1. (a) This section does not exempt securities from the remaining provisions of the Arkansas Securities Act, Arkansas Code § 23-42-101 et seq., or this part, including Arkansas Code § 23-42-507 of the Arkansas Securities Act.

2. (b) Classes of exempt securities.

   1. (1) Securities exempted under Arkansas Code § 23-42-503(a) of the Arkansas Securities Act:

      1. (A) Government securities. [Reserved];
      2. (B) Canadian government securities. [Reserved];
      3. (C) Bank securities. [Reserved];
      4. (D) Savings and Loan Association securities. [Reserved];
      5. (E) Public utility securities. [Reserved];
      6. (F) World class foreign issuers. In order to be exempt under Arkansas Code § 23-42-503(a)(6) of the Arkansas Securities Act, a security of a world class foreign issuer must meet the qualifications set forth in NASAA Statement of Policy on World Class Foreign Issuer Exemption;
      7. (G) Nonprofit organization securities.

3. (i) For nonprofit organization securities to be exempt under Arkansas Code § 23-42-503(a)(7) of the Arkansas Securities Act, a proof of exemption shall be filed with the Securities Commissioner at least ten (10) days prior to any sale of such securities.

   1. (ii) The proof of exemption required to be filed pursuant to Arkansas Code § 23-42-503(d) of the Arkansas Securities Act shall contain the following and the applicable additional items set out in subdivision (b)(1)(G)(iii), subdivision (b)(1)(G)(iv), or subdivision (b)(1)(G)(v) of this section unless waived by the commissioner:
4. (a) (a) The filing fee as set forth in Arkansas Code § 23-42-503(d)(5) of the Arkansas Securities Act;

5. (b) (b) A declaration that Arkansas Code § 23-42-503(a)(7) of the Arkansas Securities Act is applicable;

   1. (c)
   2. (1) (c)(1) A description of the method by which full disclosure of material facts will be made to each offeree.

   3. (2) (2) A copy of the prospectus, pamphlet, offering circular, or similar literature should be provided, if one is to be used;

      1. (d) (d) Copies of all advertising or other material to be distributed in connection with the offering;
6. (e) (e) A copy of the subscription agreement or other similar agreement; and

7. (f) (f) Any additional information or documentation that the commissioner may require.

   1. (iii) For nonprofit organization securities that are neither church bonds nor church extension fund securities, the proof of exemption required to be filed pursuant to Arkansas Code § 23-42-503(d) of the Arkansas Securities Act shall contain the items listed in subdivision (b)(1)(G)(ii) of this section and an affirmation that the securities will be sold by a broker-dealer registered in this state.

      1. (iv)
8. (a) (a) Church bonds as defined in the Statement of Policy Regarding Church Bonds adopted by NASAA must meet the qualifications as set forth in the appropriate NASAA Statement of Policy Regarding Church Bonds or any successor policy thereto to be exempt under Arkansas Code § 23-42-503(a)(7) of the Arkansas Securities Act.

9. (b) (b) In addition to items required for a proof of exemption filing listed in subdivision (b)(1)(G)(ii) of this section, church bonds must also provide a disclosure document prepared in accordance with the Statement of Policy Regarding Church Bonds adopted by NASAA or any successor policy thereto.

   1. (v)
10. (a) (a) Church extension fund securities as defined in the Statement of Policy Regarding Church Extension Fund Securities adopted by NASAA must meet the qualifications as set forth in the appropriate NASAA Statement of Policy Regarding Church Extension Fund Securities or any successor policy thereto to be exempt under Arkansas Code § 23-42-503(a)(7) of the Arkansas Securities Act.

