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Full Text of HB3791  100th General Assembly

HB3791eng 100TH GENERAL ASSEMBLY

  
  
  

 


 
HB3791 EngrossedLRB100 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, and which
13maintains at least one physical business location within the
14State; (b) is certified as an independent escrowee under, and
15pursuant to the terms and requirements of, the Title Insurance
16Act; or (c) is a bank, regulated trust company, savings bank,
17savings and loan association, or credit union, registered
18broker-dealer, or law firm which is authorized to do business
19in the State and which maintains at least one physical business
20location within the State.
21(Source: P.A. 99-182, eff. 1-1-16.)
 
22    (815 ILCS 5/4)  (from Ch. 121 1/2, par. 137.4)

 

 

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1    Sec. 4. Exempt transactions. The provisions of Sections 2a,
25, 6 and 7 of this Act shall not apply to any of the following
3transactions, except where otherwise specified in this Section
44:
5        A. Any offer or sale, whether through a dealer or
6    otherwise, of securities by a person who is not an issuer,
7    underwriter, dealer or controlling person in respect of
8    such securities, and who, being the bona fide owner of such
9    securities, disposes thereof for his or her own account;
10    provided, that such offer or sale is not made directly or
11    indirectly for the benefit of the issuer or of an
12    underwriter or controlling person.
13        B. Any offer, sale, issuance or exchange of securities
14    of the issuer to or with security holders of the issuer
15    except to or with persons who are security holders solely
16    by reason of holding transferable warrants, transferable
17    options, or similar transferable rights of the issuer, if
18    no commission or other remuneration is paid or given
19    directly or indirectly for or on account of the procuring
20    or soliciting of such sale or exchange (other than a fee
21    paid to underwriters based on their undertaking to purchase
22    any securities not purchased by security holders in
23    connection with such sale or exchange).
24        C. Any offer, sale or issuance of securities to any
25    corporation, bank, savings bank, savings institution,
26    savings and loan association, trust company, insurance

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        as is provided for in subsections E, F and G of Section
2        11 of this Act, or (2) the applicant filing with the
3        Secretary of State an affidavit to the effect that (i)
4        the subject securities have become exempt under
5        Section 3 of this Act or (ii) the applicant no longer
6        is capable of acting as the applicant and stating the
7        reasons therefor or (iii) the applicant no longer
8        desires to act as the applicant. In the event of the
9        filing of an affidavit under either preceding
10        sub-division (ii) or (iii) the Secretary of State may
11        authorize a substitution of applicant upon the new
12        applicant executing the application as originally
13        filed. However, the aforementioned substituted
14        execution shall have no effect upon the previously
15        determined date of expiration of approval of the
16        application. Notwithstanding the provisions of this
17        subparagraph (f), approvals granted under this
18        paragraph (2) of subsection F prior to the effective
19        date of this Act shall be governed by the provisions of
20        this Act in effect on such date of approval; and
21            (g) no person shall be considered to have violated
22        Section 5 of this Act by reason of any offer or sale
23        effected in reliance upon an approval granted under
24        this paragraph (2) after a termination thereof under
25        the foregoing subparagraph (f) if official notice of
26        such termination has not been circulated generally to

 

 

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1        dealers by the Secretary of State and if such person
2        sustains the burden of proof that he or she did not
3        know, and in the exercise of reasonable care, could not
4        have known, of the termination; or
5        (3) the securities, or securities of the same class,
6    are the subject of an existing registration under Section 5
7    of this Act.
8    The exemption provided in this subsection F shall apply
9only if the offer or sale is made in good faith and not for the
10purpose of avoiding any of the provisions of this Act, and only
11if the offer or sale is not made for the direct or indirect
12benefit of the issuer of the securities, or the controlling
13person in respect of such issuer.
14    G. (1) Any offer, sale or issuance of a security, whether
15    to residents or to non-residents of this State, where:
16            (a) all sales of such security to residents of this
17        State (including the most recent such sale) within the
18        immediately preceding 12-month period have been made
19        to not more than 35 persons or have involved an
20        aggregate sales price of not more than $1,000,000;
21            (b) such security is not offered or sold by means
22        of any general advertising or general solicitation in
23        this State; and
24            (c) no commission, discount, or other remuneration
25        exceeding 20% of the sale price of such security, if
26        sold to a resident of this State, is paid or given

 

 

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1        directly or indirectly for or on account of such sales.
2        (2) In computing the number of resident purchasers or
3    the aggregate sales price under paragraph (1) (a) above,
4    there shall be excluded any purchaser or dollar amount of
5    sales price, as the case may be, with respect to any
6    security which at the time of its sale was exempt under
7    Section 3 or was registered under Section 5, 6 or 7 or was
8    sold in a transaction exempt under other subsections of
9    this Section 4.
10        (3) A prospectus or preliminary prospectus with
11    respect to a security for which a registration statement is
12    pending or effective under the Federal 1933 Act shall not
13    be deemed to constitute general advertising or general
14    solicitation in this State as such terms are used in
15    paragraph (1) (b) above, provided that such prospectus or
16    preliminary prospectus has not been sent or otherwise
17    delivered to more than 150 residents of this State.
18        (4) The Secretary of State shall by rule or regulation
19    require the filing of a report or reports of sales made in
20    reliance upon the exemption provided by this subsection G
21    and prescribe the form of such report and the time within
22    which such report shall be filed. Such report shall set
23    forth the name and address of the issuer and of the
24    controlling person, if the sale was for the direct or
25    indirect benefit of such person, and any other information
26    deemed necessary by the Secretary of State to enforce

