HF 94

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 01/23/2023 04:00pm

A bill for an act
relating to commerce; securities; changing the investment limit for small corporate
offerings; amending Minnesota Statutes 2022, section 80A.50; Minnesota Rules,
part 2876.3021, subpart 2.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 80A.50, is amended to read:

80A.50 SECTION 302; FEDERAL COVERED SECURITIES; SMALL
CORPORATE OFFERING REGISTRATION.

(a) Federal covered securities.

(1) Required filing of records. With respect to a federal covered security, as defined
in Section 18(b)(2) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(2)), that is not
otherwise exempt under sections 80A.45 through 80A.47, a rule adopted or order issued
under this chapter may require the filing of any or all of the following records:

(A) before the initial offer of a federal covered security in this state, all records that are
part of a federal registration statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and a consent to service of process complying with section
80A.88 signed by the issuer;

(B) after the initial offer of the federal covered security in this state, all records that are
part of an amendment to a federal registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933; and

(C) to the extent necessary or appropriate to compute fees, a report of the value of the
federal covered securities sold or offered to persons present in this state, if the sales data
are not included in records filed with the Securities and Exchange Commission.

(2) Notice filing effectiveness and renewal. A notice filing under subsection (a) is
effective for one year commencing on the later of the notice filing or the effectiveness of
the offering filed with the Securities and Exchange Commission. On or before expiration,
the issuer may renew a notice filing by filing a copy of those records filed by the issuer with
the Securities and Exchange Commission that are required by rule or order under this chapter
to be filed. A previously filed consent to service of process complying with section 80A.88
may be incorporated by reference in a renewal. A renewed notice filing becomes effective
upon the expiration of the filing being renewed.

(3) Notice filings for federal covered securities under section 18(b)(4)(D). With
respect to a security that is a federal covered security under Section 18(b)(4)(D) of the
Securities Act of 1933 (15 U.S.C. Section 77r(b)(4)(D)), a rule under this chapter may
require a notice filing by or on behalf of an issuer to include a copy of Form D, including
the Appendix, as promulgated by the Securities and Exchange Commission, and a consent
to service of process complying with section 80A.88 signed by the issuer not later than 15
days after the first sale of the federal covered security in this state.

(4) Stop orders. Except with respect to a federal security under Section 18(b)(1) of the
Securities Act of 1933 (15 U.S.C. Section 77r(b)(1)), if the administrator finds that there is
a failure to comply with a notice or fee requirement of this section, the administrator may
issue a stop order suspending the offer and sale of a federal covered security in this state.
If the deficiency is corrected, the stop order is void as of the time of its issuance and no
penalty may be imposed by the administrator.

(b) Small corporation offering registration.

(1) Registration required. A security meeting the conditions set forth in this section
may be registered as set forth in this section.

(2) Availability. Registration under this section is available only to the issuer of securities
and not to an affiliate of the issuer or to any other person for resale of the issuer's securities.
The issuer must be organized under the laws of one of the states or possessions of the United
States. The securities offered must be exempt from registration under the Securities Act of
1933 pursuant to Rule 504 of Regulation D (15 U.S.C. Section 77c).

(3) Disqualification. Registration under this section is not available to any of the
following issuers:

(A) an issuer subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934;

(B) an investment company;

(C) a development stage company that either has no specific business plan or purpose
or has indicated that its business plan is to engage in a merger or acquisition with an
unidentified company or companies or other entity or person;

(D) an issuer if the issuer or any of its predecessors, officers, directors, governors,
partners, ten percent stock or equity holders, promoters, or any selling agents of the securities
to be offered, or any officer, director, governor, or partner of the selling agent:

(i) has filed a registration statement that is the subject of a currently effective registration
stop order entered under a federal or state securities law within five years before the filing
of the small corporate offering registration application;

(ii) has been convicted within five years before the filing of the small corporate offering
registration application of a felony or misdemeanor in connection with the offer, purchase,
or sale of a security or a felony involving fraud or deceit, including, but not limited to,
forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to
defraud;

(iii) is currently subject to a state administrative enforcement order or judgment entered
by a state securities administrator or the Securities and Exchange Commission within five
years before the filing of the small corporate offering registration application, or is subject
to a federal or state administrative enforcement order or judgment in which fraud or deceit,
including, but not limited to, making untrue statements of material facts or omitting to state
material facts, was found and the order or judgment was entered within five years before
the filing of the small corporate offering registration application;

