(A) Authority and purpose
(1) The Division enacts this rule under
authority granted by Subsection
61-1-14(2)(n) and
Section 61-1-24.
(2) Nothing in this rule 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 anti-fraud provisions of Section
61-1-1.
(3) In view of the objective of this rule and
the purposes and policies underlying Section 61-1-1 et seq., the safe-harbor
exemption is not available to any issuer with respect to any transaction which,
although in technical compliance with this rule, is part of a plan or scheme to
evade registration or the conditions or limitations explicitly stated in this
rule.
(4) Nothing in this rule is
intended to relieve a licensed broker-dealer or broker-dealer agent from the
due diligence, suitability, know-your-customer standards, or any other
requirements of state or federal law otherwise applicable to such licensed
persons.
(B) Definitions
(1) "Division" means the Division of
Securities, Utah Department of Commerce.
(2) "Safe-harbor exemption" means the
exemption provided in this rule.
(3) "SEC" means the United States Securities
and Exchange Commission.
(C) Safe-harbor exemption
Any offer or sale of securities offered or sold in compliance
with SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not
Exceeding $5,000,000,
17
CFR 230.505(1993), including
any offer or sale made exempt by application of SEC Rule 508, Insignificant
Deviations from a Term, Condition or Requirement of Regulation D,
17 CFR
230.508 (1993), which are adopted and
incorporated by reference and available from the SEC and the Division, and
which offer or sale of securities satisfies the following further conditions
and limitations is determined to be exempt from the registration requirement of
Section 61-1-7:
(1) No commission, fee, or other remuneration
shall be paid or given, directly or indirectly, to any person for soliciting
any prospective purchaser in this state unless such person is appropriately
licensed with the Division.
(a) It is a
defense to a violation of this paragraph if the issuer sustains the burden of
proof to establish that it 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 appropriately licensed with the Division.
(2) The safe-harbor exemption
shall not be available for the securities of any issuer if any of the parties
described in SEC Rule 262, Disqualification Provisions,
17 CFR
230.262 (1994), which is adopted and
incorporated by reference and available from the Division:
(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.
(b) Has been convicted within five years
prior to the filing of the notice required under this rule of any felony or
misdemeanor in connection with the offer, purchase, or sale of any security or
any felony involving fraud or deceit, including forgery, embezzlement,
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 administrator within five years prior to the filing of the
notice required under this rule or is subject to any state's administrative
enforcement order or judgment in which fraud or deceit, including making untrue
statements of material facts or omitting to state material facts, was found and
the order or judgment was entered within five years prior to the filing of the
notice required under this rule.
(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 the 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 restraining or enjoining, or is
subject to any order, judgment or decree of any court of competent
jurisdiction, permanently restraining or enjoining, such 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 years prior to the filing of the notice required under this
rule.
(f) The prohibitions of
Subparagraphs (a) through (c) and (e) above shall not apply if the person
subject to the disqualification is licensed or registered to conduct
securities-related business in the state in which the administrative order or
judgment was entered against such person or if the broker-dealer employing such
party is licensed with the Division and SEC Form BD - Uniform Application for
Broker-Dealer Registration, July 1988, filed with the CRD discloses the order,
conviction, judgment or decree relating to such person. No person disqualified
under this paragraph may act in a capacity other than that for which the person
is licensed.
(g) Any
disqualification caused by this paragraph is automatically waived if the state
securities administrator or agency of the state which created the basis for
disqualification determines that it is not necessary that the safe-harbor
exemption be denied.
(h) It is a
defense to a violation of this paragraph if issuer sustains the burden of proof
to establish that it did not know and in the exercise of reasonable care could
not have known that a disqualification under this paragraph existed.
(D) Notice requirement
(1) The issuer shall file with the Division:
(a) One manually-signed copy of SEC Form D,
17 CFR
239.500 (1993), no later than 15 days after
the first sale of securities in Utah in reliance upon this safe-harbor
exemption and at such other times and in the form required to be filed with the
Securities and Exchange Commission under SEC Rule 503, Filing of Notice of
Sales,
17 CFR
230.503(1993);
(b) One copy of the information furnished by
the issuer to offerees located within the state;
(c) NASAA Form U-2 - Uniform Consent to
Service of Process, which is available from NASAA or the Division;
and
(d) A fee as specified in the
Division's fee schedule.
(2) Within 30 days after termination of the
offering the issuer shall file with the Division one completed Division Form
14-2n, Uniform Limited Offering Exemption Final Report.
(E) Sales to nonaccredited investors
(1) In all sales to nonaccredited investors
in this state one 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 of the following
conditions is satisfied:
(a) The investment is
suitable for the purchaser upon the basis of the facts, if any, disclosed by
the purchaser as to the purchaser's other security holdings, financial
situation and needs. For the purpose of this condition only, it may be presumed
that if the investment does not exceed 10% of the investor's net worth, it is
suitable.
(b) The purchaser either
alone or with a representative has such knowledge and experience in financial
and business matters that the purchaser is capable of evaluating the merits and
risks of the prospective investment.
(F) Effect upon exemption from Section
61-1-7 of failure to comply with
certain provisions
A failure to comply with a term, condition or requirement of
Subparagraph (C)(1) or Paragraphs (D) or (E) of this rule will not result in
loss of the exemption from the requirements of Section 61-1-7 for any offer or
sale to a particular individual or entity if the person relying on the
exemption shows:
(1) the failure to
comply did not pertain to a term, condition, or requirement directly intended
to protect that particular individual or entity; and
(2) the failure to comply was insignificant
with respect to the offering as a whole; and
(3) a good faith and reasonable attempt was
made to comply with all applicable terms, conditions and requirements of
Subparagraph (C)(1), or Paragraphs (D) or (E) of this rule.
(G) Limitation of exemption
established in reliance upon Paragraph (F)
Where an exemption is established only through reliance upon
Paragraph (F) of this rule, the failure to comply shall nonetheless be
actionable by the director under Section
61-1-14 or
61-1-20.
(H) Prohibition against combining exemption
with other exemptions
Transactions which are exempt under this rule may not be
combined with offers and sales exempt under any other rule or section; 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 of this safe-harbor
exemption, the issuer may claim the availability of any other applicable
exemption.
(I) Authority to
modify or waive conditions
The director may, by order, increase the number of purchasers
or waive any other conditions of this safe-harbor exemption.
(J) Title
The safe-harbor exemption authorized by this rule shall be
known and may be cited as the "Uniform Limited Offering
Exemption."
