The following transactions are exempt from the requirements of Sections 301 [58-13C-301 NMSA 1978] through 306 [58-13C-306 NMSA 1978] of the New Mexico Uniform Securities Act and, unless otherwise noted, Section 504 [58-13C-504 NMSA 1978] of that act:
A. an isolated nonissuer transaction, whether effected by or through a broker-dealer or not;
B. a nonissuer transaction by or through a broker-dealer registered, or exempt from registration pursuant to the New Mexico Uniform Securities Act [58-13C-101 NMSA 1978], and a resale transaction by a sponsor of a unit investment trust registered pursuant to the federal Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety 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 pursuant to the New Mexico Uniform Securities Act or a record filed with the securities and exchange commission that is publicly available contains:
(a) a description of the business and operations of the issuer;
(b) the names of the issuer's executive officers and the names of the issuer's directors, if any;
(c) an audited balance sheet of the issuer as of a date within eighteen 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
(d) 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 audited income statements, a pro forma income statement; and
(5) any one of the following requirements is met:
(a) the issuer of the security has a class of equity securities listed on a national securities exchange registered pursuant to the federal Securities Exchange Act of 1934 or designated for trading on the national association of securities dealers automated quotation system;
(b) the issuer of the security is a unit investment trust registered pursuant to the federal Investment Company Act of 1940;
(c) the issuer of the security, including its predecessors, has been engaged in continuous business for at least three years; or
(d) the issuer of the security has total assets of at least two million dollars ($2,000,000) based on an audited balance sheet as of a date within eighteen 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 the audited balance sheet, a pro forma balance sheet for the combined organization;
C. a nonissuer transaction by or through a broker-dealer registered or exempt from registration pursuant to the New Mexico Uniform Securities Act in a security or the American depository receipt representing such 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;
D. a nonissuer transaction by or through a broker-dealer registered or exempt from registration pursuant to the New Mexico Uniform Securities Act in an outstanding security if the guarantor of the security is required to file reports with the securities and exchange commission pursuant to the reporting requirements of Section 13 or 15(d) of the federal Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and is current in such reporting;
E. a nonissuer transaction by or through a broker-dealer registered or exempt from registration pursuant to the New Mexico Uniform Securities Act 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:
(a) 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;
(b) 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 twelve 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; and
(c) the transaction complies with any additional requirements that the director may by rule impose as a condition of this exemption;
F. a nonissuer transaction by or through a broker-dealer registered or exempt from registration pursuant to the New Mexico Uniform Securities Act effecting an unsolicited order or offer to purchase;
G. a nonissuer transaction executed by a bona fide pledgee without the purpose of evading the New Mexico Uniform Securities Act;
H. a nonissuer transaction by a federal covered investment adviser with investments under management in excess of one hundred million dollars ($100,000,000) acting in the exercise of discretionary authority in a signed record for the account of others;
I. 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 director after a hearing;
J. a transaction between the issuer or other person on whose behalf the offering is made and an underwriter, or among underwriters;
K. 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 pursuant to the New Mexico Uniform Securities Act as a broker-dealer or as an agent;
L. a transaction by an executor, personal representative or administrator of an estate, sheriff, marshal, receiver, trustee in bankruptcy, guardian or conservator;
M. 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 pursuant to the New Mexico Uniform Securities Act;
N. a sale or an offer to sell securities by or on behalf of an issuer, if the transaction is part of a single issue in which:
(1) there are not more than ten purchasers who are New Mexico residents, other than purchasers designated in Subsection M of this section during any twelve consecutive months;
(2) no general solicitation or general advertising is used in connection with the offer to sell or the sale of the securities; and
(3) no commission or other remuneration is paid or given, directly or indirectly, to a person other than a broker-dealer registered or not required to be registered pursuant to the New Mexico Uniform Securities Act or an agent registered pursuant to that act for soliciting a prospective purchaser in New Mexico, and either:
(a) the seller reasonably believes that all of the purchasers in New Mexico are purchasing for investment; or
(b) immediately before and immediately after the transaction, the issuer reasonably believes that the securities of the issuer are held by fifty or fewer beneficial owners and the transaction is part of an aggregate offering that does not exceed one million dollars ($1,000,000) during any twelve consecutive months; but the director, by rule or order as to a security or transaction or a type of security or transaction, may withdraw or further condition this exemption or may waive one or more of the conditions of this subsection;
