The person has been convicted of any felony or misdemeanor in connection with the offer, sale or purchase of any security or franchise, or any felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.
The person is subject to an effective administrative order or judgment entered by a state securities administrator within 5 years before the filing of a notice required under par. (d)
, which prohibits, denies or revokes the use of any exemption from securities registration, which prohibits the transaction of business by the person as a broker-dealer or agent, or which is based on fraud, deceit, an untrue statement of a material fact or an omission to state a material fact.
The person is subject to any order, judgment or decree of any court entered within 5 years before the filing of a notice required under par. (d)
, temporarily, preliminarily or permanently restraining or enjoining the person from engaging in or continuing any conduct or practice in connection with the offer, sale or purchase of any security, or the making of any false filing with any state.
Any disqualification under this paragraph involving a broker-dealer or agent is waived if the broker-dealer or agent is or continues to be licensed in this state as a broker-dealer or agent after notifying the division of the act or event causing disqualification.
The division may waive any disqualification under this paragraph upon a showing of good cause that it is not necessary under the circumstances that use of the exemption be denied.
Not later than the earlier of the date on which the first use of an offering document or the first sale is made in this state in reliance on the exemption under par. (a)
, there is filed with the division a notice comprised of offering material in compliance with the requirements of Rule 502 of Regulation D under the Securities Act of 1933, a completed Form D as prescribed by Rule 503 of Regulation D under the Securities Act of 1933, and a fee of $200. Material amendments to the offering document shall be filed with the division not later than the date of their first use in this state.
As to all sales in this state, the issuer shall reasonably believe immediately before making any sale that:
The purchaser, either alone or with the purchaser's representative, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment.
The failure to satisfy the conditions of subd. 1.
as to a purchaser shall not affect the availability of the exemption under par. (a)
as to other purchasers.
The division may, by order, increase the number of purchasers or waive any other conditions of the exemption under par. (a)
for a particular offering. The division shall not require the filing of advertising used in connection with offers or sales in reliance on the exemption. The exemption may be revoked by order of the division, but only if the offering constitutes or would constitute a violation of s. 551.31
and notice thereof has been received by the issuer, or constitutes or would constitute a violation of s. 551.41
See also s. DFI-Sec 4.10
, Wis. adm. code.
When a certificate of stock was mailed to the plaintiff in Wisconsin, and extensive solicitation was conducted by the defendants in Wisconsin, there was an "offer" within s. 551.02 (11) (b). Since the securities were neither registered in Wisconsin nor exempt from registration, the plaintiff was entitled to rescind the transaction and recover the purchase price of the securities, plus costs. Hardtke v. Love Tree Corp. 386 F. Supp. 1085
Registration and reporting requirements for exempt transactions are discussed. Feitler v. Midas Associates, 418 F. Supp. 735
Has securities law regulation in the private capital markets become a deterrent to capital growth: a critical review. Coles. 58 MLR 395.
Exemption proceedings. 551.24(1)
The division may by order deny or revoke any exemption under s. 551.22
with respect to a specified security or transaction.
If the public interest and the protection of investors so require, the division may by order summarily deny or revoke any exemption under s. 551.22
with respect to a specified security or transaction. Upon entry of the order, the division shall serve upon all named parties a copy of the order and notify the parties of their right to request a hearing.
No order under this section may operate retroactively.
A person who offers or sells a security pursuant to an exemption under s. 551.22
after the exemption is denied or revoked by an order of the division does not violate s. 551.21 (1)
The person was not given notice of the order; and
The person sustains the burden of proof to establish that he or she was not given notice and did not know and, in the exercise of reasonable care, could not have known of the order.
In any proceeding under this chapter, the burden of proving an exemption or an exception from a definition is upon the person claiming it.
With respect to an exemption under s. 551.22
that is perfected if a notice or other information is filed with the division and the division does not disallow the exemption within a specified period after the filing, the division may, within 10 days after the filing date of the notice or other information, require that additional information reasonably related to the offering be filed. If the division requires additional information, the date by which the division may disallow the exemption is 10 days after the date of filing that information.
Registration by coordination. 551.25(1)
Registration by coordination may be used for any security for which a registration statement has been filed under the Securities Act of 1933 in connection with the same offering and has not become effective.
A registration statement under this section shall contain all of the following information and be accompanied by the following documents in addition to the information specified in s. 551.27 (2)
and the consent to service of process required by s. 551.65 (1)
Three copies of the latest form of prospectus filed under the Securities Act of 1933.
If the division by rule or otherwise requires, a copy of the articles of incorporation and bylaws or their substantial equivalents currently in effect, a copy of any agreements with or among underwriters, a copy of any indenture or other instrument governing the issuance of the security to be registered, and a specimen or copy of the security.
If the division requires, any other information, or copies of any documents, filed under the Securities Act of 1933.
