§ 830-X-6-.12. Further Limited Offering Exemption
(1) Pursuant to the Authority delegated to the Alabama Securities Commission by Code of Ala. 1975, § 8-6-11(a)(9), any offer or sale of securities which is made in compliance with the following requirements of this rule will be deemed to be an exempt transaction and Code of Ala. 1975, §§ 8-6-3 through 8-6-9 shall not apply except as hereinafter in this rule expressly provided:
INTERPRETIVE COMMENT: In response to some questions, it should be understood that this transactional exemption is an expansion of, and an alternative to, the statutory exemption found in Code of Ala. 1975, § 8-6-11(a)(9). Therefore, it is not necessary to comply with the provisions of this Rule if the offering complies with Code of Ala. 1975, § 8-6-11(a)(9) which exempts offerings to no more than ten (10) purchasers.
(a) Sales of the securities which are part of an issue are not made to more than 25 persons [other than those designated in Code of Ala. 1975, § 8-6-11(a)(8)] in this State during any period of 12 consecutive months.
(b) No commission, finders fee or other remuneration shall be paid or given, directly or indirectly, to any person for soliciting any prospective purchaser in this State, unless such person is registered in this State pursuant to Code of Ala. 1975, § 8-6-3;
(c) No exemption under this rule shall be available for the securities of any issuer if any of the parties described in Rule 262(a) or (b) of Regulation A, 17 C.F.R. § 230.262(a) and (b), adopted under the Securities Act of 1933 (generally described as: the issuer, any of its predecessors or any affiliated issuer; any director, officer or general partner of the issuer, beneficial owners of 10% or more of any class of its equity securities or any promoter of the issuer presently connected with it in any capacity; any underwriter of the securities to be offered, or any partner, director or officer of any such underwriter):
(i) 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 five years prior to the filing of the notice required under this exemption.
(ii) Has been convicted within five years prior to the filing of the notice required under this exemption 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, obtaining money under false pretenses, larceny or conspiracy to defraud.
(iii) Is currency subject to any state administrative enforcement order or judgment entered by that state's securities administrator within five years prior to the filing of the notice required under this exemption 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 years prior to the filing of the notice required under this exemption.
(iv) 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 the offer, purchase or sale of securities.
(v) Is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to any order, judgment or decree of any court of competent jurisdiction, permanently restraining or enjoining, such 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 years prior to the filing of the notice required under this exemption.
(vi) Any disqualifications caused by this section may be waived if the state securities administrator 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 the exemption be denied.
(vii) The disqualification found in Rule 505(b)(2)(iii) of Regulation D shall apply also to offerings made pursuant to this rule.
INTERPRETATIVE COMMENT: Subparagraph (c)(vii) is added to make clear that both the federal and the Alabama "bad boy" provisions apply to any offering made pursuant to this rule.
Alabama recognizes that Regulation A is interpreted by the SEC to apply only to executive officers of an underwriter and will generally follow such interpretation.
