Bill Text: IL HB3791 | 2017-2018 | 100th General Assembly | Chaptered


Bill Title: Amends the Illinois Securities Law of 1953. Includes certain agents of title insurance companies and registered broker-dealers and registered investment advisors within the scope of the term "qualified escrowee". With respect to certain exempt transactions, removes a requirement that the dealer be organized under Illinois Law, authorizes the payment of finders fees, and make other changes. Permits an Internet Portal to accept equity as payment if specified conditions are met.

Spectrum: Slight Partisan Bill (Democrat 15-7)

Status: (Passed) 2017-09-15 - Public Act . . . . . . . . . 100-0507 [HB3791 Detail]

Download: Illinois-2017-HB3791-Chaptered.html



Public Act 100-0507
HB3791 EnrolledLRB100 07306 JLS 21791 b
AN ACT concerning business.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Securities Law of 1953 is amended
by changing Sections 2.35, 4, and 8d as follows:
(815 ILCS 5/2.35)
Sec. 2.35. Qualified escrowee. "Qualified escrowee" means
a person, firm, partnership, association, corporation, or
other legal entity who: (a) falls under the definition of
"title insurance company" under, and pursuant to the terms and
requirements of, the Title Insurance Act, or is otherwise an
agent or affiliate of such title insurance company who is
approved by such title insurance company to act under this
Section and pursuant to the terms and requirements of the Title
Insurance Act, and which maintains at least one physical
business location within the State; (b) is certified as an
independent escrowee under, and pursuant to the terms and
requirements of, the Title Insurance Act; or (c) is a bank,
regulated trust company, savings bank, savings and loan
association, or credit union, registered broker-dealer, or law
firm which is authorized to do business in the State and which
maintains at least one physical business location within the
State.
(Source: P.A. 99-182, eff. 1-1-16.)
(815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
Sec. 4. Exempt transactions. The provisions of Sections 2a,
5, 6 and 7 of this Act shall not apply to any of the following
transactions, except where otherwise specified in this Section
4:
A. Any offer or sale, whether through a dealer or
otherwise, of securities by a person who is not an issuer,
underwriter, dealer or controlling person in respect of
such securities, and who, being the bona fide owner of such
securities, disposes thereof for his or her own account;
provided, that such offer or sale is not made directly or
indirectly for the benefit of the issuer or of an
underwriter or controlling person.
B. Any offer, sale, issuance or exchange of securities
of the issuer to or with security holders of the issuer
except to or with persons who are security holders solely
by reason of holding transferable warrants, transferable
options, or similar transferable rights of the issuer, if
no commission or other remuneration is paid or given
directly or indirectly for or on account of the procuring
or soliciting of such sale or exchange (other than a fee
paid to underwriters based on their undertaking to purchase
any securities not purchased by security holders in
connection with such sale or exchange).
C. Any offer, sale or issuance of securities to any
corporation, bank, savings bank, savings institution,
savings and loan association, trust company, insurance
company, building and loan association, or dealer; to a
pension fund, pension trust, or employees' profit sharing
trust, other financial institution or institutional
investor, any government or political subdivision or
instrumentality thereof, whether the purchaser is acting
for itself or in some fiduciary capacity; to any
partnership or other association engaged as a substantial
part of its business or operations in purchasing or holding
securities; to any trust in respect of which a bank or
trust company is trustee or co-trustee; to any entity in
which at least 90% of the equity is owned by persons
described under subsection C, H, or S of this Section 4; to
any employee benefit plan within the meaning of Title I of
the Federal ERISA Act if (i) the investment decision is
made by a plan fiduciary as defined in Section 3(21) of the
Federal ERISA Act and such plan fiduciary is either a bank,
savings and loan association, insurance company,
registered investment adviser or an investment adviser
registered under the Federal 1940 Investment Advisers Act,
or (ii) the plan has total assets in excess of $5,000,000,
or (iii) in the case of a self-directed plan, investment
decisions are made solely by persons that are described
under subsection C, D, H or S of this Section 4; to any
plan established and maintained by, and for the benefit of
the employees of, any state or political subdivision or
agency or instrumentality thereof if such plan has total
assets in excess of $5,000,000; or to any organization
described in Section 501(c)(3) of the Internal Revenue Code
of 1986, any Massachusetts or similar business trust, or
any partnership, if such organization, trust, or
partnership has total assets in excess of $5,000,000.
