(1) Pursuant to
KRS
292.410(1)(q), a written
document, oral communication, Internet communication, or the dissemination of a
scripted radio or television broadcast, made by or on behalf of an issuer for
the sole purpose of soliciting an indication of interest in receiving an
offering circular (or its equivalent) for an offering of a security in this
state shall be exempt from the requirements established in
KRS
292.330 to
292.390
if:
(a) The issuer:
1. Is or will be a business entity organized
under the laws of one (1) of the states or possessions of the United States or
one (1) of the provinces or territories of Canada;
2. Is engaged in or proposes to engage in a
business other than petroleum or natural gas exploration or production or
mining or other extractive industries; and
3. Is not a development stage company that
either has:
a. No specific business plan or
purpose; or
b. Indicated that its
business plan is to merge with an unidentified company or companies;
(b) The solicitation of
interest is not for a blind pool offering or other offering for which the
specific business in which to be engaged or property to be acquired cannot be
described at the time of the solicitation;
(c) The issuer intends to register the
securities in this state and conduct its offering pursuant to
15 U.S.C.
77c(a)(11),
17 CFR
230.147,
230.251, or
230.504;
(d) The written document, Internet
communication, or script of the broadcast:
1.
States that the solicitation is not an offering of a security for sale, and
that a public offering to be made shall be made by means of an offering
circular that:
a. May be obtained from the
issuer; and
b. Will contain
detailed information about the company and management, as well as financial
statements;
2. States
that no money or other consideration is being solicited, and if sent in
response, shall not be accepted;
3.
States that a sale of a security shall not be made or a commitment to purchase
shall not be accepted until:
a. A registration
statement is filed with the commissioner and becomes effective; or
b. An appropriate exemption from registration
is available and utilized;
4. States that an indication of interest made
by a prospective investor shall not involve an obligation or commitment;
and
5. Identifies the chief
executive officer of the issuer and briefly and in general describes its
business and products;
(e) Five (5) business days prior to the
initial solicitation of interest under this administrative regulation, the
issuer submits a copy of a written document, a written transcript of the
Internet communication, or the script of a broadcast to be used in reliance
upon this section to the commissioner. The document, transcript, or broadcast
script shall contain or be accompanied by the name and telephone number of a
person able to answer questions about the document or the broadcast. The issuer
shall also submit solicitation of interest material that contains substantive
changes from or additions to previously submitted material;
(f) An oral communication with a prospective
investor or other broadcast shall not be made until after submission of the
written document or script of the broadcast to the commissioner as required by
paragraph (e) of this subsection;
(g) A written document, script, advertisement
or other material which the issuer has been notified by the commissioner not to
distribute shall not be used to solicit an indication of interest;
(h) Except for a scripted broadcast and
except to the extent necessary to obtain information needed to provide a
solicitation of interest document, the issuer shall not communicate with a
prospective investor about the contemplated offering unless the prospective
investor is provided with a written document containing the disclosures
required by paragraph (d) of this subsection at or before the time of the
communication or within five (5) calendar days after the
communication;
(i) During the
solicitation of interest period, the issuer shall not solicit or accept money
or other consideration, or a commitment, binding or otherwise, to purchase a
security from a prospective investor in reliance upon this section;
(j) A sale shall not be made until a
registration statement is effective pursuant to KRS Chapter 292 with respect to
the offering, or an appropriate exemption from registration is available and
utilized; and
(k)
1. Except as provided in subparagraph 2 of
this paragraph, the issuer does not know, and in the exercise of reasonable
care could not know, that the issuer, any of the issuer's officers, directors,
general partners or beneficial owners of ten (10) percent or more of any class
of its equity securities, any promoter presently connected with the issuer in
any capacity, or any person paid or given, directly or indirectly, a
commission, fee or other remuneration for soliciting an indication of interest
pursuant to this administrative regulation:
a.
