§ 5202. Exempt transactions
The following transactions are exempt from the requirements of sections 5301 through
5306 and 5504 of this chapter:
(1) An isolated nonissuer transaction, whether effected by or through a broker-dealer
or not.
(2) A nonissuer transaction by or through a broker-dealer registered or exempt from registration
under this chapter and a resale transaction by a sponsor of a unit investment trust
registered under 15 U.S.C. § 80a-1 et seq. in a security of a class that has been outstanding in the hands of the public
for at least 90 days, if, at the date of the transaction:
(A) the issuer of the security is engaged in business, the issuer is not in the organizational
stage or in bankruptcy or receivership, and the issuer is not a blank check, blind
pool, or shell company that has no specific business plan or purpose or has indicated
that its primary business plan is to engage in a merger or combination of the business
with or an acquisition of an unidentified person;
(B) the security is sold at a price reasonably related to its current market price;
(C) the security does not constitute the whole or part of an unsold allotment to or a
subscription or participation by the broker-dealer as an underwriter of the security
or a redistribution;
(D) a nationally recognized securities manual or its electronic equivalent designated
by rule adopted or order issued under this chapter or a record filed with the Securities
and Exchange Commission that is publicly available contains:
(i) a description of the business and operations of the issuer;
(ii) the names of the issuer’s executive officers and the names of the issuer’s directors,
if any;
(iii) an audited balance sheet of the issuer as of a date within 18 months before the date
of the transaction or, in the case of a reorganization or merger when the parties
to the reorganization or merger each had an audited balance sheet, a pro forma balance
sheet for the combined organization; and
(iv) an audited income statement for each of the issuer’s two immediately previous fiscal
years or for the period of existence of the issuer, whichever is shorter, or, in the
case of a reorganization or merger when each party to the reorganization or merger
had audited income statements, a pro forma income statement; and
(E) any one of the following requirements is met:
(i) the issuer of the security has a class of equity securities listed on a national securities
exchange registered under 15 U.S.C. § 78a(6) or designated for trading on the National Association of Securities Dealers Automated
Quotation System;
(ii) the issuer of the security is a unit investment trust registered under 15 U.S.C. § 80a-1 et seq.;
(iii) the issuer of the security, including its predecessors, has been engaged in continuous
business for at least three years; or
(iv) the issuer of the security has total assets of at least $2,000,000.00 based on an
audited balance sheet as of a date within 18 months before the date of the transaction
or, in the case of a reorganization or merger when the parties to the reorganization
or merger each had such an audited balance sheet, a pro forma balance sheet for the
combined organization.
(3) A nonissuer transaction by or through a broker-dealer registered or exempt from registration
under this chapter in a security of a foreign issuer that is a margin security defined
in regulations or rules adopted by the Board of Governors of the Federal Reserve System.
(4) A nonissuer transaction by or through a broker-dealer registered or exempt from registration
under this chapter in an outstanding security if the guarantor of the security files
reports with the Securities and Exchange Commission under the reporting requirements
of 15 U.S.C. § 78m or 78o(d).
(5) A nonissuer transaction by or through a broker-dealer registered or exempt from registration
under this chapter in a security that:
(A) is rated at the time of the transaction by a nationally recognized statistical rating
organization in one of its four highest debt rating categories; or
(B) has a fixed maturity or a fixed interest or dividend, if:
(i) a default has not occurred during the current fiscal year or within the three previous
fiscal years or during the existence of the issuer and any predecessor if less than
three fiscal years, in the payment of principal, interest, or dividends on the security;
and
(ii) the issuer is engaged in business, is not in the organizational stage or in bankruptcy
or receivership, and is not and has not been within the previous 12 months a blank
check, blind pool, or shell company that has no specific business plan or purpose
or has indicated that its primary business plan is to engage in a merger or combination
of the business with or an acquisition of an unidentified person.
(6) A nonissuer transaction by or through a broker-dealer registered or exempt from registration
under this chapter effecting an unsolicited order or offer to purchase.
(7) A nonissuer transaction executed by a bona fide pledgee without the purpose of evading
this chapter.
(8) A nonissuer transaction by a federal covered investment adviser with investments under
management in excess of $100,000,000.00 acting in the exercise of discretionary authority
in a signed record for the account of others.
(9) A transaction in a security, whether or not the security or transaction is otherwise
exempt, in exchange for one or more bona fide outstanding securities, claims, or property
interests, or partly in such exchange and partly for cash, if the terms and conditions
of the issuance and exchange or the delivery and exchange and the fairness of the
terms and conditions have been approved by the Commissioner after a hearing.
(10) A transaction between the issuer or other person on whose behalf the offering is made
and an underwriter, or among underwriters.
(11) A transaction in a note, bond, debenture, or other evidence of indebtedness secured
by a mortgage or other security agreement if:
(A) the note, bond, debenture, or other evidence of indebtedness is offered and sold with
the mortgage or other security agreement as a unit;
(B) a general solicitation or general advertisement of the transaction is not made; and
(C) a commission or other remuneration is not paid or given, directly or indirectly, to
a person not registered under this chapter as a broker-dealer or as an agent.
(12) A transaction by an executor, administrator of an estate, sheriff, marshal, receiver,
trustee in bankruptcy, guardian, or conservator.
(13) A sale or offer to sell to:
(A) an institutional investor;
(B) a federal covered investment adviser; or
(C) any other person exempted by rule adopted or order issued under this chapter.
