The Cincinnati Enquirer

Gov. Bob Taft signed a bill Tuesday that will scrap portions of the state's 90-year-old securities code and stiffen penalties against people who commit securities fraud.

Ohio now will join 42 other states that give securities regulators the right to seek restitution for victims. Kentucky and Indiana, for example, already had such powers.

"This law provides new protections to Ohio investors and will help build consumer confidence in small public companies, the backbone of our economy," said Taft.

The bill provides "additional means to recover lost funds from those who violate securities laws," said Attorney General Jim Petro. "It will help restore investor confidence and strengthen Ohio businesses."

The bill, which goes into effect in 90 days, was triggered by investment scams across the state - including the Fiorini case in Cincinnati.

George Fiorini was an insurance salesman accused of bilking older and less-educated investors out of millions of dollars through the sale of unsecured promissory notes in his widely advertised 10 Percent Income Plus Plan. The state filed a civil case against Fiorini and persuaded him to sign a consent decree putting him out of business in September 2001.

But the state did not have the statutory authority to pursue restitution on behalf of Fiorini's victims. The 200 or so victims were forced to hire lawyers and file lawsuits to recover their money. Those lawsuits are plodding through the courts.

Fiorini was indicted May 7 by a federal grand jury in Cincinnati on 79 criminal counts.

He has pleaded not guilty, although a former associate has pled guilty to one count of scheming to defraud.

Federal laws designed to protect investors often apply only to larger companies that regularly file reports with the Securities and Exchange Commission.

The newly-signed legislation provides reforms for the typically smaller companies that register securities with the Ohio Department of Commerce.

The department's division of securities has received nearly 800 securities registration filings from these smaller companies proposing to sell more than $76 billion in securities to Ohio investors in the last three years.

Although Taft, Petro and fellow Republicans in the Senate and House lined up behind the securities reform bill, it was former state Rep. Wayne Coates, a Forest Park Democrat, who got the ball rolling in March 2002.

After reading an Enquirer report on the state's relatively punchless securities laws, Coates promised to introduce a bill to protect future victims of investment fraud. His bill, submitted in April, would have allowed the state to seek restitution of money stolen in frauds, but the measure died in a GOP-controlled committee.

A similar bill with Republican sponsors was introduced in September. Coates was defeated for re-election last fall in a redrawn district.

Key provisions of the law

• Increases penalties for white-collar crimes, including upgrading the theft of $1 million or more from a third-degree felony to a first-degree felony.

• Lengthens the statute of limitations for both civil and enforcement actions.

• Clarifies that an investment opportunity need not be in writing to constitute a "security."

• Establishes limits on, and require disclosures of, loans to company insiders when making registration filings with the division.

• Prohibits improper influence on accountants who prepare financial statements to be used in connection with the purchase or sale of securities in Ohio.