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1 Department of State Division of Publications 312 Rosa L. Parks, 8th Floor Snodgrass/TN Tower Nashville, TN Phone: For Department of State Use Only 0\-'l,\-- \ll} Rule ID(s): ll ~'bfj-ltlttfa Sequence Number: File Date (effective date): ( I':../ a.. \ _ 7,"7 \ v End Effective Date: 1 / 'bk/ l 0 Emergency Rule Filing Form Emergency rules are effective from date of filing for a period of up to 180 days. i Agency/Board/Commission: '. Tennessee Department of State i Division: B_u_si_n_es_s_S_e_rv_ ic_e_s ----< Contact Person: Mary,_B_et_h_T_h_o_m_a_s ~, l Address: 600 Charlotte Avenue, State Ca ital, 1 st Floor, Nashville, Tennessee Zip: Phone: (615) Mary.beth.thomas@tn.gov Rule Type: 2S_ Emergency Rule Revision Type (check all that apply): X Amendment X New Repeal Statement of Necessity: : Public Chapter 406 of the 110 th - General Assembly created a mechanism by which certain public officials who are listed as a debtor in a filed Uniform Commercial Code financing statement may dispute financing statements that were filed without reasonable basis or legal cause with the Secretary of State's office. The public ; official/debtor files an affidavit with the filing office of the Secretary of State, which is then forwarded to the. secured party of record. If the secured party contends that the UCC financing statement was indeed filed with : reasonable basis or legal cause, the secured party may file a petition for review and request a contested case hearing in front of an administrative law judge ("ALJ") for determination. If the ALJ determines that the filing did not have a reasonable basis or legal cause, the filing is voided and removed from the record. If the ALJ determines that the filing had a reasonable basis or legal cause, the filing is deemed valid with a filing date that relates back to the date that it was filed with the filing office. These rules are emergency rules because the Act took effect on October 1, 2017, which did not allow for sufficient time to romulgate non-emergency._r_u_le_s_. --~ Rule(s) Revised (ALL chapters and rules contained in filing must be listed here. If needed, copy and paste additional tables to accommodate multiple chapters. Please make sure that ALL new rule and repealed rule numbers are listed in the chart below. Please enter only ONE Rule Number/Rule Title per row). Amended Rules: Chapter Number Chapter Title (Amendment) Uniform Commercial Code General Provisions Rule Number Rule Title Definitions New Rules: Chapter Number Chapter Title (New) Filinq Procedures for Affidavits and Petitions for Review Rule Number Rule Title Filinq Procedures for Affidavits and Petitions for Review Contested Cases 1

2 Amended Rules DEFINITIONS. This Rule is amended to add the following definitions, to be numbered appropriately: (p) "Public Official" means: 1. An individual who is a current or retired elected or appointed government official, including a state, county, metropolitan, or municipal official; 2. An individual who is the head of a division or major unit or department within an agency or office of the executive, judicial, or legislative branch of state, county, metropolitan, or municipal government, regardless of the title of this position, and who, as a substantial part of the individual's duties, provides meaningful input on the development of policy goals or the implementation of policy; 3. A high-ranking employee within the executive, judicial, or legislative branch of state, county, metropolitan, or municipal government who has primary responsibility for one (1) or more of the following functions: (i) (ii) (iii) (iv) (v) Public information and legislative affairs; Fiscal, budget, and audit matters; Legal, security, or internal affairs; Information technology systems; and Human resources; 4. A first responder, as defined in T.C.A ; or 5. A law enforcement officer, as defined in T.C.A (q) "Affidavit" means a notarized affidavit, signed under penalty of perjury pursuant to T.C.A (e)(2)(A), stating that the affiant is a public official and that the UCC financing statement was filed without any reasonable basis or legal cause, and the affiant's factual basis for why the UCC financing statement lacks any reasonable basis or legal cause, executed on the form available from the secretary of state's filing office. (r) "Cost Bond" means the bond filed by the secured party of record, unless exempt pursuant to T.C.A (e)(5)(B), contemporaneously with the filing of a petition for review, in accordance with these rules. (s) "Petition for Review" means a petition filed by a secured party of record who believes in good faith that the filed financing statement by the secured party was filed with reasonable basis or legal cause. Authority: T.C.A and TC.A New Rules FILING PROCEDURES FOR AFFIDAVITS AND PETITIONS FOR REVIEW. (1) Filing of Affidavit. Affidavits shall be filed in the Secretary of State's filing office in the division of business services. The Secretary of State shall mark the affidavit with the date and time the affidavit is received. The filing office maintains regular office hours of 8:00 a.m. to 4:30 p.m. central time, Monday through Friday and is closed on legal holidays pursuant to T.C.A There is no cost to file an affidavit. (2) Delivery of Affidavit. Within three (3) days of receipt of an affidavit pursuant to T.C.A (e)(2)(A), the filing office shall send a copy of the affidavit to the secured party for the financing statement to which the affidavit relates. The copy of the affidavit shall be sent by registered or certified mail, with return receipt requested to the address on file for the secured party. Pursuant to T.C.A (e)(4)(B), the copy of the affidavit shall be deemed delivered to the secured party in the following instances: 2

