Chapter 551

551.202(2)(d)4. 4. An audited income statement for each of the issuer’s 2 immediately previous fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case of a reorganization or merger when each party to the reorganization or merger had audited income statements, a pro forma income statement.

551.202(2)(e) (e) Any of the following requirements is met:

551.202(2)(e)1. 1. The issuer of the security has a class of equity securities listed on a national securities exchange registered under section 6 of the Securities Exchange Act of 1934 or designated for trading on the National Association of Securities Dealers Automated Quotation System.

551.202(2)(e)2. 2. The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940.

551.202(2)(e)3. 3. The issuer of the security, including its predecessors, has been engaged in continuous business for at least 3 years.

551.202(2)(e)4. 4. The issuer of the security has total assets of at least $2,000,000 based on an audited balance sheet as of a date within 18 months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had such an audited balance sheet, a pro forma balance sheet for the combined organization.

551.202(3) (3) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the Board of Governors of the Federal Reserve System.

551.202(4) (4) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in an outstanding security if the guarantor of the security files reports with the Securities and Exchange Commission under the reporting requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934 (15 USC 78m or 78o (d)).

551.202(5) (5) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security to which any of the following applies:

551.202(5)(a) (a) The security is rated at the time of the transaction by a nationally recognized statistical rating organization in one of its 4 highest rating categories.

551.202(5)(b) (b) The security has a fixed maturity or a fixed interest or dividend, if all of the following apply:

551.202(5)(b)1. 1. A default has not occurred during the current fiscal year or within the 3 previous fiscal years, or during the existence of the issuer and any predecessor if less than 3 fiscal years, in the payment of principal, interest, or dividends on the security.

551.202(5)(b)2. 2. The issuer is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not and has not been within the previous 12 months a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person.

551.202(6) (6) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter effecting an unsolicited order or offer to purchase, but with respect to a nonissuer transaction involving a security that is not a federal covered security the administrator may require by rule that the records of the broker-dealer confirm that the order or offer to purchase was unsolicited.

551.202(7) (7) A nonissuer transaction executed by a bona fide pledgee without the purpose of evading this chapter.

551.202(8) (8) A nonissuer transaction by a federal covered investment adviser with investments under management in excess of $100,000,000 acting in the exercise of discretionary authority in a signed record for the account of others.

551.202(9) (9) A transaction in a security, whether or not the security or transaction is otherwise exempt, in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, if the terms and conditions of the issuance and exchange or the delivery and exchange and the fairness of the terms and conditions have been approved by the administrator after a hearing.

551.202(10) (10) A transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters.

551.202(11) (11) A transaction in a note, bond, debenture, or other evidence of indebtedness secured by a mortgage or other security agreement if all of the following apply:

551.202(11)(a) (a) The note, bond, debenture, or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit.

551.202(11)(b) (b) A general solicitation or general advertisement of the transaction is not made.

551.202(11)(c) (c) A commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this chapter as a broker-dealer or as an agent.

551.202(12) (12) A transaction by an executor, administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator.

551.202(13) (13) A sale or offer to sell to any of the following:

551.202(13)(a) (a) An institutional investor.

551.202(13)(am) (am) An accredited investor, as defined in Rule 501 (a) adopted under the Securities Act of 1933 (17 CFR 230.501 (a)), provided that prior to the sale in this state to an accredited investor described in Rule 501 (a) (5) or (6) adopted under the Securities Act of 1933, the seller files a consent to service of process with the administrator in the form required under s. 551.611. Failure to file the consent as required is a cause for administrative action by the administrator under s. 551.604 but does not result in the loss of this exemption. This consent is not required to be filed if any of the following apply:

551.202(13)(am)1. 1. The issuer of the securities to be sold has its principal place of business or a majority of its full-time employees located in this state.

551.202(13)(am)2. 2. The issuer or seller of the securities files or has previously filed a consent to service of process with the administrator.

551.202(13)(am)3. 3. The seller is a broker-dealer or agent of the issuer registered under this chapter.

551.202(13)(ar) (ar) A certified investor, or a person whom the issuer reasonably believes is a certified investor at the time of the sale or offer of the security, if all of the following apply:

551.202(13)(ar)1. 1. The transaction meets the requirements of the federal exemption for intrastate offerings in section 3 (a) (11) of the Securities Act of 1933 (15 USC 77c (a) (11)) and Rule 147 adopted under the Securities Act of 1933 (17 CFR 230.147).

