§485A-202 - Exempt transactions.

§485A-202 Exempt transactions. (a)
The following transactions are exempt from the requirements of sections
485A-301 to 485A-305 and 485A-504:

(1) An isolated nonissuer transaction, whether or not
effected by or through a broker-dealer;

(2) A nonissuer transaction by or through a
broker-dealer registered or exempt from registration under this chapter, and a
resale transaction by a sponsor of a unit investment trust registered under the
Investment Company Act of 1940, in a security of a class that has been
outstanding in the hands of the public for at least ninety days, if, at the
date of the transaction:

(A) The issuer of the security is engaged in
business, the issuer is not in the organizational stage or in bankruptcy or
receivership, and the issuer is not a blank check, blind pool, or shell company
that has no specific business plan or purpose or has indicated that its primary
business plan is to engage in a merger or combination of the business with, or
an acquisition of, an unidentified person;

(B) The security is sold at a price reasonably
related to its current market price;

(C) The security does not constitute the whole
or part of an unsold allotment to, or a subscription or participation by, the
broker-dealer as an underwriter of the security or a redistribution;

(D) A nationally recognized securities manual
or its electronic equivalent designated by rule adopted or order issued under
this chapter or a record filed with the Securities and Exchange Commission that
is publicly available and contains:

(i) A description of the business and
operations of the issuer;

(ii) The names of the issuer's executive
officers and the names of the issuer's directors, if any;

(iii) An audited balance sheet of the issuer as
of a date within eighteen months before the date of the transaction or, in the
case of a reorganization or merger when the parties to the reorganization or
merger each had an audited balance sheet, a pro forma balance sheet for the
combined organization; and

(iv) An audited income statement for each of the
issuer's two immediate previous fiscal years or for the period of existence of
the issuer, whichever is shorter, or, in the case of a reorganization or merger
when each party to the reorganization or merger had audited income statements,
a pro forma income statement; and

(E) Any one of the following requirements is
met:

(i) The issuer of the security has a class of
equity securities listed on a national securities exchange registered under
section 6 of the Securities Exchange Act of 1934 or designated for trading on
the National Association of Securities Dealers' Automated Quotation System;

(ii) The issuer of the security is a unit
investment trust registered under the Investment Company Act of 1940;

(iii) The issuer of the security, including its
predecessors, has been engaged in continuous business for at least three years;
or

(iv) The issuer of the security has total assets
of at least $2,000,000 based on an audited balance sheet as of a date within
eighteen months before the date of the transaction or, in the case of a
reorganization or merger when the parties to the reorganization or merger each
had such an audited balance sheet, a pro forma balance sheet for the combined
organization;

(3) A nonissuer transaction by or through a
broker-dealer registered or exempt from registration under this chapter in a
security of a foreign issuer that is a margin security defined in regulations
or rules adopted by the Board of Governors of the Federal Reserve System;

(4) A nonissuer transaction by or through a
broker-dealer registered or exempt from registration under this chapter in an
outstanding security if the guarantor of the security files reports with the
Securities and Exchange Commission under the reporting requirements of section
13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));

(5) A nonissuer transaction by or through a
broker-dealer registered or exempt from registration under this chapter in a
security that:

(A) Is rated at the time of the transaction by
a nationally recognized statistical rating organization in one of its four
highest rating categories; or

(B) Has a fixed maturity or a fixed interest
or dividend, if:

(i) A default has not occurred during the
current fiscal year or within the three previous fiscal years or during the
existence of the issuer and any predecessor if less than three fiscal years, in
the payment of principal, interest, or dividends on the security; and

(ii) The issuer is engaged in business, is not in
the organizational stage or in bankruptcy or receivership, and is not and has
not been within the previous twelve months a blank check, blind pool, or shell
company that has no specific business plan or purpose or has indicated that its
primary business plan is to engage in a merger or combination of the business
with, or an acquisition of, an unidentified person;

(6) A nonissuer transaction by or through a
broker-dealer registered or exempt from registration under this chapter
effecting an unsolicited order or offer to purchase;

(7) A nonissuer transaction executed by a bona fide
pledgee without the purpose of evading this chapter;

(8) A nonissuer transaction by a federal covered
investment adviser with investments under management in excess of $100,000,000,
acting in the exercise of discretionary authority in a signed record for the
account of others;

(9) A transaction between the issuer or other person
on whose behalf the offering is made and an underwriter, or among underwriters;