3 acceptance by the addressee, a statement in the return receipt of the United States postal service showing that the addressee refused to accept delivery, or the return of the copy of the affidavit by the United States postal service as undeliverable or unclaimed. (3) Filing of Petition for Review. The petition for review shall be filed with the Secretary of State's filing office in the division of business services. The Secretary of State shall mark the petition for review with the date and time the petition for review is received. The filing office maintains regular office hours of 8:00 a.m. to 4:30 p.m. central time, Monday through Friday and is closed on legal holidays pursuant to T.C.A (4) Time for Filing Petition for Review. The secured party has twenty (20) days to file a petition for review with the filing office. The twenty (20) day deadline shall begin when the filing office receives notice of delivery or constructive delivery, evidenced by the return receipt of the United States postal service, notice of refusal or failure to sign the return receipt, or notice that the affidavit is undeliverable or unclaimed. If the petition for review is received by the filing office after the twenty (20) day deadline has expired, the petition will be rejected by the filing office, and the filing office shall void and remove from the public record the financing statement, along with all other documents associated with the financing statement pursuant to T.C.A (e)(6). The twenty (20) day deadline shall not be extended for any reason. (5) Contents of Petition for Review. The petition for review must contain a short and plain statement of the facts supporting and showing that the secured party's UCC financing statement was filed with reasonable basis or legal cause, and must include the following: (a) A copy of the affidavit; (b) The name, address, telephone number, and address of the secured party filing the petition for review; (c) A description of the collateral, including its location and value; (d) A description of the security agreement between the debtor and the secured party, including the date and payment terms of the agreement. A copy of any written agreement between the debtor and the secured party shall be attached to the petition for review; (e) Any other factors that are relevant to the determination of whether the financing statement was filed with reasonable basis or legal cause; (f) The signature of the secured party or the secured party's attorney, and if the secured party is a business entity, the signature of an individual with authority to sign, as well as that individual's title within the business entity; and (g) A valid cost bond as set forth below. (6) Cost Bond to Accompany Petition for Review. The petition for review must be accompanied by a cost bond in the amount of United States Two Hundred Dollars ($200.00) in one (1) of the following forms: (a) Money order or cashier's check made payable to the "Tennessee Secretary of State;" (b) Attorney's check. A check, made payable to the Tennessee Secretary of State, from an attorney licensed to practice law in good standing. An attorney must include his or her Board of Professional Responsibility number on the check for it to be considered valid; (c) Surety. The filing office may accept a surety signed by an attorney licensed to practice in good standing, a bond from a licensed bonding company, or a corporate surety bond. (7) Rejection of Petition for Review. If the secured party fails to comply with subsection (5) and (6) of these rules within twenty (20) days as set forth in Rule (4), the petition for review shall be rejected by the filing office and the filing office shall void and remove from the public record the financing statement, along with all other documents associated with the financing statement, including the affidavit, pursuant to T.C.A (e)(6). 3

4 Authority: T.C.A and TC.A CONTESTED CASES PURSUANT TO THE UNIFORM ADMINISTRATIVE PROCEDURES ACT, T.C.A , et seq. (1) The filing of a petition for review and cost bond in compliance with T.C.A (e)(5)(A) and (B) will commence a contested case pursuant to the Uniform Administrative Procedures Act. (2) An administrative law judge will preside over the contested case. The administrative law judge shall make a determination as to whether the financing statement was filed with any reasonable basis or legal cause and shall issue an order that complies with T.C.A (c) within thirty (30) days of the close of the record of the proceedings. T.C.A shall provide to either party the exclusive method of review of the administrative law judge's order. Authority: T.C.A and TC.A

