TITLE XXXVIII
SECURITIES

CHAPTER 421-B
SECURITIES

Registration of Securities

Section 421-B:17

    421-B:17 Exemptions. –
    I. The following securities are exempted from RSA 421-B:11, and RSA 421-B:18, I:
       (a) Any security, including a revenue obligation, issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency, or corporate or other instrumentality, of one or more of the foregoing, or any certificate of deposit for any of the foregoing, but this exemption shall not include any industrial development bond or any industrial revenue bond;
       (b) Any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, or any agency, or corporate or other instrumentality, of one or more of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor;
       (c) Any security issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state;
       (d) Any security issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association, or any building and loan or similar association organized under the laws of any state and authorized to do business in this state;
       (e) Any security issued or guaranteed by any federal credit union or any credit union, or similar association organized and supervised under the laws of this state;
       (f) (1) Any security listed or approved for listing upon notice of issuance on the following securities markets, and any other security of the same issuer that is of senior or substantially equal rank; any security called for by subscription rights or warrants so listed or approved; or any warrant or right to purchase or subscribe to any of the securities exempted in this subparagraph:
             (i) The New York Stock Exchange, the American Stock Exchange, the Chicago Board Options Exchange, or the National Association of Securities Dealers Automated Quotation Market System.
             (ii) The Boston Stock Exchange or the securities designated by the board of governors of the Federal Reserve System as ""O.T.C. Margin Stocks,'' if quotations have become available and public trading has taken place for such class of security prior to the offer or sale of that security in reliance upon this exemption.
             (iii) Upon petition by an exchange and after review of such exchange's performance, its memorandum of understanding with the North American Securities Administrators Association and upon review of any other information the secretary of state may require, the secretary may by order designate such exchange as qualified under subparagraph (i) or (ii) for the exemption provided by subparagraph (f)(1).
          (2) The secretary of state may withdraw an exemption in subparagraph (f)(1) if the secretary determines, for any security or class of securities sought to be sold in reliance upon this exemption, that the listing requirements or standards have been so changed, or so insufficiently applied, that the protection of investors contemplated and relied upon by the legislature in granting this exemption is no longer afforded or is substantially reduced.
          (3) The exemption provided by the subparagraph shall not be available to securities listed on the American Stock Exchange Emerging Marketplace, the National Association of Securities Dealers Automated Quotation Small Cap Market, or any other securities market affiliated with a market named in subparagraph (f)(1)(i) or (ii) and so designated by the secretary of state.
          (4) Issuers of securities that are exempt under subparagraph (f)(1)(i) shall pay a fee for the initial public offering prior to the first sale of the securities in this state.
          (5) The secretary of state shall adopt rules relative to suitability requirements for investors purchasing securities offered pursuant to subparagraph (f)(1)(i). For the purposes of adopting the initial set of rules as provided by this section the secretary of state shall be authorized to adopt emergency rules as provided in RSA 541-A:18, notwithstanding the requirement under RSA 541-A:18, I, requiring an imminent peril to public health or safety.
