Chapter 551

551.102(22) (22) “Predecessor act” means ch. 551, 2005 stats.

551.102(23) (23) “Price amendment” means the amendment to a registration statement filed under the Securities Act of 1933 or, if an amendment is not filed, the prospectus or prospectus supplement filed under the Securities Act of 1933 that 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.

551.102(24) (24) “Principal place of business” of a broker-dealer or an investment adviser means the executive office of the broker-dealer or investment adviser from which the officers, partners, or managers of the broker-dealer or investment adviser direct, control, and coordinate the activities of the broker-dealer or investment adviser.

551.102(25) (25) “Record,” except in the phrases “of record,” “official record,” and “public record,” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

551.102(26) (26) “Sale” includes every contract of sale, contract to sell, or disposition of a security or interest in a security for value, and “offer to sell” includes every attempt or offer to dispose of, or solicitation of an offer to purchase, a security or interest in a security for value. Both terms include all of the following:

551.102(26)(a) (a) A security given or delivered with, or as a bonus on account of, a purchase of securities or any other thing constituting part of the subject of the purchase and having been offered and sold for value.

551.102(26)(b) (b) A gift of assessable stock involving an offer and sale.

551.102(26)(c) (c) A sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer and a sale or offer of a security that gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, including an offer of the other security.

551.102(27) (27) “Securities and Exchange Commission” means the United States Securities and Exchange Commission.

551.102(28) (28) “Security” means a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness; limited partnership interest; life settlement investment or similar agreement; certificate of interest or participation in a profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting trust certificate; certificate of deposit for a security; fractional undivided interest in oil, gas, or other mineral rights; put, call, straddle, option, or privilege on a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof; put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, an interest or instrument commonly known as a “security”; or a certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. The term:

551.102(28)(a) (a) Includes both a certificated and an uncertificated security.

551.102(28)(b) (b) Does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed or variable sum of money either in a lump sum or periodically for life or other specified period.

551.102(28)(bm) (bm) Does not include a funding agreement authorized under s. 632.66.

551.102(28)(c) (c) Does not include an interest in a contributory or noncontributory pension or welfare plan subject to the Employee Retirement Income Security Act of 1974 or in a governmental benefit plan qualified for federal income tax purposes under the Internal Revenue Code or trust or fund managed by the investment board.

551.102(28)(d) (d) Subject to the exception in par. (e), includes all of the following:

551.102(28)(d)1. 1. An investment in a common enterprise with the expectation of profits to be derived through the essential managerial efforts of someone other than the investor. For purposes of this subdivision, a “common enterprise” is an enterprise in which the fortunes of the investor are tied to the efficacy of the efforts of those seeking the investment or a third party.

551.102(28)(d)2. 2. Any investment by which an offeree furnishes initial value to an offeror, and a portion of this initial value is subjected to the risks of the enterprise, and the furnishing of the initial value is induced by the offeror’s promises or representations which give rise to a reasonable understanding that a valuable benefit of some kind over and above the initial value will accrue to the offeree as a result of the operation of the enterprise, and the offeree does not receive the right to exercise practical and actual control over the managerial decisions of the enterprise.

551.102(28)(e) (e) Includes as an “investment contract,” among other contracts, an interest in a limited liability partnership and in a limited liability company; except an interest, or class or series thereof, in a limited liability partnership or limited liability company is not an “investment contract” if any of the following apply:

551.102(28)(e)1. 1. Each holder of an interest, or class or series thereof, is actively engaged in the management of the limited liability partnership or limited liability company. However, evidence that partners or members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability partnership or limited liability company, or the right to participate in management, shall not establish, without more, that all partners or members are actively engaged in the management of the limited liability partnership or limited liability company.

551.102(28)(e)2. 2. Each holder of an interest, or class or series thereof, is authorized under applicable law or under the partnership, operating, or other governing agreement or document to act for and bind the limited liability partnership or limited liability company and the total number of holders of all interests in the limited liability partnership or limited liability company does not exceed 15.

551.102(28)(f) (f) Does not include a time share created and marketed in accordance with ch. 707 if the requirements under s. 707.11 are satisfied.

551.102(28)(g) (g) Does not include a membership interest in a domestic mutual holding company, as provided under s. 644.22.

551.102(28)(h) (h) Does not include as an “investment contract” any contract excluded by rule adopted or order issued under this chapter.

551.102(29) (29) “Self-regulatory organization” means a national securities exchange registered under the Securities Exchange Act of 1934, a national securities association of broker-dealers registered under the Securities Exchange Act of 1934, a clearing agency registered under the Securities Exchange Act of 1934, or the Municipal Securities Rulemaking Board established under the Securities Exchange Act of 1934.

551.102(30) (30) “Sign” means to do any of the following, with present intent to authenticate or adopt a record:

551.102(30)(a) (a) To execute or adopt a tangible symbol.

551.102(30)(b) (b) To attach or logically associate with the record an electronic symbol, sound, or process.

