1. (A) Authority and purpose.
2. (1) The Division enacts this rule under authority granted by Sections 61-1-11.1 and 61-1-24.
3. (2) This rule sets forth the procedure and requirements to be met when seeking a fairness hearing for certain exchanges of securities.

4. (3) A finding of fairness under Section 61-1-11.1 does not constitute a registration or exemption except as provided by Paragraph (H).

   1. (B) Definitions.
5. (1) "Director" means the Director of the Division of Securities, Utah Department of Commerce.
6. (2) "Division" means the Division of Securities, Utah Department of Commerce.

7. (3) "Interested person" means any officer, director or security holder of either party involved in the transaction, or any other person as the Division may permit.

   1. (C) Parties.

      The Division will only consider an application under Section 61-1-11.1 for a transaction where:

8. (1) Either party to the transaction is a domestic business entity formed, organized or incorporated under the laws of Utah;
9. (2) Either party to the transaction is a business entity whose headquarters or principal place of business is located in Utah; or

10. (3) Thirty percent (30 %) or more of the persons to whom it is proposed to issue securities or to deliver other consideration in an exchange under Subsection 61-1-11.1(1) are persons who are Utah residents.

    1. (D) Application Requirements.

       An application may be made to the Division under Subsections 61-1-11.1(1) and 61-1-11.1(5) by filing with the Division:

11. (1) Division Form 11--Application for Hearing for Certain Exchanges of Securities;
12. (2) NASAA Form U-2, Uniform Consent to Service of Process;
13. (3) A fee as specified in the Division's fee schedule; and

14. (4) Other documents as the Division may request.

    1. (E) Notice.
15. (1) At least twenty (20) calendar days prior to the hearing, the applicant must provide written notice of the hearing, as approved by the Division, to any person to whom it is proposed to issue securities or to deliver other consideration in an exchange under Subsection 61-1-11.1(1). Such notice shall be effective pursuant to Subsection 16-10a-103(5). Such notice period may be waived upon the demonstration of good cause by the applicant.

16. (2) The notice must contain the following information:

    1. (a) A brief statement of the facts that give rise to the hearing, including an outline of the terms and conditions of the proposed transaction;
    2. (b) A statement of the issues to be considered at the hearing, together with the relevant statutes and rules;
    3. (c) The time and place of the hearing as specified by the Division;

    4. (d) The procedures for participating in the hearing by telephone or affidavit as approved by the Division; and

       1. (E) Any other information requested by the Division.

17. (3) Prior to or at the hearing, the applicant must file an affidavit with the Division stating that a notice has been sent, in compliance with Subparagraphs (E)(1) and (E)(2), to all persons to whom it is proposed to issue securities or to deliver other consideration in an exchange under Subsection 61-1-11.1(1), including a description of how and when the notice was sent.

    1. (F) Hearing.
18. (1) Within a reasonable time after the receipt of an application meeting the requirements of Section 61-1-11.1 and this rule, the Division may schedule a hearing to be conducted under Subsection 61-1-11.1(2).
19. (2) A hearing under Section 61-1-11.1 shall be conducted by a hearing officer designated by the Director.
20. (3) Any interested person may attend a hearing under Section 61-1-11.1.

21. (4) Any interested person may participate in the hearing by giving written notice to the Division at least two (2) days prior to the hearing, indicating such person's intention to appear and participate in the hearing. Interested persons may participate:

    1. (a) In person;
    2. (b) By telephone; or
    3. (c) By affidavit.

22. (5) The hearing shall be recorded electronically and transcribed by the Division. The transcription costs will be assessed to the Applicant. Upon request, the Division will hire a court reporter at the requester's expense.

    1. (G) Findings and Order.

       Within a reasonable time after completion of the hearing, the Director shall issue an order pursuant to Subsection 61-1-11.1(3).

    2. (H) Exemptions.

       The Issuer may request that the Division determine that the transaction is exempt from registration under Subsection 61-1-14(2)(s).

KEY: securities regulation

Date of Last Change: February 2, 2010

Notice of Continuation: June 1, 2022

Authorizing, and Implemented or Interpreted Law: 61-1-11(7)(b)