D. The Secretary of State is granted authority to
create by rule or regulation a limited offering
transactional exemption that furthers the objectives of
compatibility with federal exemptions and uniformity among
the states. The Secretary of State shall prescribe by rule
or regulation the amount of the fee for filing any report
required under this subsection, but the fee shall not be
less than the minimum amount nor more than the maximum
amount established under Section 11a of this Act and shall
not be returnable in any event.
E. Any offer or sale of securities by an executor,
administrator, guardian, receiver or trustee in insolvency
or bankruptcy, or at any judicial sale, or at a public sale
by auction held at an advertised time and place, or the
offer or sale of securities in good faith and not for the
purpose of avoiding the provisions of this Act by a pledgee
of securities pledged for a bona fide debt.
F. Any offer or sale by a registered dealer, either as
principal or agent, of any securities (except face amount
certificate contracts and investment fund shares) at a
price reasonably related to the current market price of
such securities, provided:
(1) (a) the securities are issued and outstanding;
(b) the issuer is required to file reports pursuant
to Section 13 or Section 15(d) of the Federal 1934 Act
and has been subject to such requirements during the 90
day period immediately preceding the date of the offer
or sale, or is an issuer of a security covered by
Section 12(g)(2)(B) or (G) of the Federal 1934 Act;
(c) the dealer has a reasonable basis for believing
that the issuer is current in filing the reports
required to be filed at regular intervals pursuant to
the provisions of Section 13 or Section 15(d), as the
case may be, of the Federal 1934 Act, or in the case of
insurance companies exempted from Section 12(g) of the
Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
the annual statement referred to in Section
12(g)(2)(G)(i) of the Federal 1934 Act; and
(d) the dealer has in its records, and makes
reasonably available upon request to any person
expressing an interest in a proposed transaction in the
securities, the issuer's most recent annual report
filed pursuant to Section 13 or 15(d), as the case may
be, of the Federal 1934 Act or the annual statement in
the case of an insurance company exempted from Section
12(g) of the Federal 1934 Act by subparagraph
12(g)(2)(G) thereof, together with any other reports
required to be filed at regular intervals under the
Federal 1934 Act by the issuer after such annual report
or annual statement; provided that the making
available of such reports pursuant to this
subparagraph, unless otherwise represented, shall not
constitute a representation by the dealer that the
information is true and correct, but shall constitute a
representation by the dealer that the information is
reasonably current; or
(2) (a) prior to any offer or sale, an application for
the authorization thereof and a report as set forth
under sub-paragraph (d) of this paragraph (2) has been
filed by any registered dealer with and approved by the
Secretary of State pursuant to such rules and
regulations as the Secretary of State may prescribe;
(b) the Secretary of State shall have the power by
order to refuse to approve any application or report
filed pursuant to this paragraph (2) if
(i) the application or report does not comply
with the provisions of this paragraph (2), or
(ii) the offer or sale of such securities would
work or tend to work a fraud or deceit, or
(iii) the issuer or the applicant has violated
any of the provisions of this Act;
(c) each application and report filed pursuant to
this paragraph (2) shall be accompanied by a filing fee
and an examination fee in the amount established
pursuant to Section 11a of this Act, which shall not be
returnable in any event;
(d) there shall be submitted to the Secretary of
State no later than 120 days following the end of the
issuer's fiscal year, each year during the period of
the authorization, one copy of a report which shall
contain a balance sheet and income statement prepared
as of the issuer's most recent fiscal year end
certified by an independent certified public
accountant, together with such current information
concerning the securities and the issuer thereof as the
Secretary of State may prescribe by rule or regulation
or order;
(e) prior to any offer or sale of securities under
the provisions of this paragraph (2), each registered
dealer participating in the offer or sale of such
securities shall provide upon request of prospective
purchasers of such securities a copy of the most recent
report required under the provisions of sub-paragraph
(d) of this paragraph (2);
(f) approval of an application filed pursuant to
this paragraph (2) of subsection F shall expire 5 years
after the date of the granting of the approval, unless
said approval is sooner terminated by (1) suspension or
revocation by the Secretary of State in the same manner
as is provided for in subsections E, F and G of Section
11 of this Act, or (2) the applicant filing with the
Secretary of State an affidavit to the effect that (i)
the subject securities have become exempt under
Section 3 of this Act or (ii) the applicant no longer
is capable of acting as the applicant and stating the
reasons therefor or (iii) the applicant no longer
desires to act as the applicant. In the event of the
filing of an affidavit under either preceding
sub-division (ii) or (iii) the Secretary of State may
authorize a substitution of applicant upon the new
applicant executing the application as originally
filed. However, the aforementioned substituted
execution shall have no effect upon the previously
determined date of expiration of approval of the
application. Notwithstanding the provisions of this
subparagraph (f), approvals granted under this
paragraph (2) of subsection F prior to the effective
date of this Act shall be governed by the provisions of
this Act in effect on such date of approval; and
(g) no person shall be considered to have violated
Section 5 of this Act by reason of any offer or sale
effected in reliance upon an approval granted under
this paragraph (2) after a termination thereof under
the foregoing subparagraph (f) if official notice of
such termination has not been circulated generally to
dealers by the Secretary of State and if such person
sustains the burden of proof that he or she did not
know, and in the exercise of reasonable care, could not
have known, of the termination; or
(3) the securities, or securities of the same class,
are the subject of an existing registration under Section 5
of this Act.
