§ 230.256 Filing and use of the offering circular.

(a) Except as provided in paragraph (c) of this section and in § 230.257

(1) No written offer of securities of any issuer shall be made under §§ 230.251 to 230.262 unless an offering circular containing the information specified in Schedule I of Form 1-A is concurrently given or has previously been given to the person to whom the offer is made, or has been sent to such person under such circumstances that it would normally have been received by him at or prior to the time of such written offer; and

(2) No securities of such issuer shall be sold under §§ 230.251 to 230.262 unless such an offering circular is given to the person to whom the securities were sold, or is sent to such person under such circumstances that it would normally be received by him, with or prior to any confirmation of the sale, or prior to the payment by him of all or any part of the purchase price of the securities whichever first occurs.

(b) In the case of transactions effected on a securities exchange, delivery of the offering circular shall be deemed to have been made if prior to such transactions a reasonable number of copies of the offering circular have been furnished to the exchange for delivery to any person or persons requesting copies thereof.

(c) Any written advertisement or other written communication, or any radio or television broadcast, which states from whom an offering circular containing the information specified in Schedule I of Form 1-A may be obtained and in addition contains no more than the following information may be published, distributed or broadcast at or after the commencement of the public offering to any person prior to sending or giving such person a copy of such circular:

(1) The name of the issuer of such security;

(2) The title of the security, the amount being offered, and the per-unit offering price to the public;

(3) The identity of the general type of business of the issuer; and

ible copies. If printed, it shall be set in roman type at least as large as ten-point modern type, except that financial statements and other statistical or tabular matter may be set in roman type at least as large as eight-point modern type. All type shall be leaded at least two points.

(e) If the offering is not completed within nine months from the date of the offering circular, a revised offering circular shall be prepared, filed and used in accordance with these rules as for an original offering circular, except that in the case of offerings under stock purchase, savings, stock option or other similar plans for the benefit of employees, if the offering is not completed within 12 months from the date of the offering circular, a revised offering circular shall be prepared, filed and used in accordance with these rules as for an original offering circular. In no event shall an offering circular be used which is false or misleading in light of the circumstances then existing.

(f) Four copies of the offering circular required by this section, which is to be used at the commencement of the offering, shall be filed with the notification required by § 230.255 at the time such notification is filed and shall be deemed a part thereof. If the offering circular is thereafter revised or amended, four copies of such revised or amended circular shall be filed as an amendment to the notification with the appropriate Regional Office of the Commission at least 10 days prior to its use, or such shorter period as the Commission may, in its discretion, authorize upon a written request for such authorization.

§ 230.257 Offerings not in excess of $50,000.

Except as to issues specified in paragraph (a) of § 230.253 and issues of assessable stock, the offering circular specified in § 230.256 need not be filed or used in connection with an offering of securities under this regulation if the aggregate offering price of all securities of the issuer, its predecessors and affiliates offered or sold without the use of such an offering circular does not exceed $50,000, computed in accordance with § 230.254, provided the following conditions are met.

(a) There shall be filed as an exhibit to the notification four copies of a statement setting forth the information

(other than financial statements) required by Schedule I of Form 1-A to be set forth in an offering circular.

(b) No advertisement, article or other communication published in any newspaper, magazine or other periodical and no radio or television broadcast in regard to the offering shall contain more than the following information:

(1) The name of the issuer of such security;

(2) The title of the security, amount offered, and the per-unit offering price to the public;

(3) The identity of the general type of business of the issuer;

(4) A brief statement as to the general character and location of its property; and

(5) By whom orders will be filled or from whom further information may be obtained.

[Reg. A, 21 F.R. 5739, Aug. 1, 1956, as amended at 24 F.R. 8627, Oct. 24, 1959]

§ 230.258 Sales material to be filed.

Four copies of each of the following communications prepared or authorized by the issuer or anyone associated with the issuer, any of its affiliates or any principal underwriter for use in connection with the offering of any securities under §§ 230.251 to 230.262 shall be filed, with the office of the Commission with which the notification is filed, at least five days (exclusive of Saturdays, Sundays and holidays) prior to any use thereof, or such shorter period as the Commission, in its discretion, may authorize:

(a) Every advertisement, article or other communication proposed to be published in any newspaper, magazine or other periodical;

(b) The script of every radio or television broadcast; and

(c) Every letter, circular or other written communication proposed to be sent, given or otherwise communicated to more than ten persons, except offering circulars filed pursuant to § 230.256 (f). § 230.259 Prohibition of certain state

ments.

