The following transactions are exempt from §§ 31-5603.01, 31-5603.07, and 31-5604.05:
(1) An isolated nonissuer transaction, whether or not effected through a broker-dealer;
(2) A nonissuer transaction by a licensed agent of a licensed broker-dealer, and a resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding and publicly held for at least 90 days; provided, that at the time of the transaction:
(A) The issuer of the security is actually engaged in business and not in the organizational stage or in bankruptcy or receivership and is not a blank check, blind pool, or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person;
(B) The security is sold at a price reasonably related to the current market price of the security;
(C) 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;
(D) A nationally recognized securities manual designated by rule or order of the Commissioner or a document filed with the Securities and Exchange Commission which is publicly available through the Securities and Exchange Commission’s Electronic Data Gathering and Retrieval System contains:
(i) A description of the business and operations of the issuer;
(ii) The names of the issuer’s officers and directors, if any, or, in the case of a non-United States issuer, the corporate equivalents of such persons in the issuer’s country of domicile;
(iii) An audited balance sheet of the issuer as of a date within 18 months, or in the case of a reorganization or merger where parties to the reorganization or merger had an audited balance sheet, a pro forma balance sheet as of a date within 18 months;
(iv) An audited income statement for each of the issuer’s immediately preceding 2 fiscal years or for the period of existence of the issuer, if in existence for less than 2 years or, in the case of a reorganization or merger where the parties to the reorganization or merger had an audited income statement, a pro forma income statement; and
(E) The issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, or designated for trading on the National Association of Securities Dealers Automated Quotation System or any other electronic trading system which the Commissioner designates by rule to have substantially the same standards for listing or trading, unless:
(i) The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940;
(ii) The issuer of the security has been engaged in continuous business (including predecessors) for at least 3 years; or
(iii) The issuer of the security has total assets of at least $2 million based on an audited balance sheet as of a date within 18 months or, in the case of a reorganization or merger where parties to the reorganization or merger had an audited balance sheet, a pro forma balance sheet;
(3) A nonissuer transaction in a security by a licensed agent of a licensed broker-dealer if:
(A) The issuer of the security is actually engaged in business and not in the organizational stage or in bankruptcy or receivership and is not a blank check, blind pool, or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person; and
(B) The security is senior in rank to the common stock of the issuer both as to payment of dividends or interest and upon dissolution or liquidation of the issuer, the security has been outstanding at least 3 years, and the issuer or any predecessors has not defaulted within the current fiscal year or the 3 immediately preceding fiscal years in the payment of a dividend, interest, principal, or sinking fund installment on the security when due and payable;
(4) A nonissuer transaction in an outstanding security if the issuer of the security has a class of securities subject to registration under section 12 of the Securities Exchange Act 1934 [15 U.S.C. § 78l] and has been subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. § 78m or 15 U.S.C. § 78o(d)] for not less than 90 days next preceding the transaction, or has filed and maintained with the Commissioner for not less than 90 days preceding the transaction information, in the form that the Commissioner, by rule, specifies, substantially comparable to the information that the issuer would be required to file under section 12(b) or (g) [15 U.S.C. § 78l] of the Securities Exchange Act of 1934 if the issuer had a class of its securities registered under section 12 of the Securities Exchange Act of 1934 [15 U.S.C. § 78l];
(5) A nonissuer transaction in a security that has a fixed maturity or a fixed interest or dividend provision and for which there has been no default in the payment of principal, interest, or dividends on the security during the current fiscal year or within the 3 past years, or, if less than 3 years, during the existence of the issuer and any predecessors;
(6) A nonissuer transaction effected by or through a licensed broker-dealer under an unsolicited order or offer to purchase, if either the confirmation of the transaction delivered to the customer clearly states that the transaction was unsolicited, or the broker-dealer obtains a written acknowledgment signed by the customer that the transaction was unsolicited, and a copy of the confirmation or the acknowledgment is preserved by the broker-dealer for such period as the Commissioner may, by rule, require;
(7) A transaction between the issuer or other person on whose behalf the offering of a security is made and an underwriter, or a transaction among underwriters;
(8) A transaction in a bond or other evidence of indebtedness secured by a real estate mortgage, deed of trust, personal property security agreement, or by an agreement for the sale of real estate or personal property, if the entire mortgage, deed of trust, or agreement, together with all the bonds or other evidences of indebtedness secured thereby, is offered and sold as a unit;
(9) A transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;
(10) A transaction executed by a bona fide secured party without any purpose of evading this chapter;
(11) An offer to sell, or the sale of a, security to a financial institution or institutional investor or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity;
(11A) An offer to sell, or the sale of a security, by an issuer to an accredited investor;
(12)(A) Subject to subparagraph (B) of this paragraph, a transaction pursuant to an offer directed by the offeror to not more than 25 persons, other than those designated in § 31-5602.02(a)(1), in the District during any period of 12 consecutive months, whether or not the offeror, or any of the offerees, is then present in the District at the time of the transaction, if:
(i) The seller reasonably believes that all the purchasers in the District are purchasing for investment; and
(ii) No commission or other remuneration is paid or given directly or indirectly for soliciting a prospective purchaser in the District except to a licensed broker-dealer or a licensed agent.
