[46 Pa.B. 3420]
[Saturday, July 2, 2016]

[Continued from previous Web Page]

Subpart B. REGISTRATION OF SECURITIES

CHAPTER 202. EXEMPT SECURITIES

§ 202.010. Securities issued by a governmental unit.

 (a) The exemption contained in section 202(a) of the act (70 P.S. § 1-202(a)) is available for [any] a security described in that section which is an exempt security under section 3(a)(2) of the Securities Act of 1933 [(15 U.S.C.A. § 77c(2)) except for] (15 U.S.C.A. § 77c(a)(2)).

 (b) The exemption in paragraph (a) does not apply to any part of an obligation evidenced by a bond, note, debenture or other evidence of indebtedness issued by [any] a governmental unit specified in section 3(a)(2) of the Securities Act of 1933 that is [deemed] considered to be a separate security under [United States] Securities and Exchange Commission Rule 131 (17 CFR 230.131) (relating to definition of security issued under governmental obligations)[)].

§ 202.030. Commercial paper.

 (a) The exemption contained in section 202(c) of the act (70 P.S. § 1-202(c)) is available for any security which is a [Federally-covered] Federally covered security by reason of being an exempt security under section 3(a)(3) of the Securities Act of 1933 (15 U.S.C.A. § [77c(3)] 77c(a)(3)) as interpreted by Release 33-4412 (26 FR 9158 (September 20, 1961)) issued by the [United States] Securities and Exchange Commission which provides that:

 (1) The commercial paper [shall be] is prime quality of a type not ordinarily purchased by the general public.

 (2) The commercial paper is of a type eligible for discounting by banks which are members of the Federal Reserve System.

 (3) The commercial paper is not payable on demand and does not contain a provision for an automatic ''rollover.''

 (4) The commercial paper is issued to facilitate current operational business requirements.

 (5) The commercial paper proceeds [of the commercial paper] are not used to:

 (i) Discharge existing indebtedness unless the indebtedness is itself exempt under section 3(a)(3) of the Securities Act of 1933.

 (ii) Purchase or construct a plant facility.

 (iii) Purchase durable machinery or equipment.

 (iv) Fund commercial real estate development or financing.

 (v) Purchase real estate mortgages or other securities.

 (vi) Finance mobile homes or home improvements.

 (vii) Purchase or establish a business enterprise.

 [(b) For purposes of this section, ''prime quality'' means that the commercial paper has been rated in one of the top three rating categories by a Nationally recognized statistical rating organization.

 (c) When] (b) If commercial paper is being issued by a holding company for a bank, as that term is defined in section 102(d) of the act (70 P.S. § 1-102(d)), the commercial paper [shall] must bear a prominent legend in bold face type of at least 12 points in size indicating that the commercial paper:

 (1) Has not been issued by the bank for which the issuer is the holding company.

 (2) Is not a deposit of the bank covered by Federal deposit insurance.

 [(d) No] (c) General solicitation through public media advertisement [or mass mailing may be made], mass mailing, the Internet or other means in connection with soliciting offers or sales of commercial paper is prohibited; provided, that [nothing in this section limits] this section does not limit mailings to institutional investors or broker-dealers, as those terms are defined in the act and this subpart.

§ 202.041. [Credit union and industrial loan association securities] (Reserved).

 [(a) For the purpose of section 202(d) of the act (70 P.S. § 1-202(d)), the term, ''any credit union'' shall mean an institution organized as a credit union under the applicable laws of this Commonwealth:

 (1) the business of which is substantially confined to the credit union business; and

 (2) supervised and examined as a credit union by the appropriate Commonwealth authorities having supervision over any such institution. For the purpose of this section the ''credit union business'' shall be deemed to be exclusively the receipt of deposits from and the making of loans to bona fide members of the credit union. For the purpose of this section, securities issued by a credit union shall mean only those securities which are issued by an entity directly engaged in the credit union business as that term is used herein and shall not include securities issued by a credit union holding company or other similar entity.

 (b) For the purpose of section 202(d) of the act, the term ''industrial loan association'' shall mean an institution organized as an industrial loan association under the applicable laws of this Commonwealth:

 (1) the business of which is substantially confined to the industrial loan business; and

 (2) examined and supervised as an industrial loan association by the appropriate Commonwealth authorities having supervision over any such institution.

 (c) For the purpose of this section, the ''industrial loan business'' shall be deemed to be the making and discounting of secured and unsecured loans to bona fide members of the association. For the purpose of this section, securities issued by an industrial loan association shall mean only those securities which are issued by an entity directly engaged in the industrial loan business as that term is used herein and shall not include securities issued by an industrial loan holding company or other similar entity.]

§ 202.052. [Trade or professional association] (Reserved).

 [(a) For the purpose of section 202(e) of the act (70 P.S. § 1-202(e)), the term ''trade or professional association'' shall mean an association of persons having some common business or professional interest, the purpose of which is to promote, on behalf of the association's members generally, such common interest and not to engage in a regular business or profession of a kind ordinarily carried on for profit.

 (b) For example, the activities of a ''trade association,'' as that term is used in section 202(e) of the act (70 P.S. § 1-202(e)), must be specifically directed to the improvement, on behalf of the association's members generally, of business conditions of one or more lines of business as distinguished from the performance of particular services for individuals or entities. Similarly, the activities of a ''professional association,'' as that term is used in section 202(e) of the act (70 P.S. § 1-202(e)), must be specifically directed to the improvement, on behalf of the association's members generally, of professional conditions of one or more professions as distinguished from the performance of particular services for individuals or entities. Therefore, an association whose purpose is to engage in a regular business of a kind ordinarily carried on for profit, even though the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining, is not a ''trade or professional association'' as that term is used in section 202(e) of the act (70 P.S. § 1-202(e)).]

§ 202.091. Shares of professional corporations.

 (a) [Pursuant to] Under the authority contained in section 202(i) of the act (70 P.S. § 1-202(i)), the [Commission] Department finds that it is not in the public interest or necessary for the protection of investors to require the registration under section 201 of the act (70 P.S. § 1-201) of shares issued by a professional corporation.

 [(b) The meaning of ''professional corporation'' for this section shall be as follows:

 (1) Except as provided in paragraph (2), the term ''professional corporation,'' means one of the following:

 (i) A corporation incorporated under 15 Pa.C.S. Subpart B (relating to Business Corporation Law of 1988) or a corporation included within the scope of the act by virtue of 15 Pa.C.S. § 2904 or 2905 (relating to election of an existing business corporation to become a professional corporation; and election of professional associations to become professional corporations).

 (ii) A professional association organized under 15 Pa.C.S. Chapter 93 (relating to Professional Association Act of 1988). The reference in this section to ''shares'' shall include the interest of an associate in a professional association.

 (2) For the purpose of this section, the term ''professional corporation'' may not include an entity which has as a principal purpose, object or activity, whether or not expressed in its articles of incorporation or other organic documents, a purpose, object or activity other than the rendition of the professional services for which the professional corporation is organized and activities which are in fact incidental thereto.

 (c)] (b) The exemption contained in this section may not [be available for a transaction whose primary purpose is avoidance of] apply to a transaction entered into primarily to avoid the provisions of section 201 of the act [(70 P.S. § 1-201) or a transaction] or made in violation of the antifraud provisions in sections 401—409 of the act (70 P.S. §§ 1-401—1-409) and Subpart D (relating to fraudulent and prohibited practices).

§ 202.092. Guaranties of certain debt securities exempt.

 (a) The exemption established by this section applies to a guaranty of a bond[, as those terms are defined in subsection (d)(1) and (2),] that is offered or sold in this Commonwealth.

 (b) Under the authority contained in section 202(i) of the act (70 P.S. § 1-202(i)), the [Commission] Department finds that it is not in the public interest [nor] or necessary for the protection of investors to require the registration under section 201 of the act (70 P.S. § 1-201) of the guaranty of a bond if all of the following conditions are met:

 (1) The official statement or other disclosure document being [utilized] used in connection with the offer and sale of the bonds contains either of the following:

 (i) An audited balance sheet and statement of income of the guarantor dated within 120 days [prior to] before the commencement of the offering in this Commonwealth.

 (ii) Both of the following:

 (A) An audited balance sheet and statement of income of the guarantor for [the] either of the following:

 (I) The most recent completed fiscal year[; or].

 (II) The previous most recent completed fiscal year if the fiscal year of the guarantor ended within 90 days [prior to] before the commencement of the offering in this Commonwealth[, an audited balance sheet and statement of income for the prior most recent completed fiscal year].

 (B) A statement by a certified public accountant or the guarantor [as to whether there have been] detailing any adverse material changes in the financial condition of the guarantor which occurred from the date of the audited balance sheet submitted in compliance with clause (A) within 5 days [prior to] of the commencement of the offering in this Commonwealth.

 (2) The proceeds from the sale of the bonds are to be [utilized] used for the benefit of a facility which is owned or operated[—user—]by either of the following:

 (i) A nonprofit corporation or other nonprofit entity which has been determined by the Internal Revenue Service to be an exempt organization described in section 501(c)(3) of the Internal Revenue Code of 1986 (26 U.S.C.A. § 501(c)(3)) or has received an opinion of counsel that it is so exempt, and [where] the combined net assets of the user and guarantor [is] are not less than 25% of the amount of the securities being offered.