No offering circular or other written or oral commnuication used in connection with any offering under §§ 230.251 to 230.262 shall contain any language stating or implying that the Commission has in any way passed upon the merits of, or given approval to, the securities

offered or the terms of the offering or has determined that the securities are exempt from registration, or has made any finding that the statements in any such offering circular or other communication are accurate or complete.

§ 230.260 Reports of sales hereunder.

Within 30 days after the end of each six-month period following the date of the original offering circular required by § 230.256, or of the statement required by 230.257, the issuer or other person for whose account the securities are offered shall file with the Regional Office of the Commission with which the notification was filed four copies of a report on Form 2-A containing the information called for by that form. A final report shall be made upon completion or termination of the offering and may be made prior to the end of the six-month period in which the last sale is made.

§ 230.261 Suspension of exemption.

(a) The Commission may, at any time after the filing of a notification, enter an order temporarily suspending the exemption, if it has reason to believe that

(1) No exemption is available under §§ 230.251 to 230.262 for the securities purported to be offered hereunder or any of the terms or conditions of §§ 230.251 to 230.262 have not been complied with, including failure to file any report as required by § 230.260.

(2) The notification, the offering circular or any other sales literature contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading;

(3) The offering is being made or would be made in violation of section 17 of the act;

(4) Any event has occurred after the filing of the notification which would have rendered the exemption hereunder unavailable if it had occurred prior to such filing;

(5) Any person specified in paragraph (c) of § 230.252 has been indicted for any crime or offense of the character specified in subparagraph (3) thereof, or any proceeding has been initiated for the purpose of enjoining any such person from engaging in or continuing any conduct or practice of the character specified in subparagraph (4) of such paragraph;

(6) Any person specified in paragraph (d) of § 230.252 has been indicted for any crime or offense of the character specified in subparagraph (1) thereof, or any proceeding has been initiated for the purpose of enjoining any such person from engaging in or continuing any conduct or practice of the character specified in subparagraph (2) of such paragraph; or

(7) The issuer or any promoter, officer, director or underwriter has failed to cooperate, or has obstructed or refused to permit the making of an investigation by the Commission in connection with any offering made or proposed to be made hereunder.

(b) Upon the entry of an order under paragraph (a) of this section, the Commission will promptly give notice to the persons on whose behalf the notification was filed (1) that such order has been entered, together with a brief statement of the reasons for the entry of the order, and (2) that the Commission, upon receipt of a written request within 30 days after the entry of such order, will, within 20 days after the receipt of such request, set the matter down for hearing at a place to be designated by the Commission. If no hearing is requested and none is ordered by the Commission, the order shall become permanent on the thirtieth day after its entry and shall remain in effect unless or until it is modified or vacated by the Commission. Where a hearing is requested or is ordered by the Commission, the Commission will, after notice of and opportunity for such hearing, either vacate the order or enter an order permanently suspending the exemption.

(c) The Commission may at any time after notice of and opportunity for hearing, enter an order permanently suspending the exemption for any reason upon which it could have entered a temporary suspension order under paragraph (a) of this section. Any such order shall remain in effect until vacated by the Commission.

(d) All notices required by this part shall be given to the person or persons on whose behalf the notification was filed by personal service, registered or certified mail or confirmed telegraphic notice at the addresses of such persons given in the notification.

[Reg. A, 21 F.R. 5739, Aug. 1, 1956, as amended at 23 F.R. 4455, June 20, 1958; 29 F.R. 16982, Dec. 11, 1964]

50-035-71-16

§ 230.262

Consent to service of process.

(a) If the issuer, any of its directors or officers, any person for whose account any of the securities are to be offered, or any underwriter of the securities to be offered, is not a resident of the United States, each such non-resident person shall, at the time of filing the notification required by § 230.255, furnish to the Commission in a form prescribed by or acceptable to it, a written irrevocable consent and power of attorney which— (1) Designates the Securities and Exchange Commission as an agent upon whom may be served any process, pleadings, or other papers in any civil suit or action brought against the person executing the consent and power of attorney or to which he has been joined as defendant or respondent, in any appropriate court in any place subject to the jurisdiction of the United States, where the cause of action (i) accrues on or after the effective date of this section, and (ii) arises out of any offering made or purported to be made under §§ 230.251 to 230.262 or any purchase or sale of any security in connection therewith; and

(2) Stipulates and agrees that any such civil suit or action may be commenced by the service of process upon the Commission and the forwarding of a copy thereof as provided in paragraph (b) of this section, and that the service as aforesaid of any such process, pleadings, or other papers upon the Commission shall be taken and held in all courts to be valid and binding as if due personal service thereof had been made.

