(815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
Sec. 4. Exempt transactions. The provisions of Sections 2a, 5, 6 and 7 of this Act shall not apply to any of the following transactions, except where otherwise specified in this Section 4:
A. Any offer or sale, whether through a dealer or otherwise, of securities by a person who is not an issuer, underwriter, dealer or controlling person in respect of such securities, and who, being the bona fide owner of such securities, disposes thereof for his or her own account; provided, that such offer or sale is not made directly or indirectly for the benefit of the issuer or of an underwriter or controlling person.
B. Any offer, sale, issuance or exchange of securities of the issuer to or with security holders of the issuer except to or with persons who are security holders solely by reason of holding transferable warrants, transferable options, or similar transferable rights of the issuer, if no commission or other remuneration is paid or given directly or indirectly for or on account of the procuring or soliciting of such sale or exchange (other than a fee paid to underwriters based on their undertaking to purchase any securities not purchased by security holders in connection with such sale or exchange).
C. Any offer, sale or issuance of securities to any corporation, bank, savings bank, savings institution, savings and loan association, trust company, insurance company, building and loan association, or dealer; to a pension fund, pension trust, or employees' profit sharing trust, other financial institution or institutional investor, any government or political subdivision or instrumentality thereof, whether the purchaser is acting for itself or in some fiduciary capacity; to any partnership or other association engaged as a substantial part of its business or operations in purchasing or holding securities; to any trust in respect of which a bank or trust company is trustee or co-trustee; to any entity in which at least 90% of the equity is owned by persons described under subsection C, H, or S of this Section 4; to any employee benefit plan within the meaning of Title I of the Federal ERISA Act if (i) the investment decision is made by a plan fiduciary as defined in Section 3(21) of the Federal ERISA Act and such plan fiduciary is either a bank, savings and loan association, insurance company, registered investment adviser or an investment adviser registered under the Federal 1940 Investment Advisers Act, or (ii) the plan has total assets in excess of $5,000,000, or (iii) in the case of a self-directed plan, investment decisions are made solely by persons that are described under subsection C, D, H or S of this Section 4; to any plan established and maintained by, and for the benefit of the employees of, any state or political subdivision or agency or instrumentality thereof if such plan has total assets in excess of $5,000,000; or to any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, any Massachusetts or similar business trust, or any partnership, if such organization, trust, or partnership has total assets in excess of $5,000,000.
D. The Secretary of State is granted authority to create by rule or regulation a limited offering transactional exemption that furthers the objectives of compatibility with federal exemptions and uniformity among the states. The Secretary of State shall prescribe by rule or regulation the amount of the fee for filing any report required under this subsection, but the fee shall not be less than the minimum amount nor more than the maximum amount established under Section 11a of this Act and shall not be returnable in any event.
E. Any offer or sale of securities by an executor, administrator, guardian, receiver or trustee in insolvency or bankruptcy, or at any judicial sale, or at a public sale by auction held at an advertised time and place, or the offer or sale of securities in good faith and not for the purpose of avoiding the provisions of this Act by a pledgee of securities pledged for a bona fide debt.
F. Any offer or sale by a registered dealer, either as principal or agent, of any securities (except face amount certificate contracts and investment fund shares) at a price reasonably related to the current market price of such securities, provided:
(1) (a) the securities are issued and outstanding;
(b) the issuer is required to file reports
pursuant to Section 13 or Section 15(d) of the Federal 1934 Act and has been subject to such requirements during the 90 day period immediately preceding the date of the offer or sale, or is an issuer of a security covered by Section 12(g)(2)(B) or (G) of the Federal 1934 Act;
(c) the dealer has a reasonable basis for
believing that the issuer is current in filing the reports required to be filed at regular intervals pursuant to the provisions of Section 13 or Section 15(d), as the case may be, of the Federal 1934 Act, or in the case of insurance companies exempted from Section 12(g) of the Federal 1934 Act by subparagraph 12(g)(2)(G) thereof, the annual statement referred to in Section 12(g)(2)(G)(i) of the Federal 1934 Act; and
(d) the dealer has in its records, and makes
reasonably available upon request to any person expressing an interest in a proposed transaction in the securities, the issuer's most recent annual report filed pursuant to Section 13 or 15(d), as the case may be, of the Federal 1934 Act or the annual statement in the case of an insurance company exempted from Section 12(g) of the Federal 1934 Act by subparagraph 12(g)(2)(G) thereof, together with any other reports required to be filed at regular intervals under the Federal 1934 Act by the issuer after such annual report or annual statement; provided that the making available of such reports pursuant to this subparagraph, unless otherwise represented, shall not constitute a representation by the dealer that the information is true and correct, but shall constitute a representation by the dealer that the information is reasonably current; or
