Chapter 551

551.202(26m)(a)3. 3. Prior to the initial solicitation of interest made under this subsection, the offeror files with the division a completed solicitation of interest form, as prescribed by the division, together with any other materials to be used to conduct solicitations of interest, including the script of any broadcast to be made, any information to be posted on the Internet, and a copy of any notice to be published. Any amendments to the solicitation of interest form or to any related materials used to conduct solicitations shall be filed with the division not later than the date of their first use. Any written or posted document under this subdivision may include a coupon, or digital form, returnable to the issuer indicating interest in a potential offering and revealing the name, address, electronic mail address, and telephone number of the prospective purchaser.

551.202(26m)(a)4. 4. The text of any published notice or script for broadcast, any information to be posted on the Internet, and any printed material delivered in any solicitation of interest under this subsection begins with the disclosures and information required in, and in the format of, the solicitation of interest form prescribed by the division.

551.202(26m)(a)5. 5. The offeror does not know, and in the exercise of reasonable care could not know, that any of the issuer’s officers, directors, general partners, controlling persons, or affiliates are or would be disqualified from use of the registration exemption under this subsection.

551.202(26m)(a)6. 6. No solicitation of interest pursuant to this subsection is made after the filing of materials required for the exemption under sub. (26).

551.202(26m)(a)7. 7. No sales of the securities that are the subject of solicitations of interest under this subsection are made until 20 calendar days after the last delivery of a solicitation of interest document, scripted media broadcast, Internet post, or other media publication. For purposes of this subdivision, the last delivery date for solicitations of interest by means of the Internet is the last day on which a digital form is available for a prospective purchaser’s response indicating interest.

551.202(26m)(a)8. 8. During the solicitation of interest period, neither the issuer nor any person acting on its behalf accepts or solicits money, subscriptions, or commitments to purchase securities.

551.202(26m)(b) (b) A failure to comply with any of the requirements for exemption under par. (a) does not result in the loss of the exemption under this subsection for any offer to a particular person if the offeror demonstrates that all of the following apply:

551.202(26m)(b)1. 1. The failure to comply did not pertain to a requirement directly intended to protect that particular person.

551.202(26m)(b)2. 2. The failure to comply was insignificant with respect to the offering as a whole.

551.202(26m)(b)3. 3. A good faith and reasonable attempt was made to comply with all requirements under par. (a).

551.202(27) (27) 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(27)(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(27)(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(27)(c) (c)

551.202(27)(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(27)(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(27)(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(27)(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(27)(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(27)(e) (e) 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. This paragraph does not apply if the offer or sale of the security is to a certified investor.

551.202(27)(f) (f) 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(27)(g) (g) All funds received from investors are deposited into a bank, savings bank, savings and loan association, or credit union authorized to do business in this state, and all the funds are used in accordance with representations made to investors.

551.202(27)(h) (h) Before the 101st offer of the security, the issuer provides a notice to the administrator in writing or in electronic form, accompanied by the filing fee specified in s. 551.614 (1m). The administrator shall prescribe the form required for the notice and make the form available as an electronic document on the department of financial institutions Internet site. Notwithstanding s. 551.204 (1) and (3), the notice shall be limited to all of the following:

551.202(27)(h)1. 1. Stating that the issuer is conducting an offering in reliance on the exemption under this subsection.

551.202(27)(h)2. 2. Identifying the names and addresses of all of the following persons:

551.202(27)(h)2.a. a. The issuer.

551.202(27)(h)2.b. b. All persons who will be involved in the offer or sale of securities on behalf of the issuer.

551.202(27)(h)2.c. c. The bank, savings bank, savings and loan association, or credit union in which investor funds will be deposited.

551.202(27)(i) (i) The issuer is not, either before or as a result of the offering, an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 USC 80a-3), or subject to the reporting requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934 (15 USC 78m or 78o (d)).

551.202(27)(j) (j) The issuer informs all purchasers that the securities have not been registered under this chapter and makes the disclosures required under subsection (f) of Rule 147A adopted under the Securities Act of 1933 (17 CFR 230.147A (f)).

551.202(27)(k) (k) No offer or sale of a different class or series of security has been made by the issuer in reliance on the exemption under this subsection or sub. (26) during the immediately preceding 12-month period.

