Amendment ASA1-AB350

LRBs0114/1

ARG:eev:rs

2013 - 2014 LEGISLATURE

ASSEMBLY SUBSTITUTE AMENDMENT 1, TO ASSEMBLY BILL 350

September 20, 2013 - Offered by Representatives Craig and Weininger.

AB350-ASA1,1,7 An Act to renumber and amend 551.605 (3); to amend 551.102 (11) (o), 551.305 (9), 551.401 (1), 551.402 (2) (b) and 551.402 (2) (f); and to create 227.01 (13) (zz), 551.102 (4m), 551.102 (8m), 551.102 (9m), 551.202 (13) (ar), 551.202 (14m), 551.202 (24m), 551.202 (26), 551.202 (27), 551.205, 551.206, 551.605 (3) (bm), 551.607 (2) (g) and 551.614 (1m) of the statutes; relating to: exemptions from securities registration requirements, reporting by certain financial institution holding companies, and granting rule-making authority.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB350-ASA1,1 Section 1. 227.01 (13) (zz) of the statutes is created to read:

AB350-ASA1,1,10 227.01 (13) (zz) Adjusts, under s. 551.206, the amounts specified in s. 551.202 (26) (c) 1. a. and 1. b. and (27) (c) 1. a. and 1. b.

AB350-ASA1,2 Section 2. 551.102 (4m) of the statutes is created to read:

AB350-ASA1,2,3 551.102 (4m) "Certified investor" means an individual who is a resident of this state and who, at the time of an offer or sale of securities, satisfies any of the following:

AB350-ASA1,2,7 (a) Has an individual net worth, or joint net worth with the individual's spouse, of at least $750,000. For purposes of calculating net worth under this paragraph, the individual's primary residence shall be included as an asset and indebtedness secured by the primary residence shall be included as a liability.

AB350-ASA1,2,11 (b) Had an individual income in excess of $100,000 in each of the two most recent years or joint income with the individual's spouse in excess of $150,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

AB350-ASA1,3 Section 3. 551.102 (8m) of the statutes is created to read:

AB350-ASA1,2,15 551.102 (8m) "Financial institution holding company" means a bank holding company, as defined in 12 USC 1841 (a), or a savings and loan holding company, as defined in 12 USC 1467a (a) (1) (D).

AB350-ASA1,4 Section 4. 551.102 (9m) of the statutes is created to read:

AB350-ASA1,2,18 551.102 (9m) "Funding portal" has the meaning given in section 3 (a) (80) of the Securities Exchange Act of 1934 (15 USC 78c (a) (80)).

AB350-ASA1,5 Section 5. 551.102 (11) (o) of the statutes is amended to read:

AB350-ASA1,2,22 551.102 (11) (o) Any other person, other than an individual, of institutional character with total assets in excess of $10,000,000 $2,500,000 not organized for the specific purpose of evading this chapter.

AB350-ASA1,6 Section 6. 551.202 (13) (ar) of the statutes is created to read:

AB350-ASA1,3,3 551.202 (13) (ar) A certified investor, or a person whom the issuer reasonably believes is a certified investor at the time of the sale or offer of the security, if the transaction meets the requirements of the federal exemption for intrastate offerings in section 3 (a) (11) of the Securities Act of 1933 (15 USC 77c (a) (11)) and Rule 147 adopted under the Securities Act of 1933 (17 CFR 230.147).

AB350-ASA1,7 Section 7. 551.202 (14m) of the statutes is created to read:

AB350-ASA1,3,8 551.202 (14m) (a) Any transaction pursuant to an offer directed by the offeror to not more than 100 residents of this state, excluding those persons designated in sub. (13) (a), (am), and (ar) but including persons exempt under sub. (24), if all of the following apply:

AB350-ASA1,3,11 1. The issuer is a business entity that is organized under the laws of this state and authorized to do business in this state, that has its principal office in this state, and that has a majority of its full-time employees working in this state.

AB350-ASA1,3,14 2. No commission or other remuneration is 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 this chapter.

AB350-ASA1,3,16 3. No general solicitation or general advertising is made in connection with the offer to sell or sale of the securities unless it has been permitted by the administrator.

AB350-ASA1,3,18 (b) The exemption under this subsection and the exemption under sub. (27) may be used in conjunction with each other.

AB350-ASA1,8 Section 8. 551.202 (24m) of the statutes is created to read:

AB350-ASA1,3,21 551.202 (24m) Any offer or sale of its securities by an issuer to resident of this state if all of the following apply:

AB350-ASA1,3,24 (a) The issuer is a business entity that is organized under the laws of this state and authorized to do business in this state, that has its principal office in this state and that has a majority of its full-time employees working in this state.

AB350-ASA1,4,3 (b) The aggregate number of persons holding directly or indirectly all of the issuer's securities, after the securities to be issued are sold, does not exceed 100, exclusive of persons under sub. (13) (a), (am), and (ar).

AB350-ASA1,4,6 (c) No commission or other remuneration is paid or given, directly or indirectly, for soliciting any person in this state in connection with the offer to sell or sale of the securities, except to broker-dealers and agents licensed in this state.

