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Alaska Statutes.

Title 45. Trade and Commerce

Chapter 55. Alaska Securities Act

Section 900. Exemptions.

previous: Section 270. [Renumbered as AS 45.55.995
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AS 45.55.900. Exemptions.

(a) The following securities are exempted from AS 45.55.070 and 45.55.075:

(1) a security, including a revenue obligation, issued or guaranteed by the United States or a territory of the United States, the District of Columbia, a state, a political subdivision of a state or territory, or an agency or corporate or other instrumentality of one or more of the entities described in this paragraph; or a certificate of deposit for one or more of the entities described in this paragraph;

(2) a security issued or guaranteed by Canada, a Canadian province, a political subdivision of a Canadian province, an agency or corporate or other instrumentality of one or more of the entities described in this paragraph, or a 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;

(3) a security issued or guaranteed by a bank organized under the laws of the United States, or by a bank, savings institution, savings and loan association, building and loan association, or trust company organized and supervised under the laws of a state or of the United States, or a security issued by or representing an interest in or a direct obligation of a federal reserve bank;

(4) a commercial paper, note, draft, bill of exchange, or banker's acceptance that arises out of a current transaction or the proceeds of which have been or are to be used for current transactions and that evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or a renewal of the paper that is likewise limited, or a guarantee of the paper or of the renewal, if the commercial paper, note, draft, bill of exchange, or banker's acceptance is of the type eligible for discount by a federal reserve bank;

(5) a security issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar employee's benefit plan, or a security issued by or an interest or participation in a church plan, company, or account that is excluded from the definition of an investment company under 15 U.S.C. 80a-3(c)(14) (Investment Company Act of 1940);

(6) a security issued by and representing an interest in or a debt of, or guaranteed by, a federal savings and loan association, or a building and loan or similar association organized under the laws of a state and authorized to do business in this state;

(7) a security issued by and representing an interest in or a debt of, or guaranteed by, an insurance company organized under the laws of a state and authorized to do business in this state; but this exemption does not apply to an annuity contract, investment contract, or similar security under which the promised payments are not fixed in dollars but are substantially dependent upon the investment results of a segregated fund or account invested in securities; except that policies or annuity contracts of insurance companies admitted to do business in the state are not subject to this chapter;

(8) a security issued or guaranteed by a federal credit union or any credit union, industrial loan association, or similar association organized and supervised under the laws of this state;

(9) a security issued or guaranteed by a railroad, other common carrier, public utility, or holding company that is

(A) subject to the jurisdiction of the Interstate Commerce Commission or its successor;

(B) a registered holding company under 15 U.S.C. 79 - 79z-6 (Public Utility Holding Company Act of 1935) or a subsidiary of the company within the meaning of 15 U.S.C. 79 - 79z-6;

(C) regulated in respect of its rates and charges by a governmental authority of the United States or a state; or

(D) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, a state, Canada, or a Canadian province;

(10) a security listed or approved for listing upon notice of issuance on the New York Stock Exchange, the American Stock Exchange, the Chicago Stock Exchange, the Pacific Coast Stock Exchange, the Philadelphia Stock Exchange, the Chicago Board of Options Exchange, or another securities exchange designated by order of the administrator, or any security designated or approved for designation upon notice of issuance as a national market system security on the National Association of Securities Dealers Automated Quotation National Market System or on any other quotation system designated by order of the administrator, or any other security of the same issuer that is of senior or substantially equal rank; a security called for by subscription rights or warrants so listed or approved; or a warrant or right to purchase or subscribe to an entity described in this paragraph;

(11) a security issued by a person organized and operated not for pecuniary profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes or as a chamber of commerce or trade or professional association, or a security of a fund that is excluded from the definition of an investment company under 15 U.S.C. 80a-3(c)(10)(B) (Investment Company Act of 1940);

(12) shares of membership stock in the Alaska Commercial Fishing and Agriculture Bank, and other securities issued by that bank to members or in connection with loans to members;

(13) an equity security issued in connection with the acquisition by a holding company of a bank under 12 U.S.C. 1842(a) (Bank Holding Company Act of 1956) or a savings association, as defined in 12 U.S.C. 1813(b) (Federal Deposit Insurance Act) and the deposits of which are insured by the Federal Deposit Insurance Corporation under 12 U.S.C. 1467(e) (Home Owners' Loan Act) if

(A) the acquisition occurs solely as part of a reorganization in which security holders exchange their shares of a bank or savings association for shares of a newly formed holding company with no significant assets other than securities of the bank or savings association and the existing subsidiaries of the bank or savings association;

(B) the security holders receive after the reorganization substantially the same proportional interests in the holding company as they held in the bank or savings association except for nominal changes in shareholders' interests resulting from lawful elimination of fractional interests and the exercise of dissenting shareholders' rights under state or federal law;

(C) the rights and interests of security holders in the holding company are substantially the same as those in the bank or savings association before the transaction except as may be required by law; and

(D) the holding company has substantially the same assets and liabilities on a consolidated basis as the bank or savings association before the transaction.

