230 R.I. Code R. 230-RICR-50-05-3.5

Current through October 25, 2024

Section 230-RICR-50-05-3.5 - Uniform Limited Offering Registration

A. Authority, Scope, and Purpose

1. In addition to the authority set forth in § 3.1 of this Part, § 3.5 of this Part is also authorized by R.I. Gen. Laws § 7-11-304(c).

2. § 3.5 of this Part applies to the registration of corporate securities offerings by qualification under R.I. Gen. Laws § 7-11-304(c) which are exempt from registration with the Securities and Exchange Commission under Securities and Exchange Commission Regulation D, Rule 17 C.F.R. § 230.504, or under Regulation A, Rule 17 C.F.R. § 230.251, as promulgated under the Securities Act of 1933.

3. The purpose of § 3.5 of this Part is to implement R.I. Gen. Laws § 7-11-304(c) in order to simplify the registration of small corporate securities offerings and promote uniformity with other states.

B. In accordance with R.I. Gen. Laws § 7-11-705, the Director adopts current Form U-7, the Small Corporate Offering Registration Form.

C. General rules.

1. Qualification. To be eligible for the ULOR under R.I. Gen. Laws § 7-11-304(c), the following conditions apply:

a. The issuer must be a corporation organized under the laws of one of the states or possessions of the United States.

b. The issuer must not be an investment company subject to the Investment Company Act of 1940.

c. The issuer must not be subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1933, 15 U.S.C. §§ 78m or 78o(d).

d. The offering must not be a "blind pool" or other offering for which the specific business to be engaged in or property to be acquired by the issuer cannot be specified.

e. The issuer may not engage in, or propose to engage in, petroleum exploration or production or mining or other extractive industries.

f. The following issuers and programs will not be permitted to utilize ULOR registration unless written approval is obtained from the Director, based upon a showing that adequate disclosure can be made to investors using the Form U-7 format:

(1) Holding companies or companies whose principal purpose is owning stock in, or supervising the management of, other companies;

(2) Portfolio companies, such as a real estate investment trust, which is defined as a corporation, trust, association or other legal entity (other than a real estate syndication) which is engaged primarily in investing in equity interests in real estate (including fee ownership and leasehold interests) or in loans secured by real estate or both;

(3) Issuers with complex capital structures;

(4) Commodity pools;

(5) Equipment leasing programs;

(6) Real estate programs; and

(7) Other issuers that the Director, for good cause, may find inappropriate for ULOR registration.

g. The aggregate offering price of the securities offered (within or outside of this state) shall not exceed the aggregate offering price in Securities and Exchange Commission Regulation D, Rule 17 C.F.R. § 230.504, or Regulation A, Rule 17 C.F.R. § 230.251 as promulgated under the Securities Act of 1933, or successor rules, whichever aggregate offering price is higher, less the aggregate offering price for all securities sold within twelve months before the start of, and during the offering of, the securities in reliance on any exemption under the Securities Act of 1933, 15 U.S.C. § 77e, or in violation of Section 5(a) of that Act, 15 U.S.C. § 77e(a).

h. The offering price for common stock must be equal to or greater than $1.00 per share. This minimum offering price also applies to the exercise price of options, warrants or rights for common stock and to the conversion price of securities convertible into common stock if these types of securities are to be offered.

i. The issuer may not split its common stock or declare a stock dividend for two (2) years after effectiveness of the registration.

j. The issuer may engage selling agents to sell the securities. Commissions, fees or other remuneration for soliciting any prospective purchaser in this state in connection with an offering may only be made to persons who, if required to be registered, the issuer believes and has reason to believe, are appropriately registered in this state.

k. The securities must be offered and sold only on behalf of the issuer and Form U-7 may be used by any selling security-holder to register his or her securities for resale.

2. Disqualification for ULOR registration under R.I. Gen. Laws § 7-11-304(c).

a. ULOR registration shall not be available for the securities of any issuer if such issuer, any of its predecessors or any affiliated issuer:

(1) Has filed a registration statement which is the subject of any pending proceeding or examination under Section 8 of the Securities Act of 1933, 15 U.S.C. § 77h, or is the subject of any refusal order or stop order entered thereunder within five (5) years prior to the filing of the application to register securities;

(2) Is subject to any pending proceeding under Regulation A, Rule 17 C.F.R. § 230.258, of the Securities Act of 1933 or any similar rule adopted under Section 3(b) of the Securities Act of 1933, 15 U.S.C. § 77c(b), or to any order entered thereunder within five (5) years prior to the filing of the application to register securities;

(3) Has been convicted within five (5) years prior to the filing of such application of any felony or misdemeanor in connection with the purchase or sale of any security or involving the making of any false filing with the Securities and Exchange Commission;

(4) Is subject to any order, judgment or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with the Securities and Exchange Commission; or

(5) Is subject to a United States Postal Service false representation order entered under 39 U.S.C. § 3005 within five (5) years prior to the filing of the application to register securities; or is subject to a temporary restraining order or preliminary injunction entered under 39 U.S.C. § 3007.

b. ULOR registration shall not be available for the securities of any issuer if such issuer, any of its directors, officers, ten percent shareholders of any class of its equity securities, promoters presently connected with it in any capacity or selling agents of the securities to be offered or any officers, directors, or partners of such selling agent:

(1) Has been convicted within ten years prior to the filing of the application to register securities of any felony or misdemeanor in connection with the purchase or sale of any security, involving the making of a false filing with the Securities and Exchange Commission or arising out of the conduct of the business or an underwriter, broker, dealer, municipal securities dealer, or investment adviser;