5 * If a roll-call vote was necessary, the vote by the Agency on these rules was as follows: Board Member Aye No Abstain Absent Signature (if required) I certify that this is an accurate and complete copy of an emergency rule(s), lawfully promulgated and adopted. 1'2-l ~ ln Date: :.'as se.w:jx:; 1 _,. Signature: lj~~ e,'\u,,-i,t~""~,,,, Ch."'.. ~,,, ~' ''4",,,. \ o ~ A'>',,' ~".-.}. :1\f,,:,.,,, \!. ~,...,...r. I H:::.!!>v,, - \,~::.::.:.: (1,,:':, Name of Officer: ::l'":t y,'~n,j~ " d~... { -~ /",- -...,.--~ \.. ~n,:,r '.,.., :;_ -o - 0 ~ / J },_{,ijl11,\..._,,.,.u T"tl foff. c--,.c,,,,..w9~ J-C1.All\:J: < i ~.:...-":l~ -.i:1j. ~.. -:: 1 e o 1cer: ~~ ut:.. Cl'-'HC---- o ~ c.,;: 33.,,:;n n"- : :,::: O?~ d. l ~() : ' :: r ~ 3.1.'liLS :-.-: \ i>.....,;;(,;' tbscribed and sworn to before me on: I,\ { l/l j 1'7 ',,'1.f...,,...\, -~- ---<+b,<.f-"' ,,,, ' /./ J :i'd J i,,,,' I '- ~ /V"\_,?.Jla/ r ' _..., ---,,,,,,,;; 11,11,,,,,,,, Notary Public Signature: /Vl{/1 1 ~ '['''"'::J V Y--;,=,v,. My commission expires on: 0-+/..,_I 0-+f _.._I-= Agency/Board/Commission: S~e~c~r~e=ta_ry~of~S~t=a~te Rule Chapter Number(s): Uniform Commercial Code General Provisions Filing Procedures for Affidavits and Petitions for Review All emergency rules provided for herein have been examined by the Attorney General and Reporter of the State of Tennessee and are approved as to legality pursuant to the provisions of the Administrative Procedures Act, Tennessee Code Annotated, Title 4, Chapter 5. -<ijjmmr f:l.1:k!rtiri Attorney General and Reporter I /tt / J,t>lf T I Date Department of State Use Only i _,! ~,.. -~-- ) 0.::1 u.j t-... ~-=-= ( f U) ~ ', L '-.,_,. (. u w (/) Filed with the Department of State on:...:l...:.. {..L 'Jfz --'--'- {\.:... f(; Effective through: Effective for: -----'l_.9; '-'0~ *_da_,_y'-s- 1...:...L..: /1A- :...,,_ /...:... l ~= * Emergency rule{s) may be effective for up to 180 days from the date of filing. lt 1l/ Tre Ha~ett Secretary of State 5

6 Impact on Local Governments Pursuant to T.C.A and "any rule proposed to be promulgated shall state in a simple declarative sentence, without additional comments on the merits of the policy of the rules or regulation, whether the rule or regulation may have a projected impact on local governments." (See Public Chapter Number 1070 ( of the 2010 Session of the General Assembly) Pursuant to the law that required the enactment of these rules, officials in local governments will have the ability to permanently remove fraudulent financing statements that have been filed against them. This could save valuable time and resources of local governments who may need to assist their local public officials with removing these fraudulent liens. 6

Additional Information Required by Joint Government Operations Committee All agencies, upon filing a rule, must also submit the following pursuant to T.C.A. 4-5-226(i)(1 ).