The exemption provided in this subsection F shall apply
only if the offer or sale is made in good faith and not for the
purpose of avoiding any of the provisions of this Act, and only
if the offer or sale is not made for the direct or indirect
benefit of the issuer of the securities, or the controlling
person in respect of such issuer.
G. (1) Any offer, sale or issuance of a security, whether
to residents or to non-residents of this State, where:
(a) all sales of such security to residents of this
State (including the most recent such sale) within the
immediately preceding 12-month period have been made
to not more than 35 persons or have involved an
aggregate sales price of not more than $1,000,000;
(b) such security is not offered or sold by means
of any general advertising or general solicitation in
this State; and
(c) no commission, discount, or other remuneration
exceeding 20% of the sale price of such security, if
sold to a resident of this State, is paid or given
directly or indirectly for or on account of such sales.
(2) In computing the number of resident purchasers or
the aggregate sales price under paragraph (1) (a) above,
there shall be excluded any purchaser or dollar amount of
sales price, as the case may be, with respect to any
security which at the time of its sale was exempt under
Section 3 or was registered under Section 5, 6 or 7 or was
sold in a transaction exempt under other subsections of
this Section 4.
(3) A prospectus or preliminary prospectus with
respect to a security for which a registration statement is
pending or effective under the Federal 1933 Act shall not
be deemed to constitute general advertising or general
solicitation in this State as such terms are used in
paragraph (1) (b) above, provided that such prospectus or
preliminary prospectus has not been sent or otherwise
delivered to more than 150 residents of this State.
(4) The Secretary of State shall by rule or regulation
require the filing of a report or reports of sales made in
reliance upon the exemption provided by this subsection G
and prescribe the form of such report and the time within
which such report shall be filed. Such report shall set
forth the name and address of the issuer and of the
controlling person, if the sale was for the direct or
indirect benefit of such person, and any other information
deemed necessary by the Secretary of State to enforce
compliance with this subsection G. The Secretary of State
shall prescribe by rule or regulation the amount of the fee
for filing any such report, established pursuant to Section
11a of this Act, which shall not be returnable in any
event. The Secretary of State may impose, in such cases as
he or she may deem appropriate, a penalty for failure to
file any such report in a timely manner, but no such
penalty shall exceed an amount equal to five times the
filing fee. The contents of any such report or portion
thereof may be deemed confidential by the Secretary of
State by rule or order and if so deemed shall not be
disclosed to the public except by order of court or in
court proceedings. The failure to file any such report
shall not affect the availability of such exemption, but
such failure to file any such report shall constitute a
violation of subsection D of Section 12 of this Act,
subject to the penalties enumerated in Section 14 of this
Act. The civil remedies provided for in subsection A of
Section 13 of this Act and the civil remedies of rescission
and appointment of a receiver, conservator, ancillary
receiver or ancillary conservator provided for in
subsection F of Section 13 of this Act shall not be
available against any person by reason of the failure to
file any such report or on account of the contents of any
such report.
H. Any offer, sale or issuance of a security to an
accredited investor provided that such security is not
offered or sold by means of any general advertising or
general solicitation, except as otherwise permitted in
this Act.
I. Any offer, sale or issuance of securities to or for
the benefit of security holders of any person incident to a
vote by such security holders pursuant to such person's
organizational document or any applicable statute of the
jurisdiction of such person's organization, on a merger,
consolidation, reclassification of securities, or sale or
transfer of assets in consideration of or exchange for
securities of the same or another person.
J. Any offer, sale or issuance of securities in
exchange for one or more outstanding securities, claims or
property interests, or partly in such exchange and partly
for cash, where such offer, sale or issuance is incident to
a reorganization, recapitalization, readjustment,
composition or settlement of a claim, as approved by a
court of competent jurisdiction of the United States, or
any state.
