Securities

Exemptions from Registration

Important Things to Note

There are several exemptions from the securities registration requirements of the Alaska Securities Act. Those exemptions that are most likely to be utilized by small businesses will be discussed below. There are, however, several caveats to keep in mind when reviewing this material.

First, some exemptions are self-executing, while others require a notice filing with the division and payment of a fee ($50 regular fee or $125 for expedited service). An exemption that does not require a filing with the administrator is self-executing. The issuer must determine if that exemption is truly available. For exemptions that require a filing notice, the issuer still bears the burden of responsibility for relying on the exemption. The mere filing of the notice is not proof that the issuer is actually eligible to use that exemption. Most notices must be filed before offers or sales are made, but the accredited investor exemption notice is filed within 15 days of the first sale.

Second, the antifraud provisions of federal and state securities laws apply to all securities sales regardless of whether the securities are registered or exempt from registration. A misstatement or omission of a material fact in connection with the offer and sale of securities can result in administrative, civil or criminal penalties. A violation of the antifraud provisions may also serve as a basis for a civil suit by investors.

Third, most exemptions under state and federal securities laws require technical compliance with the specific terms of each exemption. Failure to adhere to these technical requirements will give investors the right to rescind the sale of the securities and get their money back with interest.

Fourth, the focus of the following discussion will be on the exemptions in the Alaska Securities Act, with limited references to federal securities law. Even if there is compliance with the terms of an exemption in the Alaska Securities Act, compliance with an appropriate exemption under federal securities law is also necessary. If securities are sold in other states, compliance with the securities statutes in those states is required as well.

Fifth, each of the exemptions under the Alaska Securities Act discussed below has its own specific requirements, but there are some prohibitions that apply to most of the exemptions:

  1. General advertisements for investors or advertisements which offer securities for sale are prohibited;
  2. Payment to anyone for contacting prospective investors or for offering or selling securities is also prohibited, except in certain specific circumstances where the person is registered as a broker-dealer or sales agent under state and federal securities law; and
  3. Purchasers of securities that are sold in reliance upon one or more of the exemptions discussed below receive restricted securities, i.e., the securities cannot be resold except in conformity with another exemption. Purchasers generally must be willing to hold the securities for a period of time as an investment and not purchase with the intention of reselling the securities shortly after purchase.

Private Placement Exemptions

A private placement is a term that refers to a nonpublic offering of securities usually sold to a limited number of investors. There are four exemptions in the Alaska Securities Act which afford small businesses an opportunity to privately place their securities and thereby avoid the need to register the offering. Two of the exemptions require a notice filing prior to sale, and the notice must be accompanied by the required $50.00 fee ($125 fee for expedited service).

One of the private placement exemptions, an interstate exemption, is contained in AS 45.55.900(b)(5)(A) of the Alaska Securities Act (this exemption is not available to an issuer that has before the sale, or would have after the sale, 20 or more security holders in this state):

(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 (use State of Alaska Form 08-106).

The second exemption in this section, an intrastate exemption, is at AS 45.55.900(b)(5)(B) (this exemption is not available to an issuer that has before the sale, or would have after the sale, 30 or more security holders in this state):

(5) sales by an issuer

(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 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 he 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

(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 (use State of Alaska Form 08-107).

The third exemption in this section is at AS 45.55.900(b)(5)(C) (this exemption is only available for the first distribution of stock or ownership or partnership interests by the entity issuing the securities):

(5) sales by an issuer

(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:

(i) 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 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;

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

(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; and

(iv) offers are made without public solicitation or advertisement.

The fourth exemption in this section is at AS 45.55.900(b)(5)(D) (this exemption is available for persons who are selling their entire business to another person):

(5) sales by an issuer

(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.

Institutional Investor Exemption

The exemption at AS 45.55.900(b)(4) is sometimes called the institutional investor exemption, and is self-executing for listed institutions (you may file State of Alaska Form 08-108 for sales to institutions not listed, and the division will consider them on a case-by-case basis):

(4) an offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the 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.

Preorganization Subscription Exemption

The self-executing exemption at AS 45.55.900(b)(6) allows a person to obtain no more than 10 subscribers, but it must be noted that prior to collection of any funds the securities offering must be properly registered or eligible for an exemption:

(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.

Accredited Investor Exemption

The accredited investor exemption at AS 45.55.900(b)(18) requires an issuer to file a notice (use State of Alaska Form 08-110), a copy of the allowed general notice, and the required fee 15 days after the first sale. The exemption is available to issuers that are in the development stage as long as they have a specific business plan or purpose where that business plan or purpose is not to engage in a merger or acquisition with an unidentified company or other entity or person. One of the objectives of this exemption is to allow Alaska businesses to participate in the Small Business Administration’s ACE-Net (Angel Capital Electronic Network), or similar electronic matching services that meet the exemption’s requirements:

(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 the effective date of this Act;

(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.

Rescission Offer Exemption

Under AS 45.55.930, a seller may be liable to the buyer if the securities transaction was not properly registered or exempt from registration, or if there was a failure to disclose material information. That section of statute describes the rights of the buyer to sue the seller. It also describes how the seller may avoid a lawsuit by offering to buy back the security (rescind the transaction. The rescission offer itself is an offer covered under the Act. AS 45.55.900(b)(19) provides an exemption from registration for these rescission offers, but a notice and fee are required to be filed.

(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;

Family Exemption

Transactions that involve only family members as described at AS 45.55.900(b)(20) are exempt from registration. No notice filing is required. In the exemption shown below, "affinity" means by marriage, and "consanguinity" means by blood. To see a list of the family members described by this section, see the regulation at 3 AAC 08.910(10).

(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.

