Sec. 203.189 - Isolated transaction exemption

§ 203.189. Isolated transaction exemption

(a) General. Under section 203(r) of the act (70 P.S. § 1-203(r)), the Department finds that it is not necessary or appropriate for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for the offer and sale of securities by an issuer if:

(1) Sales made under this section do not result in the issuer having made sales of its securities to more than two persons in this Commonwealth during a period of 12 consecutive months. Only sales described in subsection (c) will be counted as sales for purposes of the numerical limitations contained in this paragraph.

(2) Offers made under this section do not result in the issuer having made offers to sell its securities to more than 90 persons in this Commonwealth during a period of 12 consecutive months. Only offers described in subsection (c) will be counted as offers for purposes of the numerical limitations contained in this paragraph.

(3) The issuer either is organized under the laws of the Commonwealth or has its principal place of business in this Commonwealth.

(4) The issuer or a promoter, officer or director of the issuer are not subject to the disqualifications in § 204.010(b) (relating to increasing the number of purchasers and offerees).

(5) General solicitation through public media advertisement, mass mailing, the Internet or other means does not occur in connection with offers and sales made under this section.

(6) Cash or securities are not given or paid, directly or indirectly, to a person as compensation in connection with a sale under this section unless:

(i) The compensation is given or paid in connection with a sale made by a broker-dealer who is either:

(A) Registered under section 301 of the act (70 P.S. § 1-301).

(B) Exempt from registration under section 302(a) of the act (70 P.S. § 1-302(a)).

(ii) A person receiving compensation is either the broker-dealer or an agent of the broker-dealer who is either:

(A) Registered under section 301 of the act.

(B) Exempt from registration under section 302(b) of the act.

(b) Waivers.

(1) Subsection (a)(2), (3) and (5) does not apply if the following criteria are met:

(i) The securities to be sold in reliance on this section are registered with the Securities and Exchange Commission under section 5 of the Securities Act of 1933 (1933 Act) (15 U.S.C.A. § 77e) or exempt from registration under Regulation A adopted under section 3(b) of the 1933 Act (15 U.S.C.A. § 77c(b)).

(ii) The issuer has complied with section 203(h) of the act.

(2) Subsection (a)(3) does not apply if the following criteria are met:

(i) The offers and sales of securities made in reliance on this section would qualify for an exemption from registration under section 5 of the 1933 Act under Rule 505 or Rule 506 of Regulation D (17 CFR 230.505 or 230.506) (relating to exemption for limited offers and sales of securities not exceeding $5,000,000; and exemption for limited offers and sales without regard to dollar amount of offering) promulgated under section 3(b) of the 1933 Act and section 4(a)(2) of the 1933 Act (15 U.S.C.A. § 77d(a)(2)).

(ii) The offers made in this Commonwealth in reliance on this section are made only to accredited investors as that term is defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission (17 CFR 230.501(a)) (relating to definitions and terms used in Regulation D).

(iii) The sales made in this Commonwealth in reliance on this section are made only to accredited investors as that term is defined in Rule 501(a) of Regulation D promulgated by the Securities and Exchange Commission (17 CFR 230.501(a)).

(c) Inclusion of prior offers and sales.Offers and sales which occurred within the preceding 12 months from the date of an offer or sale to be made under this section that were made in reliance on section 203(d), (f) or (s) of the act, § 203.187 (relating to small issuer exemption), § 204.010(a)(1) and (2), Rule 506 (17 CFR 230.506) or this section are counted against the numerical limitations in subsection (a)(1) and (2).

(d) Integration.

(1) Offers and sales made by the issuer under this section are counted as offers and sales under the applicable numerical limitations in § 204.010(a)(1) and (2) if offers and sales under § 204.010 occur within 12 consecutive months of an offer or sale made under this section.

(2) Offers and sales made by the issuer under this section are counted as offers and sales under the applicable numerical limitations in section 203(s) of the act if offers and sales under section 203(s) of the act occur within 6 consecutive months of an offer or sale made under this section.

(e) Counting of offerees and purchasers.Section 609.012 (relating to computing the number of offerees, purchasers and clients) applies to offers and sales of securities made under this section.

(The provisions of this § 203.189 adopted September 25, 1992, effective September 26, 1992, 22 Pa.B. 4775; amended October 10, 1997, effective October 11, 1997, 27 Pa.B. 5255; amended December 30, 1999, effective January 1, 2000, 30 Pa.B. 18; amended July 11, 2003, effective July 12, 2003, 33 Pa.B. 3365; transferred and renumbered from 64 Pa. Code § 203.189, December 14, 2012, effective December 15, 2012, 42 Pa.B. 7533. Amended by Pennsylvania Bulletin, Vol 48, No. 02. January 13, 2018, effective 1/13/2018)

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