K. Any offer, sale or issuance of securities for
patronage, or as patronage refunds, or in connection with
marketing agreements by cooperative associations organized
exclusively for agricultural, producer, marketing,
purchasing, or consumer purposes; and the sale of
subscriptions for or shares of stock of cooperative
associations organized exclusively for agricultural,
producer, marketing, purchasing, or consumer purposes, if
no commission or other remuneration is paid or given
directly or indirectly for or on account of such
subscription, sale or resale, and if any person does not
own beneficially more than 5% of the aggregate amount of
issued and outstanding capital stock of such cooperative
association.
L. Offers for sale or solicitations of offers to buy
(but not the acceptance thereof), of securities which are
the subject of a pending registration statement filed under
the Federal 1933 Act and which are the subject of a pending
application for registration under this Act.
M. Any offer or sale of preorganization subscriptions
for any securities prior to the incorporation,
organization or formation of any issuer under the laws of
the United States, or any state, or the issuance by such
issuer, after its incorporation, organization or
formation, of securities pursuant to such preorganization
subscriptions, provided the number of subscribers does not
exceed 25 and either (1) no commission or other
remuneration is paid or given directly or indirectly for or
on account of such sale or sales or issuance, or (2) if any
commission or other remuneration is paid or given directly
or indirectly for or on account of such sale or sales or
issuance, the securities are not offered or sold by any
means of general advertising or general solicitation in
this State.
N. The execution of orders for purchase of securities
by a registered salesperson and dealer, provided such
persons act as agent for the purchaser, have made no
solicitation of the order to purchase the securities, have
no direct interest in the sale or distribution of the
securities ordered, receive no commission, profit, or
other compensation other than the commissions involved in
the purchase and sale of the securities and deliver to the
purchaser written confirmation of the order which clearly
identifies the commissions paid to the registered dealer.
O. Any offer, sale or issuance of securities, other
than fractional undivided interests in an oil, gas or other
mineral lease, right or royalty, for the direct or indirect
benefit of the issuer thereof, or of a controlling person,
whether through a dealer (acting either as principal or
agent) or otherwise, if the securities sold, immediately
following the sale or sales, together with securities
already owned by the purchaser, would constitute 50% or
more of the equity interest of any one issuer, provided
that the number of purchasers is not more than 5 and
provided further that no commission, discount or other
remuneration exceeding 15% of the aggregate sale price of
the securities is paid or given directly or indirectly for
or on account of the sale or sales.
P. Any offer, sale or issuance of securities (except
face amount certificate contracts and investment fund
shares) issued by and representing an interest in an issuer
which is a business corporation incorporated under the laws
of this State, the purposes of which are to provide capital
and supervision solely for the redevelopment of blighted
urban areas located in a municipality in this State and
whose assets are located entirely within that
municipality, provided: (1) no commission, discount or
other remuneration is paid or given directly or indirectly
for or on account of the sale or sales of such securities;
(2) the aggregate amount of any securities of the issuer
owned of record or beneficially by any one person will not
exceed the lesser of $5,000 or 4% of the equity
capitalization of the issuer; (3) the officers and
directors of the corporation have been bona fide residents
of the municipality not less than 3 years immediately
preceding the effectiveness of the offering sheet for the
securities under this subsection P; and (4) the issuer
files with the Secretary of State an offering sheet
descriptive of the securities setting forth:
(a) the name and address of the issuer;
(b) the title and total amount of securities to be
offered;
(c) the price at which the securities are to be
offered; and
(d) such additional information as the Secretary
of State may prescribe by rule and regulation.
