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Minnesota Legislature

Office of the Revisor of Statutes

HF 444

as introduced - 90th Legislature (2017 - 2018) Posted on 01/23/2017 01:48pm

KEY: stricken = removed, old language.
underscored = added, new language.
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16.31

A bill for an act
relating to securities; modifying the MNvest registration exemption; amending
Minnesota Statutes 2016, section 80A.461.

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

Section 1.

Minnesota Statutes 2016, section 80A.461, is amended to read:


80A.461 MNVEST REGISTRATION EXEMPTION.

Subdivision 1.

Definitions.

(a) For purposes of this section, the terms defined in
paragraphs (b) through (e) have the meanings given them.

(b) "MNvest issuer" means an entity deleted text beginorganized under the laws of Minnesotadeleted text end, other than
a general partnership, that satisfies the requirements of Code of Federal Regulations, title
17, part deleted text begin230.147deleted text endnew text begin 230.147Anew text end, new text begineffective April 20, 2017, new text endand the following requirements:

deleted text begin (1) the principal office of the entity is located in Minnesota;
deleted text end

deleted text begin (2) as of the last day of the most recent semiannual fiscal period of the entity, at least
80 percent, or other threshold permitted by Code of Federal Regulations, title 17, part
230.147, of the entity's assets were located in Minnesota;
deleted text end

deleted text begin (3) except in the case of an entity whose gross revenue during the most recent period of
12 full months did not exceed $5,000, the entity derived at least 80 percent, or other threshold
permitted by Code of Federal Regulations, title 17, part 230.147, of the entity's gross revenues
from the operation of a business in Minnesota during (i) the previous fiscal year, if the
MNvest offering begins during the first six months of the entity's fiscal year; or (ii) during
the 12 months ending on the last day of the sixth month of the entity's current fiscal year,
if the MNvest offering begins following the last day;
deleted text end

new text begin (1) For purposes of this section only, the MNvest issuer shall at the time of any offers
and sales have its principal place of business in Minnesota and be doing business within
Minnesota.
new text end

new text begin (i) The MNvest issuer shall be deemed to have its principal place of business in Minnesota
if the officers, partners, or managers of the issuer primarily direct, control, and coordinate
the activities of the issuer from within Minnesota.
new text end

new text begin (ii) The MNvest issuer shall be deemed to be doing business within Minnesota if the
issuer satisfies at least one of the following requirements:
new text end

new text begin (A) the issuer derived at least 80 percent of its consolidated gross revenues from the
operation of a business or of real property located in or from the rendering of services within
Minnesota. Revenues must be calculated based on the issuer's most recent fiscal year, if the
first offer of securities pursuant to this section is made during the first six months of the
issuer's current fiscal year, and based on the first six months of the issuer's current fiscal
year or during the 12-month fiscal period ending with such six-month period, if the first
offer of securities pursuant to this section is made during the last six months of the issuer's
current fiscal year;
new text end

new text begin (B) the issuer had at the end of its most recent semiannual fiscal period prior to an initial
offer of securities in any offering or subsequent offering pursuant to this section, at least
80 percent of its assets and those of its subsidiaries on a consolidated basis located within
Minnesota;
new text end

new text begin (C) the issuer intends to use and uses at least 80 percent of the net proceeds to the issuer
from sales made pursuant to Code of Federal Regulations, title 17, part 230.147A, effective
April 20, 2017, in connection with the operation of a business or of real property, the purchase
of real property located in, or the rendering of services within Minnesota; or
new text end

new text begin (D) a majority of the issuer's employees are based in Minnesota.
new text end

new text begin (2) An issuer that has previously conducted an intrastate offering pursuant to Code of
Federal Regulations, title 17, part 230.147A, or Rule 147, part 230.147, may not conduct
other intrastate offering pursuant to Code of Federal Regulations, title 17, part 230.147A,
effective April 20, 2017, in a different state or territory, until the expiration of the time
period specified in Code of Federal Regulations, title 17, part 230.147A(e), effective April
20, 2017, or Rule 147, section 230.147(e), calculated on the basis of the date of the last sale
in such offering.
new text end

deleted text begin (4)deleted text endnew text begin (2)new text end the entity does not attempt to limit its liability, or the liability of any other person,
for fraud or intentional misrepresentation in connection with the offering of its securities
in a MNvest offering; and

deleted text begin (5)deleted text endnew text begin (3)new text end the entity is not:

(i) engaged in the business of investing, reinvesting, owning, holding, or trading in
securities, except that the entity may hold securities of one class in an entity that is not itself
engaged in the business of investing, reinvesting, owning, holding, or trading in securities;
or

(ii) subject to the reporting requirements of the Securities and Exchange Act of 1934,
section 13 or 15(d), United States Code, title 15, sections 78m and 78o(d).

(c) "MNvest offering" means an offer, or an offer and sale, of securities by a MNvest
issuer that: (1) is conducted exclusively through a MNvest portal, and (2) satisfies the
requirements of this section and other requirements the administrator imposes by rule.

(d) "MNvest portal" means an Internet Web site that is operated by a portal operator for
the offer or sale of MNvest offerings under this section or registered securities under section
80A.50, paragraph (b), new text beginor 80A.52, new text endand satisfies the requirements of subdivision 6.

(e) "Portal operator" means an entity, including an issuer, that:

(1) is authorized to do business in Minnesota;

(2) is a broker-dealer registered under this chapter or otherwise registers with the
administrator as a portal operator in accordance with subdivision 7, paragraph (a), and is
therefore excluded from broker-dealer registration; and

(3) satisfies such other conditions as the administrator may determine.

new text begin (f) A "purchaser" means a person or entity that complies with this section and satisfies
other requirements the administrator imposes by rule.
new text end

Subd. 2.

Generally.

The offer, sale, and issuance of securities in a MNvest offering is
exempt from the requirements of sections 80A.49 to 80A.54, except 80A.50, paragraph (a),
clause (3), and 80A.71, if the issuer meets the qualifications under this section.

Subd. 3.

MNvest offering.

A MNvest offering must satisfy the following requirements:

(1) the issuer must be a MNvest issuer on the date that its securities are first offered for
sale in the offering and continuously through the closing of the offering;

(2) the offering must meet the requirements of the federal exemption for intrastate
offerings in deleted text beginsection 3(a)(11) of the Securities Act of 1933, United States Code, title 15,
section 77c(a)(11), and
deleted text end Rule deleted text begin147deleted text endnew text begin 147A, effective April 20, 2017,new text end adopted under the Securities
Act of 1933, Code of Federal Regulations, title 17, part deleted text begin230.147deleted text endnew text begin 230.147A, effective April
20, 2017
new text end;

(3) the sale of securities must be conducted exclusively through a MNvest portal;

(4) the MNvest issuer shall require the portal operator to provide or make available to
prospective purchasers through the MNvest portal a copy of the MNvest issuer's balance
sheet and income statement for the MNvest issuer's most recent fiscal year, if the issuer was
in existence. For offerings beginning more than 90 days after the issuer's most recent fiscal
year end, or if the MNvest issuer was not in existence the previous calendar year, the MNvest
issuer must provide or make available a balance sheet as of a date not more than 90 days
before the commencement of the MNvest offering for the MNvest issuer's most recently
completed fiscal year, or such shorter portion the MNvest issuer was in existence during
that period, and the year-to-date period, or inception-to-date period, if shorter, corresponding
with the more recent balance sheet required by this clause;

(5) in any 12-month period, the MNvest issuer shall not raise more than the aggregate
amounts set forth in item (i) or (ii), either in cash or other consideration, in connection with
one or more MNvest offerings:

(i) $2,000,000 if the financial statements described in clause (4) have been (A) audited
by a certified public accountant firm licensed under chapter 326A using auditing standards
issued by either the American Institute of Certified Public Accountants or the Public
Companynew text begin Accountingnew text end Oversight Board, or (B) reviewed by a certified public accountant
firm licensed under chapter 326A using the Statements on Standards for Accounting and
Review Services issued by the Accounting and Review Services Committee of the American
Institute of Certified Public Accountants; or