(b) The following transactions are exempted from AS 45.55.070 and 45.55.075:

(1) a transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;

(2) a 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 evidence of indebtedness, secured under those documents, is offered and sold as a unit;

(3) a transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;

(4) an offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in 15 U.S.C. 80a-1 - 80a-64 (Investment Company Act of 1940), pension or profit-sharing trust, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity;

(5) sales by an issuer

(A) to no more than 10 persons in this state other than those designated in (4) of this subsection during a period of 12 consecutive months, regardless of whether the seller or any of the buyers is then present in this state, if

(i) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective buyer in this state;

(ii) a legend is placed on the certificate or other document evidencing ownership of the security, stating that the security is not registered under this chapter and cannot be resold without registration under this chapter or exemption from it;

(iii) offers are made without public solicitation or advertisement; and

(iv) the issuer files with the administrator a notice specifying the issuer, the security to be sold, and the terms of the offer at least two days before any sales are made;

(B) to no more than 25 persons in this state other than those designated in (4) of this subsection during a period of 12 consecutive months, regardless of whether the seller or any of the buyers is then present in this state, if

(i) the sales are made solely in this state;

(ii) before a sale, each prospective buyer is furnished information that is sufficient to make an informed investment decision, which information shall be furnished to the administrator upon request; in this sub-subparagraph, "information that is sufficient to make an informed investment decision" includes a business plan, an income and expense statement, a balance sheet, a statement of risks, and a disclosure of any significant negative factors that may affect the outcome of the investment;

(iii) commissions or other remuneration meet the requirements of this chapter and are made only to persons registered under AS 45.55.040;

(iv) a legend is placed on the certificate or other document evidencing ownership of the security, stating that the security is not registered under this chapter and cannot be resold without registration under this chapter or exemption from it;

(v) the issuer obtains a signed agreement from the buyer acknowledging that the buyer is buying for investment purposes and that the securities will not be resold without registration under this chapter;

(vi) offers are made without public solicitation or advertisement; and

(vii) the issuer files with the administrator a notice specifying the issuer, the security to be sold, and the terms of the offer at least two days before any sales are made;

(C) to no more than 10 persons who are to receive the initial issue of shares of a nonpublicly traded corporation, limited liability company, limited partnership, or limited liability partnership if the requirements of (B)(ii) - (iv) and (vi) of this paragraph are met;

(D) to the buyer of an enterprise or a business and the assets and liabilities of the enterprise or business if

(i) the transfer of stock to the buyer is solely incidental to the sale of the enterprise or business and its assets and liabilities;

(ii) the seller provides full access to the buyer of the books and records of the enterprise or business; and

(iii) a legend is placed on the certificate or other document evidencing ownership of the security, stating that the security is not registered under this chapter and cannot be resold without registration under this chapter or exemption from it;

(6) an offer or sale of a preorganization certificate or subscription if

(A) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective subscriber;

(B) the number of subscribers does not exceed 10; and

(C) a payment is not made by any subscriber;

(7) a transaction under an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants, or transferable warrants exercisable within not more than 90 days of their issuance, if

(A) 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; or

(B) the issuer first files a notice specifying the terms of the offer and the administrator does not by order disallow the exemption within the next five full business days;

(8) an offer, but not a sale, of a security for which registration statements have been filed under both this chapter and 15 U.S.C. 77a - 77bbbb (Securities Act of 1933) if a stop order or refusal order is not in effect and a public proceeding or examination looking toward an order is not pending under either this chapter or 15 U.S.C. 77a - 77bbbb (Securities Act of 1933);

(9) an isolated nonissuer transaction, regardless of whether effected through a broker-dealer, if the seller is not a promoter or controlling person as the administrator may define by regulation or order or if the administrator at the request of the seller waives the requirement that the seller not be a promoter or controlling person;

(10) a nonissuer transaction effected by or through a registered broker-dealer under an unsolicited order or offer to buy; however, the administrator may by regulation require that the customer acknowledge on a specified form that the sale was unsolicited, and that a signed copy of each form be preserved by the broker-dealer for a specified period;

(11) a transaction executed by a bona fide pledgee without intending to evade this chapter;

(12) a transaction incident to a right of conversion or a statutory or judicially approved reclassification, recapitalization, reorganization, quasi-reorganization, stock split, reverse stock split, merger, consolidation, or sale of assets;

(13) a stock dividend, regardless of whether the corporation distributing the dividend is the issuer of the stock, if nothing of value is given by stockholders for the dividend other than the surrender of a right to a cash or property dividend when each stockholder may elect to take the dividend in cash or property or in stock;

