SENATE BILL REPORT

SB 6437

BYSenators von Reichbauer, Moore and Matson

Exempting certain securities sales from securities regulation.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):January 18, 1990; January 30, 1990

Majority Report:  Do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, McMullen, Sellar, Smitherman, West.

Senate Staff:Gerard S. Poliquin (786-7403)

                  February 6, 1990

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, JANUARY 30, 1990

BACKGROUND:

Presently Washington State offers businesses wishing to raise small amounts of capital from private investors three types of exemptions from the state's securities registration requirements:  the Limited Offering Exemption (LOE); the Uniform Limited Offering Registration (ULOR) and one-time small business exemption. 

LOE allows an issuer to raise up to $500,000 one time from as many as 40 investors who may be solicited by general advertising. 

ULOR allows an issuer to annually raise up to $1 million per offering with a maximum of 35 investors and an unlimited number of accredited investors.

The one-time small business exemption allows an issuer to raise "seed capital" on a one-time basis up to $100,000 from not more than ten purchasers.

SUMMARY:

Businesses are authorized to raise capital through the Small Offering Exemption (SOE).  The SOE allows issuers to annually raise up to $300,000 per offering with a maximum of 35 investors and an unlimited number of accredited investors.  An "accredited investor" is a person with an income in excess of $200,000 or net worth exceeding $1 million.  Advertising and solicitation of purchasers, sales commissions, and the use of "blind pools," which raise capital without specifying how it will be invested, are not permitted.  Each purchaser must purchase for his or her own account, and purchaser suitability is required of nonaccredited investors.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Michael Rodin, Washington State Bar Association (pro); Lee Polson, North American Securities Admin. Assoc. (con); Beverly Woods, Tom Allen, Association of Washington Business (pro); Steve Duncan, Washington Software Association (pro); Evelyn Sroufe, Perkins Coie (pro); Mike Liles, Jr., Bogle and Gates (con); Ed Drosdick, Moss Adams (con)