Kentucky Administrative Regulations › Title 808 - PUBLIC PROTECTION CABINET - DEPARTMENT OF FINANCIAL INSTITUTIONS › Chapter 10 - Securities › Section 808 KAR 10:280 - Qualifications, eligibility, and restrictions on the use of Form U-7, Small Corporate Offering Registration

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO: KRS Chapter 292,
				15
				U.S.C. 78a
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				292.500(3) authorizes the
				commissioner of the Department of Financial Institutions to promulgate
				administrative regulations, forms, and orders as are necessary to carry out the
				provisions of KRS Chapter 292, including administrative regulations and forms
				governing registration statements, applications, notice filings, and reports.
				This administrative regulation sets forth the qualifications, eligibility
				requirements, and restrictions upon legal entities desiring to use Form U-7 to
				register securities.
Section 1.
			 Qualification for Use of Form. To be eligible to use Form U-7, as incorporated
			 by reference in
			 808
			 KAR 10:010, a company shall comply with each of the
			 following requirements:
(1) The company shall
			 be a legal entity organized under the laws of one of the states or possessions
			 of the United States which engages in or proposes to engage in a business other
			 than petroleum exploration or production or mining or other extractive
			 industries. "Blind pool" offerings and other offerings for which the specific
			 business or properties cannot now be described shall not be eligible to use
			 Form U-7.
(2) The securities may be
			 offered and sold only on behalf of the company, and Form U-7 shall not be used
			 by any selling security-holder (including purchase underwriters in a firm
			 commitment underwriting) to register the securities for resale.
(3)
(a) The
			 following prices shall be equal to or greater than five (5) dollars:
1. The offering price for a share or other
			 ownership interest;
2. The exercise
			 price, if the securities are options, warrants, or similar rights;
			 and
3. The conversion price, if the
			 securities are convertible into shares or other ownership interests.
(b) Execution of the application
			 and filing of the form U-7 shall constitute agreement by the company that the
			 company shall not dilute the value below five (5) dollars by any issuance of
			 new shares or other ownership interests for two (2) years after the conclusion
			 of the registration.
(4)
			 The company may engage selling agents to sell the securities. Commissions,
			 fees, or other remuneration for soliciting any prospective purchaser in this
			 state in connection with this offering shall only be paid to persons who, if
			 required to be registered, the company believes, and has reason to believe, are
			 appropriately registered in this state.
(5) This form shall not be available for the
			 securities of any company if the company or any of its officers, directors,
			 persons with a ten (10) percent ownership interest (or persons occupying
			 similar status or performing similar functions), promoters or any selling
			 agents of the securities to be offered, or any officer, director, or partner
			 (or person occupying similar status or performing similar functions) of the
			 selling agent:
(a) Has filed a registration
			 statement which is the subject of a currently effective registration stop order
			 entered pursuant to any state's securities law within (5) years prior to the
			 filing of the application for registration;
(b) Has been convicted within ten(10) years
			 prior to the filing of the application for registration 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, money laundering, obtaining money under false pretenses, larceny,
			 or conspiracy to defraud;
(c) Is
			 currently subject to any state administrative enforcement order or judgment
			 entered by that state's securities department within five (5) years prior to
			 the filing of the application for registration or is subject to 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 (5) years prior to the filing of the application for
			 registration;
(d) Is subject to any
			 state's administrative enforcement order or judgment which prohibits, denies,
			 or revokes the use of any exemption from registration in connection with this
			 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 restricting or enjoining, or is subject to any order, judgment or
			 decree from 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 (5) years prior to the
			 filing of the application for registration;
(f) The prohibitions of paragraphs (a)
			 through (c) and (e) of this subsection 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 the person or if the broker-dealer employing the party is
			 licensed or registered in this state and the Form B-D, as incorporated by
			 reference in
			 808
			 KAR 10:010, filed with this state discloses the order,
			 conviction, judgment, or decree relating to the person. A person qualified
			 under this subsection shall not act in a capacity other than that for which the
			 person is licensed or registered; and
(g) Any disqualification caused by this
			 section shall be automatically waived if the state securities department or
			 agency of the state which created the basis for disqualification determines
			 upon a showing of good cause that it is not necessary under the circumstances
			 that registration be denied. If any of the circumstances in paragraph (c) or
			 (e) of this subsection has occurred more than five (5) years from the date of
			 the application for registration, these circumstances shall be described in
			 response to Question 45 of Form U-7 as a Miscellaneous Factor.
(6) Use of the Form U-7 is
			 available to any offering of securities by a company, the aggregate offering
			 price of which within or outside this state shall not exceed $1,000,000, less
			 the aggregate offering price for all other securities sold within the twelve
			 (12) months before the start of, and during the offering of, these securities.
			 The Form U-7 shall not be available to a company that is an investment company
			 (including mutual funds) or other pooled investment vehicle, or is subject to
			 the reporting requirements of section 13 or section 15(d) of the Securities
			 Exchange Act of 1934.