(14) an act incident to a statutory vote by security holders on a merger, consolidation, reclassification of securities, or sale of assets in consideration of the issuance of securities of another issuer;

(15) the offer or sale by a registered broker-dealer, acting either as principal or agent, of securities previously sold and distributed to the public if the securities

(A) are sold at prices reasonably related to the current market price at the time of sale, and, if the broker-dealer is acting as agent, the commission collected by the broker-dealer on account of the sale is not in excess of usual and customary commissions collected with respect to securities and transactions having comparable characteristics;

(B) do not constitute the whole or a part of an unsold allotment to or subscription or participation by the broker-dealer as an underwriter of the securities or as a participant in the distribution of the securities by the issuer, by an underwriter, or by a person or group of persons in substantial control of the issuer or of the outstanding securities of the class being distributed; and

(C) have been lawfully sold and distributed in this state under this chapter;

(16) offers or sales of certificates of interest or participation in oil, gas, or mining rights, titles, or leases, or in payments out of production under such rights, titles, or leases, if the purchasers

(A) are or have been during the preceding two years engaged primarily in the business of exploring for, mining, producing, or refining oil, gas, or minerals; or

(B) have been found by the administrator upon written application to be substantially engaged in the business of exploring for, mining, producing, or refining oil, gas, or minerals so as not to require the protection provided by AS 45.55.070 ;

(17) a nonissuer transaction by a registered agent of a registered broker-dealer, and a resale transaction by a sponsor of a unit investment trust registered under 15 U.S.C. 80a-1 - 80a-64 (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 time of the transaction,

(A) the issuer of the security is actually engaged in business and not in the organization stage or in bankruptcy or receivership and is not a blank check, blind pool, or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person or persons;

(B) the security is sold at a price reasonably related to the current market price of the security;

(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;

(D) a nationally recognized securities manual, which may be designated by rule or order of the administrator, or a document filed with the United States Securities and Exchange Commission that is publicly available through the United States Securities and Exchange Commission's electronic data gathering and retrieval system, contains

(i) a description of the business and operations of the issuer;

(ii) the names of the issuer's officers and directors, if any, or, in the case of an issuer not domiciled in the United States, the corporate equivalents of the issuer's officers and directors in the issuer's country of domicile;

(iii) an audited balance sheet of the issuer as of a date within 18 months or, in the case of a reorganization or merger where parties to the reorganization or merger had that audited balance sheet, a pro forma balance sheet; and

(iv) an audited income statement for each of the issuer's immediately preceding two fiscal years or for the period of existence of the issuer if the issuer has been in existence for less than two years or, in the case of a reorganization or merger where the parties to the reorganization or merger had that audited income statement, a pro forma income statement; and

(E) the issuer of the security has a class of equity securities listed on a national securities exchange registered under 15 U.S.C. 78a - 78lll (Securities Exchange Act of 1934) or designated for trading on the National Association of Securities Dealers Automated Quotation System, unless the issuer of the security

(i) is a unit investment trust registered under 15 U.S.C. 80a-1 - 80a-64 (Investment Company Act of 1940);

(ii) including predecessors, has been engaged in continuous business for at least three years; or

(iii) has total assets of at least $2,000,000 based on an audited balance sheet as of a date within 18 months or, in the case of a reorganization or merger where parties to the reorganization or merger had that balance sheet, a pro forma balance sheet;

(18) an offer or a sale of a security by an issuer that has a specific business plan or purpose, is not in the development stage, and has not indicated that its business plan is to engage in a merger or acquisition with an unidentified company or other entity or person, under the following conditions:

(A) sales of securities are made only to persons who are or the issuer reasonably believes are accredited investors as defined in 17 C.F.R. 230.501(a), as that regulation exists on or after October 1, 1999;

(B) the issuer reasonably believes that all purchasers are purchasing for investment and not with the view to or for sale in connection with a distribution of the security; a resale of a security sold in reliance on this exemption within 12 months of sale is presumed to be with a view to distribution and not for investment, except a resale under a registration statement under AS 45.55.070 - 45.55.120 or to an accredited investor under an exemption available under this chapter;

(C) the exemption in this paragraph is not available to an issuer if the issuer, a predecessor of the issuer, an affiliated issuer, a director, an officer, or a general partner of the issuer, a beneficial owner of 10 percent or more of a class of the issuer's equity securities, a promoter of the issuer presently connected with the issuer in any capacity, an underwriter of the securities to be offered, or a partner, a director, or an officer of the underwriter

(i) within the last five years has filed a registration statement that is the subject of a currently effective registration stop order entered by a state securities administrator or the United States Securities and Exchange Commission;