 (ii) An organization which has not been determined by the Internal Revenue Service or by an opinion of counsel to be an exempt organization under [26 U.S.C.A. § 501(c)(3)] section 501(c)(3) of the Internal Revenue Code of 1986, and [where] the combined net worth of the user and guarantor is not less than 50% of the amount of securities being offered.

 (3) [Under the guaranty, the guarantor is required] The guaranty requires the guarantor to do the following:

 (i) File with the trustee for the bondholders a copy of its audited balance sheet and statement of income within 120 days after the completion of its fiscal year.

 (ii) Be responsible for expenses incurred by the trustee for the bondholders in complying with paragraph (4)(ii) and (iii) unless there are specific provisions to the contrary in the relevant financing documents.

 (iii) Notify the trustee for the bondholders within 24 hours after it becomes insolvent [as that term is defined in subsection (d)(4)].

 (4) [Under the] The trust indenture, mortgage, deed of trust or other similar agreement[,] requires the trustee for the bondholders[, as that term is defined in subsection (d)(5), is required] to do the following:

 (i) Maintain a current list of the names and addresses of all of the bondholders.

 (ii) Provide, to a bondholder, within 30 days of receipt of a written request from a bondholder, a copy of the guarantor's most recent audited balance sheet and statement of income.

 (iii) Notify the bondholders of the occurrence of any of the following events no later than 30 days after an occurrence and inform the bondholders that a copy of the bondholders list described in subparagraph (i) will be provided within 30 days of receipt of a written request for the list:

 (A) The date the guarantor failed to comply with [subsection (b)(3)(i)] paragraph (3)(i).

 (B) The date the trustee receives a copy of the auditor's report to the guarantor containing going concern disclosure [as that term is defined in § 609.032(a) (relating to definitions)].

 (C) The date on which the trustee is informed that the guarantor is insolvent [as that term is defined in subsection (d)(4)]. There is no independent duty [on the part of] by the trustee to determine the insolvency of the guarantor.

 (c) If the guarantor is a natural person, the guarantor may satisfy the requirements of this section relating to audited balance sheets and statements of income by providing a Statement of Financial Condition prepared utilizing the criteria contained in the Personal Financial Statements Guide promulgated by the American Institute of Certified Public Accountants and accompanied by a Review Report [as that term is defined in § 609.032(a)].

 [(d) The following terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

 (1) Bond—This includes only the following:

 (i) A bond, note, debenture or other evidence of indebtedness that is an exempt security under section 3(a)(2) of the Securities Act of 1933 (15 U.S.C.A. § 77c(2)) when the issuer of the security is located in this Commonwealth.

 (ii) A bond, note, debenture or other evidence of indebtedness that is an exempt security under section 3(a)(2) of the Securities Act of 1933 (15 U.S.C.A. § 77c(2)) but when the guaranty issued in connection with the bond, note, debenture or other evidence of indebtedness is deemed to be a separate security pursuant to United States Securities and Exchange Commission Rule 131 (17 CFR 230.131 (relating to definition of security issued under governmental obligations)).

 (2) Guaranty—A duly executed written agreement wherein a person, not the issuer, in connection with offer and sale of bonds in this Commonwealth, guarantees the prompt payment of the principal of, and interest on, the bonds whether at the stated maturity, at redemption prior to maturity or otherwise, and premium, if any, when and as the principal and interest shall become due and the guaranty cannot be bought, sold or traded as a security or otherwise realized upon by a bondholder separately from the bondholder's interest in the bonds.

 (3) Guarantor—A person who executes a guaranty.

 (4) Insolvent—The inability of a guarantor to pay debts as they fall due in the usual course of business, or having liabilities in excess of the fair market value of assets. For purposes of this paragraph, a guarantor may not be considered insolvent if the auditor's report to the guarantor's audited balance sheet and statement of income did not contain a going concern disclosure as that term is defined in § 609.032(b).

 (5) Trustee for the bondholders—The person designated in the trust indenture, mortgage, deed of trust or similar agreement to act as trustee for the bonds.]

§ 202.093. Charitable contributions to pooled income funds exempt.

 (a) Under the authority contained in section 202(i) of the act (70 P.S. § 1-202(i)), the [Commission] Department finds that it is not in the public interest [nor] or necessary for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) of any securities issued or created in connection with contributions or transfers of property to, or certificates of interest or participation in, pooled income funds if the following conditions are met:

 (1) A pooled income fund (Fund) as defined in section 642(c)(5) of the Internal Revenue Code [of 1954] of 1986 (26 U.S.C.A. § 642(c)(5))[,] is established [for the purpose of permitting] to permit donors to make irrevocable remainder interest gifts to the Fund.

 (2) The Fund is afforded a tax deduction under section [642(a)(3)] 642(c)(3) of the Internal Revenue Code [of 1954] of 1986.

 (3) [The Fund is in compliance with the Charitable Organization Reform Act (10 P.S. §§ 161.1—161.19) and amendments and successor statutes thereto.] The Fund is in compliance with the Solicitation of Funds for Charitable Purposes Act (10 P.S. §§ 162.1—162.23) and amendments and successor statutes.

 (4) [Each] A prospective donor is provided written disclosure which fully and fairly describes [the]:

 (i) The consequences of a contribution or transfer of property to the Fund [and the].

 (ii) The nature, operation and financial condition of the Fund.

 (5) [None of those persons] A person responsible for solicitation of contributions to the Fund will not receive commissions or other special compensation based [upon] on the amount of property transferred except that this prohibition does not apply if the person receiving the commissions or special compensation is registered with the [Commission] Department as a broker-dealer under section 301 of the act (70 P.S. § 1-301) or is registered with the [Commission] Department under section 301 of the act as an agent of the broker-dealer.

 (6) [Any person who, for compensation, advises] A person receiving compensation for advising the charitable organization as to the advisability of investing in, purchasing or selling securities, including interests in the Fund, or otherwise [performs] performing as an investment adviser is [either an] either of the following:

 (i) An investment adviser registered with the [Commission] Department under section 301 of the act [or is a Federally-covered].

 (ii) A Federally covered adviser that is in compliance with section 303(a) of the act (70 P.S. § 1-303(a)).

 (b) If permitted by § 606.031 (relating to advertising literature), advertising literature may be used by the Fund in connection with the solicitation of contributions [but is] subject to the antifraud provisions of sections 401—409 of the act (70 P.S. §§ 1-401—1-409) and Subpart D (relating to fraudulent and prohibited practices).

§ 202.094. World class issuer exemption.

 Under the authority in section 202(i) of the act (70 P.S. § 1-202(i)), the [Commission] Department finds that it is not in the public interest [nor] or necessary for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) of any security meeting the following conditions:

 (1) The securities are one of the following:

 (i) Equity securities except options, warrants, preferred stock, subscription rights, securities convertible into equity securities or any right to subscribe to or purchase the options, warrants, convertible securities or preferred stock.

 (ii) Units consisting of equity securities permitted by subparagraph (i) and warrants to purchase the same equity security being offered in the unit.

 (iii) Nonconvertible debt securities that are rated in one of the four highest rating categories of Standard and Poor's, Moody's, Dominion Bond Rating Services or Canadian Bond Rating Services or another rating organization designated by [order of the Commission] the Department. For purposes of this subsection, nonconvertible debt securities means securities that cannot be converted for at least 1 year from the date of issuance and then only into equity shares of the issuer or its parent.

 (iv) American Depository Receipts representing securities described in subparagraphs (i)—(iii).

 (2) The issuer is not organized under the laws of the United States, or of any state, territory or possession of the United States, or of the District of Columbia or Puerto Rico.

 (3) The issuer[, at] meets the following conditions:

 (i) At the time an offer or sale is made in reliance on this section, the issuer has been a going concern engaged in continuous business operations for the immediate past 5 years [and during that period,].

 (ii) During the 5-year period, the issuer has not been the subject of a proceeding relating to insolvency, bankruptcy, involuntary administration, receivership or similar proceeding.

 [For] (iii) If an issuer otherwise meets the conditions of subparagraphs (i) and (ii), the issuer may, for purposes of this paragraph, use the operating history of any predecessor that represented more than 50% of the value of the assets of the issuer [that otherwise would have met the conditions of this section may be used] toward the 5-year requirement.

 (4) The issuer, at the time an offer or sale is made in reliance on this section, has a public float of $1 billion or more. For purposes of this paragraph:

 (i) Public float means the market value of all outstanding equity shares owned by nonaffiliates.

 (ii) Equity shares means common shares, nonvoting equity shares and subordinated or restricted voting equity shares but does not include preferred shares.

 (iii) An affiliate of a person is anyone who beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the outstanding equity shares of the person.

 (5) The market value of the issuer's equity shares, as defined in paragraph (4)(ii), at the time an offer or sale is made in reliance on this section, is $3 billion or more. [For purposes of this subsection, equity shares mean common shares, nonvoting equity shares and subordinated or restricted voting shares but does not include preferred shares.]

 (6) The issuer, at the time an offer or sale is made in reliance on this section, has a class of equity securities listed for trading on or through the facilities of a foreign securities exchange or recognized foreign securities market included in 17 CFR [230.901(a)(1)] 230.901 (relating to general statement) or successor rule promulgated under the Securities Act of 1933 (15 U.S.C.A. §§ 77a—77aa) or designated by the [United States] Securities and Exchange Commission under 17 CFR 230.902(a)(2) (relating to definitions) promulgated under the Securities Act of 1933.

§ 202.095. Charitable gift annuities.

