1. (a) This section does not exempt transactions 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) Transactions exempt under Arkansas Code § 23-42-504(a) of the Arkansas Securities Act.

   1. (1) Specific types of exempt transactions:

      1. (A) Isolated non-issuer. Any sale of an outstanding security by or on behalf of a person not in control of the issuer, controlled by the issuer, or under common control with the issuer, and the following:

3. (i) The person does not directly or indirectly effect transactions in securities for the benefit of the issuer;

   1. (ii) The person would not be defined as an issuer or underwriter pursuant to the Arkansas Securities Act and this part; and

      1. (iii) There are no more than three (3) transactions effected in this state during any period of twelve (12) consecutive months;

      2. (B) Manual exemption.

         1. (i) Nationally recognized securities manual or its electronic equivalent shall mean Fitch Investor Service, Mergent’s Investor Service, and OTC Markets Group, Inc. with respect to securities included in the OTCQX and OTCQB markets.
         2. (ii) Supplements to the above-recognized manuals are accepted, provided that the necessary information required by the Arkansas Securities Act is disclosed and the supplements are subsequently incorporated and published in the respective annual manual.
         3. (iii) The distribution of large blocks of securities by controlling persons in firmly underwritten offerings will ordinarily be presumed to be for the direct or indirect benefit of the issuer, and not within the provisions of the manual exemption;
      3. (C) Sale to underwriter. [Reserved];

      4. (D) Secured transactions.

         1. (i) This exemption applies only when the mortgage, deed of trust, or agreement, together with all the bonds or other evidences of indebtedness secured thereby are offered and sold as a whole unit.
         2. (ii) Fractional interests or undivided interests in the unit may not be offered or sold in reliance on this exemption;
      5. (E) Fiduciary transactions. [Reserved];
      6. (F) Pledges. [Reserved];
      7. (G) Cross-border transactions. [Reserved];
      8. (H) Sales to institutional buyers. [Reserved];

      9. (I) Small private offerings.

         1. (i) The proof of exemption required to be filed with the Securities Commissioner under Arkansas Code § 23-42-504(b) of the Arkansas Securities Act, where a seller claims an exemption under Arkansas Code § 23-42-504(a)(9) of the Arkansas Securities Act, shall contain the following unless waived by the commissioner:
4. (a) (a) The filing fee as set forth in Arkansas Code § 23-42-504(b)(4) of the Arkansas Securities Act;

5. (b) (b) A declaration that Arkansas Code § 23-42-504(a)(9) of the Arkansas Securities Act is applicable;

   1. (c) (c) A representation that sales will be made to not more than thirty-five (35) unaccredited purchasers other than those designated in Arkansas Code § 23-42-504(a)(8) of the Arkansas Securities Act during any period of twelve (12) consecutive months;

      1. (d) (d) A representation that no commission or other remuneration will be paid or given directly or indirectly for soliciting any prospective buyer in Arkansas unless the person receiving any commission or remuneration is registered as a broker-dealer or agent of the issuer;
6. (e) (e) A representation that the seller believes that all the buyers in Arkansas are purchasing for investment;
7. (f) (f) A representation that each buyer will sign an appropriate investment intent letter, a copy of which shall be included in the proof of exemption, stating in part that the buyer is not taking with a view to distribution;
8. (g) (g) A representation that certificates to be issued will bear an appropriate restrictive legend, and a copy of the restrictive legend;

9. (h) (h) A copy of:

   1. (1) (1) The articles of incorporation;
   2. (2) (2) The partnership agreement;
   3. (3) (3) The limited partnership agreement;
   4. (4) (4) The certificate of designation; and

   5. (5) (5) All other entity governance documents that reflect the rights of the security holders;

      1. (i)
   6. (1) (i)(1) A description of the method by which full disclosure of material facts will be made to each offeree.
   7. (2) (2) A copy of the prospectus, pamphlet, offering circular, or similar literature should be provided, if one is to be used;
10. (j) (j) A representation that no public advertising or solicitation will be employed in effecting the proposed transaction; and

11. (k) (k) Current financial statements of the issuer, if any.

    1. (ii) The investment may not exceed ten percent (10%) of any unaccredited purchaser’s net worth (net worth excludes home, furnishings, and automobiles).

