Chapter 551

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.

551.202(6) (6) A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter effecting an unsolicited order or offer to purchase, but with respect to a nonissuer transaction involving a security that is not a federal covered security the administrator may require by rule that the records of the broker-dealer confirm that the order or offer to purchase was unsolicited.

551.202(7) (7) A nonissuer transaction executed by a bona fide pledgee without the purpose of evading this chapter.

551.202(8) (8) A nonissuer transaction by a federal covered investment adviser with investments under management in excess of $100,000,000 acting in the exercise of discretionary authority in a signed record for the account of others.

551.202(9) (9) A transaction in a security, whether or not the security or transaction is otherwise exempt, in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, if the terms and conditions of the issuance and exchange or the delivery and exchange and the fairness of the terms and conditions have been approved by the administrator after a hearing.

551.202(10) (10) A transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters.

551.202(11) (11) A transaction in a note, bond, debenture, or other evidence of indebtedness secured by a mortgage or other security agreement if all of the following apply:

551.202(11)(a) (a) The note, bond, debenture, or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit.

551.202(11)(b) (b) A general solicitation or general advertisement of the transaction is not made.

551.202(11)(c) (c) A commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this chapter as a broker-dealer or as an agent.

551.202(12) (12) A transaction by an executor, administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator.

551.202(13) (13) A sale or offer to sell to any of the following:

551.202(13)(a) (a) An institutional investor.

551.202(13)(am) (am) An accredited investor, as defined in Rule 501 (a) adopted under the Securities Act of 1933 (17 CFR 230.501 (a)), provided that prior to the sale in this state to an accredited investor described in Rule 501 (a) (5) or (6) adopted under the Securities Act of 1933, the seller files a consent to service of process with the administrator in the form required under s. 551.611. Failure to file the consent as required is a cause for administrative action by the administrator under s. 551.604 but does not result in the loss of this exemption. This consent is not required to be filed if any of the following apply:

551.202(13)(am)1. 1. The issuer of the securities to be sold has its principal place of business or a majority of its full-time employees located in this state.

551.202(13)(am)2. 2. The issuer or seller of the securities files or has previously filed a consent to service of process with the administrator.

551.202(13)(am)3. 3. The seller is a broker-dealer or agent of the issuer registered under this chapter.

551.202(13)(ar) (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 all of the following apply:

551.202(13)(ar)1. 1. 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).

551.202(13)(ar)2. 2. If the offer or sale of the security had been undertaken under an exemption specified in Rule 506 (a) to (c) adopted under the Securities Act of 1933 (17 CFR 230.506 (a) to (c)), the transaction would not have been disqualified from the exemption under Rule 506 (d) adopted under the Securities Act of 1933 (17 CFR 230.506 (d)), except that the administrator may waive the requirement under this subdivision and authorize transactions in reliance on the exemption under this paragraph notwithstanding the condition specified in this subdivision.

551.202(13)(b) (b) A federal covered investment adviser.

551.202(13)(c) (c) Any other person exempted by rule adopted or order issued under this chapter.

551.202(14) (14) 

551.202(14)(a) (a) Subject to par. (b), any transaction pursuant to an offer directed by the offeror to not more than 25 persons in this state excluding those persons designated in sub. (13) but including persons exempt under sub. (24), during any period of 12 consecutive months whether or not the offeror or any of the offerees is then present in this state if all of the following apply:

551.202(14)(a)1. 1. 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.

551.202(14)(a)2. 2. No commission or other remuneration is paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting any person in this state other than those persons designated in sub. (13).

551.202(14)(a)3. 3. The offeror reasonably believes that all the purchasers in this state, other than those designated in sub. (13), are purchasing for investment.

551.202(14)(b) (b) The administrator 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.

551.202(14m) (14m) 

551.202(14m)(a) (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:

551.202(14m)(a)1. 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.

551.202(14m)(a)2. 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.

551.202(14m)(a)3. 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.

551.202(14m)(a)4. 4. If the transaction had been undertaken under an exemption specified in Rule 506 (a) to (c) adopted under the Securities Act of 1933 (17 CFR 230.506 (a) to (c)), the transaction would not have been disqualified from the exemption under Rule 506 (d) adopted under the Securities Act of 1933 (17 CFR 230.506 (d)), except that the administrator may waive the requirement under this subdivision and authorize transactions in reliance on the exemption under this paragraph notwithstanding the condition specified in this subdivision.

551.202(14m)(b) (b) The exemption under this subsection and the exemption under sub. (27) may be used in conjunction with each other.

551.202(15) (15) A transaction under an offer to existing security holders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options, or warrants, if a commission or other remuneration, other than a standby commission, is not paid or given, directly or indirectly, for soliciting a security holder in this state and if, prior to any offer or sale of any security that is not a federal covered security, the issuer files a notice specifying the terms of the offer, all other information that the administrator by rule requires, and any additional information reasonably related to the offering required to be filed by the administrator within 10 days after the filing date of the notice, and the administrator does not by order disallow the exemption within 10 days after the date of filing the notice or, if additional information is required, within 10 days after the date of filing that information.

551.202(16) (16) An offer to sell, but not a sale, of a security not exempt from registration under the Securities Act of 1933 if all of the following apply:

551.202(16)(a) (a) A registration or offering statement or similar record as required under the Securities Act of 1933 has been filed, but is not effective, or the offer is made in compliance with Rule 165 adopted under the Securities Act of 1933 (17 CFR 230.165).