 (a) Under the authority contained in section 202(i) of the act (70 P.S. § 1-202(i)), the [Commission] Department finds that it is not in the public interest [nor] or necessary for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) of securities issued or created in connection with the offer or sale of charitable gift annuities if the following conditions are met:

 (1) The charitable gift annuity (annuity) meets the terms and conditions of being exempt from the laws of [this] the Commonwealth regulating insurance under the Charitable Gift Annuity Exemption Act (10 P.S. §§ 361—364) [(annuity)].

 (2) [Each] A prospective annuitant is provided written disclosure which fully and fairly describes the consequences of a contribution or transfer of property to the qualified charity, as that term is defined in the Charitable Gift Annuity Exemption Act [(qualified charity)].

 (3) [None of the] The persons responsible for solicitation of purchasers of annuities will not receive commissions or other special compensation based [upon] on the amount of the annuity purchased [except that this prohibition does not apply if] unless the person receiving the commissions or special compensation is registered with the [Commission] Department as a broker-dealer under section 301 of the act (70 P.S. § 1-301) or is registered with the [Commission] Department under section 301 of the act as an agent of the broker-dealer.

 (4) A person [who, for compensation, advises] receiving compensation for advising the qualified charity as to the advisability of investing in, purchasing or selling securities, including annuities, or otherwise [performs] performing as an investment adviser is either [an] of the following:

 (i) An investment adviser registered with the [Commission] Department under section 301 of the act [(70 P.S. § 1-301) or is a].

 (ii) A Federally covered adviser that is in compliance with section 303(a) of the act (70 P.S. § 1-303(a)).

 (b) If permitted by § 606.031(a) (relating to advertising literature), advertising literature may be used by the qualified charity in connection with the solicitation of contributions [but is] subject to the antifraud provisions of sections 401—409 of the act (70 P.S. §§ 1-401—1-409) and Subpart D (relating to fraudulent and prohibited practices).

CHAPTER 203. EXEMPT TRANSACTIONS

§ 203.011. Nonissuer transactions.

 (a) The exemption contained in section 203(a) of the act (70 P.S. § 1-203(a)) [shall be] is available for transactions in a security which are not directly or indirectly for the benefit of the issuer or an affiliate of the issuer of the subject security. By way of illustration, an offering of securities is indirectly for the benefit of the issuer or an affiliate if any [portion] part of the proceeds of the transaction will be received indirectly by the issuer or an affiliate.

 (b) A transaction that is part of a single plan of distribution which involves a distribution by an issuer of its securities to the public will not be [deemed] considered a nonissuer transaction for purposes of section 203(a) of the act [(70 P.S. § 1-203(a))].

§ 203.041. Limited offerings.

 (a) The notice required [by] under section 203(d) of the act (70 P.S. § 1-203(d)) shall be filed with the [Commission] Department within the time period specified [by that section on the form, designated by the Commission as] on Form E in accordance with the General Instructions [thereto].

 (b) The [Commission] Department will not consider [that] the requirement of section 203(d)(i) of the act [is met unless the following steps have been taken by] to be met unless the issuer:

 (1) [A written agreement is entered into whereby] Enters into a written agreement by which the purchaser agrees not to sell the securities purchased under the exemption within 12 months after the date of purchase, except in accordance with § 204.011 (relating to waivers of the 12-month holding period), and a copy of the agreement to be signed has been filed with the [Commission] Department.

 (2) [A legend is placed] Places a legend on the security restricting its transferability for 12 months after the date of purchase except in accordance with § 204.011.

 (3) [The issuer instructs] Instructs its transfer agent, if any, that no transfer of the securities [shall be] is permitted except in accordance with section 203(d) of the act, § 204.011 and this section.

 (c) Except [where] if the promoters, as defined in section 102(o) of the act (70 P.S. § 1-102(o)), are registered under section 301 of the act (70 P.S. § 1-301), the condition contained in section 203(d)(iii) of the act [shall be deemed to be met only if a promoter receives no] is met only if a promoter does not receive an underwriting, selling or finder's fee or commission or other remuneration directly or indirectly for the sale of securities under the exemption.

 (1) A promoter [shall be deemed] is considered to have received indirect remuneration if money or property is paid to an affiliate of a promoter as compensation for the sale of securities.

 (2) The fact that the value of a promoter's investment in the issuer is increased as a result of the offering or that the promoter will receive remuneration from the issuer for services [rendered] given to the issuer in the ordinary course of its business or for the sale of property to it does not, of itself, preclude the availability of the exemption.

 (d) During the period of the offering, the issuer shall take steps necessary to ensure that the material information contained in its notice remains current and accurate in all material respects. If a material statement made in the notice, or an attachment thereto, becomes materially incorrect or inaccurate, the issuer shall file an amendment with the [Commission] Department in accordance with § 609.011 (relating to amendments to filings with [Commission] Department) within 5 business days of the occurrence of the event which required the filing of the amendment.

§ 203.091. [Equity securities issued by reporting company] (Reserved).

 [For purposes of this section and the availability of the exemption contained in section 203(i.1) of the act (70 P.S. § 1-203(i.1)), the term ''equity security'' includes:

 (1) Common stock, preferred stock and nondebt securities convertible into common or preferred stock.

 (2) Nontransferable warrants to purchase any of the foregoing.

 (3) Transferable warrants exercisable within not more than 90 days of issuance to purchase any of the foregoing.]

§ 203.101. Mortgages.

 (a) For the purpose of section 203(j) of the act (70 P.S. § 1-203(j)), the exemption [shall be] is available only if:

 (1) The entire bond or other evidence of indebtedness, together with the real or chattel mortgage, deed of trust, agreement of sale or other instrument securing the same is offered and sold as one unit.

 (2) The purchaser of the unit is not offered, as part of the offer of the unit or in connection therewith, a property interest that would itself be [deemed] considered to be a security under section 102(t) of the act (70 P.S. § 1-102(t)) or under other regulations adopted under the act.

 (3) The outstanding principal amount of all bonds or other evidences of indebtedness that are secured by the real or chattel mortgage, deed of trust or agreement of sale on the same property (including bonds and other evidences of indebtedness issued in the transaction) does not exceed the fair [market] value of the property at the time of the transaction.

 (4) [No] General solicitation through public media advertisement [is used, mass mailing made or other form of general solicitation is utilized], mass mailing, the Internet or other means does not occur in connection with soliciting the transaction.

 (5) [No compensation is] Compensation is not paid or given directly or indirectly for soliciting any person in this Commonwealth in connection with the transaction.

 (6) The issuer, at the time of the transaction, is in compliance with any applicable licensing requirements of the Department [of Banking and Securities].

 (b) The exemption contained in section 203(j) of the act may not be available for a transaction [whose primary purpose is avoidance of] entered into primarily to avoid the provisions of section 201 of the act (70 P.S. § 1-201) or [a transaction] made in violation of the [anti-fraud provisions of the act (70 P.S. § 1-407)] antifraud provisions of sections 401—409 of the act (70 P.S. §§ 1-401—1-409).

§ 203.131. [Bona fide pledgee] (Reserved).

 [The phrase ''bona fide pledgee'' as used in subsection (m) of section 203 (70 P.S. § 1-203(m)) shall include a secured party who takes securities in pledge to secure a bona fide debt. Such phrase shall not include a secured party who takes securities in pledge either:

 (1) Without any intention or expectation that they will be redeemed but merely as a step in the distribution thereof to the public.

 (2) Without having secured knowledge, in the exercise of reasonable diligence, prior to the consummation of the pledge that the securities taken in pledge are lawfully owned by the party making the pledge.]

§ 203.141. Sales to existing equity securityholders.

 (a) The exemption contained in section 203(n) of the act (70 P.S. § 1-203(n)) [shall only be] is only available for the offer and sale of equity securities when the following exist:

 (1) The offer is made to existing equity securityholders of a class of a series of the issuer's issued and outstanding equity securities, although the offer [need not be] does not need to be made to all the classes or series.

 (2) The offer is made pro rata to all [such security holders] the equity securityholders who are, of record, residents of this Commonwealth.

 (3) [No] The solicitation of an equity securityholder in this Commonwealth does not result in the payment of a commission or other remuneration, other than a standby commission[, is paid or given, directly or indirectly, for soliciting a securityholder in this Commonwealth].

 (b) The exemption contained in section 203(n) of the act [(70 P.S. § 1-203(n)) shall only be] is only available for the offer and sale of debt securities when the following exists:

 (1) The offer is made to existing equity securityholders of a class of a series of the issuer's issued and outstanding equity securities, although the offer [need not be] does not need to be made to all the classes or series.

 (2) [No] The solicitation of an equity securityholder in this Commonwealth does not result in the payment of a commission or other remuneration, other than a standby commission[, is paid or given, directly or indirectly, for soliciting a securityholder in this Commonwealth].

 (c) For purposes of subsection (a)(2), an offer will be [deemed] considered to have been made pro rata when the following exists:

 (1) The initial offer is made pro rata[; and].

 (2) After the expiration of a reasonable period of time following the initial offer, an [indentified] identified equity securityholder acquires securities in an amount exceeding a pro rata share on terms and conditions fully disclosed to the affected equity securityholders.

 [(d) For purposes of this section, the term ''securityholder'' is limited to persons who at the time of offers and sales under the exemption contained in section 203(n) of the act (70 P.S. § 1-203(n)) are holders of equity securities, including by way of illustration, holders of: common stock, preferred stock, securities convertible into common or preferred stock; nontransferable warrants to purchase any of the foregoing, and transferable warrants exercisable within not more than 90 days of their issuance, to purchase any of the foregoing; provided, that the term ''securityholder'' shall not include persons who are holders of equity securities issued in violation of or without compliance with the act and the rules and regulations adopted thereunder.