(d) The issuer shall file a notice with the Securities Commission as follows:
(i) If in connection with the transaction, the issuer is filing a notice with the Securities and Exchange Commission pursuant to Section 4(6) of the Securities Act of 1933 or Regulation D (Rule 230.503), the notice may be a copy of the form first filed pursuant to those provisions. The filing fee required by subsection (iv) below must accompany the filing. Each issuer (other than an Alabama corporation) must also file a consent to service of process in accordance with subsection (v) below, unless it already has a consent to service of process on file with the Securities Commission. The filing should be accompanied with a cover letter indicating that the filing is pursuant to Rule 830-X-6-.12, and if a consent to service of process is not included, a statement that the issuer already has a consent to service of process on file with the Securities Commission;
(ii) Unless a notice is filed pursuant to paragraph (i), the notice shall be in the form and contain the information specified by subsection (vi) below and in accordance with the instructions thereto and be accompanied by the fee required by subsection (iv) below;
(iii) A notice required by this section shall be filed with the Securities Commission no later than fifteen (15) calendar days after the latter to occur of (i) the sale of a security to the eleventh purchaser, wherever such purchaser is located, in a transaction involving purchasers in this State or (ii) the first sale to a purchaser located in this State. Each notice filed with the Securities Commission shall expire 12-months following the first sale of a security of the transaction in this State. At the written request of the issuer and upon proper showing, the Securities Commission may extend the term of the notice for up to 12 months;
INTERPRETIVE COMMENT: Regulation D of the Securities Act of 1933 requires that notice be given no later than fifteen (15) days after the first sale of a security. As previously stated, this rule is an expansion of, and an alternative to, the statutory exemption contained in Code of Ala. 1975, § 8-6-11(a)(9) which provides for an exemption from registration for sales made to no more than ten (10) purchasers. Consequently, this rule presumes that an issuer would not elect to rely upon this rule in lieu of the statutory exemption contained in Code of Ala. 1975, § 8-6-11(a)(9) until the issuer makes a sale to the eleventh purchaser in the offering, regardless of where such purchasers resides. Accordingly, the fifteen (15) calendar day filing requirement commences upon the eleventh rather than the first sale of a security of an offering involving purchasers in this State so as not to preclude reliance upon this rule by an issuer who initially chooses to rely upon the statutory exemption contained in Code of Ala. 1975, § 8-6-11(a)(9).
(iv) Each notice provided in (i) or (ii) above shall be accompanied by a nonrefundable filing fee as enumerated at § 8-6-11(C), Code of Ala. 1975. Each request for an extension as provided in (iii) above shall be accompanied by a nonrefundable filing fee. All notices shall be considered filed with the Securities Commission as of the date on which received at the offices of the Securities Commission;
(v) Unless otherwise available or the issuer is an Alabama corporation, included with or in the initial notice shall be a consent to service of process as provided for in Code of Ala. 1975, § 8-6-12;
(vi) A notice filing in the following form is to be used for transactions covered by subsection (d)(ii):
ALABAMA SECURITIES COMMISSIONER
STATE OF ALABAMA
NOTICE OF TRANSACTION PURSUANT TO RULE 830-x-6.12
1. General. This Notice is to provide information on transactions conducted under Rule 830-X-6.12 exemption from the qualification requirements of Code of Ala. 1975, §§ 8-6-3 through 8-6-9. The form is not designated to indicate whether or not the transaction complies with the requirements of those exemptions but only to provide notice to the Securities Commission that the exemption is being relied on.
2. When to File Notice. The Notice must be filed with the Securities Commission no later than 15 calendar days after the later to occur (i) the sale of a security to the eleventh purchaser, wherever such purchaser is located, in a transaction involving purchaser in this State or (ii) the first sale to a purchaser located in this State. A sale to a purchaser in this State occurs when the issuer intends to sell in connection with the same transaction. The information required by the form is to related to the entire transaction, not just the first sale or sales in this state. No subsequent notices are required for sales in connection with the same transaction. The information required by the form is to relate to the entire transaction, not just the first sale or sales in this state. The notice shall expire 12 months after the first sale of a security in the transaction in this state unless a request for an extension is granted by the Securities Commission in accordance with Rule 830-X-6-.12(i)(d)(iii).
3. Notice. The Notice may be filed in person or by mail at the office of the Securities Commission.
The Heading. If the issuer has previously qualified securities with the Securities Commission, insert the file number of the qualification in the upper right hand corner of the form in the space provided.
Item 1. Give the issuer's legal name.
Item 2. Give the street address, and the mailing address if different, of the issuer's principal place of business.
Item 3. Give the telephone number of issuer's principal place of business.
Item 4. Give the name of the state or other jurisdiction under whose laws the issuer is incorporated or organized. If the issuer is not incorporated or organized under the laws of any jurisdiction, provide the name of the jurisdiction where the issuer is domiciled and state immediately thereafter the word domicile in parenthetical as follows: "domicile)".
