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Full Text of HB3791  100th General Assembly

HB3791enr 100TH GENERAL ASSEMBLY

  
  
  

 


 
HB3791 EnrolledLRB100 07306 JLS 21791 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Securities Law of 1953 is amended
5by changing Sections 2.35, 4, and 8d as follows:
 
6    (815 ILCS 5/2.35)
7    Sec. 2.35. Qualified escrowee. "Qualified escrowee" means
8a person, firm, partnership, association, corporation, or
9other legal entity who: (a) falls under the definition of
10"title insurance company" under, and pursuant to the terms and
11requirements of, the Title Insurance Act, or is otherwise an
12agent or affiliate of such title insurance company who is
13approved by such title insurance company to act under this
14Section and pursuant to the terms and requirements of the Title
15Insurance Act, and which maintains at least one physical
16business location within the State; (b) is certified as an
17independent escrowee under, and pursuant to the terms and
18requirements of, the Title Insurance Act; or (c) is a bank,
19regulated trust company, savings bank, savings and loan
20association, or credit union, registered broker-dealer, or law
21firm which is authorized to do business in the State and which
22maintains at least one physical business location within the
23State.

 

 

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1(Source: P.A. 99-182, eff. 1-1-16.)
 
2    (815 ILCS 5/4)  (from Ch. 121 1/2, par. 137.4)
3    Sec. 4. Exempt transactions. The provisions of Sections 2a,
45, 6 and 7 of this Act shall not apply to any of the following
5transactions, except where otherwise specified in this Section
64:
7        A. Any offer or sale, whether through a dealer or
8    otherwise, of securities by a person who is not an issuer,
9    underwriter, dealer or controlling person in respect of
10    such securities, and who, being the bona fide owner of such
11    securities, disposes thereof for his or her own account;
12    provided, that such offer or sale is not made directly or
13    indirectly for the benefit of the issuer or of an
14    underwriter or controlling person.
15        B. Any offer, sale, issuance or exchange of securities
16    of the issuer to or with security holders of the issuer
17    except to or with persons who are security holders solely
18    by reason of holding transferable warrants, transferable
19    options, or similar transferable rights of the issuer, if
20    no commission or other remuneration is paid or given
21    directly or indirectly for or on account of the procuring
22    or soliciting of such sale or exchange (other than a fee
23    paid to underwriters based on their undertaking to purchase
24    any securities not purchased by security holders in
25    connection with such sale or exchange).

 

 

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1        C. Any offer, sale or issuance of securities to any
2    corporation, bank, savings bank, savings institution,
3    savings and loan association, trust company, insurance
4    company, building and loan association, or dealer; to a
5    pension fund, pension trust, or employees' profit sharing
6    trust, other financial institution or institutional
7    investor, any government or political subdivision or
8    instrumentality thereof, whether the purchaser is acting
9    for itself or in some fiduciary capacity; to any
10    partnership or other association engaged as a substantial
11    part of its business or operations in purchasing or holding
12    securities; to any trust in respect of which a bank or
13    trust company is trustee or co-trustee; to any entity in
14    which at least 90% of the equity is owned by persons
15    described under subsection C, H, or S of this Section 4; to
16    any employee benefit plan within the meaning of Title I of
17    the Federal ERISA Act if (i) the investment decision is
18    made by a plan fiduciary as defined in Section 3(21) of the
19    Federal ERISA Act and such plan fiduciary is either a bank,
20    savings and loan association, insurance company,
21    registered investment adviser or an investment adviser
22    registered under the Federal 1940 Investment Advisers Act,
23    or (ii) the plan has total assets in excess of $5,000,000,
24    or (iii) in the case of a self-directed plan, investment
25    decisions are made solely by persons that are described
26    under subsection C, D, H or S of this Section 4; to any

 

 

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1    plan established and maintained by, and for the benefit of
2    the employees of, any state or political subdivision or
3    agency or instrumentality thereof if such plan has total
4    assets in excess of $5,000,000; or to any organization
5    described in Section 501(c)(3) of the Internal Revenue Code
6    of 1986, any Massachusetts or similar business trust, or
7    any partnership, if such organization, trust, or
8    partnership has total assets in excess of $5,000,000.
9        D. The Secretary of State is granted authority to
10    create by rule or regulation a limited offering
11    transactional exemption that furthers the objectives of
12    compatibility with federal exemptions and uniformity among
13    the states. The Secretary of State shall prescribe by rule
14    or regulation the amount of the fee for filing any report
15    required under this subsection, but the fee shall not be
16    less than the minimum amount nor more than the maximum
17    amount established under Section 11a of this Act and shall
18    not be returnable in any event.
19        E. Any offer or sale of securities by an executor,
20    administrator, guardian, receiver or trustee in insolvency
21    or bankruptcy, or at any judicial sale, or at a public sale
22    by auction held at an advertised time and place, or the
23    offer or sale of securities in good faith and not for the
24    purpose of avoiding the provisions of this Act by a pledgee
25    of securities pledged for a bona fide debt.
26        F. Any offer or sale by a registered dealer, either as