11. (b) (b) In addition to items required for a proof of exemption filing listed in subdivision (b)(1)(G)(ii) of this section, church extension fund securities must also provide a disclosure document prepared in accordance with the Statement of Policy Regarding Church Extension Fund Securities adopted by NASAA or any successor policy thereto;

    1. (H) Employee stock purchase, savings, pension, profit-sharing, stock bonus, or similar benefit plans. The notice filed pursuant to Arkansas Code § 23-42-503(a)(8) of the Arkansas Securities Act for those plans not meeting the requirements of qualification under the Internal Revenue Code shall contain the following:

       1. (i) A declaration that Arkansas Code § 23-42-503(a)(8) of the Arkansas Securities Act is applicable; and

          1. (ii)
12. (a) (a) A description of the method by which full disclosure of material facts will be made to each offeree.

13. (b) (b) A copy of the prospectus, pamphlet, offering circular, or similar literature should be provided, if one is to be used; and

    1. (I) Securities exempted by rule pursuant to Arkansas Code § 23-42-503(a)(9) of the Arkansas Securities Act.

       1. (i) The following securities have been determined by the commissioner to be exempt from the registration requirements of the Arkansas Securities Act.

          1. (ii) In addition, any individual who represents an issuer in effecting transactions in securities exempted under subdivisions (b)(1)(I)(ii)(a) – (h) of this section shall not be deemed to be an agent if the transaction involves offers or sales to existing security holders of the issuer and no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective purchaser in this state:

14. (a) (a) Any security listed or approved for listing upon its issuance on the following exchanges:

    1. (1) (1) Chicago Stock Exchange, Inc.;
    2. (2) (2) CME Group, Inc.;
    3. (3) (3) NYSE Group, Inc.;
    4. (4) (4) The Chicago Board Options Exchange, Inc.; and
    5. (5) (5) Any other stock exchange approved by the commissioner;

15. (b) (b) Securities listed on Tier I of the NASDAQ OMX PHLX;

    1. (c) (c) Options traded on the NASDAQ OMX PHLX that are issued by the Options Clearing Corporation;

       1. (d) (d) Any security of an issuer which is of senior or substantially equal rank to a security of the same issuer listed in subdivisions (b)(1)(I)(ii)(a) – (c) of this section;
16. (e) (e) Any security called for by subscription rights or warrants that are exempt under subdivisions (b)(1)(I)(ii)(a) – (d) of this section;
17. (f) (f) Any warrant or right to purchase or subscribe to any security that is exempt under subdivisions (b)(1)(I)(ii)(a) – (e) of this section;
18. (g) (g) Any warrant or right to purchase or subscribe to any security that is covered pursuant to Section 18(b)(1) of the Securities Act of 1933;

19. (h) (h) Any security called for by a subscription right or warrant that is covered pursuant to Section 18(b)(1) of the Securities Act of 1933; and

    1. (i) (i) Any security issued under a written compensatory benefit plan or contract that is exempt from registration under Rule 701 under the Securities Act of 1933.

    2. (2) Securities exempted under Arkansas Code § 23-42-503(b) of the Arkansas Securities Act. Pursuant to Arkansas Code § 23-42-503(b) of the Arkansas Securities Act, the following securities offered for sale or sold in Arkansas in an aggregate amount not exceeding the gross amount as set forth in Arkansas Code § 23-42-503(b) of the Arkansas Securities Act during the period of the offering or any consecutive twelve-month period, whichever shall first occur, shall be exempt from Arkansas Code §§ 23-42-501 and 23-42-502 of the Arkansas Securities Act:

       1. (A) Small business offering.

          1. (i) All of the following requirements must be complied with prior to offering the securities in this state:
20. (a) (a) A filing fee shall be paid as set forth in Arkansas Code § 23-42-503(d)(5) of the Arkansas Securities Act;

21. (b) (b) A proof of exemption shall be filed that sets forth the means whereby each of the requirements of subdivisions (b)(2)(A)(i)(d) – (f) of this section are to be satisfied and that declares that an exemption is claimed under this section;

    1. (c) (c) An opinion of counsel or other satisfactory evidence shall be presented to the commissioner that the securities proposed to be sold pursuant to this exemption will be the following:
    2. (1) (1) Shall be offered and sold in compliance with or pursuant to appropriate exemption from all applicable registration requirements under federal securities laws; and