       (g) Any commercial paper which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within 9 months of the date of issuance, exclusive of days of grace, or any renewal of the paper which is likewise limited, or any guarantee of the paper or of any renewal which are not advertised for sale to the general public in newspapers or other publications of general circulation or otherwise, or by radio, television or direct mailing;
       (h) Any interest in any employee's savings, stock purchase, pension, profit sharing or similar benefit plan, including, but not limited to a plan that provides for direct purchases of the employer's securities and options by employees or a self-employed person's retirement plan so long as the issuer's board of directors has approved the plan and its primary purpose is to benefit employees rather than to raise capital;
       (i) Any security issued or guaranteed by any railroad, other common carrier or public utility which is subject to regulation in respect to the issuance or guarantee of its securities by a governmental authority of the United States;
       (j) Any interest in a common trust fund or similar fund maintained by a state bank or trust company organized and operating under the laws of New Hampshire, or a national bank wherever located, for the collective investment and reinvestment of funds contributed to such common trust fund or similar fund by the bank or trust company in its capacity as trustee, executor, administrator, or guardian; and any interest in a collective investment fund or similar fund maintained by the bank or trust company, or in a separate account maintained by an insurance company, for the collective investment and reinvestment of funds contributed to such collective investment fund or similar fund by the bank, trust company or insurance company in its capacity as trustee or agent, which interest is issued in connection with an employee's savings, pension, profit sharing, or similar benefit plan, or a self-employed person's retirement plan;
       (k) Any security which meets all of the following conditions:
          (1) If the issuer is not organized under the laws of the United States or a state, it has appointed a duly authorized agent in the United States for service of process and has set forth the name and address of the agent in its prospectus;
          (2) A class of the issuer's securities is required to be and is registered under section 12 of the Securities Exchange Act of 1934, and has been so registered for the 3 years immediately preceding the offering date;
          (3) Neither the issuer nor a significant subsidiary has had a material default during the last 7 years, or for the period of the issuer's existence if less than 7 years, in the payment of
             (i) Principal, interest, dividend or sinking fund installment on preferred stock or indebtedness for borrowed money, or
             (ii) Rentals under leases with terms of 3 years or more;
          (4) The issuer has had consolidated net income, before extraordinary items and the cumulative effect of accounting changes of at least $1,000,000 in 4 of its last 5 fiscal years including its last fiscal year; and if the offering is of interest bearing securities, has had for its last fiscal year, net income, before deduction for income taxes and depreciation, of at least 1 1/2 times the issuer's annual interest expense, giving effect to the proposed offering and the intended use of the proceeds. For the purposes of this subparagraph ""last fiscal year'' means the most recent year for which audited financial statements are available, provided that such statements cover a fiscal period ended not more than 15 months from the commencement of the offering;
          (5) If the offering is of stock or shares other than preferred stock or shares, the securities have voting rights and the rights include:
             (i) The right to have at least as many votes per share, and
             (ii) The right to vote on at least as many general corporate decisions, as each of the issuer's outstanding classes of stock or shares, except as otherwise required by law; and
          (6) If the offering is of stock or shares, other than preferred stock or shares, the securities are owned beneficially or of record, on any date within 6 months prior to the commencement of the offering, by at least 1,200 persons, and on that date there are at least 750,000 such shares outstanding with an aggregate market value, based on the average bid price for that day, of at least $3,750,000. In connection with the determination of the number of persons who are beneficial owners of the stock or shares of an issuer, the issuer or broker-dealer may rely in good faith for the purposes of this clause upon written information furnished by the record owners;
       (l) Any certificate of indebtedness sold or issued for investment, other than a certificate of indebtedness pledged as a security for a loan made contemporaneously therewith, by an industrial loan and thrift company;
       (m) Any security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes, or as a chamber of commerce or trade or professional association;
       (n) Any security designated by rule or order by the secretary of state after a finding that the designation is consistent with the purposes fairly intended by the policy and provisions of this title.
    II. The following transactions are exempted from RSA 421-B:11 and RSA 421-B:18, I:
       (a) (1) Any non-issuer transactions, whether or not effected by or through a broker-dealer resulting in the completion of 5 or fewer sales of securities of a single issuer by the same non-issuer within any period of 12 consecutive months. The secretary of state, on a case-by-case basis, may by rule or order, retroactively or prospectively, increase the number of persons to whom sales may be made under this exemption.
          (2) Any sale of securities by an issuer, if:
             (A) The number of purchasers of securities of the issuer, in all jurisdictions combined, does not in consequence of the sale, exceed 10 in number during any 12 consecutive months and 25 in number during the issuer's existence.
             (B) The securities sold in reliance on this subparagraph have not been offered to the public by any form of general solicitation or general advertisement.
             (C) A commission or remuneration is not paid or given, directly or indirectly, to a person other than a broker-dealer registered under this chapter or an agent registered under this chapter for soliciting a prospective purchaser.
             (D) Except for sales of securities registered under the Securities Act of 1933 or exempted by section 3(b) of that act, the seller reasonably believes that all buyers are purchasing for investment.
          (3) For purposes of subparagraph (2):
             (A) ""General solicitation'' and ""general advertisement'' includes, but is not limited to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. General solicitation and general advertisement shall not include communications and disclosure material specifically directed to persons with whom the seller or its representatives had a substantial and pre- existing relationship.
