2023 Laws of Puerto Rico › TITLE TEN - Commerce (§§ 1 — 4196) › Subtitle 1 - Regulation of Business Generally (§§ 1 — 998q) › Chapter 37 - Uniform Securities Act (§§ 851 — 898) › Subchapter IV - General Provisions (§§ 881 — 898) › § 882 - Exemptions

(a) The following securities are exempted from §§ 871 and 883 of this title:
(1) Any securities (including a revenue obligation) issued or, guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporation or other instrumentality of one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(2) Any securities issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency or corporation or other instrumentality of one or more of the foregoing; or any other foreign government with which the United States currently maintains diplomatic relations, if the securities are recognized as a valid obligation by the issuer or guarantor.
(3) Any securities issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state.
(4) Any securities issued by and representing an interest in, or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan or similar association organized under the laws of any state and authorized to conduct business in Puerto Rico.
(5) Any securities issued by and representing an interest in, or a debt of, or guaranteed by, any insurance company organized under the laws of any state and authorized to conduct business in Puerto Rico; but this exemption does not apply to an annuity contract, investment contract, or similar securities of those insurance companies not authorized to conduct business in Puerto Rico and the securities of which have been previously registered in the Securities and Exchange Commission, pursuant to the Investment Company Act of 1940, under which the promised payments are not fixed in dollars but are substantially dependent upon the investment results of a segregated fund or account invested in securities.
(6) Any securities issued or guaranteed by any federal savings and credit cooperative union, any savings and credit cooperative union, or similar association organized and supervised under the laws of Puerto Rico.
(7) Any securities issued or guaranteed by any railroad, other common carrier, public utility, or holding company which is:
(A) Subject to the jurisdiction of the Interstate Commerce Commission;
(B) a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a company within the meaning of that act;
(C) regulated in respect of its rates and charges by a government authority of the United States or any state, or
(D) regulated in respect of the issuance or guarantee of securities by a government authority of the United States, any state, Canada, or any Canadian province.
(8) Any securities listed or approved for listing upon notice of issue on the New York Stock Exchange, the American Stock Exchange, the Midwest Stock Exchange, the National Association of Securities Dealers Automated Quotations—National Market System (NASDAQ-NMS), the Chicago Option Exchange, the Pacific Stock Exchange, and any other securities exchange that requests exemption, if the Commissioner of Financial Institutions determines, at his/her discretion, that it is necessary and convenient to include said securities exchange among those listed herein; any other securities of the same issuer which are of senior or substantially equal rank; any securities acquired by subscription rights or options registered or approved as indicated above; or any option or right to purchase or subscribe to any of the above securities.
(9) Any securities issued by any person organized and operated not for private profit but exclusively for religious, educational, philanthropic, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce or trade or professional association.
(10) Any commercial paper which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine (9) months of the date of issuance, excluding the days of grace, or any renewal of such paper which is likewise limited, or any guarantee of such paper or of any such renewal.
(11) Any investment contract or interest share in a noncollective trust fund issued in connection with an employees’ stock purchase, savings, pension, profit-sharing, or similar benefit plan which meets the requirements for qualification of §§ 8565 or 8423(n)(1)(B) of Title 13, known as the Puerto Rico Internal Revenue Code of 1994 (a trust fund shall be deemed to be collective if the assets of more than one of the aforementioned plans are invested jointly).
(12) Any securities issued by and representing an interest in, or a debt of, or guaranteed by, any investment company registered pursuant to the Investment Companies Act of Puerto Rico, §§ 661—683 of this title.
(13) Any securities issued by an issuer registered as an investment company which continuously issues and redeems its stock (open-end management investment company) or by a unit investment trust under § 8 of the Investment Company Act of 1940 (15 U.S.C. § 80a-8), if the following requirements are met:
(i) The issuer is advised by an investment adviser that is a depositary institution exempted from the requirement of registration under the Investment Advisers Act of 1940 (15 U.S.C. §§ 80b-1 et seq.) or which is currently registered as an investment adviser, or affiliated to an adviser that has been registered as an investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-3) for at least three (3) years prior to an offering or sale of securities allegedly exempted under this section, and when the issuer has acted, or is affiliated to an investment adviser that has acted, as an investment adviser for one or more registered investment companies or unit investment trusts for at least three (3) years prior to an offering or sale of securities allegedly exempted under this section; or
(ii) the issuer has a promoter that, at all times, during the three (3) years preceding an offering or sale of securities allegedly exempted under this section, has promoted one or more registered investment companies or unit investment trusts, and the total asset aggregate of which has exceeded the sum of one hundred million dollars ($100,000,000), and
(iii) in addition to the aforementioned, the Commissioner has received, prior to any sale exempted under this subsection:
(a) A notice of intention to sell, prepared and signed by the issuer of the securities, which shall include the name and address of the issuer and the type and amount of the securities to be offered in Puerto Rico, and
(b) the payment of the fees established by § 875(b) of this title.
(iv) In the event that securities from an open-end management investment company or a unit investment trust should be offered or sold, the filing of a new notice and the payment of the fees corresponding thereto shall be required twelve (12) months after the Commissioner has received the notice and payment of fees established in paragraph (iii) of this clause.
(v) An exemption under this section does not constitute or grant an exemption from the requirement of registration to agents who offer or sell the securities referred to in this section.
(vi) For purposes of this section, an investment adviser shall be understood to be affiliated with another investment adviser if the investment adviser controls or is under common control with such other investment adviser.
(14) Any securities issued by and which represent an interest in, or in an obligation of, or guaranteed by the Housing and Human Development Trust of Puerto Rico, as it has been created and is operated pursuant to Public Deed No. 135 of May 5, 2004, executed before Notary José Orlando Mercado Gely.
(15) Any securities issued by and which constitute an interest in, or in an obligation of, or secured by the Puerto Rico Education and Rehabilitation Society (SER de Puerto Rico).
(b) The following transactions are exempted from §§ 871 and 883 of this title:
(1) Any isolated non-issuer transaction, whether effected through a broker-dealer or not.
(2) Any non-issuer distribution of outstanding securities if:
(A) A recognized securities manual contains the names of the issuer’s officers and directors, a balance sheet of the issuer as of a date within the preceding eighteen (18) months, and a profit and loss statement for either the fiscal year preceding that date or the most recent year of operations, or
(B) the securities have a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year or within the three (3) preceding fiscal years, or during the existence of the issuer and any predecessors if less than three (3) years, in the payment of principal, interest, or dividends on the securities.
(3) Any non-issuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offering to buy; but the Commissioner may, through regulation, require that the customer acknowledge on a standard printed that the sale was unsolicited, and that a signed copy of each such form be preserved by the broker-dealer for a specified period.
(4) Any transaction between the issuer or another person on whose behalf the offering is made and an underwriter, or among underwriters.
(5) Any transaction relative to a bond or other evidence of indebtedness secured by a real or personal property mortgage or deed of trust, or by an agreement of the sale of real estate or personal property, if all mortgages, deeds of trust, or agreements, together with all the bonds or other evidences of indebtedness secured thereby, are offered and sold as a unit.
(6) Any transaction by an executor, administrator, actuary, marshall, receiver, trustee in bankruptcy, guardian, or curator.
(7) Any transaction executed by a bona fide pledgee without any purpose of evading the provisions of this chapter.
(8) Any offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Companies Act of Puerto Rico, §§ 661—683 of this title pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for him/her/itself or in some fiduciary capacity.
(9) Any transaction in accordance to an offering directed by the offeror to no more than ten (10) persons (except those designated in clause (8) of this subsection) in Puerto Rico during any period of twelve (12) consecutive months, whether or not the offeror or any of the offerees to whom the offering is made is present in Puerto Rico at the time, if:
(A) The seller reasonably believes that all buyers in Puerto Rico (that are not designated in clause (8) of this subsection) are purchasing for investment;
(B) no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective buyer in Puerto Rico (except those designated in clause (8) of this subsection); but the Commissioner may, through regulation or order, with respect to any securities or transactions, or any kind of securities or transactions, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in paragraphs (A) and (B) of this clause with or without the substitution of a limitation in the remuneration.
(10) Any offer or sale of a preorganization or subscription certificate if:
(A) No commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber;
(B) the number of subscribers does not exceed ten (10), and
(C) not more than one thousand dollars ($1,000) is paid by all subscribers in the aggregate.
(11) Any transaction pursuant to an offering to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, non-transferable warrants, or transferable warrants that may be exercised not later than ninety (90) days after being issued for the purchase of stock at a fixed price, if:
(A) No commission or other remuneration (other than a stand-by commission) is paid or given directly or indirectly for soliciting any security holder in Puerto Rico, or
(B) the issuer first files a notice specifying the terms of the offer and the Commissioner does not, through an order, disallow the exemption within the next five (5) full business days.
(12) Any offering (but not a sale) of securities for which a registration statement has been filed under both this chapter and the Securities Act of 1933, if no stop or denial order is in effect, and no public proceeding or examination considering the issue of such order is pending.
(13) Any offering (but not a sale) of securities for which a registration statement has been filed under this chapter, under the standards adopted by the Commissioner, through a regulation to such effects, to authorize the use of the prospectus or memorandum of preliminary offering.
(14) Any offer or sale of securities made by an issuer in a transaction that meets the following requirements:
(A) The sale of securities shall be made exclusively to those buyers that the issuer reasonably considers to be accredited investors.
(B) An issuer undergoing its development phase who has no specific business plan or has stated that its business plan consists of participating in a merger or acquisition with an unidentified company or with another person or entity, may not avail itself of the exclusion.
(C) The issuer reasonably deems that all the buyers are buying the securities as an investment and not with the intention of selling or distributing the same. Any resale of a security sold under this exclusion, within twelve (12) months of the sale, shall be presumed to have been made with the intention of distribution and not as an investment, with the exception of a resale for which a statement of registration has been submitted pursuant to the provisions of this chapter or a resale to an accredited investor, as defined in this chapter.
