Statutory Authority: 6 Delaware Code,Sections 7313, 7314 and 7325(6 Del.C. 7313, 7314 & 7325)
Delaware Securities Act, Rule 508, Recognized Securities Manuals
NOTICE OF INFORMAL RULEMAKING BY THE SECURITIES DIVISION
The Delaware Securities Division of the Attorney General’s Office hereby gives notice that it will amend Rule 508(a) to accomplish the following:
Update the Division’s referenced securities manuals to reflect the trademark change of Moody’s to Mergent’s.
The legal authority for this action is found in Section 10113(b)(4) of the Administrative Procedures Act and section 7325 of the Delaware Securities Act. This change will take effect 30 days after the date of publication of this notice.
James B. Ropp
Securities Commissioner
REGULATION
§500 Registration Not Required of Federal Covered Securities
Federal covered securities, as defined in Section 7302(a)(17) of the Act, are not required to be registered] under Section 7304 of the Act. Notwithstanding this rule, however, notice filings are required for registered investment company offerings under Rule 403; and for offers or sales of securities in Delaware pursuant to SEC Rule 506, 17 C.F.R. §230.506.
1 DE Reg 1978 (6/1/98)
§501 Designated Exchange Exemption
Any security listed or approved for listing upon notice of issuance on the Boston Stock Exchange or the Chicago Board Options Exchange is exempted from Sections 7304, 7309A and 7312 of the Act pursuant to Section 7309(a)(8) of the Act.
1 DE Reg 1978 (6/1/98)
§502 Limited Offering Exemption
(a) Any offer or sale of securities made in compliance with SEC Rule 505, 17 C.F.R. §230.505 (Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) of Regulation D under the Securities Act of 1933 and the provisions of this Rule is exempt from registration under Section 7309(b)(9) of the Act.
(b) To qualify for the limited offering exemption under Section 7309(b)(9), the following conditions and limitations must be met:
(1) No commission, fee or other remuneration shall be paid or given, directly or indirectly, to any person for soliciting any prospective purchaser in this state unless such person is appropriately registered under the Act. It is a defense to a violation of this subsection if the issuer sustains the burden of proof to establish that he or she did not know and in the exercise of reasonable care could not have known that the person who received a commission, fee or other remuneration was not appropriately registered under the Act.
(2) The limited offering exemption is not available if the issuer, any of its directors, officers, general partners, trustees, beneficial owners of ten percent or more of a class of its equity interests, promoters currently connected with it in any capacity, or any person (other than a broker-dealer currently registered under the Act) that has been or will be paid or given, directly or indirectly, a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under this exemption:
(i) within ten years before the first sale of securities in an offering under this exemption has filed a registration statement or application for exemption from registration that is currently subject to a stop order under any state's securities laws;
(ii) within ten years before the first sale of securities in an offering under this exemption has been convicted of or has pleaded nolo contendere to a felony or misdemeanor in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or with a state securities administrator, or a felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, conspiracy to defraud, or theft;
(iii) is subject to an order, judgment or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment, or decree of a court of competent jurisdiction entered within ten years before the first sale of securities in an offering under this exemption permanently restraining or enjoining, that person from engaging in or continuing any conduct or practice in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or a state securities administrator;
(iv) is the subject of any order or judgment which prohibits, denies or revokes the use of any exemption from registration in connection with the offer, purchase or sale of securities;
(v) is subject to a state administrative order entered by a state securities administrator in which fraud or deceit was found, if the final order was entered within ten years before the first sale of securities in an offering under this exemption.
(3) Not later than 15 days after the first sale of securities under this regulation, the issuer shall file with the Commissioner a manually signed notice on a completed SEC Form D (Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption), as filed with the SEC and as that form may be amended from time to time. That filing shall constitute an affirmation by the issuer that it has complied with SEC Rule 505 and that upon written request the issuer shall furnish to the Commissioner any and all information furnished by the issuer or its agents to the offerees.
(4) An issuer relying on the exemption from registration under Section 7309(b)(9) of the Act and this regulation that is not filing SEC From D with the SEC shall file with the Commissioner, not later than 15 days after the first sale of securities under this regulation, or within six months of commencement of the offering (whichever occurs first), a Delaware Form D-1 (Notice of Sale of Securities Pursuant to Delaware Securities Act Section 7309(b)(9)).
(5) In all sales to nonaccredited investors in Delaware, one of the following conditions must be satisfied or the issuer and any person acting on its behalf shall have reasonable grounds to believe and after making reasonable inquiry shall believe that one of the following conditions are satisfied:
(i) The investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to the purchaser's other security holdings, financial situation and needs.
(ii) The purchaser either alone or with his or her purchaser representative(s) has such knowledge and experience in financial and business matters that he or she is or they are capable of evaluating the merits and risks of the prospective investment.
(c) Neither this regulation nor the Act provide an exemption from the provisions of Section 7303 of the Act.
(d) The burden of proving an exemption under this regulation is on the person claiming the exemption.
(e) The Commissioner may, by rule or order, increase the number of purchasers or waive any other condition of this exemption.
§505 Offers of Securities Through the Internet
(a) A communication that is placed on the Internet by or on behalf of an issuer that is designed to raise capital and/or to distribute information on securities, products or services and that is directed generally to anyone having access to the Internet, whether through postings on "Bulletin Boards," displays on "Home Pages," or otherwise (an "Internet Communication") shall not constitute an offer within the meaning of Section 7302(11)(a) of the Act, and shall therefore not be required to be registered] under the Act, provided that:
(1) The Internet Communication indicates by a prominent legend at the beginning of the Internet Communication that the securities are not being offered to any person in a state where such offer or sale would be in violation of the law];
(2) An offer of the issuer's securities is not otherwise directed to any person in Delaware by, or on behalf of, the issuer; and
(3) Unless otherwise exempt under the Act, no sale of the issuer's securities is made in Delaware, as a result of the Internet Communication.
(b) Reliance on the exemption provided by this rule does not preclude an issuer from relying on other available exemptions for offers provided under the Act.
(c) The term "Internet" for the purposes of this rule includes the Internet, the World Wide Web and similar proprietary and common carrier electronic systems.
§508 Recognized Securities Manuals
(a) Each of the following manuals shall be deemed a "Recognized Securities Manual" for the purposes of 6 Del. C. §7309(b)(2):
(1) [Moody's Mergent’s] Industrial Manual
(2) [Moody's Mergent’s] Transportation Manual
(3) [Moody's Mergent’s] Public Utility Manual
(4) [[Moody's Mergent’s] Bank and Finance Manual
(5) Standard & Poor's Standard Corporation Records
See 1 DE Reg 1978 (6/1/98)
(6) Fitch's Individual Stock Bulletin
(7) [Moody's Mergent’s] OTC Industrial Manual
(b) The term "manual" for purposes of this rule includes all commonly recognized formats of publications, including CD-ROM and electronic dissemination over the Internet.