             (B) The computation of the number of sales that may be made under this exemption shall include sales made under RSA 421-B:17,II(k), but shall not include sales made under any other exemption provided for in RSA 421-B:17 or sales made pursuant to 17 C.F.R. section 230.506
             (C) The secretary of state, on a case-by-case basis, may by rule or order increase the number of persons to whom sales may be made under this exemption.
       (b) Any non-issuer distribution of an outstanding security, other than common stock, rated in the top 3 categories of Moody's, Fitch's, or Standard & Poor's Securities Manuals if:
          (1) Either Moody's, Fitch's, or Standard & Poor's Securities Manuals, or other recognized manuals approved by the secretary of state, contains the names of the issuer's officers and directors, a balance sheet of the issuer as of a date not more than 18 months prior to the date of such sale, and a profit and loss statement for the fiscal year preceding the date of such balance sheet, and
          (2) The issuer or its predecessor has been in active, continuous business operation for the 5-year period next preceding the date of sale, and
          (3) If the security has a fixed maturity or fixed interest or dividend provision, the issuer has not, within the 3 preceding fiscal years, defaulted in payment of principal, interest, or dividends on any such securities.
       (c) The execution of any orders by a licensed broker-dealer for the purchase or sale of any security, pursuant to an unsolicited offer to purchase or sell; provided that such broker-dealer acts as agent for the purchaser or sell; provided that such broker-dealer acts as agent for the purchaser or seller, and has no direct material interest in the sale or distribution of such security, receives no commission, profit, or other compensation from any source other than the purchaser and seller and delivers to the purchaser and seller written confirmation of the transaction which clearly itemizes his commission, or other compensation and which clearly indicates the sale was an unsolicited transaction.
       (d) Any non-issuer sale of notes or bonds secured by a mortgage lien if the entire mortgage, together with all notes or bonds secured thereby, is sold to a single purchaser at a single sale.
       (e) Any judicial sale, exchange, or issuance of securities made pursuant to an order of a court of competent jurisdiction.
       (f) The sale, by a pledgeholder, of a security pledged with him in good faith as collateral for a bona fide debt.
       (g) Any offer or sale to a bank savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit sharing trust, a venture capital company which operates a small business investment company under the Small Business Investment Act of 1958, as amended, or other financial institution or institutional buyer, or to a broker-dealer, whether the purchaser is acting for itself or in some fiduciary capacity.
       (h) [Repealed.]
       (i) Any offer, but not a sale, of a security for which a registration statement has been filed under both this chapter and the Securities Act of 1933, if no stop order or refusal order is in effect and no public proceeding or examination looking toward such an order is pending under either act; and any offer of a security if the sale of such security is or would be exempt under this section. The secretary of state may by rule or order exempt such other offers, but not sales, of securities for which a registration statement has been filed, consistent with the purposes of this chapter.
       (j) The offer and sale by a cooperative association organized under the laws of New Hampshire of its securities when such securities are offered and sold only to its members, or when the purchase of such securities is necessary or incidental to establishing membership in such association, or when such securities are issued as patronage dividends.
       (k) Any offer or sale of securities, including offers and sales pursuant to preorganization subscriptions for the securities of an issuer to be formed, by a corporation, limited partnership, registered limited liability partnership, or limited liability company if after giving effect to the sale, the aggregate number of holders of all of the issuer's securities, all of whom shall have purchased for investment, does not exceed 10, exclusive of persons designated in subparagraph (g), provided that no commission or other remuneration has been paid and neither the issuer nor any person acting on its behalf offers or sells the securities by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. All sales pursuant to this subparagraph must be consummated within 60 days after the date of incorporation or formation of the issuer. The secretary of state may by rule or order increase the number of persons to whom sales may be made under this exemption.
       (l) The issuance and delivery of any securities of one corporation to another corporation or its securities holders in exchange for the acquisition by the issuer or a subsidiary of the issuer of all or substantially all of the assets of such other corporation, or in connection with a consolidation or merger of such corporation or a share exchange between the issuer or a subsidiary of the issuer and such other corporation, provided that the secretary of state has been furnished with a general description of the transaction, with the documents to be distributed to offerees, and with such other information as he prescribes by rule not less than 10 business days prior to such issuance and delivery.