551.202(13)(ar)2. 2. If the offer or sale of the security had been undertaken under an exemption specified in Rule 506 (a) to (c) adopted under the Securities Act of 1933 (17 CFR 230.506 (a) to (c)), the transaction would not have been disqualified from the exemption under Rule 506 (d) adopted under the Securities Act of 1933 (17 CFR 230.506 (d)), except that the administrator may waive the requirement under this subdivision and authorize transactions in reliance on the exemption under this paragraph notwithstanding the condition specified in this subdivision.

551.202(13)(b) (b) A federal covered investment adviser.

551.202(13)(c) (c) Any other person exempted by rule adopted or order issued under this chapter.

551.202(14) (14) 

551.202(14)(a) (a) Subject to par. (b), any transaction pursuant to an offer directed by the offeror to not more than 25 persons in this state excluding those persons designated in sub. (13) but including persons exempt under sub. (24), during any period of 12 consecutive months whether or not the offeror or any of the offerees is then present in this state if all of the following apply:

551.202(14)(a)1. 1. No general solicitation or general advertising is made in connection with the offer to sell or sale of the securities unless it has been permitted by the administrator.

551.202(14)(a)2. 2. No commission or other remuneration is paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting any person in this state other than those persons designated in sub. (13).

551.202(14)(a)3. 3. The offeror reasonably believes that all the purchasers in this state, other than those designated in sub. (13), are purchasing for investment.

551.202(14)(b) (b) The administrator may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in par. (a), and may require reports of sales under this exemption.

551.202(14m) (14m) 

551.202(14m)(a) (a) Any transaction pursuant to an offer directed by the offeror to not more than 100 residents of this state, excluding those persons designated in sub. (13) (a), (am), and (ar) but including persons exempt under sub. (24), if all of the following apply:

551.202(14m)(a)1. 1. The issuer is a business entity that is organized under the laws of this state and authorized to do business in this state, that has its principal office in this state, and that has a majority of its full-time employees working in this state.

551.202(14m)(a)2. 2. No commission or other remuneration is paid or given, directly or indirectly, for any person’s participation in the offer or sale of securities for the issuer unless the person is registered as a broker-dealer or agent under this chapter.

551.202(14m)(a)3. 3. No general solicitation or general advertising is made in connection with the offer to sell or sale of the securities unless it has been permitted by the administrator.

551.202(14m)(a)4. 4. If the transaction had been undertaken under an exemption specified in Rule 506 (a) to (c) adopted under the Securities Act of 1933 (17 CFR 230.506 (a) to (c)), the transaction would not have been disqualified from the exemption under Rule 506 (d) adopted under the Securities Act of 1933 (17 CFR 230.506 (d)), except that the administrator may waive the requirement under this subdivision and authorize transactions in reliance on the exemption under this paragraph notwithstanding the condition specified in this subdivision.

551.202(14m)(b) (b) The exemption under this subsection and the exemption under sub. (27) may be used in conjunction with each other.

551.202(15) (15) A transaction under an offer to existing security holders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options, or warrants, if a commission or other remuneration, other than a standby commission, is not paid or given, directly or indirectly, for soliciting a security holder in this state and if, prior to any offer or sale of any security that is not a federal covered security, the issuer files a notice specifying the terms of the offer, all other information that the administrator by rule requires, and any additional information reasonably related to the offering required to be filed by the administrator within 10 days after the filing date of the notice, and the administrator does not by order disallow the exemption within 10 days after the date of filing the notice or, if additional information is required, within 10 days after the date of filing that information.

551.202(16) (16) An offer to sell, but not a sale, of a security not exempt from registration under the Securities Act of 1933 if all of the following apply:

551.202(16)(a) (a) A registration or offering statement or similar record as required under the Securities Act of 1933 has been filed, but is not effective, or the offer is made in compliance with Rule 165 adopted under the Securities Act of 1933 (17 CFR 230.165).