 (e) For purposes of this section, the term ''class'' includes equity securities of an issuer which are of substantially similar character, the holders of which enjoy substantially similar rights and privileges.

 (f) For purposes of this section, the term ''standby commission'' means the commission payable to a broker-dealer registered under the act for its firm commitment to purchase securities offered to existing securityholders which are not purchased by the securityholders.

 (g) For purposes of this section, the term ''pro rata'' means the offering will be made in this Commonwealth proportionately on the basis of the number of shares owned by the existing securityholder or the securityholder's percentage ownership interest in the issuer. By way of illustration, an offering will be deemed to have been made on a pro rata basis where the issuer offers its existing securityholder an opportunity to purchase one new share of stock for each five shares owned as of a record date or when the issuer offers an existing securityholder owning 3% of the issuer's stock as of a record date, the opportunity to purchase 3% of the issuer's current offering.]

§ 203.151. Proxy materials.

 (a) Except as provided in subsection (b), in a transaction requiring the filing of proxy materials with the [Commission] Department for review under section 203(o) of the act (70 P.S. § 1-203(o)), the materials [shall] must conform to [SEC] Rule 14A, 17 CFR 240.14a-1—[240.14b-1] 240.14b-2 (relating to [solicitation] solicitations of proxies) promulgated under the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—[78mm] 78pp).

 (b) In a transaction subject to the filing requirements of section 203(o) of the act, filing is not required if the number of persons to whom securities are offered and sold in this Commonwealth does not exceed 25, exclusive of principals[—as that term is defined in § 203.184 (relating to offers and sales to principals)—]of the entities whose securityholders are voting or providing written consent.

 (c) Except for transactions described in subsection (b), notice shall be given to the [Commission] Department for a transaction requiring the filing of proxy materials with the [Commission] Department under section 203(o) of the act by filing [the form designated by the Commission as Form 203-O in accordance with the General Instructions thereto together with the]:

 (1) Form 203-O in accordance with the General Instructions.

 (2) The exemption filing fee specified in section 602(b.1)(v) of the act (70 P.S. § 1-602(b.1)(v)).

 (d) Proxy materials filed under this section may not be distributed to securityholders until the [Commission has determined] Department determines that the materials are in compliance with this section and [has communicated] communicates that determination to the person who filed the proxy materials.

§ 203.161. Debt securities of nonprofit organizations.

 (a) A person proposing to offer debt securities under section 203(p) of the act (70 P.S. § 1-203(p)) shall [complete]:

 (1) Complete and file with the [Commission] Department two copies of [the form, designated by the Commission as] Form 203-P in accordance with the General Instructions [thereto].

 (2) File Form 203-P not later than 5 business days before the earlier of either the issuer [receives] receiving from any person [an]:

 (i) An executed subscription agreement or other contract to purchase the securities being offered [or the issuer receives consideration from any person therefor, whichever is earlier].

 (ii) Consideration for the subscription agreement or other contract to purchase the securities being offered.

 (b) Except [in cases when] if the delivery of an offering document is not required by [order of the Commission] the Department, every offering of debt securities [pursuant to] under section 203(p) of the act shall be made by an offering document containing all material information about the securities being offered and the issuer.

 (1) An offering document will be [deemed] considered to meet the requirements of this section if it includes the information that is elicited by Part VII of the Statement of Policy Regarding Church Bonds adopted April 14, 2002, by [the North American Securities Administrators Association, Inc.] NASAA and any successor policy thereto (NASAA Guidelines) and is in the format set forth therein.

 (2) A copy of the offering document and any offering literature to be used in connection with the offer or sale of securities under section 203(p) of the act shall be filed with the [Commission] Department at the same time the notice required [by] under subsection (a) must be filed.

 (c) The offering document required [by] under subsection (b) [shall] must meet the following conditions:

 (1) Contain a notice of a right to withdraw that complies with § 207.130 (relating to notice to purchasers under section 207(m)).

 (2) Contain financial statements of the issuer that comply with § 609.034(b) (relating to financial statements).

 (3) Demonstrate compliance with the trust indenture standards and trustee qualification standards and associated disclosure requirements as set forth in Parts V and VI of the NASAA Guidelines if the total amount of securities to be offered exceeds $250,000.

 (4) Include whatever data may be necessary to establish that:

 (i) The investors will receive a first lien on real estate of the issuer[, that the].

 (ii) The issuer has not defaulted on prior obligations [and that the].

 (iii) The total amount of securities offered does not exceed 75% of the current fair market value of the real property covered by the securities.

§ 203.171. [Liquidations, dividends and distributions] (Reserved).

 [The phrase ''bona fide distribution'' as used in section 203(q) of the act (70 P.S. § 1-203(q)) does not include a dividend or other distribution made for the purpose of avoiding the registration provisions of section 201 of the act (70 P.S. § 1-201).]

§ 203.183. Agricultural cooperative associations.

 [(a) Pursuant to] Under the authority contained in section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission] Department finds that it is not in the public interest or necessary for the protection of investors to require the registration under section 201 of the act (70 P.S. § 1-201) of securities issued by an agricultural cooperative association in transactions [where] when all of the following conditions are met:

 (1) [Such] The securities are issued by the agricultural cooperative association.

 (2) [Such] The securities are offered and sold only to persons who are, at the time of [any such] an offer and sale, [members of the] agricultural cooperative association members or to persons who, [upon] on sale of [such] securities to them, thereby become members of the agricultural cooperative association.

 (3) The transfer of [such] the securities for value is restricted to [members of the] agricultural cooperative association members.

 (4) [No person receives] A person does not receive any commission or other compensation as a result of or based [upon] on the sale of [such] the securities other than in connection with the solicitation of nonmembers for membership in the agricultural cooperative association.

 [(b) The following words and terms, have, for the purposes of this section, the following meanings:

 (1) Agricultural cooperative association—An association which admits to membership only persons who are engaged in agriculture and which is organized and operated for the purpose of engaging in any cooperative activity for persons engaged in agriculture in connection with:

 (i) Producing, assembling, marketing, buying, selling, bargaining or contracting for agricultural products; harvesting, preserving, drying, processing, manufacturing, blending, canning, packing, ginning, grading, storing, warehousing, handling, transporting, shipping or utilizing the products; or manufacturing or marketing the by-products thereof.

 (ii) Manufacturing, processing, storing, transporting, delivering, handling, buying for or furnishing supplies to its members and patrons.

 (iii) Performing or furnishing business, educational, recreational or other services, including the services of labor, buildings, machinery, equipment, trucks, trailers and tankers, or other services connected with the purposes set forth in clauses (i) and (ii) on a cooperative basis. The term agricultural cooperative association shall also include a federation of agricultural cooperative associations if the federation possesses no greater powers or purposes and engages in operations no more extensive than an individual agricultural cooperative association.

 (2) Members—For purposes of subsection (a)(2) only, includes patrons to the extent that the organic law or another law to which the agricultural cooperative association is subject requires the patrons to be treated as members.

 (3) Securities—Membership agreements, capital stock, membership certificates and an instrument or form of advice which evidences:

 (i) A member's equity in a fund, capital investment or other asset of the agricultural cooperative association.

 (ii) The apportionment, distribution or payment to a member or patron of the net proceeds or savings of the agricultural cooperative association.

 (4) Engaged in agriculture—Persons engaged in farming, dairying, livestock raising, poultry raising, floriculture, mushroom growing, beekeeping, horticulture and allied occupations shall be deemed to be engaged in agriculture.]

§ 203.184. Offers and sales to principals.

 (a) Under the authority contained in section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission] Department finds that it is not in the public interest or necessary for the protection of investors to require the registration under section 201 of the act (70 P.S. § 1-201) of securities offered and sold by an issuer to:

 (1) A principal.

 (2) A corporation, the outstanding voting stock of which is beneficially owned by one or more principals.

 (3) A general partnership or a limited partnership, the interest in which is beneficially owned by one or more principals.

 (4) A trust, the trustees of which are principals.

 (5) Any other person, the interest in which is beneficially owned by one or more principals.

 [(b) For purposes of this section, the term ''principal,'' means the following:

 (1) The chairperson, president, chief executive officer, general manager, chief operating officer, chief financial officer, vice president or other officer in charge of a principal business function (including sales, administration, finance, marketing, research and credit), secretary, treasurer, controller and any other natural person who performs similar functions, of one of the following:

 (i) The issuer.

 (ii) A wholly-owned subsidiary of the issuer.

 (iii) A corporation, partnership or other entity which owns the voting stock or other voting equity interest of the issuer.

 (iv) A corporation, partnership or other entity which serves as a general partner of the issuer.

 (2) A director, general partner or comparable person charged by law with the management of one of the following:

 (i) The issuer.

 (ii) A wholly-owned subsidiary of the issuer.

 (iii) A corporation, partnership or other entity which owns the voting stock or other voting equity interest of the issuer.

 (iv) A corporation, partnership or other entity which serves as a general partner of the issuer.

 (3) A beneficial owner of 10% or more of an outstanding class of voting stock or other voting equity interest of one of the following:

 (i) The issuer.

 (ii) A corporation, partnership or other entity which serves as a general partner of the issuer.