       (m) Any transaction between the issuer or other person on whose behalf the offering is made and an underwriter or among underwriters.
       (n) The distribution by a corporation of its or other securities to its own security holders as a stock dividend or as a dividend from earnings or surplus or as a liquidating distribution; or upon conversion of an outstanding convertible security; or pursuant to a stock split or reverse stock split.
       (o) Any offer or sale of securities by an affiliate of the issuer of the securities if:
          (1) A registration statement is in effect with respect to securities of the same class of such issuer, and
          (2) Such offer or sale has been exempted from registration by rule or order of the secretary of state.
       (p) Any transaction pursuant to an offer to existing security holders of the issuer, where the securities held by such existing security holders were issued by the issuers for value, including, but not limited to, persons who at the time of the transaction are holders of convertible securities, non-transferable warrants, or transferable warrants exercisable within not more than 90 days of their issuance, if:
          (1) No commission or other remuneration (other than a standby commission) is paid or given directly or indirectly for soliciting any security holder in this state, or
          (2) The issuer first files a notice specifying the terms of the offer and the secretary of state does not by order disallow the exemption within the next 10 full business days.
       (q) Any acquisitions or mergers made pursuant to RSA 384:57-60, governing interstate acquisitions and mergers of banks and bank holding companies.
       (r) (1) Any offer or sale of securities offered or sold in compliance with 17 C.F.R. sections 230.501-230.503 and 230.505, which satisfies the following further conditions and limitations:
             (A) No commission, fee, or other remuneration shall be paid or given, directly or indirectly, to any person for soliciting any prospective purchaser in this state unless such person is appropriately registered as a broker-dealer or agent of a broker-dealer in this state.
             (B) The issuer shall file with the secretary of state no later than 10 days prior to the receipt of consideration or the delivery of a subscription agreement by an investor in this state which results from an offer being made in reliance upon this exemption:
                (i) A notice on Securities and Exchange Commission Form D (17 C.F.R. section 239.500).
                (ii) All information furnished by the issuer to the offeree.
                (iii) A consent to service of process pursuant to RSA 421-B:30.
                (iv) A filing fee in the amount set forth at RSA 421-B:31, I(h).
                (v) The federal Form D at such other times and in the form required under 17 C.F.R. section 230.503 to be filed with the Securities and Exchange Commission.
             (C) In all sales to persons who are not ""accredited investors,'' as defined by 17 C.F.R. section 230.501(a), in this state, the following conditions shall be satisfied or the issuer and any person acting on its behalf shall believe and have reasonable grounds to believe, after making reasonable inquiry and obtaining written representations from the investor, that the following conditions have been satisfied:
                (i) The investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to the purchaser's other security holdings, financial situation, and needs. For the purpose of this condition only, it may be presumed that if the investment does not exceed 10 percent of the investor's net worth exclusive of home, home furnishings, and automobiles it is suitable; or
                (ii) The purchaser, either alone or with his or her purchaser representative has such knowledge and experience in financial and business matters that he or she is or they are capable of evaluating the merits and risks of the prospective investment.
             (D) In those instances where sales are made to persons who are not ""accredited investors'' as defined by 17 C.F.R. section 230.501(a), where offering documents do not meet the disclosure requirements of 17 C.F.R. section 230.502(b), the secretary of state shall require additional disclosure or impose additional conditions to insure said disclosure requirements are met.
             (E) The exemption authorized by this subparagraph shall be known and may be cited as the ""uniform limited offering exemption.''
          (2) No exemption under this subparagraph shall be available for transactions involving the securities of any issuer if any part of RSA 421-B:17-a, I applies to any of the parties.
       (s) (1) The use of a designated matching service facility by an issuer-member shall not constitute an offer to purchase or sell within the meaning of RSA 421-B:2, XIX.
