SEC
RULE 147
17
C.F.R. § 230.147 (1990)
Preliminary
Notes
1. This
rule shall not raise any presumption that the exemption provided by Section
3(a)(11) of the Act is not available for transactions by an issuer which do not
satisfy all of the provisions of the rule.
2.
Nothing in this rule obviates the need for compliance with any state law
relating to the offer and sale of the securities.
3.
Section 5 of the Act requires that all securities offered by the use of the
mails or by any means or instruments of transportation or communication in
interstate commerce be registered with the Commission. Congress, however, provided certain
exemptions in the Act from such registration provisions where there was no
practical need for registration or where the benefits of registration were too
remote. Among those exemptions is that
provided by Section 3(a)(11) of the Act for transactions in "any security
which is a part of an issue offered and sold only to persons resident within a
single State or Territory, where the issuer of such security is a person
resident and doing business within * * * such State or Territory." The legislative history of that Section
suggests that the exemption was intended to apply only to issues genuinely
local in character, which in reality represent local financing by local
industries, carried out through local investment. Rule 147 is intended to provide more objective standards upon
which responsible local businessmen intending to raise capital from local
sources may rely in claiming the section 3(a)(11) exemption.
All of
the terms and conditions of the rule must be satisfied in order for the rule to
be available. These are: (i) That the
issuer be a resident of and doing business within the state or territory in
which all offers and sales are made; and (ii) that no part of the issue be
offered or sold to non‑residents within the period of time specified in
the rule. For purposes of the rule the
definition of "issuer" in section 2(4) of the Act shall apply.
All
offers, offers to sell, offers for sale, and sales which are part of the same
issue must meet all of the conditions of Rule 147 for the rule to be
available. The determination whether
offers, offers to sell, offers for sale and sales of securities are part of the
same issue (i.e., are deemed to be "integrated") will continue to be
a question of fact and will depend on the particular circumstances. See Securities Act of 1933 Release No. 4434
(December 6, 1961).... Securities Act
Release No. 4434 indicated that in determining whether offers and sales should
be regarded as part of the same issue and thus should be integrated any one or
more of the following factors may be determinative:
(i) Are
the offerings part of a single plan of financing;
(ii) Do
the offerings involve issuance of the same class of securities;
(iii)
Are the offerings made at or about the same time;
(iv) Is
the same type of consideration to be received; and
(v) Are
the offerings made for the same general purpose.
Subparagraph
(b)(2) of the rule, however, is designed to provide certainty to the extent
feasible by identifying certain types of offers and sales of securities which
will be deemed not part of an issue, for purposes of the rule only.
Persons
claiming the availability of the rule have the burden of proving that they have
satisfied all of its provisions.
However, the rule does not establish exclusive standards for complying
with the Section 3(a)(11) exemption.
The exemption would also be available if the issuer satisfied the
standards set forth in relevant administrative and judicial interpretations at
the time of the offering but the issuer would have the burden of proving the
availability of the exemption. Rule 147
relates to transactions exempted from the registration requirements of Section
5 of the Act by section 3(a)(11).
Neither the rule nor section 3(a)(11) provides an exemption from the
registration requirements of section 12(g) of the Securities Exchange Act of
1934, the anti-fraud provisions of the federal securities laws, the civil liability
provisions of section 12(2) of the Act or other provisions of the federal
securities laws.
Finally,
in view of the objectives of the rule and the purposes and policies underlying
the Act, the rule shall not be available to any person with respect to any
offering which, although in technical compliance with the rule, is part of a
plan or scheme by such person to make interstate offers or sales of
securities. In such cases registration
pursuant to the Act is required.
4. The
rule provides an exemption for offers and sales by the issuer only. It is not available for offers or sales of
securities by other persons. Section
3(a)(11) of the Act has been interpreted to permit offers and sales by persons
controlling the issuer, if the exemption provided by that section would have
been available to the issuer at the time of the offering. See Securities Act Release No. 4434. Controlling persons who want to offer or
sell securities pursuant to section 3(a)(11) may continue to do so in
accordance with applicable judicial and administrative interpretations.
(a) * *
* Offers, offers to sell, offers for
sale and sales by an issuer of its securities made in accordance with all of
the terms and conditions of this rule shall be deemed to be part of an issue
offered and sold only to persons resident within a single state or territory
where the issuer is a person resident and doing business within such state or
territory, within the meaning of section 3(a)(11) of the Act.
(b) * *
*
(1) For
purposes of this rule, all securities of the issuer which are part of an issue
shall be offered, offered for sale or sold in accordance with all of the terms
and conditions of this rule.
(2) For
purposes of this rule only, an issue shall be deemed not to include offers,
offers to sell, offers for sale or sales of securities of the issuer pursuant
to the exemption provided by section 3 or section 4(2) of the Act or pursuant
to a registration statement filed under the Act, that take place prior to the
six month period immediately preceding or after the six month period
immediately following any offers, offers for sale or sales pursuant to this
rule, Provided, That, there are during either of said six month periods no
offers, offers for sale or sales of securities by or for the issuer of the same
or similar class as those offered, offered for sale or sold pursuant to the
rule.
