No. 27777: R164-9-1. Registration by Coordination

DAR File No.: 27777
Filed: 03/25/2005, 11:12
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this emergency rule is to provide a means for the sale of real estate-related private placements as "securities" within the state of Utah.

 

Summary of the rule or change:

The change adds an additional registration category, the Limited Purpose Registration, to the existing rule governing securities registrations by coordination.

 

State statutory or constitutional authorization for this rule:

Section 61-1-9

 

Anticipated cost or savings to:

the state budget:

No material effect. The rule merely allows an existing category of private placement securities offerings to be treated as "registered" securities solely for the purpose of qualifying for the exemptive provision given in Subsection 61-2-3(3)(a)(ii) of the Utah Real Estate Act. It merely allows promoters to continue existing sales practices pending further legislative action.

 

local governments:

No material effect. The rule merely allows an existing category of private placement securities offerings to be treated as "registered" securities solely for the purpose of qualifying for the exemptive provision given in Subsection 61-2-3(3)(a)(ii) of the Utah Real Estate Act. It merely allows promoters to continue existing sales practices pending further legislative action.

 

other persons:

No material effect. The rule merely allows an existing category of private placement securities offerings to be treated as "registered" securities solely for the purpose of qualifying for the exemptive provision given in Subsection 61-2-3(3)(a)(ii) of the Utah Real Estate Act. It merely allows promoters to continue existing sales practices pending further legislative action.

 

Compliance costs for affected persons:

No material effect. The rule merely allows an existing category of private placement securities offerings to be treated as "registered" securities solely for the purpose of qualifying for the exemptive provision given in Subsection 61-2-3(3)(a)(ii) of the Utah Real Estate Act. It merely allows promoters to continue existing sales practices pending further legislative action.

 

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

This rule will have no material adverse fiscal impact on businesses. As stated above, this rule merely allows promoters and their securities dealers to continue to sell certain real estate-related investments as private placement securities under Utah law. S.B. 64, in its current form, may allow many such private placement promoters to comply with state law governing real estate or with federal law governing securities, but not both simultaneously. This rule simply preserves existing sales procedures in anticipation of additional clarifying action by the legislature. Russell Skousen, Executive Director

 

Emergency rule reason and justification:

Regular rulemaking procedures would cause an imminent peril to the public health, safety, or welfare.

S.B. 64, passed in the recent legislative session, excluded many real estate-related transactions from the definition of "security" under the Utah Uniform Securities Act and instead classified the transactions as real estate. Federal law, however, still classifies the transactions as securities. Prior to the passage of S.B. 64, many major interstate promoters of these types of investment offerings had already taken steps to comply with state and federal securities laws by setting up selling networks of licensed securities broker-dealers. However, as a result of this unintended conflict between how these transactions are defined in state and in federal law, an entire class of commercial transactions has been revealed to be at risk of violating either federal securities laws or state real estate licensing law absent the creation of some form of temporary safe harbor. Promoters' securities dealers can no longer sell the offering in this state without violating applicable local real estate licensing laws. However, if promoters place their offerings in the hands of real estate licensees for commissioned selling within Utah, they will, under federal law, be placing their securities in the hands of persons who are not licensed to sell them. Thus, commerce in this area cannot be conducted in a manner that gives the participants confidence that they will be in full compliance with all relevant state and federal rules. In anticipation of follow-up legislative action that should effectively remedy this difficulty within the applicable 120-day period, the Division, under the authority of Subsection 61-1-9(9) and Section 61-1-24, is proposing to promulgate this Emergency Rule amending Section R164-1-9 to provide for a "Limited Purpose Registration." The sole purpose of this new registration type is to provide to promoters and to securities broker-dealers who sell private placement securities containing a real estate component the means to qualify for the exemption from real estate licensure contained in Subsection 61-2-3(3)(a)(ii) of the Utah Real Estate Act. Registering a security under the Limited Purpose Registration provision will not otherwise change the character of the private placement offering in any other way. (DAR NOTE: S.B. 64 is found at UT L 2005 Ch 258, and will be effective 05/02/2005.)

 

The full text of this rule may be inspected, during regular business hours, at the Division 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 N 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]

 

This rule is effective on:

03/25/2005

 

Authorized by:

David Preece, Director

 

 

RULE TEXT

R164. Commerce, Securities.

R164-9. Registration by Coordination.

R164-9-1. Registration by Coordination.

(A) Authority and purpose

(1) The Division enacts this rule under authority granted by Sections 61-1-9, 61-1-11 and 61-1-24.

(2) This rule sets forth the procedure and requirements to be met when applying for registration by coordination in Utah. Any security for which a registration statement under the Securities Act of 1933 or a notification under Regulation A, 17 C.F.R. sections 230.251 through 230.263 (1994), has been filed with the SEC in connection with the same offering, or any security for which a Form D (17 CFR section 239.500) has been filed with the SEC pursuant to Regulation D, Rule 506 (17 CFR section 230.506) may be registered by coordination under Section 61-1-9. A registration by coordination in connection with securities for which a Form D has been filed with the SEC pursuant to Regulation D, Rule 506 shall be limited in its scope and effectiveness by the Limited Purpose Registration provisions in paragraph (J) of this rule.