The Secretary of State shall within a reasonable time
examine the offering sheet so filed and, unless the
Secretary of State shall make a determination that the
offering sheet so filed does not conform to the
requirements of this subsection P, shall declare the
offering sheet to be effective, which offering sheet shall
continue effective for a period of 12 months from the date
it becomes effective. The fee for examining the offering
sheet shall be as established pursuant to Section 11a of
this Act, and shall not be returnable in any event. The
Secretary of State shall by rule or regulation require the
filing of a report or reports of sales made to residents of
this State in reliance upon the exemption provided by this
subsection P and prescribe the form of such report and the
time within which such report shall be filed. The Secretary
of State shall prescribe by rule or regulation the amount
of the fee for filing any such report, but such fee shall
not be less than the minimum amount nor more than the
maximum amount established pursuant to Section 11a of this
Act, and shall not be returnable in any event. The
Secretary of State may impose, in such cases as he or she
may deem appropriate, a penalty for failure to file any
such report in a timely manner, but no such penalty shall
exceed an amount equal to five times the filing fee. The
contents of any such report shall be deemed confidential
and shall not be disclosed to the public except by order of
court or in court proceedings. The failure to file any such
report shall not affect the availability of such exemption,
but such failure to file any such report shall constitute a
violation of subsection D of Section 12 of this Act,
subject to the penalties enumerated in Section 14 of this
Act. The civil remedies provided for in subsection A of
Section 13 of this Act and the civil remedies of rescission
and appointment of a receiver, conservator, ancillary
receiver or ancillary conservator provided for in
subsection F of Section 13 of this Act shall not be
available against any person by reason of the failure to
file any such report or on account of the contents of any
such report.
Q. Any isolated transaction, whether effected by a
dealer or not.
R. Any offer, sale or issuance of a security to any
person who purchases at least $150,000 of the securities
being offered, where the purchaser's total purchase price
does not, or it is reasonably believed by the person
relying upon this subsection R that said purchase price
does not, exceed 20 percent of the purchaser's net worth at
the time of sale, or if a natural person a joint net worth
with that person's spouse, for one or any combination of
the following: (i) cash, (ii) securities for which market
quotations are readily available, (iii) an unconditional
obligation to pay cash or securities for which quotations
are readily available, which obligation is to be discharged
within five years of the sale of the securities to the
purchaser, or (iv) the cancellation of any indebtedness
owed by the issuer to the purchaser; provided that such
security is not offered or sold by means of any general
advertising or general solicitation in this State.
S. Any offer, sale or issuance of a security to any
person who is, or who is reasonably believed by the person
relying upon this subsection S to be, a director, executive
officer, or general partner of the issuer of the securities
being offered or sold, or any director, executive officer,
or general partner of a general partner of that issuer. For
purposes of this subsection S, "executive officer" shall
mean the president, any vice president in charge of a
principal business unit, division or function (such as
sales, administration or finance), any other officer who
performs a policy making function, or any other person who
performs similar policy making functions for the issuer.
Executive officers of subsidiaries may be deemed executive
officers of the issuer if they perform such policy making
functions for the issuer.
A document being filed pursuant to this Section 4 shall
be deemed filed, and any fee paid pursuant to this Section
4 shall be deemed paid, upon the date of actual receipt
thereof by the Secretary of State.
T. An offer or sale of a security, by an issuer that is
organized and, as of the time of the offer and the time of
sale is , in good standing under the laws of the State of
Illinois and that is , made solely to persons or entities
that are, as of the time of the offer and time of sale,
residents of the State of Illinois, subject to the
following provided:
(1) The offering is made in compliance with the
requirements of meets all of the requirements of the
federal exemption for intrastate offerings provided in
Section 3(a)(11) of the Securities Act of 1933 (15
U.S.C. 77c(a)(11)) and Rule 147 adopted under the
Securities Act of 1933 (17 CFR 230.147), Rule 147A (17
CFR 230.147A), or any other federal exemption
providing for intrastate offerings from time to time in
effect.
(2) The aggregate purchase price of all securities
sold by an issuer in reliance on the exemption under
this subsection, within any 12-month period, does not
exceed: (i) $1,000,000; or (ii) $4,000,000 if the
issuer has undergone and made available (directly, or
through a registered Internet portal), to each
prospective purchaser and the Secretary of State,
copies of its most recent financial statements which
have been audited by an independent auditor and
certified by a senior officer of the issuer as fairly,
completely, and accurately presenting the financial
condition of the issuer, in all material respects, as
of the dates indicated therein. Amounts received in
connection with any offer or sale to any accredited
investor or any of the following shall not count toward
the calculation of the foregoing monetary limitations:
(a) any entity (including, without limitation,
any trust) in which all of the equity interests are
owned by (or with respect to any trust, the primary
beneficiaries are) persons who are accredited
investors or who meet one or more of the criteria
in subparagraphs (b) through (d) of this paragraph
(2);
(b) with respect to participating in an
offering of a particular issuer, a natural person
serving as an officer, director, partner, or
trustee of, or otherwise occupying similar status
or performing similar functions with respect to,
such issuer;
(c) with respect to participating in an
offering of a particular issuer, a natural person
or entity who owns 10% or more of the then
aggregate outstanding voting capital securities of
such issuer; or
(d) such other person or entity as the
Secretary of State may hereafter exempt by rule.
