Exempt Transactions: Isolated, Unsolicited & Private Placements
Covers exempt transactions under USA Section 402(b), including isolated secondary trades, unsolicited orders, institutional sales, and the 10-offeree state private placement rule.
- Isolated non-issuer transactions are private secondary sales where the issuer receives no capital proceeds.
- Unsolicited customer orders are exempt transactions; the Administrator may require signed customer written acknowledgments.
- State Private Placement (USA 402(b)(9)): Offers to <= 10 retail persons in 12 months, investment intent, and NO commissions paid for retail solicitation.
While exempt securities focus on WHO issued the security, exempt transactions focus on HOW and TO WHOM the security is sold. If a transaction is exempt, unregistered non-exempt securities may be lawfully sold.
Major exempt transactions under Section 402(b) include:
1. Isolated Non-Issuer Transactions (Section 402(b)(1)): Infrequent secondary trades between private individuals where the issuer receives no capital proceeds.
2. Unsolicited Transactions (Section 402(b)(3)): Non-issuer trades initiated entirely by the customer. The order ticket must be marked 'unsolicited,' and the Administrator may require a signed customer acknowledgment form.
3. Transactions with Institutional Investors (Section 402(b)(8)): Sales to banks, insurance companies, investment companies, or broker-dealers are exempt due to the sophisticated nature of the buyers.
4. State Private Placements (Section 402(b)(9)): Offers directed to not more than 10 retail persons in the state during any 12 consecutive months, provided the buyers purchase for investment and no sales commissions are paid for soliciting retail offerees.
- Do not confuse state private placement (10 retail offerees) with federal Reg D 506 (35 non-accredited purchasers).
- If commissions are paid to solicit retail investors in a state private placement, the exemption is destroyed.
Under Section 402(b)(9) of the Uniform Securities Act, an offering of securities is exempt from state registration as a private placement if it complies with strict state conditions. What are the core statutory requirements for a state private placement under the USA?