Exempt Transactions

  1. Law
  2. Georgia Code
  3. Commerce and Trade
  4. Georgia Uniform Securities
  5. Exemptions
  6. Exempt Transactions

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

  1. An isolated nonissuer transaction, whether effected by or through a broker-dealer or not;
  2. A nonissuer transaction by or through a broker-dealer registered, or exempt from registration under this chapter, and a resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, 15 U.S.C. Section 80a-1, et seq., in a security of a class that has been outstanding in the hands of the public for at least 90 days, if, at the date of the transaction:
    1. The issuer of the security is engaged in business, the issuer is not in the organizational stage or in bankruptcy or receivership, and the issuer is not a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
    2. The security is sold at a price reasonably related to its current market price;
    3. The security does not constitute the whole or part of an unsold allotment to or a subscription or participation by the broker-dealer as an underwriter of the security or a redistribution;
    4. A nationally recognized securities manual or its electronic equivalent designated by rule adopted or order issued under this chapter or a record filed with the Securities and Exchange Commission that is publicly available contains:
      1. A description of the business and operations of the issuer;
      2. The names of the issuer's executive officers and the names of the issuer's directors, if any;
      3. An audited balance sheet of the issuer as of a date within 18 months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had an audited balance sheet, a pro forma balance sheet for the combined organization; and
      4. An audited income statement for each of the issuer's two immediately previous fiscal years or for the period of existence of the issuer, whichever is shorter, or, in the case of a reorganization or merger when each party to the reorganization or merger had an audited income statement, a pro forma income statement; and
    5. The issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, 15 U.S.C. Section 78a, et seq., or designated for trading on the National Association of Securities Dealers Automated Quotation System, unless the issuer of the security is a unit investment trust registered under the Investment Company Act of 1940, 15 U.S.C. Section 80a-1, et seq.; or the issuer of the security, including its predecessors, has been engaged in continuous business for at least three years; or the issuer of the security has total assets of at least $2 million based on an audited balance sheet as of a date within 18 months before the date of the transaction or, in the case of a reorganization or merger when the parties to the reorganization or merger each had an audited balance sheet, a pro forma balance sheet for the combined organization;
  3. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security of a foreign issuer that is a margin security defined in regulations or rules adopted by the Board of Governors of the Federal Reserve System;
  4. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in an outstanding security if the guarantor of the security files reports with the Securities and Exchange Commission under the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78m or 78o(d);
  5. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter in a security that:
    1. Is rated at the time of the transaction by a nationally recognized statistical rating organization in one of its four highest rating categories; or
    2. Has a fixed maturity or a fixed interest or dividend if:
      1. A default has not occurred during the current fiscal year or within the three previous fiscal years or during the existence of the issuer and any predecessor, if less than three fiscal years, in the payment of principal, interest, or dividends on the security; and
      2. The issuer is engaged in business, is not in the organizational stage or in bankruptcy or receivership, and is not and has not been within the previous 12 months a blank check, blind pool, or shell company that has no specific business plan or purpose or has indicated that its primary business plan is to engage in a merger or combination of the business with or an acquisition of an unidentified person;
  6. A nonissuer transaction by or through a broker-dealer registered or exempt from registration under this chapter effecting an unsolicited order or offer to purchase;
  7. A nonissuer transaction executed by a bona fide pledgee without the purpose of evading this chapter;
  8. A nonissuer transaction by a federal covered investment adviser with investments under management in excess of $100 million acting in the exercise of discretionary authority in a signed record for the account of others;
  9. A transaction in a security, whether or not the security or transaction is otherwise exempt, in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, if the terms and conditions of the issuance and exchange or the delivery and exchange and the fairness of the terms and conditions have been approved by the Commissioner after a hearing;
  10. A transaction between the issuer or other person on whose behalf the offering is made and an underwriter or among underwriters;
  11. A transaction in a note, bond, debenture, or other evidence of indebtedness secured by a mortgage or other security agreement if:
    1. The note, bond, debenture, or other evidence of indebtedness is offered and sold with the mortgage or other security agreement as a unit;
    2. A general solicitation or general advertisement of the transaction is not made; and
    3. A commission or other remuneration is not paid or given, directly or indirectly, to a person not registered under this chapter as a broker-dealer or as an agent;
  12. A transaction by an executor, commissioner of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;
  13. A sale or offer to sell to:
    1. An institutional investor;
    2. A federal covered investment adviser; or
    3. Any other person exempted by rule adopted or order issued under this chapter;
  14. A sale or an offer to sell securities of an issuer if part of a single issue in which:
    1. Not more than 15 purchasers are present in this state during any 12 consecutive months, other than those designated in paragraph (13) of this Code section;
    2. A general solicitation or general advertising is not made in connection with the offer to sell or sale of the securities;
    3. A commission or other remuneration is not paid or given, directly or indirectly, to any person for soliciting a prospective purchaser in this state; and
    4. The issuer reasonably believes that all the purchasers in this state, other than those designated in paragraph (13) of this Code section, are purchasing for investment;
  15. A transaction under an offer to existing security holders of the issuer, including persons that at the date of the transaction are holders of convertible securities, options, or warrants if a commission or other remuneration, other than a standby commission, is not paid or given, directly or indirectly, for soliciting a security holder in this state;
  16. An offer to sell, but not a sale, of a security not exempt from registration under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq., if:
    1. A registration or offering statement or similar record as required under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq., has been filed but is not effective, or the offer is made in compliance with Rule 165, 17 C.F.R. 230.165, adopted under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq.; and
    2. A stop order of which the offeror is aware has not been issued against the offeror by the Commissioner or the Securities and Exchange Commission, and an audit, inspection, or proceeding that is public and that may culminate in a stop order is not known by the offeror to be pending;
  17. An offer to sell, but not a sale, of a security exempt from registration under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq., if:
    1. A registration statement has been filed under this chapter but is not effective;
    2. A solicitation of interest is provided in a record to offerees in compliance with a rule adopted by the Commissioner under this chapter; and
    3. A stop order of which the offeror is aware has not been issued by the Commissioner under this chapter, and an audit, inspection, or proceeding that may culminate in a stop order is not known by the offeror to be pending;
  18. A transaction involving the distribution of the securities of an issuer to the security holders of another person in connection with a merger, consolidation, exchange of securities, sale of assets, or other reorganization to which the issuer, or its parent or subsidiary, and the other person, or its parent or subsidiary, are parties;
  19. A rescission offer, sale, or purchase under Code Section 10-5-59;
  20. An offer or sale of a security to a person not a resident of this state and not present in this state if the offer or sale does not constitute a violation of the laws of the state or foreign jurisdiction in which the offeree or purchaser is present and is not part of an unlawful plan or scheme to evade this chapter;
  21. Employees' stock purchase, savings, option, profit-sharing, pension, or similar employees' benefit plan, including any securities, plan interests, and guarantees issued under a compensatory benefit plan or compensation contract, contained in a record, and established by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned subsidiaries of the issuer's parent for the participation of their employees including offers or sales of such securities to:
    1. Directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisers;
    2. Family members who acquire such securities from those persons through gifts or domestic relations orders;
    3. Former employees, directors, general partners, trustees, officers, consultants, and advisers if those individuals were employed by or providing services to the issuer when the securities were offered; and
    4. Insurance agents who are exclusive insurance agents of the issuer or the issuer's subsidiaries or parents or who derive more than 50 percent of their annual income from those organizations;
  22. A transaction involving:
    1. A stock dividend or equivalent equity distribution, whether the corporation or other business organization distributing the dividend or equivalent equity distribution is the issuer or not, if nothing of value is given by stockholders or other equity holders for the dividend or equivalent equity distribution other than the surrender of a right to a cash or property dividend if each stockholder or other equity holder may elect to take the dividend or equivalent equity distribution in cash, property, or stock;
    2. An act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding securities, claims, or property interests or partly in such exchange and partly for cash; or
    3. The solicitation of tenders of securities by an offeror in a tender offer in compliance with Rule 162, 17 C.F.R. 230.162, adopted under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq.; and
  23. A nonissuer transaction in an outstanding security by or through a broker-dealer registered or exempt from registration under this chapter if the issuer is a reporting issuer in a foreign jurisdiction designated by this paragraph or by rule adopted or order issued under this chapter; has been subject to continuous reporting requirements in the foreign jurisdiction for not less than 180 days before the transaction; and the security is listed on the foreign jurisdiction's securities exchange that has been designated by this paragraph or by rule adopted or order issued under this chapter or is a security of the same issuer that is of senior or substantially equal rank to the listed security or is a warrant or right to purchase or subscribe to any of the foregoing. For purposes of this paragraph, Canada, together with its provinces and territories, is a designated foreign jurisdiction and The Toronto Stock Exchange, Inc., is a designated securities exchange. After an administrative hearing in compliance with Chapter 13 of Title 50, the "Georgia Administrative Procedure Act," the Commissioner, by rule adopted or order issued under this chapter, may revoke the designation of a securities exchange under this paragraph, if the Commissioner finds that revocation is necessary or appropriate in the public interest and for the protection of investors.

