Ill. Admin. Code tit. 14 § 130.420

Current through Register Vol. 48, No. 49, December 6, 2024

Section 130.420 - Uniform Limited Offering Exemption Pursuant to Section 4.D of the Act

a) Any offer or sale of securities offered or sold in compliance with the Federal 1933 Act, Regulation D, Rules 230.501-230.503 and 230.505 ( 17 CFR 230.501 - 230.503 and 230.505 (May 31, 2011)) and that satisfies the following further conditions and limitations is an exempt transaction.

1) No exemption under this Section shall be available for the securities of any issuer if any of the parties described in the Federal 1933 Act, Regulation A, Rule 230.262 Sections (a), (b) and (c) ( 17 CFR 230.262(a), (b) and (c) (May 31, 2011)).

A) has filed a registration statement that is subject to a currently effective registration stop order entered pursuant to any state's securities law or the SEC within five years prior to the filing of the notice required under this exemption as required by subsection (b);

B) has been convicted within five years prior to the filing of the notice required under this exemption 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, obtaining money under false pretenses, larceny or conspiracy to defraud;

C) is currently subject to SEC or any state administrative enforcement order or judgment entered by that state's securities administrator or the SEC within five years prior to the filing of the notice required under this exemption or is subject to SEC or 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 years prior to the filing of the notice required under this exemption;

D) is subject to SEC or any state's administrative enforcement order or judgment that 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, 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 years prior to the filing of the notice required under this exemption;

2) the prohibitions of subsections (a)(1)(A) through (C) and (E) of this Section 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 such person or if the dealer employing such party is licensed or registered in this State and the Form BD filed with the Securities Department discloses the order, conviction, judgment or decree relating to such person; no person disqualified under this subsection (a)(2) may act in a capacity other than that for which the person is licensed or registered; and

3) any disqualification caused by this Section is automatically waived if the SEC or state securities administrator or agency of the state that created the basis for disqualification determines upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied. It is a defense to a violation of this subsection (a) if the issuer sustains the burden of proof to establish that the person did not know and in the exercise of reasonable care could not have known that a disqualification under this subsection (a) existed.

b) The issuer shall file with the Securities Department a notice on Form D ( 17 CFR 239.500 (May 31, 2011)):

1) the notice shall be filed no later than 15 days after the receipt of consideration or the delivery of a subscription agreement by an investor in this State that results from an offer being made in reliance upon this exemption and at such other times and in the form required under Regulation D, Rule 230.503 to be filed with the SEC;

2) the notice shall contain an undertaking by the issuer to furnish to the Securities Department, upon written request, the information furnished by the issuer to offerees who are offered or sold a security that is not exempt under any provision of Section 3 of the Act or who are offered or sold a security in a transaction that is not exempt under any provision of Section 4 of the Act;

3) every person filing the initial notice provided for in subsection (b)(1) of this Section shall pay the filing fee pursuant to Section 130.110.

c) In all sales to nonaccredited investors in this State, 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:

1) the investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to his or her other security holdings and as to his or her 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; and

2) the purchaser, either alone or with his or her purchaser representatives, has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risk of the prospective investment.

d) A failure to comply with a term, condition or requirement of this exemption will not result in loss of the exemption from the requirements of Section 4.D of the Act 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; or

2) the failure to comply was insignificant with respect to the offering as a whole; or

3) a good faith and reasonable attempt was made to comply with all applicable terms, conditions and requirements of the exemption.

e) The exemption authorized by this Section shall be known and may be cited as the "Uniform Limited Offering Exemption."

Ill. Admin. Code tit. 14, § 130.420

Amended at 36 Ill. Reg. 2852, effective February 8, 2012