7 Additional Information Required by Joint Government Operations Committee All agencies, upon filing a rule, must also submit the following pursuant to T.C.A (i)(1 ). (A) A brief summary of the rule and a description of all relevant changes in previous regulations effectuated by such rule; Public Chapter 406 of the 11 om General Assembly created a mechanism by which certain public officials who are listed as a debtor in a filed Uniform Commercial Code financing statement may dispute financing statements that were filed without reasonable basis or legal cause with the Secretary of State's office. The public official/debtor files an affidavit with the filing office of the Secretary of State, which is then forwarded to the secured party of record. If the secured party contends that the UCC financing statement was indeed filed with reasonable basis or legal cause, the secured party may file a petition for review and request a contested case hearing in front of an administrative law judge ("ALJ") for determination. If the ALJ determines that the filing did not have a reasonable basis or legal cause, the filing is voided and removed from the record. If the ALJ determines that the filing had a reasonable basis or legal cause, the filing is deemed valid with a filing date that relates back to the date that it was filed with the filing office. There are no changes to previous regulations, except to expand the definitional section to accommodate additional definitions added by Tenn. Code (e)(1 ). (B) A citation to and brief description of any federal law or regulation or any state law or regulation mandating promulgation of such rule or establishing guidelines relevant thereto; Tenn. Code Ann requires promulgation of these rules. This statute creates a mechanism by which certain public officials who are listed as a debtor in a filed Uniform Commercial Code financing statement may dispute financing statements that were filed with the Secretary of States' office without reasonable basis or legal cause. The public official/debtor files an affidavit with the filing office of the Secretary of State, which is then forwarded to the secured party of record. If the secured party contends that the UCC financing statement was indeed filed with reasonable basis or legal cause, the secured party may request a contested case hearing in front of an administrative law judge ("ALJ") for determination. If the ALJ determines that the filing did not have a reasonable basis or legal cause, the filing is voided and removed from the record. If the ALJ determines that the filing had a reasonable basis or legal cause, the filing is deemed valid with a filing date that relates back to the date that it was filed with the filinq office. (C) Identification of persons, organizations, corporations or governmental entities most directly affected by this rule, and whether those persons, organizations, corporations or governmental entities urge adoption or rejection of this rule; I Public officials are directly affected by these rules and have been supportive of adopting the rules. (D) Identification of any opinions of the attorney general and reporter or any judicial ruling that directly relates to the rule or the necessity to promulgate the rule; None. (E) An estimate of the probable increase or decrease in state and local government revenues and expenditures, if any, resulting from the promulgation of this rule, and assumptions and reasoning upon which the estimate is based. An agency shall not state that the fiscal impact is minimal if the fiscal impact is more than two percent (2%) of the agency's annual budget or five hundred thousand dollars ($500,000), whichever is less; While there will be cost savings to state and local governments who are assisting their officials with combating fraudulent financin statements, the amount of those savin s cannot be reasonabl estimated. (F) Identification of the appropriate agency representative or representatives, possessing substantial knowledge and understanding of the rule; I Mary Beth Thomas General Counsel 7

8 Office of Secretary of State (615) (G) Identification of the appropriate agency representative or representatives who will explain the rule at a scheduled meeting of the committees; Mary Beth Thomas General Counsel Office of Secretary of State (615) marv.beth.thomasln)tn.aov (H) Office address, telephone number, and address of the agency representative or representatives who will explain the rule at a scheduled meeting of the committees; and Mary Beth Thomas General Counsel Office of Secretary of State State Capitol, 1 st Floor Nashville, Tennessee (615) mary. beth. thomas@tn.gov (I) Any additional information relevant to the rule proposed for continuation that the committee requests. 8

RULES OF THE TENNESSEE DEPARTMENT OF STATE DIVISION OF BUSINESS SERVICES CHAPTER 1360-08-01 UNIFORM COMMERCIAL CODE GENERAL PROVISIONS TABLE OF CONTENTS 1360-08-01-.01 1360-08-01-.02 1360-08-01-.

