After hearing testimony that it was "breathtakingly and shockingly ill-advised," the Senate State Affairs Committee Wednesday defeated a bill that would have required securities brokers to disclose if any financial product they offer for sale in the state contains language relating to a foreign law or religious code that violates South Dakota law.
Senate Bill 170, one of three so-called "anti-Shariah law" bills introduced in the 2011 Legislature, would have amended the South Dakota Uniform Securities Act to require such disclosure to investors. Failure to do so would have been a felony offense. The state's Division of Securities opposed the legislation as overly broad. Division attorney Erin McIntyre Menkhaus told lawmakers the bill posed an unacceptable liability risk to securities brokers. "It's so broadly written nobody will sell securities here ... because they would risk Class 4 felonies if they did," she said.
Bar association lobbyist Tom Barnett called it "breathtakingly and shockingly ill-advised" and securities industry lobbyist Dave Gerdes said there was a "strong feeling among those who sell securities in South Dakota that if this bill were to pass, they simply could not do business in South Dakota."
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Proponents of SB 170 said the bill was consumer protection legislation and that stockbrokers and other registered representatives would only be liable if they knowingly failed to disclose the foreign laws.