(iv) is currently subject to an order, judgment, or decree of a court of competent
jurisdiction temporarily restraining or enjoining, or is subject to an order, judgment, or
decree of a court of competent jurisdiction permanently restraining or enjoining the party
from engaging in or continuing any conduct or practice in connection with the purchase or
sale of any security or involving the making of a false filing with a state or with the Securities
and Exchange Commission entered within five years before the filing of the small corporate
offering registration application; or

(v) is subject to a state's administrative enforcement order, or judgment that prohibits,
denies, or revokes the use of an exemption for registration in connection with the offer,
purchase, or sale of securities,

(I) except that clauses (i) to (iv) do not apply if the person subject to the disqualification
is duly licensed or registered to conduct securities-related business in the state in which the
administrative order or judgment was entered against the person or if the dealer employing
the party is licensed or registered in this state and the form BD filed in this state discloses
the order, conviction, judgment, or decree relating to the person, and

(II) except that the disqualification under this subdivision is automatically waived if the
state securities administrator or federal agency that created the basis for disqualification
determines upon a showing of good cause that it is not necessary under the circumstances
to deny the registration.

(4) Filing and effectiveness of registration statement. A small corporate offering
registration statement must be filed with the administrator. If no stop order is in effect and
no proceeding is pending under section 80A.54, such registration statement shall become
effective automatically at the close of business on the 20th day after filing of the registration
statement or the last amendment of the registration statement or at such earlier time as the
administrator may designate by rule or order. For the purposes of a nonissuer transaction,
other than by an affiliate of the issuer, all outstanding securities of the same class identified
in the small corporate offering registration statement as a security registered under this
chapter are considered to be registered while the small corporate offering registration
statement is effective. A small corporate offering registration statement is effective for one
year after its effective date or for any longer period designated in an order under this chapter.
A small corporate offering registration statement may be withdrawn only with the approval
of the administrator.

(5) Contents of registration statement. A small corporate offering registration statement
under this section shall be on Form U-7, including exhibits required by the instructions
thereto, as adopted by the North American Securities Administrators Association, or such
alternative form as may be designated by the administrator by rule or order and must include:

(A) a consent to service of process complying with section 80A.88;

(B) a statement of the type and amount of securities to be offered and the amount of
securities to be offered in this state;

(C) a specimen or copy of the security being registered, unless the security is
uncertificated, a copy of the issuer's articles of incorporation and bylaws or their substantial
equivalents in effect, and a copy of any indenture or other instrument covering the security
to be registered;

(D) a signed or conformed copy of an opinion of counsel concerning the legality of the
securities being registered which states whether the securities, when sold, will be validly
issued, fully paid, and nonassessable and, if debt securities, binding obligations of the issuer;

(E) the states (i) in which the securities are proposed to be offered; (ii) in which a
registration statement or similar filing has been made in connection with the offering
including information as to effectiveness of each such filing; and (iii) in which a stop order
or similar proceeding has been entered or in which proceedings or actions seeking such an
order are pending;

(F) a copy of the offering document proposed to be delivered to offerees; and

(G) a copy of any other pamphlet, circular, form letter, advertisement, or other sales
literature intended as of the effective date to be used in connection with the offering and
any solicitation of interest used in compliance with section 80A.46(17)(B).

(6) Copy to purchaser. A copy of the offering document as filed with the administrator
must be delivered to each person purchasing the securities prior to sale of the securities to
such person.

new text begin (c) Offering limit. Offers and sales of securities under this section are allowed up to
the limit prescribed by Code of Federal Regulations, title 17, part 230.504(b)(2), as amended.
new text end

Sec. 2.

Minnesota Rules, part 2876.3021, subpart 2, is amended to read:

Subp. 2.

Unaudited financial statements.

Interim financial statements may be unaudited.
All other financial statements may be unaudited if reviewed by independent certified public
accountants in accordance with the Accounting and Review Service Standards promulgated
by the American Institute of Certified Public Accountants and:

A.

the applicant has not previously sold securities through an offering involving the
general solicitation of prospective investors by means of advertising, mass mailings, public
meetings, cold call telephone solicitation, or any other method directed toward the public; new text begin
and
new text end

B.

the applicant has not been previously required under federal or state securities
laws to provide audited financial statements in connection with any sale of its securities deleted text begin ;
and deleted text end new text begin .
new text end

deleted text begin C. deleted text end

deleted text begin the aggregate amount of all previous sales of securities by the applicant, exclusive
of debt financing with banks and similar commercial lenders, does not exceed $1,000,000.
deleted text end