonvoting member. The voting members shall consist of the following:

(1) Eight directors who shall be owners, officers, or employees of entities that purchase, sell, or trade securities or commodities sold on the exchange; and

(2) One director who shall be a public, at-large member elected by the board of directors.

The administrator shall be the nonvoting member of the board.

(b) A vacancy on the board shall be filled by appointment of the governor in the case of appointed directors, or by election by the board of directors in the case of positions formerly occupied by a director elected by the board of directors. The person appointed to fill a vacancy shall serve for the remainder of the term of the person's predecessor.

(c) Each director shall receive necessary traveling and board expenses incurred in the performance of duty as director and a fee commensurate with the duties expected of actual attendance at board meetings.

(d) No person shall be a director who has a direct and substantial interest in a competing securities and commodities exchange as:

(1) A stockholder (excluding the holding of less than one per cent of the outstanding shares in a publicly traded securities and commodities exchange);

(2) An employee;

(3) An attorney; or

(4) A contracting party (excluding an independent contractor or business owner who does less than twenty-five per cent of its total annual volume of business per year with competing securities and commodities exchanges).

§ -105 Powers; generally. Except as otherwise limited by this chapter, the exchange may:

(1) Sue, be sued, complain, and defend, in its corporate name;

(2) Have a corporate seal, which may be altered at pleasure, and use the seal by causing it, or a facsimile thereof, to be impressed, affixed, or in any other manner reproduced;

(3) Purchase, take, receive, lease, take by gift, devise, or bequest, or otherwise acquire, own, hold, improve, use, and otherwise deal in and with real or personal property, or any interest therein, wherever situated;

(4) Sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all and any part of its property and assets;

(5) Make contracts and incur liabilities, borrow money at such rates of interest as the board may determine, issue guaranty capital shares and surplus notes, require capital contributions, issue its notes, debenture bonds, and other obligations, secure any of its obligations by mortgage or pledge of all or any portion of its property or income, and secure financing by any board approved mechanism;

(6) Allocate fiduciary responsibilities among the directors and designate other persons to carry out fiduciary responsibilities;

(7) Collect, receive, hold, and disburse all money payable to or by the exchange;

(8) Deposit the exchange's money in banks or depositories selected by the board and withdraw the exchange's money from such banks or depositories; provided that the withdrawal shall be made or authorized only upon the signatures of at least two persons approved by the board;

(9) Pay money from the exchange to effectuate the exchange's purpose and administration, including amounts for costs incurred to establish the exchange; and

(10) Exercise all powers necessary or convenient to effect the purposes of the exchange.

§ -106 Duties and responsibilities. (a) All corporate powers shall be exercised by or under the authority of the board, unless otherwise provided in this chapter or in the articles of incorporation.

(b) The board shall discharge its duties:

(1) In accordance with the exchange's purpose;

(2) With the care, skill, prudence, and diligence under the circumstances that a prudent director, acting in a like capacity and familiar with such matters would use in conducting a similar enterprise and purpose;

(3) By diversifying the exchange's investments to minimize the risk of losses, unless it is prudent not to do so;

(4) In accordance with governing legal documents;

(5) By having an annual audit of the exchange by an independent certified public accountant;

(6) By securing a fidelity bond for the administrator and in its discretion for other agents dealing with the company's assets at the exchange's expense;

(7) By purchasing liability insurance for errors and omissions for the board, each director, and any other fiduciary employed or contracted by the exchange to cover liability or losses caused by the act or omission of a fiduciary;

(8) By maintaining proper books of accounts and records of the exchange's administration; and

(9) By carrying out the reporting and disclosure requirements required by law.

(1) Provide that any written instrument be executed for the exchange by the administrator or the administrator's agent; and

(2) Employ persons to administer the exchange, including legal counsel, accountants, administrators, investment managers, other experts, and clerical employees and pay compensation and expenses in connection therewith.

§ -107 Administrator; appointment; duties. (a) The board shall hire an administrator who shall serve at the pleasure of the board. The administrator shall be the chief executive officer and shall be responsible for the day-to-day operations and management of the exchange.

