Fifteen categories of securities transaction are exempt from registration.1ORS 59.035 Transactions are not exempt from the antifraud provisions of the Oregon Securities Law including a harsh aider and abettor liability interpretations that reaches even lawyers doing routine securities work. This summary of Oregon Securities Law exemptions provides general information only. A thorough review of the securities transaction is required to know if the transactions is exempt from Oregon law.
Federal covered securities
Since federal law trumps state law, federal covered securities are exempt. The Oregon Securities Law defines a federal covered security as “any security that is a covered security under § 18 of the Securities Act of 1933, as amended, and for which such Act provides that the Director may require filing of a notice and payment of a fee.” ORS 59.015(5). The Oregon Securities Law also includes definitions and provisions for federal covered investment advisers, investment adviser representatives, and state investment adviser. ORS 59.015(4), (8)(a), (20)(a).
The notice filing provisions for covered securities are contained in ORS 59.049: ORS 59.049(1) provides for notice filing and fees for investment companies (mutual funds, unit investment trusts); ORS 59.049(2) provides for notice filings for all other covered securities except Rule 506; and ORS 59.049(3) provides for notice filings for Rule 506 offerings. Practice Tip: A security may be a “covered security” and simultaneously be exempt under ORS 59.025 or 59.035. In such cases, no notice filing under ORS 59.049 is required.
A notice filed under ORS 59.049 expires one year after its effective date.2ORS 59.075(2); OAR 441-049-1021(5). The Director is authorized to establish procedures for renewing notice filings. 3ORS 59.075(3). See OAR 441-049-1021(6).
Exempt Transactions for Small Business
The most helpful exemption used by small business are:4from ORS 59.035
(1) Any transaction by a sheriff, marshal or court appointed fiduciary.
(2) An isolated nonissuer transaction in this state, whether effected through a broker-dealer or not.
Since the 1985 revisions to the Oregon Securities Law eliminated “offers” from the definition of “sale”, perhaps unlimited offers are allowed (including public solicitation) if the purchasers are few enough.
In Marshall v. Harris, 276 Or 447, 459, 555 P2d 756 (1976), the court said:
We have held that sales of stock to three, and perhaps even as few as two, different individuals may be “repeated and successive transactions,” so as not to qualify within this exemption. We believe that the proper test to be applied in such a case is whether the sales in question are made “within a period of such reasonable time as to indicate that one general purpose actuates the vendor and that the sales are not so detached and separate as to form no part of a single plan.”
(3) Any transaction by an issuer in its securities pursuant to a pro rata offering to its existing security holders, if:
(a) No commission or remuneration, other than a standby fee, is paid or given directly or indirectly in connection with the transaction; and
(b) The issuer has not had an effective registration under the Oregon Securities Law nor has used this exemption within one year prior to the date of the offering or sale.
(4) Any offer, sale, transfer or delivery of securities to a bank, savings institution, trust company, insurance company, investment company, pension or profit-sharing trust, or other financial institution or institutional buyer (including but not limited to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Housing Administration, the United States Department of Veterans Affairs and the Government National Mortgage Association), or to a broker-dealer, mortgage broker or mortgage banker, whether the purchaser is acting for itself or in a fiduciary capacity when the purchaser has discretionary authority to make investment decisions.
(5) Any transaction by an offeror with an accredited investor as defined in section 2 (15)(i) or (ii) of the Securities Act of 1933, as amended, or rules of the Director of the Department of Consumer and Business Services, but only if there is no public advertising or general solicitation in connection with the transaction.
(6) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to make the conversion without the payment of additional consideration, if the security surrendered was, when issued, convertible and registered or exempt from registration.
(7) Any transaction in a vendors interest in a land sale contract, or a bond or note secured by a mortgage or trust deed upon real estate, so long as the entire vendors interest or mortgage or trust deed, with all the bonds or notes secured thereby, are sold to a single purchaser, in a single sale.
(8) Agency or principal sales by licensed broker-dealers, executed upon customers orders on any exchange or on the over-the-counter market, but not the solicitation of such orders, where there is no intent to avoid the provisions of the Oregon Securities Law and a public offering is not involved. Such broker-dealers shall keep and maintain, for two years from the date of the order, a record of all the sales executed upon customers orders, giving the name and address of each customer, the name and identity of the security involved, the dates of the sales, the price paid or received for the security, and the commission or other expenses charged to the customer.
