PRINTER'S NO. 86
No. 61 Session of 2007
INTRODUCED BY MARKOSEK, BAKER, BELFANTI, CLYMER, DALLY, GEIST,
JOSEPHS, KIRKLAND, KOTIK, SAYLOR, WALKO, YOUNGBLOOD,
CALTAGIRONE, CURRY, DALEY, GIBBONS, KULA, FRANKEL AND ROSS,
JANUARY 30, 2007
REFERRED TO COMMITTEE ON COMMERCE, JANUARY 30, 2007
AN ACT
1 Amending the act of December 5, 1972 (P.L.1280, No.284),
2 entitled "An act relating to securities; prohibiting
3 fraudulent practices in relation thereto; requiring the
4 registration of broker-dealers, agents, investment advisers,
5 and securities; and making uniform the law with reference
6 thereto," further providing for exempt transactions and for
7 burden of proof.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Section 203(t) of the act of December 5, 1972
11 (P.L.1280, No.284), known as the Pennsylvania Securities Act of
12 1972, added November 24, 1998 (P.L.829, No.109), is amended to
13 read:
14 Section 203. Exempt Transactions.--The following
15 transactions are exempted from sections 201 and 211:
16 * * *
17 (t) Any offer and any sale resulting from such offer where
18 the securities being offered, whether in or outside of this
19 State, will be sold only to accredited investors as that term is
1 defined in the rules and regulations of the Securities and
2 Exchange Commission if:
3 (i) The securities are sold in good faith reliance that the
4 offering would qualify for an exemption from registration under
5 section 5 of the Securities Act of 1933 (15 U.S.C. § 77e),
6 pursuant to section 3(a)(11) of the Securities Act of 1933 (15
7 U.S.C. § 77c(a)(11)) or the regulations adopted by the
8 Securities and Exchange Commission under section 3(b) of the
9 Securities Act of 1933 (15 U.S.C. § 77c(b)), except an offering
10 under Rule 505 of Regulation D promulgated by the Securities and
11 Exchange Commission under section 3(b) of the Securities Act of
12 1933 (15 U.S.C. § 77c(b));
13 (ii) The issuer files a notice in the form prescribed by
14 rule of the commission, together with a copy of any offering
15 document or literature proposed to be used in connection with
16 such offer and sale, with the commission not later than the day
17 on which the issuer receives from any person an executed
18 subscription agreement or other contract to purchase the
19 securities being offered or the issuer receives consideration
20 from any person therefor, whichever is earlier;
21 (iii) The issuer pays the filing fee specified in section
22 602(b.1);
23 (iv) No compensation is given or paid, directly or
24 indirectly, to any person in connection with a sale under this
25 subsection unless the compensation is given or paid in
26 connection with a sale made by a broker-dealer who is registered
27 under section 301;
28 (v) Neither the issuer nor a predecessor of the issuer;
29 affiliated issuer; officer, director or general partner of the
30 issuer; promoter of the issuer presently connected with the
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1 issuer in any capacity; beneficial owner of ten per cent or more
2 of any class of equity securities of the issuer; underwriter of
3 the securities to be offered under this subsection or any
4 partner, director or officer of such underwriter has within five
5 years of filing a notice pursuant to subparagraph (i):
6 (A) Filed a registration statement which is the subject of a
7 currently effective registration stop order entered by any state
8 securities administrator or the Securities and Exchange
9 Commission;
10 (B) Been convicted of any criminal offense in connection
11 with the offer, purchase or sale of a security or involving
12 fraud or deceit;
13 (C) Been subject to a state administrative enforcement order
14 or judgment finding fraud or deceit in connection with the
15 purchase, offer or sale of any security;
16 (D) Been subject to a state administrative enforcement order
17 or judgment which prohibits, denies or revokes the use of an
18 exemption from registration in connection with the purchase,
19 offer or sale of a security; or
20 (E) Been subject to an order, judgment or decree of any
21 court of competent jurisdiction temporarily, preliminarily or
22 permanently restraining or enjoining such party from engaging in
23 or continuing to engage in any conduct or practice involving
24 fraud or deceit in connection with the purchase, offer or sale
25 of any security.
26 The provisions of this subparagraph shall not apply if the party
27 subject to a disqualification described in clause (A), (B), (C),
28 (D) or (E) is licensed or registered to conduct securities-
29 related business in the state in which the order, judgment or
30 decree creating the disqualification was entered against such
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1 party; the state securities administrator or the court of
2 regulatory authority that entered the order judgment or decree
3 waives the disqualification prior to the first offer being made
4 in this State under this subsection; or the issuer establishes
5 that it did not know and, in the exercise of reasonable care
6 based on a factual inquiry, could not have known that a
7 disqualification existed under this subparagraph;
8 (vi) The issuer specifies in any advertisement,
9 communication, sales literature or other information which is
10 publicly disseminated in connection with the offering of
11 securities, including by means of electronic transmission or
12 broadcast media, that the securities will be sold only to
13 accredited investors. For purposes of this paragraph, "publicly
14 disseminated" means communicated to 100 or more persons or
15 otherwise communicated, used or circulated in a public manner;
16 (vii) The issuer does not engage in any solicitation of
17 prospective purchasers by telephone until the issuer has
18 reasonable grounds to believe that the person to be solicited is
19 an accredited investor;
20 (viii) The issuer places a legend on the cover page of any
21 disclosure document proposed to be used in connection with the
22 offering or on the cover page of the subscription agreement
23 advising that the securities described in the disclosure
24 document or the subscription agreement will be sold only to
25 accredited investors[;] and that any resales of the securities
26 made within twelve months from the original date of purchase
27 shall only be made pursuant to an effective registration or to
28 accredited investors, whether inside or outside of this State;
29 (ix) The issuer is not an investment company as defined in
30 the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.);
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1 [and]
2 (x) The issuer is not a development stage company with no
3 specific business plan or purpose or a development stage company
4 that has indicated that its business plan is to engage in a
5 merger or acquisition with an unidentified company or companies
6 or other entity or person[.]; and
7 (xi) The issuer reasonably believes that all purchasers are
8 purchasing for investment and not with the view to or for sale
9 in connection with a distribution of the security. Any resale of
10 a security sold in reliance on this exemption within twelve
11 months from the original date of purchase shall be presumed to
12 be with a view to distribution and not for investment, except
13 resales pursuant to a registration statement effective under
14 sections 205 and 206 of this act, or to accredited investors,
15 whether inside or outside of this State, pursuant to an
16 exemption available under this act.
17 Section 2. Section 612 of the act, added July 4, 2002
18 (P.L.721, No.108), is amended to read:
19 Section 612. Burden of Proof.--(a) In a civil action or
20 administrative proceeding under this act, a person claiming
21 status as a federally covered security or adviser or an
22 exemption, exception or exclusion from a definition has the
23 burden of proving the availability of the status, exemption,
24 exception or exclusion.
25 (b) In a proceeding for a criminal violation of this act, a
26 person claiming status as a federally covered security or
27 adviser or an exemption, exception or exclusion from a
28 definition has the burden of going forward with evidence of the
29 claim, exemption, exception or exclusion.
30 Section 3. This act shall take effect in 60 days.
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