Colorado § 11-51-308 - Exempt transactions.

§ 11-51-308. Exempt transactions.

(1) The following transactions are exempted from sections 11-51-301 and 11-51-305:

(a) Any isolated nonissuer transaction, whether or not effected through a broker-dealer;

(b) Any nonissuer distribution of an outstanding security:

(I) If a recognized securities manual contains the name of the issuer, the names of the issuer's officers and directors, a balance sheet of the issuer as of a date within the eighteen-month period immediately preceding the date of the distribution, and a profit and loss statement for either the fiscal year preceding that date or the most recent year of operations;

(II) If the security has a fixed maturity or a fixed interest or dividend provision and there has been no default by the issuer during the current fiscal year or within the three preceding fiscal years, or during the existence of the issuer and any predecessors if less than three years, in the payment of principal, interest, or dividend on any security of the issuer;

(III) If any class of securities of the issuer is registered under section 12 of the federal "Securities Exchange Act of 1934";

(IV) If the issuer is an investment company registered under the federal "Investment Company Act of 1940"; or

(V) If the issuer of the security has filed and maintained with the securities commissioner, for not less than ninety days next preceding the transaction, such information as the securities commissioner may specify by rule and has paid an exemption fee to be determined and collected as provided in section 11-51-707;

(c) Any nonissuer transaction effected by or through a licensed broker-dealer pursuant to an unsolicited order or offer to buy, 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 securities commissioner may, by rule, require;

(d) Any transaction between the issuer or other person on whose behalf the offering is made and an underwriter or among underwriters;

(e) Any transaction in a bond or other evidence of indebtedness secured by a mortgage, security interest, or deed of trust or by an agreement for the sale of real estate or chattels, if the entire mortgage, security interest, deed of trust, or agreement together with all the bonds or other evidences of indebtedness secured thereby is offered and sold as a unit;

(f) Any transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator;

(g) Any transaction executed by a bona fide pledgee without any purpose of evading the provisions of this article;

(h) Any offer or sale to a financial or institutional investor or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity;

(i) Any transaction not involving any public offering;

(j) Any transaction pursuant to an offering of securities directed by the offeror to not more than twenty persons (other than those designated in paragraph (h) of this subsection (1)) in this state and sold to not more than ten buyers (other than those designated in paragraph (h) of this subsection (1)) in this state during any period of twelve consecutive months, whether or not the offeror or any of the offerees or buyers is then present in this state, if:

(I) The seller reasonably believes that all the buyers in this state (other than those designated in paragraph (h) of this subsection (1)) are purchasing for investment; and

(II) No commission or other remuneration is paid or given directly or indirectly for soliciting any prospective buyer in this state (other than those designated in paragraph (h) of this subsection (1)) except to a licensed broker-dealer or a licensed sales representative;

(k) Any offer or sale of a preorganization certificate or subscription if no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective subscriber, if the number of subscribers does not exceed twenty-five, and if no payment is made by any subscriber;

(l) Any 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 ninety days of their issuance, if no commission or other remuneration (other than a standby commission) is paid or given directly or indirectly for soliciting any security holder in this state except to a licensed or exempt broker-dealer;

(m) A transaction involving an offer to sell, but not a sale, of a security if:

(I) A registration or offering statement or similar document as required under the federal "Securities Act of 1933" has been filed with the securities and exchange commission, but is not effective;

(II) A registration statement, if required, has been filed under section 11-51-303, but is not effective; and

(III) No stop order of which the offeror is aware has been entered by the securities commissioner or the securities and exchange commission;

(n) A transaction involving an offer to sell, but not a sale, of a security if:

(I) A registration statement has been filed under section 11-51-304 but is not effective; and

(II) No stop order of which the offeror is aware has been entered by the securities commissioner;

(o) A transaction described in section 11-51-201 (13)(g); and

(p) Any offer or sale of a security in compliance with an exemption from registration with the securities and exchange commission under section 3(b)(1) or 4(a)(2) of the federal "Securities Act of 1933", as amended, 15 U.S.C. secs. 77c (b)(1) and 77d (a)(2), pursuant to regulations adopted in accordance with the federal act by the securities and exchange commission; except that an offer or sale of a security in compliance with an exemption from registration with the securities and exchange commission under regulation A, codified at 17 CFR 230.251 to 17 CFR 230.263 and adopted pursuant to section 3(b) of the federal "Securities Act of 1933", as amended, is not exempted under this section. The issuer shall file with the securities commissioner a notification of exemption, in a form prescribed by the securities commissioner, and pay an exemption fee to be determined and collected pursuant to section 11-51-707.