 (4) A promoter of the issuer as defined in section 102(o) of the act (70 P.S. § 1-102(o)).

 (5) A relative of a person specified in paragraphs (1)—(4). For purposes of this subsection, the term ''relative'' means one of the following:

 (i) A spouse.

 (ii) A parent.

 (iii) A grandparent.

 (iv) An aunt, uncle, child, child of a spouse, sibling, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law or daughter-in-law.

 (c)] (b) For purposes of this section, whether a person is a beneficial owner of a security or other interest will be determined in accordance with the Securities and Exchange Commission Rule 13d-3 (17 CFR 240.13d-3) (relating to determination of beneficial owner).

 [(d)] (c) The exemption set forth in this section [is not applicable] does not apply to any offer or sale to a person who has been appointed or elected a principal [for the primary purpose of obtaining] primarily to obtain the exemption or to an offer or sale to a relative of this person.

 (d) A person who is appointed or elected a principal in good faith for a purpose other than [the purpose of obtaining] to obtain the exemption set forth in this section to whom, or to whose relative, securities are sold without registration following the designation or election in reliance [upon] on the exemption set forth in this section will not be [deemed] considered to have been designated or elected a principal [for the primary purpose of obtaining] primarily to obtain the exemption set forth in this section.

§ 203.185. Offers [prior to] before effectiveness of registration by qualification exempt.

 (a) Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission] Department finds that it is not in the public interest [nor] or necessary for the protection of investors to require the registration under section 201 of the act (70 P.S. § 1-201) for securities to be offered but not sold [of] to an applicant filing a registration statement for its securities under section 206 of the act (70 P.S. § 1-206) [prior to] before the effectiveness of [such] the registration statement if the [applicant meets all of the] following criteria are met:

 (1) The applicant has done all of the following:

 (i) Filed a registration statement under section 206 of the act [(70 P.S. § 1-206)] to register the securities for which offers will be made.

 (ii) Filed a written opinion of management which states that [all] the following conditions apply to the applicant:

 (A) The business, including any predecessor, is an existing business which possesses a history of operations of 4 years or more.

 (B) The business, including any predecessor, maintains and will continue to maintain a place of business in this Commonwealth which employs at least 25 persons.

 (C) The business, including any predecessor, has averaged annual gross revenues of at least $500,000 for the past 2 years.

 (D) The business, including any predecessor, possesses at least [four] 4 years of historical financial information.

 (iii) Filed an intention to comply with [paragraphs (4)—(7)] paragraph (3) and subsections (b)—(d).

 (2) The minimum amount of the proceeds from the securities to be sold under the registration statement described in paragraph (1)(i) is $500,000.

 [(3) Receipt by the applicant of a nonbinding subscription agreement which is subject to the withdrawal provisions of paragraph (4) shall not constitute a ''sale'' of a security. Neither shall moneys deposited under paragraph (5) constitute the ''sale'' of a security.

 (4)] (3) There is a withdrawal procedure as follows:

 (i) Nonbinding subscription agreements received in connection with the offer but not sale of securities made under this section [shall] must contain withdrawal rights which permit the investor to withdraw moneys tendered under [such] the nonbinding subscription agreements with accrued interest under one of the following circumstances:

 (A) Investors may withdraw moneys tendered under a nonbinding subscription agreement with accrued interest at any time [prior to] before the effectiveness of the registration statement described in paragraph (1)(i).

 (B) Investors may withdraw moneys tendered under a nonbinding subscription agreement with accrued interest within [two] 2 business days from the date of receipt of notification of effectiveness of the registration statement described in paragraph (1)(i), as set forth in [paragraph (7)] subsection (d).

 (ii) Investors [shall be deemed] are considered automatically to have withdrawn any moneys tendered under a nonbinding subscription agreement and [such] the moneys with accrued interest shall be returned to the investors [upon] on the occurrence of any of the following:

 (A) The registration statement described in paragraph (1)(i) does not become effective within 150 days from the date of filing with the [Commission, unless extended by order of the Commission] Department, unless extended by the Department.

 (B) The registration statement described in paragraph (1)(i) is withdrawn by the applicant.

 (C) The [Commission] Department denies the registration statement described in paragraph (1)(i), regardless of whether [such] the denial was a result of a hearing or rehearing requested by the applicant unless the [Commission] Department permits, in its Denial Order, that the moneys remain in escrow pending any request for a rehearing on the Denial Order.

 [(5)] (b) Moneys tendered under nonbinding subscription agreements as a result of offers made under this section shall be placed in interest-bearing escrow accounts in a bank and [shall be] are subject to the investor withdrawal rights set forth in paragraph [(4)] (3).

 (1) If, [prior to] before the effectiveness of the registration statement described in paragraph (1)(i), the nonbinding subscription agreement is withdrawn under paragraph [(4)] (3), the deposit and accrued interest [shall be] is payable to the investor.

 (2) After the effectiveness of the registration statement described in paragraph (1)(i), the deposit plus accrued interest [shall be] is payable to the applicant except [where] if the investor withdraws under [paragraph (7)] subsection (d), in which event the investor shall receive the deposit plus accrued interest.

 [(6)] (c) All offers for securities made under this section [shall be] must be accompanied by the delivery of a preliminary prospectus which has been prepared and filed to satisfy the requirements of section 206(b) of the act [(70 P.S. § 1-206(b))] and § 206.010(c) (relating to registration by qualification).

 [(7)] (d) All persons whose moneys have been placed in escrow as a result of the making of offers for the securities that are the subject of the registration statement described in paragraph (1)(i) shall [be]:

 (1) Be notified of the effectiveness of [such] the registration statement either by certified mail or by direct delivery of [such] the information.

 [Concurrent with the notification of the effectiveness of such registration statement, all persons shall receive] (2) Receive a copy of the final prospectus concurrent with the notification of the effectiveness of the registration statement unless the [Commission, by order,] Department permits a supplement to the preliminary prospectus setting forth all changes and modifications to be [utilized] used for these purposes.

 (e) The following do not constitute the sale of a security:

 (1) Receipt by the applicant of a nonbinding subscription agreement which is subject to the withdrawal provision of subsection (a)(3).

 (2) Deposit of moneys under subsection (b).

 [(b)] (f) The exemption contained in this section may not be available for a transaction [whose primary purpose is avoidance of] entered into primarily to avoid the provisions of section 201 of the act [(70 P.S. § 1-201)].

§ 203.186. Employee takeovers.

 (a) Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission] Department finds that it is not in the public interest or necessary for the protection of investors to require the registration under section 201 of the act (70 P.S. § 1-201) of securities issued under an investment plan for employees of an existing person designed to purchase securities of a newly created person in transactions if:

 (1) [Where the] The proceeds from the sale of the securities will be used to purchase assets and operations of the existing person.

 (2) [Where these] The employees will preserve their jobs through their employment with the newly created person.

 (3) [When compulsory] The employees' participation in the investment plan [by the employee] is not required as a condition of employment [is not required].

 (4) [When employees] The employees being solicited to purchase securities under the investment plan receive, at least 7 days [prior to] before entering into a binding obligation to purchase or subscribe for the purchase of securities issued or to be issued under the investment plan[, written]:

 (i) Written offering materials that fully and adequately disclose all material facts about the investment plan, including detailed risk factors explaining the potential loss of their investment[, and an].

 (ii) An opinion of counsel that the security, when sold, will be legally issued, fully paid and nonassessable and, if a debt security, a binding obligation of the issuer.

 (5) [When any] The prospective financial statements[, as that term is defined in § 609.010 (relating to use of prospective financial statements),] used in connection with soliciting the purchase of securities under the investment plan comply with § 609.010(d) (relating to use of prospective financial statements).

 (b) The exemption contained in this section may not be available for a transaction [whose primary purpose is avoidance of] entered into primarily to avoid the provisions of section 201 of the act.

§ 203.187. Small issuer exemption.

 (a) General rule. Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission] Department finds that it is [neither] not in the public interest [nor] or necessary for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for the offer and sale of securities by an issuer [when] if:

 (1) The issuer has not sold securities in or out of this Commonwealth to more than ten persons.

 (2) The issuer, in connection with offers made for the sale of securities under this section, has not made offers to sell securities to more than 90 persons in this Commonwealth in a period of 12 consecutive months.

 (3) The issuer is either organized under the laws of the Commonwealth or has its principal place of business in this Commonwealth.

 (4) [Neither the issuer nor] The issuer or a promoter, officer or director of the issuer is not subject to the disqualifications in § 204.010(b) (relating to increasing the number of purchasers and offerees).

 (5) [No] General solicitation through public media advertisement [is used or mass mailing is made], mass mailing, the Internet or other means does not occur in connection with the offers and sales under this section.

 (6) [No cash] Cash or securities are not given or paid, directly or indirectly, to a person as compensation in connection with a sale under this section unless [the]:

 (i) The compensation is given or paid in connection with a sale made by a broker-dealer who either is registered under section 301 of the act (70 P.S. § 1-301) or exempt from registration under section 302(a) of the act (70 P.S. § 1-302(a)) [and a].

 (ii) The person receiving compensation is either the broker-dealer or an agent of the broker-dealer who either is registered under section 301 of the act or exempt from registration under section 302(b) of the act.

 (b) Integration.

 (1) Offers and sales made by the issuer under this section [shall be] are counted as offers and sales under applicable numerical limitations set forth in § 204.010(a)(1) and (2) if offers and sales under § 204.010 occur within a period of 12 consecutive months of an offer or sale made under this section.