 

 

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1    principal or agent, of any securities (except face amount
2    certificate contracts and investment fund shares) at a
3    price reasonably related to the current market price of
4    such securities, provided:
5        (1) (a) the securities are issued and outstanding;
6            (b) the issuer is required to file reports pursuant
7        to Section 13 or Section 15(d) of the Federal 1934 Act
8        and has been subject to such requirements during the 90
9        day period immediately preceding the date of the offer
10        or sale, or is an issuer of a security covered by
11        Section 12(g)(2)(B) or (G) of the Federal 1934 Act;
12            (c) the dealer has a reasonable basis for believing
13        that the issuer is current in filing the reports
14        required to be filed at regular intervals pursuant to
15        the provisions of Section 13 or Section 15(d), as the
16        case may be, of the Federal 1934 Act, or in the case of
17        insurance companies exempted from Section 12(g) of the
18        Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
19        the annual statement referred to in Section
20        12(g)(2)(G)(i) of the Federal 1934 Act; and
21            (d) the dealer has in its records, and makes
22        reasonably available upon request to any person
23        expressing an interest in a proposed transaction in the
24        securities, the issuer's most recent annual report
25        filed pursuant to Section 13 or 15(d), as the case may
26        be, of the Federal 1934 Act or the annual statement in

 

 

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1        the case of an insurance company exempted from Section
2        12(g) of the Federal 1934 Act by subparagraph
3        12(g)(2)(G) thereof, together with any other reports
4        required to be filed at regular intervals under the
5        Federal 1934 Act by the issuer after such annual report
6        or annual statement; provided that the making
7        available of such reports pursuant to this
8        subparagraph, unless otherwise represented, shall not
9        constitute a representation by the dealer that the
10        information is true and correct, but shall constitute a
11        representation by the dealer that the information is
12        reasonably current; or
13        (2) (a) prior to any offer or sale, an application for
14        the authorization thereof and a report as set forth
15        under sub-paragraph (d) of this paragraph (2) has been
16        filed by any registered dealer with and approved by the
17        Secretary of State pursuant to such rules and
18        regulations as the Secretary of State may prescribe;
19            (b) the Secretary of State shall have the power by
20        order to refuse to approve any application or report
21        filed pursuant to this paragraph (2) if
22                (i) the application or report does not comply
23            with the provisions of this paragraph (2), or
24                (ii) the offer or sale of such securities would
25            work or tend to work a fraud or deceit, or
26                (iii) the issuer or the applicant has violated

 

 

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1            any of the provisions of this Act;
2            (c) each application and report filed pursuant to
3        this paragraph (2) shall be accompanied by a filing fee
4        and an examination fee in the amount established
5        pursuant to Section 11a of this Act, which shall not be
6        returnable in any event;
7            (d) there shall be submitted to the Secretary of
8        State no later than 120 days following the end of the
9        issuer's fiscal year, each year during the period of
10        the authorization, one copy of a report which shall
11        contain a balance sheet and income statement prepared
12        as of the issuer's most recent fiscal year end
13        certified by an independent certified public
14        accountant, together with such current information
15        concerning the securities and the issuer thereof as the
16        Secretary of State may prescribe by rule or regulation
17        or order;
18            (e) prior to any offer or sale of securities under
19        the provisions of this paragraph (2), each registered
20        dealer participating in the offer or sale of such
21        securities shall provide upon request of prospective
22        purchasers of such securities a copy of the most recent
23        report required under the provisions of sub-paragraph
24        (d) of this paragraph (2);
25            (f) approval of an application filed pursuant to
26        this paragraph (2) of subsection F shall expire 5 years

 

 

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1        after the date of the granting of the approval, unless
2        said approval is sooner terminated by (1) suspension or
3        revocation by the Secretary of State in the same manner
4        as is provided for in subsections E, F and G of Section
5        11 of this Act, or (2) the applicant filing with the
6        Secretary of State an affidavit to the effect that (i)
7        the subject securities have become exempt under
8        Section 3 of this Act or (ii) the applicant no longer
9        is capable of acting as the applicant and stating the
10        reasons therefor or (iii) the applicant no longer
11        desires to act as the applicant. In the event of the
12        filing of an affidavit under either preceding
13        sub-division (ii) or (iii) the Secretary of State may
14        authorize a substitution of applicant upon the new
15        applicant executing the application as originally
16        filed. However, the aforementioned substituted
17        execution shall have no effect upon the previously
18        determined date of expiration of approval of the
19        application. Notwithstanding the provisions of this
20        subparagraph (f), approvals granted under this
21        paragraph (2) of subsection F prior to the effective
22        date of this Act shall be governed by the provisions of
23        this Act in effect on such date of approval; and
24            (g) no person shall be considered to have violated
25        Section 5 of this Act by reason of any offer or sale
26        effected in reliance upon an approval granted under

 

 

