Exemptions From Registration of Securities

  1. Law
  2. Georgia Code
  3. Commerce and Trade
  4. Georgia Uniform Securities
  5. Exemptions
  6. Exemptions From Registration of Securities

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The following securities are exempt from the requirements of Article 3 of this chapter and Code Section 10-5-53:

  1. A security, including a revenue obligation or a separate security as defined in Rule 131, 17 C.F.R. 230.131, adopted under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq., issued, insured, or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one or more states; by a political subdivision of one or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress or a certificate of deposit for any of the foregoing;
  2. A security issued, insured, or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor;
  3. A security issued by and representing or that will represent an interest in or a direct obligation of or be guaranteed by:
    1. An international banking institution;
    2. A banking institution organized under the laws of the United States; a member bank of the Federal Reserve System; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the Comptroller of Currency pursuant to Section 1 of P. L. 87-722, 12 U.S.C. Section 92a; or
    3. Any other depository institution, unless by rule or order the Commissioner proceeds under Code Section 10-5-13;
  4. A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to do business in this state;
  5. A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company that is:
    1. Regulated in respect to its rates and charges by the United States or a state;
    2. Regulated in respect to the issuance or guarantee of the security by the United States, a state, Canada, or a Canadian province or territory; or
    3. A public utility holding company registered under the Public Utility Holding Company Act of 1935 or a subsidiary of such a registered holding company within the meaning of that act;
  6. A federal covered security specified in Section 18(b)(1) of the Securities Act of 1933, 15 U.S.C. Section 77r(b)(1), or by rule adopted under that provision or a security listed or approved for listing on another securities market specified by rule under this chapter; a put or a call option contract; a warrant; a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the Securities Exchange Act of 1934, 15 U.S.C. Section 77a, et seq., and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the Securities Exchange Act of 1934, 15 U.S.C. Section 77a, et seq., or an offer or sale of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; or an option or a derivative security designated by the Securities and Exchange Commission under Section 9(b) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78i(b);
  7. A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes or as a chamber of commerce and not for pecuniary profit, no part of the net earnings of which inures to the benefit of a private stockholder or other person; or a security of a company that is excluded from the definition of an investment company under Section 3(c)(10)(B) of the Investment Company Act of 1940, 15 U.S.C. Section 80b-3(c)(10)(B); except that with respect to the offer or sale of a note, bond, debenture, or other evidence of indebtedness issued by such a person, a rule may be adopted under this chapter limiting the availability of this exemption by classifying securities, persons, and transactions, imposing different requirements for different classes, specifying with respect to Section 3(c)(10)(B) of the Investment Company Act of 1940, 15 U.S.C. Section 80b-3(c)(10)(B), the scope of the exemption and the grounds for denial or suspension, and requiring an issuer:
    1. To file a notice specifying the material terms of the proposed offer or sale and copies of any proposed sales and advertising literature to be used and provide that the exemption becomes effective if the Commissioner does not disallow the exemption within the period established by the rule;
    2. To file a request for exemption authorization for which a rule under this chapter may specify the scope of the exemption, the requirement of an offering statement, the filing of sales and advertising literature, the filing of consent to service of process complying with Code Section 10-5-80, and grounds for denial or suspension of the exemption; or
    3. To register under Code Section 10-5-23;
  8. A member's or owner's interest in, retention certificate, or like security given in lieu of a cash patronage dividend issued by, a cooperative organized and operated as a nonprofit membership cooperative under the cooperative laws of a state, but not a member's or owner's interest, retention certificate, or like security sold to persons other than bona fide members of the cooperative; and
  9. An equipment trust certificate with respect to equipment leased or conditionally sold to a person if any security issued by the person would be exempt under this Code section or would be a federal covered security under Section 18(b)(1) of the Securities Act of 1933, 15 U.S.C. Section 77r(b)(1).

(Code 1981, §10-5-10, enacted by Ga. L. 2008, p. 381, § 1/SB 358.)

Cross references.

- Securities laws exemption for opening and transferring of deposits in building and loan associations and savings and loan associations, § 7-1-787.

Law reviews.

- For article on the definition of a security in light of the "Georgia Securities Act of 1973" and the need for maximizing investor protection, see 30 Emory L.J. 73 (1981). For comment, the purchase of all the shares of stock of a business is not the purchase of a "Security" within the meaning of the Federal Securities Act of 1933 or the Georgia Securities Act of 1973, see 30 Emory L.J. 1212 (1981).

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Ga. L. 1957, p. 134, former Code 1933, § 97-108, and former O.C.G.A. § 10-5-8, as amended, which were subsequently repealed but were succeeded by provisions in this Code section, are included in the annotations for this Code section.

Exemptions viewed narrowly.

