Thursday, October 23, 2008

New PA Law on Internet Trading Assistants

On October 8, 2008, PA Governor Edward G. Rendell signed a bill into law that creates a new category of "trading assistants" who assist others through an "online Internet bidding platform" and requires them to register with the Pennsylvania State Board of Auctioneer Examiners, pay a registration fee, and post a surety bond.

Fiduciaries who contemplate sale of tangible personal property through an online Internet auction service should be aware of new Act 89 of 2008 (also posted in PDF format, 12 pages).

A Press Release issued by the Governor's Office entitled "Governor Rendell Signs 10 Bills Into Law" (10/09/08), briefly announced the new law, among others signed on October 8, 2008:

"Senate Bill 908 [PN 2374, enacted as Act No. 89 of 2008] amends the Auctioneer and Auction Licensing Act to require “trading assistants” (people who sell, for a fee or commission, someone’s personal property through an online Internet bidding platform) to register with the State Board of Auctioneer Examiners.
Auction Central News posted an excellent article, entitled "New Pa. law requires online trading assistants to be licensed, bonded" (10/12/08), by Gene Friedman & Catherine Saunders-Watson, who summarized the new law's background and effects:
Known as the Auctioneer Licensing and Trading Assistant Registration Act, Senate Bill 908 is an amended, updated version of an existing law (Act 85) that has been on the books since 1983.

In its new form, the legislation creates a more equitable and clearly defined playing field for the state's licensed auctioneers, who face increased competition from entrepreneurs or "drop shops" that charge a fee to manage auctions online for outside consignors.

On the other hand, the law also benefits trading assistants, who no longer have to fear the prospect of legislation requiring them to undertake formal auctioneer training. * * *

Under the new [law], which was introduced [as a bill] on Sept. 25 by State Senator Rob Wonderling, * * * trading assistants will be required to pay a biennial $100 fee to the State Board of Auctioneer Examiners. Additionally, each trading assistant must file a $5,000 bond to cover any judgments that might be ordered payable by a court. * * *
Last year, discussion about regulation of online auctioneers was sparked nationwide when the Pennsylvania Attorney General's Office commenced proceedings under the prior law governing auction activities. See: PA EE&F Law Blog posting "Ebay Sellers as "Auctioneers" in PA" (11/26/07).

Pennsylvania Auctioneers Association supported some form of a bill to regulate electronic auction brokers. See: "PAA Position Statement on the Electronic Auction Broker Legislation" and "Newest Information on PA's Electronic Auction Broker Legislative Initiative", both by Jay A. Layman.

Act 89 was the result of compromises made during a "stakeholder process convened by Representative Mike Sturla" that resulted in "a major step forward for both traditional auctioneers and electronic auction brokers," according to Mr. Layman.

Upon enactment, PAA celebrated in a Press Release posted on its website, entitled "Success for PAA's Online Auction Legislative Initiative" (PDF, 2 pages), by Jay A. Layman, also posted on AuctionZip, on October 17, 2008.

He congratulated participants in the process who arrived at a balanced legislative solution:

This effort began with divergent views expressed in Senate Bill 908 and House Bill 1899. However, the final version of Senate Bill 908 is a classic example of success by the stakeholder group convened by these legislators.

Included in it were representatives from the Department of State, Office of the Attorney General, Governor’s Office, Representative Mike Sturla and his staff, Senator Rob Wonderling and his staff, Senator Tommy Tomlinson and his staff, eBay, and the PAA.

The scope of discussions included diverse political philosophies of the role of government, the need for consumer protection and support for emerging technologies in the modern business environment.

The final work product achieved a delicate balancing of these concerns, and the effort was rewarded with the necessary political support of the House and Senate leaders managing the legislative process and who agreed it should become law. * * *
Act 89 defines "Online Internet Bidding Platform" as "hardware or software architecture that provides or enables computer access by multiple users to an interactive computer server for the purpose of allowing users to offer property for sale and that does not examine, set the price or prepare the description of the property to be offered."

The Act creates a
newly-designated group, who require licensing and some regulation -- "Trading Assistants" who sell personal property belonging to another for a fee, through such an online Internet bidding platform:
They are not required to comply with this law when they sell their own property.

In lieu of licensure requirements for traditional auctioneers, they must comply with a simpler biennial registration process that includes obtaining a bond, placing monies in escrow, disclosing their registration number, providing written receipts, and being subject to fines and penalties for failure to register or comply with the law. * * *
A fiduciary, just like an individual, should be able to sell tangible assets being administered as part of the managed "corpus", through an electronic Internet auction without licensure as a "trading assistant", assuming no separate sale commission would be charged for that auction service.

However, a fiduciary in Pennsylvania who engages another person to do so for a fee should first require proof of registration under new Act 89 of 2008 (once it takes effect).

The act will take effect sixty days after October 8, 2008.