Test The Waters Exemption

If the issuer qualifies and plans to use federal Regulation A or Regulation D Rule 504 for the securities offering, the issuer will need to file a registration in Alaska before selling any securities. When that time comes, the issuer may register the security in Alaska using NASAA Forms U-1 and U-7 for a Regulation A filing, or State of Alaska Form 08-101 for a Regulation D Rule 504 filing. However, since the registration, even with these simpler forms, is time consuming and expensive, an issuer may "test the waters" to see if there is any interest in purchasing the securities before the issuer goes to the expense of preparing registration documents. Please note, however, that no sales can be made before registration. To use the "test the waters" exemption, the issuer must file State of Alaska Form 08-113 and follow all of the requirements of the regulation at 3 AAC 08.087 that reads:

3 AAC 08.087. SOLICITATIONS OF INTEREST PRIOR TO THE FILING OF THE REGISTRATION STATEMENT. (a) An offer, but not a sale, of a security made by or on behalf of an issuer for the sole purpose of soliciting an indication of interest in receiving a prospectus, or its equivalent, for the security is exempt from AS 45.55.070, and 45.55.030 where the offer is made by an agent of the issuer, if all of the following conditions are satisfied:

(1) the issuer is

(A) or will be a business entity organized under the laws of one of the states or possessions of the United States or one of the provinces or territories of Canada;

(B) engaged in or proposes to engage in a business other than petroleum exploration or production or mining or other extractive industries; and

(C) not soliciting for a "blind pool" offering or other offering for which the specific business in which to be engaged or properties to be acquired cannot be described at the time of the solicitation;

(2) the offeror intends to register the security in this state under AS 45.55 and to conduct its offering under either Regulation A (17 C.F.R. 230.251 – 230.263) or Rule 504 of Regulation D (17 C.F.R. 230.501 - 230.504 and 17 C.F.R. 230.507), as promulgated by the United States Securities and Exchange Commission under 15 U.S.C. 77a, et seq. (Securities Act of 1933);

(3) at least ten (10) business days prior to the initial solicitation of interest under this section, the offeror files with the administrator a Solicitation of Interest Form (State of Alaska Form 08-113) along with any other materials to be used to conduct solicitations of interest, including the script of any broadcast to be made and a copy of any notice to be published, plus a filing fee equal to the fee for filings under AS 45.55.900 and described at 3 AAC 08 920(6);

(4) at least five (5) business days prior to usage, the offeror files with the administrator any amendments to the materials listed in (a)(3) of this section or additional materials to be used to conduct solicitations of interest, except for materials provided to a particular offeree under a request by that offeree, which materials shall be filed with the administrator no later than five (5) business days after usage;

(5) no Solicitation of Interest Form (State of Alaska Form 08-113), script, advertisement, or other material which the offeror has been notified by the administrator not to distribute is used to solicit indications of interest;

(6) except for scripted broadcasts and published notices and except to the extent necessary to obtain information needed to provide a Solicitation of Interest Form (State of Alaska Form 08-113), the offeror does not communicate with any offeree about the contemplated offering unless the offeree is provided with the most current Solicitation of Interest Form at or before the time of the communication or within five (5) calendar days after the communication;

(7) during the solicitation of interest period, the offeror does not solicit or accept money or commitment to purchase securities;

(8) no sale is made until seven (7) calendar days after delivery to the purchaser of a final prospectus which is part of a registration statement declared effective under AS 45.55.090 or 45.55.100;

(9) no sale of the security is made by any person who is not registered under AS 45.55.030(a) as a broker-dealer or an agent or is exempted from registration;

(10) the offeror does not know, and in the exercise of reasonable care could not know that the issuer or any of the issuer’s agents or promoters, as defined by AS 45.55.990(2) and 3 AAC 08.950(30), respectively:

(A) has filed a registration statement which is the subject of a currently effective registration stop order entered under a federal or state securities law within five years prior to the filing of the Solicitation of Interest Form (State of Alaska Form 08-113);

(B) has been convicted within five years prior to the filing of the Solicitation of Interest Form 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 United States Securities and Exchange Commission within five years prior to the filing of the Solicitation of Interest Form (State of Alaska Form 08-113), or is subject to a federal or state administrative enforcement order or judgment entered within five years prior to the filing of the Solicitation of Interest Form in which fraud or deceit, including making untrue statements of material facts and omitting to state material facts, 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 securities; and

(E) is currently subject to a court order, judgment, or decree temporarily or preliminarily or permanently restraining or enjoining, the agent or promoter 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 years prior to the filing of the Solicitation of Interest Form (State of Alaska Form 08-113);

(F) is currently subject to an administrative enforcement order or judgment entered by a self-regulatory organization such as the National Association of Securities Dealers or a stock exchange within five years prior to the filing of the Solicitation of Interest Form (State of Alaska Form 08-113), or is subject to an administrative enforcement order or judgment entered within five years prior to the filing of the Solicitation of Interest Form in which fraud or deceit, including making untrue statements of material facts and omitting to state material facts, was found;

(11) the prohibitions listed in (a)(10)(A)-(F) of this section shall not apply if 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 or if the broker-dealer employing that person is licensed or registered in this state and the SEC Form BD filed with this state discloses the order, conviction, judgment, or decree relating to that person; and the person disqualified under (a)(10)(A)-(F) of this section may act only in a capacity for which the person is licensed or registered. A disqualification caused by (a)(10)(A)-(F) of this section is 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 solicitation of interest registration be denied.

(b) Failure of the offeror to comply with the requirements of this subsection will be a violation of AS 45.55, and action may be taken by the administrator under AS 45.55.920, and the failure also may constitute grounds for denying registration under AS 45.55:

(1) any published notice or script for broadcast and any printed material delivered apart from the Solicitation of Interest Form (State of Alaska Form 08-113) shall contain at least the identity of the chief executive officer of the issuer, a brief and general description of its business and products, and the following legends:

THIS IS A SOLICITATION OF INTEREST ONLY. NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED AND NONE WILL BE ACCEPTED.

NO SALES OF THE SECURITIES WILL BE MADE OR COMMITMENT TO PURCHASE ACCEPTED UNTIL THE DELIVERY OF AN OFFERING CIRCULAR THAT INCLUDES COMPLETE INFORMATION ABOUT THE COMPANY AND THE OFFERING.

AN INDICATION OF INTEREST MADE BY A PROSPECTIVE INVESTOR INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.

THIS OFFER IS BEING MADE UNDER THE REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAWS. NEITHER THE FEDERAL NOR THE STATE AUTHORITIES HAVE CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT OR ANY OTHER DOCUMENT PRESENTED TO YOU IN CONNECTION WITH THIS OFFER. NO SALE MAY BE MADE UNTIL THE OFFERING STATEMENT IS QUALIFIED BY THE US SECURITIES AND EXCHANGE COMMISSION AND THE SECURITIES ARE REGISTERED IN ALASKA.

REGISTRATION OF THE SECURITIES FOR SALE IN ALASKA IS DEPENDENT ON COMPLIANCE WITH THE ALASKA SECURITIES ACT (AS 45.55). THEREFORE, THERE CAN BE NO ASSURANCE THAT THE SECURITIES WILL BE REGISTERED FOR SALE IN ALASKA.