O. a transaction pursuant to 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 New Mexico;
P. an offer to sell, but not a sale, of a security not exempt from registration pursuant to the federal Securities Act of 1933 if:
(1) a registration or offering statement or similar record as required pursuant to the federal Securities Act of 1933 has been filed, but is not effective, or the offer is made in compliance with Rule 165 (17 C.F.R. 230.165) adopted pursuant to the federal Securities Act of 1933; and
(2) a stop order of which the offeror is aware has not been issued against the offeror by the director 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;
Q. an offer to sell, but not a sale, of a security exempt from registration pursuant to the federal Securities Act of 1933 if:
(1) a registration statement has been filed pursuant to the New Mexico Uniform Securities Act, but is not effective;
(2) a solicitation of interest is provided in a record to offerees in compliance with a rule adopted by the director pursuant to the New Mexico Uniform Securities Act; and
(3) a stop order of which the offeror is aware has not been issued by the director pursuant to the New Mexico Uniform Securities Act and an audit, inspection or proceeding that may culminate in a stop order is not known by the offeror to be pending;
R. 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 or conversion to which the issuer, or its parent or subsidiary, and the other person, or its parent or subsidiary, are parties;
S. a rescission offer, sale or purchase pursuant to Section 510 [58-13C-510 NMSA 1978] of the New Mexico Uniform Securities Act;
T. an offer or sale of a security to a person not a resident of New Mexico and not present in New Mexico 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 the New Mexico Uniform Securities Act;
U. employees' stock purchase, savings, option, profit-sharing, pension or similar employees' benefit plan, including any securities, plan interests and guarantees issued pursuant to a compensatory benefit plan or compensation contract, contained in a record 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) bona fide directors; general partners; trustees, if the issuer is a business trust; officers; consultants; and advisors;
(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 advisors 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 fifty percent of their annual income from those organizations;
V. 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 pursuant to the federal Securities Act of 1933;
W. a nonissuer transaction in an outstanding security by or through a broker-dealer registered or exempt from registration pursuant to the New Mexico Uniform Securities Act, if the issuer is a reporting issuer in a foreign jurisdiction designated by this subsection or by rule adopted or order issued pursuant to that act; has been subject to continuous reporting requirements in the foreign jurisdiction for not less than one hundred eighty days before the transaction; and the security is listed on the foreign jurisdiction's securities exchange that has been designated by this subsection or by rule adopted or order issued pursuant to the New Mexico Uniform Securities Act, 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 subsection, 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 Subsection B of Section 604 [58-13C-604 NMSA 1978] of the New Mexico Uniform Securities Act, the director, by rule adopted or order issued pursuant to the New Mexico Uniform Securities Act, may revoke the designation of a securities exchange pursuant to this subsection if the director finds that revocation is necessary or appropriate in the public interest and for the protection of investors;
X. the issuance and offer and sale of securities by any issuer if:
(1) the issuer's principal office or principal place of business or a majority of its employees or assets are located in New Mexico;
(2) more than one-half of the proceeds from the offering shall be used by the issuer in operations of the issuer in New Mexico;
(3) no commission or other remuneration is paid or given, directly or indirectly, for soliciting or selling to any person in New Mexico except to broker-dealers and agents registered pursuant to the New Mexico Uniform Securities Act;
(4) an offering document is delivered to each purchaser or prospective purchaser prior to the sale of the securities disclosing such information as the director by rule or order may require;
(5) the total offering, including interest on installment payments, does not exceed two million five hundred thousand dollars ($2,500,000); and
(6) the issuer claiming this exemption files notice with the director on a form prescribed by the director prior to the first offer and pays a fee of three hundred fifty dollars ($350). The director may require any issuer using this exemption to file periodic reports not more often than quarterly to keep reasonably current the information contained in the notice and to disclose the progress of the offering. The director may impose conditions by rule or order with respect to issuers, broker-dealers or affiliates that by reason of prior misconduct will not be eligible to utilize this exemption. The issuance and offer and sale of securities pursuant to this subsection shall be subject to Subsection A of Section 504 of the New Mexico Uniform Securities Act;
Y. the issuance and offer and sale of securities by any issuer if:
(1) the total number of security holders does not and will not in consequence of the sale exceed twenty-five;
