808 KAR 10:340. Registration exemption for certain limited offerings
made exclusively to accredited investors.
TO: KRS 292.410(1)(q), 292.420(3), 17 C.F.R. 230.501
AUTHORITY: KRS 292.410(1)(q), 292.500(3)
FUNCTION, AND CONFORMITY: KRS 292.500(3) authorizes the commissioner to promulgate administrative
regulations necessary to carry out the provisions of KRS Chapter 292. KRS
292.410(1)(q) authorizes the commissioner
to grant exemptions for any transaction which the executive director by
rule or order finds registration is not necessary or appropriate in the public
interest or for the protection of investors. This administrative regulation
establishes the requirements for claiming the registration exemption for a
limited offering made exclusively to an accredited investor.
1. Definition. "Accredited investor" is defined in 17 C.F.R.
2. An offer or sale of a security by an issuer in a transaction that meets the
requirements established in this administrative regulation shall be exempt from
KRS 292.340 through 292.390.
To qualify for this exemption, the sale of a security shall be made
exclusively to a person who is an accredited investor.
The exemption shall not be available to an issuer that:
Issues interests in an oil, gas, or mineral enterprise; or
Is in the development stage; and
Has no specific business plan or purpose; or
Has indicated that its business plan is to engage in a merger or acquisition
with an unidentified company or companies, or other entity or person.
The issuer shall reasonably believe that each purchaser is purchasing for
investment and not with a view to or for sale in connection with a distribution
of the security.
A resale of a security sold in reliance on this exemption within twelve (12)
months of sale, except a resale to an accredited investor or pursuant to a
registration statement effective under KRS 292.340 through 292.390, shall be
presumed to be with a view to distribution and not for investment.
If resold, a security issued under this exemption shall be resold pursuant to
registration or an exemption under KRS Chapter 292.
Except as provided in paragraph (b) of this subsection, this exemption shall
not be available to an issuer if the issuer, any of the issuer's predecessors,
any affiliated issuer, any of the issuer's directors, officers, general
partners, beneficial owners of ten (10) percent or more of any class of its
equity securities, any of the issuer's promoters, promoters presently connected
with the issuer in any capacity, any underwriter of the securities to be
offered, or any partner, director or officer of the underwriter:
Within the last five (5) years, has filed a registration statement which is the
subject of a currently effective registration stop order entered by a state
securities administrator or the United States Securities and Exchange
Within the last five (5) years, has been convicted of a criminal offense in
connection with the offer, purchase or sale of a security, or involving fraud
Is currently subject to a state or federal administrative enforcement order or
judgment, entered within the last five (5) years, finding fraud or deceit in
connection with the purchase or sale of a security; or
Is currently subject to an order, judgment or decree of a court of competent
jurisdiction, entered within the last five years, temporarily, preliminarily or
permanently restraining or enjoining the party from engaging in or continuing
to engage in a conduct or practice involving fraud or deceit in connection with
the purchase or sale of a security.
Paragraph (a) of this subsection shall not apply if:
The party subject to the disqualification is licensed or registered to conduct
securities related business in the state in which the order, judgment or decree
creating the disqualification was entered against the party; or
Before the first offer under this exemption, the state securities
administrator, or the court or regulatory authority that entered the order,
judgment, or decree, waives the disqualification.
The issuer may make a general announcement of the proposed offering through the
use of electronic media or other means of communication.
The general announcement shall state only the following information, unless the
commissioner determines that additional information is in the
The name, address and telephone number of the issuer of the securities;
The name, a brief description and price (if known) of the security to be
A brief description of the business of the issuer in twenty-five (25) words or
The type, number and aggregate amount of securities being offered;
The name, address and telephone number of the person to contact for additional
A statement that:
A sale shall exclusively be made to an accredited investor;
Money or other consideration shall not be solicited or accepted; and
Has not been registered with or approved by a state securities agency or the
United States Securities and Exchange Commission; and
Is being offered and sold pursuant to an exemption from registration.
The issuer, in connection with an offer, may provide information in addition to
the general announcement under subsection (5) of this section, if the
Is delivered through an electronic database that is restricted to persons who
have been prequalified as accredited investors; or
Is delivered after the issuer reasonably believes that the prospective
purchaser is an accredited investor.
A telephone solicitation shall not be made unless prior to placing the call,
the issuer reasonably believes that the prospective purchaser to be solicited
is an accredited investor.
Dissemination of the general announcement of the proposed offering to a person
who is not an accredited investor shall not disqualify the issuer from claiming
the exemption under this administrative regulation.
Within fifteen (15) days after the first sale in this state, the issuer shall
file with the commissioner:
A notice transaction;
A consent to service of process;
A copy of the general announcement; and
A fee in the amount of $250 as required by KRS 292.420(3).
3. Adoption Without Change. 17 C.F.R. 230.501(a), as effective April 19, 1989,
is adopted without change.
This federal regulation may be inspected, copied, or obtained from the Department
of Financial Institutions, 1025 Capital Center
Drive, Suite 200, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to
4:30 p.m. (24 Ky.R. 2266; Am. 25 Ky.R. 96; eff. 6-25-98; 26 Ky.R. 1208; 1560;
eff. 2-14-2000; TAm eff.