(b) Service of any process, pleadings or other papers on the Commission under this part shall be made by delivering the requisite number of copies thereof to the Secretary of the Commission or to such other person as the Commission may authorize to act in its behalf. Whenever any process, pleadings or other papers as aforesaid are served upon the Commission, it shall promptly forward a copy thereof by registered or certified mail to the appropriate defendants at their last address of record filed with the Commission. The Commission shall be furnished a sufficient number of copies for such purpose, and one copy for its file. [Reg. A, 21 F.R. 5739, Aug. 1, 1956, as amended at 29 F.R. 16982, Dec. 11, 1964]

§ 230.263 Notice of delayed or suspended offering and sale.

If within three business days after the issuer has received notice that the Commission has no further comments with respect to the notification a bona fide effort is not made to proceed with the offering and sale of the securities proposed to be offered under this regulation, or if the offering or sale of such securities is suspended by the issuer or any underwriter within 15 days after the issuer has received such notice, a notice of the delay or suspension, stating the reasons therefor, shall be filed by the issuer or underwriter with the Regional Office of the Commission with which the notification was filed unless such information is set forth in the offering circular.

Such notice shall be sent promptly by telegraph or air mail and if sent by telegraph shall be confirmed in writing within a reasonable time by the filing of a signed copy of the notice.

(Secs. 6, 7, 10, 48 Stat. 75 et seq., as amended; 15 U.S.C. 771, 77g, 77j) [26 F.R. 10930, Nov. 22, 1961]

REGULATION B: EXEMPTIONS RELATING TO FRACTIONAL UNDIVIDED INTERESTS IN OIL OR GAS RIGHTS

AUTHORITY: §§ 230.300 to 230.356 issued under secs. 3, 19, 48 Stat. 75, as amended, 85, as amended; 15 U.S.C. 77c, 778.

SOURCE: §§ 230.300 to 230.356 contained in Regulation B, 2 F.R. 1076, May 6, 1937, unless otherwise noted.

NOTE: In §§ 230.300 to 230.356, the numbers to the right of the decimal point correspond with the respective rule numbers in Regulation B under the Securities Act of 1933.

§ 230.300

Definitions of terms used in Regulation B. When used in Regulation B (§§ 230.300-230.356):

(a) The term "fractional undivided interests in oil or gas rights" includes landowners' royalty interests, overriding royalty interests, working interests, participating interests, and oil or gas payments, as defined in paragraphs (b)-(f) of this section.

(b) The term "landowners' royalty interests" means fractional undivided interests in the royalty reserved by a landowner or fee owner upon the creation of an oil or gas lease.

(c) The term "overriding royalty interests" means fractional undivided in

terests or rights of participation in the oil or gas, or in the proceeds from the sale of the oil or gas, produced from a specified tract, which are limited in duration to the terms of an existing lease and which are not subject to any portion of the expense of development, operation, or maintenance.

(d) The term "working interests" means fractional undivided interests in an oil or gas leasehold which are subject to any portion of the expense of development, operation, or maintenance.

(e) The term "participating interests" means fractional undivided interest or rights of participation in the oil or gas, or in the proceeds from the sale of oil or gas, produced from a specified tract, which are limited in duration to the terms of an existing lease and which are subject to any portion of the expense of development, operation, or maintenance.

(f) The term "oil or gas payments" means fractional undivided interests or rights of participation in the oil or gas, or in the proceeds from the sale of oil or gas, produced from a specified tract, and which are limited to a maximum amount fixed in barrels of oil, cubic feet of gas, or dollars.

(g) The term "offeror" means any issuer of, underwriter of, or dealer in, any of the interests or rights defined in paragraphs (b)-(f) of this section, or any other person who issues, offers, or sells, any such interests or rights.