An undertaking to forward all future amendments to the federal prospectus, other than an amendment which merely delays the effective date of the registration statement, not later than the first business day after they are forwarded to or filed with the securities and exchange commission, or such longer period as the division permits.
Unless waived in writing by the applicant before federal effectiveness, a registration statement under this section automatically becomes effective at the moment the federal registration statement becomes effective if all of the following conditions are met:
The registration statement has been on file with the division for at least 10 days.
A statement of the maximum and minimum proposed offering prices and the maximum underwriting discounts and commissions has been on file for 2 full business days or such shorter period as the division permits, and the offering is made within these limitations.
The registrant shall promptly notify the division by telephone or telegram of the date and time when the federal registration statement became effective and the content of the price amendment, if any, and shall promptly file a post-effective amendment containing the information and documents in the price amendment. "Price amendment" means the final federal amendment which includes a statement of the offering price, underwriting and selling discounts or commissions, amount of proceeds, conversion rates, call prices and other matters dependent upon the offering price. Upon failure to receive the required notification and post-effective amendment with respect to the price amendment, the division may enter a stop order, without notice or hearing, retroactively denying effectiveness to the registration statement or suspending its effectiveness until compliance with this subsection is effected, if the division promptly notifies the registrant by telephone or telegram of the issuance of the order. If the registrant proves compliance with the requirements of this subsection as to notice and post-effective amendment, the stop order shall be vacated. The division may by rule or otherwise waive any of the conditions specified in par. (a)
. If the federal registration statement becomes effective before all the conditions in this subsection are satisfied and they are not waived, the registration statement automatically becomes effective as soon as all the conditions are satisfied. If the registrant advises the division of the date when the federal registration statement is expected to become effective, the division shall promptly advise the registrant by telephone or telegram, at the registrant's expense, whether all the conditions are satisfied and whether the division then contemplates the institution of a proceeding under s. 551.28
; but this advice by the division does not preclude the institution of such a proceeding at any time.
See also ch. DFI-Sec 3
, Wis. adm. code.
Registration by qualification. 551.26(1)
Any security may be registered by qualification.
A registration statement under this section shall contain the information specified in s. 551.27 (2)
, shall be accompanied by the consent to service of process required by s. 551.65 (1)
, and shall contain such further information and be accompanied by such further documents as the division by rule or otherwise requires. For this purpose the division may classify issuers and types of securities.
Registration under this section becomes effective when the division so orders. If a registration statement has been on file for at least 30 days and all information required by the division has been furnished, the person filing the statement may at any time file a written request that the division take action within 10 days following the filing of such request. If a request is filed, and the division takes no action within the period, the registration becomes effective at the end of the 10-day period.
The division may by rule or order require as a condition of registration under this section that a prospectus containing any designated part of the information contained in the registration statement or filed with it be sent or given to each person to whom an offer is made before or concurrently with the first written offer made to the person, otherwise than by means of a public advertisement, by or for the account of the issuer or any other person on whose behalf the offering is made, or by any underwriter or broker-dealer who is offering part of an unsold allotment or subscription taken by him or her as a participant in the distribution; or the confirmation of any sale made by or for the account of any person; or the payment pursuant to any sale; or the delivery of the security pursuant to any sale; whichever first occurs.
History: 1981 c. 53
; 1995 a. 27
See also ch. DFI-Sec 3
, Wis. adm. code.
General registration provisions. 551.27(1)
A registration statement may be filed by the issuer, any other person on whose behalf the offering is to be made or a licensed broker-dealer, but the division may in specific cases require that it be executed by the issuer.
Every registration statement shall specify:
The states in which a registration statement or application in connection with the offering has been or is to be filed; and
Any adverse order, judgment or decree entered in connection with the offering by the regulatory authorities in any state or by any court or the securities and exchange commission, or any withdrawal of a registration statement or application relating to the offering.
Any document filed under this chapter or a predecessor law within 5 years preceding the filing of a registration statement may be incorporated by reference in the registration statement to the extent that the document is currently accurate.
The division may by rule or otherwise permit the omission of any item of information or document from any registration statement.
The division may by rule or order require as a condition of registration, and at the expense of the applicant or registrant, that a report by an accountant, engineer, appraiser or other professional person be filed. The division may also designate one of the division's employees to make an examination of the business and records of an issuer of securities for which a registration statement has been filed by qualification or coordination, at the expense of the applicant or registrant.
In the case of a nonissuer distribution, information may not be required under s. 551.26 (2)
or 551.27 (12)
unless it is known to the person filing the registration statement or to the persons on whose behalf the distribution is to be made, or can be furnished by them without unreasonable effort or expense.
The division may by rule require that securities of designated classes shall be issued under a trust indenture containing such provisions as the division determines.