(14) A sale or an offer to sell securities by or on behalf of an issuer, if the transaction
is part of a single issue in which:
(A) not more than 25 purchasers are present in this State during any 12 consecutive months,
other than those designated in subdivision (13) of this section;
(B) a general solicitation or general advertising is not made in connection with the offer
to sell or the sale of the securities;
(C) a commission or other remuneration is not paid or given, directly or indirectly, to
a person other than a broker-dealer registered under this chapter or an agent registered
under this chapter for soliciting a prospective purchaser in this State; and
(D) the issuer reasonably believes that all the purchasers in this State, other than those
designated in subdivision (13) of this section, are purchasing for investment.
(15) A transaction under an offer to existing security holders of the issuer, including
persons that at the date of the transaction are holders of convertible securities,
options, or warrants, if a commission or other remuneration, other than a standby
commission, is not paid or given, directly or indirectly, for soliciting a security
holder in this State;
(16) An offer to sell, but not a sale, of a security not exempt from registration under
15 U.S.C. § 77a et seq. if:
(A) a registration or offering statement or similar record as required under 15 U.S.C. § 77a et seq. has been filed, but is not effective, or the offer is made in compliance
with 17 C.F.R. 230.165; and
(B) a stop order of which the offeror is aware has not been issued against the offeror
by the commissioner or the Securities and Exchange Commission, and an audit, inspection,
or proceeding that is public and that may culminate in a stop order is not known by
the offeror to be pending.
(17) An offer to sell, but not a sale, of a security exempt from registration under 15 U.S.C. § 77a et seq. if:
(A) a registration statement has been filed under this chapter, but is not effective;
(B) a solicitation of interest is provided in a record to offerees in compliance with
a rule adopted by the Commissioner under this chapter; and
(C) a stop order of which the offeror is aware has not been issued by the Commissioner
under this chapter and an audit, inspection, or proceeding that may culminate in a
stop order is not known by the offeror to be pending.
(18) A transaction involving the distribution of the securities of an issuer to the security
holders of another person in connection with a merger, consolidation, exchange of
securities, sale of assets, or other reorganization to which the issuer, or its parent
or subsidiary and the other person, or its parent or subsidiary are parties.
(19) A rescission offer, sale, or purchase under section 5510 of this chapter.
(20) An offer or sale of a security to a person not a resident of this State and not present
in this State if the offer or sale does not constitute a violation of the laws of
the state or foreign jurisdiction in which the offeree or purchaser is present and
is not part of an unlawful plan or scheme to evade this chapter.
(21) Employees’ stock purchase, savings, option, profit-sharing, pension, or similar employees’
benefit plan, including any securities, plan interests, and guarantees issued under
a compensatory benefit plan or compensation contract, contained in a record, established
by the issuer, its parents, its majority-owned subsidiaries, or the majority-owned
subsidiaries of the issuer’s parent for the participation of their employees, including
offers or sales of such securities to:
(A) directors; general partners; trustees, if the issuer is a business trust; officers;
consultants; and advisors;
(B) family members who acquire such securities from those persons through gifts or domestic
relations orders;
(C) former employees, directors, general partners, trustees, officers, consultants, and
advisors if those individuals were employed by or providing services to the issuer
when the securities were offered; and
(D) insurance agents who are exclusive insurance agents of the issuer, or the issuer’s
subsidiaries or parents, or who derive more than 50 percent of their annual income
from those organizations.
(22) A transaction involving:
(A) a stock dividend or equivalent equity distribution, whether the corporation or other
business organization distributing the dividend or equivalent equity distribution
is the issuer or not, if nothing of value is given by stockholders or other equity
holders for the dividend or equivalent equity distribution other than the surrender
of a right to a cash or property dividend if each stockholder or other equity holder
may elect to take the dividend or equivalent equity distribution in cash, property,
or stock;
(B) an act incident to a judicially approved reorganization in which a security is issued
in exchange for one or more outstanding securities, claims, or property interests,
or partly in such exchange and partly for cash; or
(C) the solicitation of tenders of securities by an offeror in a tender offer in compliance
with 17 C.F.R. § 230.162.
(23) A nonissuer transaction in an outstanding security by or through a broker-dealer registered
or exempt from registration under this chapter, if the issuer is a reporting issuer
in a foreign jurisdiction designated by this subdivision or by rule adopted or order
issued under this chapter; has been subject to continuous reporting requirements in
the foreign jurisdiction for not less than 180 days before the transaction; and the
security is listed on the foreign jurisdiction’s securities exchange that has been
designated by this subdivision or by rule adopted or order issued under this chapter,
or is a security of the same issuer that is of senior or substantially equal rank
to the listed security or is a warrant or right to purchase or subscribe to any of
the foregoing. For purposes of this subdivision, Canada, together with its provinces
and territories, is a designated foreign jurisdiction and The Toronto Stock Exchange,
Inc., is a designated securities exchange. After an administrative hearing in compliance
with 3 V.S.A. chapter 25 (Administrative Procedure Act), the Commissioner, by rule
adopted or order issued under this chapter, may revoke the designation of a securities
exchange under this subdivision, if the Commissioner finds that revocation is necessary
or appropriate in the public interest and for the protection of investors. (Added 2005, No. 11, § 1, eff. July 1, 2006.)