808 KAR 10:210.
Registration exemptions - Federal Regulation D.
RELATES TO: KRS
292.410(1)(q), 17 C.F.R. 230.262, 230.501, 230.504, 230.505, 230.508, 239.500
AUTHORITY: KRS 292.500(3), 17 C.F.R. 230.262, 230.501, 230.504, 230.505,
FUNCTION, AND CONFORMITY: KRS
292.500(3) authorizes the commissioner
promulgate administrative regulations necessary to carry out the provisions of
KRS Chapter 292. KRS 292.410(1)(q) authorizes the commissioner to exempt from KRS
292.330 to 292.390 a transaction for which the commissioner finds that registration
is not necessary or appropriate in the public interest or for the protection of
an investor. This administrative regulation establishes an exemption for an
offer or sale of a security that complies with specified federal regulations
and the requirements established in the administrative regulation.
Section 1. (1) Pursuant to KRS
292.410(1)(q), an offer or sale of a security offered or sold in compliance
with 17 C.F.R. 230.504 or 230.505, or an offer or sale made exempt by 17 C.F.R.
230.508(a) shall be exempt from KRS 292.340 to 292.390 if the offer or sale
meets the requirements established in subsections (3) and (4) of this section.
(2) A person who receives a
commission, finder fee, or other remuneration in connection with a sale of a
security made pursuant to the exemption established in subsection (1) of this
section shall not be relieved of compliance with the requirements of KRS
(3) The exemption established in
subsection (1) of this section shall apply if:
The issuer does not offer or sell the security by means of a form of general
advertisement or general solicitation except as permitted by 17 C.F.R. 230.504.
The following shall not constitute "general solicitation" within the
meaning of this paragraph:
of an indication of interest in accordance with the applicable terms and
2. An offer to
sell a security and the dissemination of written offering material in
accordance with the terms of this administrative regulation at least thirty
(30) days after the withdrawal of an application by the issuer to register the
same class of securities;
(b)1. The issuer
reasonably believes that each purchaser of the securities in Kentucky is:
a. Acquiring the
security for investment; and
b. Aware of the
restrictions imposed on transferability and resale of a security.
2. The basis for
reasonable belief may include:
a. Obtaining a
written representation signed by the purchaser that the purchaser is acquiring
the security for the purchaser's own investment and is aware of the
restrictions imposed on the transferability and resale of the security; and
b. Placement of
a legend on the certificate or other document that evidences the security
stating that the security have not been registered under KRS Chapter 292, and
setting forth or referring to the restrictions on transferability and sale of
(c)1. The issuer
shall file with the office a notice on Form D (17 C.F.R. 239.500):
a. No later than
fifteen (15) days after the first sale of a security from or into Kentucky in
the case of a transaction pursuant to 17 C.F.R. 230.505; or
b. At least ten
(10) business days prior to the first sale of a security from or into Kentucky
in the case of a transaction pursuant to 17 C.F.R. 230.504.
2. During the
time specified in subparagraph 1 of this paragraph, the office shall not have
determined that the exemption provided by this administrative regulation is not
3. A notice on
Form D shall be manually signed by a person duly authorized by the issuer.
furnished by the issuer to an offeree shall be filed with the notice required
by subparagraph 1 of this paragraph.
b. If the
information is altered in a material way during the course of the offering, the
office shall be notified of the amendment within fifteen (15) days after an
offer using the amended information.
5. At the time
of filing of the notice on Form D, the issuer shall pay to the commissioner a
filing fee of $250.
6. If the issuer
files an additional document with the United States Securities and Exchange
Commission subsequent to its initial filing, a copy of the document shall be
filed with the office.
(d)1. An issuer
selling a security in reliance on this exemption furnishes written information
to a prospective investor to comply with the antifraud provisions of KRS
Chapter 292 and applicable federal law.
2. In an offering in reliance on 17 C.F.R.
230.504 to a person who is not an accredited investor, the office shall
consider the information provided to a prospective investor in determining
whether the exemption established by this administrative regulation is available;
(e) In a sale to a nonaccredited
investor pursuant to 17 C.F.R. 230.504, the issuer and a person acting on his behalf shall have reasonable grounds to believe,
and after making reasonable inquiry shall believe, that the purchaser either
alone or with his purchaser representative has the knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risk of the prospective investment.