The division may by rule or order require as a condition of registration that any security registered be sold only on a specified form of subscription or sale contract, and that a signed or conformed copy of each contract be filed with the division or preserved for any period up to 3 years.
The division may by rule or order impose other conditions under which a security registered by qualification or coordination may be sold, if these conditions are reasonable and in the public interest.
A registration statement is effective for one year from its effective date unless extended by rule or order of the division. All outstanding securities of the same class as a registered security are considered to be registered for the purpose of any transaction by or on behalf of a person not the issuer and not in control of the issuer or controlled by the issuer or under common control with the issuer, so long as the registration statement is effective, unless otherwise prescribed by order. A registration statement may not be withdrawn after its effective date if any of the securities registered have been sold in this state, unless permitted by rule or order of the division. No registration statement is effective during the time a stop order is in effect under s. 551.28
During the effective period of a registration statement, the division may by rule or order require the person who filed the registration statement to file reports, not more often than quarterly, to keep reasonably current the information contained in the registration statement and to disclose the progress of the offering. If any of the securities registered have been sold in the state, the division may by rule or order extend the period for filing the reports for an additional period not exceeding 2 years from the date the registration became effective or the date of its last amendment or extension.
Securities issued or guaranteed by an insurer authorized by the commissioner of insurance, or by a person whose business consists principally of owning or controlling the securities of any such insurer, may not be registered without the prior approval of the commissioner of insurance. Issuance of an organization permit under s. 611.13
constitutes such approval for the securities described in the permit, and also precludes application of s. 551.28 (1) (d)
No issuer which is being organized in this state or elsewhere solely or partly for the purpose of organizing a corporation under ch. 611
may register or sell its securities in this state unless it obtains an organization permit under s. 611.13
. No security may be registered or sold in this state if there is any representation that an insurer will be organized or purchased in this state with the proceeds of the sale, unless the issuer obtains an organization permit under s. 611.13
A registration statement relating to securities issued by any class of financial institutions, which the division by rule determines, may be amended after its effective date so as to increase the specified amount of securities proposed to be offered. The amendment becomes effective when the division so orders.
No warrant or right to purchase or subscribe to another security and no security convertible into another security shall be registered unless it appears to the division that both the warrant or right or convertible security and the securities deliverable on the exercise of the warrant or right or conversion privilege comply with this chapter.
See also ch. DFI-Sec 3
, Wis. adm. code.
Blue sky law: Is there merit in the merit requirements? Goodkind, 1976 WLR 79.
Denial, suspension and revocation of registrations. 551.28(1)(1)
The division may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, any registration statement if the division finds that the order is in the public interest and that:
The registration statement as of its effective date or as of any earlier date in the case of an order denying effectiveness, or any amendment filed under s. 551.27 (14)
as of its effective date, or any report under s. 551.27 (12)
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;
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, by the person filing the registration statement; 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 registration statement is directly or indirectly controlled by the issuer; or any broker-dealer or other person involved directly or indirectly in the offering;
The securities are the subject of an administrative stop order or similar order or a permanent or temporary injunction of any court of competent jurisdiction entered under any other federal or state act applicable to the offering, but the division may not institute a proceeding against an effective registration statement under this paragraph more than one year from the date of the order or injunction relied on, and the division may not enter an order under this paragraph on the basis of an order or injunction entered under any other state act unless that order or injunction was based on facts which would currently constitute a ground for a stop order under this section;
The issuer's enterprise or method of business includes or would include activities which are illegal where performed;
The issuance or sale of the securities has worked or tended to work a fraud upon purchasers or would so operate;
The applicant or registrant has failed to pay the proper filing fee; but the division may enter only a denial order under this paragraph and the division shall vacate any such order when the deficiency has been corrected;
Advertising prohibited by s. 551.53
has been used in connection with the sale or offering of the securities; or
The division may not institute a stop order proceeding against an effective registration statement on the basis of a fact or transaction known to the division when the registration statement became effective unless the proceeding is instituted within 180 days after the effective date.
In a proceeding for registration by qualification, the applicant or registrant has the burden of satisfying the requirements of sub. (1)
. In a proceeding for registration by coordination, the division has the burden of establishing the existence of one of the causes enumerated in sub. (1)
If the public interest and the protection of investors so require, the division may, by order, summarily deny, postpone, suspend or revoke the effectiveness of the registration statement. Upon the entry of the order, the division shall serve upon all named parties a copy of the order and notify the parties of their right to request a hearing.
No stop order may be entered under this section, except under sub. (4)
, unless s. 551.61 (1)
is complied with and appropriate prior notice is given to the applicant or registrant, the issuer and the person on whose behalf the securities are to be or have been offered.
The division may vacate or modify a stop order if the division finds that the conditions which prompted its entry have changed or that it is otherwise in the public interest to do so.
See also ch. DFI-Sec 3
, Wis. adm. code.