(ii) within the last five years has been convicted of a criminal offense in connection with the offer, purchase, or sale of a security, of a criminal offense involving fraud or deceit, or of a felony;

(iii) is currently subject to a state or federal administrative enforcement order or judgment entered within the last five years finding fraud or deceit in connection with the purchase or sale of a security; or

(iv) is currently subject to an order, judgment, or decree of a court of competent jurisdiction entered within the last five years, temporarily, preliminarily, or permanently restraining or enjoining the person from engaging in or continuing to engage in conduct or a practice involving fraud or deceit in connection with the purchase or sale of a security;

(D) the nonavailability of the exemption under (C) of this paragraph does not apply if

(i) the person subject to the disqualification is licensed or registered to conduct securities related business in the state in which the order, judgment, or decree creating the disqualification was entered against the person;

(ii) before the first offer under this exemption, the state securities administrator or the court or regulatory authority that entered the order, judgment, or decree waives the disqualification; or

(iii) the issuer establishes that it did not know and, in the exercise of reasonable care, based on a factual inquiry, could not have known that a disqualification existed under this paragraph;

(E) a general announcement of the proposed offering may be made by any means and may include only the following information unless the administrator specifically permits additional information:

(i) the name, address, and telephone number of the issuer of the security;

(ii) the name, a brief description, and the price, if known, of the security to be issued;

(iii) a brief description in 25 words or less of the business of the issuer;

(iv) the type, number, and aggregate amount of securities being offered;

(v) the name, address, and telephone number of the person to contact for additional information;

(vi) a statement that sales will be made only to accredited investors;

(vii) a statement that money or other consideration is not being solicited or will not be accepted by way of this general announcement; and

(viii) a statement that the securities have not been registered with or approved by a state securities agency or the United States Securities and Exchange Commission and are being offered and sold under an exemption from registration;

(F) the issuer in connection with any offer may provide information in addition to the general announcement under (E) of this paragraph if the information is delivered

(i) through an electronic database that is restricted to persons who have been prequalified as accredited investors; or

(ii) to a prospective purchaser that the issuer reasonably believes is an accredited investor;

(G) a telephone solicitation is not permitted unless, before placing the call, the issuer reasonably believes that the prospective purchaser being solicited is an accredited investor;

(H) dissemination of the general announcement of the proposed offering to persons who are not accredited investors does not disqualify the issuer from claiming this exemption;

(I) the issuer shall file a notice of the transaction with the administrator, a copy of the general announcement, and the fee for exemption filings established by regulation within 15 days after the first sale in this state;

(19) an offer to repay, under AS 45.55.930 , the buyer of a security if the offeror first files with the administrator a notice specifying the terms of the offer at least two days before the offer is made;

(20) a transaction involving only family members who are related, including related by adoption, within the fourth degree of affinity or consanguinity, or involving only those family members and the corporations, partnerships, limited liability companies, limited partnerships, limited liability partnerships, associations, joint-stock companies, or trusts that are organized, formed, or created by those family members or at the direction of those family members.

(c) In any proceeding under this chapter, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

(d) The administrator may by order deny or revoke an exemption specified in (a)(5), (7) or (11) of this section or in (b) of this section with respect to a specific security or transaction. The order may not be entered without appropriate prior notice to all interested parties, opportunity for hearing, and written findings of fact and conclusions of law, except that the administrator may by order summarily deny or revoke any of the specified exemptions pending final determination of a proceeding under this subsection. Upon the entry of a summary order, the administrator shall promptly notify all interested parties that it has been entered and of the reasons for it and that within 15 days of the receipt of a written request the matter will be set down for hearing. If no hearing is requested and none is ordered by the administrator, the order remains in effect until it is modified or vacated by the administrator. If a hearing is requested or ordered, the administrator, after notice of and opportunity for hearing to all interested persons, may modify or vacate the order or extend it until final determination.

(e) An order under (d) of this section may not operate retroactively. A person may not be considered to have violated AS 45.55.070 or 45.55.150 by reason of an offer or sale effected after the entry of an order under this subsection if the person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known of the order.

(f) The administrator shall by regulation prescribe a schedule of fees for the application for or the examination or investigation of a claimed exemption.

(g) An offer on the Internet by an issuer is exempt from the registration provisions of AS 45.55.070 and the advertising regulations adopted under this chapter and does not preclude the issuer from relying on other available exemptions for offers provided under this chapter if

(1) the offer directly discloses, in a format and at a prominent place in the offer and in an advertisement of the offer on the Internet, that the securities are not being offered to persons in this state;

(2) the offer is not otherwise specifically directed to a person in this state by or on behalf of the issuer; and

(3) a sale of the issuer's securities is not made in this state as a result of the offer.

(h) For any security or transaction or any type of security or transaction, the administrator may by order, waive, withdraw, or modify any of the requirements or conditions of (b)(5) of this section.