The Secretary of State may hereafter cumulatively
increase the dollar limitations provided in this
paragraph (2).
(3) The aggregate amount sold by an issuer to any
purchaser (other than an accredited investor or a
person or entity which meets one or more of the
criteria in subparagraphs (a) through (d) of paragraph
(2) of this subsection T) in an offering of securities
made in reliance on the exemption provided in this
subsection T, within any consecutive 12-month period,
does not exceed $5,000.
(4) The Secretary of State shall establish by rule
the duties of the issuer including disclosure and
filing requirements, treatment of escrow funds and
agreements, production of financial statements, and
other requirements as deemed necessary.
(5) The issuer has made available, to each
prospective purchaser and the Secretary of State,
copies of its most recent financial statements
personally certified by one or more senior officers of
the issuer as fairly, completely, and accurately
presenting the financial condition of the issuer, in
all material respects, as of the dates indicated
therein.
(6) No commission or other remuneration is paid or
given directly or indirectly to any person or entity
(including, without limitation, any registered
Internet portal) for soliciting any investor, other
than such payments made person in this State, except to
registered dealers and registered salespersons
licensed in this State and such finder fees and other
payments now or hereafter permitted under applicable
Federal law or a United States Securities and Exchange
Commission rule or interpretive letter.
(7) Not less than 15 days before the earlier of the
first sale of securities made in reliance on the
exemption provided in this subsection T, or the use of
any general solicitation with respect thereto (other
than a general announcement made by or on behalf of),
an issuer shall file a notice filing with the Secretary
of State together with such other forms, materials, and
fees as required by the Secretary of State by rule.
The Secretary of State shall prescribe by rule the
amount of the fee for filing the notice filing required
under this subsection, but the fee shall not be less
than the minimum amount nor more than the maximum
amount in subparagraph (a), established under pursuant
to Section 11a of this Act and shall not be returnable
in any event. The Secretary of State may impose, in
such cases as the Secretary he or she may deem
appropriate, a penalty for failure to file any such
notice in a timely manner, but no such penalty shall
exceed an amount equal to 5 times the filing fee. The
contents of any such notice or portion thereof may be
deemed confidential by the Secretary of State by rule
or order and if so deemed shall not be disclosed to the
public except by order of court or in court
proceedings. The failure to file any such notice does
not affect the availability of such exemption, but such
failure to file any such report constitutes a violation
of subsection D of Section 12 of this Act and is
subject to the penalties and remedies available in this
Act and under the law.
(8) All payments for purchase of securities
offered pursuant to the exemption provided under this
subsection T are made directly to, and held by, a the
qualified escrowee identified in the escrow agreement
required pursuant to subparagraph (c) of paragraph
(4).
(9) The issuer includes each of the following in
one or more of the offering materials delivered to a
prospective purchaser, or to which a prospective
purchaser has been granted electronic access, in
connection with the offering:
(a) a description of the issuer, its type of
entity, the address, and telephone number of its
principal office;
(b) a reasonably detailed description of the
intended use of the offering proceeds, including
any amounts to be paid, as compensation or
otherwise, to any owner, executive officer,
director, managing member, or other person
occupying a similar status or performing similar
functions on behalf of the issuer;
(c) the identity of all persons owning more
than 20% 10% of the voting capital securities of
the issuer;
(d) the identity of the executive officers,
directors, managing members, and other persons
occupying a similar status or performing similar
functions in the name of and on behalf of the
issuer, including their titles and a reasonably
detailed description of their prior experience;
(e) the identity of any person or entity who
has been or will be retained by the issuer to
assist the issuer in conducting the offering and
sale of the securities (including all registered
Internet portals but excluding persons acting
solely as accountants or attorneys and employees
whose primary job responsibilities involve the
operating business of the issuer rather than
assisting the issuer in raising capital) and a
description of the consideration being paid to
each such person or entity for such assistance;
(e-5) to the extent the issuer is an affiliate
or related party of the registered Internet portal
being used to conduct the offering, a reasonably
detailed description of the relationship between
the parties;
(f) any additional information material to the
offering, including a description of significant
factors that make the offering speculative or
risky for the purchaser;
(g) (blank). the information required pursuant
to subparagraphs (a) and (b) of paragraph (4) of
this subsection T;
(h) such other information as the Secretary of
State may hereafter require by rule.