(10) A transaction in a note, bond, debenture, or
other evidence of indebtedness secured by a mortgage or other security
agreement if:

(A) The note, bond, debenture, or other
evidence of indebtedness is offered and sold with the mortgage or other
security agreement as a unit;

(B) A general solicitation or general
advertisement of the transaction is not made; and

(C) A commission or other remuneration is not
paid or given, directly or indirectly, to a person not registered under this
chapter as a broker-dealer or as an agent;

(11) A transaction by an executor, administrator of an
estate, personal representative, sheriff, marshal, receiver, trustee in
bankruptcy, guardian, or conservator;

(12) A sale or offer to sell to:

(A) An institutional investor;

(B) A federal covered investment adviser; or

(13) Any transaction pursuant to a sale or an offer to
sell securities of an issuer, if the transaction is part of an issue in which:

(A) There are no more than twenty-five
purchasers (other than those designated in paragraph (12)), wherever located,
during any twelve consecutive months;

(B) The issuer reasonably believes that all
purchasers (other than those designated in paragraph (12)), wherever located,
are purchasing for investment purposes and not with the view to, or for sales
in connection with, a distribution of the security. The purchase shall be
presumed to be made with a view to distribute and not to invest if any resale
of a security sold in reliance on this exemption is within twelve months of
sale, except a resale pursuant to a registration statement effective under
section 485A-301, or to an accredited investor pursuant to an exemption
available under this chapter;

(C) No commission, discount, or other
remuneration is paid or given, directly or indirectly, to a person, other than
a broker-dealer or agent registered under this chapter, for soliciting a
prospective purchaser in this State; and

(D) The securities of the issuer are not
offered or sold by general solicitation or any general advertisement or other
advertising medium;

(14) A transaction under an offer to existing security
holders of the issuer, including persons who at the date of the transaction are
holders of convertible securities, options, or warrants, if a commission or
other remuneration, other than a standby commission, is not paid or given,
directly or indirectly, for soliciting a security holder in this State;

(15) (A) A
transaction involving the offer or sale of a security by an issuer to an
accredited investor that meets the following requirements:

(i) The issuer reasonably believes that the
sale is to persons who are accredited investors;

(ii) The issuer is not in the development stage,
without specific business plan or purpose;

(iii) The issuer has not indicated that the
issuer's business plan is to engage in a merger or acquisition with an
unidentified company or companies, or other entity or person; and

(iv) The issuer reasonably believes that all
purchasers are purchasing for investment purposes and not with the view to, or
for sales in connection with, a distribution of the security. The purchase
shall be presumed to be made with a view to distribute and not to invest if any
resale of a security sold in reliance on this exemption is within twelve months
of sale, except a resale pursuant to a registration statement effective under
section 485A-301, or to an accredited investor pursuant to an exemption
available under this chapter;

(B) The exemption under this paragraph shall
not apply to an issuer if the issuer; any affiliated issuer; any beneficial
owner of ten per cent or more of any class of the issuer's equity securities;
any issuer's predecessor, director, officer, general partner, or promoter
presently connected in any capacity with the issuer; and any underwriter or
partner, director, or officer of the underwriter of the securities to be
offered:

(i) Within the last five years has filed a
registration statement that is the subject of a currently effective
registration stop order entered by any state securities administrator or the
Securities and Exchange Commission;

(ii) Within the last five years has been
convicted of any criminal offense in connection with the offer, purchase, or
sale of any security, or involving fraud or deceit;

(iii) Is currently subject to any state or
federal administrative enforcement order or judgment entered within the last
five years, finding fraud or deceit in connection with the purchase or sale of
any security; or

(iv) Is currently subject to any order,
judgment, or decree of any court of competent jurisdiction, entered within the
last five years, temporarily, preliminarily, or permanently restraining or
enjoining such party from engaging in or continuing to engage in any conduct or
practice involving fraud or deceit in connection with the purchase or sale of
any security;

(i) The party subject to the disqualification
is licensed or registered to conduct securities-related business in the state
in which the order, judgment, or decree creating the disqualification was
entered against such party;

(ii) Before the first offer under this
exemption, the commissioner, or the court or regulatory authority that entered
the order, judgment, or decree waives the disqualifications; or

(iii) The issuer establishes that the issuer did
not know and in the exercise of reasonable care, based on a factual inquiry,
could not have known that a disqualification existed under this paragraph; and

(D) An issuer claiming the exemption under
this paragraph, within fifteen days after the first sale in this State, shall
file with the commissioner a notice of transaction, a consent to service of
process, a copy of the offering circular or similar document provided to the
accredited investor and a $200 filing fee.

