Federal Securities: Exempt Transactions & Securities

Question 1

Exempt Securities:

Excluded

Answer 1

• Bank & Government
• Short Term Notes
• Charities
• Others
  
  • Regulated Savings & Loans
  • Federally regulated common carriers
  • Receivers or trustees in bankruptcy
  • Insurance & Annuity policies
  • Domestic governmental organizations

Question 2

Exempt Securities:

Offerings

Answer 2

Three Major Types

1. Small Offerings (1933 act)
2. Private Placement Exemption
   - sophisticated nature of offeree
   - Accredited investors (persons making $200k+)
   - businesses worth $5M+
3. Intrastate Offering
   - primarily inside state’s borders

Question 3

Exempt Securities:
Characteristics of Key Transactions
Rule 504 of Regulation D

Answer 3

Rule 504 of Regulation D

• Issuer: most small companies, not 1934 issuers
• Amount: only $1M in any 12 month period
• Offering: Not General Solicitation or Advertising
• Purchaser: No Purchaser requirements
• Information: No information requirements
• Filing: Form D with SEC 15 days before 1st sale
• Resale: restricted

Question 4

Exempt Securities:
Characteristics of Key Transactions
Rule 505 of Regulation D

Answer 4

Rule 505 of Regulation D

• Issuer: cannot be used by investment companies or recently in trouble with SEC
• Amount: only $5M in any 12 month period
• Offering: Not General Solicitation or Advertising, unless AI’s
• Purchaser: Unlimited Accredited Investors, 35 unaccredited
• Information: AI’s Non, if minimal sales to unaccredited, minimal disclosurelimited periodic reporting to SEC
• Filing: Form D with SEC 15 days before 1st sale
• Resale restrictions: not before 1 year

Question 5

Exempt Securities:
Characteristics of Key Transactions
Rule 506 of Regulation D

Answer 5

Rule 506 of Regulation D

• Issuer: cannot be used by recently in trouble with SEC
• Amount: No Limit on Amount
• Offering: Not General Solicitation or Advertising, unless AI’s
• Purchaser: unlimited accredited, no more than 35 unaccredited, and must be “sophisticated”
• Information: AI’s Non, if minimal sales to unaccredited, minimal disclosure
• Filing: Form D with SEC 15 days before 1st sale
• Resale restrictions: not before 1 year

Question 6

Exempt Securities:
Characteristics of Key Transactions
Regulation A

Answer 6

Regulation A
- Issuer: Cannot be used by 1934 companies, investment companies, non-canadian foreign issuers, or “Bad Actors”
- Amount:
- Tier 1: $20M in 12 month period
- Tier 2: $50M in 12 month period
- Offering: may “test the waters”
- Offeree & Purchaser:
- Tier 1: none
- Tier 2: non-accredited cannot buy stock more than 10% or greater of annual income or net worth. non-accredited firm limited to 10% annual revenue or net assets
- Information Requirements
- Tier 1, offering circular and 2 years unaudited FS
- Tier 2, offering circular and 2 years unaudited FS
Filing:
- Tier 1: Form 1-A and offering circular
- Tier 2: Form 1-A, offering circular, 2 years of FS
- Resale restrictions: none
- Other: Exempt from “blue sky laws”

Question 7

Exempt Securities:
Characteristics of Key Transactions
Rule 147 Intrastate offerings

Answer 7

• Issuer: organized and doing business in state in which it plans to do offering.
• Amount: none
• Offering: none except done in state
• Offeree and purchaser: in-state residents
• Information Requirements: None
• Filing requirements: None
• Resale restrictions: in-state residents only for 9 months

Question 8

Exempt Securities:

Blue Sky Laws

Answer 8

• preempts state regulation of “covered” securities including:
  
  • listed on national exchange
  • issued by registered investment companies
  • sold to “qualified” purchasers
  • sold pursuant to Rule 506
    States Can
• enforce antifraud act
• require notice filing