(2) the requirements of this section shall not apply to the delivery of printed material to a person who has already received a Solicitation of Interest Form (State of Alaska Form 08-113) with the legends in (b)(1) correctly included on the form.

(c) All communications with offerees made in reliance on this section must cease after a registration statement is filed in this state, and no sale may be made until at least twenty (20) calendar days after the last communication made in reliance on this section.

(d) Except for the requirements at (a)(9) of this section, the administrator may waive any requirement of this section in writing, upon application by the offeror for cause shown. Neither compliance nor attempted compliance with this section, nor the absence of an objection or order by the administrator with respect to an offer of securities undertaken under this section, shall be deemed to be a waiver of any condition of the section or deemed to be a confirmation by the administrator of the availability of this section.

(e) Offers made in reliance on this section will not result in a violation of AS 45.55.070 by virtue of being integrated with subsequent offers or sales of securities unless those subsequent offers and sales would be integrated under federal securities laws.

(f) Issuers on whose behalf indications of interest are solicited under this section may not make offers or sales in reliance on AS 45.55.900(b)(5)(A) – (C) until six (6) months after the last communication with a prospective investor is made under this section.

(g) The administrator may or may not review the materials filed under this section. Materials filed, if reviewed, will be judged under anti-fraud principles. Any discussion in the offering documents of the potential rewards of the investment must be balanced by a discussion of possible risks.

(h) With respect to (a)(3) and (4) of this section, the offeror may begin to conduct solicitations of interest once the prefiling requirements have been satisfied, unless notified otherwise by the administrator. The administrator may at any time notify the offeror not to distribute a Solicitation of Interest Form (State of Alaska Form 08-113), script, advertisement or other material which the administrator believes is in violation of AS 45.55.010.

(i) An offer effected in violation of this section may constitute an unlawful offer of an unregistered security for which civil liability attaches under AS 45.55.930. Any misrepresentation or omission may give rise to civil liability.

Selected Federal Exemptions

There are two exemptions under federal securities law (the 1933 Act) which are closely related to the exemptions discussed above. These are the intrastate exemption and the private offering exemption. Please note that a federal exemption is not an exemption from Alaska law. Offers and sales in Alaska must be registered or exempted from registration, or must be preempted as Federal Covered Securities as defined at AS 45.55.075. Some filings under the Alaska Securities Act require that the security either meet one of the federal exemptions or be a Federal Covered Security.

The intrastate exemption in Section 3(a)(11) of the 1933 Act, as its name implies, requires that the issuer be incorporated and doing business in the state where the securities are offered for sale, that a significant amount of the issuer’s business occur in the state where the securities are sold, and that offers and sales only be made to residents of the state where the issuer is located. Additionally, 80 percent of the proceeds of the offering must be spent in the state where the issuer is located. There is no limitation on the amount of securities that can be sold pursuant to the intrastate exemption.

The private offering exemption in Section 4(2) of the 1933 Act generally allows securities sales to 35 investors in any 12-month period. Each investor must be sophisticated enough to evaluate the risk of the investment and be capable of bearing the economic risk of the investment and have access to material information about the issuer and its securities. Sales under Section 4(2) may be made in accordance with Regulation D Rule 506, and, as such, are Federal Covered Securities under AS 45.55.075(d). A notice filing of SEC Form D and the appropriate fee under 3 AAC 08.920(3) are required within 15 days of the first sale in Alaska.

Additionally, Regulation A provides a federal exemption from 1933 Act registration for public offerings up to $5 million. An offering statement (disclosure document) and application must be filed in one of the SEC's regional offices and provided to investors. Regulation A allows use of the NASAA Form U-7 (SCOR) question and answer disclosure document. Because Regulation A involves a public offering, an application on NASAA Form U-1 to register securities under the Alaska Securities Act must be submitted to the division along with the U-7 and appropriate fees under 3 AAC 08.920(5).

Special Reg. Procedures: Exempt Federal Regulation D Offerings

As part of an effort to facilitate capital formation by small business, in addition to the exemptions from registration described above, the division adopted by regulation a special registration procedure to accommodate federal Regulation D filings under Rules 504 and 505. Regulation D was the result of the SEC’s efforts to modernize its exemptions. Regulation D is a series of rules that create several separate exemptions from the registration provisions of the 1933 Act.

Alaska Regulation D registration procedure was specifically designed to dovetail with the Regulation D exemptions and thereby facilitate capital formation, particularly by small businesses.

The principal federal exemptions in Regulation D are contained in Rules 504, 505 and 506. Rule 504 permits sales up to $1,000,000. The Alaska Regulation 3 AAC 08.504 is designed as a short-form registration rather than an exemption. The federal and state rules are conditioned on buyer suitability or financial status standards.

Rule 505 allows an issuer to sell up to $5 million worth of securities. Exempt from federal registration, securities registered under Alaska Regulation 3 AAC 08.505 may be sold to an unlimited number of accredited investors and/or up to 35 nonaccredited investors. The term accredited investor is defined at SEC Rule 230.501 (17 CFR 230.501) to include various institutional buyers and wealthy persons based on net worth and income criteria. If only accredited investors are sold securities under Rule 505, no specific disclosure document is required. However, if any of the prospective investors are nonaccredited persons, all purchasers must be furnished with a disclosure document that includes audited financial statements.

As mentioned in the discussion on federal exemptions, securities sold under federal Regulation D Rule 506 and Alaska Rule 3 AAC 08.506 are Federal Covered Securities. As such, only a notice filing and fee must be paid within 15 days of the first sale in Alaska

Securities offered for sale under Alaska Special Registration Procedures may not be sold by means of any general advertising unless a waiver is sought and obtained. Investors are expected to be purchasing for investment purposes, not speculation.

The Alaska Regulation D is set out in Appendix A. To obtain a Regulation D application form, go to the forms page.

Small Corporate Offering Registration

The division also completed regulations in September 1991 to implement the Small Corporate Offering Registration Form (NASAA Form U-7) developed by the Northern American Securities Administrators Association and the American Bar Association pursuant to the Small Business Incentive Act of 1980 (Section 19 of Securities Act of 1933).

The goal was to assist small businesses by creating a simplified registration form for state registration of securities offered pursuant to under SEC Regulation D Rule 504 (17 CFR 230.501-504), SEC Regulation A (17 CFR 230.251-263), or Section 3(a)(11) of the 1933 Act. The Alaska SCOR regulation is provided in Appendix B.