Source: L. 90: Entire article R&RE, p. 717, § 1, effective July 1. L. 2015: (1)(p) amended, (SB 15-104), ch. 177, p. 578, § 5, effective May 11; (1)(p) amended, (SB 15-264), ch. 259, p. 944, § 14, effective August 5.

Editor's note: (1) This section is similar to former § 11-51-113 as it existed prior to 1990.

(2) Amendments to this section by SB 15-104 and SB 15-264 were harmonized.

Cross references: For the "Securities Exchange Act of 1934", see Pub.L. 73-291, codified at 15 U.S.C. § 78a et seq.; for the "Investment Company Act of 1940", see Pub.L. 76-768, codified at 15 U.S.C. § 80a-1 et seq.; for the "Securities Act of 1933", see Pub.L. 73-22, codified at 15 U.S.C. § 77a et seq.

ANNOTATION

Law reviews. For article, "Criminal Prosecutions under the Colorado Securities Act", see 47 U. Colo. L. Rev. 233 (1976). For article, "Securities Registration Considerations in Condominium Developments", see 11 Colo. Law. 2795 (1982).

Annotator's note. The following annotations include cases decided under former provisions similar to this section.

Parallels federal acts. The Colorado securities act parallels the federal securities act of 1933 and the securities and exchange act of 1934. Sauer v. Hays, 36 Colo. App. 190, 539 P.2d 1343 (1975).

The burden of proof lies upon the party claiming an exemption. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

This section values information over mere disclaimers. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

The crux of the registration requirement is disclosure of information sufficient to allow informed decision-making by the investors as a class. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

The mere fact that seller cautioned buyers about the investment qualities of a purchase does not meet the degree of disclosure or access required by this section. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

Design of private offering exemption. The private offering exemption was designed principally to permit the issuance of securities in transactions in which the remedial purposes of registration were satisfied by independent factors. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

Question of fact. The test as to whether or not an offering is public is a question to be determined from the facts in each particular case. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

Availability of nonpublic offering exemption in subsection (1)(i) is a question of fact. People v. Morrow, 682 P.2d 1201 (Colo. App. 1983).

Each "offering" to be separately assessed. To determine the public nature of an offering, the predicates for the exemption must apply to the offerees as a group and should not be analyzed on an investor-by-investor basis. Each "offering" must be separately assessed. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

The real test as to whether or not an offering is public is whether the particular class of persons affected needs the information made available by registration. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

Criteria for test. As to the statutory test for determining whether an offering is private, criteria established by the Colorado division of securities include: (1) The number of offerees and actual purchasers; (2) the offeree's relationship to the issuer; (3) the offeree's knowledge; (4) the manner of the offering; (5) whether the offer is made in a medium intended for general distribution; and (6) a commitment by the offeree that the security is taken for investment only and not for resale or redistribution. Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

When requirements for private offering exemption satisfied. The requirements for private offering exemption are satisfied only if "each offeree . . . does not require the information which would be set forth in a registration statement". Lowery v. Ford Hill Inv. Co., 192 Colo. 125, 556 P.2d 1201 (1976).

Securities were not exempt from registration requirements under subsection (1)(p) where respondents engaged in a general solicitation and thus the offering was not conducted in accordance with rule 506 of regulation D promulgated under the federal Securities Act of 1933. Black Diamond Fund, LLLP v. Joseph, 211 P.3d 727 (Colo. App. 2009).

Applied in Brooks v. Land Drilling Co., 574 F. Supp. 1050 (D. Colo. 1983).