Current through Reg. 49, No. 38; September 20, 2024
(a) In general. The State Securities Board,
pursuant to the Securities Act, §5.T, exempts from the securities
registration requirements of the Securities Act, §7, the offer and sale by
the issuer or a registered dealer without advertising of any security to an
individual accredited investor, or to any purchaser who the issuer has
reasonable grounds to believe and after making reasonable inquiry shall believe
to be an individual accredited investor, provided that such security is not
part of the same distribution or offering as securities of the same issuer
which have been registered or are proposed to be registered by pending
application under the Securities Act, §7. "Advertising," as used in this
subsection, does not include the use of limited use advertisements under
subsection (e) of this section or the use of the type of printed material as
permitted by §
RSA
109.13(b) of this title
(relating to Limited Offering Exemptions) in connection with an offering under
the Act, §5.I.
(b) Who may
purchase; who constitutes the issuer for purposes of selling securities.
(1) Individual accredited investors. The term
"individual accredited investor" is defined in §
RSA 107.2 of this
title (relating to Definitions). For purposes of this section, the term
"individual accredited investor" also includes any self-directed employee
benefit plan with investment decisions made solely by persons that are
"individual accredited investors" as defined in §
RSA 107.2 of this
title and the individual retirement account of any such individual accredited
investor.
(2) Issuer. For the
purposes of subsection (a), the term "issuer" includes any director, officer,
or employee of the issuer provided all the following conditions are satisfied:
(A) the director, officer, or employee was
not hired for the purpose of offering or selling such securities;
(B) the director's, officer's, or employee's
activity involving the offer and sale of such securities is strictly incidental
to his or her bona fide primary non-securities related work duties;
and
(C) the director's, officer's,
or employee's compensation is based solely on the performance of other such
duties, i.e., the director, officer, or employee does not receive any
compensation for offering for sale, selling, or otherwise aiding in the sale of
securities.
(c) Disqualifications.
(1) No exemption under this section shall be
available for the securities of any issuer if the issuer or registered dealer:
(A) within the last five years, has filed a
registration statement which is the subject of a currently effective
registration stop order entered by the United States Securities and Exchange
Commission or any state securities administrator;
(B) within the last five years, has been
convicted of any felony in connection with the offer, purchase, or sale of any
security or any felony involving fraud or deceit;
(C) is currently subject to any state or
federal administrative enforcement order, entered within the last five years,
finding fraud or deceit in connection with the purchase and 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, 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 and sale of
any security.
(2) For
purposes of this subsection and subsection (d) of this section only, the term
"issuer" includes:
(A) any of the issuer's
predecessors or any affiliated issuer;
(B) any of the issuer's directors, officers,
general partners, or beneficial owners of 10% or more of any class of its
equity securities (beneficial ownership meaning the power to vote or direct the
vote and/or the power to dispose or direct the disposition of such
securities);
(C) any of the
issuer's promoters presently connected with the issuer in any capacity,
including:
(i) any person who, acting alone
or in conjunction with one or more other persons, directly or indirectly takes
initiative in founding and organizing the business or enterprise of an issuer;
or
(ii) any person who, in
connection with the founding and organizing of the business or enterprise of an
issuer, directly or indirectly receives in consideration of services or
property, or both services and property, 10% or more of any class of securities
of the issuer or 10% or more of the proceeds from the sale of any class of such
securities; however, a person who receives such securities or proceeds either
solely as underwriting commissions or solely in consideration of property shall
not be deemed a promoter within the meaning of this clause if such person does
not otherwise take part in founding and organizing the enterprise; or
(D) any underwriter of the
issuer.
(3) For purposes
of this subsection and subsection (d) of this section only, the term
"registered dealer" includes any of the registered dealer's partners,
directors, executive directors, or beneficial owners of 10% or more of any
class of its equity securities (beneficial ownership meaning the power to vote
or direct the vote and/or the power to dispose or direct the disposition of
such securities).
(d)
Exceptions from disqualifications. The prohibitions of subsection (c) of this
section shall not apply if:
(1) the party
subject to the disqualification is duly 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;
or
(2) before the first offer under
this section, the Securities Commissioner, or the court or regulatory authority
that entered the order, judgment, or decree, waives the disqualification upon a
showing of good cause.