551.102(31) (31) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

551.102 History History: 2007 a. 196; 2009 a. 180, 344, 345; 2013 a. 52; 2021 a. 114.

551.102 Annotation A profit-sharing agreement between management and labor in exchange for wage concessions was not a security. Fore Way Express, Inc. v. Bast, 178 Wis. 2d 693, 505 N.W.2d 408 (Ct. App. 1993).

551.102 Annotation There is a presumption that every note is a security, which may be rebutted by showing that the note falls within or closely resembles the family of instruments deemed not to be securities. Family resemblance is determined by examining four factors: 1) the motivations of a reasonable seller and buyer; 2) the note’s plan of distribution; 3) the reasonable expectations of the investing public; and 4) whether other risk-reducing factors exist, making unnecessary the application of the securities laws to protect the public. State v. McGuire, 2007 WI App 139, 302 Wis. 2d 688, 735 N.W.2d 555, 05-2832.

551.102 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 former s. 551.02 (11) (b), 1969 stats. 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).

551.102 Annotation An “offer to sell” under former s. 551.02 (11) (b), 1973 stats., was made when the defendant gave an unexecuted partnership agreement to the plaintiff implicitly inviting the plaintiff to return it completed as to form and amount. Feitler v. Midas Associates, 418 F. Supp. 735 (1976).

551.102 Note NOTE: The above annotations refer to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.103 551.103 References to federal statutes. “Securities Act of 1933” (15 USC 77a et seq.), “Securities Exchange Act of 1934” (15 USC 78a et seq.), “Public Utility Holding Company Act of 1935” (15 USC 79 et seq.), “Investment Company Act of 1940” (15 USC 80a-1 et seq.), “Investment Advisers Act of 1940” (15 USC 80b-1 et seq.), “Employee Retirement Income Security Act of 1974” (29 USC 1001 et seq.), “National Housing Act” (12 USC 1701 et seq.), “Commodity Exchange Act” (7 USC 1 et seq.), “Internal Revenue Code” (26 USC 1 et seq.), “Securities Investor Protection Act of 1970” (15 USC 78aaa et seq.), “Securities Litigation Uniform Standards Act of 1998” (112 Stat. 3227), “Small Business Investment Act of 1958” (15 USC 661 et seq.), and “Electronic Signatures in Global and National Commerce Act” (15 USC 7001 et seq.) mean those statutes and the rules and regulations adopted under those statutes, as in effect on the date of enactment of this chapter, or as later amended.

551.103 History History: 2007 a. 196.

551.104 551.104 References to federal agencies. A reference in this chapter to an agency or department of the United States is also a reference to a successor agency or department.

551.104 History History: 2007 a. 196.

551.105 551.105 Electronic records and signatures. This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, but does not modify, limit, or supersede section 101 (c) of that act (15 USC 7001 (c)) or authorize electronic delivery of any of the notices described in section 103 (b) of that act (15 USC 7003 (b)). This chapter authorizes the filing of records and signatures, when specified by provisions of this chapter or by a rule adopted or order issued under this chapter, in a manner consistent with section 104 (a) of that act (15 USC 7004 (a)).

551.105 History History: 2007 a. 196.

subch. II of ch. 551 SUBCHAPTER II

EXEMPTIONS FROM REGISTRATION
OF SECURITIES

551.201 551.201 Exempt securities. The following securities are exempt from the requirements of ss. 551.301 to 551.306 and 551.504:

551.201(1) (1) 

551.201(1)(a) (a) A security, including a revenue obligation or a separate security as defined in Rule 131 (17 CFR 230.131) adopted under the Securities Act of 1933, issued, insured, or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one or more states; by a political subdivision of one or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress; or a 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 exempt only as provided under par. (b).

551.201(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 exempt subject to rules adopted by the division of securities. A revenue obligation is exempt from any filing under the rules of the division if it is the subject of a guarantee or an irrevocable letter of credit from a depository institution 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 all of the following:

551.201(1)(b)1. 1. Either 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 that the guarantee or 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.

551.201(1)(b)2. 2. That the enforceability of the guarantee or 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 depository institution for payments made under the guarantee or letter of credit.

551.201(2) (2) A security issued, insured, or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor.

551.201(3) (3) A security issued by and representing or that will represent an interest in or a direct obligation of, or be guaranteed by, any of the following:

551.201(3)(a) (a) An international banking institution.

551.201(3)(b) (b) A banking institution organized under the laws of the United States; a member bank of the Federal Reserve System; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the Comptroller of Currency pursuant to Section 1 of Public Law 87-722 (12 USC 92a).

551.201(3)(c) (c) Any other depository institution, unless by rule or order the administrator proceeds under s. 551.204.

551.201(4) (4) A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to do business in this state.

551.201(5) (5) A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company that is any of the following:

551.201(5)(a) (a) Regulated in respect to its rates and charges by the United States or a state.

551.201(5)(b) (b) Regulated in respect to the issuance or guarantee of the security by the United States, a state, Canada, or a Canadian province or territory.

551.201(5)(c) (c) A public utility holding company registered under the Public Utility Holding Company Act of 1935 or a subsidiary of such a registered holding company within the meaning of that act.