551.202(27)(L) (L) 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 History History: 2007 a. 196; 2013 a. 52; 2013 a. 151 s. 28; 2017 a. 213.

551.202 Annotation When a certificate of stock was mailed to the plaintiff in Wisconsin, and extensive solicitation was conducted by the defendants in Wisconsin, there was an “offer” within former s. 551.02 (11) (b), 1969 stats. Since the securities were neither registered in Wisconsin nor exempt from registration, the plaintiff was entitled to rescind the transaction and recover the purchase price of the securities, plus costs. Hardtke v. Love Tree Corp., 386 F. Supp. 1085 (1975).

551.202 Annotation Registration and reporting requirements for exempt transactions are discussed. Feitler v. Midas Associates, 418 F. Supp. 735 (1976).

551.202 Note NOTE: The above annotations refer to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.202 Annotation To Fund or Not to Fund: Deficiencies in the Wisconsin Crowdfunding Act that Hamper the Viability of Intrastate Crowdfunding. Hovestol. 100 MLR 1063 (2017).

551.203 551.203 Additional exemptions and waivers. A rule adopted or order issued under this chapter may exempt a security, transaction, or offer; a rule under this chapter may exempt a class of securities, transactions, or offers from any or all of the requirements of ss. 551.301 to 551.306 and 551.504; and an order under this chapter may waive, in whole or in part, any or all of the conditions for an exemption or offer under ss. 551.201 and 551.202.

551.203 History History: 2007 a. 196.

551.204 551.204 Denial, suspension, revocation, condition, or limitation of exemptions; burden of proof; additional information.

551.204(1) (1) Enforcement related powers. Except with respect to a federal covered security or a transaction involving a federal covered security, an order under this chapter may deny, suspend application of, condition, limit, or revoke an exemption created under s. 551.201 or 551.202 or an exemption or waiver created under s. 551.203 with respect to a specific security, transaction, or offer, except to the extent limited by the National Securities Markets Improvement Act of 1996. An order under this section may be issued only pursuant to the procedures in s. 551.306 (4) or s. 551.604 and only prospectively.

551.204(2) (2) Knowledge of order required. A person does not violate s. 551.301, 551.303 to 551.306, 551.504, or 551.511 by an offer to sell, offer to purchase, sale, or purchase effected after the entry of an order issued under this section if the person did not know, and in the exercise of reasonable care could not have known, of the order.

551.204(3) (3) Additional information required. With respect to an exemption under s. 551.201 or 551.202 that is perfected if a notice or other information is filed with the division of securities and the division does not disallow the exemption within a specified period after the filing, the division may, within 10 days after the filing date of the notice or other information, require that additional information reasonably related to the offering be filed. If the division requires additional information, the date by which the division may disallow the exemption is 10 days after the date of filing that information.

551.204 History History: 2007 a. 196.

551.205 551.205 Additional provisions related to crowdfunding exemption for intrastate offerings through Internet sites.

551.205(1) (1) All of the following requirements apply to an offer or sale of securities pursuant to the exemption under s. 551.202 (26):

551.205(1)(a) (a) Prior to any offer or sale of securities, the issuer shall provide to the Internet site operator evidence that the issuer has a principal place of business in this state and is doing business in this state.

551.205(1)(b) (b)

551.205(1)(b)1. 1. The Internet site operator shall register with the division by filing a statement, which the administrator shall make available as an electronic document on the department of financial institutions Internet site, accompanied by the filing fee specified in s. 551.614 (1m), that includes all of the following:

551.205(1)(b)1.a. a. That the Internet site operator is a business entity organized under the laws of this state and authorized to do business in this state.

551.205(1)(b)1.b. b. That the Internet site is being utilized to offer and sell securities pursuant to the exemption under s. 551.202 (26).

551.205(1)(b)1.c. c. The identity and location of, and contact information for, the Internet site operator.

551.205(1)(b)1.d. d. Except as provided in subds. 2. and 4., that the Internet site operator is registered as a broker-dealer under s. 551.401.

551.205(1)(b)2. 2. The Internet site operator is not required to register as a broker-dealer under s. 551.401 if all of the following apply with respect to the Internet site and its operator:

551.205(1)(b)2.a. a. It does not offer investment advice or recommendations.

