Section 26-B244. LIMITED OFFERING EXEMPTION (SEC RULE 505)

 

244.1Pursuant to Sections 401 and 402 of the Act (D.C. Offical Code §§ 31-5604.01 and 31-5604.02), transactions involving securities offered or sold in compliance with Rules 501, 502, 503, and 505 of SEC Regulation D, 17 C.F.R. Sec. 230.501 (1990); 17 C.F.R. Sec. 230.502 (1990); 17 C.F.R. Sec. 230.503 (1990); 17 C.F.R. Sec. 230.505 (1990), are exempt from the registration of section 301 of the Act, provided the requirements of section 306(c) of the Act and the following conditions and limitations are met:

 

(a)No commission, finders fee, or other remuneration shall be paid or given to any dealer, or salesman for soliciting any prospective purchaser in connection with sales of securities in reliance on this exemption.

 

(b)No exemption under this section shall be available for the securities of any issuer, if the issuer or any of its affiliates:

 

(1) Is subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining or is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years prior to commencement of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with any state or District;

 

(2) Has been convicted within five years prior to commencement of the offering of any felony or misdemeanor in connection with the purchase or sale of any security or any felony involving fraud or deceit including but not limited to forgery, embezzlement, obtaining money under false pretenses, theft by conversion, theft by deception, larceny, or conspiracy to defraud;

 

(3) Is subject to any order, judgment, or decree issued by any state or District securities administrator, the United States Securities and Exchange Commission, the United States Commodities Futures Trading Commission, or the United States Postal Service in which fraud, deceit or registration violations were found, after notice and opportunity for hearing, if the order was entered within five years prior to the commencement of the offering in reliance upon this exemption; or

 

(4) Is subject to any order barring or suspending membership in any self-regulatory organization registered pursuant to the Securities Exchange Act of 1934 (48 Stat. 881; 15 U.S.C. § 78a et seq.), if the order was entered within five years prior to the commencement of the offering in reliance upon this exemption.

 

(c)The disqualification referred to in subparagraph (b) above shall not apply:

 

(1)If the issuer or its affiliate subject to the disqualification is currently registered or licensed to conduct securities-related business in the jurisdiction where the administrative order or judgment was entered against such issuer or affiliate;

 

(2)The license of the person subject to the disqualification has not been suspended or revoked, and there are no pending proceedings against the person; or

 

(3)If the Commissioner, in his discretion, waives the disqualification.

 

(d)The issuer shall file with the Commissioner a notice of intention to sell using SEC Form D (17 C.F.R. § 239.500), or any successor form, to the extent such information is available, prior to the sale or the receipt, in escrow or otherwise, of consideration from an investor in the District in reliance upon this exemption. Said notice of intention to sell shall be accompanied by the following:

 

(1)A non-refundable filing fee as provided in § 249.2;

 

(2)A consent to service of process in Form U-2 which has been executed by the applicant; and

 

(3)A copy of any prospectus as defined in the Act and these regulations that is to be used in connection with the offer and sale of securities to unaccredited purchasers pursuant to this exemption.

 

244.2The exemption provided in this section shall not apply to those transactions offered and sold in reliance under rule 504 of SEC Regulation D, 17 C.F.R. § 230.504.

 

244.3In the event the offering is to continue pursuant to this exemption more than twelve months after the date on which the Commissioner issues his certificate, then it shall be necessary for the issuer to file a renewal application prior to the expiration date of the original certificate, containing the following:

 

(a)A completed SEC Form D; and

 

(b)A copy of any prospectus as defined in these regulations to be used in connection with the offer and sale of securities to unaccredited purchasers pursuant to this exemption.

 

244.4The applicant shall promptly furnish any additional information requested by the Commissioner. A final report is not required unless specifically requested by the Commissioner.

 

244.5Any notice on or amendment to SEC Form D required by this section shall be manually signed by a person authorized by the issuer.

 

244.6If more than one notice is required to be filed pursuant to this section, notices other than the original notice need only report the information required by Part C and any material change in the facts from those set forth in parts A and B of SEC Form D.

 

244.7Any filing pursuant to the exemption provided in this section shall be amended by filing promptly with the Department such information and changes as may be necessary to correct any material misstatement or omission in the filing. Any prospectus required by these regulations that was not prepared at the time of filing, or which materially differs from a prospectus included in the filing, shall be delivered or mailed to the Commissioner prior to its use. There shall be no fees charged for amendments to filings pursuant to this section.

 

244.8The Commissioner shall notify the applicant of a deficient filing. This notification shall serve as a certificate of noncompliance, and if the deficiencies are not corrected within 60 days the filing may be deemed abandoned without further notice to the applicant.

 

244.9Unless otherwise indicated in these regulations or in conflict with the requirements of sections 306 and 403, the standards, definitions, and conditions imposed by Rules 501, 502, 503, and 505 of SEC Regulation D shall be applicable to offers and sales made in the District pursuant to the Rule.

 

244.10Nothing in this section is intended to or should be construed as in any way relieving issuers or persons acting on behalf of issuers from the antifraud provisions of the Act.

 

244.11The aggregate number of unaccredited purchasers of securities sold under this exemption shall not exceed 35 purchasers in the District during any 12-month period, exclusive of purchasers acquiring securities that are registered pursuant to the Act.

 

source

Amended by Emergency Rulemaking published at 47 DCR 9910 (December 15, 2000) [EXPIRED]; as amended by Emergency Rulemaking published at 48 DCR 1987 (March 2, 2001) [EXPIRED]; as amended by Emergency and Proposed Rulemaking published at 48 DCR 3952 (May 4, 2001) [EXPIRED]; as amended by Emergency and Proposed Rulemaking published at 48 DCR 9177 (October 5, 2001) [EXPIRED]; as amended by Final Rulemaking published at 48 DCR 10879 (November 30, 2001).