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SENATE FLOOR VERSION
February 11, 2021
SENATE BILL NO. 568 By: Montgomery of the Senate
and
Hilbert of the House
An Act relating to securities; providing exempt
treatment for certain specified secur ities pursuant
to rules adopted by the United States Securities and
Exchange Commission; requiring compliance with
certain federal securities laws; providing for
disqualification of offerings based on noncompliance;
requiring issuer of securities to file n otice;
prescribing required content of notice; authorizing
Oklahoma Securities De partment to adopt rules;
providing for termination of notice; imposing dollar
limitation; prescribing time period; requiring
disclosure of terms of issuance; imposing limitati on
on sale of certain securities wi thin certain time
period; providing exception for accredited investor;
requiring annual report; providing for suspension of
notice filing; providing for duration of suspension;
prohibiting materially false statements; imp osing
restrictions based on materia lly false statements;
defining term; requiring offering through Internet
website; imposing restriction on communications;
prescribing requirements for communication; providing
for certain corrective actions; requiring dis closure
statement; prescribing content; providing for
exemption; prohibiting use of exemption under certain
circumstances; prohibiting issuance of securities by
certain issuers based on conduct; authorizing
application for waiver; prescribing procedures fo r
payments for purchase of securiti es; authorizing
escrow account; prescribing procedures related to
escrow accounts; providing for account
administration; providing for codification; and
declaring an emergency.
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BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section o f law to be codified
in the Oklahoma Statutes as Section 1 -801 of Title 71, unless there
is created a duplica tion in numbering, reads as follows:
A. Notwithstanding any ot her provision of law, a security
issued and offered for sale by an issuer pursuant to Section
3(a)(11) of the Securities Act of 1933 (15 U.S.C. Section
77c(a)(11)) shall maintain compliance with Rule 147A (17 C.F.R.
230.147A), the federal exemption f or intrastate offerings adopted by
the U.S. Securities and Exchange Commission (SEC). Failure to
maintain compliance shall disqualify an issuer from offering
securities pursuant to this act .
B. The issuer must file a notice of the offering with the
Oklahoma Department of Securities, in writing or in electronic form,
together with a nonrefundable filing fee, in a form and format to be
determined by Department rule. The notice filing shall include a
notice of exemption and the disclosure statement required by Se ction
2 of this act. The Department may adopt rules establishing
procedures for the deposit of fees and the filing of documents by
electronic means. A notice is effective upon receipt by the
Department and payment of the filing fee. The notice may be
terminated by filing with th e Department a notice of termination.
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The notice and offering expire twelve (12) months after filing the
notice with the Department.
C. The issuer must amend the notice within thirty (30) days if,
at any time, any material information provided in the notice becomes
materially inaccurate.
D. The sum of all cash and other consideration received for the
sale of securities under this section shall be limited to Five
Million Dollars ($5,000,000.00) within the twelve-month period
starting from the effective da te of the notice filing. Subject to
the integration provi sions of Rule 147A, such limit shall be in
addition to any other limit available to an issuer under any other
federal or Oklahoma exemption. This provision shall not be
interpreted to restrict an i ssuer from offering additional
securities intended to qualify under any other exemption under
federal or Oklahoma securities laws.
E. The aggregate value of securities sold by an issuer to a
purchaser in transactions exempt from registration under this
section in a twelve-month period shall not exceed Five Thous and
Dollars ($5,000.00); provided, however, if the purchaser is an
accredited investor as defin ed by Rule 501 of Regulation D, adopted
by the SEC pursuant to the Securities Act, such purchaser shall not
be restricted in the amount of securities purchased . The issuer
must have a reasonable basis for believing that the purchaser of a
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security qualifying for exemption under this section is an Oklahoma
resident and, if applicab le, an accredited investor.
F. The issuer shall file with the Department and provid e to
purchasers without cost an annual report of the results of the
operations and financial statements of the issuer within sixty (60)
days after the end of its fiscal yea r in a form and manner to be
prescribed by the Department until no securities under this offering
are outstanding.
G. A notice filing under this section shall be immediately
suspended by the Department if the payment of the filing fee is
dishonored by the financial institution upo n which the funds are
drawn. The suspension shall remain in effect for fourteen (14)
calendar days. If the issuer does not re mit the filing fee within
fourteen (14) calendar days beginning on the date of the suspension,
the Department shall enter a final order revoking the issuer’s
notice filing.