- Exempted transactions specifying "promissory notes" only must be narrowly viewed since the law was remedial legislation entitled to a broad construction. Blau v. Redmond, 143 Ga. App. 897, 240 S.E.2d 273 (1977) (decided under former Code 1933, § 97-108).

Exemptions from registration are to be strictly construed in favor of investors and one claiming an exemption has the burden of proving the exemption's application. Womack v. State, 270 Ga. 56, 507 S.E.2d 425 (1998) (decided under former O.C.G.A. § 10-5-8).

Unregistered stock as security.

- Unregistered status of stock in a closely-held corporation did not negate the stock's character as a security since the Georgia and federal securities acts contemplate that stock may be a "security" and yet be unregistered. Cohen v. William Goldberg & Co., 262 Ga. 606, 423 S.E.2d 231 (1992) (decided under former O.C.G.A. § 10-5-8).

Promissory note exemption applies to high quality commercial paper.

- Exemption for promissory notes maturing in not more than nine months in paragraph (9) of this section was explicit as to the type of security and was indicative that it was applicable to high quality commercial paper. Blau v. Redmond, 143 Ga. App. 897, 240 S.E.2d 273 (1977) (decided under former Code 1933, § 97-108).

Notes issued by a corporation.

- Exemption from registration for promissory notes under former paragraph (9) of O.C.G.A. § 10-5-8 did not apply to notes issued by a corporation, although the corporate notes did not mature more than nine months from the date of issuance as required by the exemption, since the notes had all the characteristics of a security and were offered to the public as investments. Womack v. State, 270 Ga. 56, 507 S.E.2d 425 (1998) (decided under former O.C.G.A. § 10-5-8).

Cited in Hirsch v. Equilateral Assocs., 245 Ga. 373, 264 S.E.2d 885 (1980).

OPINIONS OF THE ATTORNEY GENERAL

Editor's notes.

- In light of the similarity of the statutory provisions, opinions under former Ga. L. 1957, p. 134, former Code 1933, § 97-108, and former O.C.G.A. § 10-5-8, as amended, which were subsequently repealed but were succeeded by provisions in this Code section, are included in the annotations for this Code section.

Registration not necessary if exemption applies.

- It did not necessarily follow that a scheme which constituted a "security" under former Code 1933, § 97-102 must always be registered with the commissioner of securities; if a scheme fell within any of the exemptions provided in former Code 1933, § 97-108 or if the sale of such a scheme fits any of the exempt transactions set forth in former Code 1933, § 97-109, the registration requirements of the law would not apply. 1973 Op. Att'y Gen. No. 73-100 (decided under former Ga. L. 1957, p. 134, as amended).

Investment clubs.

- If the formation of an investment club were essentially the same as that for a limited partnership, such an interest would be a "security," since the offering for sale of limited partnerships constitutes the offering for sale of a "security" as the security was defined by former Code 1933, § 97-102; unless exempted or involved in an exempt transaction, such securities must be registered. 1969 Op. Att'y Gen. No. 69-328 (decided under former Ga. L. 1957, p. 134, as amended).

Sales of mortgages.

- Sales of mortgages described in paragraph (10) of former Code 1933, § 97-108 were exempt from the registration requirement of former Code 1933, § 97-105, but mortgage offerings which were structured or promoted in such a way that they become investment contracts must be registered pursuant to former Code 1933, § 97-105 unless the mortgages qualify for some exemption from registration other than paragraph (10) of former Code 1933, § 97-108. 1974 Op. Att'y Gen. No. 74-153 (decided under former Code 1933, § 97-108).

Sale of time-sharing condominium units.

- Sale of time-sharing units in a condominium when coupled with a rental pool or other profit-sharing arrangement constitutes a "security" within the definition of former Code 1933, § 97-102 and, unless exempt, must be registered pursuant to the law. 1976 Op. Att'y Gen. No. 76-75 (decided under former Code 1933, § 97-108).

Variable annuity contract is subject to regulation as a security. 1962 Op. Att'y Gen. p. 448 (decided under former Ga. L. 1957, p. 134, as amended).

"Security" does not include variable annuity contracts provided for and regulated under the insurance law. 1970 Op. Att'y Gen. No. 70-22 (decided under Ga. L. 1957, p. 134, as amended).

RESEARCH REFERENCES

Am. Jur. 2d.

- 69A Am. Jur. 2d, Securities Regulation - State, § 64 et seq.

C.J.S.

- 79A C.J.S., Securities Regulation and Commodity Futures Trading Regulation, § 491 et seq.

ALR.

- Sales as "isolated" or "successive" or the like, under state securities Acts, 1 A.L.R.3d 614.

What securities are exempt from registration under § 402(a) of the Uniform Securities Act, 84 A.L.R.3d 575.


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