21 Va. Admin. Code § 5-40-70 – Solicitations of interest prior to the filing of a registration statement.

A. In accordance with § 13.1-514.1 C of the Act, an offer, but not a sale, of a security made by or on behalf of an issuer for the sole purpose of soliciting an indication of interest in receiving a prospectus (or its equivalent) for the security is exempt from the securities and, where the offer is made by an agent of the issuer, agent registration requirements of the Act if all of the conditions set forth in subdivisions 1 through 11, below, are satisfied:
1. 1. The issuer is or will be a business entity organized under the laws of one of the states or possessions of the United States or one of the provinces or territories of Canada and is engaged in or proposes to engage in a business other than petroleum exploration or production or mining or other extractive industries;
2. 2. The solicitation of interest is not for a so-called "blind pool" offering or other offering for which the specific business in which to be engaged or property to be acquired cannot be described at the time of the solicitation;
3. 3. It is intended that the security be registered under the Act and that the offering be conducted pursuant to either Regulation A (17 CFR §§ 230.251-230.263) or Rule 504 of Regulation D (17 CFR §§ 230.501-230.508), as promulgated by the United States Securities and Exchange Commission;
4. 4. At least 10 business days prior to the initial solicitation of interest under this section, the offeror files with the State Corporation Commission a Solicitation of Interest Form along with any other materials to be used to conduct solicitations of interest, including, but not limited to, the script of any broadcast to be made and a copy of any notice to be published;
5. 5. At least five business days prior to usage, the offeror files with the State Corporation Commission any amendments to the materials specified in subdivision 4, above, or additional materials to be used to conduct solicitations of interest, except for materials provided to a particular offeree pursuant to a request by that offeree, which materials shall be filed with the Commission no later than five business days after usage;
6. 6. No Solicitation of Interest form, script, advertisement or other material which the offeror has been notified by the State Corporation Commission not to distribute is used to solicit indications of interest;
7. 7. Except for scripted broadcasts and except to the extent necessary to obtain information needed to provide a Solicitation of Interest form, the offeror does not communicate with an offeree about the contemplated offering unless the offeree is provided with the most current Solicitation of Interest form at or before the time of the communication or within five calendar days after the communication;
8. 8. During the solicitation of interest period, the offeror does not solicit or accept money or a commitment to purchase securities;
9. 9. No sale is made until at least seven calendar days after delivery to the purchaser of a prospectus which is part of a registration statement declared effective under § 13.1-508 or § 13.1-510 of the Act;
10. 10. No sale of the security is consummated by any person who is not registered under or exempted from registration by the Act as a broker-dealer or an agent;
11. 11. The offeror does not know, and in the exercise of reasonable care, could not know that any of the issuer's officers, directors, agents, 10% shareholders or promoters:
  1. a. Has filed a registration statement which is the subject of a currently effective registration stop order entered pursuant to a federal or state securities law within five years prior to the filing of the Solicitation of Interest form;
  2. b. Has been convicted within five years prior to the filing of the Solicitation of Interest form of a felony or misdemeanor in connection with the offer, purchase or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud;
  3. c. Is currently subject to a federal or state administrative enforcement order or judgment entered by any state securities administrator or the United States Securities and Exchange Commission within five years prior to the filing of the Solicitation of Interest form or is subject to a federal or state administrative enforcement order or judgment entered within five years prior to the filing of the Solicitation of Interest form in which fraud or deceit, including, but not limited to, making untrue statements of material facts and omitting to state material facts, was found;
  4. d. Is subject to a federal or state administrative enforcement order or judgment which prohibits, denies, or revokes the use of an exemption from registration in connection with the offer, purchase or sale of securities; or
  5. e. Is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of a court of competent jurisdiction, permanently restraining or enjoining, the party from engaging in or continuing a conduct or practice in connection with the purchase or sale of a security or involving the making of a false filing with the state entered within five years prior to the filing of the Solicitation of Interest form.