H. A notice filing under this section shall be immediately
suspended by the Depart ment if the issuer is determined to have made
any materially false statement in the issuer’s notice filing. The
suspension shall remain in effect until the matter has been
investigated by the Department and either the suspension of the
notice filing has been removed or a final order is entered by the
Department revoking the notice filing. If an issuer is determined
to have made any materially false statement in the issuer’s notice
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filing, the Department shall bar the officers, directors and control
persons of the issuer from the use of the exemption in this section
for a period of five (5) years from the e ntry date of the final
order revoking the notice filing. For the purposes of this a ct,
“control persons” means any officer, director or other person having
the power, directly or indirectly, to direct the management or
policies of the entity, whether by contract or otherwise; and any
person holding twenty percent (20%) or greate r of the outstanding
equity of the issuer.
I. Subject to the requiremen ts of Rule 147A, the issuer may
make offers and sales of its securities using any form of general
solicitation or advertising, includin g making the offering available
through the issuer’s website.
J. The issuer shall require evidence from each purchaser of
residency within this state before a sale may be made. Such
evidence shall include an affirmative represen tation made by the
purchaser that the purchaser is an Oklahoma resident at least
eighteen (18) years of age along with any one of the following:
1. Valid Oklahoma driver ’s license or official i dentification
card issued by the State of Oklahoma;
2. Current Oklahoma voter registratio n card; or
3. County property tax records showing the i ndividual owns and
occupies property in th is state as his or her primary residence.
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K. The Department shall immediately suspend the notice filing
of an issuer in violation of either subsection I or J of this
section. If corrective action is not taken by the issuer, the
Department shall enter a final order revoking the notice filing and
terminating the offering.
SECTION 2. NEW LAW A new section of la w to be codified
in the Oklahoma Statutes as Section 1-802 of Title 71, unless there
is created a duplication in numbering, reads as follows:
The issuer must make available to p rospective purchasers , along
with a copy to the Oklahoma Department of Securities at the time the
notice is filed, a disclosure statement containing material
information about the issuer and the offering including, but not
limited to:
1. The name, legal statu s, physical address and Internet
website of the issuer ;
2. The names of any and all control persons along with
descriptions of each person’s background and qualifications;
3. A description of the business of the issuer and a history of
the issuer’s organization and operations ;
4. A description of the stated purpose and intende d use of the
proceeds of the offering ;
5. The target offering amount, the deadline to reach the target
offering amount, and any minimum amount required to close t he
offering if such minimum is less than the target offering amount ;
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6. The price to the pub lic of the securities along with the
method for determining the price;
7. A description of the ownership and capital structure of the
issuer including:
a. the terms under which each then outstanding type and
class of security was offered,
b. the rights granted to owners of each type and class of
security then outstanding, and
c. how the rights of the securities being offered may be
affected by the rights of any other class of security
then outstanding of the issuer;
8. A description of the financial condit ion of the issuer to
include:
a. a copy of the most recent tax return filed by the
issuer, if any, and
b. financial statements for the previous three (3) years,
or, for an issuer in business for less than three (3)
years, financial statements for each year the issuer
has been operating. The financial statements must be
prepared in accordance with generally accepted
accounting principles and certified by the principal
executive officer of the issuer to be true and
complete in all material respects. The financial
statements must be reviewed by a certified public
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accountant independent of t he issuer using
professional standar ds and procedures for such review
or standards and procedures established by the
Department for such purpose;
9. Any current or reasona bly anticipated litigation or legal
proceedings in which the issuer is involved;
10. The issuer shall inform all purchasers and prospective
purchasers of the following:
a. there is no ready market for the sale of the
securities acquired from this offering ; it may be
difficult or impossible fo r a purchaser to sell or
otherwise dispose of this investment. A purchaser may
be required to hold and bear the financial risks of
this investment indefinitely ,
b. the securities have not been registered under federal
or state securities laws and, therefo re, cannot be
resold unless the securities are registered or qualify
for an exemption from registration under federal and
state law,
c. in making an investment decision, purchasers must rely
on their own examination of the issuer and the terms
of the offering including the merits and risks
involved, and
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d. no federal or state securities commission or
regulatory authority has confirmed the accuracy or
determined the adequacy of th e disclosure statement or
any other information on this Internet website.
SECTION 3. NEW LAW A new se ction of law to be codified
in the Oklahoma Statutes as Section 1 -803 of Title 71, unless there
is created a duplication in numberi ng, reads as follows:
A. An issuer of securities claiming exemption under this
section shall be a for-profit business residing in and doing
business within the State of Oklahoma.