(4)(a) Except as
provided in paragraph (b) of this subsection, the exemption established in
subsection (1) of this section shall not apply if the issuer or a person described
in 17 C.F.R. 230.262:
1. Has filed a registration statement
which is the subject of a currently effective stop order entered pursuant to a
federal or state law within five (5) years prior to the commencement of the
2. Has been convicted within five (5)
years prior to commencement of the offering of a felony or misdemeanor in
connection with the purchase or sale of a security or a felony involving fraud
or deceit including forgery, embezzlement, obtaining money under false pretenses,
larceny or conspiracy to defraud;
3. Is currently subject to a federal
or state administrative order or judgment entered by that state's securities
administrator within five (5) years prior to reliance on this exemption or is
subject to a state's administrative order or judgment in which fraud or deceit
was found and the order or judgment was entered within five (5) years of the
expected offer and sale of a security in reliance upon this exemption;
4. Is currently subject to a state's
administrative order or judgment which prohibits the use of an exemption from
registration in connection with the purchase or sale of a security; or
5. Is subject to an order, judgment
or decree of a court of competent jurisdiction temporarily or preliminarily
restraining or enjoining, or is subject to an order, judgment or decree of a
court of competent jurisdiction, entered within five (5) years prior to the
commencement of the offering permanently restraining or enjoining, the person
from engaging in or continuing a conduct or practice in connection with the
purchase or sale of a security or involving the making of a false filing with a
(b) The prohibitions of paragraph
(a)1, 2, 3 and 5 of this subsection shall not apply if:
1. The person subject to the
disqualification is duly licensed or registered to conduct securities related
business in the state in which the administrative order or judgment was entered
against the person; or
2. The broker-dealer employing the
person is licensed or registered in Kentucky and the Form BD filed with
Kentucky discloses the order, conviction, judgment or decree relating to the
(c) A disqualification pursuant to
paragraph (a) of this subsection shall be automatically waived if the state
which created the basis for disqualification determines upon a showing of good
cause that it is not necessary under the circumstances that the exemption be
(d) It shall be a defense to a
violation of paragraph (a) of this subsection if the issuer sustains the burden
of proof to establish that he did not know, and in the exercise of reasonable
care could not have known, that a disqualification under paragraph (a) of this
(5) A failure to
comply with a term, condition or requirement established in subsection (2) or
(3)(c) or (d) of this section shall not result in loss of the exemption for a
new offer or sale to a particular individual or entity if the person relying on
the exemption shows:
(a) The failure
to comply did not pertain to a term, condition or requirement directly intended
to protect that particular individual or entity;
(b) The failure
to comply was insignificant with respect to the offering as a whole; and
(c) A good faith
and reasonable attempt was made to comply with all applicable terms, conditions
and requirements of this section.
(6) If an
exemption is established only through reliance upon subsection (5) of this
section, the failure to comply shall be actionable by the commissioner.
(7)(a) An offer or
sale which is exempt pursuant to this administrative regulation shall not be
combined with an offer or sale exempt under another administrative regulation
or KRS Chapter 292.
(b) If an offer or sale fails to
comply with all the conditions for this exemption, the issuer may claim the
availability of another applicable exemption.
(8) This exemption shall not relieve
an issuer or a person acting on behalf of an issuer from the requirement to
provide disclosure to a prospective investor to satisfy the antifraud
provisions established within KRS Chapter 292.
(9) In a
proceeding involving this administrative regulation, the burden of proving the
exemption or an exception from a definition or condition shall be upon the
person claiming it.
(10) The exemption
established in this administrative regulation shall not be available to an
issuer for a transaction which is:
(a) In technical compliance with the
requirements of this administrative regulation; and
(b) Part of a plan or scheme to evade
registration or the requirements of this administrative regulation.
Section 2. Adoption Without Change.
The offer or sale of a security offered or sold pursuant to Federal Regulation
D is governed by:
(1) 17 C.F.R. 230.262, August 13,
(2) 17 C.F.R. 230.501, March 20,
(3) 17 C.F.R. 230.504, June 14, 1996;
(4) 17 C.F.R. 230.505, August 13,
(5) 17 C.F.R. 230.508, August 13,
Section 3. Incorporation by
Reference. (1) Form B-D, "Application for Registration as
Broker-Dealer", July 1988 edition, is incorporated by reference.
(2) It may be inspected, copied, or
obtained at the Department of Financial Institutions, 1025 Capital Center
Drive, Suite 200, Frankfort, Kentucky, 40601, Monday through Friday, 8 a.m. to
(3) A copy may also be obtained from
the National Association of Securities Dealers (NASD), 1735 K Street, N.W.,
Washington, D.C., 20006, or a regional NASD office. (11 Ky.R. 1969; eff. 7-9-85; Am. 12 Ky.R. 358; eff. 10-8-85; 1762; eff.
6-10-86; 13 Ky.R. 1112; eff. 1-13-87; 16 Ky.R. 53; 543; eff. 10-8-89; 24 Ky.R.
2186; 25 Ky.R. 91; 313; eff. 6-25-98; TAm eff. 11-7-2012.)