551.201(6) (6) A federal covered security specified in section 18 (b) (1) of the Securities Act of 1933 (15 USC 77r (b) (1)) or by rule adopted under that provision or a security listed or approved for listing on another securities market specified by rule under this chapter; a put or a call option contract; a warrant; a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the Securities Exchange Act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the Securities Exchange Act of 1934 or an offer or sale, of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; or an option or a derivative security designated by the Securities and Exchange Commission under section 9 (b) of the Securities Exchange Act of 1934 (15 USC 78i (b)).

551.201(7) (7) A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes, or as a chamber of commerce, and not for pecuniary profit, no part of the net earnings of which inures to the benefit of a private stockholder or other person, or a security of a company that is excluded from the definition of an investment company under section 3 (c) (10) (B) of the Investment Company Act of 1940 (15 USC 80a-3 (c) (10) (B)); except that with respect to the offer or sale of a note, bond, debenture, or other evidence of indebtedness issued by such a person, a rule may be adopted under this chapter limiting the availability of this exemption by classifying securities, persons, and transactions, imposing different requirements for different classes, specifying with respect to par. (b) the scope of the exemption and the grounds for denial or suspension, and requiring an issuer to do any of the following:

551.201(7)(a) (a) To file a notice specifying the material terms of the proposed offer or sale and copies of any proposed sales and advertising literature to be used and provide that the exemption becomes effective if the administrator does not disallow the exemption within the period established by the rule.

551.201(7)(b) (b) To file a request for exemption authorization for which a rule under this chapter may specify the scope of the exemption, the requirement of an offering statement, the filing of sales and advertising literature, the filing of consent to service of process complying with s. 551.611, and grounds for denial or suspension of the exemption.

551.201(7)(c) (c) To register under s. 551.304.

551.201(8) (8) Any securities of a cooperative corporation organized under ch. 185 or an unincorporated cooperative association organized under ch. 193.

551.201(9) (9) An equipment trust certificate with respect to equipment leased or conditionally sold to a person, if any security issued by the person would be exempt under this section or would be a federal covered security under section 18 (b) (1) of the Securities Act of 1933 (15 USC 77r (b) (1)).

551.201 History History: 2007 a. 196; 2011 a. 178.

551.202 551.202 Exempt transactions. The following transactions are exempt from the requirements of ss. 551.301 to 551.306 and 551.504:

551.202(1) (1) An isolated nonissuer transaction, whether effected by or through a broker-dealer or not.

551.202(2) (2) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter, and a resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least 90 days if, at the date of the transaction, all of the following apply:

551.202(2)(a) (a) The issuer of the security is engaged in business, the issuer is not in the organizational stage or in bankruptcy or receivership, and the issuer is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person.

551.202(2)(b) (b) The security is sold at a price reasonably related to its current market price.

551.202(2)(c) (c) The security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security or a redistribution.

551.202(2)(d) (d) A nationally recognized securities manual or its electronic equivalent designated by rule adopted or order issued under this chapter or a record filed with the Securities and Exchange Commission that is publicly available contains all of the following:

551.202(2)(d)1. 1. A description of the business and operations of the issuer.

551.202(2)(d)2. 2. The names of the issuer’s executive officers and the names of the issuer’s directors, if any.

551.202(2)(d)3. 3. An audited balance sheet of the issuer as of a date within 18 months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had an audited balance sheet, a pro forma balance sheet for the combined organization.

551.202(2)(d)4. 4. An audited income statement for each of the issuer’s 2 immediately previous fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case of a reorganization or merger when each party to the reorganization or merger had audited income statements, a pro forma income statement.

551.202(2)(e) (e) Any of the following requirements is met:

551.202(2)(e)1. 1. The issuer of the security has a class of equity securities listed on a national securities exchange registered under section 6 of the Securities Exchange Act of 1934 or designated for trading on the National Association of Securities Dealers Automated Quotation System.

551.202(2)(e)2. 2. The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940.

551.202(2)(e)3. 3. The issuer of the security, including its predecessors, has been engaged in continuous business for at least 3 years.

551.202(2)(e)4. 4. The issuer of the security has total assets of at least $2,000,000 based on an audited balance sheet as of a date within 18 months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had such an audited balance sheet, a pro forma balance sheet for the combined organization.

551.202(3) (3) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the Board of Governors of the Federal Reserve System.

551.202(4) (4) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in an outstanding security if the guarantor of the security files reports with the Securities and Exchange Commission under the reporting requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934 (15 USC 78m or 78o (d)).

551.202(5) (5) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security to which any of the following applies:

551.202(5)(a) (a) The security is rated at the time of the transaction by a nationally recognized statistical rating organization in one of its 4 highest rating categories.

551.202(5)(b) (b) The security has a fixed maturity or a fixed interest or dividend, if all of the following apply:

551.202(5)(b)1. 1. A default has not occurred during the current fiscal year or within the 3 previous fiscal years, or during the existence of the issuer and any predecessor if less than 3 fiscal years, in the payment of principal, interest, or dividends on the security.

551.202(5)(b)2. 2. The issuer is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not and has not been within the previous 12 months a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person.