State Codes and Statutes

State Codes and Statutes

Statutes > North-carolina > Chapter_78D > GS_78D-4

§ 78D‑4.  Exempttransactions.

(a)        The prohibitions inG.S. 78D‑2 shall not apply to the following:

(1)        An account,agreement or transaction within the exclusive jurisdiction of the CommodityFutures Trading Commission as granted under the Commodity Exchange Act;

(2)        A commodity contractfor the purchase of one or more precious metals which requires, and under whichthe purchaser receives, within 28 calendar days from the payment in good fundsof any portion of the purchase price, physical delivery of the quantity of theprecious metals purchased by such payment, provided that, for purposes of thisparagraph, physical delivery shall be deemed to have occurred if, within suchtwenty‑eight‑day period, such quantity of precious metals purchasedby such payment is delivered (whether in specifically segregated or fungiblebulk form) into the possession of a depository (other than the seller) which iseither (i) a financial institution, (ii) a depository the warehouse receipts ofwhich are recognized for delivery purposes for any commodity on a contractmarket designated by the Commodity Futures Trading Commission, (iii) a storagefacility licensed or regulated by the United States or any agency thereof, or(iv) a depository designated by the Administrator, and such depository (orother person which itself qualifies as a depository as aforesaid) or aqualified seller issues and the purchaser receives, a certificate, document oftitle, confirmation or other instrument evidencing that such quantity ofprecious metals has been delivered to the depository and is being and willcontinue to be held by the depository on the purchaser's behalf, free and clearof all liens and encumbrances, other than liens of the purchaser, tax liens,liens agreed to by the purchaser, or liens of the depository for fees andexpenses, which have previously been disclosed to the purchaser;

(3)        A commodity contractsolely between persons engaged in producing, processing, using commercially orhandling as merchants, each commodity subject thereto, or any by‑productthereof; or

(4)        A commodity contractunder which the offeree or the purchaser is a person referred to in G.S. 78D‑3of this Chapter, an insurance company, an investment company as defined in theInvestment Company Act of 1940, or an employee pension and profit sharing orbenefit plan (other than a self‑employed individual retirement plan, orindividual retirement account).

(b)        For the purposes ofG.S. 78D‑4(a)(2), a qualified seller is a person who:

(1)        Is a seller ofprecious metals and has a tangible net worth of at least $5,000,000 (or has anaffiliate who has unconditionally guaranteed the obligations and liabilities ofthe seller and the affiliate has a tangible net worth of at least $5,000,000);

(2)        Has stored preciousmetals with one or more depositories on behalf of customers for at least theprevious three years;

(3)        Prior to any offer,and annually thereafter, files with the Administrator a sworn notice of intentto act as a qualified seller under G.S. 78D‑4(a)(2), containing:

a.         The seller's nameand address, names of its directors, officers, controlling shareholders,partners, principals, and other controlling persons;

b.         The address of itsprincipal place of business, state and date of incorporation or organization,and the name and address of seller's registered agent in this State;

c.         A statement that theseller (or a person affiliated with the seller who has guaranteed theobligations and liabilities of the seller) has a tangible net worth of at least$5,000,000;

d.         Depositoryinformation including:

1.         The name and addressof the depository or depositories that the seller intends to use;

2.         The name and addressof each and every depository where the seller has stored precious metals onbehalf of customers for the previous three years; and

3.         Independentverification from each and every depository named in (3)d2 of this section thatthe seller has in fact stored precious metals on behalf of the seller'scustomers for the previous three years and a statement of total deposits madeduring this period.

e.         Financial statementsfor the seller (or the person affiliated with the seller who has guaranteed theobligations and liabilities of the seller) for the past three years, audited byan independent certified public accountant, together with the accountant'sreport;

f.          A statementdescribing the details of all civil, criminal, or administrative proceedingscurrently pending or adversely resolved against the seller or its directors,officers, controlling shareholders, partners, principals, or other controllingpersons during the past 10 years including: (i) civil litigation andadministrative proceedings involving securities or commodities violations, orfraud, (ii) criminal proceedings, (iii) denials, suspensions or revocations ofsecurities or commodities licenses or registrations, and (iv) suspensions orexpulsions from membership in, or associations with, self‑regulatoryorganizations registered under the Securities Exchange Act of 1934, or theCommodity Exchange Act; or (v) a statement that there were no such proceedings.