(2) the issuer reasonably believes that all buyers are purchasing for investment;
(3) no public advertising or general solicitation is used in connection with the offer or sale; and
(4) no commission or other remuneration is paid or given, directly or indirectly, for soliciting or selling to any person in New Mexico except to broker-dealers and sales representatives registered pursuant to the New Mexico Uniform Securities Act. The director by rule or order may impose additional requirements as a condition of the exemption established in this subsection as necessary for the protection of investors and to specify its application. Any notice filing that may be imposed pursuant to Section 203 [58-13C-203 NMSA 1978] of the New Mexico Uniform Securities Act shall not be deemed a condition of this exemption;
Z. any offer or sale of a preorganization certificate or subscription if:
(1) when such sale or offer is made by an agent, the agent is registered pursuant to the New Mexico Uniform Securities Act. No commission shall be paid to an agent not registered pursuant to that act;
(2) no public advertising or general solicitation is used in connection with the offer or sale;
(3) the number of subscribers does not exceed ten; and
(4) either no payment is made by any subscriber or any payment made by a subscriber is put into escrow until the entire issue is subscribed;
AA. a transaction:
(1) involving the offer to sell or the sale of one or more promissory notes each of which is directly secured by a first lien on a single parcel of real estate, or a transaction involving the offer to sell or the sale of participation interests in the notes if the notes and participation interests are originated by a depository institution and are offered and sold subject to the following conditions:
(a) the minimum aggregate sales price paid by each purchaser shall not be less than two hundred fifty thousand dollars ($250,000);
(b) each purchaser must pay cash either at the time of the sale or within sixty days after the sale; and
(c) each purchaser may buy for that person's own account only;
(2) involving the offer to sell or the sale of one or more promissory notes directly secured by a first lien on a single parcel of real estate or participation interests in the notes, if the notes and participation interests are originated by a mortgagee approved by the secretary of housing and urban development pursuant to Sections 203 and 211 of the National Housing Act and are offered or sold, subject to the conditions specified in Paragraph (1) of this subsection, to a depository institution or insurance company, the federal home loan mortgage corporation, the federal national mortgage association or the government national mortgage association; and
(3) between any of the persons described in Paragraph (2) of this subsection involving a nonassignable contract to buy or sell the securities described in Paragraph (1) of this subsection, which contract is to be completed within two years, if:
(a) the seller of the securities pursuant to the contract is one of the parties described in Paragraph (1) or (2) of this subsection that may originate securities;
(b) the purchaser of securities pursuant to any contract is any other institution described in Paragraph (2) of this subsection; and
(c) the three conditions described in Paragraph (1) of this subsection are fulfilled;
BB. any transaction involving leases or interests in leases in oil, gas or other mineral rights between parties, each of whom is engaged in the business of exploring for or producing oil and gas or other valuable minerals as an ongoing business. For purposes of this subsection, "a party engaged in the business of exploring for or producing oil and gas or other valuable minerals as an ongoing business" means:
(1) any corporation, limited liability company, partnership or other business entity that is directly engaged in and derives at least eighty percent of its annual gross income from the exploration or production of oil, gas or other valuable minerals;
(2) any general partner or any employee who spends at least eighty percent of work time in the daily management of a business entity that is directly engaged in and derives at least eighty percent of its gross annual income from the exploration or production of oil, gas or other valuable minerals; or
(3) any corporation, limited liability company, partnership or other business entity that is directly engaged in the business of exploration and production of oil, gas or other valuable minerals and derives at least five million dollars ($5,000,000) of annual gross income from such business; and
CC. any transaction involving the sale or offer of interests in and under oil, gas or mining rights located in New Mexico or fees, titles or contracts relating thereto, or such sale or offer of such interests, wherever located, made by an entity principally operating in New Mexico, provided that:
(1) the total number of sales by any one owner of interests, whether whole, fractional, segregated or undivided, in any oil, gas or mineral lease, fee or title, or contract relating thereto, shall not exceed twenty-five, provided that such sales shall be made only to persons meeting suitability standards established by rule or order of the director and that investors are provided with such disclosure documents and other information as the director may require by rule or order;
(2) no use is made of advertisement or public solicitation; and
(3) if such sale or offer is made by an agent for such owner or owners, such agent shall be registered pursuant to the New Mexico Uniform Securities Act. No commission shall be paid to an agent not registered pursuant to that act.
