551.21 Annotation
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 (1975).
551.21 Annotation
Registration and reporting requirements for exempt transactions are discussed. Feitler v. Midas Associates,
418 F. Supp. 735 (1976).
551.21 Annotation
The financing of corporate expansion through industrial revenue bonds. Mulcahy & Guszkowski. 57 MLR 201.
551.22
551.22
Exempt securities. The following securities are exempt from registration under
s. 551.21 (1):
551.22(1)(a)(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; but any revenue obligation payable from payments to be made in respect of property or money used under a lease, sale or loan arrangement by or for a nongovernmental industrial or commercial enterprise is exempted only as provided under
par. (b). A security, other than a security issued or guaranteed by the United States or an agency or corporate instrumentality of the United States and other than a revenue obligation, is exempt under this subsection only if the issuer's financial statements are prepared according to generally accepted accounting principles or guidelines which the division designates by rule.
551.22(1)(b)
(b) Unless subject to a letter of credit of a bank, savings bank or savings and loan association as provided in this paragraph, a revenue obligation of an issuer specified under
par. (a) that is payable from payments to be made in respect of property or money used under a lease, sale or loan arrangement by or for a nongovernmental industrial or commercial enterprise is exempted subject to rules adopted by the division. A revenue obligation is exempt from any filing under the rules of the division if it is the subject of an irrevocable letter of credit from a bank, savings bank or savings and loan association in favor of holders of the revenue obligations providing for payment of all principal of the revenue obligations and all accrued and unpaid interest to the date of an event of default on the revenue obligations, and the letter of credit is accompanied by an opinion of counsel stating:
551.22(1)(b)1.a.a. That payment of debt service will not constitute a preference under federal bankruptcy law if a petition in bankruptcy with respect to the enterprise is filed; or
551.22(1)(b)1.b.
b. That the letter of credit will provide for reimbursement to holders of the revenue obligations if they are required by order of a federal bankruptcy court to disgorge as a preference any payment of a debt service; and
551.22(1)(b)2.
2. That the enforceability of the letter of credit would not be materially affected by the filing of a petition under federal bankruptcy law with respect to the enterprise or any person obligated to reimburse the bank, savings bank or a savings and loan association for payments made under the letter of credit.
551.22(2)
(2) Any security, excluding a revenue obligation, issued or guaranteed by Canada, any Canadian province, any political subdivision of any such 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.
551.22(3)
(3) 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 organized under the laws of any state and subject to regulation in respect of the issuance or guarantee of its securities by a governmental authority of that state.
551.22(4)
(4) Any security issued by and representing an interest in or a debt of, or guaranteed by, any federal savings bank or federal savings and loan association, or any savings bank or savings and loan or similar association organized under the laws of any state and licensed to do business in this state, but not including the capital stock of a state-chartered capital stock savings bank or savings and loan association.
551.22(5)
(5) Any security issued or guaranteed by any federal credit union, or any credit union or similar association organized and supervised under the laws of this state.
551.22(6)
(6) Any security issued or guaranteed by any railroad, other common carrier, public service corporation, public utility or public utility holding company, which is subject to regulation in respect of the issuance or guarantee of the security by a governmental authority of the United States, any state, Canada or any Canadian province.
551.22(7)
(7) Any security listed, or approved for listing upon notice of issuance, on a securities exchange designated by rule of the division, subject to rules that the division may promulgate under this subsection; any security of the same issuer which is of senior or substantially equal rank to the security listed, designated or approved for listing or designation; any security called for by subscription rights or warrants so listed, approved or designated; or any warrant or right to purchase or subscribe to any of the foregoing.
551.22(8)
(8) Any security issued to its members by a domestic corporation organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic or reformatory purposes; and any evidences of debt issued by any such corporation to nonmembers in compliance with rules adopted by the division.
551.22(9)
(9) Any commercial paper meeting the requirements established by rule of the division and which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within 9 months of the date of issuance, exclusive of days of grace, or any renewal of such paper which is likewise limited, or any guarantee of such paper or of any such renewal.