(ii) $1,000,000 if the financial statements described in clause (4) have not been audited
or reviewed as described in item (i);

(6) deleted text beginthe MNvest issuer must use at least 80 percent of the net proceeds of the offering in
connection with the operation of its business within Minnesota;
deleted text endnew text begin offers or sales made in
reliance on this section will not be integrated with:
new text end

new text begin (i) offers or sales of securities made prior to the commencement of offers and sales of
securities pursuant to this section; or
new text end

new text begin (ii) offers or sales made after completion of offers and sales of securities pursuant to
this section that are:
new text end

new text begin (A) registered under the Securities Act of 1933, except as provided in Code of Federal
Regulations, part 230.147A, paragraph (h);
new text end

new text begin (B) exempt from registration under Regulation A, title 17, parts 230.251 to 230.263;
new text end

new text begin (C) exempt from registration under Rule 701, title 17, part 230.701;
new text end

new text begin (D) made pursuant to an employee benefit plan;
new text end

new text begin (E) exempt from registration under Regulation S, title 17, parts 230.901 to 230.905;
new text end

new text begin (F) exempt from registration under section 4(a)(6) of the Securities Act of 1933, United
States Code, title 15, section 77d(a)(6); or
new text end

new text begin (G) made more than six months after the completion of an offering conducted pursuant
to this section.
new text end

new text begin For purposes of clarity, this section does not permit a MNvest issuer to conduct
simultaneous securities offerings;
new text end

(7) no single purchaser may purchase more than $10,000 in securities of the MNvest
issuer under this exemption in connection with a single MNvest offering unless the purchaser
is an accredited investornew text begin under Rule 501, adopted under the Securities Act of 1933, Code
of Federal Regulations, title 17, part 230.501
new text end;

(8) all payments for the purchase of securities must be held in escrow until the aggregate
capital deposited into escrow from all purchasers is equal to or greater than the stated
minimum offering amount. Purchasers will receive a return of all their subscription funds
if the minimum offering amount is not raised by the stipulated expiration date required in
subdivision 4, clause (2). The escrow agent must be a bank, regulated trust company, savings
bank, savings association, or credit union authorized to do business in Minnesota. Prior to
the execution of the escrow agreement between the issuer and the escrow agent, the escrow
agent must conduct searches of the issuer, its executive officers, directors, governors, and
managers, as provided to the escrow agent by the portal operator, against the Specially
Designated Nationals list maintained by the Office of Foreign Assets Control. The escrow
agent is only responsible to act at the direction of the party establishing the escrow account
and does not have a duty or liability, contractual or otherwise, to an investor or other person
except as set forth in the applicable escrow agreement or other contract;

(9) the MNvest issuer shall require the portal operator to make available to the prospective
purchaser through the MNvest portal a disclosure document that meets the requirements
set forth in subdivision 4;

(10) before selling securities to a prospective purchaser on a MNvest portal, the MNvest
issuer shall require the portal operator to obtain from the prospective purchaser the
certification required under subdivision 5;

(11) not less than ten days before the beginning of an offering of securities in reliance
on the exemption under this section, the MNvest issuer shall provide the following to the
administrator:

(i) a notice of claim of exemption from registration, specifying that the MNvest issuer
will be conducting an offering in reliance on the exemption under this section;

(ii) a copy of the disclosure document to be provided to prospective purchasers in
connection with the offering, as described in subdivision 4; deleted text beginand
deleted text end

(iii) a filing fee of $300; and

new text begin (iv) MNvest offerings otherwise registered pursuant to sections 80A.50 and 80A.52 are
excluded from such ten-day wait period; and
new text end

(12) the MNvest issuer and the portal operator may engage in solicitation and advertising
of the MNvest offering provided that:

