Chapter DFI-Sec 2
REGISTRATION EXEMPTIONS AND FEDERAL COVERED SECURITY NOTICE FILINGS
DFI-Sec 2.01 Exempt securities. DFI-Sec 2.02 Exempt transactions. DFI-Sec 2.027 Exemption for solicitations of interest prior to registration or exemption. DFI-Sec 2.028 Wisconsin issuer registration exemption by filing. DFI-Sec 2.029 Federal regulation D rule 505 exemption by filing. DFI-Sec 2.03 Exemption proceedings. DFI-Sec 2.04 Federal covered security notice filings. Ch. DFI-Sec 2 NoteNote: Chapter SEC 2 was renumbered chapter DFI-Sec 2 under s. 13.93 (2m) (b) 1., Stats., and corrections made under s. 13.93 (2m) (b) 6. and 7., Stats., Register, December, 1996, No. 492. DFI-Sec 2.01(1)(a)(a) Any revenue obligation payable from payments to be made in respect of property or money used under a lease, sale or loan arrangement by or for a nongovernmental industrial or commercial enterprise, is exempted under s. 551.201 (1), Stats., if any of the following are met: DFI-Sec 2.01(1)(a)1.1. The enterprise is a public utility described under s. 551.201 (5), Stats., having securities registered under section 12 of the securities exchange act of 1934, or is a wholly-owned subsidiary of one or more of such utilities. DFI-Sec 2.01(1)(a)2.2. Any securities of the enterprise, or any securities of an unconditional guarantor of all payments under the lease, sale or loan arrangement, are covered securities under section 18(b)(1) of the securities act of 1933 or are exempt under s. 551.201 (6), Stats. DFI-Sec 2.01(1)(a)3.3. A notice of the proposed offering is filed with the division prior to the offering, including a trust indenture meeting the requirements of s. DFI-Sec 3.04, an official statement or a prospectus meeting the requirements of s. DFI-Sec 3.03 that contains financial statements for the enterprise and additional information as the division may require, and the division does not by order deny the exemption within 10 days of the date the notice is filed. DFI-Sec 2.01(1)(b)(b) Any guarantee of, or any put option or similar agreement to purchase from a holder of, any security exempt under s. 551.201 (1), Stats., is exempted from s. 551.301, Stats. DFI-Sec 2.01(3)(3) The Chicago stock exchange is designated as a national securities exchange qualifying for registration exemption status under s. 551.201 (6), Stats., but only with respect to Tier 1 securities listed on that exchange, provided that proposed rule changes with respect to its Tier 1 securities are approved by the U.S. securities and exchange commission, and provided that a Memorandum of Understanding is entered into and is in force and effect between the Chicago stock exchange and the north american securities administrators, inc. The designation is subject to the authority of the division to revoke the designation by order based upon a determination that the forecast exchange’s requirements for listing or maintenance for Tier 1 securities as contained in the Memorandum of Understanding and as published in the Commerce Clearing House NASAA Reports, have been so changed or insufficiently applied that the protection of investors contemplated by the exemption no longer exists. The division also may deny or revoke, by order, registration exemption status accorded by this paragraph with respect to a specific issue of securities or category of securities on the exchange. The issuance of any order by the division under this paragraph shall be in accordance with the provisions of the Memorandum of Understanding relating to notice of and opportunity for hearing, written findings of fact and conclusions of law, and judicial review. DFI-Sec 2.01(4)(a)(a) The exemption for the offer or sale of a note, bond, debenture or other evidence of indebtedness issued by a person or issuer listed in s. 551.201 (7) (intro.), Stats., that is a domestic, Wisconsin corporation to persons other than its members is available for use if the issuer or a registered broker-dealer files a notice of the proposed issuance with the division prior to the offering, including: a trust indenture meeting the requirements of s. DFI-Sec 3.04, under which the evidence of debt is proposed to be issued; a prospectus describing the issuer, the trust indenture and the evidence of debt proposed to be issued, which shall be given or sent to each person to whom an offer of such evidence of debt is made at the time or times specified in s. DFI-Sec 3.03 (1); and such additional information as the division may require; and the