Appendix A Alaska Regulation D Registration and Notice Procedure

This section contains information on

Creation of Classifications
Definitions
General Requirements
Registration and Reporting
Registration of Offerings not Exceeding $1,000,000
Registration of Offerings not Exceeding $5,000,000
Notice Filing Procedures for Rule 506 Offerings

3 AAC 08.500. CREATION OF CLASSIFICATIONS. The following classifications of transactions in securities are created:

(1) an offering relying on "Regulation D" as adopted by the Securities and Exchange Commission in 17 C.F.R. Parts 230 and 239;

(2) an offering relying on another federal rule or statute and which otherwise meets the requirements of 3 AAC 08.500--3 AAC 08.506.

3 AAC 08.501. DEFINITIONS. (a) As used in 3 AAC 08.500--3 AAC 08.506, the definitions of the following terms are contained in SEC Rule 230.501 (17 C.F.R. 230.501) promulgated under the Securities Act of 1933, as amended and are adopted by reference:

(1) "accredited investor;"

(2) "affiliate;"

(3) "aggregate offering price;"

(4) "business combination;"

(5) "calculation of number of purchasers;"

(6) "executive officer;"

(7) "issuer;"

(8) "purchaser representative."

(b) Unless the context indicates otherwise, in 3 AAC 08.501--3 AAC 08.506,

(1) "closing a sale" means that transaction under which the offeror becomes legally bound to sell the securities;

(2) "counting purchasers" means the number of purchasers arrived at by calculation of the number of purchasers according to 17 C.F.R. 230.501 (SEC Rule 501);

(3) "permitted Alaska purchaser" means a person who comes within any of the following categories or who the issuer reasonably believes comes within any of the following categories, at the time the person becomes a purchaser of the securities:

(A) a natural person who purchases at least $10,000 of the securities being offered, where the purchaser’s total purchase does not exceed five percent of the purchaser’s net worth at the time of purchase; the purchase must be only for cash or marketable securities or both; the net worth of the purchaser’s spouse may be included for the purpose of this subparagraph;

(B) a natural person who had an individual income in excess of $70,000 in each of the two most recent years and who reasonably expects an income in excess of $70,000 in the current year, provided the amount purchased does not exceed 10 percent of the person’s individual income for the most recent year; the purchase must be only for cash or marketable securities or both; the income of a spouse may be included for the purpose of this subparagraph;

(C) a limited partnership, limited liability partnership, limited liability company, corporation, trust, or other entity in which all of the equity owners, or holders of beneficial interests in the case of a trust, satisfy the requirements of (A) or (B) of this paragraph, and the amount invested by the entity would be allowable as an individual purchase by each person under the same subparagraphs;

(c) A person who is not a registered agent, state investment adviser, or noticed federal covered adviser and who acts as a purchaser representative, as defined in this section, is not considered an agent, state investment adviser, or federal covered adviser if the activity as purchaser representative is merely an incidental part of the person’s usual activities or occupation.

3 AAC 08.502. GENERAL REQUIREMENTS. (a) Integration. Integration provisions are as follows:

(1) All separate sales of securities by an issuer that are a part of the same offering registered under 3 AAC 05.501--3 AAC 08.505, or noticed under 3 AAC 08.506 will be counted and included as securities sold under the same offering, except as otherwise provided in this section.

(2) In determining whether to treat separate sales of securities inside or outside of this state as part of the same offering, the administrator will consider the following elements:

(A) whether the sales are part of a single plan of financing;

(B) whether the sales involve issuance of the same class of security;

(C) whether the sales are made at or about the same time;

(D) whether the same type of consideration is received;

(E) whether the sales are made for the same general purpose.

(3) Sales of securities made more than six months before the effective date of registration under 3 AAC 08.501--3 AAC 08.505, or of notice under 3 AAC 08.506, or more than six months after the termination of the offering, will not be counted or included as sales made as part of the same offering under this section if there are no sales of securities of the same or similar class by the issuer during either six-month period. For the purposes of this paragraph

(A) the effective date of a registration under 3 AAC 08.504 or 505 is the date a registrant is authorized to sell securities under an order of registration issued by the administrator;

(B) the effective date of a notice under 3 AAC 08.506 is found at 3 AAC 08.506(c);

(C) the termination date of the offering under 3 AAC 08.504, 505, or 506 is the earlier of

(i) the expiration of an order of registration in the case of an offering under 3 AAC 08.504 or 505, or a certificate of notice in the case of an offering under 3 AAC 08.506; or

(ii) the date of last sale of securities.

(4) Offerings of interests in a partnership will not be included as securities sold under the same offering under 3 AAC 08.504 or 506, even if there is a common sponsor or affiliate involved in offerings of interests in another entity, if all of the following conditions are satisfied:

(A) For purposes of this paragraph,

(i) "partnership" includes a general partnership, limited partnership, limited liability partnership, joint venture, or other similar entity, including entities existing on May 24, 1984 as well as those that are to be formed in the future;

(ii) "sponsor" is a promoter or any person directly or indirectly instrumental in organizing the entity wholly or in part, or any person who will manage or participate in the management of the partnership; it includes a general partner and affiliate of the sponsor; "sponsor" does not include independent third parties such as attorneys, accountants, and underwriters whose only compensation is for professional services rendered in connection with offering of interests in the partnership.

(B) The partnership must

(i) be a separate legal entity;

(ii) have separate books and records; and

(iii) not commingle funds of the partnership with those of the sponsor or any other entity having the same sponsor.

(C) The partnership, at the time the interests are sold, must have an independent opportunity to meet its primary investment objective. If the partnership is substantially dependent on the creation, continued existence, or economic results of investments of another entity having a common sponsor, the partnership does not have an independent opportunity to meet its primary investment objective.

(D) No material portion of the gross offering proceeds of the partnership may be invested in properties where another entity having a common sponsor has also invested, and continues to hold invested, a material portion of its gross offering proceeds.

(E) An offering that does not identify at least 50 percent of the assets in which the partnership intends to invest does not qualify under this paragraph if

(i) another entity with a common sponsor was formed to conduct the same general type of activity and that entity has not invested or committed the major portion of its gross offering price before commencement of this offering by the registering partnership; or

(ii) the sponsor creates a simultaneous or subsequent offering through another entity to conduct the same general type of activity before the registering partnership has invested or committed for investment the major portion of its gross offering proceeds; this clause does not apply if the investment to be made by the other entity is fully identified.

(F) An offering of interests in a partnership that is formed to engage in sale and leaseback transactions does not qualify under this paragraph if the ultimate intended lessee of the assets in which the partnership invests is a sponsor of the partnership.