 (2) Offers and sales made by the issuer under this section [shall be] are counted as offers and sales under the applicable numerical limitations in section 203(s) of the act [(70 P.S. § 1-203(s))] if offers and sales under section 203(s) of the act occur within a period of 6 consecutive months of an offer or sale made under this section.

 (c) Computation. Section 609.012 (relating to computing the number of offerees, purchasers and clients) applies to offers and sales of securities made under this section.

§ 203.188. Cooperative Business Associations Exemption.

 (a) Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission] Department finds that it is not in the public interest or necessary for the protection of investors to require registration of securities transactions under section 201 of the act (70 P.S. § 1-201) [where] if the following conditions are met:

 (1) The issuance, offer and sale of securities of a cooperative business association is made only to persons who are members of the cooperative business association or, [upon] on the purchase of the security offered, will become members of a cooperative business association.

 (2) The transfer of the securities for value is restricted to the cooperative business association, members of the cooperative business association or a successor in interest of a transferor who qualifies for membership, as may be further limited by the articles of incorporation of the cooperative business association, if certificates evidencing the securities bear a legend setting forth the restrictions.

 (3) [No person receives] A person does not receive a commission or other compensation directly or indirectly as a result of or based [upon] on the sale of securities of a cooperative business association other than in connection with the solicitation of nonmembers for membership.

 [(b) When used in this section, the following terms have the following meanings:

 Cooperative business association—A person which is organized exclusively as a retail or wholesale cooperative and admits to membership only persons which bona fide engage, in whole or in part, in the line of business for which the cooperative was organized.

 Securities—An equity or debt security, membership agreement, membership certificate, patronage dividend or form of advice which evidences a member's interest in a fund, capital investment or other asset of a cooperative business association or the apportionment, distribution or payment to a member of the net proceeds or savings of a cooperative business association.

 (c)] (b) Section 209.010(b) (relating to required records; report on sales of securities and use of proceeds) [is not applicable] does not apply to the offer and sale of securities without registration under this section.

§ 203.189. Isolated transaction exemption.

 (a) General. Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission finds it neither necessary nor] Department finds that it is not necessary or appropriate for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for the offer and sale of securities by an issuer if:

 (1) Sales made under this section do not result in the issuer having made sales of its securities to more than two persons in this Commonwealth during a period of [12-consecutive] 12 consecutive months. Only sales described in subsection (c) will be counted as sales for purposes of the numerical limitations contained in this paragraph.

 (2) Offers made under this section do not result in the issuer having made offers to sell its securities to more than 90 persons in this Commonwealth during a period of [12-consecutive] 12 consecutive months. Only offers described in subsection (c) will be counted as offers for purposes of the numerical limitations contained in this paragraph.

 (3) The issuer either is organized under the laws of the Commonwealth or has its principal place of business in this Commonwealth.

 (4) [Neither the issuer nor] The issuer or a promoter, officer or director of the issuer [is] are not subject to the disqualifications in § 204.010(b) (relating to increasing the number of purchasers and offerees).

 (5) [No] General solicitation through public media advertisement [is used or mass mailing is made], mass mailing, the Internet or other means does not occur in connection with offers and sales made under this section.

 (6) Cash or securities are not given or paid, directly or indirectly, to a person as compensation in connection with a sale under this section unless [the]:

 (i) The compensation is given or paid in connection with a sale made by a broker-dealer who is either [is registered]:

 (A) Registered under section 301 of the act (70 P.S. § 1-301) [or exempt].

 (B) Exempt from registration under section 302(a) of the act (70 P.S. § 1-302(a)) [and a].

 (ii) A person receiving compensation is either the broker-dealer or an agent of the broker-dealer who is either [is registered]:

 (A) Registered under section 301 of the act [or exempt].

 (B) Exempt from registration under section 302(b) of the act.

 (b) Waivers.

 (1) Subsection (a)(2), (3) and (5) [do] does not apply if the following criteria are met:

 (i) The securities to be sold in reliance on this section are registered with the [United States] Securities and Exchange Commission under section 5 of the Securities Act of 1933 (1933 Act) (15 U.S.C.A. § 77e) or exempt from registration under Regulation A adopted under section 3(b) of the 1933 Act (15 U.S.C.A. § [77(c)(b)] 77c(b)).

 (ii) The issuer has complied with section 203(h) of the act.

 (2) Subsection (a)(3) does not apply if the following criteria are met:

 (i) The offers and sales of securities made in reliance on this section would qualify for an exemption from registration under section 5 of the 1933 Act under Rule 505 or Rule 506 of Regulation D (17 CFR 230.505 [and] or 230.506) (relating to exemption for limited offers and sales of securities not exceeding [$5 million] $5,000,000; and exemption for limited offers and sales without regard to dollar amount of offering)[)] promulgated under [sections 3(b) and 4(2) of the 1933 Act] section 3(b) of the 1933 Act and section 4(a)(2) of the 1933 Act (15 U.S.C.A. § 77d(a)(2)).

 (ii) The offers made in this Commonwealth in reliance on this section are made only to accredited investors as that term is defined in Rule 501(a) of Regulation D promulgated by the [United States] Securities and Exchange Commission (17 CFR 230.501(a)) (relating to definitions and terms used in Regulation D).

 (iii) The sales made in this Commonwealth in reliance on this section are made only to accredited investors as that term is defined in Rule 501(a) of Regulation D promulgated by the [United States] Securities and Exchange Commission (17 CFR 230.501(a)).

 (c) Inclusion of prior offers and sales. Offers and sales which occurred within the preceding 12 months from the date of an offer or sale to be made under this section that were made in reliance [upon] on section 203(d), (f) or (s) of the act, [§§ 203.187 and 204.010(a)(1) and (2) (relating to small issuer exemption; and increasing the number of purchasers and offerees), SEC] § 203.187 (relating to small issuer exemption), § 204.010(a)(1) and (2), Rule 506 (17 CFR 230.506) or this section [shall be] are counted against the numerical limitations in subsection (a)(1) and (2).

 (d) Integration.

 (1) Offers and sales made by the issuer under this section [shall be] are counted as offers and sales under the applicable numerical limitations in § 204.010(a)(1) and (2) if offers and sales under § 204.010 occur within [12-consecutive] 12 consecutive months of an offer or sale made under this section.

 (2) Offers and sales made by the issuer under this section [shall be] are counted as offers and sales under the applicable numerical limitations in section 203(s) of the act [(70 P.S. § 1-203(s))] if offers and sales under section 203(s) of the act occur within [6-consecutive] 6 consecutive months of an offer or sale made under this section.

 (e) Counting of offerees and purchasers. Section 609.012 (relating to computing the number of offerees, purchasers and clients) applies to offers and sales of securities made under this section.

§ 203.190. Certain Internet offers exempt.

 (a) Under section 203(r) of the act (70 P.S. § [1-203-(r)], the [Commission finds it neither necessary nor] Department finds it not necessary or appropriate for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for offers of securities by an issuer which are communicated electronically by means of a proprietary or common carrier electronic delivery system, the Internet, the World Wide Web or similar media (Internet Offer) [when] if the issuer does not intend to offer and sell the securities in this Commonwealth and meets the following conditions:

 (1) The Internet Offer indicates, directly or indirectly, that the securities are not to be offered to persons in this Commonwealth.

 (2) An offer is not otherwise specifically directed to any person in this Commonwealth, by or on behalf of the issuer.

 (3) [No sales of the] The issuer's securities are [made] not sold in this Commonwealth as a result of the Internet Offer.

 (b) [Nothing in this section prohibits] This section does not prohibit, in connection with an Internet Offer, the availability of another exemption which otherwise does not prohibit general solicitation.

§ 203.191. [SEC] Rule 505 offerings.

 (a) Filing requirement. The notice required [by] under section 203(s)(i) of the act (70 P.S. § [203(s)(i)] 1-203(s)(i)) shall be filed with the [Commission] Department within the time period specified [in that section on Commission] on Form E as set forth in § 203.041 (relating to limited offerings).

 [(b) Compensation. The term ''compensation,'' as used in section 203(s)(iv) of the act, is not limited to receipt of monetary consideration.

 (c)] (b) Integration. Offers and sales made under this section [shall be] are counted as offers and sales under the applicable numerical limitations in section 203(d) and (f) of the act [(70 P.S. § 1-203(d) and (f))] and § 204.010 (relating to increasing the number of purchasers and offerees).

 [(d) Beneficial ownership. For purposes of section 203(s)(v), whether a person is a beneficial owner of a security shall be determined in accordance with SEC Rule 13d-3 (17 CFR 240.13d-3 (relating to determination of beneficial owner)).

 (e)] (c) Amendments. During the period of the offering, the issuer shall take steps necessary to [insure] ensure that all material information contained in the notice remains current and accurate in all material respects. If a material statement made in the notice, or an attachment thereto, becomes materially incorrect or inaccurate, the issuer shall file an amendment with the [Commission] Department in accordance with § 609.011 (relating to amendments to filings with [Commission] Department) within 5 business days of the occurrence of the event which required the filing of the amendment.

§ 203.192. [SEC] Rule 801 and 802 offerings exempt.

 Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission finds it neither necessary nor] Department finds it not necessary or appropriate for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for the offer and sale of securities by an issuer which are exempt from registration under the Securities Act of 1933 (15 U.S.C.A. §§ 77a—77aa) [pursuant to] under Rule 801 or 802 promulgated by the [United States] Securities and Exchange Commission (17 CFR 230.801 or 230.802) (relating to exemption in connection with a rights offering; and exemption for offerings in connection with an exchange offer or business combination for the securities of foreign private issuers).