(3) The rule also authorizes optional electronic filing of registration statements and allows an optional modification of the term of effectiveness to facilitate simultaneous electronic filing.

(4) [Offerings]Except for Limited Purpose Registrations under paragraph (J), offerings which are registered, as opposed to being exempt from registration, in less than 20 states, including the state of Utah, are subject to the requirements of Section R164-11-1. Failure to comply with the requirements of Section R164-11-1 may be grounds for denial, suspension or revocation of effectiveness of a registration statement filed under Section 61-1-9.

(B) Definitions

(1) "Designee" means any person or entity authorized and recognized by the Division in this rule to accept filings on behalf of the Division by electronic or other means of communication.

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

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

(4) "Registration Statement" means the registration statement filed under the Securities Act of 1933 or the notification filed under Regulation A, 17 C.F.R. sections 230.251 through 230.263 (1994), or SEC Form D, 17 C.F.R. section 239.500, filed under Regulation D, Rule 506, 17 C.F.R. section 230.506.

(5) "SEC" means the United States Securities and Exchange Commission.

(6) "SRD" means the Securities Registration Depository, Inc.

(C) Registration requirements

(1) An issuer may register securities by submitting to the Division or its designee the following:

(1)(a) One original application on NASAA Form U-1 - Uniform Application to Register Securities;

(1)(b) One copy of the registration statement, including exhibits, together with all amendments as filed with the SEC under the Securities Act of 1933[ or], SEC Regulation A, or SEC Form D and such other documents as the SEC may require to be filed in connection with Form D;

(1)(c) One original NASAA Form U-2 - Uniform Consent to Service of Process;

(1)(d) A fee as specified in the Division's fee schedule; and

(1)(e) Any additional documents or information which the Division requests.

(2) No document or application shall be deemed to be filed, and the ten working day period referred to in Subsection 61-1-9(3)(b) shall not begin, until all items required by Subparagraph (C)(1) have been received by the Division or its designee.

(3) Where the Division notifies the registrant in writing of any missing or incomplete documents or information, or other deficiencies in the registration statement, registrant must respond promptly. If the registrant does not respond to the Division in writing within 30 calendar days of the mailing date of the Division's letter, the registration statement will be deemed incomplete and action may be taken to deny the effectiveness of the registration statement, and to impose a fine.

(D) Additional notification to the Division

The registrant shall notify the Division within two business days upon the receipt of any stop order, denial, order to show cause, suspension or revocation order, injunction or restraining order, or similar order entered or issued by any state or other regulatory authority or by any court, concerning the securities covered by this application or other securities of the issuer currently being offered to the public.

(E) Effective date

(1) The registration statement becomes effective as set forth in Subsection 61-1-9(3).

(2) The registration statement is effective for one year from its effective date with the Division.

(3) A registration statement which does not become effective within one year from the filing date may be deemed materially incomplete and action may be taken to deny effectiveness to the registration statement.

(4) To facilitate the coordination of expiration dates with other states, the issuer may request a specific term of effectiveness which does not exceed one year.

(F) Post effective amendments

A registration statement or a Form D may be amended by filing with the Division or its designee an amended NASAA Form U-1 - Uniform Application to Register Securities, and an amended registration statement. The amendment becomes effective when the Division so orders.

(G) Re-registration

The registrant may re-register securities, for which a registration statement or Form D is about to expire, by submitting to the Division or its designee, a NASAA Form U-1, an updated registration statement or Form D and the filing fee specified in the Division's fee schedule.

(H) Closing report

Within 30 days of the close of the offering or the expiration of the registration statement, whichever occurs first, the registrant shall file a closing report. The closing report must be filed on Division Form 9-1.

(I) Recognized designee

(1) The Division authorizes and recognizes the SRD as designee to receive filings under this rule on behalf of the Division, including but not limited to applications, registration statements and fees.

(2) The designation provided in this rule is for the sole purpose of receiving filings on behalf of the Division and then transmitting those documents to the Division, or for any other purpose which the Division may prescribe by order or release.

(J) Limited Purpose Registration

(1) An effective registration by coordination for which an application was made in reliance upon the filing of Form D with the SEC pursuant to Regulation D, Rule 506 shall be referred to as a Limited Purpose Registration.

(2) A security registered by coordination as a Limited Purpose Registration shall be regarded as a security registered under the Utah Uniform Securities Act solely for the purpose of applying the exemptive provision found in Section 61-2-3(3)(a)(ii).

(3) Except with regards to the application of the exemptive provision referenced in subparagraph (J)(2), a security registered by coordination as a Limited Purpose Registration shall otherwise retain its character as a private placement under SEC Regulation D, Rule 506 and shall be offered and sold within this state in full compliance with Regulation D and all other federal and state regulations applicable to such offerings.

 

KEY: securities, securities regulation

March 25, 2005

Notice of Continuation December 19, 2002

61-1-9

61-1-11

61-1-24