(B) The Commissioner may, by rule or order, as to a security or transaction or any type of security or transaction, withdraw or further condition this exemption, increase or decrease the number of purchasers permitted, or waive one or more of the conditions in this paragraph;
(13) To the extent permitted by rule or order of the Commissioner, an offer or sale within the District by an issuer now or hereafter exempt from section 5 of the Securities Act of 1933 [15 U.S.C. § 77e] by a rule or regulation adopted by the Securities and Exchange Commission under section 3(b) or section 4(2) of that Act [15 U.S.C. § 77c or 15 U.S.C. § 77d] if the issuer files with the Commissioner a notice of intent to claim exemption under this paragraph, at such time, in such form, and containing such information as the Commissioner determines;
(14) An offer or sale of a preorganization certificate or subscription if:
(A) No commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber;
(B) The number of subscribers does not exceed 10; and
(C) No payment is made by a subscriber;
(15) A transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants, or transferable warrants exercisable within not more than 90 days of their issuance, if no commission or other remuneration, other than a standby commission, is paid or given directly or indirectly for soliciting a security holder in the District except to a licensed or exempt broker-dealer;
(16) A transaction involving an offer to sell, but not a sale, of a security if:
(A) A registration statement or offering statement or similar document as required under the Securities Act of 1933 has been filed with the Securities and Exchange Commission, but is not effective;
(B) A registration statement, if required, has been filed under § 31-5603.02, but is not effective; and
(C) No stop order of which the offeror is aware has been entered by the Commissioner or the Securities and Exchange Commission;
(17) The issuance of a security dividend, whether the corporation distributing the dividend is the issuer of the security or not, if nothing of value is given by security holders for the distribution other than the surrender of a right to a cash dividend where the security holder can elect to take a dividend in cash or in a security;
(18) A transaction involving an offer to sell, but not a sale, of a security if:
(A) A registration statement has been filed under § 31-5603.04, but is not effective; and
(B) No stop order of which the offeror is aware has been entered by the Commissioner or the Securities and Exchange Commission;
(19) A transaction incident to a right of conversion or a statutory or judicially approved reclassification, recapitalization, reorganization, quasi-reorganization, stock split, reverse stock split, merger, triangular merger, consolidation, sale of assets, or exchange of securities; and
(20) An offer or sale of units of fractional undivided interests in a unit investment trust registered under the Investment Company Act of 1940 if:
(A) The units have been the subject of a previously effective registration statement under this chapter or were exempt from registration;
(B) The units are offered or sold by a broker-dealer licensed under this chapter; and
(C) The broker-dealer is a sponsor or depositor of the unit investment trust or is an affiliate of the sponsor or depositor.
(Oct. 26, 2000, D.C. Law 13-203, § 402, 47 DCR 7837; June 25, 2002, D.C. Law 14-150, § 2(j), 49 DCR 4238.)
This section is referenced in § 31-5601.01, § 31-5603.01, § 31-5603.08, § 31-5604.04, § 31-5604.05, § 31-5604.06, and § 31-5605.02.
D.C. Law 14-150, in par. (11), substituted “financial institution” for “financial”; added par. (11A); and in par. (12)(A), substituted “subparagraph (B) of this paragraph” for “paragraph (2) of this subsection”.
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