Has filed a registration statement which is the subject of a currently
effective registration stop order entered pursuant to a federal or state
securities law within five (5) years prior to the submission of the written
document or broadcast script to the commissioner as required by paragraph (e)
of this subsection;
b. Has been
convicted within five (5) years prior to the submission of the written document
or broadcast script to the commissioner as required by paragraph (e) of this
subsection of a felony or misdemeanor in connection with the offer, purchase or
sale of a security or a felony involving fraud or deceit, including forgery,
embezzlement, obtaining money under false pretense, larceny or conspiracy to
defraud;
c. Is currently subject to
a federal or state administrative enforcement order or judgment entered by a
state securities administrator or the Securities and Exchange Commission within
five (5) years prior to the submission of the written document or broadcast
script to the commissioner as required by paragraph (e) of this subsection, or
is subject to a federal or state administrative enforcement order or judgment
entered within five (5) years prior to the submission of the written document
or broadcast script to the commissioner as required by paragraph (e) of this
subsection, in which fraud or deceit, including making an untrue statement of
material fact or omitting to state a material fact, was found;
d. Is subject to a federal or state
administrative enforcement order or judgment which prohibits, denies or revokes
the use of an exemption from registration in connection with the offer,
purchase or sale of a security; or e. Is currently subject to an order,
judgment or decree of a court of competent jurisdiction temporarily or
preliminarily restraining or enjoining, or is subject to an order, judgment or
decree of a court of competent jurisdiction permanently restraining or
enjoining, the party from engaging in or continuing a conduct or practice in
connection with the purchase or sale of a security or involving the making of a
false filing with the state entered within five (5) years prior to the
submission of the written document or broadcast script to the commissioner as
required by paragraph (e) of this subsection.
2. The prohibitions established in
subparagraph 1 of this paragraph shall not apply if:
a. The person subject to the disqualification
is duly licensed or registered to conduct securities related business in the
state in which the administrative order or judgment was entered against the
person;
b. The broker-dealer
employing the party is licensed or registered in Kentucky and the Form BD filed
with Kentucky discloses the order, conviction, judgment or decree relating to
the person.
3. A person
disqualified under subparagraph 1 of this paragraph shall not act in a capacity
other than that for which the person is licensed or registered.
4. A disqualification pursuant to
subparagraph 1 of this paragraph shall be automatically waived if the agency
which created the basis for disqualification determines upon a showing of good
cause that it is not necessary under the circumstances that the exemption be
denied.
5. It shall be a defense to
a violation of subparagraph 1 of this paragraph if the issuer sustains the
burden of proof that it did not know, and in the exercise of reasonable care
could not have known, that a disqualification under subparagraph 1 of this
paragraph existed.
(3)
(a)
Except as provided in paragraph (b) of this subsection, a failure to comply
with a condition established in subsection (1) of this section shall not result
in the loss of the exemption from the requirements of
KRS
292.340 through
292.390
for an offer to a particular individual or entity if the issuer shows:
1. The failure to comply did not pertain to a
condition directly intended to protect that particular individual or
entity;
2. The failure to comply
was insignificant with respect to the offering as a whole; and
3. A good faith and reasonable attempt was
made to comply with all applicable conditions of subsection (1) of this
section.
(b) If an
exemption is established only through reliance upon the provisions of paragraph
(a) of this subsection, the failure to comply shall:
1. Be actionable as a violation of KRS
Chapter 292 by the commissioner under
KRS 292.470;
and
2. Constitute grounds for
denying or revoking the exemption as to a specific security or
transaction.
(4) A written document or Internet
communication used in reliance upon this administrative regulation may include
a coupon returnable to the issuer or an Internet email link to the issuer,
which shall:
(a) Indicate interest in a
potential offering;
(b) Reveal the
name, address and telephone number of the prospective investor;
(c) State clearly and separately that:
1. The indication of interest shall not be
binding; and
2. Money shall not be
sent; and
(d) Not
request information about the financial profile of the investor, including
income, assets or investment history.
(7) If an issuer has a bona fide change of
intention and decides to pursue an exempt offering pursuant to
KRS
292.410(1)(i) or
808 KAR
10:210 after following the process established by this
administrative regulation without having filed a registration statement, the
issuer may proceed with the exempt offering if:
(a) At least thirty (30) calendar days have
elapsed between the last solicitation of interest pursuant to this
administrative regulation and the first sale of a security pursuant to the
exempt offering; and
(b) The issuer
has complied with all of the conditions of the applicable exemption, including
the provision of all solicitation of interest documents submitted to the
commissioner.
(9) A commission, fee or other remuneration
shall not be paid or given, directly or indirectly, to a person for soliciting
a prospective investor in this state unless the person is:
(a) Appropriately registered in this state
pursuant to
KRS
292.330; or
(b) Exempt from registration.