(i) the advertisement contains disclaiming language which clearly states:

(A) the advertisement is not the offer and is for informational purposes only;

(B) the offering is being made in reliance on the exemption under this section;

(C) the offering deleted text beginis directeddeleted text endnew text begin indicates that purchasers maynew text end only deleted text begintodeleted text endnew text begin benew text end residents of the state;

(D) all offers and sales are made through a MNvest portal; and

(E) the Department of Commerce is the securities regulator in Minnesota;

(ii) along with the disclosures required under item (i), the advertisement may contain
no more than the following information:

(A) the name and contact information of the MNvest issuer;

(B) a brief description of the general type of business of the MNvest issuer;

(C) the minimum offering amount the MNvest issuer is attempting to raise through its
offering;

(D) a description of how the issuer will use the funds raised through the MNvest offering;

(E) the duration that the MNvest offering will remain open;

(F) the MNvest issuer's logo; and

(G) a link to the MNvest issuer's Web site and the MNvest portal in which the MNvest
offering is being made; and

(iii) the advertisement complies with all applicable state and federal laws.

Subd. 4.

Required disclosures to prospective MNvest offering purchasers.

The
MNvest issuer shall require the portal operator to make available to the prospective purchaser
through the MNvest portal a printable or downloadable disclosure document containing the
following:

(1) the MNvest issuer's type of entity, the address and telephone number of its principal
office, its formation history for the previous five years, a summary of the material facts of
its business plan and its capital structure, and its intended use of the offering proceeds,
including any amounts to be paid from the proceeds of the MNvest offering, as compensation
or otherwise, to an owner, executive officer, director, governor, manager, member, or other
person occupying a similar status or performing similar functions on behalf of the MNvest
issuer;

(2) the MNvest offering must stipulate the date on which the offering will expire, which
must not be longer than 12 months from the date the MNvest offering commenced;

(3) a copy of the escrow agreement between the escrow agent, the MNvest issuer, and,
if applicable, the portal operator, as described in subdivision 3, clause (8);

(4) the financial statements required under subdivision 3, clause (4);

(5) the identity of all persons owning more than ten percent of any class of equity interests
in the company;

(6) the identity of the executive officers, directors, governors, managers, members, and
other persons occupying a similar status or performing similar functions in the name of and
on the behalf of the MNvest issuer, including their titles and their relevant experience;

(7) the terms and conditions of the securities being offered, a description of investor exit
strategies, and of any outstanding securities of the MNvest issuer; the minimum and
maximum amount of securities being offered; either the percentage economic ownership
of the MNvest issuer represented by the offered securities, assuming the minimum and, if
applicable, maximum number of securities being offered is sold, or the valuation of the
MNvest issuer implied by the price of the offered securities; the price per share, unit, or
interest of the securities being offered; any restrictions on transfer of the securities being
offered; and a disclosure that any future issuance of securities might dilute the value of
securities being offered;

(8) the identity of and consideration payable to a person who has been or will be retained
by the MNvest issuer to assist the MNvest issuer in conducting the offering and sale of the
securities, including a portal operator, but excluding (i) persons acting primarily as
accountants or attorneys, and (ii) employees whose primary job responsibilities involve
operating the business of the MNvest issuer rather than assisting the MNvest issuer in raising
capital;

(9) a description of any pending material litigation, legal proceedings, or regulatory
action involving the MNvest issuer or any executive officers, directors, governors, managers,
members, and other persons occupying a similar status or performing similar functions in
the name of and on behalf of the MNvest issuer;

(10) a statement of the material risks unique to the MNvest issuer and its business plans;

(11) a statement that the securities have not been registered under federal or state
securities law and that the securities are subject to limitations on resale; deleted text beginand
deleted text end

(12) the following legend must be displayed conspicuously in the disclosure document:

"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. THESE
SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR DIVISION OR OTHER REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED BY SUBSECTION (e) OF SEC RULE deleted text begin147deleted text endnew text begin 147Anew text end
(CODE OF FEDERAL REGULATIONS, TITLE 17, PART deleted text begin230.147deleted text endnew text begin 230.147Anew text end (e)) AS
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

new text begin SALES WILL BE MADE ONLY TO RESIDENTS OF MINNESOTA. OFFERS AND
SALES OF THESE SECURITIES ARE MADE UNDER AN EXEMPTION FROM
FEDERAL REGISTRATION AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. FOR A PERIOD OF SIX MONTHS FROM THE DATE
OF THE SALE BY THE ISSUER OF THE SECURITIES, ANY RESALE OF THE
SECURITIES (OR THE UNDERLYING SECURITIES IN THE CASE OF
CONVERTIBLE SECURITIES) SHALL BE MADE ONLY TO PERSONS RESIDENT
WITHIN MINNESOTA. ANY RESALE OF THESE SECURITIES MUST BE
REGISTERED OR EXEMPT PURSUANT TO THIS CHAPTER.
new text end"new text begin; and
new text end

new text begin (13) the following legend must be displayed conspicuously on the certificate or other
document, if applicable, evidencing the security stating that:
new text end

new text begin "OFFERS AND SALES OF THESE SECURITIES WERE MADE UNDER AN
EXEMPTION FROM FEDERAL REGISTRATION AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. FOR A PERIOD OF SIX
MONTHS FROM THE DATE OF THE SALE BY THE ISSUER OF THESE
SECURITIES, ANY RESALE OF THESE SECURITIES (OR THE UNDERLYING
SECURITIES IN THE CASE OF CONVERTIBLE SECURITIES) SHALL BE MADE
ONLY TO PERSONS RESIDENT WITHIN MINNESOTA. ANY RESALE OF THESE
SECURITIES MUST BE REGISTERED OR EXEMPT PURSUANT TO THIS
CHAPTER."
new text end

Subd. 5.

Required certification from MNvest offering purchasers.

Before selling
securities to a prospective purchaser through a MNvest portal, the MNvest issuer shall
require the portal operator to obtain from the prospective purchaser through the applicable
MNvest portal a written or electronic certification that includes, at a minimum, the following
statements:

"I UNDERSTAND AND ACKNOWLEDGE THAT:

If I make an investment in an offering through this MNvest portal, it is very likely that
I am investing in a high-risk, speculative business venture that could result in the complete
loss of my investment, and I need to be able to afford such a loss.

This offering has not been reviewed or approved by any state or federal securities
commission or division or other regulatory authority and that no such person or authority
has confirmed the accuracy or determined the adequacy of any disclosure made to me
relating to this offering.

If I make an investment in an offering through this MNvest portal, it is very likely that
the investment will be difficult to transfer or sell and, accordingly, I may be required to
hold the investment indefinitely.

By entering into this transaction with the company, I am affirmatively representing
myself as being a Minnesota resident at the time that this contract is formed, and if this
representation is subsequently shown to be false, the contract is void."

Subd. 6.

MNvest portal.

A MNvest portal must satisfy the requirements of clauses (1)
through (4):

(1) the Web site does not contain the word "MNvest" in its URL address;

(2) the Web site implements steps to limit Web site access to deleted text beginthe offer ordeleted text end sale of securities
to only Minnesota residents when conducting MNvest offerings; and

(3) MNvest offerings may not be viewed on the MNvest portal by a prospective purchaser
until:

(i) the portal operator verifies, through its exercise of reasonable steps, such as using a
third-party verification service or as otherwise approved by the administrator, that the
prospective purchaser is a Minnesota resident; and

(ii) the prospective purchaser makes an affirmative acknowledgment, electronically
through the MNvest portal, that:

(A) I am a Minnesota resident;

(B) the securities and investment opportunities listed on this Web site involve high-risk,
speculative business ventures. If I choose to invest in any securities or investment opportunity
listed on this Web site, I may lose all of my investment, and I can afford such a loss;

(C) the securities and investment opportunities listed on this Web site have not been
reviewed or approved by any state or federal securities commission or division or other
regulatory authority, and no such person or authority, including this Web site, has confirmed
the accuracy or determined the adequacy of any disclosure made to prospective investors
relating to any offering; and

(D) if I choose to invest in any securities or investment opportunity listed on this Web
site, I understand that the securities I will acquire may be difficult to transfer or sell, that
there is no ready market for the sale of such securities, that it may be difficult or impossible
for me to sell or otherwise dispose of this investment at any price, and that, accordingly, I
may be required to hold this investment indefinitely; and

(4) the Web site complies with all other rules adopted by the administrator.

