Utah Administrative Code
Topic - Commerce
Title R164 - Securities
Rule R164-14 - Exemptions
Section R164-14-2b - Manual Listing Exemption
Universal Citation: UT Admin Code R 164-14-2b
Current through Bulletin 2024-06, March 15, 2024
(A) Authority and purpose
(1) The Division enacts
this rule under authority granted by Subsection
61-1-14(2)(b)
and Section
61-1-24.
(2) The rule specifies recognized securities
manuals.
(3) The rule prescribes
the information upon which each listing must be based to qualify for the
exemption.
(4) The rule sets forth
the exclusive method of claiming the transactional exemption contained in
Subsection
61-1-14(2)(b).
(4)(a) Except as provided in Paragraph (H),
the exemption is not self-executing and may not be relied upon until the
Division confirms the exemption as provided below.
(4)(b) A confirmation may only be requested
by a broker-dealer licensed with the Division or by the issuer of the
securities for which the exemption is sought.
(B) Definitions
(1) "Blank-check company" means a development
stage company that:
(1)(a) has no business
plan or purpose;
(1)(b) has not
fully disclosed its business plan or purpose; or
(1)(c) has only indicated that its business
plan is to engage in a merger or acquisition with an unidentified company or
companies.
(2)
"Blind-pool company" means a development stage company that has generally
disclosed its business plan or purpose, but such business plan or purpose has
not identified specific properties or products to be purchased, constructed or
developed.
(3) "Confirmation" means
written confirmation of the exemption from registration from the
Division.
(4) "Development stage
company" means a company that is devoting substantially all of its efforts to
acquiring or establishing a new business and either of the following conditions
exists:
(4)(a) planned principal operations
have not commenced; or
(4)(b)
planned principal operations have commenced, but there has been no significant
revenues therefrom.
(5)
"Division" means the Division of Securities, Utah Department of
Commerce.
(6) "Dormant company"
means a company which does not pursue nor has the financial capacity to pursue
a business plan or purpose, whether or not it is a development stage
company.
(7) "Exemption" means the
exemption provided in Subsection
61-1-14(2)(b)
of the Act.
(8) "Financial
statements" means a balance sheet, an income statement or statement of
operations, a statement of cash flows, a statement of stockholders' equity, if
a corporation or partners' capital, if a partnership, and appropriate notes to
the financial statements.
(9)
"Shell company" means a company which does not pursue nor has the financial
capacity to pursue a business plan or purpose, whether or not it is a
development stage company.
(10)
"Significant change" means any change involving a reorganization, merger,
acquisition, or other change which causes the issuer to increase its issued and
outstanding shares of stock by at least 40% of the issued and outstanding
shares before the change.
(C) Recognized securities manuals
(1) The Division recognizes the following
securities manuals:
(1)(a) The OTCQX and
OTCQB markets maintained by OTC Markets Group Inc.
(1)(b) Mergent's Industrial Manual
(1)(c) Mergent's Bank and Finance Manual
(1)(d) Mergent's Transportation
Manual
(1)(e) Mergent's OTC
Industrial Manual
(1)(f) Mergent's
Public Utility Manual
(1)(g)
Mergent's OTC Unlisted Manual
(1)(h) Mergent's International
Manual
(D) Information upon which listing must be based
(1) A listing must be based upon the
following information, which must be filed with the selected recognized
securities manual:
(1)(a) the issuer's name,
current street and mailing address and telephone number;
(1)(b) the names and titles of the executive
officers and members of the board of directors of the issuer;
(1)(c) a description of the issuer's
business;
(1)(d) the number of
shares of each class of stock outstanding at the balance sheet date;
and
(1)(e)(i) the issuer's annual
financial statements as of a date within 18 months which have been prepared in
accordance with generally accepted accounting principles, and audited by an
independent certified public accountant who has issued an unqualified opinion;
if the issuer has been organized for less than one year, the financial
statements must be for the period from inception; or
(1)(e)(ii) in the case of a reorganization or
merger where the parties to the reorganization or merger had an audited balance
sheet and an audited income statement, a pro forma balance sheet for the
combined organization and a pro forma income statement.
(E) Confirmation requirement
(1) Except as provided in Paragraph (H),
confirmation must be obtained prior to relying upon the exemption.
(2) A request for confirmation must include:
(2)(a) all information filed with the
selected recognized securities manual;
(2)(b) a copy of the listing with the
recognized securities manual which is based upon the information filed under
paragraph (D); and
(2)(c) a filing
fee as specified in the Division's fee schedule.
(3) In response to a request for confirmation
which complies with this rule, the Division will issue a letter confirming the
exemption.
(4) The Division will
issue a copy of the letter confirming the exemption to any person so requesting
in writing or in person for the cost of the photocopying, and mailing if
necessary.
(F) Term of exemption
(1) Except as provided in
Subparagraph (F)(2), the exemption becomes effective on the date confirmed by
the Division.
(2) The exemption for
the securities of an issuer which qualify under Paragraph (H) becomes effective
on the date a listing, based upon the information required under Paragraph (D),
is published in a recognized securities manual.
(3) The exemption shall expire upon the
earliest of:
(3)(a) A date 18 months from the
date of the annual financial statements required under paragraph (D); or
(3)(b) The date of a new annual
issue or edition of the recognized securities manual which does not contain a
listing based upon the information required under paragraph (D);
(G) Blank-check, blind-pool, dormant, or shell company
(1) The
exemption is not available to a blank-check, blind-pool, dormant, or shell
company which has not previously registered its securities with the
Division.
(2) A company which has
not previously registered its securities with the Division which, within the
past three fiscal years of the company, has merged with or been acquired by a
blank-check, blind-pool, dormant, or shell company, which has not previously
registered its securities with the Division, must file:
(2)(a) with the recognized securities manual,
the information required under paragraph (D), as to all parties to such
transaction;
(2)(b) with the
Division, the shareholders list reflecting the initial public offering of the
blank-check, blind-pool, dormant or shell company; and
(2)(c) with the Division, the shareholders
list of the company, current within thirty days of the request for confirmation
of the exemption.
(H) Exceptions to confirmation requirement
(1) Confirmation prior to relying upon the
exemption shall not be required for any security if at the time of the
transaction:
(1)(a) the security is sold at a
price reasonably related to the current market price of such security;
(1)(b) the security does not
constitute the whole or part of an unsold allotment to, or subscription or
participation by, a broker-dealer as an underwriter of the security;
(1)(c) the security has been outstanding in
the hands of the public for at least 90 days;
(1)(d) the issuer of the security is a going
concern, actually engaged in business and is not in the development stage, in
bankruptcy or receivership;
(1)(e)
the issuer of the security has been in continuous operation for at least five
years; and
(1)(f) the information
required by Paragraph (D) is contained in a recognized securities manual listed
in Paragraph (C).
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