(10) The issuer (directly or through a registered
Internet portal) requires each purchaser to certify,
in writing or electronically, that the purchaser:
(a) is a resident of the State of Illinois;
(b) understands that the purchaser he or she is
investing in a high-risk, highly speculative,
business venture, that the purchaser he or she may
lose all of the his or her investment, and that the
purchaser that he or she can afford such a loss of
the his or her investment;
(c) understands that the securities being
offered are highly illiquid, that there is no ready
market for the sale of such securities, that it may
be difficult or impossible for purchaser to sell or
otherwise dispose of such securities, and (where
applicable) that purchaser may be required to hold
the securities for an indefinite period of time;
and
(d) understands that purchaser may be subject
to the payment of certain taxes with respect to the
securities being purchased whether or not
purchaser has sold, or otherwise disposed of, such
securities or whether purchaser has received any
distributions or other amounts from the issuer.
(11) The issuer (directly or through a registered
Internet portal) obtains from each purchaser of a
security offered under this subsection T evidence that
the purchaser is a resident of this State and, if
applicable, is an accredited investor. Without
limiting the generality of the foregoing, and not to
the exclusion of other reasonable methods which may be
used by the issuer in connection with the foregoing, an
issuer may rely on any evidence permitted under the
applicable Federal exemption relied upon pursuant to
paragraph (1) of this subsection T.
(12) The issuer (and to the extent a registered
Internet portal is used, such registered Internet
portal) maintains records of all offers and sales of
securities made pursuant to the exemption granted by
this subsection T and provides ready access to such
records to the Secretary of State, upon notice from the
Secretary of State.
(13) The issuer is not, either before or as a
result of the offering:
(a) an investment company, as defined in
Section 3 of the Investment Company Act of 1940 (15
U.S.C. 80a-3), as amended and in effect (unless the
issuer qualifies for exemption from the terms
thereof exclusion from such definition pursuant
to: one or more of the exceptions provided in
Section 3(c) of the Investment Company Act of
1940; , any other provision of the Investment
Company Act of 1940; , or any United States
Securities and Exchange Commission administrative
rule, regulation, or interpretive letter ruling
rule or regulation promulgated with respect to the
Investment Company Act of 1940 or in connection
therewith; or any other applicable Federal
regulation or exemption); or
(b) subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m or 15 U.S.C. 78o(d).
(14) Neither the issuer, nor any person owning more
than 20% of the voting capital securities of the issuer
affiliated with the issuer (either before or as a
result of the offering), nor the offering itself, nor
the registered Internet portal (to the extent used) is
subject to disqualification established by the
Secretary of State by rule or contained in the
applicable Federal exemption relied upon pursuant to
paragraph (1) of this subsection T the Securities Act
of 1933 (15 U.S.C. 77c(a)(11)) and Rule 147 adopted
under the Securities Act of 1933 (17 CFR 230.147),
unless both of the following are met:
(a) on a showing of good cause and without
prejudice to any other action by the Secretary of
State, the Secretary of State determines that it is
not necessary under the circumstances that an
exemption is denied; and
(b) the issuer establishes that it made a
factual inquiry into whether any disqualification
existed under this paragraph (14), but did not
know, and in the exercise of reasonable care could
not have known, that a disqualification existed
under this paragraph (14); the nature and scope of
the requisite inquiry will vary based on the
circumstances of the issuer and the other offering
participants.
(15) A separate investment vehicle may be used to
aggregate investments in the offering being made by an
issuer under this Section provided that such separate
investment vehicle is permitted pursuant to Federal
law or the rules or an interpretive letter of the
United States Securities and Exchange Commission. The
Secretary shall adopt rules consistent with Federal
law, rules, or interpretive opinions regarding such
separate investment vehicles. For purposes of
determining compliance with the provisions of this
subsection T and the related administrative rules,
such investment vehicle shall be disregarded and the
subject offering shall be assessed as if the issuer had
made a direct offering to the participating investors.
Such separate investment vehicle shall not be
considered as an entity qualifying under subparagraph
(c) of paragraph (2) of this subsection T for purposes
of calculating the purchase price totals permitted
under the exemption. The Secretary of State may
establish by rule the duties of the separate investment
vehicle under this subsection including the production
of financial statements, maintenance of certain books
and records of the separate investment vehicle, and
other requirements as deemed necessary.
(Source: P.A. 99-182, eff. 1-1-16.)
(815 ILCS 5/8d)
Sec. 8d. Offerings made through registered Internet
portals.
(a) An issuer shall make an offering or sale of securities
pursuant to subsection T of Section 4 of this Act through the
use of one or more registered Internet portals.