AB350-ASA1,4,8 (d) No advertising is published in connection with the offer to sell or sale of the securities unless it has been permitted by the division of securities.

AB350-ASA1,9 Section 9. 551.202 (26) of the statutes is created to read:

AB350-ASA1,4,11 551.202 (26) An offer or sale of a security by an issuer if the offer or sale is conducted in accordance with all of the following requirements:

AB350-ASA1,4,13 (a) The issuer of the security is a business entity organized under the laws of this state and authorized to do business in this state.

AB350-ASA1,4,16 (b) The transaction meets the requirements of the federal exemption for intrastate offerings in section 3 (a) (11) of the Securities Act of 1933 (15 USC 77c (a) (11)) and Rule 147 adopted under the Securities Act of 1933 (17 CFR 230.147).

AB350-ASA1,4,20 (c) 1. Except as provided in subd. 2., the sum of all cash and other consideration to be received for all sales of the security in reliance on the exemption under this subsection, excluding sales to any accredited investor, certified investor, or institutional investor, does not exceed the following amount:

AB350-ASA1,5,2 a. If the issuer has not undergone and made available to each prospective investor and the administrator the documentation resulting from a financial audit of its most recently completed fiscal year which complies with generally accepted accounting principles, $1,000,000 subject to adjustment under s. 551.206, 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 on the exemption under this subsection.

AB350-ASA1,5,8 b. If the issuer has undergone and made available to each prospective investor and the administrator the documentation resulting from a financial audit of its most recently completed fiscal year which complies with generally accepted accounting principles, $2,000,000 subject to adjustment under s. 551.206, 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 on the exemption under this subsection.

AB350-ASA1,5,13 2. An offer or sale to an officer, director, partner, trustee, or individual occupying similar status or performing similar functions with respect to the issuer or to a person owning 10 percent or more of the outstanding shares of any class or classes of securities of the issuer does not count toward the monetary limitation in subd. 1. a. and 1. b.

AB350-ASA1,5,15 (d) The issuer does not accept more than $5,000 from any single purchaser unless the purchaser is an accredited investor or certified investor.

AB350-ASA1,5,18 (e) The offering under this subsection is made exclusively through one or more Internet sites and each Internet site is registered with the division under s. 551.205 (1) (b).

AB350-ASA1,5,23 (f) Not less than 10 days prior to the commencement of an offering of securities in reliance on the exemption under this subsection, the issuer files a notice with the administrator, in writing or in electronic form as prescribed by the administrator, which the administrator shall make available as an electronic document on the department of financial institutions Internet site, containing all of the following:

AB350-ASA1,6,3 1. A notice of claim of exemption from registration, specifying that the issuer will be conducting an offering in reliance on the exemption under this subsection, accompanied by the filing fee specified in s. 551.614 (1m).

AB350-ASA1,6,5 2. A copy of the disclosure statement to be provided to prospective investors in connection with the offering, containing all of the following:

AB350-ASA1,6,11 a. A description of the company, its type of entity, the address and telephone number of its principal office, its history, its business plan, and the intended use of the offering proceeds, including any amounts to be paid, as compensation or otherwise, to any owner, executive officer, director, managing member, or other person occupying a similar status or performing similar functions on behalf of the issuer.

AB350-ASA1,6,13 b. The identity of all persons owning more than 10 percent of the ownership interests of any class of securities of the company.

AB350-ASA1,6,16 c. The identity of the executive officers, directors, managing members, and other persons occupying a similar status or performing similar functions in the name of and on behalf of the issuer, including their titles and their prior experience.

AB350-ASA1,6,24 d. The terms and conditions of the securities being offered and of any outstanding securities of the company; the minimum and maximum amount of securities being offered, if any; either the percentage ownership of the company represented by the offered securities or the valuation of the company implied by the price of the offered securities; the price per share, unit, or interest of the securities being offered; any restrictions on transfer of the securities being offered; and a disclosure of any anticipated future issuance of securities that might dilute the value of securities being offered.

AB350-ASA1,7,5 e. The identity of any person who has been or will be retained by the issuer to assist the issuer in conducting the offering and sale of the securities, including any Internet site operator but excluding persons acting solely as accountants or attorneys and employees whose primary job responsibilities involve the operating business of the issuer rather than assisting the issuer in raising capital.

AB350-ASA1,7,7 f. For each person identified as required under subd. 2. e., a description of the consideration being paid to the person for such assistance.

AB350-ASA1,7,9 g. A description of any litigation or legal proceedings involving the company or its management.

AB350-ASA1,7,12 h. The names and addresses, including the Uniform Resource Locator, of each Internet site that will be used by the issuer to offer or sell securities under this subsection.

AB350-ASA1,7,16 i. Any additional information material to the offering, including, if appropriate, a discussion of significant factors that make the offering speculative or risky. This discussion shall be concise and organized logically and may not be limited to risks that could apply to any issuer or any offering.