§ 203.201. Accredited investor exemption.

 (a) Filing requirement. The notice required [by section 203(t)(i) of the act (70 P.S. § 203(t)(i)) shall be filed with the Commission] under section 203(t)(ii) of the act (70 P.S. § 1-203(t)(ii)) shall be filed with the Department within the time period specified [in that section on Commission] on Form E as set forth in § 203.041 (relating to limited offerings).

 (b) General solicitation. Use of general solicitation in a manner permitted by section 203(t) of the act will not be considered to be an advertisement subject to section 606(c) of the act (70 P.S. § [606(c)] 1-606(c)) and § 606.031 (relating to advertising literature) [but is] subject to the antifraud provisions in sections 401—409 of the act (70 P.S. §§ 1-401—1-409) and Subpart D (relating to fraudulent and prohibited practices).

 [(c) Compensation. The term ''compensation,'' as used in section 203(t)(iv) of the act, is not limited to receipt of monetary consideration.

 (d) Beneficial ownership. For purposes of section 203(t)(v) of the act, whether a person is a beneficial owner of a security shall be determined in accordance with SEC Rule 13d-3 (17 CFR 240.13d-3) (relating to determination of beneficial owner).

 (e)] (c) Amendments. During the period of the offering, the issuer shall take steps necessary to [insure] ensure that all material information contained in the notice remains current and accurate in all material respects. If a material statement made in the notice, or an attachment thereto, becomes materially incorrect or inaccurate, the issuer shall file an amendment with the [Commission] Department in accordance with § 609.011 (relating to amendments to filings with [Commission] Department) within 5 business days of the occurrence of the event which required the filing of the amendment.

§ 203.202. Certain transactions with persons from Canada exempt.

 Under section 203(r) of the act (70 P.S. § 1-203(r)), the [Commission finds it neither necessary nor] Department finds it not necessary or appropriate for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for the offer or sale of a security if the following requirements are met:

 (1) The security is offered or sold in this Commonwealth only to a person described in § 302.065(1) (relating to Canadian broker-dealer exempt).

 (2) The transaction is effected in this Commonwealth solely by a Canadian broker-dealer or agent of a Canadian broker-dealer described in § 302.065(2).

§ 203.203. Certain Rule 144A exchange transactions exempt.

 Under section 203(r) of the act (70 P.S. § [1-203] 1-203(r)), the [Commission finds that it is neither necessary nor] Department finds that it is not necessary or appropriate for the protection of investors to require registration under section 201 of the act (70 P.S. § 1-201) for the offer or sale of a security in a transaction if the following requirements are met:

 (1) A person who owns outstanding debt securities [(and any related guarantees)], and related guarantees, exchanges those securities for debt securities [(and any related guarantees)], and related guarantees of the same issuer which are the subject of an effective registration statement filed with the [United States] Securities and Exchange Commission [(SEC)] under section 5 of the Securities Act of 1933 (15 U.S.C.A. [§§ 77(e)] § 77e) (exchange transaction).

 (2) The outstanding debt securities [(and any related guarantees)], and related guarantees, are ['']restricted securities[''] as that term is defined in 17 CFR 230.144(a)(3) (relating to persons deemed not to be engaged in a distribution and therefore not underwriters).

 (3) [No consideration is paid by the] The owner of the outstanding debt securities [(and any related guarantees)], and related guarantees, does not pay consideration in connection with the exchange transaction.

 (4) There are no material differences in the terms of the outstanding debt securities [(and any related guarantees) and the debt securities (and any related guarantees)], and related guarantees, which are the subject of the exchange transaction.

CHAPTER 204. EXEMPTION PROCEEDINGS

§ 204.010. Increasing the number of purchasers and offerees.

 (a) Increases in purchasers and offerees. Under section 204(a) of the act (70 P.S. § 1-204(a)), the number of purchasers and offerees permitted under section 203(d) and (e) of the act, respectively (70 P.S. [§§] § 1-203(d) and (e)) [shall be] are increased as follows, if the issuer complies with all the conditions described in subsection (b):

 (1) The total number of persons to whom securities may be offered in this Commonwealth during [12-consecutive] 12 consecutive months under section 203(e) [shall be] of the act is 90 persons, except that offers made to experienced private placement investors, [as that term is defined in subsection (d),] who actually purchase the securities being offered are not included in the limitation established by this paragraph.

 (2) The total number of persons to whom securities may be sold in this Commonwealth during [12-consecutive] 12 consecutive months under section 203(d) [shall be] of the act is 35 persons, except that sales made to experienced private placement investors, [as that term is defined in subsection (d)] are not included in the numerical limitation established by this paragraph.

 (b) Conditions.

 (1) Disqualification. The issuer or a person who is an officer, director, principal, partner [(other than a limited partner)] other than a limited partner, promoter, or controlling person of the issuer or a person occupying a similar status or performing a similar function on behalf of the issuer, has not been convicted of a crime, made the subject of a sanction or otherwise found to have met any of the criteria described in section 305(a)(ii)—(xiii) of the act (70 P.S. § 1-305(a)(ii)—(xiii)) unless the person subject to this disqualification is registered under section 301 of the act (70 P.S. § 1-301).

 (2) [Notice] Exemption notice filing. With respect to reliance on subsection (a)(2), the issuer files with the [Commission the notice required by] Department the notice required under section 203(d) of the act and § 203.041 (relating to limited offerings) and pays the filing fee required [by] under section 602(b.1)(viii) of the act (70 P.S. § 1-602(b.1)(viii)).

 (3) Broker-dealer requirement.

 (i) All offers and sales made to persons in reliance on section 203(d) and (e) of the act, including the increased number of offerees and purchasers permitted by subsection (a), are effected by a broker-dealer registered under section 301 of the act[, except that this condition].

 (ii) Subparagraph (i) does not apply if the issuer either is organized under the laws of the Commonwealth or has its principal place of business in this Commonwealth.

 (4) Statutory requirement. With respect to all offers and sales made to persons permitted under this section, the issuer shall comply with all conditions imposed by section 203(d) and (e) of the act, respectively.

 (c) Exceptions.

 (1) Subsection (b)(1) does not apply if [the] either of the following conditions exist:

 (i) The person subject to the disqualification enumerated therein is 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].

 (ii) The broker-dealer employing the person is licensed or registered in this Commonwealth and disclosed the order, conviction, judgment or decree relating to the person in the Form BD filed with the [Commission has disclosed the order, conviction, judgment or decree relating to this person. Nothing in this paragraph shall be construed to] Department.

 (2) Paragraph (1) does not allow a person disqualified under subsection (b)(1)[,] to act in a capacity other than that for which the person is registered.

 [(2)] (3) A disqualification created under this section is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification determines [upon] on a showing of good cause that it is not necessary under the circumstances that the exemption be denied.

 [(d) Definitions. For purposes of this section, the following terms have the following meanings:

 (1) Experienced private placement investor. An individual—and spouse when purchasing as joint tenants or as tenants by the entireties—who previously has purchased a minimum of $450,000 of securities within the past 3 years in private placement offerings exclusive of the purchase of securities of an issuer of which the individual, or spouse, was an affiliate at the time of purchase.

 (2) Private placement offering of securities. An offering of securities made in reliance on an exemption from the registration provisions of section 5 of the Securities Act of 1933 (15 U.S.C.A. § 77) under section 3(b) or 4(2) of that act (15 U.S.C.A. §§ 77c(b) and 77d(2)).

 (3) Purchase of securities by an experienced private placement investor. The sale of securities for cash or for an unconditional obligation to pay cash which obligation is to be discharged within 5 years from the date of the sale of the securities to the experienced private placement investor.

 (e)] (d) Due diligence obligation.

 (1) A broker-dealer registered under section 301 of the act [(70 P.S. § 1-301)] that sells a security to an experienced private placement investor in reliance on subsection (a) [must receive] meets the due diligence obligation if the broker-dealer:

 (i) Obtains from the purchaser a written representation that the purchaser meets the definition of ''experienced private placement investor'' in [subsection (d)(1) and must have] § 102.021 (relating to definitions).

 (ii) Has reasonable grounds to believe, after reasonable inquiry, that the written representation is correct.

 (2) An issuer that either is organized under the laws of the Commonwealth or has its principal place of business in this Commonwealth and sells its securities to experienced private placement investors in reliance on subsection (a) [must receive] meets the due diligence obligation if the issuer:

 (i) Obtains from the purchaser a written representation that the purchaser meets the definition of ''experienced private placement investor'' in [subsection (d)(1) and must have] § 102.021.

 (ii) Has reasonable grounds to believe, after reasonable inquiry, that the written representation is correct.

 [(f)] (e) Statutory basis for offers and sales under this section. All offers and sales made to persons permitted by this section are [deemed] considered to be offers and sales made under section 203(d) and (e) of the act and all conditions imposed by those sections of the act [are applicable] apply to offers and sales to persons permitted by this section.

§ 204.011. Waivers of the 12-month holding period.

