Florida FAQ on website 10-30-14
What are Florida's Regulation D and Rule 506 Offering requirements?
…
Rule 506 Filings (Offerings):
Florida does not require any Notice filing fee, or consent to service for Rule
506 Filings (Offerings), Chapter 517.071(1), Florida Statutes.
All sales of securities in Florida must be made by a properly registered Dealer
(Chapter 517.12(1), Florida Statutes) or by someone utilizing an exemption
provided by Chapter 517.12(3), Florida Statutes. This includes officers and
employees of Rule 506 issuers.
There are two exemptions available under Chapter 517.12(3), Florida Statutes, for
Issuers of Rule 506 Offerings:
1. Chapter 517.061(19) and 517.021(6)(b)6, Florida Statutes, and Rule 69W500.016, Florida Administrative Code, requiring the offer and sale to be made by
a bona fide employee of the issuer.
2. Chapter 517.061(11) and 517.021(6)(b)6, Florida Statutes, and Rule 69W500.001-007, Florida Administrative Code, requiring the sale to be made in
reliance upon a limited offering exemption.
. What are Florida's Regulation D and Rule 506 Offering requirements?
Regulation D and Rule 504 Public Offerings:
Sales must be made pursuant to the registration by Qualification (Intra-state or Merit Review)
requirements of Chapter 517.081, Florida Statutes, and Rule 69W-700.001, Florida
Administrative Code, and the dealer registration requirements of Chapter 517.12, Florida
Statutes.
Rule 506 Filings (Offerings):
Florida does not require any Notice filing fee, or consent to service for Rule 506 Filings
(Offerings), Chapter 517.071(1), Florida Statutes.
All sales of securities in Florida must be made by a properly registered Dealer (Chapter
517.12(1), Florida Statutes) or by someone utilizing an exemption provided by Chapter
517.12(3), Florida Statutes. This includes officers and employees of Rule 506 issuers.
There are two exemptions available under Chapter 517.12(3), Florida Statutes, for Issuers of
Rule 506 Offerings:
1. Chapter 517.061(19) and 517.021(6)(b)6, Florida Statutes, and Rule 69W-500.016, Florida
Administrative Code, requiring the offer and sale to be made by a bona fide employee of the
issuer.
2. Chapter 517.061(11) and 517.021(6)(b)6, Florida Statutes, and Rule 69W-500.001-007,
Florida Administrative Code, requiring the sale to be made in reliance upon a limited offering
exemption.
Older Info
Florida Securities Act
In Florida, it involves the Florida Securities Act as administered by the Florida Department of Banking and
Finance, Division of Securities and Investor Protection (the Florida Division of Securities). 2
Exemptions from registration …..“exempt transactions,” based on the nature of the transaction in which
the security is offered.7
Fla. Stat. §§517.051 and 517.061. Both types of exemptions in Florida are self-executing, meaning that
there is no filing requirement with the Florida Division of Securities in order to claim the exemption. In any
proceeding to determine the validity of the exemption, the burden of proof rests on the person claiming
the exemption. See also Weinberg v. Pennington, 462 So. 2d 862, 863 (Fla. 3d D.C.A. 1985).
7
…..vast majority of offering by for-profit issuers, most issuers must look to the exempt transactions in
order to avoid registering the securities to be offered for sale. Exempt transactions take many forms. 9
See Fla. Stat. §517.061 which lists 19 different types of transactions that are exempted from Florida’s
registration requirements.
9
Some of the more commonly relied upon exempt transactions are for isolated sales by an individual,
stock dividends or other distributions to security holders, sales to a sophisticated institution such as a
bank, savings institution, insurance company, dealer, investment company, or qualified institutional buyer,
sales by a Florida registered dealer, and sales under a stock option or other employee benefit plan. 10
10
See Fla. Stat. §517.061.
Private Placement Exemption in Florida
For corporations and other issuers of securities, the exemption11 for the private placement of securities in
Florida (private placement exemption) is likely the most relied upon of the exempt transactions.
11
Fla. Stat. §517.061(11).
The private placement exemption allows an issuer to sell its securities to no more than 35 purchasers in
any 12-month period without the need to register the securities with the Florida Division of Securities. The
35 purchaser limit does not include accredited investors,12 purchasers who invest more than $100,000, or
certain relatives or spouses of purchasers.13 It also does not include any purchaser with whom the
transaction was consummated outside the State of Florida.14 For an offering to qualify for the private
placement exemption, there cannot be any public advertising or general solicitation of the offering in
Florida.15
15 Fla. Stat. §517.061(11)(a)(2). See Fla. Admin. Code Ann. r. 3E-500.007.
The issuer must provide each purchaser in the private placement “with full and fair disclosure of all
material information.”16
The issuer typically meets this disclosure requirement in one of two ways: Access to the books and
records of the issuer as well as the opportunity to ask questions of the executive officers of the issuer. 17
…or provide the purchaser with a disclosure document, or private placement memorandum (PPM).
Where feasible, the PPM should contain all of the information prescribed by the Florida Division of
Securities in Fla. Admin. Code rule 3E-500.005. This rule, however, is simply a safe harbor; failure to
include the information listed in the rule does not necessarily mean that the issuer has failed to give the
purchaser full and fair disclosure of all material information.
Unlike most other states, the private placement exemption in Florida gives a purchaser the explicit right to
rescind the sale of a security when sales are made to five or more purchasers. 18 A purchaser’s right of
rescission expires on the later of three days after the first tender of consideration is made by such
purchaser to the issuer, or three days after the availability of the rescission privilege is communicated to
the purchaser.19 In order to toll the right of rescission, the issuer should advise purchasers of the
availability of the right of rescission in the PPM or subscription agreement. 20 Care should be taken that the
notice closely follows the statutory language. In Barnebey v. E.F. Hutton & Co., 715 F. Supp. 1512, 1531
(M.D. Fla. 1989), a notice stating that a purchaser could void his subscription within three days of the
submission of a subscription agreement was held to be insufficient because it failed to follow the specific
statutory language noted above.