(5) A person wishing a determination of nonintegration under (2) of this subsection, or applicability of the safe-harbor provisions in (3) or (4) of this subsection, must file a request with his or her application for registration, setting out arguments and citations in support of the request.

(6) The order of registration for registrations under 3 AAC 08.504 and 505 will include a ruling on the merits of whether separate sales will be integrated under this section, if a ruling has been requested under (5) of this subsection.

(7) No presumptions are created by the unavailability of safe harbors under (3) and (4) of this subsection.

(8) Offers and sales of securities under an employee benefit plan, as defined by 17 C.F.R. 230.405, are not counted under (1) of this subsection for purposes of integration.

(b) Information Requirements. Information requirements are as follows:

(1) Nothing in 3 AAC 08.501--3 AAC 08.505 waives or modifies the statutory requirements of the Alaska Securities Act (AS 45.55) for full and adequate disclosures of material items.

(2) When an offering is registered under 3 AAC 08.504, written disclosures must be provided in connection with all offers and sales.

(3) If an offering, other than one registered under 3 AAC 08.504, is restricted to accredited investors, this subsection does not require specific information or a specific method of providing disclosure.

(4) When an offering is registered under 3 AAC 08.505 [or 3 AAC 08.506 FOR MORE THAN $500,000], disclosures to the extent material to an understanding of the issuer, its business, and the securities being offered must comply with either (A), (B), and (C) of this paragraph, or (B), (C), and (D) of this paragraph, as follows:

(A) Disclosures must provide at least the type of information and documentation to all investors as required by SEC Rule 230.502(b)(2) (17 CFR 230.502(b)(2)).

(B) Disclosures must provide an opportunity to a prospective purchaser to ask questions and receive answers concerning the terms of the offering and to obtain any additional information, which the issuer possesses or can acquire through reasonable effort or expense, necessary to verify the accuracy of information provided under (A) of this paragraph.

(C) Disclosures must provide to persons who are not accredited investors, upon written request by the purchasers before purchase, a brief description in writing of any written information concerning the offering that is provided by the issuer to any accredited investor. Failure by the purchaser to request the information does not constitute a waiver of the statutory obligation to provide full and complete disclosure. Permitted Alaska purchasers are included as persons entitled to the additional information.

(D) Disclosures must provide full and adequate disclosure of all material matters.

(E) Registrants relying on SEC Rule 230.505 must comply with (A), (B), and (C) of this paragraph.

(5) All disclosures must be provided to a person before that person becomes a purchaser of the securities.

(6) When written information is provided to a prospective Alaska purchaser, the offering materials must contain the following legend, which must be set out in a prominent place:

"IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.

THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME."

(c) Limitations on Manner of Offering. Limitations on the manner of offering are as follows:

(1) Neither the issuer nor any person acting on behalf of the issuer may offer or sell the securities registered under 3 AAC 08.500--3 AAC 08.505 by any form of general solicitation or general advertising, including but not limited to the following:

(A) an advertisement, article, notice or other communication published in a newspaper, magazine, or similar medium, or broadcast over television or radio; and

(B) a seminar or meeting at which attendees are invited by general solicitation or general advertising.

(2) The administrator will, in his or her discretion, waive or conditionally waive the provisions of (1) of this subsection. To obtain a waiver, the registrant must

(A) file a request for waiver;

(B) provide the advertising materials or an adequate description of the advertising materials and identify the media that will be used;

(C) provide the reasons for requesting the waiver and show how the purchasers are otherwise protected; and

(D) provide an attorney’s opinion that the proposed use of the advertising will not invalidate the offering under the laws or regulations of all federal and state regulatory agencies having securities jurisdiction over the offering.

(d) Limitations on Aggregate Offering Price. The amount of securities being registered plus the aggregate offering price of all securities of the issuer sold within the 12 months preceding the effective date of the order of registration, as well as all additional securities of the issuer sold during the course of the offering being registered if the securities were sold in reliance on sec. 3(b) of the Securities Act of 1933 or in violation of sec. 5(a) of that Act, may not exceed the limits imposed by the registration provisions of 3 AAC 08.504 and 3 AAC 08.505.

(e) Disqualification. Disqualification provisions are as follows:

(1) A person who is disqualified from using any provision of SEC Rule 230.504 or 505 is also disqualified from using the comparable provision of 3 AAC 08.500--3 AAC 08.505.

(2) The administrator will, in his or her discretion, deny registration under 3 AAC 08.500--3 AAC 08.505 if any of the parties of interest described in SEC Rule 230.262(a), (b), or (c) meet any of the disqualification provisions of SEC Rule 230.262 (17 C.F.R 230.262) for the party of interest or

(A) has filed a registration statement which is the subject of a currently effective stop order entered by any state within five years before the registration of the offering;

(B) has been convicted, within the 10 years preceding the registration, of a felony or misdemeanor in connection with the purchase or sale of a security or involving a false filing with a state; or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud; or

(C) is subject to a state administrative order or judgment, including an injunction, entered within the five years preceding the filing of the registration, where a state banking, insurance, real estate, or securities law is the grounds for the order or judgment.

(3) The disqualifications under (2)(A), (B), or (C) of this subsection do not apply if the party or interest subject to the disqualifying order is licensed to conduct securities related business in the state in which the order or judgment was entered.

(4) A disqualification under (2)[(A), (B), OR (C)] of this subsection is automatically waived if the state which created the basis for disqualification waives the disqualification.

(5) The administrator will review the representations in each registration to determine whether registration will be denied under (2)[(A), (B), OR (C)] of this subsection. Registration will, at the administrator’s discretion, be allowed upon a showing that it is in the public interest to permit the registration and that safeguards have been provided for that offering.

(f) Limitation on Sales Expenses. All expenses of the offering, including sales expenses, acquisition expenses, expenses for preparing the offering, and other similar expenses, must be reasonable after taking into account the nature of the offering, amount to be raised by the offering, and proposed use of the money.

(g) Impoundment of Proceeds. If the proposed business of the issuer requires a minimum amount of proceeds to commence or continue the business in the manner proposed, impoundment of proceeds will be accomplished as provided under 3 AAC 08.190.