 (a) Automatic waiver. Under section 204(a) of the act (70 P.S. § 1-204(a)), the restriction under section 203(d)(i) of the act (70 P.S. § 1-203(d)(i)) not to sell securities purchased under that section for 12 months after the date of purchase automatically is waived if:

 (1) The 203(d) restricted securities are registered under the act, the Securities Act of 1933 (15 U.S.C.A. §§ 77a—77aa) or the Securities Exchange Act of 1934 (15 U.S.C.A. §§ 78a—[78kk] 78pp) [subsequent to a notice filed with the Commission] after a notice is filed with the Department under section 203(d) of the act and § 203.041 (relating to limited offerings).

 (2) The purchaser dies or becomes disabled or incompetent and a legal guardian for the purchaser is appointed.

 (3) The purchaser undergoes liquidation or dissolution if the action is not undertaken [for the purpose of avoiding] to avoid registration.

 (4) The purchaser becomes insolvent.

 (5) The issuer is merged into another entity and new securities are exchanged for the 203(d) restricted securities, if the merger is not undertaken [for the purpose of avoiding] to avoid registration of the 203(d) restricted security.

 (6) The 203(d) restricted securities are sold in a transaction in which an offer to purchase on the same terms is made to all securityholders of that class of the issuer's securities.

 (7) A rescission offer is made in connection with a potential violation of State or Federal securities laws.

 (8) The 203(d) restricted securities are subject to repurchase under a buy-sell agreement that is conditioned with terms of employment or other commercial, as opposed to, mere investment relationship.

 (9) The 203(d) restricted securities are to be exchanged for other securities of the issuer in a transaction exempt from registration under [sections 202 or 203 of the act (70 P.S. §§ 1-202 and 1-203)] section 202 of the act (70 P.S. § 1-202) or section 203 of the act, if the exchange is not undertaken [for the purpose of avoiding] to avoid registration.

 [(b) For purposes of this section, the following terms, have the following meanings:

 (1) Restricted securities—Securities purchased under section 203(d) of the act where the purchaser is subject to the restriction not to resell the security for 12 months after the date of purchase.

 (2) Insolvent—The inability of the purchaser to pay debts as they fall due in the usual course of business or having liabilities in excess of the fair market value of assets.

 (c)] (b) Resale agreement. For transactions undertaken in reliance on waivers provided in [subsections] subsection (a)(3) and (4), the person acquiring the restricted securities and the issuer shall agree [with the issuer] in writing at the time of sale not to resell the restricted securities [prior to] before the expiration of the original 12-month holding period.

 [(d)] (c) Discretionary waiver.

 (1) In addition to the automatic waivers set forth in subsection (a), persons may make application to the [Commission] Department under section 204(a) of the act for a discretionary order to waive the 12-month holding period for a restricted security in a proposed specified transaction [in which the].

 (2) The applicant shall demonstrate in the application that the sale of the restricted security is not being undertaken [for the purpose of avoiding] to avoid registration or otherwise [would constitute a distribution] to distribute in violation of the act.

§ 204.012. Waivers for pre-effective offers under section 203(h).

 Under section 204(a) of the act (70 P.S. § 1-204(a)), the [Commission] Department waives the requirement in section 203(h) of the act (70 P.S. § 1-203(h)) that a registration statement, including a prospectus, be filed with the [Commission] Department to make offers, but not sales, of securities in this Commonwealth if the issuer of the securities to be offered under the exemption in section 203(h) of the act has filed a registration statement with the [United States] Securities and Exchange Commission under the Securities Act of 1933 (15 U.S.C.A. §§ 77a—77aa) [prior to] before the time offers are made in this Commonwealth in reliance on section 203(h) of the act.

CHAPTER 205. REGISTRATION BY COORDINATION

§ 205.021. Registration by coordination.

 (a) Except as specified in subsection (b), registration by coordination may be initiated by filing with the [Commission] Department within the specified time period:

 (1) A registration statement and other materials required under section 205 of the act (70 P.S. § 1-205).

 (2) A properly executed Uniform Application to Register Securities (Form U-1) and relevant exhibits thereto.

 (3) Additional information the [Commission] Department may by regulation or order require under section 205(b)(iii) of the act [(70 P.S. § 1-205(b)(iii))].

 (b) In addition to filing the information and form required [in] under subsection (a), [insurers] issuers in offerings being made in reliance on [SEC] Regulation A promulgated under section 3(b) of the Securities Act of 1933 (15 U.S.C.A. § 77c(b)) shall execute and file with the [Commission] Department within the specified time [period the form, designated by the Commission as] Form R in accordance with the General Instructions [thereto].

 (c) The 10-day registration statement filing requirement in section 205(c)(2)(ii) of the act [(70 P.S. § 1-205(c)(2)(ii)) shall be] is reduced to 5 days for the following:

 (1) An offering for which a registration statement has been filed with the [Commission] Department designated as Form S-2 or S-3 by the [SEC] Securities and Exchange Commission.

 (2) An offering for which a registration statement has been filed with the [Commission] Department designated as Form F-7, F-8, F-9 or F-10, or otherwise equivalent form, by the [SEC] Securities and Exchange Commission.

 (3) An offering for pass-through certificates evidencing undivided interests in trusts consisting of, or debt securities secured by, specific categories of receivables which securities, as a condition of issuance, are to be rated in one of the top three rating categories by one or more Nationally recognized statistical rating organizations.

 (d) During the period of the offering, the issuer shall take steps necessary to ensure that all material information contained in its Form R remains current and accurate in all material respects. If a material statement made in the form, or any attachment thereto, becomes materially incorrect or inaccurate, the issuer shall file an amendment with the [Commission] Department in accordance with § 609.011 (relating to amendments [filed with the Commission] to filings with Department) within 5 business days of the occurrence of the event which required the filing of the amendment.

§ 205.040. Series of unit investment trusts as separate issuers.

 [For purposes of complying] To comply with the requirements of sections 201 and 211(a) of the act (70 P.S. §§ 1-201 and 1-211(a)), each series underlying a unit investment trust, as that person is classified in the Investment Company Act of 1940 (15 U.S.C.A. §§ 80a-1—80a-64), constitutes a separate and distinct issuer under the act and shall [be required to] make a separate filing with the [Commission] Department under section 211(a) of the act.

CHAPTER 206. REGISTRATION BY QUALIFICATION

§ 206.010. Registration by qualification.

 (a) Except as specified in subsection (b), registration by qualification shall be initiated by filing with the [Commission] Department:

 (1) A registration statement and other materials required under section 206(b)(1)—(16) of the act (70 P.S. § [1-206(1)—(16)] 1-206(b)(1)—(16)).

 (2) A properly executed Uniform Application to Register Securities (Form U-1) and relevant exhibits.

 (3) Additional information the [Commission] Department may by regulation or order require under section 206(b)(17) of the act.

 (b) In addition to the information and form required [in] under subsection (a), issuers in the following offerings shall execute and file with the [Commission] Department Form R as set forth in § 205.021 (relating to registration by coordination):

 (1) Offerings made in reliance on section 3(a)(4) of the Securities Act of 1933 (15 U.S.C.A. § 77c(a)(4)).

 (2) Offerings made in reliance on section 3(a)(11) of the Securities Act of 1933.

 (3) Offerings made in reliance on Rule 504 of [SEC] Regulation D promulgated under section 3(b) of the Securities Act of 1933.

 (4) Offerings made in reliance on [SEC] Regulation A promulgated under section 3(b) of the Securities Act of 1933.

 (c) Financial statements used in connection with an offering under section 206 [shall] of the act must meet the requirements of section 609(c) of the act (70 P.S. § [609(c)] 1-609(c)) and Chapter 609 (relating to regulations, forms and orders) or as the [Commission shall, by order, require] Department requires.

 (d) During the period of the offering, the issuer required to file Form R shall take steps necessary to ensure that all material information contained in its Form R remains current and accurate. If a material statement made in the form or any attachment thereto becomes incorrect or inaccurate, the issuer shall file an amendment with the [Commission] Department in accordance with § 609.011 (relating to amendments [filed with the Commission] to filings with Department) within 5 business days of the occurrence of the event which required the filing of the amendment.

§ 206.020. [Tax opinion in offerings of limited partnership interests] (Reserved).

 [(a) Under the authority contained in section 206(b)(17) and (d) of the act (70 P.S. § 1-206(b)(17) and (d)), the Commission has determined that it is necessary:

 (1) To require that a registration statement filed under section 206 of the act for the registration of limited partnership interests contain a tax opinion or discussion of tax aspects prepared or reviewed under subsection (c).

 (2) To require as a condition for the registration of limited partnership interests under section 206 of the act that the prospectus include tax opinion or tax aspects contained in the registration statement and a statement identifying the preparer or reviewer of the tax opinion or discussion of tax aspects.

 (b) Material tax issues in relation to the facts, including but not limited to, whether the limited partnership will be treated as a partnership for Internal Revenue Code tax purposes under 26 CFR 301.7701-2 shall be addressed in the registration statement.

 (c) The tax opinion or discussion of tax aspects shall be prepared or reviewed by an independent attorney, certified public accountant or other qualified professional who shall be identified in the registration statement.

 (d) For purposes of this section, an attorney, certified public accountant, or other qualified professional may not be considered to be ''independent'' if the professional or a member of the professional's firm is either:

 (1) A promoter, underwriter, general partner or employe of the issuer.

 (2) An affiliate of a promoter, underwriter, general partner or employe of the issuer.

 (e) The requirement of subsection (c) does not apply where the limited partnership has received a favorable ruling from the Internal Revenue Service on all of the tax issues addressed in the tax opinion or discussion of tax aspects contained in the registration statement.]

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