2006 Utah Code - 61-1-14 — Exemptions.

     61-1-14.   Exemptions.
     (1) The following securities are exempted from Sections 61-1-7 and 61-1-15:
     (a) any security, including a revenue obligation, issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporate or other instrumentality of one or more of the foregoing, or any certificate of deposit for any of the foregoing;
     (b) any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any Canadian province, any agency or corporate or other instrumentality of one or more of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor;
     (c) any security issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company supervised under the laws of any state;
     (d) any security issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan or similar association organized under the laws of any state and authorized to do business in this state;
     (e) any security issued or guaranteed by any federal credit union or any credit union, industrial loan association, or similar association organized and supervised under the laws of this state;
     (f) any security issued or guaranteed by any public utility or holding company which is a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a company within the meaning of that act, or any security regulated in respect of its rates or in its issuance by a governmental authority of the United States, any state, Canada, or any Canadian province;
     (g) any security listed on the National Association of Securities Dealers Automated Quotation National Market System, the New York Stock Exchange, the American Stock Exchange, or on any other stock exchange or medium approved by the division, except that the director may at any time suspend or revoke this exemption for any particular stock exchange, medium, security, or securities under Subsection (4); any other security of the same issuer which is of senior or substantially equal rank to any security so listed and approved by the director, any security called for by subscription rights or warrants so listed or approved, or any warrant or right to purchase or subscribe to any of the foregoing;
     (h) (i) any security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce or trade or professional association; and
     (ii) any security issued by a corporation organized under Title 3, Chapter 1, and any security issued by a corporation to which the provisions of that chapter are made applicable by compliance with the requirements of Section 3-1-21;
     (i) a promissory note, draft, bill of exchange, or banker's acceptance that evidences an obligation to pay cash within nine months after the date of issuance, exclusive of days of grace, or a renewal of such an obligation that is likewise limited, or a guarantee of such an obligation or of a renewal:
     (i) issued in denominations of at least $50,000; and
     (ii) either:

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     (A) receives a rating in one of the three highest rating categories from a nationally recognized statistical rating organization; or
     (B) the issuer satisfies requirements established by rule or order of the division;
     (j) any investment contract issued in connection with an employees' stock purchase, option, savings, pension, profit-sharing, or similar benefit plan;
     (k) a security issued by an issuer registered as an open-end management investment company or unit investment trust under Section 8 of the Investment Company Act of 1940, if:
     (i) (A) the issuer is advised by an investment adviser that is a depository institution exempt from registration under the Investment Advisers Act of 1940 or that is currently registered as an investment adviser, and has been registered, or is affiliated with an adviser that has been registered, as an investment adviser under the Investment Advisers Act of 1940 for at least three years next preceding an offer or sale of a security claimed to be exempt under this subsection; and
     (B) the adviser has acted, or is affiliated with an investment adviser that has acted as investment adviser to one or more registered investment companies or unit investment trusts for at least three years next preceding an offer or sale of a security claimed to be exempt under this subsection; or
     (ii) the issuer has a sponsor that has at all times throughout the three years before an offer or sale of a security claimed to be exempt under this subsection sponsored one or more registered investment companies or unit investment trusts the aggregate total assets of which have exceeded $100,000,000;
     (iii) in addition to Subsection (i) or (ii), the division has received prior to any sale exempted herein:
     (A) a notice of intention to sell which has been executed by the issuer which sets forth the name and address of the issuer and the title of the securities to be offered in this state; and
     (B) a filing fee as determined under Section 61-1-18.4;
     (iv) in the event any offer or sale of a security of an open-end management investment company is to be made more than 12 months after the date on which the notice and fee under Subsection (iii) is received by the director, another notice and payment of the applicable fee shall be required;
     (v) for the purpose of this subsection, an investment adviser is affiliated with another investment adviser if it controls, is controlled by, or is under common control with the other investment adviser; and
     (l) any security as to which the director, by rule or order, finds that registration is not necessary or appropriate for the protection of investors.
     (2) The following transactions are exempted from Sections 61-1-7 and 61-1-15:
     (a) any isolated transaction, whether effected through a broker-dealer or not;
     (b) any nonissuer transaction in an outstanding security, if as provided by rule of the division:
     (i) information about the issuer of the security as required by the division is currently listed in a securities manual recognized by the division, and the listing is based upon such information as required by rule of the division; or
     (ii) the security has a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year or 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;

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     (c) any nonissuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy;
     (d) any transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;
     (e) 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;
     (f) any transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;
     (g) any transaction executed by a bona fide pledgee without any purpose of evading this chapter;
     (h) any offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional investor, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity;
     (i) any offer or sale of a preorganization certificate or subscription if:
     (i) no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber;
     (ii) the number of subscribers acquiring any legal or beneficial interest therein does not exceed ten; and
     (iii) there is no general advertising or solicitation in connection with the offer or sale;
     (j) any transaction pursuant to an offer by an issuer of its securities to its existing securities holders, if:
     (i) no commission or other remuneration, other than a standby commission is paid or given directly or indirectly for soliciting any security holders in this state and the transaction constitutes either:
     (A) the conversion of convertible securities;
     (B) the exercise of nontransferable rights or warrants;
     (C) the exercise of transferable rights or warrants if the rights or warrants are exercisable not more than 90 days after their issuance; or
     (D) the purchase of securities under a preemptive right; and
     (ii) the exemption created by Subsection (2)(j) is not available for an offer or sale of securities to existing securities holders who have acquired their securities from the issuer in a transaction in violation of Section 61-1-7;
     (k) any offer, but not a sale, of a security for which registration statements have been filed under both this chapter and the Securities Act of 1933 if no stop order or refusal order is in effect and no public proceeding or examination looking toward such an order is pending;
     (l) a distribution of securities as a dividend if the person distributing the dividend is the issuer of the securities distributed;
     (m) any nonissuer transaction effected by or through a registered broker-dealer where the broker-dealer or issuer files with the division, and the broker-dealer maintains in his records, and makes reasonably available upon request to any person expressing an interest in a proposed transaction in the security with the broker-dealer information prescribed by the division under its rules;

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     (n) any transactions not involving a public offering;
     (o) any offer or sale of "condominium units" or "time period units" as those terms are defined in the Condominium Ownership Act, whether or not to be sold by installment contract, if the provisions of the Condominium Ownership Act, or if the units are located in another state, the condominium act of that state, the Utah Uniform Land Sales Practices Act, the Utah Timeshare and Camp Resort Act, and the Utah Uniform Consumer Credit Code are complied with;
     (p) any transaction or series of transactions involving a merger, consolidation, reorganization, recapitalization, reclassification, or sale of assets, if the consideration for which, in whole or in part, is the issuance of securities of a person or persons, and if:
     (i) the transaction or series of transactions is incident to a vote of the securities holders of each person involved or by written consent or resolution of some or all of the securities holders of each person involved;
     (ii) the vote, consent, or resolution is given under a provision in:
     (A) the applicable corporate statute or other controlling statute;
     (B) the controlling articles of incorporation, trust indenture, deed of trust, or partnership agreement; or
     (C) the controlling agreement among securities holders;
     (iii) (A) one person involved in the transaction is required to file proxy or informational materials under Section 14 (a) or (c) of the Securities Exchange Act of 1934 or Section 20 of the Investment Company Act of 1940 and has so filed;
     (B) one person involved in the transaction is an insurance company which is exempt from filing under Section 12(g)(2)(G) of the Securities Exchange Act of 1934, and has filed proxy or informational materials with the appropriate regulatory agency or official of its domiciliary state; or
     (C) all persons involved in the transaction are exempt from filing under Section 12(g)(1) of the Securities Exchange Act of 1934, and file with the division such proxy or informational material as the division requires by rule;
     (iv) the proxy or informational material is filed with the division and distributed to all securities holders entitled to vote in the transaction or series of transactions at least ten working days prior to any necessary vote by the securities holders or action on any necessary consent or resolution; and
     (v) the division does not, by order, deny or revoke the exemption within ten working days after filing of the proxy or informational materials;
     (q) any transaction pursuant to an offer to sell securities of an issuer if:
     (i) the transaction is part of an issue in which there are not more than 15 purchasers in this state, other than those designated in Subsection (2)(h), during any 12 consecutive months;
     (ii) no general solicitation or general advertising is used in connection with the offer to sell or sale of the securities;
     (iii) no commission or other similar compensation is given, directly or indirectly, to a person other than a broker-dealer or agent licensed under this chapter, for soliciting a prospective purchaser in this state;
     (iv) the seller reasonably believes that all the purchasers in this state are purchasing for investment;
     (v) the transaction is part of an aggregate offering that does not exceed $500,000, or a greater amount as prescribed by a division rule, during any 12 consecutive months; and

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     (vi) the director, as to a security or transaction, or a type of security or transaction, may withdraw or further condition this exemption or waive one or more of the conditions in Subsection (q);
     (r) any transaction involving a commodity contract or commodity option; and
     (s) any transaction as to which the division finds that registration is not necessary or appropriate for the protection of investors.
     (3) Every person filing an exemption notice or application shall pay a filing fee as determined under Section 61-1-18.4.
     (4) Upon approval by a majority of the Securities Advisory Board, the director, by means of an adjudicative proceeding conducted in accordance with Title 63, Chapter 46b, Administrative Procedures Act, may deny or revoke any exemption specified in Subsection (1)(g), (h), or (j) or in Subsection (2) with respect to:
     (a) a specific security, transaction, or series of transactions; or
     (b) any person or issuer, any affiliate or successor to a person or issuer, or any entity subsequently organized by or on behalf of a person or issuer generally and may impose a fine if he finds that the order is in the public interest and that:
     (i) the application for or notice of exemption filed with the division is incomplete in any material respect or contains any statement which was, in the light of the circumstances under which it was made, false or misleading with respect to any material fact;
     (ii) any provision of this chapter, or any rule, order, or condition lawfully imposed under this chapter has been willfully violated in connection with the offering or exemption by:
     (A) the person filing any application for or notice of exemption;
     (B) the issuer, any partner, officer, or director of the issuer, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling or controlled by the issuer, but only if the person filing the application for or notice of exemption is directly or indirectly controlled by or acting for the issuer; or
     (C) any underwriter;
     (iii) the security for which the exemption is sought is the subject of an administrative stop order or similar order, or a permanent or temporary injunction or any court of competent jurisdiction entered under any other federal or state act applicable to the offering or exemption; the division may not institute a proceeding against an effective exemption under this subsection more than one year from the date of the order or injunction relied on, and it may not enter an order under this subsection on the basis of an order or injunction entered under any other state act unless that order or injunction was based on facts that would currently constitute a ground for a stop order under this section;
     (iv) the issuer's enterprise or method of business includes or would include activities that are illegal where performed;
     (v) the offering has worked, has tended to work, or would operate to work a fraud upon purchasers;
     (vi) the offering has been or was made with unreasonable amounts of underwriters' and sellers' discounts, commissions, or other compensation, or promoters' profits or participation, or unreasonable amounts or kinds of options;
     (vii) an exemption is sought for a security or transaction which is not eligible for the exemption; or
     (viii) the proper filing fee, if required, has not been paid.

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     (5) (a) No order under Subsection (4) may operate retroactively.
     (b) No person may be considered to have violated Section 61-1-7 or 61-1-15 by reason of any offer or sale effected after the entry of an order under this subsection if he sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the order.

Amended by Chapter 160, 1997 General Session