    3. (2) (2) Will be legally issued, fully paid, and nonassessable, and if a debt security, a binding obligation of the issuer;

       1. (d) (d) The issuer shall furnish (in a form satisfactory to the commissioner) each prospective purchaser of the securities proposed to be sold pursuant to this exemption with the following:

    4. (1)

       1. (A) (1)(A) A prospectus which contains full disclosure of all material facts relating to the issuer and the offering and sale of the securities.
       2. (B) (B) A prospectus meeting the requirements of Form U-7 or other uniform forms deemed acceptable to the commissioner will generally meet the requirements for disclosure;

    5. (2)

       1. (A) (2)(A) A balance sheet of the issuer as of a date within four (4) months prior to the filing of the proof of exemption and a profit and loss statement for the two (2) fiscal years preceding the date of the balance sheet and for any period between the close of the last fiscal year and the date of the balance sheet, or for a period of this issuer’s and any predecessor’s existence if less than two (2) years, all prepared in accordance with generally accepted accounting principles.
       2. (B) (B) Financial statements meeting the requirements of Form U-7 or Regulation A will be deemed acceptable to the commissioner; and
    6. (3) (3) If over fifty percent (50%) of the proceeds from the sale of securities sold pursuant to this exemption are to be applied to the purchase of any business, the issuer shall furnish the same financial statements that would be required if the business were the issuer;
22. (e) (e) A copy of any offering circular, pamphlet, form letter, advertisement, television script, radio script, public advertising, or other sales literature intended as of the effective date to be used in connection with the offering shall be filed with the commissioner; and

23. (f) (f) The issuer shall file the consent to service of process required by Arkansas Code § 23-42-107(a) of the Arkansas Securities Act, the documents required to be filed by Arkansas Code § 23-42-403(b)(13) and (15) of the Arkansas Securities Act, the information specified in Arkansas Code § 23-42-404(c)(1) – (3) of the Arkansas Securities Act, and a written acknowledgment executed by each executive officer, director, and controlling person of the issuer, that the person has done the following:

    1. (1) (1) Made a diligent inquiry of the affairs of the issuer;
    2. (2) (2) Is personally familiar with the financial condition, operations, and manner in which the offering is proposed to be effected, and salient risk features of the issuer’s securities proposed to be sold pursuant to this exemption;
    3. (3) (3) After review of the documents required pursuant to this section, believes to his or her best knowledge that all materials are true, accurate, and complete; and

    4. (4) (4) Is aware of the criminal and civil liabilities provisions of Arkansas Code §§ 23-42-104 – 23-42-106 of the Arkansas Securities Act, as amended.

       1. (ii) In addition to the requirements set forth in subdivision (b)(2)(A)(i) of this section, the following shall also be met or apply to offerings under this section:

24. (a)

    1. (1) (a)(1) The purchase of all securities shall be evidenced in writing by a form affixed to the purchaser’s copy of the materials whereby the purchaser represents and acknowledges receipt and review thereof prior to the consummation of the sale, the resident address of the purchaser, and the date of execution thereof.
    2. (2) (2) The issuer shall retain the detached receipt for a period of not less than five (5) years thereafter;

25. (b) (b) The requirements of 23 CAR § 300-404 shall apply to offerings of securities pursuant to this exemption unless the commissioner waives any or all of the requirements;

    1. (c) (c) The issuer undertakes during the period of the offering to promptly file an amendment to the proof of exemption any time anything previously filed with the commissioner in connection with the offering becomes:
    2. (1) (1) Outdated;
    3. (2) (2) Incorrect;
    4. (3) (3) Inaccurate;
    5. (4) (4) Modified; or

    6. (5) (5) Otherwise changes in any material respect;

       1. (d) (d) This exemption shall become effective only when the commissioner so indicates by written confirmation signifying effectiveness;
26. (e) (e) The exemption from Arkansas Code §§ 23-42-501 and 23-42-502 of the Arkansas Securities Act shall only be effective for the period of the offering or twelve (12) months from the date it is declared effective, whichever shall first occur;
27. (f) (f) The exemption for any issue of securities may be denied, suspended, or revoked for any of the reasons set forth in Arkansas Code § 23-42-405 of the Arkansas Securities Act; and

28. (g) (g) In connection with the sale of the security, no commission or other remuneration shall be paid or given, directly or indirectly, for soliciting any prospective purchaser in this state unless registered as a broker-dealer or agent of the issuer; and

    1. (B) Small real estate investment oriented securities offering.

