(815 ILCS 5/3)
(from Ch. 121 1/2, par. 137.3)
The provisions of Sections 2a, 5, 6 and 7 of this Act shall not
apply to any of the following securities:
A. Any security (including a revenue obligation)
issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporation or other instrumentality of any one or more of the foregoing, or any certificate of deposit for any such security.
B. Any security issued or guaranteed by Canada, any
Canadian province, any political subdivision of any such province, any agency or corporation or other instrumentality of one or more of the foregoing, or any other foreign government with which the United States then maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor.
C. (1) Any security issued by and representing an
interest in or a debt of, or guaranteed by, any bank or savings bank, bank holding company, or credit union organized under the laws of the United States, or any bank, savings bank, savings institution or trust company organized and supervised under the laws of any state, or any interest or participation in any common trust fund or similar fund maintained by any such bank, savings bank, savings institution or trust company exclusively for the collective investment and reinvestment of assets contributed thereto by such bank, savings bank, savings institution or trust company or any affiliate thereof, in its capacity as fiduciary, trustee, executor, administrator or guardian.
(2) Any security issued or guaranteed to both
principal and interest by an international bank of which the United States is a member.
D. (1) Any security issued by and representing an
interest in or a debt of, or guaranteed by, any federal savings and loan association, or any savings and loan association or building and loan association organized and supervised under the laws of any state.
(2) Any security issued or guaranteed by any federal
credit union or any credit union, industrial loan association, or similar organization organized and supervised under the laws of any state.
E. Any security issued or guaranteed by any railroad,
other common carrier, public utility or holding company where such issuer or guarantor is subject to the jurisdiction of the Interstate Commerce Commission or successor entity, or is a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a company within the meaning of that Act, or is regulated in respect of its rates and charges by a governmental authority of the United States or any state, or is regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, any state, Canada, or any Canadian province.
F. Equipment trust certificates in respect of
equipment leased or conditionally sold to a person, if securities issued by such person would be exempt under subsection E of this Section.
G. Any security which at the time of sale is listed
or approved for listing upon notice of issuance on the New York Stock Exchange, Inc., the American Stock Exchange, Inc., the Pacific Stock Exchange, Inc., the Chicago Stock Exchange, Inc., the Chicago Board of Trade, the Philadelphia Stock Exchange, Inc., the Chicago Board Options Exchange, Incorporated, the National Market System of the Nasdaq Stock Market, or any other exchange, automated quotation system or board of trade which the Secretary of State, by rule or regulation, deems to have substantially equivalent standards for listing or designation as required by any such exchange, automated quotation system or board of trade; and securities senior or of substantially equal rank, both as to dividends or interest and upon liquidation, to securities so listed or designated; and warrants and rights to purchase any of the foregoing; provided, however, that this subsection G shall not apply to investment fund shares or securities of like character, which are being continually offered at a price or prices determined in accordance with a prescribed formula.
The Secretary of State may, after notice and
opportunity for hearing, revoke the exemption afforded by this subparagraph with respect to any securities by issuing an order if the Secretary of State finds that the further sale of the securities in this State would work or tend to work a fraud on purchasers of the securities.
H. Any security issued by a person organized and
operated not for pecuniary profit and exclusively for religious, educational, benevolent, fraternal, agricultural, charitable, athletic, professional, trade, social or reformatory purposes, or as a chamber of commerce or local industrial development corporation, or for more than one of said purposes and no part of the net earnings of which inures to the benefit of any private stockholder or member.
I. Instruments evidencing indebtedness under an
agreement for the acquisition of property under contract of conditional sale.
J. A note secured by a first mortgage upon tangible
personal or real property when such mortgage is made, assigned, sold, transferred and delivered with such note or other written obligation secured by such mortgage, either to or for the benefit of the purchaser or lender; or bonds or notes not more than 10 in number secured by a first mortgage upon the title in fee simple to real property if the aggregate principal amount secured by such mortgage does not exceed $500,000 and also does not exceed 75% of the fair market value of such real property.
K. A note or notes not more than 10 in number secured
by a junior mortgage lien if the aggregate principal amount of the indebtedness represented thereby does not exceed 50% of the amount of the then outstanding prior lien indebtedness and provided that the total amount of the indebtedness (including the indebtedness represented by the subject junior mortgage note or notes) shall not exceed 90% of the fair market value of the property securing such indebtedness; and provided further that each such note or notes shall bear across the face thereof the following legend in letters at least as large as 12 point type: "THIS NOTE IS SECURED BY A JUNIOR MORTGAGE".
