WSR 98-17-012
PERMANENT RULES
DEPARTMENT OF
FINANCIAL INSTITUTIONS
(Securities Division)
[Filed August 10, 1998, 8:38 a.m.]
Date of Adoption: August 6, 1998.
Purpose: Adopt NASAA's uniform manual exemption. RCW 21.20.320(2) was amended during the 1997 legislative session to grant the director rule-making authority concerning nonissuer transactions by registered salespersons of registered broker-dealers. The intent behind this amendment was to authorize the director to adopt the NASAA uniform manual exemption. The proposed amendment will foster uniformity with other jurisdictions and decrease the compliance burden on persons conducting secondary trading.
Statutory Authority for Adoption: RCW 21.20.450.
Other Authority: RCW 21.20.320(2).
Adopted under notice filed as WSR 98-14-073 on June 30, 1998.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 2, amended 0, repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, amended 0, repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 2, amended 0, repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 2, amended 0, repealed 0.
Other Findings Required by Other Provisions of Law as Precondition to Adoption or Effectiveness of Rule: No rule may be made unless the director of the Department of Financial Institutions finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of chapter 21.20 RCW.
Effective Date of Rule: Thirty-one days after filing.
August 6, 1998
John L. Bley
Director
OTS-2235.1
NEW SECTION
WAC 460-44A-100 Nonissuer transactions pursuant to RCW 21.20.320(2)--Manual exemption. Any nonissuer transaction by a registered salesperson of a registered broker-dealer, and any resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety days shall be exempt pursuant to RCW 21.20.320(2) provided that, at the time of the transaction:
(1) The issuer of the security is actually engaged in business and not in the organizational stage, bankruptcy, or receivership;
(2) The issuer is not a blank check, blind pool or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person or persons;
(3) The security is sold at a price reasonably related to the current market price of the security;
(4) The security does not constitute all or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security;
(5) A nationally recognized securities manual designated by the director pursuant to WAC 460-10A-160 or a document filed with and publicly available through the U.S. Securities & Exchange Commission's Electronic Data Gathering and Retrieval System (EDGAR) contains:
(a) A description of the business and operations of the issuer;
(b) The names of the issuer's officers and the names of the issuer's directors, if any, or, in the case of a non-U.S. issuer, the corporate equivalents of such persons in the issuer's country of domicile;
(c) An audited balance sheet of the issuer as of a date within eighteen months or, in the case of a reorganization or merger where parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet; and
(d) An audited income statement for each of the issuer's immediately preceding two fiscal years, or for the period of existence of the issuer, if in existence for less than two years or, in the case of a reorganization or merger where the parties to the reorganization or merger had such audited income statement, a pro forma income statement; and
(6) The issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, or designated for trading on the National Association of Securities Dealers Automated Quotation System (NASDAQ), unless:
(a) The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940;
(b) The issuer of the security has been engaged in continuous business (including predecessors) for at least three years; or
(c) The issuer of the security has total assets of at least $2,000,000 based on an audited balance sheet as of a date within eighteen months or, in the case of a reorganization or merger where parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet.
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NEW SECTION
WAC 460-44A-110 Nonissuer transactions pursuant to RCW 21.20.320(2)--Senior securities. Any nonissuer transaction in a security by a registered salesperson of a registered broker-dealer shall be exempt pursuant to RCW 21.20.320(2) if:
(1) The issuer of the security is actually engaged in business and not in the organizational stage, bankruptcy or receivership;
(2) The issuer is not a blank check, blind pool or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person or persons;
(3) The security is senior in rank to the common stock of the issuer both as to payment of dividends or interest and upon dissolution or liquidation of the issuer;
(4) Such security has been outstanding in the hands of the public for at least three years; and
(5) Neither the issuer nor any predecessors has defaulted, within the current fiscal year or the three immediately preceding fiscal years, in the payment of any dividend, interest, principal, or sinking fund instalment on the security when due and payable.
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