551.22(10)
(10) Any investment contract or other security issued in connection with an employee's stock purchase, savings, pension, profit sharing or similar benefit plan if, in the case of plans which are not qualified under section
401 of the internal revenue code and which provide for contribution by employees, there is filed with the division prior to any offer or sale a notice specifying the terms of the plan and any additional information required under
s. 551.24 (6), and the division does not by order disallow the exemption within 10 days after the date of filing the notice or, if additional information is required under
s. 551.24 (6), within 10 days after the date of filing that information.
551.22(12)
(12) Any securities of a cooperative corporation organized under
ch. 185.
551.22(13)
(13) Any option to put or call any outstanding security transactions in which are exempted under
s. 551.23 (3).
551.22(14)
(14) Any security issued by a licensed broker-dealer to its officers, partners or employees, subject to rules adopted by the division.
551.22(15)
(15) Any contract for the sale or purchase of a commodity for future delivery, if it is traded or executed on a contract market designated under
7 USC 7.
551.22(16)
(16) Contribution notes issued under
s. 611.33 (2) (b),
613.33 (2) or
614.33, and any debt securities approved by the commissioner of insurance and issued under
s. 611.75 (2) in connection with the conversion of a stock insurance corporation to a mutual, or under
s. 613.75 or
614.76 in connection with the conversion of a service insurance corporation or fraternal to a mutual.
551.22(17)
(17) Any security as to which the division by rule or order finds that registration is not necessary or appropriate for the protection of investors.
551.22 Cross-reference
Cross Reference: See also ss.
DFI-Sec 2.01 and
2.03, Wis. adm. code.
551.23
551.23
Exempt transactions. The following transactions are exempt from registration under
s. 551.21 (1):
551.23(1)
(1) Any isolated nonissuer transaction, whether effected through a broker-dealer or not.
551.23(2)
(2) Any nonissuer transaction effected by or through a licensed broker-dealer pursuant to an unsolicited order or offer to purchase; but the division may by rule require that the records of the broker-dealer confirm that the order or offer to purchase was unsolicited.
551.23(3)
(3) Any sale of any outstanding security 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 at a price reasonably related to the current market price if any of the following conditions are met:
551.23(3)(a)
(a) The issuer has any securities registered under section 12 of the Securities Exchange Act of 1934 or exempted from registration by section 12 (g) (2) (G) or 12 (g) (3) of that act, or the issuer is an investment company registered under the Investment Company Act of 1940.
551.23(3)(b)
(b) Securities of the same class have been registered under this chapter under a registration statement becoming effective within 2 years preceding the sale and the registration has not been revoked or suspended.
551.23(3)(c)
(c) Securities of the same class have been registered under the Securities Act of 1933 and there is filed with the division prior to any offer or sale a notice of the proposed sale, other information as the division by rule requires and any additional information required under
s. 551.24 (6), and the division does not by order disallow the exemption within 10 days after the date of filing the notice or, if additional information is required under
s. 551.24 (6), within 10 days after the date of filing that information.
551.23(3)(d)
(d) The issuer or applicant files with the division such information, and an undertaking to file such reports, as the division by rule requires and any additional information required under
s. 551.24 (6), and the division does not by order disallow the exemption within 10 days after the date of filing such information required by rule or, if additional information is required under
s. 551.24 (6), within 10 days after the date of filing that information.
551.23(4)
(4) Any transaction between the issuer or other person on whose behalf the offering is made and an underwriter or among underwriters.
551.23(5)
(5) 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.
551.23(6)
(6) Any judicial sale or any transaction by a personal representative, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator.
551.23(7)
(7) Any transaction executed by a bona fide pledgee without any purpose of evading this chapter.
551.23(8)
(8) Any offer or sale of a security to any of the following:
551.23(8)(b)
(b) A bank, savings institution, savings bank, credit union, trust company, insurer, broker-dealer, investment adviser, federal covered adviser or savings and loan association, if the purchaser or prospective purchaser is acting for itself or as trustee with investment control.