L. Any negotiable promissory note or draft, bill of
exchange or bankers' acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within 9 months of the date of issuance exclusive of days of grace, or any renewal of such note, draft, bill or acceptance which is likewise limited, or any guarantee of such note, draft, bill or acceptance or of any such renewal, provided that the note, draft, bill, or acceptance is a negotiable security eligible for discounting by banks that are members of the Federal Reserve System. Any instrument exempted under this subsection from the requirement of Sections 5, 6, and 7 of this Act shall bear across the face thereof the following legend in letters at least as large as 12 point type: "THIS INSTRUMENT IS NEITHER GUARANTEED, NOR IS THE ISSUANCE THEREOF REGULATED BY ANY AGENCY OR DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED STATES.". However, the foregoing legend shall not be required with respect to any such instrument:
(i) sold to a person described in subsection C or H
of Section 4 of this Act;
(ii) sold to a "Qualified Institutional Buyer" as
that term is defined in Rule 144a adopted under the Securities Act of 1933;
(iii) where the minimum initial subscription for the
purchase of such instrument is $100,000 or more; or
(iv) issued by an issuer that has any class of
securities registered under Section 12 of the Securities Exchange Act of 1934 or has any outstanding class of indebtedness rated in one of the 3 highest categories by a rating agency designated by the Department;
M. Any security issued by and representing an
interest in or a debt of, or guaranteed by, any insurance company organized under the laws of any state.
N. Any security issued pursuant to (i) a written
compensatory benefit plan (including without limitation, any purchase, savings, option, bonus, stock appreciation, profit sharing, thrift, incentive, pension, or similar plan) and interests in such plans established by one or more of the issuers thereof or its parents or majority-owned subsidiaries for the participation of their employees, directors, general partners, trustees (where the issuer is a business trust), officers, or consultants or advisers of such issuers or its parents or majority-owned subsidiaries, provided that bona fide services are rendered by consultants or advisers and those services are not in connection with the offer and sale of securities in a capital-raising transaction or (ii) a written contract relating to the compensation of any such person.
O. Any option, put, call, spread or straddle issued
by a clearing agency registered as such under the Federal 1934 Act, if the security, currency, commodity, or other interest underlying the option, put, call, spread or straddle is not required to be registered under Section 5.
P. Any security which meets all of the following
(1) If the issuer is not organized under the laws of
the United States or a state, it has appointed a duly authorized agent in the United States for service of process and has set forth the name and address of the agent in its prospectus.
(2) A class of the issuer's securities is required to
be and is registered under Section 12 of the Federal 1934 Act, and has been so registered for the three years immediately preceding the offering date.
(3) Neither the issuer nor a significant subsidiary
has had a material default during the last seven years, or for the period of the issuer's existence if less than seven years, in the payment of (i) principal, interest, dividend, or sinking fund installment on preferred stock or indebtedness for borrowed money, or (ii) rentals under leases with terms of three years or more.
(4) The issuer has had consolidated net income,
before extraordinary items and the cumulative effect of accounting changes, of at least $1,000,000 in four of its last five fiscal years including its last fiscal year; and if the offering is of interest bearing securities, has had for its last fiscal year, net income, before deduction for income taxes and depreciation, of at least 1-1/2 times the issuer's annual interest expense, giving effect to the proposed offering and the intended use of the proceeds. For the purposes of this clause "last fiscal year" means the most recent year for which audited financial statements are available, provided that such statements cover a fiscal period ended not more than 15 months from the commencement of the offering.
(5) If the offering is of stock or shares other than
preferred stock or shares, the securities have voting rights and the rights include (i) the right to have at least as many votes per share, and (ii) the right to vote on at least as many general corporate decisions, as each of the issuer's outstanding classes of stock or shares, except as otherwise required by law.
(6) If the offering is of stock or shares, other than
preferred stock or shares, the securities are owned beneficially or of record, on any date within six months prior to the commencement of the offering, by at least 1,200 persons, and on that date there are at least 750,000 such shares outstanding with an aggregate market value, based on the average bid price for that day, of at least $3,750,000. In connection with the determination of the number of persons who are beneficial owners of the stock or shares of an issuer, the issuer or dealer may rely in good faith for the purposes of this clause upon written information furnished by the record owners.
(7) The issuer meets the conditions specified in
paragraphs (2), (3) and (4) of this subsection P if either the issuer or the issuer and the issuer's predecessor, taken together, meet such conditions and if: (a) the succession was primarily for the purpose of changing the state of incorporation of the predecessor or forming a holding company and the assets and liabilities of the successor at the time of the succession were substantially the same as those of the predecessor; or (b) all predecessors met such conditions at the time of succession and the issuer has continued to do so since the succession.
Q. Any security appearing on the List of OTC Margin
Stocks published by the Board of Governors of the Federal Reserve System or any security incorporated by reference to the List of OTC Margin Stocks by the Board of Governors of the Federal Reserve System; any other securities of the same issuer which are of senior or substantially equal rank; any securities called for by subscription rights or warrants so listed or approved; or any warrants or rights to purchase or subscribe to any of the foregoing.
R. Any security issued by a bona fide limited worker
cooperative association or by a bona fide agricultural cooperative operating in this State that is organized under the laws of this State or as a foreign cooperative association organized under the law of another state that has been duly qualified to transact business in this State.
(Source: P.A. 101-292, eff. 1-1-20