Subd. 7.

Portal operator.

(a) An entity, other than a registered broker-dealer, wishing
to become a portal operator shall file with the administrator:

(1) deleted text beginform ....... [to be approved by the administrator]deleted text endnew text begin the Portal Operator Registration
Form
new text end, including all applicable schedules and supplemental information;

(2) a copy of the articles of incorporation or other documents that indicate the entity's
form of organization; and

(3) a filing fee of $200.

(b) A portal operator's registration expires 12 months from the date the administrator
has approved the entity as a portal operator, and subsequent registration for the succeeding
12-month period shall be issued upon written application and upon payment of a renewal
fee of $200, without filing of further statements or furnishing any further information, unless
specifically requested by the administrator. This section is not applicable to a registered
broker-dealer functioning as a portal operator.

(c) A portal operator that is not a broker-dealer registered under this chapter shall not:

(1) offer investment advice or recommendations, provided that a portal operator shall
not be deemed to be offering investment advice or recommendations merely because it (i)
selects, or may perform due diligence with respect to, issuers or offerings to be listed, or
(ii) provides general investor educational materials;

(2) provide transaction-based compensation for securities sold under this chapter to
employees, agents, or other persons unless the employees, agents, or other persons are
registered with the administrator and permitted to receive such compensation;

(3) charge a fee to the issuer for an offering of securities on a MNvest portal unless the
fee is (i) a fixed amount for each offering, (ii) a variable amount based on the length of time
that the securities are offered on the MNvest portal, or (iii) a combination of such fixed and
variable amounts; or

(4) hold, manage, possess, or otherwise handle purchaser funds or securities. This
restriction does not apply if the issuer is the portal operator.

(d) A portal operator shall provide the administrator with read-only access to
administrative sections of the MNvest portal.

(e) A portal operator shall comply with the record-keeping requirements of this paragraph,
provided that the failure of a portal operator that is not an issuer to maintain records in
compliance with this paragraph shall not affect the MNvest issuer's exemption from
registration afforded by this section:

(1) a portal operator shall maintain and preserve, for a period of five years from either
the date of the closing or termination of the securities offering, the following records:

(i) the name of each issuer whose securities have been listed on its MNvest portal;

(ii) the full name, residential address, Social Security number, date of birth, and copy
of a state-issued identification for all owners with greater than ten percent voting equity in
an issuer;

(iii) copies of all offering materials that have been displayed on its MNvest portal;

(iv) the names and other personal information of each purchaser who has registered at
its MNvest portal;

(v) any agreements and contracts between the portal operator and the issuer; and

(vi) any information used to establish that a MNvest issuer, prospective MNvest
purchaser, or MNvest purchaser is a Minnesota resident;

(2) a portal operator shall, upon written request of the administrator, furnish to the
administrator any records required to be maintained and preserved under this subdivision;

(3) the records required to be kept and preserved under this subdivision must be
maintained in a manner, including by any electronic storage media, that will permit the
immediate location of any particular document so long as such records are available for
immediate and complete access by representatives of the administrator. Any electronic
storage system must preserve the records exclusively in a nonrewriteable, nonerasable
format; verify automatically the quality and accuracy of the storage media recording process;
serialize the original and, if applicable, duplicate units storage media, and time-date for the
required period of retention the information placed on such electronic storage media; and
be able to download indexes and records preserved on electronic storage media to an
acceptable medium. In the event that a records retention system commingles records required
to be kept under this subdivision with records not required to be kept, representatives of the
administrator may review all commingled records; and

(4) a portal operator shall maintain such other records as the administrator shall determine
by rule.

