Bill filed to toughen securities laws

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The bill, filed in the state Senate, would also hold liable anyone who assists in security fraud.

Sen. Larry Martin, a Pickens Republican and chief sponsor of the bill, said while no charges have been filed in the Carolina Investors case and none may ever be filed, he wants investors and prosecutors to be armed to handle any future problems.

Pickens-based Carolina Investors closed last week, telling its 8,000 investors it did not have the money to operate. On Monday, its parent company HomeGold Financial Inc. and HomeGold Inc., both based in Lexington, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court. HomeGold Inc. said it owes $275 million to Carolina Investors.

"The citizens of Pickens County and South Carolina have suffered a tremendous blow because of what has occurred at Carolina Investors and Home Gold," Martin said. "If there is an injustice, we must ensure there is a path for recourse. These changes will empower anyone who has been wronged to right that wrong."

Joining Martin in sponsoring the bill was Senate Majority Leader Glenn McConnell of Charleston and Sen. Ralph Anderson, a Greenville Democrat.

"It is my hope that this legislation will become law and serve as an insurance policy to the people of South Carolina," Anderson said. "I pray that we never again will be faced with a deplorable situation where churches, groups of retired teachers, or any other South Carolinian will have to find out they have lost major portions of their building funds, pensions or other investments."

The bill changes the statute of limitations for a lawsuit involving securities fraud to give victims three years from the time the fraud is discovered or three years "after such discovery should have been made by exercise of reasonable diligence."

The legislation also widens the net around those who can be held liable for securities fraud, including "every person who knowingly and substantially assists a seller or other person who engages in fraudulent acts or practices."

In addition to the bill, Martin said, McConnell and others have pledged to help state Attorney General Henry McMaster find additional funds for securities investigations by considering an increase in securities-related fees.

Martin said while the bill is in direct response to Carolina Investors, "I'm not suggesting the first fraud charge will ever be filed."

"But if there is, we need to make sure the resources are there to adequately deal with it and there is a substantial law on the books that deters someone from wanting to engage in that type of activity."

Martin said the legislation will make the state's already strong securities law stronger.

"There are other companies doing business similarly around the state," he said. "If there is a lack of confidence in how this type of business is conducted, it's going to impact most folks."

The Pickens senator said he hopes the bill will pass the Senate next week and be approved by the House before lawmakers the end of the session in early June.