(b) The Internet portal:
(1) shall be a registered broker-dealer under the
Securities Exchange Act of 1934 (15 U.S.C. 78o);
(2) shall be a funding portal registered under the
Securities Act of 1933 (15 U.S.C. 77d-1) and the Securities
and Exchange Commission has adopted rules under authority
of Section 3(h) of the Securities Exchange Act of 1934 (15
U.S.C. 78c) and Section 304 of the Jumpstart Our Business
Startups Act (P.L. 112-106) governing funding portals;
(3) shall be a dealer registered under this Act as of
the date of any offer or sale of securities made through
the Internet portal; or
(4) shall, to the extent it meets the qualifications
for exemption from registration pursuant to subsection (d)
of this Section:
(A) file, not later than 30 days before the date of
the first offer or sale of securities made within this
State, an application for registration (or renewal of
registration, as applicable) as a registered Internet
portal with the Secretary of State, in writing or in
electronic form as prescribed by the Secretary of
State, which the Secretary of State shall make
available as an electronic document on the Secretary of
State's Internet website, containing such information
and required deliveries as specified therein; and
(B) pay the application filing fee established
under Section 11a of this Act; the Secretary of State
shall, within a reasonable time, examine the filed
application and other materials filed and, approve or
deny the application.
(c) If any change occurs in the information submitted by,
or on behalf of, an Internet portal to the Secretary of State,
the Internet portal shall notify the Secretary of State within
10 days after such change occurs and shall provide the
Secretary of State with such additional information (if any)
requested by the Secretary of State in connection therewith.
(d) Notwithstanding anything contained in this Act to the
contrary, neither an Internet portal nor its owning or
operating entity is required to register as a dealer or an
investment advisor under this Act if each of the following
applies with respect to the Internet portal and its owning or
operating entity:
(1) It does not solicit purchases, sales, or offers to
buy the securities offered or displayed on the Internet
portal.
(2) It does not collect or hold funds in connection
with any purchase, sale, or offer to buy any securities
offered or displayed on the Internet portal.
(3) It does not compensate employees, agents, or other
persons for the solicitation or based on the sale of
securities displayed or referenced on the Internet portal.
(4) It is not compensated based on the amount of
securities sold.
(5) The fee it charges an issuer for an offering of
securities on the Internet portal is a fixed amount for
each offering, a variable amount based on the length of
time that the securities are offered on the Internet
portal, a variable amount based on the total proposed
offering amount, or any combination of such fixed and
variable amounts.
(6) It does not offer investment advice or
recommendations; however, an Internet portal is not deemed
to be offering investment advice or recommendations simply
by virtue of:
(A) selecting transactions in which the Internet
portal shall serve as an intermediary;
(B) establishing reasonable selection criteria for
an issuer to meet in order to establish an offer or
sale of securities through the Internet portal;
(C) establishing reasonable selection criteria for
a potential purchaser to meet in order to participate
in an offer or sale of securities made through the
Internet portal; or
(D) terminating an issuer transaction at any time
before the first sale of the securities of such issuer
if the Internet portal determines such action is
appropriate, after reasonable due diligence, to
protect potential purchasers, and the Internet portal
is able to direct the qualified escrowee to return all
funds then provided by potential purchasers, if any.
(7) It does not engage in such other activities as the
Secretary of State, by rule, determines are prohibited.
(e) Upon completion of an offering made pursuant to
subsection T of Section 4, each registered Internet portal
involved with the transactions (and the issuer, to the extent
applicable) shall store any and all electronic materials
related to the completed offering (including copies of all
offering documents, all offering materials, and all purchaser
information) on a secure, non-public, server or in such other
manner as the Secretary of State may hereafter deem acceptable
by rule.
(f) Notwithstanding anything contained in this Act to the
contrary, in connection with any offering or sale of securities
pursuant to subsection T of Section 4 of this Act, the hosting
registered Internet portal may elect, in its discretion, to
accept as compensation (in whole or part) for the services
provided in connection with the subject offering:
(1) such equity in, or other securities issued by,
issuer on the Internet portal as part of the subject
offering; or
(2) equity in, or other securities issued by, issuer of
any kind, provided that any right to distribution or
payment with respect to such class of equity or other
securities received by the registered Internet portal be
equal, or junior, in terms of priority to the distribution
and payment rights, as applicable, of the securities being
offered on the Internet portal as part of the subject
offering.
(Source: P.A. 99-182, eff. 1-1-16.)
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