Subd. 8.

Portal operator; privacy of purchaser information.

(a) For purposes of this
subdivision, "personal information" means information provided to a portal operator by a
prospective purchaser or purchaser that identifies, or can be used to identify, the prospective
purchaser or purchaser.

(b) Except as provided in paragraph (c), a portal operator must not disclose personal
information without written or electronic consent from the prospective purchaser or purchaser
that authorizes the disclosure.

(c) Paragraph (b) does not apply to:

(1) records required to be provided to the administrator under subdivision 7, paragraph
(e);

(2) the disclosure of personal information to a MNvest issuer relating to its MNvest
offering; or

(3) the disclosure of personal information to the extent required or authorized under
other law.

Subd. 9.

Bad actor disqualification.

(a) An exemption under this section is not available
for a sale if securities in the MNvest issuer; any predecessor of the MNvest issuer; any
affiliated issuer; any director,new text begin governor,new text end executive officer, other officer participating in the
MNvest offering, general partner, or managing member of the MNvest issuer; any beneficial
owner of 20 percent or more of the MNvest issuer's outstanding voting equity securities,
calculated on the basis of voting power; any promoter connected with the MNvest issuer
in any capacity at the time of the sale; any investment manager of an issuer that is a pooled
investment fund; any general partner or managing member of any investment manager; or
any director,new text begin governor,new text end executive officer, or other officer participating in the offering of
any investment manager or general partner or managing member of the investment manager:

(1) has been convicted, within ten years before the offering, or five years, in the case of
MNvest issuers, their predecessors, and affiliated issuers, of any felony or misdemeanor:

(i) in connection with the purchase or sale of any security;

(ii) involving the making of any false filing with the Securities and Exchange Commission
or a state administrator; or

(iii) arising out of the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, investment adviser, or paid solicitor of purchasers of securities;

(2) is subject to any order, judgment, or decree of any court of competent jurisdiction,
entered within five years before the sale, that, at the time of the sale, restrains or enjoins
the person from engaging or continuing to engage in any conduct or practice:

(i) in connection with the purchase or sale of any security;

(ii) involving the making of any false filing with the Securities and Exchange Commission
or a state administrator; or

(iii) arising out of the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, investment adviser, or paid solicitor of purchasers of securities;

(3) is subject to a final order of a state securities commission or an agency or officer of
a state performing like functions; a state authority that supervises or examines banks, savings
associations, or credit unions; a state insurance commission or an agency or officer of a
state performing like functions; an appropriate federal banking agency; the United States
Commodity Futures Trading Commission; or the National Credit Union Administration
that:

(i) at the time of the offering, bars the person from:

(A) association with an entity regulated by the commission, authority, agency, or officer;

(B) engaging in the business of securities, insurance, or banking; or

(C) engaging in savings association or credit union activities; or

(ii) constitutes a final order based on a violation of any law or regulation that prohibits
fraudulent, manipulative, or deceptive conduct entered within ten years before the offering;

(4) is subject to an order of the Securities and Exchange Commission entered pursuant
to section 15(b) or 15B(c) of the Securities Exchange Act of 1934, United States Code, title
15, section 78o(b) or 78o-4(c) or section 203(e) or (f) of the Investment Advisers Act of
1940, United States Code, title 15, section 80b-3(e) or (f) that, at the time of the offering:

(i) suspends or revokes the person's registration as a broker, dealer, municipal securities
dealer, or investment adviser;

(ii) places limitations on the activities, functions, or operations of the person; or

(iii) bars the person from being associated with any entity or from participating in the
offering of any penny stock;

(5) is subject to any order of the Securities and Exchange Commission or a state
administrator entered within five years before the sale that, at the time of the sale, orders
the person to cease and desist from committing or causing a violation or future violation
of:

(i) any scienter-based antifraud provision of the federal securities laws, including without
limitation section 17(a)(1) of the Securities Act of 1933, United States Code, title 15, section
77q(a)(1), section 10(b) of the Securities Exchange Act of 1934, United States Code, title
15, section 78j(b) and Code of Federal Regulations, title 17, section 240.10b-5, section
15(c)(1) of the Securities Exchange Act of 1934, United States Code, title 15, section
78o(c)(1) and section 206(1) of the Investment Advisers Act of 1940, United States Code,
title 15, section 80b-6(1), or any other rule or regulation thereunder; or

(ii) section 5 of the Securities Act of 1933, United States Code, title 15, section 77e;

(6) is suspended or expelled from membership in, or suspended or barred from association
with a member of, a registered national securities exchange or a registered national or
affiliated securities association for any act or omission to act constituting conduct inconsistent
with just and equitable principles of trade;

(7) has filed as a registrant or issuer, or was or was named as an underwriter in, any
registrations statement or Regulation A offering statement filed with the Securities and
Exchange Commission or a state administrator that, within five years before the sale, was
the subject of a refusal order, stop order, or order suspending the Regulation A exemption,
or is, at the time of the sale, the subject of an investigation or proceeding to determine
whether a stop order or suspension order should be issued; or

(8) is subject to a United States Postal Service false representation order entered within
five years before the offering, or is, at the time of the offering, subject to a temporary
restraining order or preliminary injunction with respect to conduct alleged by the United
States Postal Service to constitute a scheme or device for obtaining money or property
through the mail by means of false representations.

(b) Paragraph (a) does not apply:

(1) with respect to any conviction, order, judgment, decree, suspension, expulsion, or
bar that occurred or was issued before September 23, 2013;

(2) upon a showing of good cause and without prejudice to any other action by the
Securities and Exchange Commission or a state administrator, if the Securities and Exchange
Commission or a state administrator determines that it is not necessary under the
circumstances that an exemption be denied;

(3) if, before the relevant offering, the court of regulatory authority that entered the
relevant order, judgment, or decree advises in writing, whether contained in the relevant
judgment, order, or decree or separately to the Securities and Exchange Commission or a
state administrator or their staff, that disqualification under paragraph (a) should not arise
as a consequence of the order, judgment, or decree; or

(4) if the MNvest issuer establishes that it did not know and, in the exercise of reasonable
care, could not have known that a disqualification existed under paragraph (a).

(c) For purposes of paragraph (a), events relating to any affiliated issuer that occurred
before the affiliation arose will not be considered disqualifying if the affiliated entity is not:

(1) in control of the issuer; or

(2) under common control with the issuer by a third party that was in control of the
affiliated entity at the time of the events.

new text begin Subd. 10. new text end

new text begin Residence of purchasers. new text end

new text begin Sales of securities pursuant to this section must be
made only to residents of Minnesota, or who the issuer reasonably believes, at the time of
sale, are residents of Minnesota. For purposes of determining the residence of purchasers:
new text end

new text begin (1) a corporation, partnership, limited liability company, trust, or other form of business
organization shall be deemed to be a resident of Minnesota if, at the time of sale to it, it has
its principal place of business, as defined in this paragraph, within Minnesota;
new text end

new text begin (2) individuals shall be deemed to be residents of Minnesota if the individuals have, at
the time of sale to them, their principal residence in Minnesota;
new text end

new text begin (3) a corporation, partnership, trust, or other form of business organization, which is
organized for the specific purpose of acquiring securities offered pursuant to this section,
shall not be a resident of Minnesota unless all of the beneficial owners of the organization
are residents of Minnesota;
new text end

new text begin (4) obtaining a written representation from purchasers of in-state residency status will
not, without more, be sufficient to establish a reasonable belief that the purchasers are
in-state residents; and
new text end

new text begin (5) a trust that is not deemed by the law of the state or territory of its creation to be a
separate legal entity is deemed to be a resident of each state or territory in which its trustee
is, or trustees are, residents.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end