[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR230.147]

[Page 482-484]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
 PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975--REGULATION S-K--Table of Contents
 
       Subpart 229.1000--Mergers and Acquisitions (Regulation M-A)
 
Sec. 230.147  ``Part of an issue'', ``person resident'', and ``doing business within'' for purposes of section 3(a)(11).

    Preliminary Notes: 1. This rule shall not raise any presumption that 
the exemption provided by section 3(a)(11) of the Act is not available 
for transactions by an issuer which do not satisfy all of the provisions 
of the rule.
    2. Nothing in this rule obviates the need for compliance with any 
state law relating to the offer and sale of the securities.
    3. Section 5 of the Act requires that all securities offered by the 
use of the mails or by any means or instruments of transportation or 
communication in interstate commerce be registered with the Commission. 
Congress, however, provided certain exemptions in the Act from such 
registration provisions where there was no practical need for 
registration or where the benefits of registration were too remote. 
Among those exemptions is that provided by section 3(a)(11) of the Act 
for transactions in any security which is a part of an issue offered and 
sold only to persons resident within a single State or Territory, where 
the issuer of such security is a person resident and doing business 
within * * * such State or Territory. The legislative history of that 
Section suggests that the exemption was intended to apply only to issues 
genuinely local in character, which in reality represent local financing 
by local industries, carried out through local investment. Rule 147 is 
intended to provide more objective standards upon which responsible 
local businessmen intending to raise capital from local sources may rely 
in claiming the section 3(a)(11) exemption.
    All of the terms and conditions of the rule must be satisfied in 
order for the rule to be available. These are: (i) That the issuer be a 
resident of and doing business within the state or territory in which 
all offers and sales are made; and (ii) that no part of the issue be 
offered or sold to non-residents within the period of time specified in 
the rule. For purposes of the rule the definition of issuer in section 
2(4) of the Act shall apply.
    All offers, offers to sell, offers for sale, and sales which are 
part of the same issue must meet all of the conditions of Rule 147 for 
the rule to be available. The determination whether offers, offers to 
sell, offers for sale and sales of securities are part of the same issue 
(i.e., are deemed to be integrated) will continue to be a question of 
fact and will depend on the particular circumstances. See Securities Act 
of 1933 Release No. 4434 (December 6, 1961) (26 FR 9158). Securities Act 
Release No. 4434 indicated that in determining whether offers and sales 
should be regarded as part of the same issue and thus should be 
integrated any one or more of the following factors may be 
determinative:
    (i) Are the offerings part of a single plan of financing;
    (ii) Do the offerings involve issuance of the same class of 
securities;
    (iii) Are the offerings made at or about the same time;
    (iv) Is the same type of consideration to be received; and
    (v) Are the offerings made for the same general purpose.
    Subparagraph (b)(2) of the rule, however, is designed to provide 
certainty to the extent feasible by identifying certain types of offers 
and sales of securities which will be deemed not part of an issue, for 
purposes of the rule only.
    Persons claiming the availability of the rule have the burden of 
proving that they have satisfied all of its provisions. However, the 
rule does not establish exclusive standards for complying with the 
section 3(a)(11) exemption. The exemption would also be available if the 
issuer satisfied the standards set forth in relevant administrative and 
judicial interpretations at the time of the offering but the issuer 
would have the burden of proving the availability of the exemption. Rule 
147 relates to transactions exempted from the registration requirements 
of section 5 of the Act by section 3(a)(11). Neither the rule nor 
section 3(a)(11) provides an exemption from the registration 
requirements of section 12(g) of the Securities Exchange Act of 1934, 
the anti-fraud provisions of the federal securities laws, the civil 
liability provisions of section 12(2) of the Act or other provisions of 
the federal securities laws.
    Finally, in view of the objectives of the rule and the purposes and 
policies underlying the Act, the rule shall not be available to any 
person with respect to any offering which, although in technical 
compliance with the rule, is part of a plan or scheme by such person to 
make interstate offers or sales of securities. In such cases 
registration pursuant to the Act is required.
    4. The rule provides an exemption for offers and sales by the issuer 
only. It is not available for offers or sales of securities by other

[[Page 483]]

persons. Section 3(a)(11) of the Act has been interpreted to permit 
offers and sales by persons controlling the issuer, if the exemption 
provided by that section would have been available to the issuer at the 
time of the offering. See Securities Act Release No. 4434. Controlling 
persons who want to offer or sell securities pursuant to section 
3(a)(11) may continue to do so in accordance with applicable judicial 
and administrative interpretations.

    (a) Transactions covered. Offers, offers to sell, offers for sale 
and sales by an issuer of its securities made in accordance with all of 
the terms and conditions of this rule shall be deemed to be part of an 
issue offered and sold only to persons resident within a single state or 
territory where the issuer is a person resident and doing business 
within such state or territory, within the meaning of section 3(a)(11) 
of the Act.
    (b) Part of an issue. (1) For purposes of this rule, all securities 
of the issuer which are part of an issue shall be offered, offered for 
sale or sold in accordance with all of the terms and conditions of this 
rule.
    (2) For purposes of this rule only, an issue shall be deemed not to 
include offers, offers to sell, offers for sale or sales of securities 
of the issuer pursuant to the exemption provided by section 3 or section 
4(2) of the Act or pursuant to a registration statement filed under the 
Act, that take place prior to the six month period immediately preceding 
or after the six month period immediately following any offers, offers 
for sale or sales pursuant to this rule, Provided, That, there are 
during either of said six month periods no offers, offers for sale or 
sales of securities by or for the issuer of the same or similar class as 
those offered, offered for sale or sold pursuant to the rule.
    Note: In the event that securities of the same or similar class as 
those offered pursuant to the rule are offered, offered for sale or sold 
less than six months prior to or subsequent to any offer, offer for sale 
or sale pursuant to this rule, see Preliminary Note 3 hereof as to which 
offers, offers to sell, offers for sale, or sales are part of an issue.