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1            (d) such additional information as the Secretary
2        of State may prescribe by rule and regulation.
3        The Secretary of State shall within a reasonable time
4    examine the offering sheet so filed and, unless the
5    Secretary of State shall make a determination that the
6    offering sheet so filed does not conform to the
7    requirements of this subsection P, shall declare the
8    offering sheet to be effective, which offering sheet shall
9    continue effective for a period of 12 months from the date
10    it becomes effective. The fee for examining the offering
11    sheet shall be as established pursuant to Section 11a of
12    this Act, and shall not be returnable in any event. The
13    Secretary of State shall by rule or regulation require the
14    filing of a report or reports of sales made to residents of
15    this State in reliance upon the exemption provided by this
16    subsection P and prescribe the form of such report and the
17    time within which such report shall be filed. The Secretary
18    of State shall prescribe by rule or regulation the amount
19    of the fee for filing any such report, but such fee shall
20    not be less than the minimum amount nor more than the
21    maximum amount established pursuant to Section 11a of this
22    Act, and shall not be returnable in any event. The
23    Secretary of State may impose, in such cases as he or she
24    may deem appropriate, a penalty for failure to file any
25    such report in a timely manner, but no such penalty shall
26    exceed an amount equal to five times the filing fee. The

 

 

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1    contents of any such report shall be deemed confidential
2    and shall not be disclosed to the public except by order of
3    court or in court proceedings. The failure to file any such
4    report shall not affect the availability of such exemption,
5    but such failure to file any such report shall constitute a
6    violation of subsection D of Section 12 of this Act,
7    subject to the penalties enumerated in Section 14 of this
8    Act. The civil remedies provided for in subsection A of
9    Section 13 of this Act and the civil remedies of rescission
10    and appointment of a receiver, conservator, ancillary
11    receiver or ancillary conservator provided for in
12    subsection F of Section 13 of this Act shall not be
13    available against any person by reason of the failure to
14    file any such report or on account of the contents of any
15    such report.
16        Q. Any isolated transaction, whether effected by a
17    dealer or not.
18        R. Any offer, sale or issuance of a security to any
19    person who purchases at least $150,000 of the securities
20    being offered, where the purchaser's total purchase price
21    does not, or it is reasonably believed by the person
22    relying upon this subsection R that said purchase price
23    does not, exceed 20 percent of the purchaser's net worth at
24    the time of sale, or if a natural person a joint net worth
25    with that person's spouse, for one or any combination of
26    the following: (i) cash, (ii) securities for which market

 

 

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

 

 

HB3791 Engrossed- 19 -LRB100 07306 JLS 21791 b

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

 

 

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

 

 

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1            Secretary of State may hereafter exempt by rule.
2            The Secretary of State may hereafter cumulatively
3        increase the dollar limitations provided in this
4        paragraph (2).
5            (3) The aggregate amount sold by an issuer to any
6        purchaser (other than an accredited investor or a
7        person or entity which meets one or more of the
8        criteria in subparagraphs (a) through (d) of paragraph
9        (2) of this subsection T) in an offering of securities
10        made in reliance on the exemption provided in this
11        subsection T, within any consecutive 12-month period,
12        does not exceed $5,000.
13            (4) The Secretary of State shall establish by rule
14        the duties of the issuer including disclosure and
15        filing requirements, treatment of escrow funds and
16        agreements, production of financial statements, and
17        other requirements as deemed necessary.
18            (5) The issuer has made available, to each
19        prospective purchaser and the Secretary of State,
20        copies of its most recent financial statements
21        personally certified by one or more senior officers of
22        the issuer as fairly, completely, and accurately
23        presenting the financial condition of the issuer, in
24        all material respects, as of the dates indicated
25        therein.
26            (6) No commission or other remuneration is paid or

 

 

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1        given directly or indirectly to any person or entity
2        (including, without limitation, any registered
3        Internet portal) for soliciting any investor, other
4        than such payments made person in this State, except to
5        registered dealers and registered salespersons
6        licensed in this State and such finder fees and other
7        payments now or hereafter permitted under applicable
8        Federal law or a United States Securities and Exchange
9        Commission rule or interpretive letter.
10            (7) Not less than 15 days before the earlier of the
11        first sale of securities made in reliance on the
12        exemption provided in this subsection T, or the use of
13        any general solicitation with respect thereto (other
14        than a general announcement made by or on behalf of),
15        an issuer shall file a notice filing with the Secretary
16        of State together with such other forms, materials, and
17        fees as required by the Secretary of State by rule.
18            The Secretary of State shall prescribe by rule the
19        amount of the fee for filing the notice filing required
20        under this subsection, but the fee shall not be less
21        than the minimum amount nor more than the maximum
22        amount in subparagraph (a), established under pursuant
23        to Section 11a of this Act and shall not be returnable
24        in any event. The Secretary of State may impose, in
25        such cases as the Secretary he or she may deem
26        appropriate, a penalty for failure to file any such