(h) Rescission of Improvident Sales. Provisions on rescission of improvident sales are as follows:

(1) The improvident closing of a sale of securities in violation of a provision of 3 AAC 08.500--3 AAC 08.505 will not by itself invalidate the registration of the securities if

(A) the registrant seeks an appropriate amendment to the registration with the administrator, provides full details of the transaction, demonstrates that the registrant and the person acting on behalf of the registrant who sold the security acted in good faith and sustains the burden of proof that they acted without intent to violate the provisions of this section, and receives an amended order authorizing the proposed transaction; or

(B) the registrant cancels the sale or provides rescission to the purchaser involved within a reasonable time after discovery; [and] or

(C) the registrant either

(i) cancels the sale or provides rescission before release of proceeds from escrow, or

(ii) has the financial capacity to pay and offers to or does provide the rescission payment out of separate funds, if the payment does not create additional risks or obligations to the remaining purchasers or the project for which the money was raised.

(2) Nothing in this subsection waives liabilities under any other federal or state law.

(3) Regardless of whether a cancellation or a rescission is made, the transaction with the purchaser must be counted as a sale for the purpose of 3 AAC 08.501(a)(5).

(4) Nothing in this subsection allows a rescission payment or payment date to be made subject to resale of the interest to be cancelled.

(5) This subsection applies to the registrant as well as to all persons liable as a result of the sale of securities.

3 AAC 08.503. REGISTRATION AND REPORTING. (a) Registration of Offerings. Under the registration provisions in this section, a registrant is only required to file the registration statement on Alaska Form 08-101, those items required by the registration statement, those items requested by the staff, and a fee as provided in 3 AAC 08.920(5). If additional documents, including the offering documents, are filed with the administrator, the filing will be treated as a request for full merit review.

(b) Registration of Salespeople. Requirements for registration of salespeople are as follows:

(1) No special exemptions from licensing of salespeople are created for sales of offerings registered under 3 AAC 08.500--3 AAC 08.505. Sales must be made by Alaska-licensed broker-dealers and salespeople or other persons exempted by statute or regulation of the administrator.

(2) Up to five salespeople may be registered as agents of an issuer or sponsor of an issuer to be formed under a waiver of examination. To register, an issuer or sponsor of an issuer shall file an application for registration and pay a $75 initial registration fee and a $20 filing fee for each subsequent issue. A $75 annual renewal fee is charged for renewals of registration. No salesperson may be registered to more than one person at a time without compliance with the dual registration provisions of 3 AAC 08.010.

(d) Records. The registrant shall, for a period of three years following the closing of the offering, maintain and keep open for inspection by the administrator or his designee inside or outside of the State of Alaska

(1) all offering materials;

(2) records relating to purchaser representatives used, and materials and data relied upon to determine the qualifications of the purchaser representatives;

(3) records relating to purchasers, and materials and data relied upon to determine the qualifications of the purchasers;

(4) records relating to securities sales following the close of the offering, that are considered as part of the offering; and

(5) all offering materials used in connection with offerings registered under 3 AAC 08.500--3 AAC 08.505.

(e) Waiver of provisions. The administrator will, in his or her discretion, by order, modify or waive any requirement in 3 AAC 08.500--3 AAC 08.505. An applicant for waiver must provide proof and arguments that the action requested is consistent with the Alaska Securities Act (AS 45.55), and that the investors are otherwise adequately protected.

3 AAC 08.504. REGISTRATION OF RULE 504 OFFERINGS. Offerings of securities not exceeding the greater of $1,000,000 or the limit established under SEC rule 230.504(b) (17 C.F.R. 230.504(b) may be registered as follows:

(1) Purchasers. No limits are placed upon the numbers of purchasers that may be involved.

(2) Information Requirements. Written offering documents providing full and adequate disclosure of material facts must be provided to all purchasers.

(3) Limitations on Manner of Offering. No advertising is allowed without a waiver from the administrator.

(4) Limitations on Aggregate Offering Price. The total of the amount being registered, plus the aggregate offering price of all securities of the issuer sold within the 12 months preceding the effective date of the order of registration, plus all securities of the issuer sold during the course of the offering being registered if the securities were sold in reliance on sec. 3(b) of the Securities Act of 1933 or in violation of sec. 5(a) of that Act, may not exceed the greater of $1,000,000 or the limit established under SEC rule 230.504(b) (17 C.F.R. 230.504(b).

(5) Offerings to Sophisticated Purchasers. Provisions on offerings to sophisticated purchasers are as follows:

(A) The registration of an offering to sophisticated purchasers under this section allows sales to

(i) accredited investors;

(ii) permitted Alaska purchasers; or

(iii) persons, acting alone or with a purchaser representative, who the issuer reasonably believes have the knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment; the issuer’s reasonable belief of the investor’s knowledge and experience must exist before a person becomes a purchaser.

(B) Sales under this paragraph may be made by the issuer, a person licensed in Alaska to sell for the issuer, a broker-dealer, or a person exempted from licensing by statute, regulation, or order.

(6) Offerings to Suitable Purchasers. The registration of an offering to suitable purchasers under this section allows

(A) sales to be made only by an Alaska licensed broker-dealer who is also registered as a broker-dealer with the Securities and Exchange Commission under sec. 15(b) of the Securities Exchange Act of 1934;

(B) registration if the broker-dealer who will conduct the sales reasonably believes that adequate diligence and review have been applied in connection with the offering being registered in order for the broker-dealer to adequately determine the suitability of the offering to any purchasers; and

(C) sales if the broker-dealer reasonably believes that the security is suitable for the purchaser after reasonable inquiry concerning the purchaser’s investment objectives, financial situation and needs, and after consideration of any other information known by the broker-dealer.

3 AAC 08.505. REGISTRATION OF RULE 505 OFFERINGS. Offerings of securities not exceeding the greater of $5,000,000 or the limit established under SEC rule 230.505(b) (17 C.F.R. 230.505(b) may be registered under this section, subject to the following:

(1) Limitation on Number of Counting Purchasers. The issuer must reasonably believe that there are no more than 35 counting purchasers of its securities in the offering.

(2) Information Requirements. The requirements of 3 AAC 08. 502 (b)(1), (3), (4), (5), and (6) apply to offerings registered under this section.

(3) Limitations on Manner of Offering. No advertising is allowed without a waiver from the administrator.

(4) Limitations on Aggregate Offering Price. The total of the amount being registered, plus the aggregate offering price of all securities of the issuer sold within the 12 months preceding the effective date of the order of registration, plus all securities of the issuer sold during the course of the offering being registered if the securities were sold in reliance on sec. 3(b) of the Securities Act of 1933 or in violation of sec. 5(a) of that Act, may not exceed the greater of $5,000,000 or the limit established under SEC rule 230.505(b) (17 C.F.R. 230.505(b).