       1. (iii) Any additional information or documentation which the commissioner may require;

       2. (J) Sales to existing security holders. A proof of exemption filed pursuant to Arkansas Code § 23-42-504(a)(10) of the Arkansas Securities Act shall contain the following:

          1. (i) The filing fee as set forth in Arkansas Code § 23-42-504(b)(4) of the Arkansas Securities Act;
          2. (ii) A statement of which registration or exemption section was utilized in placing the original securities with the existing security holders;
          3. (iii)
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. (iv) A representation that no commission or other remuneration (other than a standby commission) is paid or given directly or indirectly for soliciting any security holder in Arkansas unless waived by the commissioner;

       1. (K) Red herring offers. [Reserved];

       2. (L) Arkansas-only crowdfunding offering. In addition to complying with provisions found in Arkansas Code § 23-42-504(a)(12) of the Arkansas Securities Act, transactions must also comply with the following:

          1. (i) Escrow.
14. (a) (a) The issuer shall provide the commissioner with a copy of the escrow agreement with a bank or depository institution authorized to do business in Arkansas where all funds received from investors shall be deposited until the aggregate capital raised from all purchasers is equal to or greater than the minimum target offering amount specified in the disclosure statement as necessary to implement the business plan.

15. (b) (b) Investors shall receive a return of all their subscription funds if the target offering amount is not raised by the time stated in the disclosure statement.

    1. (c) (c) All the funds received from investors shall be used in accordance with all representations made to investors;

       1. (ii) The issuer shall file the following with the commissioner at least ten (10) days before securities are offered or sold:
16. (a) (a) A written notice of proof of exemption from registration, declaring that an exemption under this subdivision (b)(1)(L) is applicable;

17. (b) (b) Any general solicitation, advertising, or other sales literature used in connection with the offering;

    1. (c) (c) A copy of the offering documents to be provided to each prospective purchaser in connection with the offering, containing the following:
    2. (1) (1) The name, legal status, physical address, and website address of the issuer;
    3. (2) (2) The names of the directors, officers, and control person;
    4. (3) (3) A description of the business of the issuer and the anticipated business plan of the issuer;
    5. (4) (4) A description of the stated purpose and intended use of the proceeds of the offering sought by the issuer, including compensation paid to any officer, director, or control person;
    6. (5) (5) The target offering amount and the deadline to reach the target offering amount;
    7. (6) (6) A copy of the escrow agreement required in subdivision (b)(1)(L)(i) of this section;

    8. (7) (7) Financial information about the issuer including:

       1. (A) (A) The income tax returns filed by the issuer for the most recently completed year;
       2. (B) (B) Financial statements of the issuer, which shall be certified by the principal executive officer of the issuer to be true and complete in all material respects; and
       3. (C) (C) Audited financial statements, if the issuer has had them prepared within the last three (3) years;
    9. (8) (8) A description of any litigation, legal proceedings, or pending regulatory action involving the issuer or its officers, directors, or control persons; and

    10. (9) (9) The disclosures regarding resale of securities as required by United States Securities and Exchange Commission Rule 144(e) – (f) under the Securities Act of 1933; and

        1. (d) (d) A copy of the restrictive legend on the certificate or other document evidencing that the securities have not been registered and setting forth the limitations on resale contained in United States Securities and Exchange Commission Rule 147(e) under the Securities Act of 1933;

           1. (iii) No commissions or other remuneration shall be paid or given, directly or indirectly, for any person’s participation in the offer or sale of securities for the issuer unless registered as a broker-dealer or agent of the issuer under the Arkansas Securities Act or a funding portal registered with FINRA;
           2. (iv) This exemption is not available if the following conditions apply:

18. (a) (a) The issuer is, either before or as a result of the offering:

    1. (1) (1) An investment company as defined in Section 3 of the Investment Company Act of 1940, 15 U.S.C. § 80a-3;
    2. (2) (2) Subject to reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m and 78u(d); or
    3. (3) (3) A “blind pool” or a company that has not yet defined its business operations, has no business plan, has no stated investment goal for the funds being raised, or that plans to engage in a merger or acquisition with an unspecified business entity; or

19. (b) (b) The issuer, the issuer’s predecessors, any affiliated issuer, any of the issuer’s directors, officers, general partners, promoters, or any other control person of the issuer:

    1. (1) (1) Has filed a registration statement that is subject to a currently effective registration stop order entered by any state securities administrator or the United States Securities and Exchange Commission within the last five (5) years;
    2. (2) (2) Has been convicted within the last ten (10) years of any criminal offense in connection with the offer, purchase, or sale of any security, or involving fraud or deceit;
    3. (3) (3) Is subject to any current state or federal administrative enforcement order or judgment entered within the last five (5) years finding fraud or deceit in connection with the purchase or sale of any security;
    4. (4) (4) Is subject to any current order, judgment, or decree of any court of competent jurisdiction entered within the last five (5) years temporarily, preliminarily, or permanently retraining or enjoining the party from engaging in or continuing to engage in any conduct or practice involving fraud or deceit in connection with the purchase or sale of any security; or

    5. (5) (5) Is subject to an order of any state securities, banking, credit union, and insurance regulators, federal banking regulators, United States Securities and Exchange Commission, FINRA, Commodity Futures Trading Commission, United States Postal Service, and the National Credit Union Administration that either:

       1. (A) (A) Bar a person from association with an entity regulated by the regulator issuing the order, or from engaging in the business of securities, insurance, or banking, or from savings association or credit union activities; or

       2. (B) (B) Are based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct within a five-year period;

          1. (v)
20. (a) (a) The issuer shall inform all purchasers that the securities have not been registered under the Arkansas Securities Act and, therefore, cannot be resold unless the securities are registered or qualify for an exemption from registration under Arkansas Code §§ 23-42-501 – 23-42-504 of the Arkansas Securities Act.

21. (b) (b) In addition, the issuer shall make the disclosures required by this subdivision (b)(1)(L)(v) or United States Securities and Exchange Commission Rule 147, 17 C.F.R. § 230.147(e);

    1. (vi)
22. (a) (a) This exemption shall not be used in conjunction with any other exemption under the Arkansas Securities Act except the exemption to institutional investors at Arkansas Code § 23-42-504(a)(8) of the Arkansas Securities Act and for offers and sales to controlling persons of the issuer.

23. (b) (b) Sales to controlling persons shall not count toward the limitation in Arkansas Code § 23-42-504(a)(12)(C) of the Arkansas Securities Act;

    1. (vii)
24. (a) (a) The issuer shall provide free of charge a quarterly report to the shareholders.

25. (b) (b) The issuer may satisfy the reporting requirement by making the information available within forty-five (45) days after the end of each fiscal quarter and remains available until the succeeding quarterly report is issued.

    1. (c) (c) The issuer shall file each quarterly report with the commissioner.

       1. (d) (d) The report shall contain, at a minimum, all compensation received by officers, directors, and control persons during the reporting period and an analysis of the business operations and financial condition of the issuer; and

          1. (viii) Nothing in this exemption shall be construed to alleviate any person from the anti-fraud provisions at Arkansas Code § 23-42-507 of the Arkansas Securities Act; and

       2. (M) Discretionary exemptions.

          1. (i) The following transactions have been determined by the commissioner to be exempt from the registration requirements of Arkansas Code § 23-42-501 of the Arkansas Securities Act, the registration having been found to be not necessary or appropriate in the public interest or for the protection of investors.
          2. (ii) These transactions are not exempt from the remaining provisions of the Arkansas Securities Act or this part, including Arkansas Code § 23-42-507 of the Arkansas Securities Act:

26. (a) (a) Business organization. Where seven (7) or fewer persons form, incorporate, or each otherwise organize a corporation, joint venture, limited liability company, limited liability partnership, or general or limited partnership, provided the following occurs:

    1. (1) (1) Each person purchases from the issuer with investment intent and not with a view to distribution;
    2. (2) (2) Each purchaser is an organizer on the date the issuer is formed, not including the initial limited partner of a limited or general partnership who withdraws and is replaced by the organizing limited partners;
    3. (3) (3) Each purchaser has access to information concerning the issuer;
    4. (4) (4) In connection with the organization, no commission or other remuneration is paid or given directly or indirectly to any person for soliciting any prospective buyer in Arkansas; and
    5. (5) (5) No public advertising or other solicitation will be employed in effectuating the proposed transaction;

27. (b) (b) Additional sales by an existing issuer. Any sale by an issuer to twelve (12) or fewer purchasers provided that the sale complies with each of the following:

    1. (1) (1) No commission or other remuneration is paid or given directly or indirectly to any person for the sale of the security;

    2. (2) (2) The security is the following:

       1. (A) (A) Sold exclusively to existing security holders and the issuer reasonably believes that each purchaser is purchasing with investment intent; or
       2. (B) (B) Offered or sold to not more than five (5) additional purchasers provided that in no event shall the total number of security holders of the issuer exceed twelve (12) on consummation of the last sale and the issuer shall reasonably believe that each purchaser is purchasing with investment intent;
    3. (3) (3) Each purchaser has access to information concerning the issuer prior to consummation of sale;
    4. (4) (4) For purposes of computing the number of security holders in this transactional exemption, security holders who have been issued securities pursuant to Arkansas Code § 23-42-504(a)(5) and (8) of the Arkansas Securities Act shall not be counted;
    5. (5) (5) This exemption shall not be available to an issuer that has not been organized or when its securities have not been previously issued in compliance with Arkansas Code § 23-42-501 of the Arkansas Securities Act; and

    6. (6) (6) No public advertising or other solicitation will be employed in effectuating the proposed transaction;

       1. (c) (c) Professional corporation or professional limited liability company. Any security issued by a professional corporation organized under the Medical Corporation Act, Arkansas Code § 4-29-301 et seq., the Dental Corporation Act, Arkansas Code § 4-29-401 et seq., and the Arkansas Professional Corporation Act, Arkansas Code § 4-29-201 et seq., or a limited liability company formed under the Small Business Entity Tax Pass Through Act, Arkansas Code § 4-32-101 et seq. [repealed], that performs professional services, provided the following:
    7. (1) (1) The professional corporation or limited liability company complies with the ownership and retransfer restrictions as set forth in the professional corporation acts or the Small Business Entity Tax Pass Through Act [repealed];
    8. (2) (2) The securities are sold to a professional person;
    9. (3) (3) The seller reasonably believes that each buyer is purchasing for investment;
    10. (4) (4) Each professional is provided access to information concerning the professional corporation or limited liability company; and

    11. (5) (5) No public advertising or other solicitation will be employed in effectuating the proposed transaction;

        1. (d) (d) Limited offering of oil, gas, and other mineral interests under select conditions. Any offer or sale of an interest in or under an oil, gas, or mining lease, or title, or payments out of production in or under the leases, titles, or contracts relating thereto by the issuer or an agent for the issuer provided the following conditions are met:

    12. (1) (1) The offer or sale is made to persons or companies, each of which the issuer or issuer’s agent reasonably believes is the following:

        1. (A) (A) Engaged in the business of exploring for or producing oil, gas, or other minerals as an ongoing business or is engaged in the practice of a profession or discipline that is directly related to the exploration for, production of, refining of, or marketing of oil, gas, or other minerals such as the interest being sold;
        2. (B) (B) A landman, drilling company, well service company, production company, refining company, geologist, geophysicist, petroleum engineer, or earth scientist; or
        3. (C) (C) An executive officer of a company whose primary business involves one of the activities listed in subdivision (b)(1)(M)(ii)(d)(1)(A) or subdivision (b)(1)(M)(ii)(d)(1)(B) of this section immediately preceding this subdivision (b)(1)(M)(ii)(d)(1);
    13. (2) (2) The issuer or issuer’s agent reasonably believes that each purchaser is purchasing for investment and not with a view for resale, and each investor must represent in writing that he or she understands that he or she cannot resell his or her security or interest without registration or other compliance with the state and federal securities laws, provided, however, that sales may be made exclusively by and between those persons described in subdivision (b)(1)(M)(ii)(d)(1)(A), subdivision (b)(1)(M)(ii)(d)(1)(B), or subdivision (b)(1)(M)(ii)(d)(1)(C) of this section, for purposes of assembling leases or other rights for oil and gas production or exploration;
    14. (3) (3) No commission or other remuneration shall be paid or given directly or indirectly for soliciting any prospective investor unless the person receiving any commission or other remuneration is registered as a broker-dealer or agent of the issuer; and