Note: In the event that securities of the same or
similar class as those offered pursuant to the rule are offered, offered for
sale or sold less than six months prior to or subsequent to any offer, offer
for sale or sale pursuant to this rule, see Preliminary Note 3 hereof as to
which offers, offers to sell, offers for sale, or sales are part of an issue.
(c) * *
* The issuer of the securities shall at
the time of any offers and the sales be a person resident and doing business
within the state or territory in which all of the offers, offers to sell,
offers for sale and sales are made.
(1) The
issuer shall be deemed to be a resident of the state or territory in which:
(i) It
is incorporated or organized, if a corporation, limited partnership, trust or
other form of business organization that is organized under state or
territorial law;
(ii)
Its principal office is located, if a general partnership or other form of
business organization that is not organized under any state or territorial law;
(iii)
His principal residence is located if an individual.
(2) The
issuer shall be deemed to be doing business within a state or territory if:
(i) The
issuer derived at least 80 percent of its gross revenues and those of its
subsidiaries on a consolidated basis.
(A) For
its most recent fiscal year, if the first offer of any part of the issue is
made during the first six months of the issuer's current fiscal year; or
(B) For
the first six months of its current fiscal year or during the twelve month
fiscal period ending with such six month period, if the first offer of any part
of the issue is made during the last six months of the issuer's current fiscal
year from the operation of a business or of real property located in or from
the rendering of services within such state or territory; provided, however,
that this provision does not apply to any issuer which has not had gross
revenues in excess of $5,000 from the sale of products or services or other
conduct of its business for its most recent twelve month fiscal period;
(ii)
The issuer had at the end of its most recent semi-annual fiscal period prior to
the first offer of any part of the issue, at least 80 percent of its assets and
those of its subsidiaries on a consolidated basis located within such state or
territory;
(iii)
The issuer intends to use and uses at least 80 percent of the net proceeds to
the issuer from sales made pursuant to this rule in connection with the
operation of a business or of real property, the purchase of real property
located in, or the rendering of services within such state or territory; and
(iv)
The principal office of the issuer is located within such state or territory.
(d) * *
* Offers, offers to sell, offers for
sale and sales of securities that are part of an issue shall be made only to
persons resident within the state or territory of which the issuer is a
resident. For purposes of determining
the residence of offerees and purchasers:
(1) A
corporation, partnership, trust or other form of business organization shall be
deemed to be a resident of a state or territory if, at the time of the offer
and sale to it, it has its principal office within such state or territory.
(2) An
individual shall be deemed to be a resident of a state or territory if such
individual has, at the time of the offer and sale to him, his principal
residence in the state or territory.
(3) A
corporation, partnership, trust or other form of business organization which is
organized for the specific purpose of acquiring part of an issue offered
pursuant to this rule shall be deemed not to be a resident of a state or
territory unless all of the beneficial owners of such organization are
residents of such state or territory.
(e) * *
* During the period in which securities
that are part of an issue are being offered and sold by the issuer, and for a
period of nine months from the date of the last sale by the issuer of such
securities, all resales of any part of the issue, by any person, shall be made
only to persons resident within such state or territory.
Notes: 1. In the case of convertible securities resales
of either the convertible security, or if it is converted, the underlying
security, could be made during the period described in paragraph (e) only to
persons resident within such state or territory. For purposes of this rule a conversion in reliance on section
3(a)(9) of the Act does not begin a new period.
2. Dealers must satisfy the requirements of Rule 15c2-11
under the Securities Exchange Act of 1934 prior to publishing any quotation for
a security, or submitting any quotation for publication, in any quotation
medium.
(f) * *
*
(1) The
issuer shall, in connection with any securities sold by it pursuant to this
rule:
(i)
Place a legend on the certificate or other document evidencing the security
stating that the securities have not been registered under the Act and setting
forth the limitations on resale contained in paragraph (e) of this section;
(ii)
Issue stop transfer instructions to the issuer's transfer agent, if any, with
respect to the securities, or, if the issuer transfers its own securities make
a notation in the appropriate records of the issuer; and
(iii)
Obtain a written representation from each purchaser as to his residence.
(2) The
issuer shall, in connection with the issuance of new certificates for any of
the securities that are part of the same issue that are presented for transfer
during the time period specified in paragraph (e), take the steps required by
paragraphs (f)(1)(i) and (ii) of this section.
(3) The
issuer shall, in connection with any offers, offers to sell, offers for sale or
sales by it pursuant to this rule, disclose, in writing, the limitations on
resale contained in paragraph (e) and the provisions of paragraphs (f)(1)(i)
and (ii) and paragraph (f)(2) of this section.