For the purposes of this paragraph,
"accredited investor" shall have the same meaning as provided in Rule
501(a) adopted under the Securities Act of 1933 (17 C.F.R. 230.501(a));

(16) An offer to sell, but not a sale, of a security
not exempt from registration under the Securities Act of 1933 if:

(A) A registration or offering statement or
similar record as required under the Securities Act of 1933 has been filed, but
is not effective, or the offer is made in compliance with Rule 165 adopted
under the Securities Act of 1933 (17 C.F.R. 230.165); and

(B) A stop order of which the offeror is aware
has not been issued against the offeror by the commissioner or the Securities
and Exchange Commission, and an audit, inspection, or proceeding that is public
and that may culminate in a stop order is not known by the offeror to be
pending;

(17) An offer to sell, but not a sale, of a security
exempt from registration under the Securities Act of 1933 if:

(A) A registration statement has been filed
under this chapter, but is not effective;

(B) A solicitation of interest is provided in
a record to offerees in compliance with a rule adopted by the commissioner
under this chapter; and

(C) A stop order of which the offeror is aware
has not been issued by the commissioner under this chapter and an audit,
inspection, or proceeding that may culminate in a stop order is not known by
the offeror to be pending;

(18) A transaction involving the distribution of the
securities of an issuer to the security holders of another person in connection
with a merger, consolidation, exchange of securities, sale of assets, or other
reorganization to which the issuer, or its parent or subsidiary and the other
person, or its parent or subsidiary, are parties;

(19) A rescission offer, sale, or purchase under
section 485A-510;

(20) An offer or sale of a security to a person not a
resident of this State and not present in this State if the offer or sale does
not constitute a violation of the laws of the state or foreign jurisdiction in
which the offeree or purchaser is present and is not part of an unlawful plan
or scheme to evade this chapter;

(21) Employees' stock purchase, savings, option, profit-sharing,
pension, or similar employees' benefit plan, including any securities, plan
interests, and guarantees issued under a compensatory benefit plan or
compensation contract, contained in a record, established by the issuer, its
parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of
the issuer's parent for the participation of their employees, including offers
or sales of such securities to:

(A) Directors; general partners; trustees, if
the issuer is a business trust; officers; consultants; and advisors;

(B) Family members who acquire the securities
from those persons through gifts or domestic relations orders;

(C) Former employees, directors, general
partners, trustees, officers, consultants, and advisors if those individuals
were employed by or providing services to the issuer when the securities were
offered; and

(D) Insurance agents who are exclusive
insurance agents of the issuer, or the issuer's subsidiaries or parents, or who
derive more than fifty per cent of their annual income from those
organizations;

(22) A transaction involving:

(A) A stock dividend or equivalent equity
distribution, whether or not the corporation or other business organization
distributing the dividend or equivalent equity distribution is the issuer, if
nothing of value is given by stockholders or other equity holders for the
dividend or equivalent equity distribution other than the surrender of a right
to a cash or property dividend if each stockholder or other equity holder may
elect to take the dividend or equivalent equity distribution in cash, property,
or stock;

(B) An act incident to a judicially approved
reorganization in which a security is issued in exchange for one or more
outstanding securities, claims, or property interests, or partly in such
exchange and partly for cash; or

(C) The solicitation of tenders of securities
by an offeror in a tender offer in compliance with Rule 162 adopted under the
Securities Act of 1933 (17 C.F.R. 230.162);

(23) A nonissuer transaction in an outstanding
security by or through a broker-dealer registered or exempt from registration
under this chapter, if the issuer is a reporting issuer in a foreign
jurisdiction designated by this paragraph or by rule adopted or order issued
under this chapter; has been subject to continuous reporting requirements in
the foreign jurisdiction for not less than one hundred eighty days before the
transaction; and the security is listed on the foreign jurisdiction's
securities exchange that has been designated by this paragraph or by rule
adopted or order issued under this chapter, or is a security of the same issuer
that is of senior or substantially equal rank to the listed security or is a
warrant or right to purchase or subscribe to any of the foregoing. For
purposes of this paragraph, Canada, together with its provinces and
territories, is a designated foreign jurisdiction and the Toronto Stock
Exchange, Inc., is a designated securities exchange. After an administrative
hearing in accordance with chapter 91, the commissioner, by rule adopted or
order issued under this chapter, may revoke the designation of a securities
exchange under this paragraph, if the commissioner finds that revocation is
necessary or appropriate in the public interest and for the protection of
investors;