551.205(1)(b)2.b. b. It does not solicit purchases, sales, or offers to buy the securities offered or displayed on the Internet site.

551.205(1)(b)2.c. c. It does not compensate employees, agents, or other persons for the solicitation or based on the sale of securities displayed or referenced on the Internet site.

551.205(1)(b)2.d. d. It does not hold, manage, possess, or otherwise handle investor funds or securities.

551.205(1)(b)2.e. e. The fee it charges an issuer for an offering of securities on the Internet site is a commission, a fixed amount for each offering, a variable amount based on the length of time that the securities are offered on the Internet site, or a combination of such fixed and variable amounts.

551.205(1)(b)2.f. f. It does not identify, promote, or otherwise refer to any individual security offered on the Internet site in any advertising for the Internet site.

551.205(1)(b)2.g. g. It does not engage in such other activities as the division, by rule, determines are prohibited of such an Internet site.

551.205(1)(b)2.h. h. Neither the Internet site operator, nor any director, executive officer, general partner, managing member, or other person with management authority over the Internet site operator, has been subject to any conviction, order, judgment, decree, or other action specified in Rule 506 (d) (1) adopted under the Securities Act of 1933 (17 CFR 230.506 (d) (1)) that would disqualify an issuer under Rule 506 (d) adopted under the Securities Act of 1933 (17 CFR 230.506 (d)) from claiming an exemption specified in Rule 506 (a) to (c) adopted under the Securities Act of 1933 (17 CFR 230.506 (a) to (c)).

551.205(1)(b)3. 3. If any change occurs in the information that an Internet site operator submits to the division in a statement filed under subd. 1., the Internet site operator shall notify the division within 30 days after the change occurs.

551.205(1)(b)4. 4. The Internet site operator is not required to register as a broker-dealer under s. 551.401 if the Internet site operator is registered as a broker-dealer under the Securities Exchange Act of 1934 (15 USC 78o) or is a funding portal registered under the Securities Act of 1933 (15 USC 77d-1) and the Securities and Exchange Commission has adopted rules under authority of section 3 (h) of the Securities Exchange Act of 1934 (15 USC 78c (h)) and P.L. 112-106, section 304, governing funding portals. Nothing in this section requires an Internet site operator to register as a broker-dealer under the Securities Exchange Act of 1934 or as a funding portal under the Securities Act of 1933.

551.205(1)(c) (c) The issuer and the Internet site operator shall maintain records of all offers and sales of securities effected through the Internet site and shall provide ready access to the records to the division, upon request. The division may access, inspect, and review any Internet site registered under this subsection as well as its records.

551.205(2) (2) An issuer of a security, the offer and sale of which is exempt under s. 551.202 (26), shall provide, free of charge, a quarterly report to the issuer’s investors until no securities issued under s. 551.202 (26) are outstanding. An issuer may satisfy the reporting requirement of this subsection by making the information available on an Internet site if the information is made available within 45 days after the end of each fiscal quarter and remains available until the succeeding quarterly report is issued. If the quarterly report is made available on an Internet site, the issuer shall provide a written copy of the report to any investor upon request. Upon written request from the division, the issuer shall provide a copy of the quarterly report to the division within 10 business days following the division’s request. The report shall contain all of the following:

551.205(2)(a) (a) Compensation received by each director and executive officer, including cash compensation earned since the previous report and on an annual basis and any bonuses, stock options, other rights to receive securities of the issuer or any affiliate of the issuer, or other compensation received.

551.205(2)(b) (b) An analysis by management of the issuer of the business operations and financial condition of the issuer.

551.205 History History: 2013 a. 52; 2017 a. 213.

551.206 551.206 Adjustments. At 5-year intervals after January 1, 2014, the department of financial institutions shall adjust the monetary amounts specified in s. 551.202 (26) (c) 1. a. and b. and (27) (c) 1. a. and b. to reflect changes since January 1, 2014, in the consumer price index for all urban consumers, Milwaukee-Racine area average, as determined by the U.S. department of labor. Each adjustment shall be rounded to the nearest multiple of $50,000. Each adjustment under this section shall be published on the department of financial institutions Internet site.