(Code 1981, §10-5-11, enacted by Ga. L. 2008, p. 381, § 1/SB 358.)

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 survey article on business associations, see 34 Mercer L. Rev. 13 (1982). For article, "Uniformity Under the Securities Laws: Regulation D and the New Georgia Uniform Limited Offering Exemption," see 19 Ga. St. B. J. 74 (1982). For article, "Regulatory Evolution of Limited Offerings in Georgia," see 20 Ga. St. B. J. 202 (1984). For article, "The Uniform Limited Offering Exemption: How 'Uniform' is 'Uniform'? - An Evaluation and Critique of the ULOE," see 36 Emory L.J. 357 (1987). For article, "The Georgia Uniform Securities Act of 2008: An Analysis of Significant Changes to Georgia's Blue Sky Law," see 14 (No. 6) Ga. St. B. J. 18 (2009). 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 O.C.G.A. § 10-5-9, which was subsequently repealed but was succeeded by provisions in this Code section, are included in the annotations for this Code section.

Section strictly construed.

- Former O.C.G.A. § 10-5-9 required notice of exempt transaction marked for period of one year on any certificate or certificates and because former O.C.G.A. § 10-5-9 created an exemption from registration requirement, it would be strictly construed against anyone claiming application. Novatex Sales, Inc. v. Prince, 159 Ga. App. 559, 284 S.E.2d 65 (1981) (decided under former O.C.G.A. § 10-5-9).

Burden of proving exemption from registration requirements was on seller of unregistered securities, the party seeking its protection from liability. Novatex Sales, Inc. v. Prince, 159 Ga. App. 559, 284 S.E.2d 65 (1981) (decided under former O.C.G.A. § 10-5-9).

Section requires notice to be on any certificate or certificates. Novatex Sales, Inc. v. Prince, 159 Ga. App. 559, 284 S.E.2d 65 (1981) (decided under former O.C.G.A. § 10-5-9).

Owner of stock included in the Georgia Securities Act.

- See Jorges v. Griffin, 161 Ga. App. 439, 288 S.E.2d 356 (1982) (decided under former O.C.G.A. § 10-5-9).

Stock not exempt from registration.

- Exemption under paragraph (12) of O.C.G.A. § 10-5-9 did not apply when stock was sold to an individual, not a corporation, and the fact that the buyer later transferred some of the stock to new investors was of no import because the relevant period for determining whether the stock had to be registered was at the time it was offered for sale. Bell v. Sasser, 238 Ga. App. 843, 520 S.E.2d 287 (1999) (decided under former O.C.G.A. § 10-5-9).

Cited in Hirsch v. Equilateral Assocs., 245 Ga. 373, 264 S.E.2d 885 (1980); Binder v. Gordian Sec., Inc., 742 F. Supp. 663 (N.D. Ga. 1990).

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, § 97-109, and former O.C.G.A. § 10-5-9, as amended, which were subsequently repealed but were succeeded by provisions in this Code section, are included in the annotations for this Code section.