(h) The term "offering sheet" means any of the schedules from A to F, inclusive, the form of which is prescribed by the Commission, when appropriately completed so as to comply with the requirements of Regulation B (§§ 230.300230.356), and particularly § 230.330. [Reg. B, 2 F.R. 1076, May 6, 1937, as amended at 4 F.R. 4700, Nov. 28, 1939] § 230.310

Limitation upon exemption. Pursuant to section 3 (b) of the Securities Act of 1933, as amended, but subject to the terms and conditions prescribed by Regulation B (§§ 230.300-230.356), and the rules contained therein, fractional undivided interests in oil or gas rights, as defined in § 230.300, are added to the classes of securities exempted as provided in section 3(a) of such act; but no issue or offering, of which any interest sought to be exempted hereunder is a part, shall be exempted under Regulation B, where the aggregate amount at which such issue or offering is issued, offered, or sold, exceeds $100,000.

§ 230.312 Exemption not available to offeror, if unregistered dealer.

If any offeror of any of the fractional undivided interests in oil or gas rights defined in § 230.300 is, in fact, a "dealer”, as such term is defined in the Securities Exchange Act of 1934 (sec. 3(a) (5), 48 Stat. 883; 15 U.S.C. 78c(a) (5)), the exemption provided by Regulation B (§§ 230.300-230.356) shall not be available, and such offeror shall not be relieved from the liability which, in the absence of the exemption provided by Regulation B, would be imposed upon him because the security offered for sale or sold, was unregistered, unless such offeror is, at the time of each offer to sell, and at the time of each sale, duly registered as a dealer under section 15 of said act (sec. 3, 49 Stat. 1377; 15 U.S.C. 780).

CROSS REFERENCES: For the regulations under the Securities Exchange Act of 1934, see Part 240 of this chapter. For exemptions available to fractional undivided interests in oil or gas rights, see §§ 230.310-230.314.

§ 230.314 Exceptions to availability of exemption.

(a) Except as provided in paragraph (b) of this section, no exemption shall be available under this regulation unless it appears that the operating lessee or lessees will own, unencumbered in his name or their names, upon completion of the sale of the issue, a working interest in the tract or tracts involved equal to whichever of the following amounts is greater: (1) 20 percent of the total production from such tract or tracts of all oil, gas or other hydrocarbon substances, or (2) the total percentage of production from such tract or tracts which is not subject to any portion of the expenses of development, operation or maintenance.

(b) Paragraph (a) of this section shall not apply if (1) the aggregate amount at which the issue is offered to the public does not exceed $30,000 and (2) the smallest interest which is separately offered or sold to the public is not so offered or sold for less than $300,

(c) As used in this section, the term "operating lessee or lessees" shall include the lessee of record actually engaged in developing and operating the tract or tracts involved and all other owners of working interests who are regularly engaged in the business of exploring for or producing oil or gas and who have consented in writing to the development and

operation of said tract or tracts by such lessee of record.

[17 F. R. 11430, Dec. 18, 1952]

§ 230.320

Conditions to exemption and relief from liability for nonregistration.

The exemption provided by Regulation B (§§ 230.300-230.356) shall be available, and, an offeror of any of the fractional undivided interests in oil or gas rights defined in §§ 230.300 shall be relieved from the liability which, in the absence of the exemption provided by Regulation B (§§ 230.300-230.356), would be imposed upon him because the security offered for sale, or sold, was unregistered, only upon condition:

(a) That prior to any offer to sell any security sought to be exempted hereunder, the offeror, or some person acting on his behalf, shall file with the Commission four copies of an offering sheet accurately describing such security and complying with the requirements of § 230.330.

(b) That the offeror, at the time of the initial offer to sell any security sought to be exempted hereunder, shall deliver, or cause to be delivered, to every person solicited to buy, a copy of the offering sheet then on file with the Commission (as amended, if amended) accurately describing such security and complying with the requirements of § 230.330.

The term "offer to sell," as used in this paragraph, shall not be deemed to include a notice, circular, advertisement, letter, or communication published in any newspaper, or sent through the mails, or by means of any instrument of transportation, or communication in interstate commerce, or broadcast by radio, if such notice, circular, advertisement, letter, communication, or radio broadcast states only from whom an offering sheet may be obtained, and in addition, does no more than identify the security, state the price thereof, and state by whom orders will be executed.

(c) That the offering sheet referred to in paragraphs (a) and (b) of this section is fully effective in all respects at the time of each initial offer to sell and at the time of the making of each contract for the sale of any security described therein.

(d) That prior to the making of each contract of sale with, and prior to the payment of any part of the consideration by, the purchaser of any security sought to be exempted hereunder, the offeror