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ment of the United States pursuant to authority granted by
the Congress of the United States; or any certificate of deposit
for any of the foregoing; or any security issued or guaranteed
by any bank; or any security issued by or representing an in-
terest in or a direct obligation of a Federal Reserve bank; or
any interest or participation in any common trust fund or
similar fund maintained by a bank exclusively for the collec-
tive investment and reinvestment of assets contributed thereto
by such bank in its capacity as trustee, executor, administra-
tor, or guardian; or any security which is an industrial devel-
opment bond (as defined in section 103(c)(2) of the Internal
Revenue Code of 1954) 4 the interest on which is excludable
from gross income under section 103(a)(1) of such Code if, by
reason of the application of paragraph (4) or (6) of section
103(c) of such Code (determined as if paragraphs (4)(A), (5), and
(7) 5 were not included in such section 103(c)), paragraph (1) of
such section 103(c) does not apply to such security; or any in-
terest or participation in a single trust fund, or in a collective
trust fund maintained by a bank, or any security arising out of
a contract issued by an insurance company, which interest,
participation, or security is issued in connection with (A) a
stock bonus, pension, or profit-sharing plan which meets the
requirements for qualification under section 401 of the Inter-
nal Revenue Code of 1954,6 (B) an annuity plan which meets
the requirements for the deduction of the employer's contribu-
tions under section 404(a)(2) of such Code,' or (C) a governmen-
tal plan as defined in section 414(d) of such Code 8 which has
been established by an employer for the exclusive benefit of its
employees or their beneficiaries for the purpose of distributing
to such employees or their beneficiaries the corpus and income
of the funds accumulated under such plan, if under such plan
it is impossible, prior to the satisfaction of all liabilities with
respect to such employees and their beneficiaries, for any part
of the corpus or income to be used for, or diverted to, purposes
other than the exclusive benefit of such employees or their
beneficiaries, other than any plan described in clause (A), (B),
or (C) of this paragraph (i) the contributions under which are
held in a single trust fund or in a separate account maintained
by an insurance company for a single employer and under
which an amount in excess of the employer's contribution is al-
located to the purchase of securities (other than interests or
participations in the trust or separate account itself) issued by
the employer or any company directly or indirectly controlling,
controlled by, or under common control with the employer, (ii)
which covers employees some or all of whom are employees
within the meaning of section 401(c)(1) of such Code, or (iii)
which is a plan funded by an annuity contract described in sec-
tion 403(b) of such Code. The Commission, by rules and regulations or order, shall exempt from the provisions of section 5 of this title any interest or participation issued in connection with a stock bonus, pension, profit-sharing, or annuity plan which covers employees some or all of whom are employees within the meaning of section 401(c)(1) of the Internal Revenue Code of 1954, if and to the extent that the Commission determines this to be necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this title. For purposes of this paragraph, a security issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank; and the term "bank” means any national bank, or any banking institution organized under the laws of any State, territory, or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official; except that in the case of a common trust fund or similar fund, or a collective trust fund, the term "bank” has the same meaning as in the Investment Company Act of 1940;

4 Section 103(c) of the Internal Revenue Code of 1954 redesignated as section 103(b) by section
1901(aX17) of Pub. L. 94-455 (26 U.S.C. 103(b)). [Printed in appendix to this volume.)

5 Paragraph (7) redesignated as paragraph (13) (26 U.S.C. 103(b)(13)). [Printed in appendix to
this volume.]

6 26 U.S.C. 401. [Printed in appendix to this volume.)
7 26 U.S.C. 404(a)(2). [Printed in appendix to this volume.)
8 26 U.S.C. 414(d). [Printed in appendix to this volume.)

(3) Any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited;

(4) Any security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual;

(5) Any security issued (A) by a savings and loan association, building and loan association, cooperative bank, homestead association, or similar institution, which is supervised and examined by State or Federal authority having supervision over any such institution; or (B) by (i) a farmer's cooperative organization exempt from tax under section 521 of the Internal Revenue Code of 1954,10 (ii) a corporation described in section 501(c)(16) of such Code 11 and exempt from tax under section 501(a) of such Code, or (iii) a corporation described in section 501(c)(2) of such Code which is exempt from tax under section 501(a) of such Code and is organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization or corporation described in clause (i) or (ii);

(6) Any interest in a railroad equipment trust. For purposes of this paragraph “interest in a railroad equipment trust” means any interest in an equipment trust, lease, conditional sales contract, or other similar arrangement entered into, issued, assumed, guaranteed by, or for the benefit of, a common carrier to finance the acquisition of rolling stock, including motive power;

9 26 U.S.C. 403(b). [Printed in appendix to this volume.) 10 26 U.S.C. 521. [Printed in appendix to this volume.) 11 26 U.S.C. 501(c)(16). [Printed in appendix to this volume.)