    15. (4) (4) Neither the issuer, any of the issuer’s predecessors, any affiliated issuer, any of the issuer’s officers, directors, general partners, any beneficial owners of ten percent (10%) or more of any class of the issuer’s equity securities, any of the issuer’s promoters presently connected with the issuer in any capacity, any underwriter of the securities to be offered, nor any partner, director, or officer of the underwriter shall have done the following:

        1. (A) (A) Within the last five (5) years, filed a registration statement that is the subject of a currently effective registration stop order entered by any state or federal securities regulator;
        2. (B) (B) Been convicted of any criminal offense in connection with the offer, purchase, or sale of any security, or involving fraud or deceit;
        3. (C) (C) Currently be subject to any state or federal administrative enforcement order or judgment entered within the last five (5) years finding fraud or deceit in connection with the offer, sale, or purchase of any security; or
        4. (D) (D) Currently be subject to any order, judgment, or decree of any court of competent jurisdiction entered within the last five (5) years temporarily, preliminarily, or permanently restraining or enjoining the party from engaging in or continuing to engage in any conduct or practice involving fraud or deceit in connection with the offer, sale, or purchase of any security;
28. (e) (e) Insured savings, certificate, passbook, and other similar insured accounts. Any savings, passbook, certificate, and other similar accounts insured in whole or in part by the Federal Deposit Insurance Corporation or the National Credit Union Administration;

29. (f) (f) Organization and additional capitalization of wholly owned subsidiary. Where the offer and sale of securities is by a wholly owned subsidiary to its parent for purposes of organizing or placing additional capital in the wholly owned subsidiary provided each sale or additional capitalization complies with the following:

    1. (1) (1) The securities are purchased for investment and not with a view to distribution; and
    2. (2) (2) The securities bear an appropriate restrictive legend;
30. (g) (g) Class vote. Any transaction incident to a class vote by security holders or members, pursuant to the certificate of incorporation, organizational document, or the applicable statute on a merger, consolidation, reclassification of securities, sale of assets in consideration of the issuance of securities of another entity, or reorganization;

31. (h) (h) Investment club. The sale by an investment club of beneficial interests for not more than fifty thousand dollars ($50,000) in any one (1) year in contributions for the purpose of investing and reinvesting the proceeds in securities, provided there is compliance with each of the following conditions:

    1. (1) (1) The organization is one (1), incorporated or unincorporated, partnership or association, composed of not more than twenty-five (25) members, each of whom are natural individuals, who for their education and benefit periodically or initially pay in sums of money to invest in securities which are held in a fund beneficially owned by those individuals in relative proportion as determined by the value of their payments;
    2. (2) (2) The structure of the organization shall be evidenced by a written instrument setting forth the rights and obligations of the members, a copy of which shall be furnished to each member;

    3. (3)

       1. (A) (3)(A) Broker-dealers or registered agents of broker-dealers who may be members of the club shall certify that this is the only investment club to which they belong.
       2. (B) (B) The broker-dealer or registered agent may not be the organizer or promoter of the club.
       3. (C) (C) A broker-dealer or registered agent who is a member of the club may not himself or herself receive a fee or commission for sales of securities to the club, however, the broker-dealer may receive a commission;
    4. (4) (4) Voting shall be based either upon each member’s proportionate interest in the entire assets of the club or upon one (1) vote for each member of the club;
    5. (5) (5) Club decisions will require a majority vote at the meeting authorized by the club’s bylaws, determined either by a majority in interest of the total interest of the members present or by a majority of the members present;
    6. (6) (6) No member shall own beneficially more than thirty-three percent (33%) of the club’s entire assets;
    7. (7) (7) Adequate books of account of the transactions of the investment club shall be kept and be available and opened to inspection and examination by any member at each meeting;
    8. (8) (8) Sales are made in good faith and not for the purpose of avoiding the provisions of the Arkansas Securities Act;

    9. (9) (9) This exemption shall not be available to any club if it, any officer, director, promoter, sponsor, operator, organizer, or agent of the club or other authorized person participating in the process of offering or selling the securities shall have been the subject of the following:

       1. (A) (A) Any administrative order issued under any state or federal securities law or regulation or a postal fraud order;
       2. (B) (B) Any outstanding injunction consent or otherwise for a securities violation of any state or federal securities law, rule, or regulation; or
       3. (C) (C) Any court decision granting civil relief for a securities violation of any state or federal securities law, rule, or regulation, or shall have been convicted of any violation of the federal securities or postal laws or regulations, the securities laws of any state, or criminal fraud;
    10. (10) (10) No member of the club may receive a fee, commission, profit, or other remuneration for selling an investment to the club unless the member first discloses in writing that information to the other members and receives prior written approval from each member; and

    11. (11) (11) No public advertising or other solicitation will be employed in effectuating the proposed transaction;

        1. (i) (i) Deferred compensation plans.
    12. (1) (1) Transactions entered into in connection with certain types of deferred compensation plans (deferred compensation plans), shall be exempt from Arkansas Code §§ 23-42-501 and 23-42-502 of the Arkansas Securities Act.

    13. (2) (2) Contributions and purchases of securities regarding Section 401 of the I.R.C. plans. Any transaction whereby:

        1. (A) (A) An issuer or an affiliate of the issuer (affiliate) contributes any security of the issuer or affiliate to a Section 401 Plan; or
        2. (B) (B) A Section 401 Plan purchases any security of the issuer or affiliate with cash or other property which has been contributed to the Section 401 Plan by the issuer or affiliate.
    14. (3) (3) Allocation of phantom stock plan units. Any transaction whereby an issuer allocates Section 401 of the I.R.C. Plan benefits in the form of units or otherwise representing a right eventually to receive cash, but not stock, measured by dividends paid on shares of capital stock of the issuer or the market value of shares of capital stock of the issuer or both in so-called phantom stock plan.
    15. (4) (4) Governmental plans. The offer or sale of any interest, participation, or investment contract in connection with a deferred compensation plan established or administered by the United States, any state, any political subdivision of a state, or any agency or corporate or other instrumentality of one (1) or more of the foregoing.
    16. (5) (5) Tax-exempt organization plans. The offer or sale of any interest, participation, or investment contract in connection with a deferred compensation plan established or administered by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purpose, or as a chamber of commerce or trade or professional association.
    17. (6) (6) Unfunded plans. The offer or sale of any interest, participation, or investment contract in connection with a deferred compensation plan established primarily for a select group of management or highly compensated employees or agents and which does not provide for the contribution of funds to a trust or other legally separate fund but is rather carried as a general obligation of the establishing entity;

32. (j) (j) Security holder agreement. Any offer, sale, purchase, or other transaction between a corporation, limited liability company, limited liability partnership, limited partnership, joint venture, or partnership and its security holders or among the security holders themselves in connection with a written agreement between the persons concerning the buy-back, sale, exchange, or other contractual agreement of the security holders’ interest that has been entered into prior to or at the time of the transaction provided the following:

    1. (1) (1) There are no more than thirty-five (35) persons party to the agreement;
    2. (2) (2) Each person acquiring the security has access to information concerning the issuer at the time of entering into the agreement;
    3. (3) (3) No commission or other remuneration is paid or given directly or indirectly to any person for the sale, disposition, or transfer of the security; and
    4. (4) (4) The underlying securities when issued were registered or exempt from registration under the Arkansas Securities Act;

33. (k) (k) One hundred percent (100%) sale of a business. Any transaction pursuant to the one hundred percent (100%) sale of securities of a business entity provided the following:

    1. (1) (1) There are no more than seven (7) purchasers;
    2. (2) (2) Each person purchases with investment intent and any certificates issued will bear an appropriate restrictive legend;
    3. (3) (3) Each person has access to information concerning the issuer; and

    4. (4) (4) In connection with the transaction, no commission or other remuneration is paid or given directly or indirectly to any person other than a merger and acquisition broker acting as such and meeting the conditions set forth in 23 CAR § 300-302(f) for soliciting any prospective purchaser;

       1. (l) (l) Affiliate exclusion — Control person.
    5. (1) (1) Any sale of an outstanding security by or on behalf of a person in control of the issuer, or controlled by the issuer, or under common control with the issuer, that complies with United States Securities and Exchange Commission Rule 144 under the Securities Act of 1933.

