S.D. Admin. R. 20:08:07:33 - Church extension fund securities

(1) Definitions.
(a) Church extension fund means a not-for-profit organization affiliated or associated with a denomination, or a fund that is accounted for separately by a denomination organized as a not-for-profit organization, that offers and sells notes primarily to provide funding for loans to various affiliated churches and related religious organizations of the denomination for the acquisition of property, construction or acquisition of buildings, and other related capital expenditures or operating needs.
(b) Denomination means a national or regional religious organization or association that consists of or acts on behalf of its individual affiliated churches as well as various affiliated national or regional administrative and religious organizations or units. The organization, associations, churches, or units described in this definition shall be organized as or associated with a not-for-profit organization.
(c) Not-for-profit means an entity as described in section 501(c)(3) of the Internal Revenue Code of 1986, as amended, that is accounted for as a not-for-profit organization under generally accepted accounting principles (GAAP) in the United States. A not-for-profit organization generally possesses the following characteristics, in varying degrees, that distinguish it from a business enterprise: contributions of significant amounts of resource providers who do not expect commensurate or proportionate pecuniary return; operating purposes other than to provide goods or services at a profit; and absence of ownership interests like those of business enterprises.
(2) Full disclosure. In order to assure full disclosure, the division may apply the applicable statements of policy adopted by the North American Securities Administrators Association, Inc. (NASAA) as listed in the Statement of Policy Regarding Church Extension Fund Securities adopted by NASAA on April 17, 1994, and amended April 18, 2004.
(3) Church extension fund securities filing required. For each request for exemption under SDCL 47-31B-201(7)(B), the following shall be submitted to the division:
a. Form U-2;
b. A copy of the prospectus used to make offers and sales;
c. All advertising; and
d. The fee listed under SDCL 47-31B-203.
(4) Effective period. Church extension fund securities that qualify for the exemption under SDCL 47-31B-201(7)(B) are effective for one year from the date that the securities were ordered to be exempt by the director.
(5) Individual church offerings. General obligation financing by a church extension fund is different in its purposes and operation than the one-time offering of church bonds by an individual church or congregation to finance the construction of a single, specific church building or other related capital improvements, in which all of the securities are repaid within a set period of time. An offering of this nature does not need to file a request for an exemption under SDCL 47-31B-201(7)(B) unless the director so orders. However, the director recommends that issuers of such securities consider using the Archived NASAA Statement of Policy for Church Bonds as adopted by NASAA on April 29, 1981, as a useful tool in drafting documents to provide full disclosure and avoid anti-fraud violations.


S.D. Admin. R. 20:08:07:33
30 SDR 211, effective July 1, 2004.

General Authority: SDCL 47-31B-201(7), 47-31B-605(a)(1) to (3), inclusive.

Law Implemented: SDCL 47-31B-103, 47-31B-201(7), 47-31B-203.

Note: The NASAA statements of policy can be located at www.nasaa.com under NASAA corporate finance.

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