Sec. 710 IAC 4-2-4 - Indiana uniform limited offering exemption

ยง 710 IAC 4-2-4. Indiana uniform limited offering exemption

Authority: IC 23-19-2

Affected: IC 23-19

Sec. 4.

(a) Nothing in this exemption is intended to or should be construed as in any way relieving issuers or persons acting on behalf of issuers from providing disclosure to prospective investors adequate to satisfy the antifraud provisions of IC 23-19-5-1.

(b) In view of:

(1) the objective of this section; and

(2) the purposes and policies underlying IC 23-19;

the exemption created by this section is not available to any issuer with respect to any transaction that, although in technical compliance with this section, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this section.

(c) Nothing in this section is intended to relieve broker-dealers or agents from the:

(1) due diligence;

(2) suitability; or

(3) know your customer;

standards or any other requirements of law otherwise applicable to these persons.

(d) By authority delegated to the commissioner by IC 23-19-2-3 to create a rule, any offer or sale of securities offered or sold in compliance with 17 CFR 230.504, or 17 CFR 230.505 including any offer or sale made exempt by application of 17 CFR 230.508(a), as made effective in SEC Release No. 33-6389, 47 FR 11,251 (1982), and as amended in SEC Release Nos. 33-6437, 47 FR 54,764 (1982), 33-6663, 51 FR 36,385 (1986), 33-6758, 53 FR 7,866 (1988), and 33-6825, 54 FR 11,369 (1989), and which satisfies the following further conditions and limitations is determined to be exempt from the registration provisions of IC 23-19-3-1:

(1) No commission, fee, or other remuneration shall be paid or given, directly or indirectly, to any broker-dealer for soliciting any prospective purchaser in this state unless the broker-dealer is appropriately registered under IC 23-19-4-6(a). It is a defense to a violation of this subsection if the issuer sustains the burden of proof that he or she did not know and in the exercise of reasonable care could not have known that the person who received a commission, fee, or other remuneration was not properly registered.

(2) The disqualifications found in section 2 of this rule shall apply to this section as well as IC 23-19-2-2(14).

(3) The issuer shall file with the commissioner a notice on Form D (17 CFR 239.500) as follows:

(A) Not later than ten (10) full business days prior to the receipt of consideration or the delivery of a subscription agreement by an investor in this state that results from an offer being made in reliance upon this exemption.

(B) The notice shall be accompanied by the information furnished by the issuer to offerees. This filing requirement is not intended to provide the basis for a fairness type of review of the offering.

(C) Unless otherwise available, included with or in the initial notice shall be a consent to service of process.

(4) In all sales to nonaccredited investors in this state, one (1) of the following conditions must be satisfied or the issuer and any person acting on its behalf shall have reasonable grounds to believe and after making reasonable inquiry shall believe that one (1) of the following conditions is satisfied:

(A) The investment is suitable for the purchaser upon the basis of facts, if any, disclosed by the purchaser as to the purchaser's other security holdings, financial situation, and needs. For purposes of this condition only, it may be presumed that, if the investment does not exceed ten percent (10%) of the investor's net worth, it is suitable.

(B) The purchaser, either alone or with his or her purchaser representative or representatives, has the knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment.

(5) A failure to comply with a term, condition, or requirement of subdivisions (1), (3), and (4) will not result in loss of the exemption from the requirements of IC 23-19-3-1 for any offer or sale to a particular individual or entity if the person relying on the exemption shows:

(A) the failure to comply:

(i) did not pertain to a term, condition, or requirement directly intended to protect that particular individual or entity; and

(ii) was insignificant with respect to the offering as a whole; and

(B) a good faith and reasonable attempt was made to comply with all applicable terms, conditions, and requirements of subdivisions (1), (3), and (4).

(6) The commissioner may:

(A) increase the number of purchasers; or

(B) waive any other conditions of this exemption.

(e) Transactions that are exempt under this section may not be combined with offers and sales exempt under any other rule or section of IC 23-19; however, nothing in this limitation shall act as an election. Should, for any reason, the offer and sale fail to comply with all of the conditions for this exemption, the issuer may claim the availability of any other applicable exemption.

(f) The exemption authorized by this section shall be known and may be cited as the Indiana uniform limited offering exemption or IULOE.

(Securities Division; 710 IAC 4-2-4; filed Jun 28, 2010, 2:36 p.m.: 20100728-IR-710100044FRA Readopted filed 5/12/2016, 1:47 p.m.: 20160608-IR-710160136RFA)

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