    The prohibitions listed above shall not apply if the person subject to the disqualification is duly licensed or registered to conduct securities related business in the state in which the administrative order or judgment was entered against the person or if the broker-dealer employing the party is licensed or registered in this state and the Form B-D filed with this Commonwealth discloses the order, conviction, judgment or decree relating to the person. No person disqualified under this subdivision 11 shall act in a capacity other than that for which the person is licensed or registered. A disqualification caused by this subdivision 11 is automatically waived if the agency which created the basis for disqualification determines upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied.
B. A failure to comply with a term, condition or requirement of subdivisions 1 through 11 of subsection A of this section will not result in the loss of the exemption from the securities registration requirements of the Act for an offer to a particular individual or entity if the offeror shows:
1. 1. The failure to comply did not pertain to a term, condition or requirement directly intended to protect that particular individual or entity;
2. 2. The failure to comply was insignificant with respect to the offering as a whole; and
3. 3. A good faith and reasonable attempt was made to comply with all applicable terms, conditions and requirements of subdivisions A 1 through 11 of subsection A.
  Where an exemption is established only through reliance upon this subsection B, the failure to comply shall nonetheless be actionable by the State Corporation Commission as a violation of the Act, and shall be grounds for denying or revoking the exemption as to a specific security or transaction.
C. The offeror shall comply with the requirements set forth in subdivisions 1 and 2 below. Failure to comply will not result in the loss of the exemption from the securities registration requirements of the Act, but shall be a violation of the Act, actionable by the State Corporation Commission, and grounds for denying or revoking the exemption as to a specific security or transaction.
1. 1. Any published notice or script for broadcast and any printed material delivered apart from the Solicitation of Interest Form shall contain at least the identity of the chief executive officer of the issuer, a brief and general description of its business and products, and the following legends:
  1. a. NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED AND NONE WILL BE ACCEPTED;
  2. b. NO SALES OF THE SECURITIES WILL BE MADE OR COMMITMENT TO PURCHASE ACCEPTED UNTIL DELIVERY OF AN OFFERING CIRCULAR THAT INCLUDES COMPLETE INFORMATION ABOUT THE ISSUER AND THE OFFERING;
  3. c. AN INDICATION OF INTEREST MADE BY A PROSPECTIVE INVESTOR INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND;
  4. d. THIS OFFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE FEDERAL AND STATE SECURITIES LAWS. NO SALE MAY BE MADE UNTIL THE OFFERING STATEMENT IS QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION AND THE SECURITIES ARE REGISTERED IN THIS STATE; and
  5. e. REGISTRATION OF THE SECURITIES FOR SALE IN THIS STATE IS DEPENDENT ON COMPLIANCE WITH THE SECURITIES LAWS OF VIRGINIA. THEREFORE, THERE CAN BE NO ASSURANCE THAT THE SECURITIES WILL BE REGISTERED FOR SALE IN VIRGINIA.
    This requirement shall not apply to the delivery of printed material to a person who has already received a Solicitation of Interest Form with the legends correctly included.
2. 2. All communications with offerees made in reliance on this section shall cease after a registration statement is filed in this state, and no sale may be made until at least 20 calendar days after the last communication made in reliance on this section.
D. Other than the requirements of subdivision 10 of subsection A above, the State Corporation Commission may waive any condition of this exemption in writing, upon application by the offeror and good cause having been shown. Neither compliance nor attempted compliance with this section, nor the absence of an objection or order by the State Corporation Commission with respect to an offer of securities undertaken pursuant to this section, shall be deemed to be a waiver of a condition of the section or deemed to be a confirmation by the State Corporation Commission of the availability of this section.
E. Offers made in reliance on this section will not result in a violation of § 13.1-507 of the Act by virtue of being integrated with subsequent offers or sales of securities unless the subsequent offers and sales would be integrated under federal securities laws.
F. Issuers on whose behalf indications of interest are solicited under this section may not make offers or sales in reliance on subdivision B 7 or B 13 of § 13.1-514 of the Act until six months after the last communication with an offeree made pursuant to this section.
1. 1. All communications made in reliance on this section are subject to the anti-fraud provisions of the Act.
2. 2. Persons who deliver a prospectus in connection with an offering for which indications of interest have been solicited under this section must be registered under the Act as a broker-dealer or as an agent.
