Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1941-02-01

The Quandry OF Montana mining
and oil men who wish to finance
primary mining enterprises through
public subscription, has brought
some explanatory information from
Dav Kerr. regional SEC administra-
tor. to a Great Falls operator, who
submitted the problem to the Seattle
regional office OF the Securities a
Exchange Commission.
Kerr replied to statements OF an
article contained in the Montana
on & Mining Journal IN which IL
was nointed out that the former
100000 exemption, under the for
MGR law. was more valuable than
is the present "broadened eXemp-
ton" because the latter incorpor-
ates the blue sky laws Of every
state.
The letter from Director Karr
indicates otherwise. it follows:
This is with reference to your
letter of January 10, 1871, in
which you ask for advice concern
ing various statements made in an
article contained in the Montana
ON & Mining Journal OF January
II 1871. a copy of which you have
enclosed. This newspaper article, In
discussing the commission new eX-
emptive rules. states among other
things:
zone man who contemplated plac-
ing an advertisement in a TRACE
publication, hoping to attract capl-
tai to his enterprise small Out
legitimate one-dropped the plan
entirely because he found that ne
would be allowed to sell stock only
in designated states in which ne
must pass the state securities com
mission. Thus he might insert an
advertisement in a trade publica-
ton of national circulation and get
injuries from seven states. Even
if it meant a sale of only 500 in
one or more OF these states, he
would have TO qualify under the
blue sky laws of that state before
he could accept the 800.
LAS will be hereinafter pointed
out the statements contained in this
article which indicate that an IS
suer is required by the commits
sion's exemptive rules to comply
with the Blue Sky laws of any
state in Which securities are to be
offered for sale are entirely er-
roneous. Compliance with state laws
relating to the registration, quailfi-
cation and licensing Of securities
and dealers which are applicable to
any transaction of offering, sale
and delivery after sale, is not a
condition OF the commissions ex-
emptive rules On the other hand,
the fact that an issuer has COM
piled with these exemptive rules
does not relieve it of the necessity
of complying with state laws le.al-
relating to the registration, qualifi-
ton and licensing of securities and
dealers which may become appli-
cable to the transaction of offer
ing, sale and delivery after sale
of securities in any particular
state. Thus the question Of wheth-
er or not an issuer must comply
with the Blue Sky laws of a par
ticular state depends solely upon
the laws OF that state.
THE commission in adopting
these new exemptive rules intend
ed TO broaden the availability Of
the exemption authorized under
section (b) of the Securities
Act of 1893 for security issues up
to and including 500 900. AS an
nounced in Securities Act Release
No. 2410, this new regulation shifts
the commissions administrative en-
phasis from the disclosure re-
Quirements of the act to the fraud
preventions. However, in order for
an issuer to claim this exemption
it must comply with the conditions
of the exemptive rules. Strict com
pliance with these conditions, to an
issuer so as to avoid any POSSIBLE
ity of mourning civil liabilities un-
der the Securities Act which might
later be attempted to be imposed
by disgruntled investors who might
endeavor to show that the issuer
was selling unregistered securities
for which no exemption existed.
Since the regional offices are
now charged with administering
the new regulation, we deem it our
duty to notify issuers If in our op-
inion the material filed fails t.
meet the few formal requirement.
of the rule. Otherwise the offering
in all probability would be made
in unwilling violation of Section
of the Securities Act.
"One of the conditions of Rul,
222 which specifies the content
of the letter of notification whicl
must be filed is that such lette
of notification contain "a hist @
the Jurisdiction Estates, territoI
tories. the District of Columbia o
foreign countries) in which 1t
proposed to sell the securities.
The rule then provides that IN
securities shall be offered in an
jurisdiction not mentioned in tn