Current through Register Vol. 41, No. 25, June 23, 2022
transaction made in compliance with SEC regulation D, rule 505, 17 C.F.R.
, as adopted by reference in K.A.R. 81-2-1
, shall be exempt from the
registration requirements of K.S.A. 17-12a301 through 17-12a306 and K.S.A.
17-12a504, and amendments thereto, if all of the following requirements are
(1) No commission, finders fee, or other
remuneration shall be paid or given, directly or indirectly, for soliciting any
prospective purchaser, or in connection with the sale of securities in reliance
on this exemption, unless the recipient is appropriately registered in this
state as a broker-dealer or agent.
No later than 15 days after the first
sale of the security in this state, the issuer shall pay the fee specified in
and file a notice on form D, including the appendix. The form D
shall be manually signed on part E by a person authorized by the issuer.
(3) Each sale to a non-accredited
investor shall be suitable for the investor, or the issuer and any person
acting on its behalf shall have reasonable grounds to believe, and after making
reasonable inquiry shall believe, that the investment is suitable for the
investor. Suitability shall be based upon the facts disclosed by the investor
concerning the investor's other security holdings, financial situation, and
needs. For the limited purpose of this exemption only, it may be presumed that
the investment is suitable if it does not exceed 10 percent of the investor's
liquid net worth.
The exemption under
subsection (a) shall not be available if the issuer, any one of the issuer's
directors, officers, or general partners, any beneficial owner of 10 percent or
more of any class of the issuer's equity securities, any promoter currently
connected with the issuer in any capacity, or any other person, other than a
broker-dealer currently registered under the act, who has been or will be paid
or given any commission or similar remuneration in connection with an offer or
sale of the security meets any of the following conditions:
(A) Has filed a registration statement that
is subject to a currently effective stop order entered pursuant to any state
law within five years before the commencement of the offering;
(B) has been convicted, within five years
before commencement of the offering, of any felony or misdemeanor in connection
with the purchase or sale of any security or any felony involving fraud or
deceit, including forgery, embezzlement, obtaining money under false pretenses,
larceny, and conspiracy to defraud;
(C) is subject to any current state
administrative order or judgment entered by a state securities administrator
within five years before the commencement of the offering or is subject to any
state administrative order or judgment in which fraud or deceit was found and
the order or judgment was entered within five years before the commencement of
(D) is subject to
any current state administrative order or judgment that prohibits the use of
any exemption from registration in connection with the purchase or sale of
(E) is subject to
any order, judgment, or decree of any court of competent jurisdiction
temporarily or preliminarily restraining or enjoining the person from engaging
in or continuing any conduct or practice in connection with the purchase or
sale of any security or involving the making of any false filing with any
state, or is subject to any order, judgment, or decree of any court of
competent jurisdiction entered within five years before the commencement of the
offering permanently restraining or enjoining the person from engaging in or
continuing any conduct or practice in connection with the purchase or sale of
any security or involving the making of any false filing with any state.
Upon application by
the issuer, disqualification from the exemption specified in paragraph (b)(1)
may be waived in writing by the administrator under any of the following
(A) The issuer demonstrates that
it did not know and in the exercise of reasonable care could not have known
that a disqualification existed.
(B) The person subject to a disqualifying
order under paragraph (b)(1)(A) through (b)(1)(C) is currently licensed to
conduct securities-related business in the state in which the administrative
order or judgment was entered against the person.
(C) The agency that created the basis for
disqualification determines, upon a showing of good cause, that it is not
necessary under the circumstances to disqualify the person from use of the
exemption, and the administrator concurs with that determination.
(D) The issuer demonstrates good cause that a
disqualification should be waived by the administrator.
Effect of noncompliance. Each
failure to comply with a requirement of subsection (a) shall constitute grounds
for denying or revoking the exemption for a security or transaction and shall
be grounds for other relief and sanctions under K.S.A. 17-12a603 and 17-12a604,
and amendments thereto. However, upon application by the offeror, the failure
to comply shall not result in loss of the exemption for any offer or sale to a
particular individual or entity if the administrator determines that all of the
following conditions are met:
(1) The failure
to comply did not pertain to a condition directly intended to protect that
particular individual or entity.
(2) The failure to comply was insignificant
with respect to the offering as a whole.
(3) A good faith and reasonable attempt was
made to comply with all applicable requirements of subsection (a).
(d) Stacking of exemptions. Offers
and sales that are exempt under this regulation shall not be combined with
offers and sales exempt under any other provision of the act or these
offerings. The exemption in subsection (a) shall be available to each issuer
offering and selling securities in reliance upon the federal exemption for
intrastate offerings in section 3(a)(11) of the federal securities act of 1933,
15 U.S.C. § 77c(a)(11)
, as adopted by reference in K.A.R. 81-2-1
, if the
issuer complies with the requirements of this regulation.
(f) Technical compliance insufficient. The
exemption in subsection (a) shall not be available for any transaction that
technically complies with this regulation but is part of a plan or scheme to
evade registration or the conditions or limitations explicitly stated in this
(g) Recordkeeping. The
issuer shall maintain, for at least five years, a written record of all
information furnished by it to all offerees, and the issuer shall file copies
of the record with the administrator upon written request.
Kan. Admin. Regs. § 81-5-6
Authorized by K.S.A. 2005
Supp. 17-12a605(a); implementing K.S.A. 2005 Supp. 17-12a203; effective,
T-83-40, Nov. 23, 1982; effective May 1, 1983; amended May 1, 1984; amended,
T-87-28, Oct. 1, 1986; amended May 1, 1987; amended, T-81-2-23-89, Feb. 23,
1989; amended March 20, 1989; amended, T-81-12-28-89, Dec. 28, 1989; amended
Jan. 15, 1990; amended Jan. 19, 2007.