9 RULES OF THE TENNESSEE DEPARTMENT OF STATE DIVISION OF BUSINESS SERVICES CHAPTER UNIFORM COMMERCIAL CODE GENERAL PROVISIONS TABLE OF CONTENTS Definitions Means to Deliver UCC Records Search Reauest Deliverv Forms Fees Reserved Methods of Payment Overpayment and Underpayment Public Records Services Fees for Public Records Services Office Hours Effective Date DEFINITIONS. The following terms shall have the respective meanings provided in this rule. Terms not defined in this rule which are defined in the UCC shall have the respective meanings accorded such terms in the UCC. (a) (b) "Active record" means a UCC record that has been stored in the UCC information management system and indexed in, but not yet removed from, the searchable indexes and has not either lapsed or been terminated. "Address" means either (i) a street address, route number (may include box}, or P.O. Box number, plus the city, state, and zip code, or (ii) an address that purports to be a mailing address outside the United States of America. Submitted addresses will be verified and standardized using the United States Postal Service Address Matching System Application Programming Interface. (c) "Affidavit" means a notarized affidavit, signed under penalty of perjury pursuant to T.C.A (e}(2}(A}, stating that the affiant is a public official and that the UCC financing statement was filed without any reasonable basis or legal cause, and the affiant's factual basis for why the UCC financing statement lacks any reasonable basis or legal cause, executed on the form available from the secretary of state's filing office. (g) "Amendment" means a UCC record that amends the information contained in a financing statement. Amendments include assignments, continuations, and terminations. (.~) "Assignment" is an amendment that assigns all or a part of a secured party's power to authorize an amendment to a financing statement. (D "Statement of claim" means a UCC record whereby the debtor or secured party indicates that a financing statement is inaccurate or wrongfully filed. (g) (b.) (l) (i} "Cost Bond" means the bond filed by the secured party of record, un less exempt pursuant to T.C.A (e}(5)(B), contemporaneously with the filing of a petition for review, in accordance with these rules. "Filing office" and "filing officer" mean the Tennessee Secretary of State, Division of Business Services. "Filing officer statement" means a statement entered into the filing office's information system to correct an error. "Initial financing statement" means a UCC record that causes the filing office to establish the initial record of filing of a financing statement. 9

(ls) (l) "Petition for Review" means a petition filed by a secured party of record who believes in good faith that the filed financing statement by the secured party was filed with reasonable basis

10 (ls) (l) "Petition for Review" means a petition filed by a secured party of record who believes in good faith that the filed financing statement by the secured party was filed with reasonable basis or legal cause. "Public Official" means: (A) (B) (C) An individual who is a current or retired elected or appointed government official, including a state, county, metropolitan, or municipal official: An individual who is the head of a division or major unit or department within an agency or office of the executive, judicial, or legislative branch of state, county, metropolitan, or municipal government, regardless of the title of this position, and who, as a substantial part of the individual's duties, provides meaningful input on the development of policy goals or the implementation of policy: A high-ranking employee within the executive, judicial or legislative branch of state, county, metropolitan or municipal government who has primary responsibility for one (1) or more of the following functions: i. ii. iii. iv. V. Public information and legislative affairs; Fiscal, budget and audit matters: Legal, security, or internal affairs: Information technology systems: and Human resources; (D) A first responder, as defined in T.C.A : or (E) A law enforcement officer, as defined in T.C.A (m) (D.) (Q) (Q) (g) (r) "Remitter" means a person who tenders a UCC record to the filing officer for filing, whether the person is a filer or an agent of a filer responsible for tendering the record for filing. "Remitter" does not include a person responsible merely for the delivery of the record to the filing office, such as the postal service or a courier service, but does include a service provider who acts as a filer's representative in the filing process. "Searchable indexes" means the searchable index of individual debtor names and the searchable index of organization debtor names maintained in the UCC information management system. "Secured party of record" includes a secured party of record as defined in the UCC as well as a person who has been a secured party of record with respect to whom an amendment has been filed purporting to delete such person as a secured party of record. "UCC" means the Uniform Commercial Code as adopted in this State. "UCC information management system" means the information management system used by the filing office to store, index, and retrieve information relating to financing statements as described in Rule "UCC record" means an initial financing statement, an amendment, an assignment, a continuation statement, a termination statement, a filing officer statement, or a statement of claim, and includes a record thereof maintained by the filing office. The term "UCC record" shall not be deemed to refer exclusively to paper or paper-based writings. 10

11 ( ) "Unlapsed record" means a UCC record that has been stored and indexed in the UCC information management system, which has not yet lapsed under T.C.A with respect to all secured parties of record. 11

Proposed Rule(s) Filing Form

Proposed Rule(s) Filing Form Department of State Division of Publications 312 Rosa L. Parks Avenue, 8th Floor Snodgrass/TN Tower Nashville, TN 37243 Phone: 615-741-2650 Email: publications.information@tn.gov For Department of State