(5) Offerings to Sophisticated Purchasers. Provisions on offerings to sophisticated purchasers are as follows:

(A) The registration of an offering to sophisticated purchasers under this section allows sales to an unlimited number of accredited investors, and the following counting purchasers who may not exceed 35:

(i) permitted Alaska purchasers; or

(ii) persons, acting alone or with a purchaser representative, who the issuer reasonably believes have the knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment; the issuer’s reasonable belief of the investor’s knowledge and experience must exist before a person becomes a purchaser.

(B) Sales under this paragraph may be made by the issuer, a person licensed in Alaska to sell for the issuer, a broker-dealer, or a person exempt from licensing by statute, regulation, or order.

(6) Offerings to Suitable Purchasers. The registration of an offering to suitable purchasers under this section requires that

(A) sales be made only by all [an] Alaska-licensed broker-dealer who is also registered as a broker-dealer with the Securities and Exchange Commission under sec. 15(b) of the Securities Exchange Act of 1934;

(B) the broker-dealer who will conduct the sales reasonably believes that adequate diligence and review have been applied in connection with the offering being registered in order for the broker-dealer to adequately determine the suitability of the offering to a purchaser;

(C) the broker-dealer reasonably believes that the security is suitable for the purchaser after reasonable inquiry concerning the purchaser’s investment objectives, financial situation, and needs, and after consideration of any other information known by the broker-dealer; and

(D) sales be made to not more than 35 unaccredited purchasers, but sales may be made to an unlimited number of accredited purchasers.

3 AAC 08.506. NOTICE FILING PROCEDURES FOR RULE 506 OFFERINGS. (a) An issuer offering a security that is a federal covered security under section 18(b)(4)(D) of the Securities Act of 1933 shall file with the administrator no later than 15 days after the first sale of that federal covered security in this state

(1) a notice on SEC Form D (17 C.F.R. 239.500) or on any successor form adopted by the US Securities and Exchange Commission;

(2) a nonrefundable notice filing fee as provided in 3 AAC 08.920(3);

(b) For purposes of this section, the SEC Form D in (a)(1) of this section means the document, as adopted by the US Securities and Exchange Commission and in effect on September 1, 1996, as may be amended by the SEC from time to time, entitled "Form D: Notice of Sale of Securities under Regulation D, Section 4 (6), and/or Uniform Limited Offering Exemption", including Part E and the Appendix;

(c) After receipt of the items in (a)(1) of this section, the division shall issue an order of effectiveness as of the date of receipt of the notice and fee or as of the date of SEC effectiveness whichever is later. It is understood that sales may have occurred prior to the date of effectiveness on the order under (a) of this section;

(d) A notice filing under this section shall be effective for one year from the date of effectiveness on the order, unless the effectiveness is automatically extended for one additional year at the time the notice filing originally is made effective, and the notice filing fee paid reflects the extension. A notice filing under this section shall terminate unless renewed by filing the documents and fees in (a) of this section.

Appendix B Alaska Small Corporate Offering Registration Procedure

General Provisions
Qualifications
Disqualification
Filing Requirements
Registration and Reporting
Escrow and Impound Provisions

3 AAC 08.600. GENERAL PROVISIONS. (a) As an alternative to the registration procedure contained in 3 AAC 08.500--3 AAC 08.505, a corporation or limited liability company issuing securities that are exempt from registration with the Securities and Exchange Commission under either Regulation A (17 C.F.R. 230.251 – 230.263) or Rule 504 of Regulation D (17 C.F.R. 230.501 - 230.504 and 17 C.F.R. 230.507), as promulgated by the United States Securities and Exchange Commission under 15 U.S.C. 77a, et seq. (Securities Act of 1933), or under Section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. 77c, may use the NASAA registration Form U-7, or its successor, as the disclosure document for the offering.

(b) The administrator will, in the administrator’s discretion, for good cause shown, waive or modify any of the requirements of 3 AAC 08.600--3 AAC 08.650.

(c) The administrator reserves the right to apply any of the provisions of 3 AAC 08.080--3 AAC 08.230 to offerings under 3 AAC 08.600--3 AAC 08.650, if the administrator determines that that application, even in the small business offering context, is necessary for the protection of investors.

3 AAC 08.610. QUALIFICATIONS. To be eligible to use NASAA Form U-7, or its successor

(1) the corporation or limited liability company must meet the requirements under either Regulation A (17 C.F.R. 230.251 – 230.263), or Rule 504 of Regulation D (17 C.F.R. 230.501 - 230.504 and 17 C.F.R. 230.507), as promulgated by the United States Securities and Exchange Commission under 15 U.S.C. 77a, et seq. (Securities Act of 1933), or under Section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. 77c, and must engage in or propose to engage in a business other than petroleum exploration or production, mining, or other extractive industry, unless this restriction on the issuer’s business is waived at the request of the issuer under 3 AAC 08.600(b);

(2) the offering must describe the specific business, properties and use of all proceeds; so-called "blind pool" offerings are ineligible;

(3) the securities must be offered and sold only on behalf of the issuer; NASAA Form U-7, or its successor, may not be used by any selling security-holders, including an affiliate of the issuer, purchasing underwriters in a firm commitment underwriting, or any other person, to register the securities for resale, unless the federal law cited in (1) of this subsection upon which the issuer is relying provides for sales on behalf of those other than the issuer and the issuer specifically requests a waiver of this restriction and it is granted by the administrator;

(4) the offering price for common stock, the exercise price if the securities are options, warrants or rights for common stock, or the conversion price if the securities are convertible into common stock, must be equal to or greater than $1 per share;

(5) the issuer may not split its common stock or declare a stock dividend for two years after the effective date of the registration, without the written consent of the administrator;

(6) commissions, fees, or other remuneration for soliciting any prospective purchaser in Alaska in connection with an offering made under 3 AAC 08.600--3 AAC 08.650 may be paid only to persons who the issuer reasonably believes are appropriately registered under AS 45.55.030, if required;

(7) the aggregate offering price of the securities within or outside this state may not exceed the greater of $1,000,000 or the amount allowed under Regulation A (17 C.F.R. 230.251 – 230.263), or Rule 504 of Regulation D (17 C.F.R. 230.501 - 230.504 and 17 C.F.R. 230.507), as promulgated by the United States Securities and Exchange Commission under 15 U.S.C. 77a, et seq. (Securities Act of 1933), or under Section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. 77c, upon which the issuer is relying, less the aggregate offering price for all securities sold

