Code of Alabama - Title 8: Commercial Law and Consumer Protection - Section 8-6-11 - Registration of securities - Exempt transactions

Section 8-6-11 - Registration of securities - Exempt transactions.

(a) Except as hereinafter in this section expressly provided, Sections 8-6-3 through 8-6-9 shall not apply to any of the following transactions:

(1) Any isolated nonissuer transaction, whether effected through a dealer or not;

(2) Any nonissuer transaction in an outstanding security by a registered dealer if:

a. The issuer has a class of securities subject to registration under Section 12 of the Securities Exchange Act of 1934 and has been subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934 for not less than 180 days before the transaction; or has filed and maintained with the commission for not less than 180 days before the transaction information, in such form as the commission, by rule, specifies, substantially comparable to the information which the issuer would be required to file under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, or the securities have been the subject of an effective registration statement within 180 days before the transaction, or the issuer is required to file and has filed all reports under Section 13 of the Securities Exchange Act of 1934, or the issuer is exempted from registration by Section 12(g)(3) of the Securities Exchange Act of 1934, it or its predecessor in interest has been in existence for at least five years, the security is listed for trading on a foreign securities exchange and has been trading for at least six months and continues to trade on such exchange, and the aggregate market value of shares, the ownership of which is unrestricted, is not less than $500,000,000; or

b. The issuer is an investment company registered under the Investment Company Act of 1940 and has been subject to the reporting requirements of Section 30 of that act for not less than 180 days before the transaction; or

c. The security has a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year, within the three preceding fiscal years, or during the existence of the issuer and any predecessors if less than three years in the payment of principal, interest, or dividends on the security;

(3) Any nonissuer transaction effected by or through a registered dealer pursuant to an unsolicited order or offer to buy;

(4) Any transaction between the issuer or other person on whose behalf the offering is made and an underwriter or among underwriters;

(5) Any transaction in a bond or other evidence of indebtedness secured by a real or chattel mortgage or deed of trust or by an agreement for the sale of real estate or chattels if the entire mortgage, deed of trust, or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit;

(6) Any sale or the offering for sale of any security at any judicial, executor's, administrator's, guardian, or conservator's sale, or at any sale by a receiver or trustee in insolvency or bankruptcy;

(7) Any transaction executed by a bona fide pledge without any purpose of evading this article;

(8) Any offer or sale to a bank, savings institution, credit union, trust company, insurance company or investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer, or to a dealer, whether the purchaser is acting for itself or in some fiduciary capacity;

(9) Any transaction which is part of an issue of which there are no more than 10 purchasers [other than those designated in subdivision (a)(8) of this section] wherever located, of securities from the issuer during any period of 12 consecutive months if:

a. The issuer reasonably believes that all the buyers are purchasing for investment and not with a view to distribution, and such issuer exercises reasonable care to assure this investment intent, which reasonable care shall be presumed if the following conditions are satisfied:

1. Reasonable inquiry to determine if the purchaser is acquiring the securities for himself or herself or for other persons;

2. Written disclosure to each purchaser prior to sale that the securities have not been registered under the act and, therefore, cannot be resold unless they are registered under the act or unless an exemption from registration is available;

3. Placement of a legend on the certificate or other document that evidences the securities stating that the securities have not been registered under the act and setting forth or referring to the restrictions on transferability and sale of the securities; and

b. No commission or other remuneration is paid or given directly or indirectly for soliciting any prospective buyer; and

c. No public advertising or general solicitation is used in connection with the issue of which the transaction in reliance on this exemption is a part.

Sections 8-6-3 through 8-6-9 shall not apply to any offer made pursuant to this subdivision (a)(9) in which no sale results.

But the Securities Commission may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption or decrease or increase the number of purchasers permitted, or waive the conditions in paragraphs a. and b. of this subdivision (9) with or without the substitution of a limitation on remuneration.

(10) Any transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants or transferable warrants exercisable within not more than 90 days of their issuance, if:

a. No commission or other remuneration, other than a standby commission, is paid or given directly or indirectly for soliciting any security holder in this state; or

b. The issuer first files a notice specifying the terms of the offer and the Securities Commission does not by order disallow the exemption within the next five full business days;

(11) Any offer, but not a sale, of a security for which registration statements have been filed under both this article and the Securities Act of 1933 if no order of denial, suspension, or revocation is in effect and no public proceeding or examination looking toward such an order is pending under either act;

(12) The issuance of any stock dividend, whether the corporation distributing the dividend is the issuer of the stock or not, if nothing of value is given by stockholders for the distribution other than the surrender of a right to a cash dividend where the stockholder can elect to take a dividend in cash or stock;

(13) Any transaction incident to a right of conversion or a statutory or judicially approved reclassification, recapitalization, reorganization, quasi-reorganization, stock split, reverse stock split, merger, consolidation, or sale of assets; or