(D)
(i) An issuer may not avail itself to the exclusion if the issuer, or any predecessor, partner, official or director thereof, or any beneficiary of ten percent (10%) or more of any of its capital securities, or its promoter, or any person who directly or indirectly controls or is controlled by the issuer, or any insurer underwriter of the securities to be offered, or any partner, director or official of said insurer, if:
(I) Within the last five (5) years, it has submitted a registration statement that is currently subject to a suspension order issued by the Commissioner denying it effectiveness;
(II) within the last five (5) years, it has been convicted of any crime connected to the offer, purchase or sale of securities, or to fraud or deceit;
(III) is currently subject to any federal or state administrative suspension order or decision issued in the last five (5) years, which involves fraud or deceit in connection to purchase or sale in the securities business;
(IV) is currently subject to an order, ruling or judgment of any federal or state court with competent jurisdiction rendered within the last five (5) years, prohibiting the party, whether permanently or temporarily, from engaging or continuing to engage in any conduct or practice involving fraud or deceit in connection to the purchase or sale of securities.
(ii) Paragraph (D)(i) of this clause shall not be applicable if:
(I) The party subject to a suspension or revocation order is registered, pursuant to the provisions of this chapter, to conduct activities connected to the securities business in the state in which the suspension or revocation order was issued against said party;
(II) prior to the first offer under this exclusion, the Commissioner, or the federal or state court or regulatory authority that issued the order, ruling or judgment for suspension or revocation, renders said suspension or revocation ineffective, or
(III) the issuer establishes that it had no knowledge of, and that, in the exercise of reasonable care and based on a factual investigation, could not have known that there was a suspension or revocation order against it.
(E)
(i) With the prior authorization of the Commissioner, a general notice of the proposed offer may be made.
(ii) The general notice of the proposed offer shall include the following information:
(I) Name, physical or mailing address and telephone number of the securities issuer;
(II) name, brief description and price of any securities to be issued;
(III) a brief description of the issuer’s business, in not more than twenty-five (25) words;
(IV) the type, number and aggregate amount of the securities offered;
(V) name, physical or mailing address and telephone number of the person to be contacted to obtain additional information, and
(VI) a statement to the effect that:
a. The sales shall only be made to accredited investors;
b. no money or other consideration may be solicited through the general notice;
c. the securities have not been registered at or approved by the Commissioner and are being offered for sale and sold under a registration exemption;
(VII) any other information that the Commissioner may request.
(F) The issuer with respect to an offer, may furnish information additional to that of the general notice under paragraph (E) of this clause if said information:
(i) Is offered through an electronic data base restricted to accredited investors under the “ACE-Net” Program as implemented by the Federal Small Business Administration, or
(ii) is offered after the issuer reasonably believes that the buyer in question is an accredited investor.
(G) Solicitation or offer through the telephone shall not be allowed, unless the issuer reasonably believes that the buyer in question is an accredited investor prior to placing the phone call.
(H) The issuer shall submit to the Commissioner, in the forms provided by the latter, its unconditional and irrevocable consent to be summoned pursuant to the provisions of § 894 of this title and shall enclose the same together with the filing fees established in subsection (e) of this section.
(c) The Commissioner may, through an order, deny or revoke any exemption specified in clauses (9) and (11) of subsection (a) or subsection (b) of this section with respect to any specific securities or transactions. No such order may be issued without appropriate prior notice to all interested parties, or opportunity for hearing, and formulation of written findings of fact and conclusions of law, except that the Commissioner may, through an order, summarily deny or revoke any of the specified exemptions pending final determination of any proceeding under this subsection. Upon issuing a summary order, the Commissioner shall promptly notify all interested parties to the effects that such order has been issued, stating the grounds therefor, and shall notify that the matter shall be scheduled for hearing within fifteen days from the receipt of a written petition to such effects. If no hearing is requested and none is ordered by the Commissioner, the order shall continue in effect until modified or rendered ineffective by the Commissioner. If a hearing is requested or ordered, the Commissioner may, upon prior notice to all interested parties, and opportunity for hearing, modify, render ineffective or defer the order until a final determination is reached. No order under this subsection may be enforced retroactively. No person may be held in violation of §§ 871 or 883 of this title by reason of any offering or sale effected after issuance of an order under this subsection if said person sustains burden of proof of not having any knowledge about said order, and that in the exercise of reasonable diligence, he/she could not have any knowledge of the same.
(d) In any proceeding initiated pursuant to the provisions of this chapter, the burden of proof shall rest upon the person claiming an exception or exemption under the provisions of this chapter.
(e) Any person filing a petition for exemption under the provisions of this section must accompany the same with a filing fee of one hundred dollars ($100).
History —June 18, 1963, No. 60, p. 128, § 402; July 1, 1986, No. 60, p. 209, § 3; Aug. 28, 1991, No. 77, § 5; June 26, 1992, No. 15, § 18; Mar. 9, 1994, No. 9, § 1; Aug. 11, 1996, No. 114, § 15; Jan. 10, 1999, No. 36, § 2; Sept. 21, 2004, No. 390, § 1; Aug. 16, 2012, No. 179, § 6.