(e) Limited use advertisements. Any limited
use advertisement used in connection with an offering under this section must
be filed with the Securities Commissioner ten days prior to use in this state.
A limited use advertisement may be disseminated by any means, direct or
indirect. A limited use advertisement shall contain only the statements
required or permitted to be included therein by this subsection.
(1) A limited use advertisement shall contain
the following items of information:
(A) a
brief description of the securities to be offered (e.g., description of class,
size of offering, price, percentage of commission);
(B) the name, address, and telephone number
of the person to contact for additional information concerning the
offering;
(C) the address where
offering material may be obtained; and
(D) the following statement: "The securities
have not been registered with or approved by the Texas Securities Commissioner
and are being offered and sold pursuant to the exemption provided by
§139.16 of the Rules and Regulations of the State Securities Board. This
advertisement was filed with the Texas Securities Commissioner on or about
(fill in date). The securities are being offered to, and may be purchased by,
only those natural persons whose individual net worth, or joint net worth with
that person's spouse, at the time of purchase of the securities, exceeds $1
million, excluding the value of the person's primary residence, or natural
persons who have an individual income in excess of $200,000 in each of the two
most recent years, or joint income with that person's spouse in excess of
$300,000 in each of those years, and who have a reasonable expectation of
reaching that same income level in the current year."
(2) A limited use advertisement may include
any one or more of the following items of information:
(A) the name and address of the issuer of the
securities;
(B) a brief description
of the business of the issuer; and
(C) the name and address of the registered
dealer(s) acting on the issuer's behalf in connection with the
offering.
(f)
Any issuer relying on this exemption shall, upon written request, furnish to
the Securities Commissioner the information furnished by the issuer or
registered dealer to offerees. Any issuer relying on this exemption must
maintain, for a period of at least three years, evidence of the basis for its
belief that all purchasers were accredited investors at the time of
purchase.
(g) Transactions exempt
under this section may be combined with offers and sales exempt under the
Securities Act, §5.H, and §
RSA
109.4 of this title (relating to Securities
Registration Exemption for Sales to Financial Institutions and Certain
Institutional Investors). In this event, the statement required by subsection
(e)(1)(D) of this section may be modified to indicate that the securities are
also being offered to eligible purchasers under §5.H and §
RSA
109.4 of this title (relating to Securities
Registration Exemption for Sales to Financial Institutions and Certain
Institutional Investors).
(h)
Because this exemption permits limited use advertisements, use of this
exemption under certain circumstances could result in other exemptions not
being available for other sales due to prohibitions in such exemptions against
public solicitation and advertisements. Therefore, issuers or registered
dealers who use this exemption should take all necessary steps to document that
any sales to persons who are not individual accredited investors, as defined,
were not made in response to a limited use advertisement. Users of this section
should consult with experienced securities counsel, especially if they
anticipate selling, within six months of the last sale made under this section,
to any persons who are not individual accredited investors.
(i) The use of a limited use advertisement in
compliance with this section and in connection with sales under this section
will not render exemptions that prohibit public solicitation or advertisements
unavailable to sales that are made more than six months after the use of the
limited use advertisement.
(j)
Should the offer and sale of securities fail, for any reason, to comply with
all the terms and conditions for use of this section, the issuer may claim the
availability of any other applicable exemption. A limited use advertisement
that results in an offer to a person who is not an individual accredited
investor within the meaning of this section does not alone result in loss of
the exemption.
(k) Investment
intent; resales. The issuer and any person acting on its behalf shall exercise
reasonable care to assure that the purchasers are acquiring the securities as
an investment. Such reasonable care should include, but not be limited to, the
following:
(1) having reasonable grounds to
believe and, after making reasonable inquiry, believe that the purchaser is
acquiring the securities with investment intent for his or her own account or
on behalf of other persons and not for resale or with a view toward
distribution;
(2) placing a legend
on the certificate or other document evidencing the securities to the effect
that the securities have not been registered under any securities law and
setting forth or referring to the restrictions on transferability and sale of
the securities;
(3) issuing stop
transfer instructions to the issuer's transfer agent, if any, with respect to
the securities, or, if the issuer transfers its own securities, making a
notation in the appropriate records of the issuer; and
(4) obtaining from the purchaser a signed
written agreement to the effect that the securities will not be sold without
registration under applicable securities laws or exemptions
therefrom.