    6. (2) (2) Any sale of an outstanding security by or on behalf of a person in control of the issuer, or controlled by the issuer, or under common control with the issuer, provided the sale does not involve a public offering and is effected pursuant to the following:

       1. (A) (A) Resale purchasers must be solicited directly by the holder of the stock, not by the issuer;
       2. (B) (B) Control person sellers are limited to no more than three (3) transactions involving the same security within a twelve-month period;
       3. (C) (C) Resale purchasers must be provided with full disclosure of the type of information found in a registration statement on a form that the issuer would be eligible to use;
       4. (D) (D) The resale must include the typical characteristics of a private placement including compliance with the purchaser qualification requirements of sophistication and ability to bear risk; and

       5. (E)

          1. (i) (E)(i) The control person seller must demonstrate that he or she is not making the sale with a view toward distribution of securities and not on behalf of the issuer.
          2. (ii) (ii) This is typically done by having the resale purchaser make investment representations similar to those typically required in a private placement of securities;
          3. (m) (m) Life settlements contract. Any offer or sale of a life settlements contract if the following:
    7. (1) (1) The underlying life settlement transaction with the insured was in compliance with the Life Settlements Act, Arkansas Code § 23-81-801 et seq.;
    8. (2) (2) The life settlements contract contains a provision providing for a right of rescission within fifteen (15) days of the date the last required disclosure document is delivered to the purchaser or the date the purchaser paid the purchase price for the life settlements contract, whichever is later; and

    9. (3) (3) The following disclosure documents published by the commissioner are delivered as follows:

       1. (A) (A) Life Settlements Disclosure Document I is delivered to a prospective purchaser initially within seven (7) days after the first contact by the person selling the life settlements contract; and
       2. (B) (B) Life Settlements Disclosure Document II is delivered to a purchaser within fifteen (15) days after the purchaser’s check is delivered or the purchaser’s funds are otherwise made available to the seller for purchase;

34. (n) (n) Accredited investors.

    1. (1) (1) Certain offers and sales of securities sold to accredited investors if in compliance with NASAA Model Accredited Investor Exemption.

    2. (2) (2) The issuer shall file the following with the commissioner within fifteen (15) days of the first sale in this state:

       1. (A) (A) Notice of the transaction;
       2. (B) (B) The consent to service of process required by Arkansas Code § 23-42-107(a) of the Arkansas Securities Act; and
       3. (C) (C) A copy of the general announcement of the proposed offering; and

35. (o) (o) Charitable organizations. The commissioner having found that the enforcement of the registration provisions of the Arkansas Securities Act are not necessary for the protection of investors or in the public’s interest with respect to certain transactions entered into with any offer or sale of securities by an issuer who is a charitable organization that maintains certain charitable funds, the following transactions shall be exempt from Arkansas Code §§ 23-42-501 and 23-42-502 of the Arkansas Securities Act provided the following:

    1. (1) (1) The sale involves securities issued by, or any interest or participation in, any charitable fund maintained by a company organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes that is excluded from the definition of an investment company under Section 3(c)(10)(B) of the Investment Company Act, or other offer or sale thereof;
    2. (2) (2) Each charitable fund should provide to each donor to the charitable fund at or before the time of the donation written information containing the information required by Section 7(e) of the Investment Company Act;
    3. (3) (3) Provide a copy of the written information to the commissioner within ten (10) days following a written request; and

    4. (4) (4) For purposes of this exemption:

       1. (A) (A) Agent requirements. Any person who represents an issuer in effecting transactions in securities exempted under this subdivision (b)(1)(M)(ii)(o) is not an agent if the person soliciting donations on behalf of the charitable organization to a charitable fund is either a volunteer or is engaged in the overall fundraising activities of the charitable organization and receives no commission, remuneration, or other special compensation, directly or indirectly, based on the number or the value of donations collected for the charitable fund; and

       2. (B) (B) Investment adviser. For purposes of this exemption, an investment adviser does not include the following:

          1. (i) (i) Any person that is a charitable organization where no part of the net earnings of the charitable organization or fund inures to the benefit of any private shareholder or individual;
          2. (ii) (ii) Any person that is a charitable organization offering a charitable fund whose securities are exempt under this subdivision (b)(1)(M)(ii)(o); and
          3. (iii) (iii) Any person that is a trustee, officer, employee, or volunteer of a charitable organization described in this subdivision (b)(1)(M)(ii)(o) acting within the scope of the person’s employment or duties with the charitable organization, whose advice, analysis, or reports are provided to one (1) or more of the following:
36. (a)
37. (a) (a)(a) Any charitable organization;
38. (b)

39. (b) (b)(b) A charitable fund whose securities are exempt under this subdivision (b)(1)(M)(ii)(o); and

    1. (c)

       1. (c) (c)(c) A trust or other donative instrument whose securities are exempt under this subdivision (b)(1)(M)(ii)(o) or the trustees, administrators, settlors (or potential settlors), or the beneficiaries of any trust or instrument.