division does not by order deny or revoke the exemption within 10 days. DFI-Sec 2.01(4)(b)(b) The exemption for the offer or sale of a note, bond, debenture or other evidence of indebtedness issued by a person or issuer listed in s. 551.201 (7) (intro.), Stats., that is a domestic, Wisconsin corporation, is available for use without the need for a filing with the division if the securities are sold exclusively to its members. A person does not become a ”member” for purposes of this subdivision solely by reason of the purchase of the issuer’s securities. DFI-Sec 2.01(5)(5) The exemption for the offer or sale of a note, bond, debenture or other evidence of indebtedness issued by a person or issuer listed in s. 551.201 (7) (intro.), Stats., that is not a domestic, Wisconsin corporation, is available for use if the issuer or a registered broker-dealer files a notice of the proposed issuance with the division prior to the offering, identifying the security and the basis of its qualification under par. (a) or (b) and includes: a trust indenture meeting the requirements of s. DFI-Sec 3.04, under which the evidence of debt is proposed to be issued; a prospectus describing the issuer, the trust indenture and the evidence of debt proposed to be issued, which shall be given or sent to each person to whom an offer of such evidence of debt is made at the time or times specified in s. DFI-Sec 3.03 (1); and such additional information as the division may require; and the division does not by order deny or revoke the exemption within 10 days. The security qualifies under this exemption if the issuer and any predecessor have not defaulted within the current fiscal year or the 3 preceding fiscal years in any fixed interest or principal obligation; and the security qualifies under either of the following: DFI-Sec 2.01(5)(a)1.1. The issuer and its predecessors have not been in existence for 3 years, and the securities proposed to be sold are secured by a mortgage or deed of trust upon land and buildings which is or will become a first lien at or prior to the issuance of such evidences of debt, or provisions satisfactory to the division are made for impounding the proceeds from their sale until such first lien is established, and the total amount of such securities does not exceed 50% of the then fair market value of the land and buildings included in such mortgage or deed of trust, less the amount of any unpaid special assessment taxes. DFI-Sec 2.01(5)(a)2.2. A signed or conformed opinion of counsel for the issuer or other evidence satisfactory to the division shall be provided with respect to the validity and rank of the lien of the mortgage or deed of trust, and evidence satisfactory to the division shall be provided that the total amount of the securities proposed to be offered does not exceed 50% of the then fair market value of the land and buildings included in the mortgage or deed of trust, less the amount of any unpaid special assessment taxes. DFI-Sec 2.01(5)(b)1.1. The issuer or its predecessors have had an excess of revenues over expenses, excluding interest expense, provision for depreciation and extraordinary items, for each of the 2 fiscal years next preceding such offer or sale, or average net revenues for the last 3 fiscal years next preceding such offer or sale, of not less than 1-1/2 times the aggregate annual interest requirements on the issue of securities to be sold under this subsection and all securities of equal or prior rank to be outstanding immediately after such sale. DFI-Sec 2.01(5)(b)2.2. A balance sheet of the issuer as of the end of the last fiscal year preceding the date of filing, and statements of income and changes in financial position and an analysis of surplus of the issuer shall be filed for each of its 3 immediately preceding fiscal years meeting the requirements of s. DFI-Sec 7.06. DFI-Sec 2.01 HistoryHistory: Cr. Register, December 1969, No. 168, eff. 1-1-70; r. and recr. Register, August, 1972, No. 200, eff. 9-1-72; cr. (6), Register, October, 1974, No. 226, eff. 11-1-74; r. (1), renum. (6) to be (1) and am., renum. (2) to (5) to be (3) to (6), am. (3) and (4), r. and recr. (5), cr. (2) and (7), Register, December, 1977, No. 264, eff. 1-1-78; am. (2), r. (3), renum. (4), (5) and (7) to be (3), (4) and (5), am. (3) (a), cr. (7) and (8), Register, September, 1978, No. 273, eff. 10-1-78; emerg. am. (1) (a) 2., eff. 10-1-78; am. (1) (a) 2., Register, January, 1979, No. 277, eff. 2-1-79; am. (7) (d) and (h), Register, December, 1979, No. 288, eff. 1-1-80; am. (1) (a) 1. to 3., (3) (a), (4) (a) and (b), (5) (f), (6) (a) and (7) (a) and (d), Register, December, 1980, No. 300, eff. 1-1-81; am. (1) (a) 3. and (3) (a), cr. (7m), Register, December, 1981, No. 312, eff. 1-1-82; emerg. cr. (1) (c) and (d), (10), (11) and (12), eff. 5-1-82; cr. (1) (c) and (d), (9), (10) and (11), Register, September, 1982, No. 321, eff. 10-1-82; am. (7) (d), Register, December, 1982, No. 324, eff. 1-1-83; am. (1) (a) 3., Register, December, 1983, No. 336, eff. 1-1-84; am. (1) (a) 3., r. (10), renum. (11) to be (10), Register, December, 1985, No. 360, eff. 1-1-86; emerg. am. (1) (a), r. (7), eff. 1-1-86; r. (7), renum. (8) to (10) to be (7) to (9), Register, March, 1986, No. 363, eff. 4-1-86; am. (1) (a), Register, May, 1986, No. 365, eff. 6-1-86; emerg. am. (1) (c) 3., eff. 7-1-86; am. (1) (b), (c) 2. and 3., (3) (a) and (4) (b), r. (7m), Register, December, 1986, No. 372, eff. 1-1-87; emerg. am. (1) (c) 3., eff. 7-1-88; am. (1) (c) 3. and (9) (b) 14., Register, December, 1988, No. 396, eff. 1-1-89; renum. (3) to (9) to be (4) to (10), cr. (3), Register, December, 1990, No. 420, eff. 1-1-91; renum. (3) to be (3) (a), cr. (3) (b), Register, December, 1991, No. 432, eff. 1-1-92; emerg. cr. (1) (c) 4. to 6., (d) 4. to 6., eff. 5-1-94, cr. (1) (c) 4. to 6., (d) 4. to 6., Register, September, 1994, No. 465, eff. 10-1-94; am. (1) (a), 3., r. (1) (c) 2. and 3., (d) 2. and 3., renum (1) (c) 4., 5. and 6., (d) 4., 5. and 6. to be (1) (c) 2. to 4. and (d) 2. to 4., cr. (3) (c) and (d), Register, December, 1995, No. 480, eff. 1-1-96; emerg. cr. (1) (c) 5. and (d) 5. eff. 7-1-96; cr. (3) (e), Register, July, 1996, No. 487, eff. 8-1-96; cr. (1) (c) 5., (d) 5., Register, November, 1996, No. 491, eff. 12-1-96; renum. (6) (intro.) to be (6) and am., r. (6) (a) to (h), Register, December, 1996, No. 492, eff. 1-1-97; corrections in (1) (a) and (4) (a) made under s. 13.93 (2m) (b) 7., Stats., Register, March, 1997, No. 495; am. (1) (a) 2., (9) and (10) (a), r. (3) (a) to (d), Register, December, 1998, No. 516, eff. 1-1-99; correction made under s. 13.93 (2m) (b) 1., Stats., Register, December, 1998, No. 516; emerg. cr. (1) (c) 6. and (1) (d) 6., eff. 2-25-99; cr. (1) (c) 6. and (1) (d) 6., Register, August, 1999, No. 524, eff. 9-1-99; renum. (3) to be (3) (a), cr. (3) (b), Register, December, 1999, No. 528, eff. 1-1-00; CR 08-077: am. (1) (a), (b), (4) (a), (9) and (10) (a), r. (1) (c), (d), (2), (3) (b) and (5) to (8), renum. (3) (a) to be (3) and am., r. and recr (4) (b), cr. (5) Register December 2008 No. 636, eff. 1-1-09; CR 09-056: r. (9) and (10) Register December 2009 No. 648, eff. 1-1-10. DFI-Sec 2.02(1)(a)(a) Any sale of an outstanding security by or on behalf of a person not in control of the issuer or controlled by the issuer or under common control with the issuer and not involving a distribution; but if the sale is effected through a broker-dealer, the transaction is deemed isolated only if it is one of not more than 5 such transactions effected by or through the broker-dealer in this state during the prior 12 months; and DFI-Sec 2.02(1)(b)(b) Any sale of an outstanding security by or on behalf of a person in control of the issuer or controlled by the issuer or under common control with the issuer if the sale is effected pursuant to brokers’ transactions in accordance with section 4 (4) of the Securities Act of 1933 and rule 144 thereunder; or pursuant to any other transaction not effected through a broker-dealer and not involving a distribution if the sale, including any other sales by the person of securities of the same class during the prior 12 months, does not exceed 1% of the outstanding shares or units of that class. DFI-Sec 2.02(2)(2) In any nonissuer transaction effected by or through a registered broker-dealer under s. 551.202 (6), Stats., pursuant to an unsolicited order or offer to purchase, the broker-dealer shall obtain from the purchaser a written acknowledgment that the purchase was unsolicited, or the confirmation delivered to the purchaser or a memorandum delivered in connection therewith shall confirm that the purchase was unsolicited by the broker-dealer or any agent of the broker-dealer. This exemption includes only transactions between a broker-dealer and a purchaser of a security. DFI-Sec 2.02(5)(a)(a) Offerees or persons holding directly or indirectly all the issuer’s securities include all joint or common owners and all