(b) The administrator shall have proven, successful experience as an executive at the general management level in the business of securities and commodities exchange. The administrator shall manage and conduct the business of the exchange according to the board's direction and policies. The administrator shall receive compensation authorized by the board.

(c) Before entering the duties of office, the administrator shall give a fidelity bond in an amount and with sureties approved by the board. The premium for the bond shall be paid by the exchange.

(d) The administrator shall be an ex officio, nonvoting member of the board.

§ -108 Financial management. (a) The board shall select a custodial trustee to collect, receive, hold, or disburse moneys payable to or by the exchange.

(b) The board shall invest the exchange's principal and income without distinction between principal and income and keep the exchange's assets invested in real or personal property or other securities. The board may retain cash temporarily awaiting investment or to meet contemplated payments without liability for interest thereon.

(c) The board shall manage the exchange's assets, except to the extent that the authority to manage the exchange's assets is delegated to other qualified investment managers. The board may appoint investment managers to manage, acquire, or dispose of any of the exchange's assets. An investment manager may be designated as an "investment agent". The investment manager shall acknowledge in writing that the investment manager is a fiduciary under the exchange.

(d) The board may:

(1) Sell the exchange's securities. No purchaser of the exchange's securities is bound to see to the application of the purchase money or inquire as to the validity of such sale;

(2) Vote on behalf of any stocks, bonds, or securities of any corporation or issuer held in the exchange or request any action to such corporation or issuer. The board may give general or special proxies or powers of attorney with or without powers of substitution;

(3) Participate in reorganizations, recapitalization, consolidations, mergers, and similar transactions for stocks, bonds, or other securities of any corporation that are held by the exchange, and accept and retain any property received thereunder for the exchange;

(4) Exercise any subscription rights and conversion privileges for the exchange's stocks or securities;

(5) Compromise, compound, and settle any debt or obligation due to or from the exchange; reduce the amount of principal and interest, damages, and costs of collection in settling such debts;

(6) Cause securities held by it to be registered in its own name or in the name of a nominee without indicating that the securities are held in a fiduciary capacity and to hold any securities in bearer form. The exchange's records, however, shall show that such investments are part of the exchange;

(7) Delegate its investment powers to investment managers of the exchange to expedite the purchase and sale of securities. The purchase or sale of securities by these managers shall be in the name selected by the board. The authority of these managers to purchase or sell securities for the exchange shall be evidenced by written authority executed by the administrator. The board shall require these managers to keep it currently informed as to the nature and amount of the investments made for the exchange by them. The board may enter into appropriate agreements with these managers setting forth their investment powers and limitations. The board may terminate the services of these managers. These managers shall be subject to the board's instructions;

(8) Pay taxes or assessments that are assessed against the exchange;

(9) Require any applicant or policyholder to furnish the board with such information necessary for the exchange's administration; and

(10) Delegate its authority to the administrator or any authorized representative to maintain any legal proceedings necessary to protect the company or the directors or to secure payment due to the exchange. In connection with this delegation, the board or the administrator or their representative may compromise, settle, or release claims on behalf of or against the exchange or the board.

§ -109 Financial statements and other reports. (a) The exchange shall submit to the director of business, economic development, and tourism affairs an annual statement of financial condition audited by an independent certified accountant. The financial statement shall be on a form prescribed by the director of business, economic development, and tourism.

(b) The exchange shall compile and maintain statistical data relating to the logistical operations of the exchange. The compiled information shall be submitted annually to the director of business, economic development, and tourism.

§ -110 Hours of operation. The board shall determine and schedule the hours of operation of the mid-pacific securities and commodities exchange in order to maximize the opportunity for users world-wide to engage in the uninterrupted trade of securities and commodities listed on other exchanges but to be traded through the mid-pacific securities and commodities exchange between the closings and next day's openings of those other exchanges.

§ -111 Trading of securities and commodities; types. The board shall determine the types of securities and commodities that may be traded through the exchange based upon the types of securities and commodities that are listed on and traded through other exchanges. The board shall also determine and authorize the trading of any types of securities and commodities that may not be readily available through the other exchanges."

SECTION 2. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2005
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII