Kentucky Administrative Regulations › Title 808 - PUBLIC PROTECTION CABINET - DEPARTMENT OF FINANCIAL INSTITUTIONS › Chapter 10 - Securities › Section 808 KAR 10:210 - Registration exemptions - Federal Regulation D

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				292.410(1)(q),
				17 C.F.R.
				230.262,
				230.501,
				230.504,
				230.505,
				230.508,
				239.500
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				292.500(3) authorizes the
				commissioner to promulgate administrative regulations necessary to carry out
				the provisions of KRS Chapter 292.
				KRS
				292.410(1)(q) authorizes the
				commissioner to exempt from
				KRS
				292.330 to
				292.390
				a transaction for which the commissioner finds that registration is not
				necessary or appropriate in the public interest or for the protection of an
				investor. This administrative regulation establishes an exemption for an offer
				or sale of a security that complies with specified federal regulations and the
				requirements established in the administrative regulation.
Section 1.
(1) Pursuant to
			 KRS
			 292.410(1)(q), an offer or
			 sale of a security offered or sold in compliance with
			 17
			 C.F.R. 230.504 or
			 230.505,
			 or an offer or sale made exempt by
			 17
			 C.F.R. 230.508(a) shall be
			 exempt from
			 KRS
			 292.340 to
			 292.390
			 if the offer or sale meets the requirements established in subsections (3) and
			 (4) of this section.
(2) A person
			 who receives a commission, finder fee, or other remuneration in connection with
			 a sale of a security made pursuant to the exemption established in subsection
			 (1) of this section shall not be relieved of compliance with the requirements
			 of
			 KRS
			 292.330.
(3) The exemption established in subsection
			 (1) of this section shall apply if:
(a) The
			 issuer does not offer or sell the security by means of a form of general
			 advertisement or general solicitation except as permitted by
			 17
			 C.F.R. 230.504. The following shall not
			 constitute "general solicitation" within the meaning of this paragraph:
1. Solicitation of an indication of interest
			 in accordance with the applicable terms and conditions; or
2. An offer to sell a security and the
			 dissemination of written offering material in accordance with the terms of this
			 administrative regulation at least thirty (30) days after the withdrawal of an
			 application by the issuer to register the same class of securities;
(b)
1. The issuer reasonably believes that each
			 purchaser of the securities in Kentucky is:
a.
			 Acquiring the security for investment; and
b. Aware of the restrictions imposed on
			 transferability and resale of a security.
2. The basis for reasonable belief may
			 include:
a. Obtaining a written representation
			 signed by the purchaser that the purchaser is acquiring the security for the
			 purchaser's own investment and is aware of the restrictions imposed on the
			 transfer-ability and resale of the security; and
b. Placement of a legend on the certificate
			 or other document that evidences the security stating that the security have
			 not been registered under KRS Chapter 292, and setting forth or referring to
			 the restrictions on transferability and sale of security.
(c)
1. The issuer shall file with the office a
			 notice on Form D (17
			 C.F.R. 239.500) :
a. No later than fifteen (15) days after the
			 first sale of a security from or into Kentucky in the case of a transaction
			 pursuant to
			 17
			 C.F.R. 230.505; or
b. At least ten (10) business days prior to
			 the first sale of a security from or into Kentucky in the case of a transaction
			 pursuant to
			 17
			 C.F.R. 230.504.
2. During the time specified in subparagraph
			 1 of this paragraph, the office shall not have determined that the exemption
			 provided by this administrative regulation is not available.
3. A notice on Form D shall be manually
			 signed by a person duly authorized by the issuer.
4.
a.
			 Information furnished by the issuer to an offeree shall be filed with the
			 notice required by subparagraph 1 of this paragraph.
b. If the information is altered in a
			 material way during the course of the offering, the office shall be notified of
			 the amendment within fifteen (15) days after an offer using the amended
			 information.
5. At the
			 time of filing of the notice on Form D, the issuer shall pay to the
			 commissioner a filing fee of $250.
6. If the issuer files an additional document
			 with the United States Securities and Exchange Commission subsequent to its
			 initial filing, a copy of the document shall be filed with the
			 office.
(d)
1. An issuer selling a security in reliance
			 on this exemption furnishes written information to a prospective investor to
			 comply with the antifraud provisions of KRS Chapter 292 and applicable federal
			 law.