For the purposes of this subsection, "an entity principally operating in New Mexico" means a corporation or limited liability company organized pursuant to the law of New Mexico, a corporation in which a majority in interest of the shareholders are residents of New Mexico, a limited liability company in which a majority in interest of the members are residents of New Mexico, any form of partnership in which a majority in interest of the partners are residents of New Mexico, a trust in which a majority in interest of the beneficiaries are residents of New Mexico or a sole proprietorship in which the owner is a resident of New Mexico.
History: Laws 2009, ch. 82, § 202.
ANNOTATIONSEffective dates. — Laws 2009, ch. 82, § 704 made the New Mexico Uniform Securities Act effective January 1, 2010.
Cases under prior law. — The pre-2010 cases below were decided under the former New Mexico Securities Act of 1986, Chapter 58, Article 13B. Due to the similarities between the two laws, the case annotations have been retained and included as annotations to the New Mexico Uniform Securities Act.
Section's exemption not limited in application to close corporations. — The exemption of former 58-13-30 NMSA 1978 was not limited in application to the small close corporation where additional capital was to be raised by sales to friends and relatives familiar with the business. Bills v. All-Western Bowling Corp., 1964-NMSC-176, 74 N.M. 430, 394 P.2d 274 (decided under former law).
Isolated transaction exemption, in Subsection A, of former 58-13-30 NMSA 1978 did not depend on whether offering was public. State v. Sheets, 1980-NMCA-041, 94 N.M. 356, 610 P.2d 760, cert. denied, 94 N.M. 675, 615 P.2d 992.
"Isolated" transactions. — Not being defined in the statutes, "isolated" is to be given its ordinary meaning; an ordinary meaning of "isolated" is "unique, occurring alone or once, sporadic, not likely to recur." State v. Sheets, 1980-NMCA-041, 94 N.M. 356, 610 P.2d 760, cert. denied, 94 N.M. 675, 615 P.2d 992; State v. Shafer, 1985-NMCA-018, 102 N.M. 629, 698 P.2d 902, cert. denied, 102 N.M. 613, 698 P.2d 886 (both decided under former law).
An isolated transaction is one that is "unique; occurring alone or once, sporadic; not likely to recur." For the securities act to apply, the transactions must have some tangible connection to one another, more than just the same seller. White v. Solomon, 1986-NMCA-136, 105 N.M. 366, 732 P.2d 1389, cert. denied, 105 N.M. 290, 731 P.2d 1334, modifying State v. Sheets, 1980-NMCA-041, 94 N.M. 356, 610 P.2d 760, cert. denied, 94 N.M. 675, 615 P.2d 992 (decided under former law).
The term "isolated transaction" is not equivalent to "single transaction." The mere fact that defendants sold two incorporated businesses in separate transactions would not require a determination that they have brought themselves within the requirements of the New Mexico Securities Act. White v. Solomon, 1986-NMCA-136, 105 N.M. 366, 732 P.2d 1389, cert. denied, 105 N.M. 290, 731 P.2d 1334 (decided under former law).
Law reviews. — For article, "A Survey of the Securities Act of New Mexico," see 2 N.M.L. Rev. 1 (1972).
For article, "The Use (or Abuse) of the Limited Partnership in Financing Real Estate Ventures in New Mexico," see 3 N.M.L. Rev. 251 (1973).
For comment, "Securities: Private Placements in New Mexico," see 7 N.M.L. Rev. 105 (1976-77).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 69A Am. Jur. 2d Securities Regulation - State § 138 et seq.
Sales as "isolated" or "successive," or the like, under state securities acts, 1 A.L.R.3d 614.