10 Pa. Code § 504.060

Current through Register Vol. 54, No. 44, November 2, 2024

Section 504.060 - Rescission offers

(a) A person proposing to make an offer under section 504(d) or (e) of the act (70 P.S. § 1-504(d) and (e)) shall follow the procedure for the registration of securities by qualification, as described in sections 206 and 207 of the act (70 P.S. §§ 1-206 and 1-207).

(1) The forms required to be filed and time periods for Department action are those applicable to registration by qualification and a person shall note at the top of Form R that the offer is a rescission offer.

(2) The Department may, on petition by the proposed offeror, waive or modify any requirement for the registration if it finds the requirement burdensome and not necessary for the protection of investors.

(b) The Department may waive compliance with the procedures in subsection (a) for a person making a rescission offer for possible violations of the act if the securities which are the subject of the rescission offer were sold to and purchased by no more than 35 persons in this Commonwealth during 12 consecutive months and all of the following conditions are met:

(1) The person making the rescission offer files the form designated by the Department as Form RO in accordance with the General Instructions requesting waiver of the procedures in subsection (a) accompanied by disclosure materials prepared to satisfy the antifraud provisions of section 401(b) of the act (70 P.S. § 1-401(b)).

(2) The person making the rescission offer gives the documents specified in paragraph (1) to each rescission offeree.

(3) The Department does not deny the waiver request within either of the following time periods:

(i) Five business days from the date a complete filing is made with the Department if the issuer is making the rescission offer for possible violations of section 201 of the act (70 P.S. § 1-201) and the issuer or a promoter, general partner of a limited partnership, managing general partner of a limited partnership, executive officer or director of the issuer are not subject to the disqualifications in § 204.010(b) (relating to increasing the number of purchasers and offerees).

(ii) Ten business days from the date a complete filing is made with the Department for all other rescission offers made under this subparagraph.

(4) If a rescission offer is being made under section 504(e) of the act, the offeror shall comply with section 201 of the act as section 102(r)(vi) of the act (70 P.S. § 1-102(r)(vi)) states that an offer of rescission made under section 504(e) of the act involves an offer and sale.

(c) The Department may waive compliance with the procedures in subsection (a) for a person making a rescission offer for possible violations of section 301 or sections 401-409 of the act (70 P.S. §§ 1-301 and 1-401-1-409) if the following apply:

(1) The transactions subject to the rescission offer were effected in compliance with section 202 or 203 of the act (70 P.S. §§ 1-202 and 1-203) which did not require any filing to be made with the Department.

(2) The rescission offer is not being made to more than five investors in this Commonwealth, exclusive of investors which purchased under section 203(c) of the act.

(3) The person making the rescission offer, and if the person is the issuer, a general partner of a limited partnership, managing general partner of a limited partnership, promoter, executive officer or director of the issuer are not subject to the disqualifications in § 204.010(b).

(4) The rescission offer is being made under section 504(d) of the act or if a rescission offer is being made under section 504(e) of the act, the offeror complies with section 201 of the act in that section 102(r)(vi) of the act states that an offer of rescission made under section 504(e) of the act involves an offer and sale.

(5) Public media advertising or general solicitation were not used in connection with the offer or sale of the securities subject to the rescission offer.

(6) Mass mailings were not used in connection with the offer or sale of the securities subject to the rescission offer, except in offerings made in good faith reliance on Rule 505 or 506 of Regulation D.

(7) The person making the rescission offer provides to each offeree disclosure materials prepared to satisfy the antifraud provisions of section 401(b) of the act.

(8) The person making the rescission offer provides a letter offering rescission to each rescission offeree which contains only the information set forth in Item 14 of the General Instructions to Department Form RO which will be given to each rescission offeree.

(d) The Department may waive compliance with the procedures in subsection (a) for an issuer which, after offering rescission for possible violations of section 201 of the act under this subsection, will not have made rescission offers to more than five investors in this Commonwealth within the past 24 months, exclusive of investors which purchased under section 203(c) of the act and the following apply:

(1) A person did not receive commissions directly or indirectly for the sale of the securities subject to the rescission offer.

(2) The issuer or a promoter, general partner, executive officer or director of the issuer is not subject to the disqualifications in § 204.010(b).

(3) The issuer provides a letter offering rescission to each rescission offeree which contains only the information set forth in Item 14 of the General Instructions to Department Form RO which will be given to each rescission offeree.

(4) The issuer provides to each offeree disclosure materials prepared to satisfy the antifraud provisions of section 401(b) of the act.

(5) Public media advertising or general solicitation were not used in connection with the offer or sale of the securities subject to the rescission offer.

(e) If an offer is made under section 504(d) or (e) of the act and this section, an offeree's right to remedy under the act is terminated by either of the following:

(1) A nonresponse to the offer within 30 days of receipt of the offer.

(2) An affirmative rejection of the offer within 30 days of receipt of the offer.

(f) A person making a rescission offer under this section shall:

(1) Advise the Department of the results of the rescission offer within 15 calendar days after the expiration of the rescission offer period.

(2) Keep and maintain for 3 years following the expiration of each rescission offer period a complete set of books, records and accounts of the rescission offers made including:

(i) Copies of the rescission offers given or mailed to rescission offerees in this Commonwealth.

(ii) Records of acceptances and rejections and records of cash disbursements to offerees who accepted the rescission offer.

(3) Promptly furnish to the Department on request records concerning a rescission offer made in this Commonwealth under this section.

(g) The requirements of this section also apply if the following rescission offers are made:

(1) The purchaser of securities which are the subject of a rescission offer under this section no longer owns the securities before receipt of the rescission offer and, under section 504(d)(i) of the act, is being offered an amount in cash equal to damages, if any, as computed in accordance with section 501(a) of the act (70 P.S. § 1-501(a)).

(2) A person who purchased a security in violation of the act no longer owns the security and, under section 504(e)(ii) of the act, offers to pay the seller an amount in cash equal to damages, if any, computed in accordance with section 501(b) of the act.

10 Pa. Code § 504.060

The provisions of this §504.060 adopted March 29, 1974, effective 3/30/1974, 4 Pa.B. 582; amended July 6, 1990, effective 7/7/1990, 20 Pa.B. 3681; amended December 30, 1999, effective 1/1/2000, 30 Pa.B. 18; amended December 8, 2006, effective 12/9/2006, 36 Pa.B. 7456; transferred and renumbered from 64 Pa. Code § 504.060, December 14, 2012, effective 12/15/2012, 42 Pa.B. 7533; amended January 12, 2018, effective 1/13/2018, 48 Pa.B. 389.

The provisions of this §504.060 amended under sections 202(g) and (i), 203(d), (i.1), (j) and (n)-(t), 204(a), 205, 206, 207(g), (j.1) and (n), 209(b), 211(a) and (b), 301, 303, 504, 513, 603(a), 606(d) and 609 of the Pennsylvania Securities Act of 1972 (70 P.S. §§ 1-202(g) and (i), 1-203(d), (i.1), (j) and (n)-(t), 1-204(a), 1-205, 1-206, 1-207(g), (j.1) and (n), 1-209(b), 1-211(a) and (b), 1-301, 1-303, 1-504, 1-513, 1-603(a), 1-606(d) and 1-609); sections 4 and 9(b) of the Takeover Disclosure Law (70 P.S. §§ 74 and 79(b)); and section 202.C of the Department of Banking and Securities Code (71 P.S. § 733-202.C).

This section cited in 10 Pa. Code § 513.010 (relating to rescission orders).