(2) (a) prior to any offer or sale, an application
for the authorization thereof and a report as set forth under sub-paragraph (d) of this paragraph (2) has been filed by any registered dealer with and approved by the Secretary of State pursuant to such rules and regulations as the Secretary of State may prescribe;
(b) the Secretary of State shall have the power
by order to refuse to approve any application or report filed pursuant to this paragraph (2) if
(i) the application or report does not comply
with the provisions of this paragraph (2), or
(ii) the offer or sale of such securities
would work or tend to work a fraud or deceit, or
(iii) the issuer or the applicant has
violated any of the provisions of this Act;
(c) each application and report filed pursuant to
this paragraph (2) shall be accompanied by a filing fee and an examination fee in the amount established pursuant to Section 11a of this Act, which shall not be returnable in any event;
(d) there shall be submitted to the Secretary of
State no later than 120 days following the end of the issuer's fiscal year, each year during the period of the authorization, one copy of a report which shall contain a balance sheet and income statement prepared as of the issuer's most recent fiscal year end certified by an independent certified public accountant, together with such current information concerning the securities and the issuer thereof as the Secretary of State may prescribe by rule or regulation or order;
(e) prior to any offer or sale of securities
under the provisions of this paragraph (2), each registered dealer participating in the offer or sale of such securities shall provide upon request of prospective purchasers of such securities a copy of the most recent report required under the provisions of sub-paragraph (d) of this paragraph (2);
(f) approval of an application filed pursuant to
this paragraph (2) of subsection F shall expire 5 years after the date of the granting of the approval, unless said approval is sooner terminated by (1) suspension or revocation by the Secretary of State in the same manner as is provided for in subsections E, F and G of Section 11 of this Act, or (2) the applicant filing with the Secretary of State an affidavit to the effect that (i) the subject securities have become exempt under Section 3 of this Act or (ii) the applicant no longer is capable of acting as the applicant and stating the reasons therefor or (iii) the applicant no longer desires to act as the applicant. In the event of the filing of an affidavit under either preceding sub-division (ii) or (iii) the Secretary of State may authorize a substitution of applicant upon the new applicant executing the application as originally filed. However, the aforementioned substituted execution shall have no effect upon the previously determined date of expiration of approval of the application. Notwithstanding the provisions of this subparagraph (f), approvals granted under this paragraph (2) of subsection F prior to the effective date of this Act shall be governed by the provisions of this Act in effect on such date of approval; and
(g) no person shall be considered to have
violated Section 5 of this Act by reason of any offer or sale effected in reliance upon an approval granted under this paragraph (2) after a termination thereof under the foregoing subparagraph (f) if official notice of such termination has not been circulated generally to dealers by the Secretary of State and if such person 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 termination; or
(3) the securities, or securities of the same class,
are the subject of an existing registration under Section 5 of this Act.
The exemption provided in this subsection F shall apply only if the offer or sale is made in good faith and not for the purpose of avoiding any of the provisions of this Act, and only if the offer or sale is not made for the direct or indirect benefit of the issuer of the securities, or the controlling person in respect of such issuer.
G. (1) Any offer, sale or issuance of a security, whether
to residents or to non-residents of this State, where:
(a) all sales of such security to residents of
this State (including the most recent such sale) within the immediately preceding 12-month period have been made to not more than 35 persons or have involved an aggregate sales price of not more than $1,000,000;
(b) such security is not offered or sold by means
of any general advertising or general solicitation in this State; and
(c) no commission, discount, or other
remuneration exceeding 20% of the sale price of such security, if sold to a resident of this State, is paid or given directly or indirectly for or on account of such sales.
(2) In computing the number of resident purchasers or
the aggregate sales price under paragraph (1) (a) above, there shall be excluded any purchaser or dollar amount of sales price, as the case may be, with respect to any security which at the time of its sale was exempt under Section 3 or was registered under Section 5, 6 or 7 or was sold in a transaction exempt under other subsections of this Section 4.
(3) A prospectus or preliminary prospectus with
respect to a security for which a registration statement is pending or effective under the Federal 1933 Act shall not be deemed to constitute general advertising or general solicitation in this State as such terms are used in paragraph (1) (b) above, provided that such prospectus or preliminary prospectus has not been sent or otherwise delivered to more than 150 residents of this State.
(4) The Secretary of State shall by rule or
regulation require the filing of a report or reports of sales made in reliance upon the exemption provided by this subsection G and prescribe the form of such report and the time within which such report shall be filed. Such report shall set forth the name and address of the issuer and of the controlling person, if the sale was for the direct or indirect benefit of such person, and any other information deemed necessary by the Secretary of State to enforce compliance with this subsection G. The Secretary of State shall prescribe by rule or regulation the amount of the fee for filing any such report, established pursuant to Section 11a of this Act, which shall not be returnable in any event. The Secretary of State may impose, in such cases as he or she may deem appropriate, a penalty for failure to file any such report in a timely manner, but no such penalty shall exceed an amount equal to five times the filing fee. The contents of any such report or portion thereof may be deemed confidential by the Secretary of State by rule or order and if so deemed shall not be disclosed to the public except by order of court or in court proceedings. The failure to file any such report shall not affect the availability of such exemption, but such failure to file any such report shall constitute a violation of subsection D of Section 12 of this Act, subject to the penalties enumerated in Section 14 of this Act. The civil remedies provided for in subsection A of Section 13 of this Act and the civil remedies of rescission and appointment of a receiver, conservator, ancillary receiver or ancillary conservator provided for in subsection F of Section 13 of this Act shall not be available against any person by reason of the failure to file any such report or on account of the contents of any such report.
H. Any offer, sale or issuance of a security to (1) any natural person who has, or is reasonably believed by the person relying upon this subsection H to have, a net worth or joint net worth with that person's spouse, at the time of the offer, sale or issuance, in excess of $1,000,000 excluding the value of a principal residence, or (2) any natural person who had, or is reasonably believed by the person relying upon this subsection H to have had, an income or joint income with that person's spouse, in excess of $200,000 in each of the two most recent years and who reasonably expects, or is reasonably expected to have, an income in excess of $200,000 in the current year, or (3) any person that is not a natural person and in which at least 90% of the equity interest is owned by persons who meet either of the tests set forth in clauses (1) or (2) of this subsection H; provided that such security is not offered or sold by means of any general advertising or general solicitation in this State.
I. Any offer, sale or issuance of securities to or for the benefit of security holders of any person incident to a vote by such security holders pursuant to such person's organizational document or any applicable statute of the jurisdiction of such person's organization, on a merger, consolidation, reclassification of securities, or sale or transfer of assets in consideration of or exchange for securities of the same or another person.
J. Any offer, sale or issuance of securities in exchange for one or more outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where such offer, sale or issuance is incident to a reorganization, recapitalization, readjustment, composition or settlement of a claim, as approved by a court of competent jurisdiction of the United States, or any state.
K. Any offer, sale or issuance of securities for patronage, or as patronage refunds, or in connection with marketing agreements by cooperative associations organized exclusively for agricultural, producer, marketing, purchasing, or consumer purposes; and the sale of subscriptions for or shares of stock of cooperative associations organized exclusively for agricultural, producer, marketing, purchasing, or consumer purposes, if no commission or other remuneration is paid or given directly or indirectly for or on account of such subscription, sale or resale, and if any person does not own beneficially more than 5% of the aggregate amount of issued and outstanding capital stock of such cooperative association.
L. Offers for sale or solicitations of offers to buy (but not the acceptance thereof), of securities which are the subject of a pending registration statement filed under the Federal 1933 Act and which are the subject of a pending application for registration under this Act.
M. Any offer or sale of preorganization subscriptions for any securities prior to the incorporation, organization or formation of any issuer under the laws of the United States, or any state, or the issuance by such issuer, after its incorporation, organization or formation, of securities pursuant to such preorganization subscriptions, provided the number of subscribers does not exceed 25 and either (1) no commission or other remuneration is paid or given directly or indirectly for or on account of such sale or sales or issuance, or (2) if any commission or other remuneration is paid or given directly or indirectly for or on account of such sale or sales or issuance, the securities are not offered or sold by any means of general advertising or general solicitation in this State.
N. The execution of orders for purchase of securities by a registered salesperson and dealer, provided such persons act as agent for the purchaser, have made no solicitation of the order to purchase the securities, have no direct interest in the sale or distribution of the securities ordered, receive no commission, profit, or other compensation other than the commissions involved in the purchase and sale of the securities and deliver to the purchaser written confirmation of the order which clearly identifies the commissions paid to the registered dealer.
O. Any offer, sale or issuance of securities, other than fractional undivided interests in an oil, gas or other mineral lease, right or royalty, for the direct or indirect benefit of the issuer thereof, or of a controlling person, whether through a dealer (acting either as principal or agent) or otherwise, if the securities sold, immediately following the sale or sales, together with securities already owned by the purchaser, would constitute 50% or more of the equity interest of any one issuer, provided that the number of purchasers is not more than 5 and provided further that no commission, discount or other remuneration exceeding 15% of the aggregate sale price of the securities is paid or given directly or indirectly for or on account of the sale or sales.
P. Any offer, sale or issuance of securities (except face amount certificate contracts and investment fund shares) issued by and representing an interest in an issuer which is a business corporation incorporated under the laws of this State, the purposes of which are to provide capital and supervision solely for the redevelopment of blighted urban areas located in a municipality in this State and whose assets are located entirely within that municipality, provided: (1) no commission, discount or other remuneration is paid or given directly or indirectly for or on account of the sale or sales of such securities; (2) the aggregate amount of any securities of the issuer owned of record or beneficially by any one person will not exceed the lesser of $5,000 or 4% of the equity capitalization of the issuer; (3) the officers and directors of the corporation have been bona fide residents of the municipality not less than 3 years immediately preceding the effectiveness of the offering sheet for the securities under this subsection P; and (4) the issuer files with the Secretary of State an offering sheet descriptive of the securities setting forth:
(a) the name and address of the issuer;
(b) the title and total amount of securities to be
offered;
(c) the price at which the securities are to be
offered; and
(d) such additional information as the Secretary of
State may prescribe by rule and regulation.
The Secretary of State shall within a reasonable time examine the offering sheet so filed and, unless the Secretary of State shall make a determination that the offering sheet so filed does not conform to the requirements of this subsection P, shall declare the offering sheet to be effective, which offering sheet shall continue effective for a period of 12 months from the date it becomes effective. The fee for examining the offering sheet shall be as established pursuant to Section 11a of this Act, and shall not be returnable in any event. The Secretary of State shall by rule or regulation require the filing of a report or reports of sales made to residents of this State in reliance upon the exemption provided by this subsection P and prescribe the form of such report and the time within which such report shall be filed. The Secretary of State shall prescribe by rule or regulation the amount of the fee for filing any such report, but such fee shall not be less than the minimum amount nor more than the maximum amount established pursuant to Section 11a of this Act, and shall not be returnable in any event. The Secretary of State may impose, in such cases as he or she may deem appropriate, a penalty for failure to file any such report in a timely manner, but no such penalty shall exceed an amount equal to five times the filing fee. The contents of any such report shall be deemed confidential and shall not be disclosed to the public except by order of court or in court proceedings. The failure to file any such report shall not affect the availability of such exemption, but such failure to file any such report shall constitute a violation of subsection D of Section 12 of this Act, subject to the penalties enumerated in Section 14 of this Act. The civil remedies provided for in subsection A of Section 13 of this Act and the civil remedies of rescission and appointment of a receiver, conservator, ancillary receiver or ancillary conservator provided for in subsection F of Section 13 of this Act shall not be available against any person by reason of the failure to file any such report or on account of the contents of any such report.
Q. Any isolated transaction, whether effected by a dealer or not.
R. Any offer, sale or issuance of a security to any person who purchases at least $150,000 of the securities being offered, where the purchaser's total purchase price does not, or it is reasonably believed by the person relying upon this subsection R that said purchase price does not, exceed 20 percent of the purchaser's net worth at the time of sale, or if a natural person a joint net worth with that person's spouse, for one or any combination of the following: (i) cash, (ii) securities for which market quotations are readily available, (iii) an unconditional obligation to pay cash or securities for which quotations are readily available, which obligation is to be discharged within five years of the sale of the securities to the purchaser, or (iv) the cancellation of any indebtedness owed by the issuer to the purchaser; provided that such security is not offered or sold by means of any general advertising or general solicitation in this State.
S. Any offer, sale or issuance of a security to any person who is, or who is reasonably believed by the person relying upon this subsection S to be, a director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer. For purposes of this subsection S, "executive officer" shall mean the president, any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function, or any other person who performs similar policy making functions for the issuer. Executive officers of subsidiaries may be deemed executive officers of the issuer if they perform such policy making functions for the issuer.
A document being filed pursuant to this Section 4 shall be deemed filed, and any fee paid pursuant to this Section 4 shall be deemed paid, upon the date of actual receipt thereof by the Secretary of State.
(Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
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Last modified: February 18, 2015