(14) An offering of securities conducted solely in this state to residents of this state in which:

a. The issuer of the security shall be a for-profit corporation or other for-profit entity, or business cooperative with its principal place of business in the State of Alabama and registered with the Secretary of State.

b. The transaction shall meet the requirements of the federal exemption for intrastate offerings in section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. § 77c(a)(11), and SEC Rule 147. As such, securities must be offered to and sold only to persons who are residents of the State of Alabama at the time of purchase. Prior to any offer or sale pursuant to this exemption, the seller shall obtain documentary evidence from each prospective purchaser that provides the seller with a reasonable basis to believe that such investor is a resident of the State of Alabama.

c. The sum of all cash and other consideration to be received for all sales of the security in reliance upon this exemption shall not exceed one million dollars ($1,000,000), less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance upon this exemption.

d. The issuer shall not accept more than five thousand dollars ($5,000) from any single purchaser unless the purchaser is an accredited investor as defined by Rule 501 SEC Regulation D, 17 C.F.R. 230.501.

e. The issuer must reasonably believe that all purchasers of securities are purchasing for investment and not for sale in connection with a distribution of the security.

f. A commission or remuneration shall not be paid or given, directly or indirectly, for any person's participation in the offer or sale of securities for the issuer unless the person is registered as a broker-dealer or agent under the act.

g. All funds received from investors shall be deposited into a bank or depository institution authorized to do business in Alabama, and all the funds shall be used in accordance with representations made to investors.

h. Not less than 10 days prior to the use of any general solicitation or within 15 days after the first sale of the security pursuant to this exemption (provided no general solicitation has been used prior to such sale), whichever occurs first, the issuer shall provide a notice to the commission in writing or electronically on Form CF1. The notice shall specify that the issuer is conducting an offering in reliance upon this exemption and shall contain the names and addresses of the following persons:

1. The issuer;

2. Officers, directors and any control person of the issuer;

3. All persons who will be involved in the offer or sale of securities on behalf of the issuer; and

4. The bank or other depository institution in which investor funds will be deposited.

i. The issuer shall not be, either before or as a result of the offering:

1. An investment company as defined in section 3 of the Investment Company Act of 1940, 15 U.S.C. § 80a-3, or subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m and 78o(d); or

2. An investment adviser as defined in Section 8-6-2(18) of this code, nor a person who otherwise provides investment advice as a service or for a fee.

j. The issuer shall inform all purchasers that the securities have not been registered under the act and, therefore, cannot be resold unless the securities are registered or qualify for an exemption from registration under Sections 8-6-4 through 8-6-11 of this code. In addition, the issuer shall make the disclosures required by subsection (f) or SEC Rule 147, 17 C.F.R. 230.147(f).

k. This exemption shall not be used in conjunction with any other exemption under the act except the exemption to institutional investors in Section 8-6-11(a)(8) of this code and for offers and sales to controlling persons of the issuer. Sales to controlling persons shall not count toward the limitation in paragraph (14)c.

l. This exemption shall not be available if the issuer, or any its officers, controlling people or promoters is subject to a disqualifier enumerated in Section 8-6-9 of this code.

m. Nothing in this exemption shall be construed to alleviate any person from the anti-fraud provisions in Section 8-6-17 of this code, nor shall such exemption be construed to provide relief from any other provisions of this article other than as expressly stated.

n. Every notice of exemption provided for in paragraph h. above shall be accompanied by a nonrefundable filing fee of $150. Such filing fee shall be deposited in the Alabama Securities Commission Fund in the State Treasury to be drawn upon by the commission for its use in administration of this article.

But the Securities Commission may by rule or order, as to any security or transaction of any type of security or transaction, withdraw, further condition or expand this exemption.

(b) The Securities Commission may by order deny or revoke the exemption specified in this section with respect to a specific security if it finds the sale of such security would work or tend to work a fraud upon the purchasers thereof. No order under this subsection may operate retroactively. No person may be considered to have violated this article by reason of any offer or sale effected after the entry of an order under this subsection if he or she sustains the burden of proof that he or she did not know and in the exercise of reasonable care could not have known of the order. In any proceeding under this article, the burden of proving an exemption from a definition is upon the person claiming it.

(c) Any individual, corporation, partnership, or association who makes application to the Securities Commission for any exemption from full registration under subdivision (a)(9) of this section shall be assessed a filing fee in the amount of three hundred dollars ($300) upon application for such exemption. The fee shall accompany the application and shall not be refunded whether the application is approved or rejected. Fees collected under this subsection shall be deposited in a special account in the State Treasury for the use of the commission in the administration of this article.

(Acts 1959, No. 542, p. 1318, §11; Acts 1971, No. 2244, p. 3600; Acts 1975, No. 1044, p. 2095, §2; Acts 1979, No. 79-462, p. 827, §4; Acts 1990, No. 90-527, p. 772, §1; Acts 1991, No. 91-320, p. 584, §1; Act 2009-774, p. 2401, §1; Act 2014-376, p. 1401, §1.)

Last modified: May 3, 2021