(2) Is subject to any order, judgment or decree entered by any court of competent jurisdiction temporarily or preliminarily enjoining or restraining, or is subject to any order, judgment or decree of any court of competent jurisdiction entered within five (5) years prior to the filing of the application to register securities, permanently enjoining or restraining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security, involving the making of a false filing with the Securities and Exchange Commission or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser;

(3) Is subject to an order of the Securities and Exchange Commission entered pursuant to Sections 15(b), 15B(a), or 15B(c) or the Securities Exchange Act of 1934, 15 U.S.C. §§ 78o(b), 78o-4(a) or 78o-4(c); or is subject to an order of the Securities and Exchange Commission entered pursuant to Section 203(e) or (f) of the Investment Adviser Act of 1940, 15 U.S.C. § 80b-3 (e & f);

(5) Is subject to a United States Postal Service false representation order entered under 39 U.S.C. § 3007, within five (5) years prior to the filing of the application to register securities; or is subject injunction entered under 39 U.S.C. § 3007, with respect to conduct alleged to have violated 39 U.S.C. § 3005.

c. ULOR registration shall not be available for the securities of any issuer if any promoter presently connected with it in any capacity or any selling agents of the securities to be offered was or named as, an underwriter of any securities:

(1) Covered by any registration statement which is the subject of any pending proceeding or examination by the Securities and Exchange Commission under Section 8 of the Securities Act of 1933, 15 U.S.C. § 77b, or is the subject of any refusal order or stop order entered thereunder within five (5) years prior to the filing of any application to register securities; or

(2) Covered by any filing which is subject to any pending proceeding under Regulation A, Rule 17 C.F.R. § 230.258 of the Securities Act of 1933 or any similar rule adopted under Section 3(b) of the Securities Act of 1933, 15 U.S.C. § 77c(2), or to an order entered thereunder within five (5) years prior to the filing of the application to register securities

d. ULOR registration shall not be available for the securities of any issuer if such issuer, any of its directors, officers, ten percent shareholders of any class of its equity securities, promoters presently connected with it is any capacity or selling agents of the securities to be offered or any officers, directors, or partners of such selling agents:

(1) Is the subject of an adjudication or determination within the last five (5) years by a securities agency or administrator of another state or a court of competent jurisdiction that the person has violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Commodity Exchange Act, or the securities law of any other state;

(2) Within the last ten (10) years, pled guilty or nolo contendere to, or been convicted in a domestic or foreign court of an offense that the Director finds:

(AA) Involves the purchase or sale of a security, taking a false oath, making a false report, bribery, perjury, burglary, robbery, or attempt or conspiracy to commit any of those offenses;

(BB) Arises out of the conduct of business as a broker-dealer, investment adviser, depository institution, insurance company, or fiduciary; or

(CC) Involves the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities or an attempt or conspiracy to commit any of those offenses;

(3) Is permanently or temporarily enjoined buy a court of competent jurisdiction from acting as an investment adviser, investment adviser representative, underwriter, broker-dealer, sales representative, or as an affiliated person or employee of an investment company, depository institution, or insurance company, or from engaging in or continuing conduct or practice in connection with any of the foregoing activities, or in connection with the purchase or sale of a security;

(4) Is the subject of an order of the Director denying, suspending, or revoking the person's license as a broker-dealer, sales representative, investment adviser, or investment adviser representative; or

(5) Is the subject of any of the following orders that are currently effective and were issued within the last five (5) years:

(AA) An order by the securities agency or administrator of another state or Canadian province or territory, or by the Securities and Exchange Commission, denying, suspending, or revoking the person's license as a broker-dealer, sales representative, investment adviser, or investment adviser representative, or the substantial equivalent of those terms;

(BB) A suspension or expulsion from membership in or association with a member of a self-regulatory organization;

(CC) A United States Postal Service fraud order;

(DD) A cease and desist order by the Director, the securities agency or administrator of another state, or a Canadian province or territory, the Securities Exchange Commission, or the Commodity Futures Trading Commission; or

(EE) An order by the Commodity Futures Trading Commission denying, suspending, or revoking registration under the Commodity Exchange Act.

3. Disclosure Document. Application for ULOR registration under R.I. Gen. Laws § 7-11-304(c) shall be made by the issuer of the securities by filing with the Department a disclosure document on Form U-7, with Exhibits as required by Part V of the Instructions for Use of Form U-7, and such other documents as are required by Part III(A) of the Instructions for Use of Form U-7.

4. Financial Statements. The financial statements included in the application for ULOR registration shall be in the form provided in Part IV(K) of the Instructions for Use of Form U-7.

5. Debt Service and Preferred Stock. If the offering includes debt securities or preferred stock, the application for registration must include information that demonstrates the ability of the issuer to service its debt or pay the preferred stock dividends.

6. Registration Fee. An application for ULOR registration under this Regulation shall be accompanied by a non-refundable fee as provided in R.I. Gen. Laws § 7-11-305.

7. Other requirements. After registration under R.I. Gen. Laws § 7-11-304(c), the Director may require the issuer to file such reports as the Director may deem appropriate or necessary in such manner and form as may be required by the Director.

8. Waiver. The Director may, for good cause shown, waive or modify any of the requirements of this Regulation.

230 R.I. Code R. 230-RICR-50-05-3.5