Term "other financial institution," found in paragraph (7) of this section, refers to any institution primarily engaged in banking, extending credit, making investments, or circulating money. 1978 Op. Att'y Gen. No. 78-71 (decided under former Code 1933, § 97-109).

Banks are considered to fall within term "corporation" as used in paragraph (12) of former O.C.G.A. § 10-5-9 since bank shareholders, in merger transactions, were adequately protected by other statutory provisions which effectuate investor protection purpose of the law. In addition, banks should be considered "corporations" because banks are given similar corporate powers as nonbank corporations, thereby evidencing intent on the part of the legislature to treat banks as corporations for purposes of general corporate law. 1981 Op. Att'y Gen. No. 81-103 (decided under former O.C.G.A. § 10-5-9).

Registration not necessary if exempt.

- It did not necessarily follow that a scheme which constitutes 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 fit 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 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 security was defined; unless exempted or involved in an exempt transaction, such securities must be registered. 1969 Op. Att'y Gen. No. 69-328 (decided under Ga. L. 1957, p. 134, as amended).

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. 1976 Op. Att'y Gen. No. 76-75 (decided under former Code 1933, § 97-109).

Small issue registration provisions.

- It would be consistent with the intent of the General Assembly as manifested in the Act as a whole for a syndicator to sell interests to 40 persons concurrently if the investor was afforded the disclosures and rescission right of subsection (e) of former Code 1933, § 97-105, the prohibitions against public advertising of paragraph (13) of former Code 1933, § 97-109 were observed, and the legend and investment letter provisions of the two sections were complied with. 1974 Op. Att'y Gen. No. 74-75 (decided prior to 1975 amendment to paragraph (13) of this section).

Syndicator may sell interests to 40 investors in any 12-month period utilizing the small issue registration procedure of subsection (e) of former Code 1933, § 97-105 and the registration exemption of paragraph (13) of former Code 1933, § 97-109; if this was done in such a way that purchasers pursuant to paragraph (13) of former Code 1933, § 97-109 were not clearly identifiable, all investors must be accorded the rights and disclosures provided for in subsection (e) of former Code 1933, § 97-105. 1974 Op. Att'y Gen. No. 74-75 (decided under former Code 1933, § 97-109).

In determining whether the maximum number of purchasers pursuant to paragraph (13) of former Code 1933, § 97-109 or subsection (e) of former Code 1933, § 97-105 had been exceeded, the syndicator and the sydicator's affiliates must be counted as purchasers if the syndicators obtain or retain an interest. 1974 Op. Att'y Gen. No. 74-75 (decided under former Code 1933, § 97-109).

Integration would be virtually demanded if the syndicator commingles funds and other assets belonging to purportedly separate syndications; such commingling reduces the separate syndications to the level of mere window dressing and would preclude treatment of the syndications as separate entities in determining the number of purchasers to which sales have been made. 1974 Op. Att'y Gen. No. 74-75 (decided under former Code 1933, § 97-109).

Fee for application for exemption nonrefundable.

- Law vests the commissioner of securities with no authority to refund the $250.00 filing fee tendered under former subparagraph (C) of paragraph (5) of this section when the party paying the fee subsequently withdraws the federal registration statement on which the exemption provided by that paragraph depends. 1974 Op. Att'y Gen. No. 74-150 (decided under former Code 1933, § 97-109).

The $250.00 filing fee required by former Code 1933, § 97-109 for applications seeking a transactional exemption from the requirements of former Code 1933, § 97-105 was nonrefundable since the legislature, had the legislature intended that a refund be implied, would have explicitly provided for one. 1975 Op. Att'y Gen. No. 75-79 (decided under former Code 1933, § 97-109).

RESEARCH REFERENCES

Am. Jur. 2d.

- 69A Am. Jur. 2d, Securities Regulation - State, § 72 et seq.

C.J.S.

- 79A C.J.S., Securities Regulation and Commodity Futures Trading Regulation, § 506.

ALR.

- Applicability of Blue Sky Laws to preincorporation subscriptions, 50 A.L.R.2d 1103.

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

What constitutes "public" or "private" offering within meaning of state securities regulation, 84 A.L.R.3d 1009.


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