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1        this paragraph (2) after a termination thereof under
2        the foregoing subparagraph (f) if official notice of
3        such termination has not been circulated generally to
4        dealers by the Secretary of State and if such person
5        sustains the burden of proof that he or she did not
6        know, and in the exercise of reasonable care, could not
7        have known, of the termination; or
8        (3) the securities, or securities of the same class,
9    are the subject of an existing registration under Section 5
10    of this Act.
11    The exemption provided in this subsection F shall apply
12only if the offer or sale is made in good faith and not for the
13purpose of avoiding any of the provisions of this Act, and only
14if the offer or sale is not made for the direct or indirect
15benefit of the issuer of the securities, or the controlling
16person in respect of such issuer.
17    G. (1) Any offer, sale or issuance of a security, whether
18    to residents or to non-residents of this State, where:
19            (a) all sales of such security to residents of this
20        State (including the most recent such sale) within the
21        immediately preceding 12-month period have been made
22        to not more than 35 persons or have involved an
23        aggregate sales price of not more than $1,000,000;
24            (b) such security is not offered or sold by means
25        of any general advertising or general solicitation in
26        this State; and

 

 

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1            (c) no commission, discount, or other remuneration
2        exceeding 20% of the sale price of such security, if
3        sold to a resident of this State, is paid or given
4        directly or indirectly for or on account of such sales.
5        (2) In computing the number of resident purchasers or
6    the aggregate sales price under paragraph (1) (a) above,
7    there shall be excluded any purchaser or dollar amount of
8    sales price, as the case may be, with respect to any
9    security which at the time of its sale was exempt under
10    Section 3 or was registered under Section 5, 6 or 7 or was
11    sold in a transaction exempt under other subsections of
12    this Section 4.
13        (3) A prospectus or preliminary prospectus with
14    respect to a security for which a registration statement is
15    pending or effective under the Federal 1933 Act shall not
16    be deemed to constitute general advertising or general
17    solicitation in this State as such terms are used in
18    paragraph (1) (b) above, provided that such prospectus or
19    preliminary prospectus has not been sent or otherwise
20    delivered to more than 150 residents of this State.
21        (4) The Secretary of State shall by rule or regulation
22    require the filing of a report or reports of sales made in
23    reliance upon the exemption provided by this subsection G
24    and prescribe the form of such report and the time within
25    which such report shall be filed. Such report shall set
26    forth the name and address of the issuer and of the

 

 

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1    controlling person, if the sale was for the direct or
2    indirect benefit of such person, and any other information
3    deemed necessary by the Secretary of State to enforce
4    compliance with this subsection G. The Secretary of State
5    shall prescribe by rule or regulation the amount of the fee
6    for filing any such report, established pursuant to Section
7    11a of this Act, which shall not be returnable in any
8    event. The Secretary of State may impose, in such cases as
9    he or she may deem appropriate, a penalty for failure to
10    file any such report in a timely manner, but no such
11    penalty shall exceed an amount equal to five times the
12    filing fee. The contents of any such report or portion
13    thereof may be deemed confidential by the Secretary of
14    State by rule or order and if so deemed shall not be
15    disclosed to the public except by order of court or in
16    court proceedings. The failure to file any such report
17    shall not affect the availability of such exemption, but
18    such failure to file any such report shall constitute a
19    violation of subsection D of Section 12 of this Act,
20    subject to the penalties enumerated in Section 14 of this
21    Act. The civil remedies provided for in subsection A of
22    Section 13 of this Act and the civil remedies of rescission
23    and appointment of a receiver, conservator, ancillary
24    receiver or ancillary conservator provided for in
25    subsection F of Section 13 of this Act shall not be
26    available against any person by reason of the failure to

 

 

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1    file any such report or on account of the contents of any
2    such report.
3        H. Any offer, sale or issuance of a security to an
4    accredited investor provided that such security is not
5    offered or sold by means of any general advertising or
6    general solicitation, except as otherwise permitted in
7    this Act.
8        I. Any offer, sale or issuance of securities to or for
9    the benefit of security holders of any person incident to a
10    vote by such security holders pursuant to such person's
11    organizational document or any applicable statute of the
12    jurisdiction of such person's organization, on a merger,
13    consolidation, reclassification of securities, or sale or
14    transfer of assets in consideration of or exchange for
15    securities of the same or another person.
16        J. Any offer, sale or issuance of securities in
17    exchange for one or more outstanding securities, claims or
18    property interests, or partly in such exchange and partly
19    for cash, where such offer, sale or issuance is incident to
20    a reorganization, recapitalization, readjustment,
21    composition or settlement of a claim, as approved by a
22    court of competent jurisdiction of the United States, or
23    any state.
24        K. Any offer, sale or issuance of securities for
25    patronage, or as patronage refunds, or in connection with
26    marketing agreements by cooperative associations organized

 

 