(A) within the twelve months before the start of and during the offering of the securities, under 17 CFR 230.504 (SEC Rule 504) that relied on any exemption under Section 3(b) of the Securities Act of 1933, 15 U.S.C. 77c, or

(B) in violation of Section 5(a) of that Act, 15 U.S.C. 77e; NASAA Form U-7, or its successor, is not available to an issuer that is subject to the reporting requirements of §13 or §15(d) of the Securities Exchange Act of 1934, 15 U.S.C. 77m and 15 U.S.C. 780-5, respectively;

(8) the issuer must file with the Securities and Exchange Commission the SEC Form 1-A (17 C.F.R. 239.90) or other documents as they may be required to be filed under SEC Rule 230.252 (17 C.F.R. 230.252 or an SEC Form D, or its successor, claiming exemption of the offering from registration under 17 C.F.R. 230.251 or 17 CFR 230.504 (SEC Rule 504), respectively, and a copy of the form with appropriate state signature pages must be filed with the administrator at the same time that it is filed with the Securities and Exchange Commission;

(9) for registration of debt offerings, the issuer must demonstrate a reasonable ability to service its debt.

3 AAC 08.620. DISQUALIFICATION. (a) NASAA Form U-7, or its successor, may not be used if the issuer or any of its officers, directors, 10 percent stockholders, promoters, or any selling agents of the securities to be offered, or any officer, director, or partner of a selling agent

(1) has filed a registration statement that is the subject of a currently effective registration stop order entered under a federal or state securities law within the five years before the filing of the registration application;

(2) has been convicted, within the five years prior to the filing of the application for registration, of (A) a misdemeanor in connection with the offer, purchase, or sale of any security or (B) any felony;

(3) is currently subject to an administrative enforcement order or judgment, entered within five years before the filing of the application for registration, by (A) any state’s securities administrator or the Securities and Exchange Commission, or (B) any other agency of any state or the federal government for fraud or deceit, including the making of untrue statements of material facts or omitting to state material facts;

(4) is subject to an administrative enforcement order or judgment of any state that prohibits, denies, or revokes the use of any exemption for registration in connection with the subject offer, purchase, or sale of securities;

(5) is currently subject to an order, judgment, or decree of any court temporarily or permanently restraining or enjoining that party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security, or involving the making of any false filing with any state or with the Securities and Exchange Commission, entered within five years before the filing of the application for registration.

(b) The disqualifications contained in (a)(1)--(3) and (5) of section do not apply if

(1) the person subject to the disqualification is licensed or registered to conduct securities-related business in the state in which the administrative order or judgment was entered, or if the broker-dealer employing that person is licensed or registered in this state and the SEC Form BD, or its successor, filed with the administrator discloses the order, conviction, judgment, or decree, and

(2) the person acts only in the capacity for which the person is licensed or registered.

(c) A disqualification under this section does not apply if the state securities administrator or other state or federal agency that created the basis for the disqualification determines, upon a showing of good cause, that it is not necessary under the circumstances that the use of NASAA Form U-7, or its successor, be denied.

(d) If any of the circumstances set out in (a)(1)--(3) or (5) of this section occurred more than five years before the date of the application for registration, the circumstances must be described on NASAA Form U-7, or its successor, as a Miscellaneous Factor.

3 AAC 08.630. FILING REQUIREMENTS. In addition to filing a properly completed and signed NASAA Form U-7, or its successor, an issuer must file with the administrator a NASAA Form U-1, Uniform Application to Register Securities, or its successor. References in the NASAA Form U-1, or its successor, to Securities and Exchange Commission registration and effectiveness and Questions 6 and 8(a) of the form are inapplicable. The following documents must be filed as exhibits to the NASAA Form U-1, or its successor:

(1) a representative form of the Selling Agency Agreements;

(2) a copy of the issuer’s Articles of Incorporation, if a corporation, or other charter documents and all amendments to the documents;

(3) a copy of the issuer’s bylaws, as amended to date;

(4) a copy of any resolutions by directors setting forth terms and provisions of capital stock or ownership interests to be issued;

(5) copies of any indenture, note, or other contractual provision for debt, or of any options, warrants or rights to be offered;

(6) a specimen of the security to be offered, including any legend restricting resale;

(7) a NASAA Form U-2, Consent to Service of Process, and an appropriate NASAA Form U-2A, Corporate Resolution, or their successors;

(8) copies of all advertising or other materials directed at or to be furnished to investors in the offering;

(9) a form of escrow agreement for the escrow of proceeds of the offering;

(10) consent to inclusion in the Disclosure Document of Accountant’s report;

(11) consent to inclusion in the Disclosure Document of a tax advisor’s opinion or description of tax consequences;

(12) consent to inclusion in the Disclosure Document of any evaluation of litigation or administrative action by counsel;

(13) copies of any Subscription Agreement forms for the purchase of securities in the offering;

(14) an opinion of an attorney, licensed to practice in a state or territory of the United States, that the securities to be sold in the offering have been authorized and, when issued upon payment of the offering price, will be legally and validly issued, fully paid, and nonassessable and binding on the issuer in accordance with their terms;

(15) a schedule of the resident street addresses of promoters of the issuer as defined at 3 AAC 08.950(30); and

(16) copies of work sheets showing computations for responses to Questions 5, 6, 7(a), 8(a), 8(b), 17(a), 37, 38, 41(a), and 41(b) of NASAA Form U-7, or its successor.

3 AAC 08.640. REGISTRATION AND REPORTING. (a) The issuer shall pay a registration and filing fee as provided in 3 AAC 08.920(5) for the registration of the offering under NASAA Form U-7.

(b) Up to five salespeople may be registered as agents of the issuer and be exempt from the examination requirement of this chapter. To register, the issuer must file an application for registration and pay a $75 registration fee. No salesperson may be registered to more than one issuer at a time without compliance with the dual registration provisions of 3 AAC 08.010.

(c) For a period of three years following the closing of the offering, the issuer shall maintain and keep open for inspection by the administrator

(1) all offering materials;

(2) all records relating to purchasers; and

(3) all records relating to securities sales following the close of the offering that are considered as part of the offering.

3 AAC 08.650. ESCROW, LOCK-IN, AND IMPOUND PROVISIONS. (a) Escrow or lock-in of promotional shares, if any, will be accomplished as provided under 3 AAC 08.160 and 180.

(b) If the proposed business of the issuer requires a minimum amount of proceeds to commence or continue the business in the manner proposed, impoundment of proceeds will be accomplished as provided under 3 AAC 08.190.