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Friday, October 10, 2014

Intrastate Offering Exemption

By: Matthew J. Moisan

 Securities and Venture Capital

Last week the SEC posted the following CD&I in connection with the intrastate offering exemption (Rule 407):

Question: Can an issuer use its own website or social media presence to offer securities in a manner consistent with Rule 147?

Answer: Issuers generally use their websites and social media presence to advertise their market presence in a broad and open manner so that information is widely disseminated to any member of the general public. Although whether a particular communication is an “offer” of securities will depend on all of the facts and circumstances, using such established Internet presence to convey information about specific investment opportunities would likely involve offers to residents outside the particular state in which the issuer did business.

{continued} We believe, however, that issuers could implement technological measures to limit communications that are offers only to those persons whose Internet Protocol, or IP, address originates from a particular state or territory and prevent any offers to be made to persons whose IP address originates in other states or territories. Offers should include disclaimers and restrictive legends making it clear that the offering is limited to residents of the relevant state under applicable law. Issuers must comply with all other conditions of Rule 147, including that sales may only be made to residents of the same state as the issuer.

This appears consistent with Rule 147 which indicates that an issuer is exempt from registration if: (i) the company is incorporated in the state in which it is offering securities. (ii) at least 80% of the company’s operations are in that state and (iii) the company only offers securities to individuals residing within the state of incorporation. 


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