    2. (2) Proof of exemption.

       1. (A) Arkansas Code § 23-42-504(b) of the Arkansas Securities Act establishes filing requirements for certain exempt transactions.
       2. (B) A filing shall be deemed incomplete until all information is filed as required by the appropriate rule.

       3. (C) Before any transaction is entered into pursuant to Arkansas Code § 23-42-504(a)(9) or Arkansas Code § 23-42-504(a)(10) of the Arkansas Securities Act, a proof of exemption must be filed with the commissioner and not disallowed within the following ten (10) business days.

          1. (c) General provisions.

    3. (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 § 23-42-504 of the Arkansas Securities Act.

       2. (B)

          1. (i) A failure to comply with any one (1) material element will render that exemption unavailable to the claimant.
          2. (ii) The burden of proof for an exemption under Arkansas Code § 23-42-504 of the Arkansas Securities Act shall be on the claimant.

    4. (2) Filing.

       1. (A) Certain exemptions set forth in Arkansas Code § 23-42-504 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.

    5. (3) Requirements.

       1. (A) The commissioner will look with disfavor upon any exemption request under Arkansas Code § 23-42-504 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 requirements.
       2. (B) Request for deviation from exemption requirements must be in writing and, if not acceptable to the commissioner, the request will be denied.

    6. (4) Records. All issuers that effect sales or offers of securities pursuant to the exemption specified in Arkansas Code § 23-42-504 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.

    7. (5) Agent requirements.

       1. (A) Any person who effects transactions in securities exempted by Arkansas Code § 23-42-504(a)(9) 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.

    8. (6) Confirmations. At 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 so 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.

    9. (7) Number of purchasers. Unless otherwise noted, the number of persons purchasing, receiving offers, or otherwise involved in an exempt transaction shall be determined as follows:

       1. (A) A general partnership shall not be counted as a single person but as the total number of its partners;
       2. (B) A husband and wife purchasing or acting as joint tenants or tenants by the entirety may be counted as a single person;
       3. (C) A government or political subdivision of a government shall be counted as a single person;
       4. (D) A trust, regardless of the number of beneficial owners, that is evidenced by an appropriate instrument declaring its creation may be counted as a single person; and
       5. (E) A corporation, limited partnership, limited liability company, or other legal entity required to organize, register, or charter through the Secretary of State or some other state or federal agency may be counted as a single person unless, from a totality of circumstances, it appears reasonably likely that the entity was formed with the purpose, in whole or in part, to evade the registration requirements of the Arkansas Securities Act or to invest in the specific offering in question.
    10. (8) Denial or revocation. If applicant has filed for an exemption pursuant to Arkansas Code § 23-42-504 of the Arkansas Securities Act, and if the commissioner deems it necessary, he or she may by order summarily deny or revoke any of the specified exemptions pending a final determination of any proceeding under 23 CAR § 300-608 or Arkansas Code § 23-42-505 of the Arkansas Securities Act.

    11. (9) Period of effectiveness.

        1. (A) Except as provided by specific statute or rule or unless the exemption is revoked, securities underlying a transactional exemption effected pursuant to Arkansas Code § 23-42-504 of the Arkansas Securities Act may be issued until the time when the transaction is complete.
        2. (B) The maximum time period for completing a transaction is twelve (12) months from the effective date.
        3. (C) After the expiration of the effective period of the exemption, a new filing is required.
        4. (D) For exemptions executed pursuant to Arkansas Code § 23-42-504(a)(9) of the Arkansas Securities Act, any offer or sale of additional securities during the twelve-month effective period shall be considered amendments to the original statutory limitations.

Codification Notes: “I.R.C.” means Internal Revenue Code. The Investment Company Act of 1940 is codified at 15 U.S.C. § 80a-1 et seq. The Securities Act of 1933 is codified at 15 U.S.C. § 77a et seq.