(7) Certificates issued by a receiver or by a trustee in bankruptcy, with the approval of the court;

(8) Any insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions, of any State or Territory of the United States or the District of Columbia;1

(9) Any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange;

(10) Any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval;

(11) Any security which is a part of an issue offered and sold only to persons resident within a single State or Territory, where the issuer of such security is a person resident and doing business within or, if a corporation, incorporated by and

doing business within, such State or Territory. 12 (b) The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of securities to the securities exempted as provided in this section, if it finds that the enforcement of this title with respect to such securities is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering; but no issue of securities shall be exempted under this subsection where the aggregate amount at which such issue is offered to the public exceeds $5,000,000.

(c) The Commission may from time to time by its rules and regulations and subject to such terms and conditions as may be prescribed therein, add to the securities exempted as provided in this section any class of securities issued by a small business investment company under the Small Business Investment Act of 1958 13 if it finds, having regard to the purposes of that Act, that the enforcement of this Act with respect to such securities is not necessary in the public interest and for the protection of investors.

12 But see section 24(d) of the Investment Company Act of 1940, infra. 13 15 U.S.C. 661 et seq.

EXEMPTED TRANSACTIONS 14

SEC. 4. [77d] The provisions of section 5 shall not apply to

(1) transactions by any person other than an issuer, underwriter, or dealer.

(2) transactions by an issuer not involving any public offering.

(3) transactions by a dealer (including an underwriter no longer acting as an underwriter in respect of the security involved in such transaction), except

(A) transactions taking place prior to the expiration of forty days after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter,

(B) transactions in a security as to which a registration statement has been filed taking place prior to the expiration of forty days after the effective date of such registration statement or prior to the expiration of forty days after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter after such effective date, whichever is later (excluding in the computation of such forty days any time during which a stop order issued under section 8 is in effect as to the security), or such shorter period as the Commission may specify by rules and regulations or order, and

(C) transactions as to securities constituting the whole or a part of an unsold allotment to or subscription by such dealer as a participant in the distribution of such securi

ties by the issuer or by or through an underwriter. 15 With respect to transactions referred to in clause (B), if securities of the issuer have not previously been sold pursuant to an earlier effective registration statement the applicable period, instead of forty days, shall be ninety days, or such shorter period as the Commission may specify by rules and regulations or order.

(4) brokers' transactions executed upon customers' orders on any exchange or in the over-the-counter market but not the solicitation of such orders.

(5/(A) Transactions involving offers or sales of one or more promissory notes directly secured by a first lien on a single parcel of real estate upon which is located a dwelling or other residential or commercial structure, and participation interests in such notes

(i) where such securities are originated by a savings and loan association, savings bank, commercial bank, or similar banking institution which is supervised and examined by a Federal or State authority, and are offered and sold subject to the following conditions:

(a) the minimum aggregate sales price per purchaser shall not be less than $250,000;

14 See additional exemption contained at 11 U.S.C. 1145. [Printed in appendix to this volume.] 15 But see section 14(d) of the Investment Company Act of 1940, infra.

(b) the purchaser shall pay cash either at the time of the sale or within sixty days thereof; and

(c) each purchaser shall buy for his own account only; or (ii) where such securities are originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to sections 203 and 21116 of the National Housing Act and are offered or sold subject to the three conditions specified in subparagraph (A)(i) to any institution described in such subparagraph or to any insurance company subject to the supervision of the insurance commissioner, or any agency or officer performing like function, of any State or territory of the United States or the District of Columbia, or the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association,

or the Government National Mortgage Association. (B) Transactions between any of the entities described in subparagraph (A)(i) or (A)(ii) hereof involving non-assignable contracts to buy or sell the foregoing securities which are to be completed within two years, where the seller of the foregoing securities pursuant to any such contract is one of the parties described in subparagraph (A)(i) or (A)(ii) who may originate such securities and the purchaser of such securities pursuant to any such contract is any institution described in subparagraph (A)(i) or any insurance company described in subparagraph (A)(ii), the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, or the Government National Mortgage Association and where the foregoing securities are subject to the three conditions for sale set forth in subparagraphs (A)(i) (a) through (c).

(C) The exemption provided by subparagraphs (A) and (B) hereof shall not apply to resales of the securities acquired pursuant thereto, unless each of the conditions for sale contained in subparagraphs (A)(1) (a) through (c) are satisfied.

(6) transactions involving offers or sales by an issuer solely to one or more accredited investors, if the aggregate offering price of an issue of securities offered in reliance on this paragraph does not exceed the amount allowed under section 3(b) of this title, if there is no advertising or public solicitation in connection with the transaction by the issuer or anyone acting on the issuer's behalf, and if the issuer files such notice with the Commission as the Commission shall prescribe.

PROHIBITIONS RELATING TO INTERSTATE COMMERCE AND THE MAILS

SEC. 5. [774] (a) Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly

(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise; or

16 12 U.S.C. 1709, 1715b.

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