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1    exclusively for agricultural, producer, marketing,
2    purchasing, or consumer purposes; and the sale of
3    subscriptions for or shares of stock of cooperative
4    associations organized exclusively for agricultural,
5    producer, marketing, purchasing, or consumer purposes, if
6    no commission or other remuneration is paid or given
7    directly or indirectly for or on account of such
8    subscription, sale or resale, and if any person does not
9    own beneficially more than 5% of the aggregate amount of
10    issued and outstanding capital stock of such cooperative
11    association.
12        L. Offers for sale or solicitations of offers to buy
13    (but not the acceptance thereof), of securities which are
14    the subject of a pending registration statement filed under
15    the Federal 1933 Act and which are the subject of a pending
16    application for registration under this Act.
17        M. Any offer or sale of preorganization subscriptions
18    for any securities prior to the incorporation,
19    organization or formation of any issuer under the laws of
20    the United States, or any state, or the issuance by such
21    issuer, after its incorporation, organization or
22    formation, of securities pursuant to such preorganization
23    subscriptions, provided the number of subscribers does not
24    exceed 25 and either (1) no commission or other
25    remuneration is paid or given directly or indirectly for or
26    on account of such sale or sales or issuance, or (2) if any

 

 

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1    commission or other remuneration is paid or given directly
2    or indirectly for or on account of such sale or sales or
3    issuance, the securities are not offered or sold by any
4    means of general advertising or general solicitation in
5    this State.
6        N. The execution of orders for purchase of securities
7    by a registered salesperson and dealer, provided such
8    persons act as agent for the purchaser, have made no
9    solicitation of the order to purchase the securities, have
10    no direct interest in the sale or distribution of the
11    securities ordered, receive no commission, profit, or
12    other compensation other than the commissions involved in
13    the purchase and sale of the securities and deliver to the
14    purchaser written confirmation of the order which clearly
15    identifies the commissions paid to the registered dealer.
16        O. Any offer, sale or issuance of securities, other
17    than fractional undivided interests in an oil, gas or other
18    mineral lease, right or royalty, for the direct or indirect
19    benefit of the issuer thereof, or of a controlling person,
20    whether through a dealer (acting either as principal or
21    agent) or otherwise, if the securities sold, immediately
22    following the sale or sales, together with securities
23    already owned by the purchaser, would constitute 50% or
24    more of the equity interest of any one issuer, provided
25    that the number of purchasers is not more than 5 and
26    provided further that no commission, discount or other

 

 

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1    remuneration exceeding 15% of the aggregate sale price of
2    the securities is paid or given directly or indirectly for
3    or on account of the sale or sales.
4        P. Any offer, sale or issuance of securities (except
5    face amount certificate contracts and investment fund
6    shares) issued by and representing an interest in an issuer
7    which is a business corporation incorporated under the laws
8    of this State, the purposes of which are to provide capital
9    and supervision solely for the redevelopment of blighted
10    urban areas located in a municipality in this State and
11    whose assets are located entirely within that
12    municipality, provided: (1) no commission, discount or
13    other remuneration is paid or given directly or indirectly
14    for or on account of the sale or sales of such securities;
15    (2) the aggregate amount of any securities of the issuer
16    owned of record or beneficially by any one person will not
17    exceed the lesser of $5,000 or 4% of the equity
18    capitalization of the issuer; (3) the officers and
19    directors of the corporation have been bona fide residents
20    of the municipality not less than 3 years immediately
21    preceding the effectiveness of the offering sheet for the
22    securities under this subsection P; and (4) the issuer
23    files with the Secretary of State an offering sheet
24    descriptive of the securities setting forth:
25            (a) the name and address of the issuer;
26            (b) the title and total amount of securities to be

 

 

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1        offered;
2            (c) the price at which the securities are to be
3        offered; and
4            (d) such additional information as the Secretary
5        of State may prescribe by rule and regulation.
6        The Secretary of State shall within a reasonable time
7    examine the offering sheet so filed and, unless the
8    Secretary of State shall make a determination that the
9    offering sheet so filed does not conform to the
10    requirements of this subsection P, shall declare the
11    offering sheet to be effective, which offering sheet shall
12    continue effective for a period of 12 months from the date
13    it becomes effective. The fee for examining the offering
14    sheet shall be as established pursuant to Section 11a of
15    this Act, and shall not be returnable in any event. The
16    Secretary of State shall by rule or regulation require the
17    filing of a report or reports of sales made to residents of
18    this State in reliance upon the exemption provided by this
19    subsection P and prescribe the form of such report and the
20    time within which such report shall be filed. The Secretary
21    of State shall prescribe by rule or regulation the amount
22    of the fee for filing any such report, but such fee shall
23    not be less than the minimum amount nor more than the
24    maximum amount established pursuant to Section 11a of this
25    Act, and shall not be returnable in any event. The
26    Secretary of State may impose, in such cases as he or she

 

 

