Chapter DFI-Sec 2

DFI-Sec 2.027(2)(a)3. 3. A good faith and reasonable attempt was made to comply with the conditions in sub. (1) (a) to (f).

DFI-Sec 2.027(2)(b) (b) Where an exemption is established only through reliance upon this subsection, the failure to comply with the conditions in sub. (1) (a) to (f) shall constitute a basis for action that may be taken by the division under s. 551.603, Stats., and shall constitute a basis for action that may be taken by the division under s. 551.204, Stats., to deny or revoke the exemption as to a specific security or transaction.

DFI-Sec 2.027 History History: Cr. Register, December, 1995, No. 480, eff. 1-1-96; renum. from SEC 2.028 and am. (1) (c), Register, December, 1996, No. 492, eff. 1-1-97; CR 08-077: am. (1) (intro.), (a) 2., (d), (e) and (2) (b) Register December 2008 No. 636, eff. 1-1-09.

DFI-Sec 2.028 DFI-Sec 2.028 Wisconsin issuer registration exemption by filing. If all of the following conditions are met, other than any condition or conditions waived by the division upon a showing of good cause, a transaction registration exemption is available under s. 551.203, Stats., for any offer or sale for cash of the equity securities of an issuer having, both before and upon completion of the offering, its principal office and a majority of the full-time employees located in this state:

DFI-Sec 2.028(1) (1) The securities are sold to not more than 100 persons in this state, excluding:

DFI-Sec 2.028(1)(a) (a) Persons described in s. 551.102 (11), Stats., and rules thereunder, and in s. 551.202 (13) (am), Stats.;

DFI-Sec 2.028(1)(b) (b) Members of the immediate family of an executive officer or director of the issuer who have the same permanent residence as the officer or director.

DFI-Sec 2.028(2) (2) No commission or other remuneration is paid or given, directly or indirectly, for soliciting or selling to any person in this state in reliance on the exemption in this section except to broker-dealers and agents registered in this state.

DFI-Sec 2.028(3) (3) Neither the issuer, its officers, directors, general partners, controlling persons or affiliates, nor any broker-dealer or agent offering or selling the securities is or would be disqualified under s. DFI-Sec 2.029 (3).

DFI-Sec 2.028(4) (4) The aggregate offering price of the securities sold in the offering to persons in Wisconsin pursuant to this exemption does not exceed $5,000,000, provided that the issuer has not made other offerings in Wisconsin pursuant to this exemption that would meet the criteria for being integrated with the offering under Rule 502 (a) of Regulation D under the securities act of 1933.

DFI-Sec 2.028(5) (5) The duration of the offering period shall not exceed one year, although the issuer may extend the offering for up to an additional one year by filing amended and updated disclosure materials, together with any advertising, with the division in conformance with the requirements of sub. (8). If the disclosure materials provide that a minimum dollar amount of offering subscriptions must be received before the issuer may utilize any of the proceeds, all subscriptions shall be held by a financial institution under an impounding agreement until the required minimum subscription level is reached.

DFI-Sec 2.028(6) (6) The issuer reasonably believes that all sales made pursuant to this exemption are suitable for the purchaser and that the purchaser either alone or with the purchaser’s representative has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment.

DFI-Sec 2.028(7) (7) An offering document is delivered to each purchaser prior to the sale of the securities that meets one of the following requirements:

DFI-Sec 2.028(7)(a) (a) For offerings by a corporate issuer, an offering document that complies with the North American Securities Administrators Association, Inc. Form U-7 Small Corporate Offering Registration and Prospectus Disclosure Form, except that the financial statements may be either audited or reviewed; or

DFI-Sec 2.028(7)(b) (b) For offerings by any type of issuer, an offering document that complies with the disclosure requirements of rule 502 (b) (2) of Regulation D under the securities act of 1933.

DFI-Sec 2.028(8) (8) The issuer or applicant files with the division:

DFI-Sec 2.028(8)(a) (a) The offering document to be used in connection with the offer and sale of the securities, not later than the date of the first use of the document in this state, together with a fee of $200; and

DFI-Sec 2.028(8)(b) (b) A letter specifying how the requirements for use of this exemption contained in the introduction and in subs. (1) to (7) are met or will be met; and

DFI-Sec 2.028(8)(c) (c) A copy of all advertising, other than the offering document and except for solicitation of interest materials previously filed pursuant to s. DFI-Sec 2.027, to be used in connection with the offer and sale of the securities, not later than the date of its first use in this state, and a copy of all material amendments to the offering document, not later than the date of first use of each material amendment in this state.

DFI-Sec 2.028 History History: Cr. Register, March, 1986, No. 363, eff. 4-1-86; r. and recr. Register, December, 1990, No. 420, eff. 1-1-91; am. (3) and (4), Register, December, 1991, No. 432, eff. 1-1-92; am. (intro.), renum. (6) to (8) to be (7) to (9), cr. (6), Register, December, 1994, No. 468, eff. 1-1-95; am. (1) (intro.), (4), r. (5), renum. (6) to (9) to be (5) to (8) and am. (7) (a), (8) (b) is renumbered to (8) (c) and amended, cr. (8) (b), Register, December, 1995, No. 480, eff. 1-1-96; correction in (5) made under s. 13.93 (2m) (b) 7., Stats., Register, November, 1996, No. 491; renum. from SEC 2.027, r. (1) (b), renum. (1) (c) to be (1) (b), Register, December, 1996, No. 492, eff. 1-1-97; CR 01-083: am. (4), Register December 2001 No. 552, eff. 1-1-02; CR 08-077: am. (intro.), (1) (a), (2) and (3) Register December 2008 No. 636, eff. 1-1-09; correction in (1) (a) made under s. 13.92 (4) (b) 7., Stats., Register February 2009 No. 638; CR 10-062: am. (intro.) Register September 2010 No. 657, eff. 10-1-10.

DFI-Sec 2.029 DFI-Sec 2.029 Federal regulation D rule 505 exemption by filing.

DFI-Sec 2.029(1) (1) Any offer or sale of securities made in reliance on the exemption provided by Rule 505 of Regulation D under the Securities Act of 1933 and the conditions and definitions provided by Rules 501 to 503 thereunder constitutes a transaction exempt from registration under s. 551.203, Stats., if the offer or sale also satisfies the additional conditions and limitations in sub. (2) to (6).

DFI-Sec 2.029(2) (2) No commission or other remuneration may be paid or given, directly or indirectly, to any person for soliciting or selling to any person in this state in reliance on the exemption under sub. (1), except to broker-dealers and agents registered in this state or exempt from registration under s. 551.401 (2) or 551.402 (2), Stats.

DFI-Sec 2.029(3) (3) 

DFI-Sec 2.029(3)(a) (a) Unless the cause for disqualification is waived under par. (b) 2., no exemption under sub. (1) is available for the securities of an issuer unless the issuer did not know and in the exercise of reasonable care could not have known that any of the following applies to any of the persons described in 17 CFR 230.262 (a), (b), or (c):

DFI-Sec 2.029(3)(a)1. 1. The person has filed a registration statement which is the subject of an effective order entered against the issuer, its officers, directors, general partners, controlling persons or affiliates thereof, pursuant to any state’s law within 5 years before the filing of a notice required under sub. (4) denying effectiveness to, or suspending or revoking the effectiveness of, the registration statement.

DFI-Sec 2.029(3)(a)2. 2. The person has been convicted of any felony or misdemeanor in connection with the offer, sale or purchase of any security or franchise, or any felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.

DFI-Sec 2.029(3)(a)3. 3. The person is subject to an effective administrative order or judgment entered by a state securities administrator within 5 years before the filing of a notice required under sub. (4), which prohibits, denies or revokes the use of any exemption from securities registration, which prohibits the transaction of business by the person as a broker-dealer or agent, or which is based on fraud, deceit, an untrue statement of a material fact or an omission to state a material fact.

DFI-Sec 2.029(3)(a)4. 4. The person is subject to any order, judgment or decree of any court entered within 5 years before the filing of a notice required under sub. (4), temporarily, preliminarily or permanently restraining or enjoining the person from engaging in or continuing any conduct or practice in connection with the offer, sale or purchase of any security, or the making of any false filing with any state.

DFI-Sec 2.029(3)(b) (b)

DFI-Sec 2.029(3)(b)1. 1. Any disqualification under this paragraph involving a broker-dealer or agent is waived if the broker-dealer or agent is or continues to be registered in this state as a broker-dealer or agent after notifying the division of the act or event causing disqualification.

DFI-Sec 2.029(3)(b)2. 2. The division may waive any disqualification under this paragraph upon a showing of good cause that it is not necessary under the circumstances that use of the exemption be denied.

DFI-Sec 2.029(4) (4) Not later than the earlier of the date on which the first use of an offering document or the first sale is made in this state in reliance on the exemption under sub. (1), there is filed with the division a notice comprised of offering material in compliance with the requirements of Rule 502 of Regulation D under the Securities Act of 1933, a completed Form D as prescribed by Rule 503 of Regulation D under the Securities Act of 1933, and a fee of $200. Material amendments to the offering document shall be filed with the division not later than the date of their first use in this state.

DFI-Sec 2.029(5) (5) 

DFI-Sec 2.029(5)(a) (a) As to all sales in this state, the issuer shall reasonably believe immediately before making any sale that:

DFI-Sec 2.029(5)(a)1. 1. The investment is suitable for the purchaser; and

DFI-Sec 2.029(5)(a)2. 2. The purchaser, either alone or with the purchaser’s representative, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment.

DFI-Sec 2.029(5)(b) (b) The failure to satisfy the conditions of par. (a) as to a purchaser does not affect the availability of the exemption under sub. (1) as to other purchasers.

DFI-Sec 2.029(6) (6) The division may, by order, increase the number of purchasers or waive any other conditions of the exemption under sub. (1) for a particular offering. The division shall not require the filing of advertising used in connection with offers or sales in reliance on the exemption. The exemption may be revoked by order of the division, but only if the offering constitutes or would constitute a violation of s. 551.401 (1) or 551.402 (1), Stats., and notice thereof has been received by the issuer, or constitutes or would constitute a violation of s. 551.501, Stats.

DFI-Sec 2.029 History History: CR 08-077: cr. Register December 2008 No. 636, eff. 1-1-09.

DFI-Sec 2.03 DFI-Sec 2.03 Exemption proceedings.

DFI-Sec 2.03(1) (1) If a notice is required to be filed in order to seek to claim registration exemption status pursuant to s. 551.201, 551.202, Stats., or rule or order under s. 551.203, Stats., the notice shall consist of a copy of any prospectus, circular or other material to be delivered to offerees, the fee prescribed by s. DFI-Sec 7.01 (2), and a cover letter describing how the offering will meet all the requirements for use of the exemption sought to be utilized.

DFI-Sec 2.03(2) (2) If any information is reasonably required by the division prior to the effective date of an exemption, in connection with the examination of any notice filed pursuant to s. 551.201, 551.202, Stats., or rule or order under s. 551.203, Stats., the notice is not deemed filed until the information so required is filed with the division.

DFI-Sec 2.03(3) (3) An order of the division disallowing an exemption with respect to a specified security or transaction pursuant to s. 551.201, 551.202, Stats., or rule or order under s. 551.203, Stats., has the same effect as an order denying or revoking an exemption pursuant to s. 551.204, Stats.

DFI-Sec 2.03 History History: Cr. Register, December, 1969, No. 168, eff. 1-1-70; r. and recr. Register, August, 1972, No. 200, eff. 9-1-72; am. (1), Register, December, 1977, No. 264, eff. 1-1-78; r. and recr. (1), Register, December, 1981, No. 312, eff. 1-1-82; am. (1), Register, December, 1982, No. 324, eff. 1-1-83; am. (1), Register, December, 1991, No. 432, eff. 1-1-92; CR 08-077: am. Register December 2008 No. 636, eff. 1-1-09.

DFI-Sec 2.04 DFI-Sec 2.04 Federal covered security notice filings.

DFI-Sec 2.04(1) (1) 

DFI-Sec 2.04(1)(a) (a) With respect to a federal covered security referred to in s. 551.302 (1) (a), Stats., unless the security is registered or exempt from registration under s. 551.201, 551.202, Stats., or rule or order under s. 551.203, Stats., the issuer or a person acting on behalf of the issuer shall file with the division not later than the initial offer of the security in this state, a consent to service of process signed by the issuer and the notice filing fee prescribed under s. DFI-Sec 7.01 (2) (d). If a completed Form NF as prescribed in s. DFI-Sec 9.01 (1) (d) is included with the consent to service of process and the notice filing fee, the issuer need not also include with the filing copies of any documents that are part of the registration statement filed under the securities act of 1933, although the division may at a later time require the filing of a copy of any document that is part of the registration statement filed under the securities act of 1933.

DFI-Sec 2.04(1)(b) (b) After the initial offer in this state of a federal covered security referred to in s. 551.302 (1) (a), Stats., if the issuer files an amendment to its registration statement with the U.S. securities and exchange commission under the securities act of 1933 that relates either to a name change of the issuer, or to a change in the designation of the federal covered security, the issuer or a person acting on behalf of the issuer shall file with the division concurrent with the federal filing, a fee of $200, which shall be accompanied by a copy of each amendment-related document filed with the U.S. securities and exchange commission unless the issuer files with the division a completed Form NF as prescribed in s. DFI-Sec 9.01 (1) (d). The division may at a later time require the filing of a copy of any document relating to the amendment filed under the securities act of 1933.

DFI-Sec 2.04(1)(c) (c) A unit investment trust or closed-end investment company may extend the offering of its securities beyond a one-year period pursuant to s. 551.302 (1) (c), Stats., by filing a notice of extension not less than 30 days prior to the end of one year from the date of filing of the initial notice with the division, or an extension notice filed under this paragraph, whichever is most recent. A notice shall consist of a copy of an updated Form NF as prescribed in s. DFI-Sec 9.01 (1) (d), together with a fee of $200, and at the option of the filing party, a cover letter identifying the most recent prior filing status with the division for the issuer’s securities.

DFI-Sec 2.04(2) (2) With respect to a federal covered security referred to in s. 551.302 (3), Stats., unless the security is registered or exempt from registration under s. 551.201, 551.202, Stats., or rule or order under s. 551.203, Stats., the issuer or a person acting on behalf of the issuer shall make a filing with the division not later than 15 days after the first sale of the security in this state that meets the requirements of either of the following:

DFI-Sec 2.04(2)(a) (a) A notice consisting of a photocopy of a completed Form D as prescribed by rule 503 of regulation D under the securities act of 1933 that has been filed electronically with the U.S. securities and exchange commission, together with a $200 fee.

DFI-Sec 2.04(2)(b) (b) An electronic filing under the Electronic Filing of Form D (EFD) System developed by the North American Securities Administrators Association and operated by PNC Global Investment Servicing or its affiliate, that designates Wisconsin as a state in which the offering is or will be made, and allocates to Wisconsin a $200 fee.

DFI-Sec 2.04 History History: Cr. Register, December, 1998, No. 516, eff. 1-1-99; am. (1) (a), Register, December, 1999, No. 528, eff. 1-1-00; CR 01-082: cr. (1) (c), Register December 2001 No. 552, eff. 1-1-02; CR 08-077: am. (1) and (2), r. (3) and (4) Register December 208 No. 636, eff. 1-1-09; CR 09-056: am. (2) Register December 2009 No. 648, eff. 1-1-10.