551.23(8)(c)
(c) An investment company as defined under
15 USC 80a-3 or a pension or profit-sharing trust, except that an offer or sale of a security to a pension or profit-sharing trust or to an individual retirement plan, including a self-employed individual retirement plan, is not exempt under this paragraph unless the trust or plan is administered by a bank, savings institution, savings bank, credit union, trust company, insurer, broker-dealer, investment adviser, federal covered adviser or savings and loan association that has investment control.
551.23(8)(d)
(d) This state or any of its agencies or political subdivisions.
551.23(8)(e)
(e) The federal government or any of its agencies or instrumentalities.
551.23(8)(f)
(f) Any financial institution or institutional investor designated by rule or order of the division.
551.23(9)
(9) Any offer or sale of a preorganization subscription, if no commission or other remuneration is paid or given directly or indirectly for soliciting any subscriber in this state and no advertising is published or circulated unless it has been permitted by the division, and if the subscription is not binding and no payment is made by any subscriber until the securities subscribed for may legally be sold.
551.23(10)
(10) Any offer or sale of its securities by an issuer having its principal office in this state, if 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 25, exclusive of persons under
sub. (8), if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state, except to broker-dealers and agents licensed in this state, and if no advertising is published unless it has been permitted by the division.
551.23(11)(a)(a) Any transaction pursuant to an offer directed by the offeror to not more than 25 persons in this state, excluding persons exempt under
sub. (8) but including persons exempt under
sub. (10), during any period of 12 consecutive months, whether or not the offeror or any of the offerees is then present in this state, if the offeror reasonably believes that all the persons in this state are purchasing for investment, and no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state other than those exempt by
sub. (8).
551.23(11)(b)
(b) The division may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in
par. (a), and may require reports of sales under this exemption.
551.23(12)
(12) Any transaction pursuant to an offer to existing security holders of the issuer, other than an entity designated in
s. 551.52 (1) (b), or of a corporation which, prior to the offer, owned substantially all of the voting stock of the issuer or whose controlling persons organized the issuer for the purpose of the offer, if no commission or other remuneration other than a standby commission is paid or given directly or indirectly for soliciting any security holder in this state, and if, prior to any offer or sale, the issuer files a notice specifying the terms of the offer, all other information which the division by rule requires and any additional information required under
s. 551.24 (6), and the division does not by order disallow the exemption within 10 days after the date of filing the notice or, if additional information is required under
s. 551.24 (6), within 10 days after the date of filing that information. In this subsection, "security holder" includes a person who at the time of the transaction is a holder of convertible securities or nontransferable warrants or a holder of transferable warrants that are exercisable within not more than 90 days of their issuance but does not include a person who at the time of the transaction is a holder of only transferable warrants that are exercisable for more than 90 days after their issuance.
551.23(13)
(13) Any transaction incident to a class vote by stockholders, pursuant to the articles of incorporation or the applicable corporation statute, on a merger, consolidation, share exchange, reclassification of securities, or sale of corporate assets in consideration of the issuance of securities of another corporation; or any transaction incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims or property interests, or partly in such exchange and partly for cash.
551.23(14)
(14) Any stock split and any stock dividend by a corporation, and any share split or share dividend by a business trust, whether the corporation or business trust distributing the dividend is the issuer or not, if nothing of value is given for the dividend other than the surrender of a right to a cash or property dividend when each stockholder or shareholder may elect to take the dividend in cash or property or in stock or shares.