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1    may deem appropriate, a penalty for failure to file any
2    such report in a timely manner, but no such penalty shall
3    exceed an amount equal to five times the filing fee. The
4    contents of any such report shall be deemed confidential
5    and shall not be disclosed to the public except by order of
6    court or in court proceedings. The failure to file any such
7    report shall not affect the availability of such exemption,
8    but such failure to file any such report shall constitute a
9    violation of subsection D of Section 12 of this Act,
10    subject to the penalties enumerated in Section 14 of this
11    Act. The civil remedies provided for in subsection A of
12    Section 13 of this Act and the civil remedies of rescission
13    and appointment of a receiver, conservator, ancillary
14    receiver or ancillary conservator provided for in
15    subsection F of Section 13 of this Act shall not be
16    available against any person by reason of the failure to
17    file any such report or on account of the contents of any
18    such report.
19        Q. Any isolated transaction, whether effected by a
20    dealer or not.
21        R. Any offer, sale or issuance of a security to any
22    person who purchases at least $150,000 of the securities
23    being offered, where the purchaser's total purchase price
24    does not, or it is reasonably believed by the person
25    relying upon this subsection R that said purchase price
26    does not, exceed 20 percent of the purchaser's net worth at

 

 

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1    the time of sale, or if a natural person a joint net worth
2    with that person's spouse, for one or any combination of
3    the following: (i) cash, (ii) securities for which market
4    quotations are readily available, (iii) an unconditional
5    obligation to pay cash or securities for which quotations
6    are readily available, which obligation is to be discharged
7    within five years of the sale of the securities to the
8    purchaser, or (iv) the cancellation of any indebtedness
9    owed by the issuer to the purchaser; provided that such
10    security is not offered or sold by means of any general
11    advertising or general solicitation in this State.
12        S. Any offer, sale or issuance of a security to any
13    person who is, or who is reasonably believed by the person
14    relying upon this subsection S to be, a director, executive
15    officer, or general partner of the issuer of the securities
16    being offered or sold, or any director, executive officer,
17    or general partner of a general partner of that issuer. For
18    purposes of this subsection S, "executive officer" shall
19    mean the president, any vice president in charge of a
20    principal business unit, division or function (such as
21    sales, administration or finance), any other officer who
22    performs a policy making function, or any other person who
23    performs similar policy making functions for the issuer.
24    Executive officers of subsidiaries may be deemed executive
25    officers of the issuer if they perform such policy making
26    functions for the issuer.

 

 

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1        A document being filed pursuant to this Section 4 shall
2    be deemed filed, and any fee paid pursuant to this Section
3    4 shall be deemed paid, upon the date of actual receipt
4    thereof by the Secretary of State.
5        T. An offer or sale of a security, by an issuer that is
6    organized and, as of the time of the offer and the time of
7    sale is , in good standing under the laws of the State of
8    Illinois and that is , made solely to persons or entities
9    that are, as of the time of the offer and time of sale,
10    residents of the State of Illinois, subject to the
11    following provided:
12            (1) The offering is made in compliance with the
13        requirements of meets all of the requirements of the
14        federal exemption for intrastate offerings provided in
15        Section 3(a)(11) of the Securities Act of 1933 (15
16        U.S.C. 77c(a)(11)) and Rule 147 adopted under the
17        Securities Act of 1933 (17 CFR 230.147), Rule 147A (17
18        CFR 230.147A), or any other federal exemption
19        providing for intrastate offerings from time to time in
20        effect.
21            (2) The aggregate purchase price of all securities
22        sold by an issuer in reliance on the exemption under
23        this subsection, within any 12-month period, does not
24        exceed: (i) $1,000,000; or (ii) $4,000,000 if the
25        issuer has undergone and made available (directly, or
26        through a registered Internet portal), to each

 

 

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1        prospective purchaser and the Secretary of State,
2        copies of its most recent financial statements which
3        have been audited by an independent auditor and
4        certified by a senior officer of the issuer as fairly,
5        completely, and accurately presenting the financial
6        condition of the issuer, in all material respects, as
7        of the dates indicated therein. Amounts received in
8        connection with any offer or sale to any accredited
9        investor or any of the following shall not count toward
10        the calculation of the foregoing monetary limitations:
11                (a) any entity (including, without limitation,
12            any trust) in which all of the equity interests are
13            owned by (or with respect to any trust, the primary
14            beneficiaries are) persons who are accredited
15            investors or who meet one or more of the criteria
16            in subparagraphs (b) through (d) of this paragraph
17            (2);
18                (b) with respect to participating in an
19            offering of a particular issuer, a natural person
20            serving as an officer, director, partner, or
21            trustee of, or otherwise occupying similar status
22            or performing similar functions with respect to,
23            such issuer;
24                (c) with respect to participating in an
25            offering of a particular issuer, a natural person
26            or entity who owns 10% or more of the then

 

 

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1            aggregate outstanding voting capital securities of
2            such issuer; or
3                (d) such other person or entity as the
4            Secretary of State may hereafter exempt by rule.
5            The Secretary of State may hereafter cumulatively
6        increase the dollar limitations provided in this
7        paragraph (2).
8            (3) The aggregate amount sold by an issuer to any
9        purchaser (other than an accredited investor or a
10        person or entity which meets one or more of the
11        criteria in subparagraphs (a) through (d) of paragraph
12        (2) of this subsection T) in an offering of securities
13        made in reliance on the exemption provided in this
14        subsection T, within any consecutive 12-month period,
15        does not exceed $5,000.
16            (4) The Secretary of State shall establish by rule
17        the duties of the issuer including disclosure and
18        filing requirements, treatment of escrow funds and
19        agreements, production of financial statements, and
20        other requirements as deemed necessary.
21            (5) The issuer has made available, to each
22        prospective purchaser and the Secretary of State,
23        copies of its most recent financial statements
24        personally certified by one or more senior officers of
25        the issuer as fairly, completely, and accurately
26        presenting the financial condition of the issuer, in