       1. (i) A security representing an investment in real estate, offered in compliance with each of the following conditions, shall be exempt under Arkansas Code § 23-42-503(b) of the Arkansas Securities Act:
29. (a) (a) The total purchase price of the real property including all fees, commissions, and notes or other evidences of indebtedness, but excluding points and prepaid interest, shall not exceed the limitation set forth in Arkansas Code § 23-42-503(b) of the Arkansas Securities Act;

30. (b)

    1. (1) (b)(1) There shall be no more than ten (10) persons as investors of the offering.

    2. (2) (2) For purposes of computing the number of investing persons, the following shall be used:

       1. (A) (A) All persons who invest as organizers shall be included; and

       2. (B) (B) Each corporation, partnership, association, joint stock company, trust, or unincorporated organization shall be counted as one (1) person, except that if the entity was organized for the specific purpose of acquiring the securities offered, then this exemption shall not be available to the claimant;

          1. (c) (c) No investor shall purchase less than one-tenth (1/10) ownership in the offering;
          2. (d) (d) Each investing person shall take title to the real estate in his or her own name as a tenant in common;

31. (e)

    1. (1) (e)(1) The sponsor or organizer must reasonably believe that each investor is able to bear the economic risk of the investment.
    2. (2) (2) It shall be prima facie evidence of compliance of this element if each investing person demonstrates in writing prior to consummation of sale that he or she is able to bear the economic risk of the investment;

32. (f)

    1. (1) (f)(1) The sponsor or organizer must reasonably believe that each investor is purchasing for investment.
    2. (2) (2) It shall be prima facie evidence of compliance of this element if each investment person demonstrates in writing prior to consummation of sale that he or she is purchasing for investment and not with a view to distribution; and

33. (g) (g) In connection with the sale of the security, no commission or other remuneration shall be paid or given, directly or indirectly, for soliciting any prospective purchaser in this state, except a standard real estate brokerage commission or securities commission that is reasonable, customary, and competitive in light of the size, type, and location of the property shall be permitted provided that the following occurs:

    1. (1) (1) The real estate commission is paid to a registered Arkansas real estate broker or the broker’s agent; and
    2. (2) (2) In no event shall the commission exceed ten percent (10%) of the total purchase price of the property.

    3. (3) Securities exempted under Arkansas Code § 23-42-503(c). The proof of exemption required to be filed pursuant to Arkansas Code § 23-42-503(d) of the Arkansas Securities Act, and that may be filed by cooperatives pursuant to Arkansas Code § 23-42-503(c) of the Arkansas Securities Act, shall contain the following unless waived by the commissioner:

       1. (A) The filing fee as set forth in Arkansas Code § 23-42-503(d)(5)(B) of the Arkansas Securities Act;
       2. (B) A declaration that Arkansas Code § 23-42-503(c) of the Arkansas Securities Act exemption will be utilized;
       3. (C) A copy of the articles of incorporation and bylaws of the issuer;

       4. (D)

          1. (i) A description of the method by which full disclosure of material facts will be made to each offeree.
          2. (ii) A copy of the prospectus, pamphlet, offering circular, or similar literature should be provided, if one is to be used;
       5. (E) Current financial statements of the issuer;
       6. (F) A copy of the subscription agreement or other similar agreement;
       7. (G) A representation that no commissions or other remuneration will be paid in connection with the offer or sale of the securities; and

       8. (H) Any additional information or documentation that the commissioner may require.

          1. (c) General provisions.

    4. (1) Qualification.