(4)        Notifies theAdministrator within 15 days of any material changes in the informationprovided in the notice of intent; and

(5)        Annually furnishesto each purchaser for whom the seller is then storing precious metals, and tothe Administrator, a report by an independent certified public accountant ofthe accountant's examination of the seller's precious metals storage programthat includes a reconciliation of the total amount of depository confirmationsissued by all depositories where the seller has stored precious metals to thetotal amount of all confirmations issued to customers by the seller.

(c)        The Administratormay, upon request by the seller, waive any of the exemption requirements inG.S. 78D‑4(b), conditionally or unconditionally.

(d)        The Administratormay, by order, deny, suspend, revoke or place limitations on the authority toengage in business as a qualified seller under G.S. 78D‑4(a)(2) if theAdministrator finds that the order is in the public interest and that theperson, the person's officers, directors, partners, agents, servants oremployees, any person occupying a similar status or performing similarfunctions, any person who directly or indirectly controls or is controlled bythe seller, or any of them, the seller's affiliates or subsidiaries:

(1)        Has filed a noticeof intention under G.S. 78D‑4(c) with the Administrator or the designeeof the Administrator which was incomplete in any material respect or containedany statement which was, in light of the circumstances under which it was made,false or misleading with respect to any material fact;

(2)        Has, within the last10 years, pled guilty or nolo contendere to, or been convicted of any crimeindicating a lack of fitness to engage in the investment commodity business;

(3)        Has been permanentlyor temporarily enjoined by any court of competent jurisdiction from engagingin, or continuing, any conduct or practice which injunction indicates a lack offitness to engage in the investment commodities business;

(4)        Is the subject of anorder of the Administrator denying, suspending, or revoking the person'slicense as a securities broker‑dealer, sales representative, orinvestment adviser;

(5)        Is the subject ofany of the following orders which are currently effective and which were issuedwithin the last five years:

a.         An order by thesecurities agency or Administrator of another state, Canadian province orterritory, the Securities and Exchange Commission, or the Commodity FuturesTrading Commission, entered after notice and opportunity for hearing, denying,suspending, or revoking the person's registration as a futures commissionmerchant, leverage transaction merchant, introducing broker, commodity tradingadviser, commodity pool operator, securities broker‑dealer, salesrepresentative, or investment adviser, or the substantial equivalent of thoseterms;

b.         Suspension orexpulsion from membership in, or association with, a self‑regulatoryorganization registered under the Securities Exchange Act of 1934 or theCommodity Exchange Act;

c.         A United StatesPostal Service fraud order;

d.         A cease and desistorder entered after notice and opportunity of hearing by the Administrator orthe securities agency or Administrator of any other state, Canadian province orterritory, the Securities and Exchange Commission, or the Commodity FuturesTrading Commission;

e.         An order entered bythe Commodity Futures Trading Commission denying, suspending or revokingregistration under the Commodity Exchange Act.

(6)        Has engaged in anunethical or dishonest act or practice in the investment commodities orsecurities business; or

(7)        Has failedreasonably to supervise sales representatives or employees.

(e)        If the publicinterest or the protection of investors so requires, the Administrator may, byorder, summarily deny or suspend the exemption for a qualified seller. Upon theentry of the order, the Administrator shall promptly notify the person claimingsaid status that an order has been entered and the reasons therefor and that within20 days after the receipt of a written request the matter will be scheduled forhearing. The provisions of G.S. 78D‑30 shall apply with respect to allsubsequent proceedings.

(f)         If theAdministrator finds that any applicant or qualified seller is no longer inexistence or has ceased to do business or is subject to an adjudication ofmental incompetence or to the control of a committee, conservator, or guardian,or cannot be located after reasonable search, the Administrator may, by order,deny or revoke the exemption for a qualified seller.

(g)        The Administratormay issue rules or orders prescribing the terms and conditions of alltransactions and contracts covered by the provisions of this Chapter which arenot within the exclusive jurisdiction of the Commodity Futures TradingCommission as granted by the Commodity Exchange Act, exempting any person ortransaction from any provision of this Chapter conditionally or unconditionallyand otherwise implementing the provisions of this Chapter for the protection ofpurchasers and sellers of commodities. (1989, c. 634, s. 1; 2001‑126, s. 7.)