Illinois Compiled Statutes
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815 ILCS 5/3
(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
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
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
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
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
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
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
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 conditions:
(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
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
R. Any security issued by a bona fide agricultural cooperative
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. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)