       1. (A) In order to qualify for an exemption, each applicant must meet each of the requirements of the particular exemption claimed under Arkansas Code § 23-42-503 of the Arkansas Securities Act.
       2. (B) A failure to comply with any one (1) material element will render that exemption unavailable to the claimant.
       3. (C) The burden of proof for an exemption under Arkansas Code § 23-42-503 of the Arkansas Securities Act shall be on the claimant.

    5. (2) Filing.

       1. (A) Certain exemptions set forth in Arkansas Code § 23-42-503 of the Arkansas Securities Act and the corresponding rules first require a filing with the State Securities Department as the initial step in the exemption process.
       2. (B) These exemptions are unavailable unless the required filing is made.

    6. (3) Requirements.

       1. (A) The commissioner will look with disfavor upon any exemption request under Arkansas Code § 23-42-503 of the Arkansas Securities Act as not being in the public interest and tending to work a fraud on investors unless the requirements set forth in the Arkansas Securities Act and this part are met or good cause is shown for an exception from the applicable requirements.
       2. (B) A request for deviation from exemption policies must be in writing and, if not acceptable, the request will be denied.

    7. (4) Records. All issuers who effect sales or offers of securities pursuant to the exemption specified in Arkansas Code § 23-42-503 of the Arkansas Securities Act when a proof of exemption is filed, shall preserve the following records during the period of five (5) years following the completion of the sales:

       1. (A) A copy of the proof of exemption and all exhibits thereto;
       2. (B) A copy of all literature by which the issuer made disclosure to offerees of the offers for sale;
       3. (C) Original copies of all communications received and copies of all communications sent by the issuer pertaining to the offer, sale, and transfer of the securities, including purchase agreements and confirmations; and
       4. (D) A list of the names and addresses of all persons to whom the securities were sold, the type and amount of securities sold to each, the consideration paid or promised by each, the method of payment (for example, cash, check, property, services, or promissory note), and the name of each person or persons who represented the issuer in effecting each sale.

    8. (5) Agent requirements.

       1. (A)

          1. (i) Any person who effects transactions in securities of an issuer exempted by Arkansas Code § 23-42-503(a)(5) – (7) of the Arkansas Securities Act is an agent.
          2. (ii) Any person who effects transactions in securities exempted by Arkansas Code § 23-42-503(c) of the Arkansas Securities Act where a commission or other remuneration is to be paid is an agent.
       2. (B) All agents are required to be registered.

       3. (C)

          1. (i) If the agent is not associated with a broker-dealer registered in Arkansas, the person must become registered as an agent of the issuer.
          2. (ii) Arkansas Code § 23-42-301 of the Arkansas Securities Act sets forth the requirements for the registration of an agent.

    9. (6) Confirmations. At or before completion of each transaction with a purchaser, the agent of the issuer shall give or send to each purchaser written notification of the following information (if the information is not included in the subscription agreement):

       1. (A) The date the transaction took place and the date or dates payments are made by the purchaser;
       2. (B) The identity of the registered agent handling the transaction; and

       3. (C)

          1. (i) Any other information required or deemed material to the transaction such that the failure to disclose the information would be misleading to the purchaser or would not accurately represent material facts to the transaction.
          2. (ii) The information should include, at a minimum, a full description of the security.
    10. (7) Denial or revocation. If an applicant has filed for an exemption pursuant to Arkansas Code § 23-42-503 of the Arkansas Securities Act, and if the commissioner deems it necessary, he or she may by order summarily deny or revoke any exemption pending a final determination of any proceeding under 23 CAR § 300-608 or Arkansas Code § 23-42-505 of the Arkansas Securities Act.
    11. (8) Period of effectiveness. Except as provided by specific statute, rule, or order, or unless the exemption is revoked, securities for which a proof of exemption was filed pursuant to Arkansas Code § 23-42-503(a)(7) or Arkansas Code § 23-42-503(c) of the Arkansas Securities Act may be issued as exempt securities during the twelve-month period following the effective date.

Codification Notes: The Securities Act of 1933 is codified at 15 U.S.C. § 77a et seq.