551.202(16)(b) (b) A stop order of which the offeror is aware has not been issued against the offeror by the administrator or the Securities and Exchange Commission, and an audit, inspection, or proceeding that is public and that may culminate in a stop order is not known by the offeror to be pending.

551.202(17) (17) An offer to sell, but not a sale, of a security exempt from registration under the Securities Act of 1933 if all of the following apply:

551.202(17)(a) (a) A registration statement has been filed under this chapter, but is not effective.

551.202(17)(b) (b) A solicitation of interest is provided in a record to offerees in compliance with a rule adopted by the administrator under this chapter.

551.202(17)(c) (c) A stop order of which the offeror is aware has not been issued by the administrator under this chapter and an audit, inspection, or proceeding that may culminate in a stop order is not known by the offeror to be pending.

551.202(18) (18) A transaction involving the distribution of the securities of an issuer to the security holders of another person in connection with a merger, consolidation, exchange of securities, sale of assets, or other reorganization to which the issuer, or its parent or subsidiary and the other person, or its parent or subsidiary, are parties.

551.202(19) (19) A rescission offer, sale, or purchase under s. 551.511.

551.202(20) (20) An offer or sale of a security to a person not a resident of this state and not present in this state if the offer or sale does not constitute a violation of the laws of the state or foreign jurisdiction in which the offeree or purchaser is present and is not part of an unlawful plan or scheme to evade this chapter.

551.202(21) (21) Employees’ stock purchase, savings, option, profit-sharing, pension, or similar employees’ benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer’s parent, for the participation of their employees including offers or sales of such securities to all of the following:

551.202(21)(a) (a) Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisors.

551.202(21)(b) (b) Family members who acquire such securities from those persons through gifts or domestic relations orders.

551.202(21)(c) (c) Former employees, directors, general partners, trustees, officers, consultants, and advisors if those individuals were employed by or providing services to the issuer when the securities were offered.

551.202(21)(d) (d) Insurance agents who are exclusive insurance agents of the issuer, or the issuer’s subsidiaries or parents, or who derive more than 50 percent of their annual income from those organizations.

551.202(22) (22) A transaction involving any of the following:

551.202(22)(a) (a) A stock dividend or equivalent equity distribution, whether the corporation or other business organization distributing the dividend or equivalent equity distribution is the issuer or not, if nothing of value is given by stockholders or other equity holders for the dividend or equivalent equity distribution other than the surrender of a right to a cash or property dividend if each stockholder or other equity holder may elect to take the dividend or equivalent equity distribution in cash, property, or stock.

551.202(22)(b) (b) An act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims, or property interests, or partly in such exchange and partly for cash.

551.202(22)(c) (c) The solicitation of tenders of securities by an offeror in a tender offer in compliance with Rule 162 adopted under the Securities Act of 1933 (17 CFR 230.162).

551.202(23) (23) A nonissuer transaction in an outstanding security by or through a broker-dealer registered or exempt from registration under this chapter, if the issuer is a reporting issuer in a foreign jurisdiction designated by this subsection or by rule adopted or order issued under this chapter; has been subject to continuous reporting requirements in the foreign jurisdiction for not less than 180 days before the transaction; and the security is listed on the foreign jurisdiction’s securities exchange that has been designated by this subsection or by rule adopted or order issued under this chapter, or is a security of the same issuer that is of senior or substantially equal rank to the listed security or is a warrant or right to purchase or subscribe to any of the foregoing. For purposes of this subsection, Canada, together with its provinces and territories, is a designated foreign jurisdiction and The Toronto Stock Exchange, Inc. and the TSX Venture Exchange, Inc. are designated securities exchanges. After an administrative hearing in compliance with ch. 227, the administrator, by rule adopted or order issued under this chapter, may revoke the designation of a securities exchange under this subsection, if the administrator finds that revocation is necessary or appropriate in the public interest and for the protection of investors.

551.202(24) (24) Any offer or sale of its securities by an issuer, having its principal office in this state, if the aggregate number of persons holding directly or indirectly all of the issuer’s securities, after the securities to be issued are sold, does not exceed 25, exclusive of persons under sub. (13), if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state, except to broker-dealers and agents licensed in this state, and if no advertising is published unless it has been permitted by the division of securities.

