No. 41470 (Amendment): Section R164-15-4. Notice Filings for Offerings Made Under Federal Crowdfunding Provisions

(Amendment)

DAR File No.: 41470
Filed: 04/12/2017 09:14:33 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

In the federal "Jumpstart Our Business Startups Act" of 2012 (JOBS Act), Congress directed the Securities and Exchange Commission (SEC) to promulgate rules supporting the creation of offering platforms for crowdfunded securities offerings. The JOBS Act and the final rules issued by the SEC (see 17 C.F.R. Sec. 227 and Sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933) permit state securities regulators to require the filing of notice when a crowdfunding issuer has its principal place of business in this state or when sales of its securities to residents of this state meet a certain threshold. This new section effectuates the creation of such filings.

Summary of the rule or change:

Pursuant to the authority granted to the Utah Division of Securities (Division) by Subsection 61-1-15.5(3), the Division adds this section to effectuate the receiving of notice filings for securities offerings made by issuing entities with their principal place of business in this state or who sell fifty percent (50%) or greater of the aggregate amount of the offering to residents of this state. This section establishes the filing requirement and enumerates the required documents and fees that constitute a complete filing.

Statutory or constitutional authorization for this rule:

• Section 61-1-24
• Subsection 61-1-15.5(3)

Anticipated cost or savings to:

the state budget:

The state will incur no additional costs to its budget. Each filing will be accompanied by a filing fee of either $100 or $500. The Division anticipates that additional revenue from these fees will not exceed $5,000 during the first full fiscal year of receipt. Currently, the Division anticipates it can process the filings with existing personnel resources.

local governments:

Local governments will not receive or process these filings.

small businesses:

Small businesses will be required to pay a filing fee of either $100 or $500.

persons other than small businesses, businesses, or local governmental entities:

Other entities seeking to avail themselves of the federal crowdfunding provisions will pay filings fees identical to those for small businesses above.

Compliance costs for affected persons:

The compliance costs for affected persons will be the payment of a filing fee of $100 for filings made within the deadline periods specified in the rule and $500 for filings made after the expiration of any applicable deadline.

Comments by the department head on the fiscal impact the rule may have on businesses:

The crowdfunding provisions of the JOBS Act have the potential to provide Utah-based startup and other small businesses with a new avenue for capital raising on a nationwide scale. As this new marketplace takes shape, the Division wishes to discharge its duty to protect investors by obtaining key information about the offering, the issuing company, and those who manage its operations. The notice filings contemplated under this rule will provide this information at a minimal regulatory cost to business. As required by law, the Utah Securities Commission has reviewed the proposed rule and has approved it by a unanimous vote.

Francine Giani, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Commerce
Securities
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Benjamin Johnson at the above address, by phone at 801-530-6134, by FAX at 801-530-6980, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/31/2017

This rule may become effective on:

06/30/2017

Authorized by:

Keith Woodwell, Director

RULE TEXT

R164. Commerce, Securities.

R164-15. Federal Covered Securities.

R164-15-4. Notice Filings for Offerings Made Under Federal Crowdfunding Provisions.

(A) Authority and purpose.

(1) The Division enacts this rule under authority granted by Sections 61-1-15.5(3) and 61-1-24.

(2) The rule requires a notice filing for offerings made under federal Regulation Crowdfunding, 17 C.F.R. Sec. 227 and Sections 4(a)(6) and 18(b)(4)(C) of the Securities Act of 1933 and sets forth the filing procedure.

(B) Definitions

(1) "Division" means the Division of Securities, Utah Department of Commerce.

(2) "NASAA" means the North American Securities Administrators Association, Inc.

(3) "EFD" means the Electronic Filing Depository established and maintained by NASAA.

(C) Filing Requirements:

(1) An issuer that offers and sells securities in this state in an offering exempt under federal Regulation Crowdfunding, and that either has its principal place of business in this state or sells fifty percent (50%) or greater of the aggregate amount of the offering to residents of this state, shall file the following with the Division or its designee:

(1)(a) A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission;

(1)(b) A consent to service of process on Form U-2 if not filing on the Uniform Notice of Federal Crowdfunding Offering form;

(1)(c) A filing fee as specified in the Division's fee schedule.

(1)(d) The forms referenced in (C)(1)(a) and (b) above shall be manually signed by a person duly authorized by the issuer.

(2) If the issuer has its principal place of business in this state, the filing required under paragraph (A) of this section shall be filed with the Division no later than 15 days after the issuer makes its initial Form C filing concerning the offering with the Securities and Exchange Commission.

(3) If the issuer does not have its principal place of business in this state, but residents of this state have purchased fifty percent (50%) or greater of the aggregate amount of the offering, the filing required under paragraph (A) of this section shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 15 days from the date of the completion of the offering.

(4) An issuer may file an amendment to a previously filed notice filing at any time and must file such an amendment to correct a material mistake of fact or error in the previously filed notice of sales as soon as practicable after discovery of the mistake or error.

(5) An issuer that files an amendment to a previously filed notice filing must provide current information in response to all requirements of the notice filing form regardless of why the amendment is filed.

(D) Designation of EFD for Electronic Filings

(1) At such time as the EFD system is operationally configured to receive such filings, the Division hereby designates EFD to receive and store notice filings made on Uniform Notice of Federal Crowdfunding Offering and to collect related filing fees on behalf of the Division.

(2) The filing of notice filings made on Uniform Notice of Federal Crowdfunding Offering and the collection of related processing fees through the EFD system is permissive and shall not be required until the Division shall amend this Rule to designate a specific date of mandatory compliance. The public notice designated for Form D filings in Section R164-15-2(C)(3) shall not constitute such an amendment.

(3) Any documents or fees required to be filed with the Division that are not permitted to be filed with, or cannot be accepted by, EFD shall be filed directly with the Division.

(4) A duly authorized person of the issuer shall affix his or her electronic signature to the notice filing on Uniform Notice of Federal Crowdfunding Offering form by typing his or her name in the appropriate fields and submitting the filing to EFD. Submission of a filing in this manner shall constitute irrefutable evidence of legal signature by any individual whose name is typed on the filing both for purposes of authorizing the disclosures in the Form as well as giving effect to any consent to service provisions found therein.

(5) Subsequent to the amendment of this Rule referenced in paragraph (D)(2) above, no filing, partial filing, or filing fee submitted to the Division by means other than EFD shall act to grant such a filing the status of being duly received by the Division for any purpose relating to the timeliness of the filing or the avoidance of the assessment of any late filing fee.

 

KEY: mutual funds, securities, securities regulation

Date of Enactment or Last Substantive Amendment: [June 29, 2016]2017

Notice of Continuation: July 25, 2012

Authorizing, and Implemented or Interpreted Law: 61-1-15.5; 61-1-24

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