551.206 History History: 2013 a. 52; 2013 a. 151 s. 28.

subch. III of ch. 551 SUBCHAPTER III

REGISTRATION OF SECURITIES AND NOTICE FILING OF FEDERAL COVERED SECURITIES

551.301 551.301 Securities registration requirement. It is unlawful for a person to offer or sell a security in this state unless any of the following apply:

551.301(1) (1) The security is a federal covered security.

551.301(2) (2) The security, transaction, or offer is exempted from registration under this chapter.

551.301(3) (3) The security is registered under this chapter.

551.301 History History: 2007 a. 196.

551.301 Annotation Section 551.21 (1) is violated through an offer to sell an unregistered security, even if no sale occurs. State v. Johnson, 2002 WI App 224, 257 Wis. 2d 736, 652 N.W.2d 642, 01-1092.

551.301 Annotation When a certificate of stock was mailed to the plaintiff in Wisconsin, and extensive solicitation was conducted by the defendants in Wisconsin, there was an “offer” within former s. 551.02. (11) (b), 1969 stats. Since the securities were neither registered in Wisconsin nor exempt from registration, the plaintiff was entitled to rescind the transaction and recover the purchase price of the securities, plus costs. Hardtke v. Love Tree Corp., 386 F. Supp. 1085 (1975).

551.301 Annotation Registration and reporting requirements for exempt transactions are discussed. Feitler v. Midas Associates, 418 F. Supp. 735 (1976).

551.301 Note NOTE: The above annotations refer to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.302 551.302 Notice filing.

551.302(1) (1) Required filing of records. With respect to a federal covered security, as defined in section 18 (b) (2) of the Securities Act of 1933 (15 USC 77r (b) (2), that is not otherwise exempt under ss. 551.201 to 551.203, a rule adopted by the administrator or an order issued under this chapter may require the filing of any or all of the following records:

551.302(1)(a) (a) Prior to offer. Not later than the initial offer of the federal covered security in this state, a copy of each document that is part of its registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, which may, at the option of the issuer, be accompanied by a form containing the information specified by the administrator by rule. If a filing is required under this paragraph, the filing shall be accompanied by a consent to service of process signed by the issuer and a notice filing fee under s. 551.614. Any notice filing required under this paragraph is effective upon receipt by the administrator of the documents and fees required under this paragraph, or upon the effectiveness of the registration statement under the Securities Act of 1933, whichever is later.

551.302(1)(b) (b) After offer. After the initial offer of the federal covered security in this state, a copy of each document that is part of an amendment to its registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, concurrent with the federal filing, which may, at the option of the issuer, be accompanied by a form containing the information specified by the administrator by rule. If a filing is required under this paragraph and the amendment relates either to a name change of the issuer or a change in the designation of the federal covered security, the filing shall be accompanied by a fee in the amount prescribed by the rule or order requiring the filing. Unless the issuer requests a later effective date, an amendment filing required under this paragraph is effective upon receipt by the administrator of the documents and fees required under this paragraph.

551.302(1)(c) (c) Unit trust or investment company. For a unit investment trust or closed-end investment company to extend its offering beyond a one-year period, a notice of extension, together with any filing fee prescribed by rule or order, at the time prescribed by rule or order.

551.302(3) (3) Notice filings for certain federal covered securities. With respect to a security that is a federal covered security under section 18 (b) (4) (D) of the Securities Act of 1933 (15 USC 77r (b) (4) (D)), a rule under this chapter may require a notice filing by or on behalf of an issuer to include a copy of Form D, including the Appendix, as promulgated by the Securities and Exchange Commission, and a consent to service of process complying with s. 551.611 signed by the issuer not later than 15 days after the first sale of the federal covered security in this state and the payment of a fee as provided in s. 551.614 or by rule of the administrator; and the payment of a fee as provided in s. 551.614 or by rule of the administrator for any late filing.

551.302(4) (4) Stop orders. Except with respect to a federal covered security under section 18 (b) (1) of the Securities Act of 1933 (15 USC 77r (b) (1)), if the administrator finds that there is a failure to comply with a notice or fee requirement of this section, the administrator may issue a stop order suspending the offer and sale of a federal covered security in this state. If the deficiency is corrected, the stop order is void as of the time of its issuance and no penalty may be imposed by the administrator.