551.202(24m) (24m) Any offer or sale of its securities by an issuer to a resident of this state if all of the following apply:

551.202(24m)(a) (a) The issuer is a business entity that is organized under the laws of this state and authorized to do business in this state, that has its principal office in this state and that has a majority of its full-time employees working in this state.

551.202(24m)(b) (b) The aggregate number of persons holding directly or indirectly all of the issuer’s securities, after the securities to be issued are sold, does not exceed 100, exclusive of persons under sub. (13) (a), (am), and (ar).

551.202(24m)(c) (c) No commission or other remuneration is paid or given, directly or indirectly, for soliciting any person in this state in connection with the offer to sell or sale of the securities, except to broker-dealers and agents licensed in this state.

551.202(24m)(d) (d) No advertising is published in connection with the offer to sell or sale of the securities unless it has been permitted by the division of securities.

551.202(24m)(e) (e) If the offer or sale of the security had been undertaken under an exemption specified in Rule 506 (a) to (c) adopted under the Securities Act of 1933 (17 CFR 230.506 (a) to (c)), the transaction would not have been disqualified from the exemption under Rule 506 (d) adopted under the Securities Act of 1933 (17 CFR 230.506 (d)), except that the administrator may waive the requirement under this paragraph and authorize transactions in reliance on the exemption under this subsection notwithstanding the condition specified in this paragraph.

551.202(25) (25) Any offer or sale of a preorganization subscription, if no commission or other remuneration is paid or given directly or indirectly for soliciting any subscriber in this state and no advertising is published or circulated unless it has been permitted by the division of securities, and if the subscription is not binding and no payment is made by any subscriber until the securities subscribed for may legally be sold.

551.202(26) (26) An offer or sale of a security by an issuer if the offer or sale is conducted in accordance with all of the following requirements:

551.202(26)(a) (a) The issuer of the security is a business entity with a principal place of business in this state and that is doing business in this state.

551.202(26)(b) (b) The transaction meets the requirements of the federal exemption for intrastate offerings in section 3 (a) (11) of the Securities Act of 1933 (15 USC 77c (a) (11)) and Rule 147A adopted under the Securities Act of 1933 (17 CFR 230.147A).

551.202(26)(c) (c)

551.202(26)(c)1. 1. Except as provided in subd. 2., the sum of all cash and other consideration to be received for all sales of the security in reliance on the exemption under this subsection, excluding sales to any accredited investor, certified investor, or institutional investor, does not exceed the following amount:

551.202(26)(c)1.a. a. If the issuer has not undergone and made available to each prospective investor and the administrator the documentation resulting from a financial audit of its most recently completed fiscal year which complies with generally accepted accounting principles, $1,000,000 subject to adjustment under s. 551.206, less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance on the exemption under this subsection.

551.202(26)(c)1.b. b. If the issuer has undergone and made available to each prospective investor and the administrator the documentation resulting from a financial audit of its most recently completed fiscal year which complies with generally accepted accounting principles, $2,000,000 subject to adjustment under s. 551.206, less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance on the exemption under this subsection.

551.202(26)(c)2. 2. An offer or sale to an officer, director, partner, trustee, or individual occupying similar status or performing similar functions with respect to the issuer or to a person owning 10 percent or more of the outstanding shares of any class or classes of securities of the issuer does not count toward the monetary limitation in subd. 1. a. and b.

551.202(26)(d) (d) The issuer does not accept more than $10,000 from any single purchaser unless the purchaser is an accredited investor or certified investor.

551.202(26)(e) (e) Except as provided in sub. (26m), the offering under this subsection is made exclusively through one or more Internet sites and each Internet site is registered with the division under s. 551.205 (1) (b).

551.202(26)(f) (f) Not less than 10 days prior to the commencement of an offering of securities in reliance on the exemption under this subsection, the issuer files a notice with the administrator, in writing or in electronic form as prescribed by the administrator, which the administrator shall make available as an electronic document on the department of financial institutions Internet site, containing all of the following:

551.202(26)(f)1. 1. A notice of claim of exemption from registration, specifying that the issuer will be conducting an offering in reliance on the exemption under this subsection, accompanied by the filing fee specified in s. 551.614 (1m).

551.202(26)(f)2. 2. A copy of the disclosure statement to be provided to prospective investors in connection with the offering, containing all of the following: