(a) In general. The State Securities Board, pursuant
to the Securities Act, §5.T, exempts from the securities registration
requirements of the Securities Act, §7, the offer and sale by
the issuer or a registered dealer without advertising of any security
to an individual accredited investor, or to any purchaser who the
issuer has reasonable grounds to believe and after making reasonable
inquiry shall believe to be an individual accredited investor, provided
that such security is not part of the same distribution or offering
as securities of the same issuer which have been registered or are
proposed to be registered by pending application under the Securities
Act, §7. "Advertising," as used in this subsection, does not
include the use of limited use advertisements under subsection (e)
of this section or the use of the type of printed material as permitted
by §109.13(b) of this title (relating to Limited Offering Exemptions)
in connection with an offering under the Act, §5.I.
(b) Who may purchase; who constitutes the issuer for
purposes of selling securities.
(1) Individual accredited investors. The term "individual
accredited investor" is defined in §107.2 of this title (relating
to Definitions). For purposes of this section, the term "individual
accredited investor" also includes any self-directed employee benefit
plan with investment decisions made solely by persons that are "individual
accredited investors" as defined in §107.2 of this title and
the individual retirement account of any such individual accredited
investor.
(2) Issuer. For the purposes of subsection (a), the
term "issuer" includes any director, officer, or employee of the issuer
provided all the following conditions are satisfied:
(A) the director, officer, or employee was not hired
for the purpose of offering or selling such securities;
(B) the director's, officer's, or employee's activity
involving the offer and sale of such securities is strictly incidental
to his or her bona fide primary non-securities related work duties;
and
(C) the director's, officer's, or employee's compensation
is based solely on the performance of other such duties, i.e., the
director, officer, or employee does not receive any compensation for
offering for sale, selling, or otherwise aiding in the sale of securities.
(c) Disqualifications.
(1) No exemption under this section shall be available
for the securities of any issuer if the issuer or registered dealer:
(A) within the last five years, has filed a registration
statement which is the subject of a currently effective registration
stop order entered by the United States Securities and Exchange Commission
or any state securities administrator;
(B) within the last five years, has been convicted
of any felony in connection with the offer, purchase, or sale of any
security or any felony involving fraud or deceit;
(C) is currently subject to any state or federal administrative
enforcement order, entered within the last five years, finding fraud
or deceit in connection with the purchase and sale of any security;
or
(D) is currently subject to any order, judgment or
decree of any court of competent jurisdiction, entered within the
last five years, permanently restraining or enjoining such party from
engaging in or continuing to engage in any conduct or practice involving
fraud or deceit in connection with the purchase and sale of any security.
(2) For purposes of this subsection and subsection
(d) of this section only, the term "issuer" includes:
(A) any of the issuer's predecessors or any affiliated
issuer;
(B) any of the issuer's directors, officers, general
partners, or beneficial owners of 10% or more of any class of its
equity securities (beneficial ownership meaning the power to vote
or direct the vote and/or the power to dispose or direct the disposition
of such securities);
(C) any of the issuer's promoters presently connected
with the issuer in any capacity, including:
(i) any person who, acting alone or in conjunction
with one or more other persons, directly or indirectly takes initiative
in founding and organizing the business or enterprise of an issuer;
or
(ii) any person who, in connection with the founding
and organizing of the business or enterprise of an issuer, directly
or indirectly receives in consideration of services or property, or
both services and property, 10% or more of any class of securities
of the issuer or 10% or more of the proceeds from the sale of any
class of such securities; however, a person who receives such securities
or proceeds either solely as underwriting commissions or solely in
consideration of property shall not be deemed a promoter within the
meaning of this clause if such person does not otherwise take part
in founding and organizing the enterprise; or
(D) any underwriter of the issuer.
(3) For purposes of this subsection and subsection
(d) of this section only, the term "registered dealer" includes any
of the registered dealer's partners, directors, executive directors,
or beneficial owners of 10% or more of any class of its equity securities
(beneficial ownership meaning the power to vote or direct the vote
and/or the power to dispose or direct the disposition of such securities).
(d) Exceptions from disqualifications. The prohibitions
of subsection (c) of this section shall not apply if:
(1) the party subject to the disqualification is duly
licensed or registered to conduct securities related business in the
state in which the order, judgment, or decree creating the disqualification
was entered against such party; or
(2) before the first offer under this section, the
Securities Commissioner, or the court or regulatory authority that
entered the order, judgment, or decree, waives the disqualification
upon a showing of good cause.
(e) Limited use advertisements. Any limited use advertisement
used in connection with an offering under this section must be filed
with the Securities Commissioner ten days prior to use in this state.
A limited use advertisement may be disseminated by any means, direct
or indirect. A limited use advertisement shall contain only the statements
required or permitted to be included therein by this subsection.
(1) A limited use advertisement shall contain the following
items of information:
(A) a brief description of the securities to be offered
(e.g., description of class, size of offering, price, percentage of
commission);
(B) the name, address, and telephone number of the
person to contact for additional information concerning the offering;
(C) the address where offering material may be obtained;
and
(D) the following statement: "The securities have not
been registered with or approved by the Texas Securities Commissioner
and are being offered and sold pursuant to the exemption provided
by §139.16 of the Rules and Regulations of the State Securities
Board. This advertisement was filed with the Texas Securities Commissioner
on or about (fill in date). The securities are being offered to, and
may be purchased by, only those natural persons whose individual net
worth, or joint net worth with that person's spouse, at the time of
purchase of the securities, exceeds $1 million, excluding the value
of the person's primary residence, or natural persons who have an
individual income in excess of $200,000 in each of the two most recent
years, or joint income with that person's spouse in excess of $300,000
in each of those years, and who have a reasonable expectation of reaching
that same income level in the current year."
(2) A limited use advertisement may include any one
or more of the following items of information:
(A) the name and address of the issuer of the securities;
(B) a brief description of the business of the issuer;
and
(C) the name and address of the registered dealer(s)
acting on the issuer's behalf in connection with the offering.
(f) Any issuer relying on this exemption shall, upon
written request, furnish to the Securities Commissioner the information
furnished by the issuer or registered dealer to offerees. Any issuer
relying on this exemption must maintain, for a period of at least
three years, evidence of the basis for its belief that all purchasers
were accredited investors at the time of purchase.
(g) Transactions exempt under this section may be combined
with offers and sales exempt under the Securities Act, §5.H,
and §109.4 of this title (relating to Securities Registration
Exemption for Sales to Financial Institutions and Certain Institutional
Investors). In this event, the statement required by subsection (e)(1)(D)
of this section may be modified to indicate that the securities are
also being offered to eligible purchasers under §5.H and §109.4
of this title (relating to Securities Registration Exemption for Sales
to Financial Institutions and Certain Institutional Investors). Cont'd... |