AB350-ASA1,7,24 3. An escrow agreement with a bank, savings bank, savings and loan association, or credit union chartered under the laws of this state in which the investor funds will be deposited, providing that all offering proceeds will be released to the issuer only when the aggregate capital raised from all investors is equal to or greater than the minimum target offering amount specified in the business plan as necessary to implement the business plan and that all investors may cancel their commitments to invest if that target offering amount is not raised by the time stated in the disclosure document.

AB350-ASA1,8,6 (g) The issuer is not, either before or as a result of the offering, an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 USC 80a-3), or an entity that would be an investment company but for the exclusions provided in section 3 (c) of the Investment Company Act of 1940 (15 USC 80a-3 (c)), or subject to the reporting requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934 (15 USC 78m or 78o (d)).

AB350-ASA1,8,11 (h) The issuer informs all prospective purchasers of securities offered under this subsection that the securities have not been registered under federal or state securities law and that the securities are subject to limitations on resale. The issuer shall display the following legend conspicuously on the cover page of the disclosure document:

AB350-ASA1,9,3 IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR DIVISION OR OTHER REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY SUBSECTION (e) OF SEC RULE 147 (17 CFR 230.147 (e)) AS PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

AB350-ASA1,9,5 (i) The issuer requires each purchaser to certify in writing or electronically as follows:

AB350-ASA1,9,6 I UNDERSTAND AND ACKNOWLEDGE THAT:

AB350-ASA1,9,9 I am investing in a high-risk, speculative business venture. I may lose all of my investment, or under some circumstances more than my investment, and I can afford this loss.

AB350-ASA1,9,13 This offering has not been reviewed or approved by any state or federal securities commission or division or other regulatory authority and that no such person or authority has confirmed the accuracy or determined the adequacy of any disclosure made to me relating to this offering.

AB350-ASA1,9,17 The securities I am acquiring in this offering are illiquid, that there is no ready market for the sale of such securities, that it may be difficult or impossible for me to sell or otherwise dispose of this investment, and that, accordingly, I may be required to hold this investment indefinitely.

AB350-ASA1,9,20 I may be subject to tax on my share of the taxable income and losses of the company, whether or not I have sold or otherwise disposed of my investment or received any dividends or other distributions from the company.

AB350-ASA1,9,21 .... (Signature)

AB350-ASA1,9,24 (j) The issuer obtains from each purchaser of a security offered under this subsection evidence that the purchaser is a resident of this state and, if applicable, is an accredited investor or certified investor.

AB350-ASA1,10,4 (k) All payments for purchase of securities offered under this subsection are directed to and held by the financial institution specified in par. (f) 3. The bank or depository institution shall notify the administrator of the receipt of payments for securities. This information shall be confidential as provided in s. 551.607 (2) (g).

AB350-ASA1,10,8 (L) The issuer of securities offered under this subsection provides a copy of the disclosure document provided to the administrator under par. (f) 2. to each prospective investor at the time the offer of securities is made to the prospective investor.

AB350-ASA1,10,11 (m) No offer or sale of a different class or series of security has been made by the issuer in reliance on the exemption under this subsection or sub. (27) during the immediately preceding 12-month period.

AB350-ASA1,10 Section 10. 551.202 (27) of the statutes is created to read:

AB350-ASA1,10,14 551.202 (27) An offer or sale of a security by an issuer if the offer or sale is conducted in accordance with all of the following requirements:

AB350-ASA1,10,16 (a) The issuer of the security is a business entity organized under the laws of this state and authorized to do business in this state.

AB350-ASA1,10,19 (b) The transaction meets the requirements of the federal exemption for intrastate offerings in section 3 (a) (11) of the Securities Act of 1933 (15 USC 77c (a) (11)) and Rule 147 adopted under the Securities Act of 1933 (17 CFR 230.147).

AB350-ASA1,10,23 (c) 1. Except as provided in subd. 2., the sum of all cash and other consideration to be received for all sales of the security in reliance on the exemption under this subsection, excluding sales to any accredited investor, certified investor, or institutional investor, does not exceed the following amount:

AB350-ASA1,11,5 a. If the issuer has not undergone and made available to each prospective investor and the administrator the documentation resulting from a financial audit of its most recently completed fiscal year which complies with generally accepted accounting principles, $1,000,000 subject to adjustment under s. 551.206, 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 on the exemption under this subsection.

AB350-ASA1,11,11 b. If the issuer has undergone and made available to each prospective investor and the administrator the documentation resulting from a financial audit of its most recently completed fiscal year which complies with generally accepted accounting principles, $2,000,000 subject to adjustment under s. 551.206, 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 on the exemption under this subsection.

AB350-ASA1,11,16 2. An offer or sale to an officer, director, partner, trustee, or individual occupying similar status or performing similar functions with respect to the issuer or to a person owning 10 percent or more of the outstanding shares of any class or classes of securities of the issuer does not count toward the monetary limitation in subd. 1. a. and 1. b.

AB350-ASA1,11,18 (d) The issuer does not accept more than $5,000 from any single purchaser unless the purchaser is an accredited investor or certified investor.

AB350-ASA1,11,22 (e) No commission or other remuneration is 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 this chapter. This paragraph does not apply if the offer or sale of the security is to a certified investor.