RELATES TO: KRS Chapter 292,
15
U.S.C. 78a
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
292.500(3) authorizes the
commissioner of the Department of Financial Institutions to promulgate
administrative regulations, forms, and orders as are necessary to carry out the
provisions of KRS Chapter 292, including administrative regulations and forms
governing registration statements, applications, notice filings, and reports.
This administrative regulation sets forth the qualifications, eligibility
requirements, and restrictions upon legal entities desiring to use Form U-7 to
register securities.
Section 1.
Qualification for Use of Form. To be eligible to use Form U-7, as incorporated
by reference in
808
KAR 10:010, a company shall comply with each of the
following requirements:
(1) The company shall
be a legal entity organized under the laws of one of the states or possessions
of the United States which engages in or proposes to engage in a business other
than petroleum exploration or production or mining or other extractive
industries. "Blind pool" offerings and other offerings for which the specific
business or properties cannot now be described shall not be eligible to use
Form U-7.
(2) The securities may be
offered and sold only on behalf of the company, and Form U-7 shall not be used
by any selling security-holder (including purchase underwriters in a firm
commitment underwriting) to register the securities for resale.
(3)
(a) The
following prices shall be equal to or greater than five (5) dollars:
1. The offering price for a share or other
ownership interest;
2. The exercise
price, if the securities are options, warrants, or similar rights;
and
3. The conversion price, if the
securities are convertible into shares or other ownership interests.
(b) Execution of the application
and filing of the form U-7 shall constitute agreement by the company that the
company shall not dilute the value below five (5) dollars by any issuance of
new shares or other ownership interests for two (2) years after the conclusion
of the registration.
(4)
The company may engage selling agents to sell the securities. Commissions,
fees, or other remuneration for soliciting any prospective purchaser in this
state in connection with this offering shall only be paid to persons who, if
required to be registered, the company believes, and has reason to believe, are
appropriately registered in this state.
(5) This form shall not be available for the
securities of any company if the company or any of its officers, directors,
persons with a ten (10) percent ownership interest (or persons occupying
similar status or performing similar functions), promoters or any selling
agents of the securities to be offered, or any officer, director, or partner
(or person occupying similar status or performing similar functions) of the
selling agent:
(a) Has filed a registration
statement which is the subject of a currently effective registration stop order
entered pursuant to any state's securities law within (5) years prior to the
filing of the application for registration;
(b) Has been convicted within ten(10) years
prior to the filing of the application for registration of any felony or
misdemeanor in connection with the offer, purchase, or sale of any security or
any felony involving fraud or deceit, including, but not limited to, forgery,
embezzlement, money laundering, obtaining money under false pretenses, larceny,
or conspiracy to defraud;
(c) Is
currently subject to any state administrative enforcement order or judgment
entered by that state's securities department within five (5) years prior to
the filing of the application for registration or is subject to any state's
administrative enforcement order or judgment in which fraud or deceit,
including but not limited to making untrue statements of material facts and
omitting to state material facts, was found and the order or judgment was
entered within five (5) years prior to the filing of the application for
registration;
(d) Is subject to any
state's administrative enforcement order or judgment which prohibits, denies,
or revokes the use of any exemption from registration in connection with this
offer, purchase, or sale of securities;
(e) Is currently subject to any order,
judgment, or decree of any court of competent jurisdiction temporarily or
preliminarily restricting or enjoining, or is subject to any order, judgment or
decree from any court of competent jurisdiction, permanently restraining or
enjoining, the party 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 the state entered within five (5) years prior to the
filing of the application for registration;
(f) The prohibitions of paragraphs (a)
through (c) and (e) of this subsection shall not apply if the person subject to
the disqualification is duly licensed or registered to conduct securities
related business in the state in which the administrative order or judgment was
entered against the person or if the broker-dealer employing the party is
licensed or registered in this state and the Form B-D, as incorporated by
reference in
808
KAR 10:010, filed with this state discloses the order,
conviction, judgment, or decree relating to the person. A person qualified
under this subsection shall not act in a capacity other than that for which the
person is licensed or registered; and
(g) Any disqualification caused by this
section shall be automatically waived if the state securities department or
agency of the state which created the basis for disqualification determines
upon a showing of good cause that it is not necessary under the circumstances
that registration be denied. If any of the circumstances in paragraph (c) or
(e) of this subsection has occurred more than five (5) years from the date of
the application for registration, these circumstances shall be described in
response to Question 45 of Form U-7 as a Miscellaneous Factor.
(6) Use of the Form U-7 is
available to any offering of securities by a company, the aggregate offering
price of which within or outside this state shall not exceed $1,000,000, less
the aggregate offering price for all other securities sold within the twelve
(12) months before the start of, and during the offering of, these securities.
The Form U-7 shall not be available to a company that is an investment company
(including mutual funds) or other pooled investment vehicle, or is subject to
the reporting requirements of section 13 or section 15(d) of the Securities
Exchange Act of 1934.
Section
2. General Requirements for Use of Form.
(1) The fully completed Form U-7 shall be
accompanied by:
(a) A letter stating:
1. That registration is sought under 808 KAR
10:280;
2. That the applicant meets
the qualifications specified in Section 1;
3.The total dollar amount of the securities
to be sold anywhere in connection with this offering; and
4. The total dollar amount of the securities
to be sold in this state;
(b) A consent to service of process, Form U-2
as incorporated by reference in
808
KAR 10:010;
(c) An opinion by an attorney licensed to
practice in a state or territory of the United States that the securities to be
sold in the offering have been duly authorized and when issued, upon payment of
the offering price, will be legally and validly issued, fully paid, and
nonassessable and binding on the company in accordance with their terms;
and
(d) A check payable to the
Kentucky State Treasurer for the amount specified as the filing fee in
KRS
292.380(5) which consists of
a registration fee and an examination fee.
(2) The Form U-7 constitutes the offering
circular or prospectus. The Form U-7 shall be delivered to each investor before
a sale is made.
(3) The
registration, once declared effective in this state, shall be effective for
either the period specified in the Form U-7 or one (1) year, whichever is
shorter. If the offering is not yet concluded after the initial one (1) year
period, the registration may be renewed by payment of a new registration fee
and filing of an updated Form U-7.
(4) After the registration has been declared
effective, and while the offering is still in progress, if any portion of the
Form U-7 needs to be changed or revised because of an event concerning the
company or the offering to make the Form U-7 accurate and complete, it shall be
changed, revised, or supplemented. An updated Form U-7, clearly marked to show
the changes from the previously filed version, shall be filed and cleared with
the office of this state before use. If any of the changes or revisions are of
such significance that they are material to the making of an investment
decision, and if the minimum proceeds have not been raised, the updated Form
U-7 shall be recirculated to persons in this state that have previously
subscribed, and they shall be given the opportunity to either rescind or
reconfirm their investment.
(5)
Options, warrants, and similar rights to purchase securities shall constitute a
continuous offering of the underlying securities during the exercise period and
shall require the securities to be registered and the Form U-7 to be kept
continuously current throughout the exercise period through the use of the
procedure set forth in subsection (4) of this section or by means of a
supplement, as appropriate. Upon any change, revision, or supplement to the
Form U-7, a copy shall be promptly furnished to the holders of options,
warrants, and similar rights.
(6)
Any supplemental literature or advertisements announcing the offering shall be
cleared by the department prior to use. Advertisements and announcements
mentioning the offering shall be governed by the guidelines for "tombstone"
style statements generally used in registered offerings and shall contain a
statement to the effect that "this announcement does not constitute an offer to
sell or the solicitation of an offer to buy" the securities and that the offer
shall be made only by an official disclosure document. Any materials meeting
the requirements of
808
KAR 10:380, Section 1(d), shall be
acceptable.