beneficial owners of its securities, and all beneficial owners of any corporation, partnership, association or trust holding any of the issuer’s securities and organized in connection with the offer or sale of the securities, provided that any relative or spouse, or any relative of the spouse, taking or holding the securities in joint or common tenancy with and having the same home as the offeree or person, shall not be deemed a separate offeree or person; DFI-Sec 2.02(5)(b)(b) Issuers affiliated by reason of direct or indirect control or persons affiliated by reason of direct or indirect control of any issuer are deemed to be a single issuer or person; but use of an exemption for the offer and sale of securities by such affiliated issuer or person shall not be denied on account of such affiliation provided the offer and sale are not part of a common business purpose or plan of offering, or if upon the filing of an application the division so orders. A “common business purpose or plan of offering” is presumed where the offer or sale of securities is not separate and distinct from another offer and sale of securities with respect to (i) the application of proceeds, (ii) the physical proximity of real property or other assets, or (iii) the financial affairs of the business; DFI-Sec 2.02(5)(d)1.1. Except as provided in this subdivision, any offer or sale of interests in an entity that is or will be primarily engaged in oil, gas or mining activities, any investment contract irrespective of the kind of assets held or business engaged in by the enterprise, or any certificate of interest or participation in an oil, gas or mining title or lease, or in payments out of production under the title or lease, if the aggregate offering price or face amount, whichever is greater, of all securities to be offered by or on behalf of the issuer, together with the value of any securities sold to persons in this state by or on behalf of the issuer during the prior 12 months, exceeds $100,000, unless prior to the offering the issuer files a notice of the proposed offer or sale with the division, including any prospectus, circular or other material to be delivered to offerees, and other information as the division may require, and the division does not by order withdraw, deny or revoke the exemption within 10 days. This paragraph is not applicable to any offer or sale made by a broker-dealer registered in Wisconsin if the broker-dealer is not affiliated with either the issuer or sponsor of the issuer by means of direct or indirect common control; DFI-Sec 2.02(5)(d)2.2. Any offering of securities if the issuer, any of its officers, directors, general partners, controlling persons or affiliates thereof are or would be disqualified from use of the registration exemption in s. DFI-Sec 2.029 as a result of any of the causes specified in s. DFI-Sec 2.029 (3) (a) 1. to 4., except for any person or persons subject to a disqualification who meets the conditions for waiver in s. DFI-Sec 2.029 (3) (b) 1., or for any person who receives a waiver by the division upon a showing of good cause that it is not necessary under the circumstances that use of the exemption be withdrawn. DFI-Sec 2.02(7)(a)(a) “Stock dividend or equivalent equity distribution” within the meaning of s. 551.202 (22), Stats., does not include any action by the corporation which has or may have the effect of consolidating securities of a class of outstanding equity securities into a smaller number of securities of that class; DFI-Sec 2.02(7)(b)(b) “Stock dividend” within the meaning of s. 551.202 (22), Stats., includes the issuance of shares under a dividend reinvestment plan in which the election by a shareholder to participate in the plan is voluntary and such election may be rescinded at any time upon notice to the issuer. DFI-Sec 2.02(9)(9) The following transactions are exempted under s. 551.203, Stats., without limiting the division’s authority thereunder: DFI-Sec 2.02(9)(a)(a) An exemption under this subsection is available for any isolated issuer transaction relating to redeemable securities of an investment company registered under the investment company act of 1940, effected through a registered broker-dealer pursuant to an unsolicited order or offer to purchase, provided that the broker-dealer obtains from the purchaser a written acknowledgment that the purchase was unsolicited or the confirmation delivered to the purchaser or a memorandum delivered in connection therewith confirms that the purchase was unsolicited by the broker-dealer or any agent of the broker-dealer. A transaction is presumed to be “isolated” if it is one of not more than 3 such transactions during the prior 12 months. DFI-Sec 2.02(9)(c)(c) Any transaction pursuant to an offer to existing security holders of the issuer, and to not more than 25 other persons in this state less the number of persons in this state with whom the issuer has effected any transactions during the period of 12 months preceding the offer pursuant to s. 551.202 (14) and (24), Stats., excluding persons listed in s. 551.202 (13), Stats., and rules there under, if no commission or other remuneration other than a standby commission is paid or given directly or indirectly for soliciting any security holder in this state; and if the issuer files with the division prior to the offering a notice specifying the terms of the offer, including any prospectus, circular or other material to be delivered to offerees in connection with the transaction and such other information as the division may require, and the division does not by order disallow the exemption within 10 days. DFI-Sec 2.02(9)(d)(d) For purposes of the registration exemption in s. 551.202 (2), Stats., any Standard & Poor’s, Mergent or Fitch securities manual that contains, in whatever format, the information specified in s. 551.202 (2) (d) 1. to 4., Stats., is designated as a “nationally recognized securities manual” under s. 551.202 (2) (d), Stats. DFI-Sec 2.02(9)(e)(e) Any offer or sale of securities pursuant to a transaction not involving a public offering under the securities act of 1933 which the division by order exempts upon application filed by the issuer or seller, including such information as the division may require, effected in compliance with such conditions as the division may prescribe. DFI-Sec 2.02(9)(g)(g) Any offer by a registered broker-dealer pursuant to a preliminary prospectus, provided all the following requirements are met: DFI-Sec 2.02(9)(g)2.2. The preliminary prospectus has been filed with the U.S. securities and exchange commission or the division for a period of 10 days, and the division does not by order deny the exemption; and DFI-Sec 2.02(9)(g)3.3. Before the securities referred to in subd. 1. may legally be sold, no customer funds are received and no customer signs any subscription agreement or similar document relating to the securities offered other than a tentative reservation of securities that is not binding on the subscriber until ratified by the subscriber after the securities may legally be sold. DFI-Sec 2.02(9)(h)(h) Any transaction, in other than the initial public offering, involving any government security, other than a revenue obligation and other than a security issued or guaranteed by the United States, or any agency or corporate instrumentality of the United States, where the government security is of investment quality rating as determined by the office of the division of banking for the state of Wisconsin or by the comptroller of the currency by virtue of credit worthiness, or any transaction involving any government security dated prior to the effective date of this paragraph. DFI-Sec 2.02(9)(j)(j) Offers or sales of a discretionary or managed trading account involving discretion or management provided by a broker-dealer registered in this state or by an investment adviser registered in this state. DFI-Sec 2.02(9)(k)(k) Any offer, but not a sale, of a security through a presentation to potential investors at an organized venture capital fair or other investment forum designated in writing by the division. In order to be designated as a venture capital fair or investment forum for purposes of this exemption, a written application for designation shall be submitted to the division either by a sponsor of the fair or forum or by any interested person if accompanied by the written affirmation of a sponsor, setting forth the dates, places and times the activity will take place, the names and addresses of all sponsors of the activity, and the criteria to be met for a firm or person to participate in the fair or forum. Within 10 days from the receipt of the application or 10 days from the date of receipt of any amendment or supplemental information to the application required by the division, the division shall either designate the applicant a venture capital fair or investment forum or notify the applicant in writing why such a designation will not be made. For purposes of this paragraph, the terms “venture capital fair” or “investment forum” include, but are not limited to, gatherings open to public attendance that are sponsored by one or more not-for-profit entities at which persons representing existing or proposed businesses may make presentations regarding their business plans and products, or their financing or investment capital needs or proposals. DFI-Sec 2.02(9)(L)(L) An exemption under this subsection is available for any transaction by the sponsor of a unit investment trust involving the resale of a share of beneficial interest in the trust that meets all of the following conditions: DFI-Sec 2.02(9)(L)1.1. The sponsor acquired the share of beneficial interest in the secondary market. DFI-Sec 2.02(9)(L)2.2. The share of beneficial interest had been sold in the secondary market by a public holder of the share after the initial public offering of shares by the trust had been completed. DFI-Sec 2.02(9)(n)(n) Any offer or sale of a security by an issuer in a transaction that meets each of the following requirements based on the North American Securities Administrators Association Model Accredited Investor Exemption: DFI-Sec 2.02(9)(n)1.1. Sales of the securities shall be made only to persons who are accredited investors as defined in 17 CFR 230.501(a), or who the issuer reasonably believes are accredited investors. DFI-Sec 2.02(9)(n)2.2. The exemption is not available to an issuer that is in the development stage that either has no specific business plan or purpose or had indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person. DFI-Sec 2.02(9)(n)3.3. The issuer reasonably believes that all purchasers are purchasing for investment and not with the view to or for sale in connection with a distribution of the security. Any resale of a security sold in reliance on this exemption within 12 months of sale shall be presumed to be with a view to distribution and not for investment, except a resale pursuant to a registration statement effective under s. 551.303 or 551.304, Stats., or to an accredited investor pursuant to an exemption available under ch. 551, Stats. DFI-Sec 2.02(9)(n)4.4. Neither the issuer, any of the issuer’s predecessors, any affiliated issuer, any of the issuer’s officers, directors, general partners, beneficial owners of 10% or more of any class of its equity securities, any of the issuer’s promoters presently connected with the issuer in any capacity, nor any broker-dealer or agent offering or selling the securities is or would be disqualified under s. DFI-Sec 2.029 (3) (a) 1. to 4., absent an applicable waiver under s. DFI-Sec 2.029 (3) (b), and with the timing of the disqualification events described in s. DFI-Sec 2.029 (3) (a) computed for purposes of this exemption from the date of the filing under subd. 9. of this section. DFI-Sec 2.02(9)(n)5.5. A general announcement of the proposed offering may be made by any means, which shall include each of the following information items only, except as provided in subd. 6., and unless additional information is specifically permitted by the division: DFI-Sec 2.02(9)(n)5.e.e. The name, address and telephone number of the person to contact for additional information; and DFI-Sec 2.02(9)(n)5.f.f. A statement disclosing that sales will only be made to accredited investors, that no money or other consideration is being solicited or will be accepted by way of this general announcement, and that the securities have not been registered with or approved by any state securities agency or the U.S. securities and exchange commission and are being offered and sold pursuant to an exemption from registration. DFI-Sec 2.02(9)(n)6.6. The issuer, in connection with an offer, may provide information in addition to the general announcement under subd. 5., if the information meets either of the following requirements of this subdivision: DFI-Sec 2.02(9)(n)6.a.a. The information is delivered through an electronic database that is restricted to persons who have been prequalified as accredited investors; or DFI-Sec 2.02(9)(n)6.b.b. The information is delivered after the issuer reasonably believes that the prospective purchaser is an accredited investor. DFI-Sec 2.02(9)(n)7.7. No telephone solicitation shall be permitted unless prior to placing the call, the issuer reasonably believes that the prospective purchaser to be solicited is an accredited investor.
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