§ 23-42-503 - Exempted securities.
23-42-503. Exempted securities.
(a) The following securities are exempted from 23-42-501 and 23-42-502:
(1) (A) Any security, including a revenue obligation, issued or guaranteed by this state, any political subdivision of this state, or any agency or corporate or other instrumentality of one (1) or more of the foregoing, or any certificate of deposit for any of the foregoing.
(B) Any securities that are offered and sold pursuant to section 4(5) of the Securities Act of 1933 or that are "mortgage related securities" as that term is defined in section 3(a)(41) of the Securities Exchange Act of 1934 are not covered securities in the same manner as obligations issued or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof. These instruments, commonly referred to as private mortgage-backed securities, may be exempt from the registration requirements of this chapter provided that the transaction or the securities are otherwise exempt under this section. This provision specifically overrides the preemption of state law contained in section 106(c) of the Secondary Mortgage Market Enhancement Act of 1984, Pub. L. No. 98-440, of the United States;
(2) Any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any Canadian province, any agency or corporate or other instrumentality of one (1) or more of the foregoing, or by 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;
(3) Any security issued by and representing an interest in or a debt of any bank organized under the laws of the United States, or any federally insured savings bank, or any bank, savings institution, or trust company organized and supervised under the laws of any state, or any bank holding company regulated under the Bank Holding Company Act of 1956;
(4) Any security issued by and representing an interest in or a debt of any state or federal savings and loan association, or any federally insured savings bank, or any building and loan or similar association organized under the laws of any state and authorized to do business in this state, or any savings and loan holding company regulated by the Office of Thrift Supervision of the United States Department of the Treasury or its successor;
(5) Any security issued or guaranteed by any public utility or holding company which is:
(A) A registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of such a company within the meaning of that act;
(B) Regulated in respect of its rates and charges by a governmental authority of the United States or any state; or
(C) Regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, any state, Canada, or any Canadian province;
(6) Any security of a world-class foreign issuer that meets the qualifications as set forth by rule of the Securities Commissioner;
(7) 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. Section 6(c) of the Philanthropy Protection Act of 1995, Pub. L. No. 104-62, of the United States shall not preempt any provision of this chapter;
(8) Any investment contract or other security issued in connection with an employees' stock purchase, savings, pension, profit sharing, stock bonus, stock option, or similar benefit plan. Plans which do not meet the requirements for qualification under the Internal Revenue Code must file with the commissioner prior to any offer or sale a notice specifying the terms of the plan. The commissioner may by order disallow the exemption within ten (10) days; and
(9) Any security as to which the commissioner by rule or order finds that registration is not necessary or appropriate in the public interest or for the protection of investors.
(b) The commissioner may, from time to time, by his or her rules, and subject to any terms, conditions, and fees which may be prescribed therein, add any class of securities to the securities exempted as provided in this section if the commissioner finds that the enforcement of this chapter with respect to the securities is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering, but no issue of securities shall be exempted under this section where the aggregate amount at which the issue is offered to the public exceeds one million dollars ($1,000,000).
(c) The following shall apply to farm cooperatives organized under the laws of this state as a business corporation but operated as a cooperative, or organized and operated in this state under 2-2-101 et seq., 2-2-401 -- 2-2-411, 2-2-413 -- 2-2-429, 4-30-101 -- 4-30-117, 4-30-201, 4-30-202, and 4-30-204 -- 4-30-207, and to any nonprofit farm cooperative which is qualified to do business in this state:
(1) Any common stock, preferred stock, promissory note, debenture, or other security may be issued to any cooperative member after either compliance with subsection (d) of this section or delivery to the cooperative member and filing, with the commissioner, of financial statements of the farm cooperative for each of the two (2) fiscal years as of a date not earlier than four hundred fifty-five (455) days prior to the issuance of the security, all of which statements shall have been audited, examined, and certified by independent public accountants to have been prepared in accordance with generally accepted accounting principles consistently maintained by the cooperative during the fiscal years represented by the statements. No registered agent shall be required if no commission or other remuneration is to be paid in connection with the offer and sale of such securities; or
(2) Any interest or agreement which qualifies its holder to be a member or other patron of a farm cooperative or which represents the terms or conditions by which members or other patrons purchase or sell agricultural products or commodities from, to, or through a farm cooperative, or which represents a capital retain, or patronage distribution issued by a farm cooperative solely to its members or other patrons shall not be considered to be a security under this chapter and shall not be subject to the provisions of this chapter, provided:
(A) The instruments or interests are properly identified and not labeled with the traditional names of investment securities as defined by 23-42-102(15);
(B) The instruments or interests are not part of a class of instruments or interests regularly bought or sold for investment purposes or for which an active trading market exists. However, this limitation shall not in any way restrict the bona fide pledge of the instruments or interests; and
(C) No commission or other remuneration is paid in connection with the sale or issuance to members or other patrons of the interests and instruments. This exemption shall not apply to those interests or instruments which possess the characteristics of an investment contract or other security as interpreted under the laws of the State of Arkansas; and
(3) The commissioner may render foreign nonprofit farm cooperatives the privilege afforded Arkansas nonprofit farm cooperatives set forth in subdivision (c)(2) of this section, provided such foreign cooperative first files supporting documents verifying that it is qualified to do business in Arkansas, that members have substantially the same rights as members of farm cooperatives organized under the nonprofit farm cooperative corporate laws of this state, that the offering is within the scope of subdivision (c)(2) of this section, and any other information which the commissioner deems appropriate.
(d) (1) Before any security may be issued as an exempted security under subdivision (a)(7) of this section, a proof of exemption must first be filed with the commissioner, and the commissioner by order shall not have disallowed the exemption within the next ten (10) full business days.
(2) The proof of exemption shall contain a statement of the grounds upon which the exemption is claimed and a designation of the subsection of this section under which the exemption is claimed.
(3) Proofs of exemption which have not been completed within a period of one hundred eighty (180) days after filing with the commissioner may be deemed abandoned and considered withdrawn by the applicant, provided the applicant has been notified of the deficiencies to the proof and afforded a reasonable opportunity to correct the deficiencies.
(4) Each offering shall be effective only for twelve (12) consecutive months.
(5) For every proof of exemption filed with the commissioner, there shall be paid to the commissioner a filing fee equal to one-tenth percent (0.1%) of the maximum aggregate offering price at which the securities are to be offered in this state. The fee shall in no case be less than one hundred dollars ($100) nor more than five hundred dollars ($500). The commissioner shall have authority under this subsection to amend or rescind the filing fees by rule or order if the commissioner determines that the fee is excessive under the circumstances.