(9) The offer or sale by a licensed broker-dealer of any security acquired in the ordinary and usual course of business, when such security is a part of an issue which has been registered in whole or in part, if the offer or sale is made in good faith and not directly or indirectly for the benefit of the issuer or for the promotion of any scheme or enterprise effecting a violation or an evasion of any provisions of the Oregon Securities Law, unless:
(a) The registration has been revoked or suspended; or
(b) The continued sale of the security has been enjoined.
(10) The offer or sale by licensed broker-dealer, acting either as principal or agent, of securities theretofore sold and distributed to the public, if the sale meets the requirements of paragraphs (a), (b) and (c) or (a), (b) and (d) of this subsection:
(a) Such securities are sold at prices reasonably related to the current market price thereof at the time of sale, and, if such licensed broker-dealer is acting as agent, the commission collected by such licensed broker-dealer on account of the sale thereof is not in excess of usual and customary commissions collected with respect to securities and transactions having comparable characteristics;
(b) Such securities do not constitute an unsold allotment to or subscription by such broker-dealer as a participant in the distribution of such securities by the issuer or by or through an underwriter;
(c) The issuer is listed in any recognized securities manual approved by rule by the director, and the listing contains the names of the issuers officers and directors, a balance sheet of the issuer as of a date not more than 18 months prior to the date of such sale, and a profit and loss statement for either the fiscal year preceding the date of the balance sheet or the most recent year of operations; and
(d) The securities are authorized for quotation on a nationwide automated quotations system approved by rule or order of the director.
(11) An offer, but not the sale, of a security meeting either of the following descriptions:
(a) A security for which registration statements have been filed under both the Oregon Securities Law and the Securities Act of 1933, as amended, if no stop or refusal order or order under ORS 59.105 (Denial, suspension or revocation of registration) is in effect and no public proceeding or examination looking toward such an order is pending. However, an offer for such a security may not be accepted until the securities have been registered as provided in the Oregon Securities Law.
(b) A security for which a registration statement has been filed under the Oregon Securities Law and the offer is allowed by the director. However, an offer for such a security may not be accepted until the securities have been registered as provided in the Oregon Securities Law.
(12)(a) Any transactions in securities by an offeror within or without this state that meet all of the requirements of subparagraph (A) or (B) of this paragraph and all of the requirements of subparagraphs (C), (D) and (E) of this paragraph:
(A) When the offeror is an issuer, the transactions result in not more than 10 purchasers within this state of securities of the issuer during any 12 consecutive months.
(B) When the offeror is a nonissuer the securities must have been bought and held for at least 12 consecutive months and the transactions result in not more than 10 purchasers within this state of securities from the nonissuer during any 12 consecutive months.
(C) No commission or other remuneration is paid or given directly or indirectly in connection with the offer or sale of the securities.
(D) No public advertising or general solicitation is used in connection with any transaction under this exemption.
(E) At the time of any transaction under this exemption the offeror does not have under the Oregon Securities Law an application for registration or an effective registration of securities which are part of the same offering.
(b) In connection with transactions under paragraph (a) of this subsection:
(A) Purchasers of securities of the offeror registered under ORS 59.065 (Registration procedures), exempt under ORS 59.025 (Securities exempt from registration), exempt under any other subsection of this section, or for which a notice has been filed under ORS 59.049 (Federal covered securities exempt from registration), are not counted as purchasers under this exemption.
(B) Repeat transactions with persons who are counted as purchasers within Oregon under paragraph (a) of this subsection do not increase the number of purchasers. However, a purchaser remains a purchaser for 12 months following the month of the last sale to that purchaser.
(C) No limitations are placed on the number of transactions or purchasers without this state. No limitations are placed on the number of offers under this exemption.
(13) A transaction with security holders, pursuant to a statutory vote by such security holders on a merger, consolidation, partial or complete liquidation, reclassification of securities, plan of exchange or sale of assets, in consideration of the issuance of securities of another issuer.
(14) Capital stock issued by a professional corporation organized under ORS chapter 58.
(15) Any other transaction exempted by rule of the director.
Footnotes [ + ]
|2.||↑||ORS 59.075(2); OAR 441-049-1021(5).|
|3.||↑||ORS 59.075(3). See OAR 441-049-1021(6).|
|4.||↑||from ORS 59.035|