          (2) A person may apply to the secretary of state to be a designated matching service by filing an application for designation as matching service, as defined by the secretary of state. No designation will be made unless the applicant demonstrates that it:
             (i) Owns or will own, operates or will operate, sponsors or will sponsor, or conducts or will conduct a matching service facility limited to providing investor members with the investor packages and identities of issuer-members;
             (ii) Enforces the requirement that each issuer-member, prior to the sale of securities, complies with RSA 421-B:11;
             (iii) Will not be involved in any manner in the sale, offer for sale, solicitation of a sale, or offer to buy a security other than as set forth in subparagraph (2)(i);
             (iv) Believes, after making a reasonable factual inquiry, that any person who uses the matching service facility in the capacity of an investor is a properly qualified investor member;
             (v) Is a governmental entity, quasi-governmental entity, an institution of higher education, or a domestic nonprofit corporation that is associated with a governmental or quasi-governmental entity or an institution of higher education;
             (vi) Does not employ any person required to be registered under this chapter as a broker-dealer, investment adviser, salesman, or agent;
             (vii) Does not have, and does not employ any person who has, a business relationship with any investor member or issuer-member other than to provide such member access to the matching service facility;
             (viii) Charges fees only in an amount necessary to cover its reasonable operating costs and that are unrelated to the amount of money being raised by any issuer-member or the amount of securities sold by any member;
             (ix) Agrees not to use any advertisement of its matching service facility that advertises any particular issuer or any particular securities or the quality of any securities or that is false or misleading or otherwise likely to deceive a reader thereof, and upon objection by the secretary of state, agrees to cease any advertisement;
             (x) Agrees not to publish or distribute any issuer-member material to which the secretary of state raises objection, and upon objection by the secretary of state, agrees to cease any publication of such material;
             (xi) Enforces the requirement that no issuer-member will make a sale of securities until 5 calendar days after delivery to the purchaser of a final offering circular or final documents; and
             (xii) Meets such other conditions as the secretary of state considers appropriate for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of this chapter and the rules adopted under this chapter.
          (3) Designation under this subparagraph is not available to any matching service formed in a manner that constitutes part of a scheme to violate or evade the provision of this chapter or rules adopted under this chapter.
          (4) The secretary of state, upon 10 days' notice and after a hearing, may withdraw a person's designation as a matching service if the person does not meet the standards for designation provided in this section.
       (t) Any transaction designated by rule or order by the secretary of state after a finding that the designation is consistent with the purposes fairly intended by the policy and provisions of this title.
    III. The secretary of state may issue an order requiring any person who claims the benefit of an exemption with respect to a specific security or transaction, to show cause why the exemption should not be revoked. The order shall be calculated to give reasonable notice of the time and place for the revocation hearing, and shall state the reasons for the entry of the order. The secretary of state may by order summarily suspend, deny or revoke an exemption pending final determination of any order to show cause, provided the secretary of state finds the public interest will be irreparably harmed by delay in issuing such an order. If an exemption is denied, revoked or suspended pending final determination of an order to show cause, a hearing on the merits shall be held within 10 days of the issuance. The secretary of state may deem abandoned and withdraw any filing made pursuant to this section, if any person fails to respond in writing within 90 days, to a written request from the secretary of state requesting a response.
    IV. All hearings shall be conducted in accordance with rules adopted pursuant to this chapter. After the hearing, the secretary of state shall enter an order making such disposition of the matter as the facts require. If the person claiming the benefit of the exemption fails to appear at a hearing of which he has been duly notified, such person shall be deemed in default, and the proceeding may be determined against him upon consideration of the order to show cause, the allegations of which may be deemed to be true. The secretary of state may adopt rules of procedure concerning all proceedings conducted pursuant to this subdivision.
    V. In any judicial or administrative proceeding under this chapter, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

Source. 1981, 214:1. 1985, 334:1. 1987, 155:4; 411:2. 1989, 144:2. 1991, 16:1; 17:1; 139:1; 196:2; 355:89, II. 1992, 288:31. 1994, 19:4; 388:12-16. 1995, 304:2. 1996, 212:15; 239:24-28, 30, 39, 40; 288:11. 1997, 112:13-19; 296:18. 1998, 250:2. 2001, 194:3, eff. July 1, 2001; 260:16, eff. July 13, 2001. 2006, 245:15-17, 29, II, eff. July 1, 2006.