551.23(15)
(15) Any offer or sale of an evidence of debt issued by a corporation organized and operated not for private profit but exclusively for religious, educational, benevolent or charitable purposes if the security qualifies under this exemption, and if there has been filed with the division prior to any offer or sale a notice identifying the security and the basis of its qualification under this exemption together with any further information as the division by rule or order requires, and any additional information required under
s. 551.24 (6), and if the division does not by order disallow the exemption within 10 days after the date of filing the notice or, if additional information is required under
s. 551.24 (6), within 10 days after the date of filing that information. The security qualifies under this exemption if the issuer and any predecessor have not defaulted within the current fiscal year or the 3 preceding fiscal years in any fixed interest or principal obligation; and the issuer complies with rules of the division with respect to trust indentures and the use of a prospectus; and the security qualifies under either of the following:
551.23(15)(a)
(a) The issuer and its predecessors have not been in existence for 3 years, and the securities proposed to be sold are secured by a mortgage or deed of trust upon land and buildings which is or will become a first lien at or prior to the issuance of such evidences of debt or provision satisfactory to the division is made for impounding the proceeds from their sale until such first lien is established, and the total amount of such securities does not exceed 50% of the then fair market value of the land and buildings included in such mortgage or deed of trust, less the amount of any unpaid special assessment taxes; or
551.23(15)(b)
(b) The issuer or its predecessors have had an excess of revenues over expenses, excluding interest expense, provision for depreciation and extraordinary items, for each of the 2 fiscal years next preceding such offer or sale, or average net revenues for the last 3 fiscal years next preceding such offer or sale, of not less than 1 1/2 times the aggregate annual interest requirements on the issue of securities to be sold under this subsection and all securities of equal or prior rank to be outstanding immediately after such sale.
551.23(16)
(16) 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 denial order is in effect and no proceeding is pending under either law.
551.23(17)
(17) Any offer or sale of warrants for or rights to subscribe to any security, provided the sale of the security deliverable on exercise of the warrant or right is in compliance with this chapter.
551.23(18)
(18) Any other transaction as to which the division by rule or order finds that registration is not necessary or appropriate for the protection of investors.
551.23(19)(a)(a) Any offer or sale of securities made in reliance on the exemption provided by Rule 505 of Regulation D under the Securities Act of 1933 and the conditions and definitions provided by Rules 501 to 503 thereunder, if the offer or sale also satisfies the additional conditions and limitations in
pars. (b) to
(f).
551.23(19)(b)
(b) No commission or other remuneration may be paid or given, directly or indirectly, to any person for soliciting or selling to any person in this state in reliance on the exemption under
par. (a), except to broker-dealers and agents licensed in this state or exempt from licensure under
s. 551.31 (1).
551.23(19)(c)1.1. Unless the cause for disqualification is waived under
subd. 2., no exemption under
par. (a) is available for the securities of an issuer unless the issuer did not know and in the exercise of reasonable care could not have known that any of the following apply to any of the persons described in
17 CFR 230.262 (a), (b) or (c):
551.23(19)(c)1.a.
a. The person has filed a registration statement which is the subject of an effective order entered against the issuer, its officers, directors, general partners, controlling persons or affiliates thereof, pursuant to any state's law within 5 years before the filing of a notice required under
par. (d) denying effectiveness to, or suspending or revoking the effectiveness of, the registration statement.
551.23(19)(c)1.b.
b. 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.
551.23(19)(c)1.c.
c. 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.
551.23(19)(c)1.d.
d. 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.
551.23(19)(c)2.a.a. 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.
551.23(19)(c)2.b.
b. 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.
551.23(19)(d)
(d) 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.
551.23(19)(e)1.1. As to all sales in this state, the issuer shall reasonably believe immediately before making any sale that:
551.23(19)(e)1.b.
b. 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.
551.23(19)(e)2.
2. 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.
551.23(19)(f)
(f) 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.
551.23 Cross-reference
Cross Reference: See also s.
DFI-Sec 4.10, Wis. adm. code.
551.23 Annotation
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 (1975).
551.23 Annotation
Registration and reporting requirements for exempt transactions are discussed. Feitler v. Midas Associates,
418 F. Supp. 735 (1976).
551.23 Annotation
Has securities law regulation in the private capital markets become a deterrent to capital growth: a critical review. Coles. 58 MLR 395.
551.24
551.24
Exemption proceedings. 551.24(1)
(1) The division may by order deny or revoke any exemption under
s. 551.22 or
551.23 with respect to a specified security or transaction.