 

 

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1        all material respects, as of the dates indicated
2        therein.
3            (6) No commission or other remuneration is paid or
4        given directly or indirectly to any person or entity
5        (including, without limitation, any registered
6        Internet portal) for soliciting any investor, other
7        than such payments made person in this State, except to
8        registered dealers and registered salespersons
9        licensed in this State and such finder fees and other
10        payments now or hereafter permitted under applicable
11        Federal law or a United States Securities and Exchange
12        Commission rule or interpretive letter.
13            (7) Not less than 15 days before the earlier of the
14        first sale of securities made in reliance on the
15        exemption provided in this subsection T, or the use of
16        any general solicitation with respect thereto (other
17        than a general announcement made by or on behalf of),
18        an issuer shall file a notice filing with the Secretary
19        of State together with such other forms, materials, and
20        fees as required by the Secretary of State by rule.
21            The Secretary of State shall prescribe by rule the
22        amount of the fee for filing the notice filing required
23        under this subsection, but the fee shall not be less
24        than the minimum amount nor more than the maximum
25        amount in subparagraph (a), established under pursuant
26        to Section 11a of this Act and shall not be returnable

 

 

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1        in any event. The Secretary of State may impose, in
2        such cases as the Secretary he or she may deem
3        appropriate, a penalty for failure to file any such
4        notice in a timely manner, but no such penalty shall
5        exceed an amount equal to 5 times the filing fee. The
6        contents of any such notice or portion thereof may be
7        deemed confidential by the Secretary of State by rule
8        or order and if so deemed shall not be disclosed to the
9        public except by order of court or in court
10        proceedings. The failure to file any such notice does
11        not affect the availability of such exemption, but such
12        failure to file any such report constitutes a violation
13        of subsection D of Section 12 of this Act and is
14        subject to the penalties and remedies available in this
15        Act and under the law.
16            (8) All payments for purchase of securities
17        offered pursuant to the exemption provided under this
18        subsection T are made directly to, and held by, a the
19        qualified escrowee identified in the escrow agreement
20        required pursuant to subparagraph (c) of paragraph
21        (4).
22            (9) The issuer includes each of the following in
23        one or more of the offering materials delivered to a
24        prospective purchaser, or to which a prospective
25        purchaser has been granted electronic access, in
26        connection with the offering:

 

 

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1                (a) a description of the issuer, its type of
2            entity, the address, and telephone number of its
3            principal office;
4                (b) a reasonably detailed description of the
5            intended use of the offering proceeds, including
6            any amounts to be paid, as compensation or
7            otherwise, to any owner, executive officer,
8            director, managing member, or other person
9            occupying a similar status or performing similar
10            functions on behalf of the issuer;
11                (c) the identity of all persons owning more
12            than 20% 10% of the voting capital securities of
13            the issuer;
14                (d) the identity of the executive officers,
15            directors, managing members, and other persons
16            occupying a similar status or performing similar
17            functions in the name of and on behalf of the
18            issuer, including their titles and a reasonably
19            detailed description of their prior experience;
20                (e) the identity of any person or entity who
21            has been or will be retained by the issuer to
22            assist the issuer in conducting the offering and
23            sale of the securities (including all registered
24            Internet portals but excluding persons acting
25            solely as accountants or attorneys and employees
26            whose primary job responsibilities involve the

 

 

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1            operating business of the issuer rather than
2            assisting the issuer in raising capital) and a
3            description of the consideration being paid to
4            each such person or entity for such assistance;
5                (e-5) to the extent the issuer is an affiliate
6            or related party of the registered Internet portal
7            being used to conduct the offering, a reasonably
8            detailed description of the relationship between
9            the parties;
10                (f) any additional information material to the
11            offering, including a description of significant
12            factors that make the offering speculative or
13            risky for the purchaser;
14                (g) (blank). the information required pursuant
15            to subparagraphs (a) and (b) of paragraph (4) of
16            this subsection T;
17                (h) such other information as the Secretary of
18            State may hereafter require by rule.
19            (10) The issuer (directly or through a registered
20        Internet portal) requires each purchaser to certify,
21        in writing or electronically, that the purchaser:
22                (a) is a resident of the State of Illinois;
23                (b) understands that the purchaser he or she is
24            investing in a high-risk, highly speculative,
25            business venture, that the purchaser he or she may
26            lose all of the his or her investment, and that the

 

 