    (c) Nature of the issuer. The issuer of the securities shall at the 
time of any offers and the sales be a person resident and doing business 
within the state or territory in which all of the offers, offers to 
sell, offers for sale and sales are made.
    (1) The issuer shall be deemed to be a resident of the state or 
territory in which:
    (i) It is incorporated or organized, if a corporation, limited 
partnership, trust or other form of business organization that is 
organized under state or territorial law;
    (ii) Its principal office is located, if a general partnership or 
other form of business organization that is not organized under any 
state or territorial law;
    (iii) His principal residence is located if an individual.
    (2) The issuer shall be deemed to be doing business within a state 
or territory if:
    (i) The issuer derived at least 80 percent of its gross revenues and 
those of its subsidiaries on a consolidated basis.
    (A) For its most recent fiscal year, if the first offer of any part 
of the issue is made during the first six months of the issuer's current 
fiscal year; or
    (B) For the first six months of its current fiscal year or during 
the twelve-month fiscal period ending with such six-month period, if the 
first offer of any part of the issue is made during the last six months 
of the issuer's current fiscal year from the operation of a business or 
of real property located in or from the rendering of services within 
such state or territory; provided, however, that this provision does not 
apply to any issuer which has not had gross revenues in excess of $5,000 
from the sale of products or services or other conduct of its business 
for its most recent twelve-month fiscal period;
    (ii) The issuer had at the end of its most recent semi-annual fiscal 
period prior to the first offer of any part of the issue, at least 80 
percent of its assets and those of its subsidiaries on a consolidated 
basis located within such state or territory;
    (iii) The issuer intends to use and uses at least 80 percent of the 
net proceeds to the issuer from sales made pursuant to this rule in 
connection with the operation of a business or of real property, the 
purchase of real property located in, or the rendering of services 
within such state or territory; and

[[Page 484]]

    (iv) The principal office of the issuer is located within such state 
or territory.
    (d) Offerees and purchasers: Person Resident. Offers, offers to 
sell, offers for sale and sales of securities that are part of an issue 
shall be made only to persons resident within the state or territory of 
which the issuer is a resident. For purposes of determining the 
residence of offerees and purchasers:
    (1) A corporation, partnership, trust or other form of business 
organization shall be deemed to be a resident of a state or territory 
if, at the time of the offer and sale to it, it has its principal office 
within such state or territory.
    (2) An individual shall be deemed to be a resident of a state or 
territory if such individual has, at the time of the offer and sale to 
him, his principal residence in the state or territory.
    (3) A corporation, partnership, trust or other form of business 
organization which is organized for the specific purpose of acquiring 
part of an issue offered pursuant to this rule shall be deemed not to be 
a resident of a state or territory unless all of the beneficial owners 
of such organization are residents of such state or territory.
    (e) Limitation of resales. During the period in which securities 
that are part of an issue are being offered and sold by the issuer, and 
for a period of nine months from the date of the last sale by the issuer 
of such securities, all resales of any part of the issue, by any person, 
shall be made only to persons resident within such state or territory.
    Notes: 1. In the case of convertible securities resales of either 
the convertible security, or if it is converted, the underlying 
security, could be made during the period described in paragraph (e) 
only to persons resident within such state or territory. For purposes of 
this rule a conversion in reliance on section 3(a)(9) of the Act does 
not begin a new period.
    2. Dealers must satisfy the requirements of Rule 15c2-11 under the 
Securities Exchange Act of 1934 prior to publishing any quotation for a 
security, or submitting any quotation for publication, in any quotation 
medium.

    (f) Precautions against interstate offers and sales. (1) The issuer 
shall, in connection with any securities sold by it pursuant to this 
rule:
    (i) Place a legend on the certificate or other document evidencing 
the security stating that the securities have not been registered under 
the Act and setting forth the limitations on resale contained in 
paragraph (e) of this section;
    (ii) Issue stop transfer instructions to the issuer's transfer 
agent, if any, with respect to the securities, or, if the issuer 
transfers its own securities make a notation in the appropriate records 
of the issuer; and
    (iii) Obtain a written representation from each purchaser as to his 
residence.
    (2) The issuer shall, in connection with the issuance of new 
certificates for any of the securities that are part of the same issue 
that are presented for transfer during the time period specified in 
paragraph (e), take the steps required by paragraphs (f)(1) (i) and (ii) 
of this section.
    (3) The issuer shall, in connection with any offers, offers to sell, 
offers for sale or sales by it pursuant to this rule, disclose, in 
writing, the limitations on resale contained in paragraph (e) and the 
provisions of paragraphs (f)(1) (i) and (ii) and paragraph (f)(2) of 
this section.

[39 FR 2356, Jan. 21, 1974]