Kentucky Administrative Regulations › Title 808 - PUBLIC PROTECTION CABINET - DEPARTMENT OF FINANCIAL INSTITUTIONS › Chapter 10 - Securities › Section 808 KAR 10:340 - Registration exemption for certain limited offerings made exclusively to accredited investors

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				292.410(1)(q),
				292.420(3),
				17 C.F.R.
				230.501
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 grant exemptions for any transaction which the executive
				director by rule or order finds registration is not necessary or appropriate in
				the public interest or for the protection of investors. This administrative
				regulation establishes the requirements for claiming the registration exemption
				for a limited offering made exclusively to an accredited investor.
Section 1. Definition. "Accredited investor"
			 is defined in
			 17 C.F.R.
			 230.501(a).
Section 2. An offer or sale of a security by
			 an issuer in a transaction that meets the requirements established in this
			 administrative regulation shall be exempt from
			 KRS
			 292.340 through
			 292.390.
(1) To qualify for this exemption, the sale
			 of a security shall be made exclusively to a person who is an accredited
			 investor.
(2) The exemption shall
			 not be available to an issuer that:
(a)
			 Issues interests in an oil, gas, or mineral enterprise; or
(b)
1. Is in
			 the development stage; and
2.
a. Has no specific business plan or purpose;
			 or
b. Has indicated that its
			 business plan is to engage in a merger or acquisition with an unidentified
			 company or companies, or other entity or person.
(3) The issuer shall reasonably
			 believe that each purchaser is purchasing for investment and not with a view to
			 or for sale in connection with a distribution of the security.
(a) A resale of a security sold in reliance
			 on this exemption within twelve (12) months of sale, except a resale to an
			 accredited investor or pursuant to a registration statement effective under
			 KRS
			 292.340 through
			 292.390,
			 shall be presumed to be with a view to distribution and not for
			 investment.
(b) If resold, a
			 security issued under this exemption shall be resold pursuant to registration
			 or an exemption under KRS Chapter 292.
(4)
(a)
			 Except as provided in paragraph (b) of this subsection, this exemption shall
			 not be available to an issuer if the issuer, any of the issuer's predecessors,
			 any affiliated issuer, any of the issuer's directors, officers, general
			 partners, beneficial owners of ten (10) percent or more of any class of its
			 equity securities, any of the issuer's promoters, promoters presently connected
			 with the issuer in any capacity, any underwriter of the securities to be
			 offered, or any partner, director or officer of the underwriter:
1. Within the last five (5) years, has filed
			 a registration statement which is the subject of a currently effective
			 registration stop order entered by a state securities administrator or the
			 United States Securities and Exchange Commission;
2. Within the last five (5) years, has been
			 convicted of a criminal offense in connection with the offer, purchase or sale
			 of a security, or involving fraud or deceit;
3. Is currently subject to a state or federal
			 administrative enforcement order or judgment, entered within the last five (5)
			 years, finding fraud or deceit in connection with the purchase or sale of a
			 security; or
4. Is currently
			 subject to an order, judgment or decree of a court of competent jurisdiction,
			 entered within the last five years, temporarily, preliminarily or permanently
			 restraining or enjoining the party from engaging in or continuing to engage in
			 a conduct or practice involving fraud or deceit in connection with the purchase
			 or sale of a security.
(b) Paragraph (a) of this subsection shall
			 not apply if:
1. The party subject to the
			 disqualification is licensed or registered to conduct securities related
			 business in the state in which the order, judgment or decree creating the
			 disqualification was entered against the party; or
2. Before the first offer under this
			 exemption, the state securities administrator, or the court or regulatory
			 authority that entered the order, judgment, or decree, waives the
			 disqualification.
(5)
(a) The
			 issuer may make a general announcement of the proposed offering through the use
			 of electronic media or other means of communication.
(b) The general announcement shall state only
			 the following information, unless the commissioner determines that additional
			 information is in the public interest:
1. The
			 name, address and telephone number of the issuer of the securities;
2. The name, a brief description and price
			 (if known) of the security to be issued;
3. A brief description of the business of the
			 issuer in twenty-five (25) words or less;
4. The type, number and aggregate amount of
			 securities being offered;
5. The
			 name, address and telephone number of the person to contact for additional
			 information; and
6. A statement
			 that:
a. A sale shall exclusively be made to
			 an accredited investor;
b. Money or
			 other consideration shall not be solicited or accepted; and
c The security:
(i) Has not been registered with or approved
			 by a state securities agency or the United States Securities and Exchange
			 Commission; and
(ii) Is being
			 offered and sold pursuant to an exemption from registration.
(6) The issuer, in connection with an offer,
			 may provide information in addition to the general announcement under
			 subsection (5) of this section, if the information:
(a) Is delivered through an electronic
			 database that is restricted to persons who have been prequalified as accredited
			 investors; or
(b) Is delivered
			 after the issuer reasonably believes that the prospective purchaser is an
			 accredited investor.
(7)
			 A telephone solicitation shall not be made unless prior to placing the call,
			 the issuer reasonably believes that the prospective purchaser to be solicited
			 is an accredited investor.
(8)
			 Dissemination of the general announcement of the proposed offering to a person
			 who is not an accredited investor shall not disqualify the issuer from claiming
			 the exemption under this administrative regulation.
(9) Within fifteen (15) days after the first
			 sale in this state, the issuer shall file with the commissioner:
(a) A notice transaction;
(b) A consent to service of
			 process;
(c) A copy of the general
			 announcement; and
(d) A fee in the
			 amount of $250 as required by
			 KRS
			 292.420(3).