Item 5. Set forth the name or title of each class or type of security to be sold in the transaction.
Item 6. Give the name and business address or home address (P.O. Boxes are not acceptable) of each of the persons listed on the form and indicate by checking the applicable box or boxes whether such person is a Promoter, Beneficial Owner, Executive Officer, Director or General and/or Managing Partner.
Item 7. The value of the securities shall be the price at which the issuer proposes to sell the securities, alleged in the notice, or the actual value of the consideration (if other than money) to be received in exchange for the securities.
Item 8. Indicate which exemption from registration under the Securities Act of 1933 is being relied upon by the issuer citing the statute and, if applicable, the rule of the Securities and Exchange Commission.
Item 9. If (i) the issuer or (ii) any of the individuals listed in Item 6 of the notice through a different issuer, have issued securities in the state of Alabama in the last four (4) years pursuant to an exempt offering, list the name of the issuer, the individual listed in Item 6, if applicable, and cite the exemption from registration under the Alabama Securities Act upon which such issuer relied.
Item 10. Date and Signature. The notice should be signed by an authorized officer, director, general partner or trustee of the issuer (or a person occupying a position with the issuer of equivalent responsibility) or by the authorized attorney of the issuer. If the person the Securities Commission is to contact in the event of questions concerning the transaction or the notice is different than the signer, insert the contact person's name, telephone number and correspondence address in the spaces provided. Otherwise, provide the information with respect to the signer.
4. Filing Fee . Each notice must be accompanied by the filing fee. Each request for an extension of this notice must be accompanied by the filing fee. All checks shall be made payable to the "Alabama Securities Commission".
5. Consent to Service of Process. Each issuer, other than an Alabama corporation, shall file a consent to service of process on file with the Securities Commission. Use Form U-2. Also, the consent to service of process must be accompanied by a certified resolution of the Board of Directors on Form U-2A.
(e) In all sales to nonaccredited investors the issuer and any persons acting on its behalf shall have reasonable grounds to believe, and after making diligent inquiry shall believe, that both of the following conditions are satisfied:
(i) The investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to his other security holdings and as to his financial situation and needs. For the limited purpose of this condition only, it may be presumed that if the investment does not exceed 20% of the investors net worth (excluding principal residence, furnishings therein and personal automobiles) it is suitable;
(ii) The purchaser either alone or with his purchaser representative(s) has such knowledge and experience in financial and business matters that he is or they are capable of evaluating the merits and risks of the prospective investment.
(f) The following legend shall be placed on the certificate or other document which evidences the securities:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH NOR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE AND SUCH REGISTRATION IS NOT CONTEMPLATED. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED IN WHOLE OR IN PART IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
(g) No public advertising or general solicitation is used in connection with the issue of which the transaction in reliance on this exemption is a part.
(3) Offers and sales which are exempt under this rule may not be combined with offers and sales by issuers in transactions which are exempt under any other rule or section of this Act; however, nothing herein shall be deemed an election. If the offer and sale should for any reason fail to comply with all of the conditions for this exemption, the issuer may claim the availability of any other applicable exemption.
(4) In view of the objective of this rule and the purposes and policies underlying the Act, this exemption is not available to any issuer with respect to any transaction which, although in technical compliance with the rule, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this rule.(Rule entitled "Further Conditioning of Limited Offering Exemption" filed March 15, 1984. Repealed: Filed September 28, 1990. New Rule: Filed October 23, 1997; effective November 27, 1997. Amended: Filed October 13, 1998; effective November 17, 1998. Amended: Filed August 18, 1999; effective September 22, 1999. Amended: Filed October 23, 2009; effective November 27, 2009.)
Author: Joseph P. Borg
Statutory Authority: Code of Ala. 1975, §§ 8-6-11(a)(9), 8-6-23.
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