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1            purchaser that he or she can afford such a loss of
2            the his or her investment;
3                (c) understands that the securities being
4            offered are highly illiquid, that there is no ready
5            market for the sale of such securities, that it may
6            be difficult or impossible for purchaser to sell or
7            otherwise dispose of such securities, and (where
8            applicable) that purchaser may be required to hold
9            the securities for an indefinite period of time;
10            and
11                (d) understands that purchaser may be subject
12            to the payment of certain taxes with respect to the
13            securities being purchased whether or not
14            purchaser has sold, or otherwise disposed of, such
15            securities or whether purchaser has received any
16            distributions or other amounts from the issuer.
17            (11) The issuer (directly or through a registered
18        Internet portal) obtains from each purchaser of a
19        security offered under this subsection T evidence that
20        the purchaser is a resident of this State and, if
21        applicable, is an accredited investor. Without
22        limiting the generality of the foregoing, and not to
23        the exclusion of other reasonable methods which may be
24        used by the issuer in connection with the foregoing, an
25        issuer may rely on any evidence permitted under the
26        applicable Federal exemption relied upon pursuant to

 

 

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1        paragraph (1) of this subsection T.
2            (12) The issuer (and to the extent a registered
3        Internet portal is used, such registered Internet
4        portal) maintains records of all offers and sales of
5        securities made pursuant to the exemption granted by
6        this subsection T and provides ready access to such
7        records to the Secretary of State, upon notice from the
8        Secretary of State.
9            (13) The issuer is not, either before or as a
10        result of the offering:
11                (a) an investment company, as defined in
12            Section 3 of the Investment Company Act of 1940 (15
13            U.S.C. 80a-3), as amended and in effect (unless the
14            issuer qualifies for exemption from the terms
15            thereof exclusion from such definition pursuant
16            to: one or more of the exceptions provided in
17            Section 3(c) of the Investment Company Act of
18            1940; , any other provision of the Investment
19            Company Act of 1940; , or any United States
20            Securities and Exchange Commission administrative
21            rule, regulation, or interpretive letter ruling
22            rule or regulation promulgated with respect to the
23            Investment Company Act of 1940 or in connection
24            therewith; or any other applicable Federal
25            regulation or exemption); or
26                (b) subject to the reporting requirements of

 

 

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1            Section 13 or 15(d) of the Securities Exchange Act
2            of 1934 (15 U.S.C. 78m or 15 U.S.C. 78o(d).
3            (14) Neither the issuer, nor any person owning more
4        than 20% of the voting capital securities of the issuer
5        affiliated with the issuer (either before or as a
6        result of the offering), nor the offering itself, nor
7        the registered Internet portal (to the extent used) is
8        subject to disqualification established by the
9        Secretary of State by rule or contained in the
10        applicable Federal exemption relied upon pursuant to
11        paragraph (1) of this subsection T the Securities Act
12        of 1933 (15 U.S.C. 77c(a)(11)) and Rule 147 adopted
13        under the Securities Act of 1933 (17 CFR 230.147),
14        unless both of the following are met:
15                (a) on a showing of good cause and without
16            prejudice to any other action by the Secretary of
17            State, the Secretary of State determines that it is
18            not necessary under the circumstances that an
19            exemption is denied; and
20                (b) the issuer establishes that it made a
21            factual inquiry into whether any disqualification
22            existed under this paragraph (14), but did not
23            know, and in the exercise of reasonable care could
24            not have known, that a disqualification existed
25            under this paragraph (14); the nature and scope of
26            the requisite inquiry will vary based on the

 

 

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1            circumstances of the issuer and the other offering
2            participants.
3            (15) A separate investment vehicle may be used to
4        aggregate investments in the offering being made by an
5        issuer under this Section provided that such separate
6        investment vehicle is permitted pursuant to Federal
7        law or the rules or an interpretive letter of the
8        United States Securities and Exchange Commission. The
9        Secretary shall adopt rules consistent with Federal
10        law, rules, or interpretive opinions regarding such
11        separate investment vehicles. For purposes of
12        determining compliance with the provisions of this
13        subsection T and the related administrative rules,
14        such investment vehicle shall be disregarded and the
15        subject offering shall be assessed as if the issuer had
16        made a direct offering to the participating investors.
17        Such separate investment vehicle shall not be
18        considered as an entity qualifying under subparagraph
19        (c) of paragraph (2) of this subsection T for purposes
20        of calculating the purchase price totals permitted
21        under the exemption. The Secretary of State may
22        establish by rule the duties of the separate investment
23        vehicle under this subsection including the production
24        of financial statements, maintenance of certain books
25        and records of the separate investment vehicle, and
26        other requirements as deemed necessary.

 

 

HB3791 Enrolled- 30 -LRB100 07306 JLS 21791 b

1(Source: P.A. 99-182, eff. 1-1-16.)
 