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1        portal) maintains records of all offers and sales of
2        securities made pursuant to the exemption granted by
3        this subsection T and provides ready access to such
4        records to the Secretary of State, upon notice from the
5        Secretary of State.
6            (13) The issuer is not, either before or as a
7        result of the offering:
8                (a) an investment company, as defined in
9            Section 3 of the Investment Company Act of 1940 (15
10            U.S.C. 80a-3), as amended and in effect (unless the
11            issuer qualifies for exemption from the terms
12            thereof exclusion from such definition pursuant
13            to: one or more of the exceptions provided in
14            Section 3(c) of the Investment Company Act of
15            1940; , any other provision of the Investment
16            Company Act of 1940; , or any United States
17            Securities and Exchange Commission administrative
18            rule, regulation, or interpretive letter ruling
19            rule or regulation promulgated with respect to the
20            Investment Company Act of 1940 or in connection
21            therewith; or any other applicable Federal
22            regulation or exemption); or
23                (b) subject to the reporting requirements of
24            Section 13 or 15(d) of the Securities Exchange Act
25            of 1934 (15 U.S.C. 78m or 15 U.S.C. 78o(d).
26            (14) Neither the issuer, nor any person owning more

 

 

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1        than 20% of the voting capital securities of the issuer
2        affiliated with the issuer (either before or as a
3        result of the offering), nor the offering itself, nor
4        the registered Internet portal (to the extent used) is
5        subject to disqualification established by the
6        Secretary of State by rule or contained in the
7        applicable Federal exemption relied upon pursuant to
8        paragraph (1) of this subsection T the Securities Act
9        of 1933 (15 U.S.C. 77c(a)(11)) and Rule 147 adopted
10        under the Securities Act of 1933 (17 CFR 230.147),
11        unless both of the following are met:
12                (a) on a showing of good cause and without
13            prejudice to any other action by the Secretary of
14            State, the Secretary of State determines that it is
15            not necessary under the circumstances that an
16            exemption is denied; and
17                (b) the issuer establishes that it made a
18            factual inquiry into whether any disqualification
19            existed under this paragraph (14), but did not
20            know, and in the exercise of reasonable care could
21            not have known, that a disqualification existed
22            under this paragraph (14); the nature and scope of
23            the requisite inquiry will vary based on the
24            circumstances of the issuer and the other offering
25            participants.
26            (15) A separate investment vehicle may be used to

 

 

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1        aggregate investments in the offering being made by an
2        issuer under this Section provided that such separate
3        investment vehicle is permitted pursuant to Federal
4        law or the rules or an interpretive letter of the
5        United States Securities and Exchange Commission. The
6        Secretary shall adopt rules consistent with Federal
7        law, rules, or interpretive opinions regarding such
8        separate investment vehicles. For purposes of
9        determining compliance with the provisions of this
10        subsection T and the related administrative rules,
11        such investment vehicle shall be disregarded and the
12        subject offering shall be assessed as if the issuer had
13        made a direct offering to the participating investors.
14        Such separate investment vehicle shall not be
15        considered as an entity qualifying under subparagraph
16        (c) of paragraph (2) of this subsection T for purposes
17        of calculating the purchase price totals permitted
18        under the exemption. The Secretary of State may
19        establish by rule the duties of the separate investment
20        vehicle under this subsection including the production
21        of financial statements, maintenance of certain books
22        and records of the separate investment vehicle, and
23        other requirements as deemed necessary.
24(Source: P.A. 99-182, eff. 1-1-16.)
 
25    (815 ILCS 5/8d)

 

 

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

 

 

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1        State, which the Secretary of State shall make
2        available as an electronic document on the Secretary of
3        State's Internet website, containing such information
4        and required deliveries as specified therein; and
5            (B) pay the application filing fee established
6        under Section 11a of this Act; the Secretary of State
7        shall, within a reasonable time, examine the filed
8        application and other materials filed and, approve or
9        deny the application.
10    (c) If any change occurs in the information submitted by,
11or on behalf of, an Internet portal to the Secretary of State,
12the Internet portal shall notify the Secretary of State within
1310 days after such change occurs and shall provide the
14Secretary of State with such additional information (if any)
15requested by the Secretary of State in connection therewith.
16    (d) Notwithstanding anything contained in this Act to the
17contrary, neither an Internet portal nor its owning or
18operating entity is required to register as a dealer or an
19investment advisor under this Act if each of the following
20applies with respect to the Internet portal and its owning or
21operating entity:
22        (1) It does not solicit purchases, sales, or offers to
23    buy the securities offered or displayed on the Internet
24    portal.
25        (2) It does not collect or hold funds in connection
26    with any purchase, sale, or offer to buy any securities

 

 

HB3791 Engrossed- 32 -LRB100 07306 JLS 21791 b

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

 

 

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

 

 

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