B. An issuer shall be deemed to be a resident of Oklahoma if
the issuer’s principal place of bu siness is located wit hin the
state. The issuer shall be deemed to have its principal place of
business in Oklahoma if the officers, partners or managers of the
issuer that primarily direct, control and coordinate the activities
of the issuer are located within the State of Oklahoma.
C. An issuer shall be deemed to be doing business in Oklahoma
if the issuer satisfies at least one of the following requirements:
1. The issuer derived at least eighty percent (80%) of its
consolidated gross revenues from the operation of a busin ess or of
real property located in or from the rendering of services within
this state;
2. The issuer had at the end of its most recent semiannual
fiscal period prior to an initial offer of securities in any
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offering or subsequent offering pursuant to thi s section, at least
eighty percent (80%) of its assets and those of its subsidiaries on
a consolidated basis located within this state;
3. The issuer intends to use and uses at least eighty percent
(80%) of the net proceeds to the issuer from sales made p ursuant to
this section in connection with the operation of a business or of
real property, the purchase of real prope rty located in, or the
rendering of services within this state; or
4. A majority of the issuer’s employees are based in this
state.
D. An issuer shall not be permitted to use this exemption if:
1. A company that has not yet defined its business operations,
has no business plan, has no stated investment goal for the funds
being raised, or that plans to engage in a merger or acquisition
with an unspecified business entity;
2. Subject to the reporting requirements of the S ecurities and
Exchange Act of 1934, Section 13 or Section 15(d), 15 U.S.C. ,
Section 78m and Section 78o(d);
3. A control person of the issuer is also a control person of
another issuer that has made a securiti es offering under this
exemption within the pr evious twelve-month period in this state;
4. A control person of the issuer is also a control person of
another issuer that is concurrently conducting a securities offeri ng
under this exemption in this state; or
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5. The proceeds of the offering will be co mbined with the
proceeds of a securities offering by another issuer as part of a
single plan of financing.
SECTION 4. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 1-804 of Title 71, unless there
is created a duplication in numbering, reads as follows:
A. Notwithstanding the foregoing, an issuer shall be prohibited
from offering securities under this section if the issuer:
1. Within the last five (5) years, has filed a registration
statement that is the subject of a currently effective registration
stop order entered by any state securities administrator or the S EC;
2. Within the last five (5) years, has been convi cted of any
criminal offense in connect ion with the offer, purchase or sale of
any security, or involving fraud or deceit;
3. Is currently subject to any state or federal administrative
enforcement order or judgment, entered within the last five (5)
years, finding fraud or deceit in connection with the purchase or
sale of any security; or
4. Is currently subject to any order, judgment or decree of any
court of competent jurisdiction, entered within the last five (5)
years, temporarily, preliminarily or pe rmanently restraining or
enjoining such party from engaging in or continuing to engag e in any
conduct or practice involving fraud or deceit in connection with the
purchase or sale of any security.
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B. The Department may pro mulgate additional rules for
disqualification of an issuer for t he purposes of this act.
C. An issuer may apply to th e Administrator of the Oklahoma
Department of Securities for a waiver from the prohibitions in
paragraph 4 of subsection A of this section . Such application shall
be in a form and manner prescribed by the Department. The
Administrator in his or her discretion may grant such a waiver based
on the specific facts and circumstances stated and submitted in
writing and attested to under penalty of perjury where the
Administrator determines such waiver is appropriate and in the
public interest.
SECTION 5. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 1 -805 of Title 71, unless there
is created a duplication in numbering, reads as follows:
A. All payments for purchases of securities offered under this
section shall be directed to and deposited into an escrow account
and all funds shall be used in accordance with the representations
made by the issuer to pur chasers for such funds. Each security
offering shall have a dedicated escrow account. The payments must
be held in an escrow account until the aggregate capital raised from
all purchases is equal to or greater than the minimum target
offering amount specified in the discl osure statement as necessary
to implement the business plan. If the target offering amount is
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not raised by the stated deadline in the disclosure s tatement, all
subscribed funds shall be returned to purchasers.
B. The escrow account must be held at a ban k, depository or
other financial institution authorized to conduct escrow business in
this state and subject to regulation under the laws of the United
States or under the laws of this state.
SECTION 6. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 1-806 of Title 71, unless there
is created a duplication in numb ering, reads as follows:
The Oklahoma Department of Securities shall promulgate r ules and
regulations authorized under this a ct within ninety (90) days of the
effective date of thi s act.
SECTION 7. It being immediately necessary for the pr eservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its pas sage and approval.
COMMITTEE REPORT BY: COMMIT TEE ON BUSINESS, COMMERCE AND TOURISM
February 11, 2021 - DO PASS