2    (815 ILCS 5/8d)
3    Sec. 8d. Offerings made through registered Internet
4portals.
5    (a) An issuer shall make an offering or sale of securities
6pursuant to subsection T of Section 4 of this Act through the
7use of one or more registered Internet portals.
8    (b) The Internet portal:
9        (1) shall be a registered broker-dealer under the
10    Securities Exchange Act of 1934 (15 U.S.C. 78o);
11        (2) shall be a funding portal registered under the
12    Securities Act of 1933 (15 U.S.C. 77d-1) and the Securities
13    and Exchange Commission has adopted rules under authority
14    of Section 3(h) of the Securities Exchange Act of 1934 (15
15    U.S.C. 78c) and Section 304 of the Jumpstart Our Business
16    Startups Act (P.L. 112-106) governing funding portals;
17        (3) shall be a dealer registered under this Act as of
18    the date of any offer or sale of securities made through
19    the Internet portal; or
20        (4) shall, to the extent it meets the qualifications
21    for exemption from registration pursuant to subsection (d)
22    of this Section:
23            (A) file, not later than 30 days before the date of
24        the first offer or sale of securities made within this
25        State, an application for registration (or renewal of

 

 

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1        registration, as applicable) as a registered Internet
2        portal with the Secretary of State, in writing or in
3        electronic form as prescribed by the Secretary of
4        State, which the Secretary of State shall make
5        available as an electronic document on the Secretary of
6        State's Internet website, containing such information
7        and required deliveries as specified therein; and
8            (B) pay the application filing fee established
9        under Section 11a of this Act; the Secretary of State
10        shall, within a reasonable time, examine the filed
11        application and other materials filed and, approve or
12        deny the application.
13    (c) If any change occurs in the information submitted by,
14or on behalf of, an Internet portal to the Secretary of State,
15the Internet portal shall notify the Secretary of State within
1610 days after such change occurs and shall provide the
17Secretary of State with such additional information (if any)
18requested by the Secretary of State in connection therewith.
19    (d) Notwithstanding anything contained in this Act to the
20contrary, neither an Internet portal nor its owning or
21operating entity is required to register as a dealer or an
22investment advisor under this Act if each of the following
23applies with respect to the Internet portal and its owning or
24operating entity:
25        (1) It does not solicit purchases, sales, or offers to
26    buy the securities offered or displayed on the Internet

 

 

HB3791 Enrolled- 32 -LRB100 07306 JLS 21791 b

1    portal.
2        (2) It does not collect or hold funds in connection
3    with any purchase, sale, or offer to buy any securities
4    offered or displayed on the Internet portal.
5        (3) It does not compensate employees, agents, or other
6    persons for the solicitation or based on the sale of
7    securities displayed or referenced on the Internet portal.
8        (4) It is not compensated based on the amount of
9    securities sold.
10        (5) The fee it charges an issuer for an offering of
11    securities on the Internet portal is a fixed amount for
12    each offering, a variable amount based on the length of
13    time that the securities are offered on the Internet
14    portal, a variable amount based on the total proposed
15    offering amount, or any combination of such fixed and
16    variable amounts.
17        (6) It does not offer investment advice or
18    recommendations; however, an Internet portal is not deemed
19    to be offering investment advice or recommendations simply
20    by virtue of:
21            (A) selecting transactions in which the Internet
22        portal shall serve as an intermediary;
23            (B) establishing reasonable selection criteria for
24        an issuer to meet in order to establish an offer or
25        sale of securities through the Internet portal;
26            (C) establishing reasonable selection criteria for

 

 

HB3791 Enrolled- 33 -LRB100 07306 JLS 21791 b

1        a potential purchaser to meet in order to participate
2        in an offer or sale of securities made through the
3        Internet portal; or
4            (D) terminating an issuer transaction at any time
5        before the first sale of the securities of such issuer
6        if the Internet portal determines such action is
7        appropriate, after reasonable due diligence, to
8        protect potential purchasers, and the Internet portal
9        is able to direct the qualified escrowee to return all
10        funds then provided by potential purchasers, if any.
11        (7) It does not engage in such other activities as the
12    Secretary of State, by rule, determines are prohibited.
13    (e) Upon completion of an offering made pursuant to
14subsection T of Section 4, each registered Internet portal
15involved with the transactions (and the issuer, to the extent
16applicable) shall store any and all electronic materials
17related to the completed offering (including copies of all
18offering documents, all offering materials, and all purchaser
19information) on a secure, non-public, server or in such other
20manner as the Secretary of State may hereafter deem acceptable
21by rule.
22    (f) Notwithstanding anything contained in this Act to the
23contrary, in connection with any offering or sale of securities
24pursuant to subsection T of Section 4 of this Act, the hosting
25registered Internet portal may elect, in its discretion, to
26accept as compensation (in whole or part) for the services

 

 

HB3791 Enrolled- 34 -LRB100 07306 JLS 21791 b

1provided in connection with the subject offering:
2        (1) such equity in, or other securities issued by,
3    issuer on the Internet portal as part of the subject
4    offering; or
5        (2) equity in, or other securities issued by, issuer of
6    any kind, provided that any right to distribution or
7    payment with respect to such class of equity or other
8    securities received by the registered Internet portal be
9    equal, or junior, in terms of priority to the distribution
10    and payment rights, as applicable, of the securities being
11    offered on the Internet portal as part of the subject
12    offering.
13(Source: P.A. 99-182, eff. 1-1-16.)