2. In an offering in reliance
			 on
			 17
			 C.F.R. 230.504 to a person who is not an
			 accredited investor, the office shall consider the information provided to a
			 prospective investor in determining whether the exemption established by this
			 administrative regulation is available; and
(e) In a sale to a nonaccredited investor
			 pursuant to
			 17
			 C.F.R. 230.504, the issuer and a person
			 acting on his behalf shall have reasonable grounds to believe, and after making
			 reasonable inquiry shall believe, that the purchaser either alone or with his
			 purchaser representative has the knowledge and experience in financial and
			 business matters that he is capable of evaluating the merits and risk of the
			 prospective investment.
(4)
(a)
			 Except as provided in paragraph (b) of this subsection, the exemption
			 established in subsection (1) of this section shall not apply if the issuer or
			 a person described in
			 17 C.F.R.
			 230.262:
1.
			 Has filed a registration statement which is the subject of a currently
			 effective stop order entered pursuant to a federal or state law within five (5)
			 years prior to the commencement of the offering;
2. Has been convicted within five (5) years
			 prior to commencement of the offering of a felony or misdemeanor in connection
			 with the purchase or sale of a security or a felony involving fraud or deceit
			 including forgery, embezzlement, obtaining money under false pretenses, larceny
			 or conspiracy to defraud;
3. Is
			 currently subject to a federal or state administrative order or judgment
			 entered by that state's securities administrator within five (5) years prior to
			 reliance on this exemption or is subject to a state's administrative order or
			 judgment in which fraud or deceit was found and the order or judgment was
			 entered within five (5) years of the expected offer and sale of a security in
			 reliance upon this exemption;
4. Is
			 currently subject to a state's administrative order or judgment which prohibits
			 the use of an exemption from registration in connection with the purchase or
			 sale of a security; or
5. Is
			 subject to an order, judgment or decree of a court of competent jurisdiction
			 temporarily or preliminarily restraining or enjoining, or is subject to an
			 order, judgment or decree of a court of competent jurisdiction, entered within
			 five (5) years prior to the commencement of the offering permanently
			 restraining or enjoining, the person from engaging in or continuing a conduct
			 or practice in connection with the purchase or sale of a security or involving
			 the making of a false filing with a state.
(b) The prohibitions of paragraph (a)1, 2, 3
			 and 5 of this subsection shall not apply if:
1. 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 the
			 person; or
2. The broker-dealer
			 employing the person is licensed or registered in Kentucky and the Form BD
			 filed with Kentucky discloses the order, conviction, judgment or decree
			 relating to the person.
(c) A disqualification pursuant to paragraph
			 (a) of this subsection shall be automatically waived if the state which 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.
(d) It shall be a defense
			 to a violation of paragraph (a) of this subsection if the issuer sustains the
			 burden of proof to establish that he did not know, and in the exercise of
			 reasonable care could not have known, that a disqualification under paragraph
			 (a) of this subsection existed.
(5) A failure to comply with a term,
			 condition or requirement established in subsection (2) or (3)(c) or (d) of this
			 section shall not result in loss of the exemption for a new offer or sale to a
			 particular individual or entity if the person relying on the exemption shows:
(a) The failure to comply did not pertain to
			 a term, condition or requirement directly intended to protect that particular
			 individual or entity;
(b) The
			 failure to comply was insignificant with respect to the offering as a whole;
			 and
(c) A good faith and reasonable
			 attempt was made to comply with all applicable terms, conditions and
			 requirements of this section.
(6) If an exemption is established only
			 through reliance upon subsection (5) of this section, the failure to comply
			 shall be actionable by the commissioner.
(7)
(a) An
			 offer or sale which is exempt pursuant to this administrative regulation shall
			 not be combined with an offer or sale exempt under another administrative
			 regulation or KRS Chapter 292.
(b)
			 If an offer or sale fails to comply with all the conditions for this exemption,
			 the issuer may claim the availability of another applicable
			 exemption.
(8) This
			 exemption shall not relieve an issuer or a person acting on behalf of an issuer
			 from the requirement to provide disclosure to a prospective investor to satisfy
			 the antifraud provisions established within KRS Chapter 292.
(9) In a proceeding involving this
			 administrative regulation, the burden of proving the exemption or an exception
			 from a definition or condition shall be upon the person claiming it.
(10) The exemption established in this
			 administrative regulation shall not be available to an issuer for a transaction
			 which is:
(a) In technical compliance with the
			 requirements of this administrative regulation; and
(b) Part of a plan or scheme to evade
			 registration or the requirements of this administrative regulation.