(24) Any offer or sale by or through a real estate
broker or real estate salesperson licensed under the laws of this State, of a
security issued on or after July 1, 1961, by a corporation organized under the
laws of this State, the holder of which is entitled solely by reason of the
holder's ownership thereof, to occupy for dwelling purposes a house, or an
apartment in a building, owned or leased by such corporation; provided that the
issuer of the security shall apply for the exemption to the commissioner on
such form and containing such information as the commissioner may prescribe.
If the commissioner finds that the business applicant's proposed plan and the
proposed issuance of securities are fair, just, and equitable, that the applicant
intends to transact its business fairly and honestly, and that the securities
that the applicant proposes to issue and the method to be used by the applicant
in issuing or disposing of the securities will not, in the opinion of the
commissioner, work a fraud upon the purchaser thereof, the commissioner shall
issue to the applicant a permit authorizing the applicant to issue and dispose
of the securities in this State in the manner provided herein and in such
amounts and for such consideration as the commissioner may provide in the
permit. Otherwise, the commissioner shall deny the application and refuse the
permit and notify the applicant of the decision in writing, subject to appeal
as provided in section 485A-609. In any permit issued under this paragraph,
the commissioner may require the deposit in escrow or impoundment of any or all
securities, the proceeds from the sale thereof, approval of advertising
material, and any of the conditions as set forth in section 485A-304(f). The
commissioner may act as escrow holder for securities required to be deposited
in escrow by the commissioner's order or as a necessary signatory on any
account in which impounded proceeds from the sale of escrowed securities are
deposited;

(25) Any offer or sale by or through a real estate
broker or real estate salesperson licensed under the laws of this State of an
apartment or unit in a condominium project, and a rental management contract
relating to the apartment or unit, including an interest in a partnership
formed for the purpose of managing the rental of apartments or units if the
rental management contract or the interest in the partnership is offered at the
same time as the apartment or unit is offered.

For the purposes of
this paragraph, the terms "apartment", "unit",
"condominium", and "project" shall have the meanings
prescribed in section 514A-3 or 514B-3; and

(26) Any transaction not involving a public offering
within the meaning of section 4(2) of the Securities Act of 1933 (15 U.S.C.
77d), but not including any transaction specified in the rules and regulations
thereunder.

(b) With respect to the exemption under
paragraph (a)(13):

(1) The exemption shall not apply to an issuer if the
issuer; any affiliated issuer; any beneficial owner of ten per cent or more of
any class of the issuer's equity securities; any issuer's predecessor,
director, officer, general partner, or promoter presently connected in any
capacity with the issuer; and any underwriter or partner, director, or officer
of the underwriter of the securities to be offered:

(A) Within the last five years has filed a
registration statement that is the subject of a currently effective
registration stop order entered by any state securities administrator or the
United States Securities and Exchange Commission;

(B) Within the last five years has been
convicted of any criminal offense in connection with the offer, purchase, or
sale of any security, or involving fraud or deceit;

(C) Is currently subject to any state or
federal administrative enforcement order or judgment entered within the last
five years, finding fraud or deceit in connection with the purchase or sale of
any security; or

(D) Is currently subject to any order,
judgment, or decree of any court of competent jurisdiction, entered within the
last five years, temporarily, preliminarily, or permanently restraining or
enjoining such party from engaging in or continuing to engage in any conduct or
practice involving fraud or deceit in connection with the purchase or sale of
any security; and

(2) Paragraph (1) shall not apply if:

(A) The party subject to the disqualification
is licensed or registered to conduct securities-related business in the state
in which the order, judgment, or decree creating the disqualification was
entered against such party;

(B) Before the first offer under this
exemption, the commissioner, or the court or regulatory authority that entered
the order, judgment, or decree waives the disqualifications; or

(C) The issuer establishes that the issuer did
not know and in the exercise of reasonable care, based on a factual inquiry,
could not have known that a disqualification existed under this paragraph. [L
2006, c 229, pt of §1; am L 2008, c 28, §23]