SD Initiaded Measure 9 - Make certain securities unlawful

Initiated Measure 9

Title: An Initiative to make certain securities practices and transactions unlawful.

Attorney General Explanation
State and federal law regulates the purchase and sale of stocks and other securities.
A common “stock market” transaction is a “short sale” where, for example, an investor who believes a publicly traded stock
is over-priced will borrow that stock from an owner, sell the borrowed stock, and repurchase the stock later at a lower price to repay
the loan, thereby making money if the price has fallen. If the price goes up, the investor must repurchase the stock at the higher
price to repay the loan, and will lose money. Measure 9 would prohibit short sales.
State law currently does not regulate the time frame for the delivery of securities upon sale. Measure 9 would prohibit
anyone from routinely taking longer than three business days to deliver securities they have sold.
If adopted, Measure 9 will likely be challenged in court and may be declared to be preempted by federal law and the United
States Constitution.

A vote “Yes” will adopt the proposed law.

A vote “No” will reject the proposed law.

Pro – Initiated Measure 9

Initiated Measure 9 -- The South Dakota Small Investor Protection
Act -- allows for action within the State of South Dakota if the seller of
stock in publicly traded companies:

“Has engaged in a pattern of commercially unreasonable delay in the
delivery of securities sold, or has sold securities that the person did not
own or have a bona fide contract to purchase.

For the purposes of this subdivision, commercially unreasonable is
presumed to be more than three business days.”

This means that when a South Dakotan buys stock, it must be timely
delivered from seller to buyer.

The same existing requirements under Federal law are not being
enforced. According to testimony before the US Senate, each day more
than $6 billion in stock is sold but not delivered to buyers -- including
stock in some of South Dakota’s best-known companies.

This illegal activity puts South Dakota small investors at risk, as well as
South Dakota public pension funds that invest in stocks, and ultimately
South Dakota taxpayers.

The Securities & Exchange Commission recently began enforcing its 3-
day delivery rule – but only for 19 large banks and Wall Street firms –
leaving investors in the rest of America’s publicly-traded companies at
risk.

Voting “YES” on 9 will allow our courts to intervene when Federal
bureaucrats and New York courts don’t.

The initiative, written by former South Dakota Attorney General Mark
Meierhenry, does not end short selling. It does not even mention short
selling. The law enables Federal law to be enforced in South Dakota
courts.

When someone robs a South Dakota bank, they face both Federal and
state prosecution. Under Initiated Measure 9, when someone cheats a
South Dakota investor, they too will face both Federal and South Dakota
action.

To protect South Dakotans, vote “YES” on 9.

Submitted by: Mark V. Meierhenry, Danforth & Meierhenry, LLP,
315 S. Phillips Avenue, Sioux Falls, SD 57104 and Mr. Tim Mooney,
Arno Political Consultants, 38060 N. Miramonte Drive, Cave Creek, AZ
85331

Con – Initiated Measure 9

Because this initiative outlaws a practice called “short selling” that is
already authorized and regulated by federal law, the courts will
undoubtedly strike it down as unconstitutional under the Supremacy
Clause of the United States Constitution. South Dakota taxpayers will
bear the financial burden of defending this unnecessary new measure if it
passes, even though out of state private interests brought it to South
Dakota.

A short sale is the sale of a security that the seller does not own and does
not have a contract to purchase, such as a sale for which a seller delivers,
or will deliver, borrowed securities.

Of immediate concern, the initiative will have negative consequences for
our economy as the case drags through the judicial system. The proposal
is not restricted to in state transactions, but rather applies to transactions
anywhere by any company registered to do business in South Dakota,
which includes all major national broker-dealers. Because of the broad
sweep of the act, it applies not only to in state broker-dealer employees
but to officers and directors wherever located. The companies will have
only one choice, to exit the state. Even if companies found ways to do
business here they would probably choose not to do so, because the
initiative would disrupt their national trading systems. Small business
issuers would also be hurt raising capital.

Under current South Dakota and federal securities law, manipulative
short selling constitutes fraudulent activity and a crime. Current
regulatory, criminal and civil remedies under both state and federal law
adequately govern those persons or entities that fraudulently manipulate
short sale transactions. No need exists for additional state law to protect
investors or small businesses from abusive short sale practices.

The initiative would be unnecessary, expensive, and economically
harmful to South Dakota. Vote No.

Submitted by: Gail Sheppick, Director of the South Dakota Division of
Securities, 445 E Capitol Avenue Pierre, SD 57501

Can somebody hit this with a hammer and give it to me in chunks?



Maybe I am dense but I don't get this. It must be important though
because yesterday I received an automated phone call attempting
to explain it and asking me if I would vote yes.

9 is an attempt to prohibit short selling stocks and bonds, which is a widely accepted practive nationally, and 9 would be unconstitutional and unnecessary, the way it was explained to me.

I think I'll vote No.