3. 3. The Commission may or may not review the materials filed pursuant to this section. Materials filed, if reviewed, will be judged under anti-fraud principles. Any discussion in the offering documents of the potential rewards of the investment must be balanced by a discussion of possible risks.
4. 4. With respect to subdivisions 4 and 5 of subsection A, the offeror may begin to conduct solicitations of interest once the prefiling requirements have been satisfied, unless notified otherwise by the State Corporation Commission. The State Corporation Commission may at any time notify the offeror not to distribute a Solicitation of Interest form, script, advertisement or other material which the Commission believes is in violation of the Act's anti-fraud provisions.
5. 5. An offer effected in violation of this section may constitute an unlawful offer of an unregistered security for which civil liability attaches under § 13.1-522 of the Act. Likewise, a misrepresentation or omission may give rise to civil liability.
6. 6. Issuers should note that under certain conditions the State Corporation Commission may refuse to grant effectiveness to a registration statement filed under § 13.1-508 or § 13.1-510 of the Act. In that event, sales to prospective Virginia investors solicited under this section may not be consummated. Please refer to § 13.1-513 of the Act, 21VAC5-70-10, and 21VAC5-30-40.
  NOTE TO USERS: The following form sets forth the minimum informational requirements for soliciting indications of interest under federal and state securities laws. You may include additional information if you think it necessary or desirable. Remember that a discussion in this document is subject to the anti-fraud provisions of the federal and state securities laws and must thereby be complete. Also, a discussion of potential rewards of the proposed investment must be balanced by a discussion of possible risks. You may alter the graphic presentation of the form in any way as long as the minimum information is clearly presented.
  SOLICITATION OF INTEREST FORM
  NAME OF COMPANY
  Street Address of Principal Office:
  Company Telephone Number:
  Date of Organization:
  Amount of the Proposed Offering:
  Name of the Chief Executive Officer:
  THIS IS A SOLICITATION OF INTEREST ONLY. NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED AND NONE WILL BE ACCEPTED.
  NO SALES OF THE SECURITIES WILL BE MADE OR COMMITMENT TO PURCHASE ACCEPTED UNTIL THE DELIVERY OF A FINAL OFFERING CIRCULAR THAT INCLUDES COMPLETE INFORMATION ABOUT THE COMPANY AND THE OFFERING.
  AN INDICATION OF INTEREST MADE BY A PROSPECTIVE INVESTOR INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.
  THIS OFFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE FEDERAL AND STATE SECURITIES LAWS. NO SALE MAY BE MADE UNTIL THE OFFERING STATEMENT IS QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION AND THE SECURITIES ARE REGISTERED IN THIS STATE.
  REGISTRATION OF THE SECURITIES FOR SALE IN THIS STATE IS DEPENDENT ON COMPLIANCE WITH THE SECURITIES LAWS OF VIRGINIA. THEREFORE, THERE CAN BE NO ASSURANCE THAT THE SECURITIES WILL BE REGISTERED FOR SALE IN VIRGINIA.
  This Company:
  ( ) Has never conducted business operations.
  ( ) Is in the development stage.
  ( ) Is currently conducting operations.
  ( ) Has shown a profit for the last fiscal year.
  ( ) Other (Specify) __________.
  BUSINESS:
7. 1. Describe in general what business the company does or proposes to do, including what products or goods are or will be produced or services that are or will be rendered.
8. 2. Describe in general how these products or services are to be produced or rendered and how and when the company intends to carry out its activities.
  OFFERING PROCEEDS:
9. 3. Describe in general how the company intends to use the proceeds of the proposed offering.
  KEY PERSONNEL OF THE COMPANY:
10. 4. Provide the following information for all officers and directors or persons occupying similar positions:
  Name, title, office street address, telephone number, employment history (employers, titles and dates of positions held during the past five years), and education (degrees, schools and dates).
  (end of form)
COMMENTS:

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 507, Case No. SEC940048, eff. August 1, 1994; amended, Virginia Register Volume 11, Issue 21, eff. July 1, 1995.