Each of the rules in this Section (15 through 15.9) is a legislative rule promulgated pursuant to the provisions of section four hundred twelve, article four, chapter thirty-two of the Code. Rules 15.1, 15.3 and 15.7 relate to section four hundred twelve, article four, chapter thirty-two of the Code. Rules 15.2 and 15.6 relate to section four hundred two, article four, chapter thirty-two of the Code. Rule 15.4 relates to section four hundred twelve, article four, chapter thirty-two of the Code, and sections two hundred two, two hundred three and two hundred four, article two, chapter thirty-two of the Code. Rule 15.5 relates to section four hundred three, article four, chapter thirty-two of the Code. Rule 15.8 relates to section four hundred thirteen, article four, chapter thirty-two of the Code. Rule 15.9 relates to section four hundred fourteen, article four, chapter thirty-two of the Code.
15.1. Definitions. -- When used in the Code and these rules, unless the context clearly otherwise requires: (a) "Certified," when used in connection with financial statements, means certified by an independent public accountant in accordance with generally accepted accounting principles.(b) "Code" means the Code of West Virginia, 1931, as amended.(c) "Commission" means all cash, securities, contracts or anything else of value paid, to be set aside, disposed of, or understandings with or for the benefit of any other persons in which any underwriter is interested, made in connection with the sale of such security.(d) "Commissioner" means the Auditor of the State of West Virginia, who is by virtue of section four hundred one, article four, chapter thirty-two of the Code, the Commissioner of Securities.(e) "Control, Controlling, Controlled By and Under Common Control With" means the possession, direct or indirect, or the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.(f) "Corporation" includes any entity having transferable shares, and includes, without implied limitation, a voluntary association, business trust and limited partnership.(g) "Federal Registration Statement" means a registration statement filed under the Securities Act of 1933.(h) "Isolated," as used in subdivision (1), subsection (b), section four hundred one, article four, chapter thirty-two of the Code, means not in the course of repeated and successive transactions of like character. Two (2) consecutive sales of securities made within such a period of time and in such circumstances as to indicate that they involve the same plan of financing are not isolated.(i) "NASD" means the National Association of Securities Dealers, Inc.(j) "Officer" means (1) A president, vice president, treasurer, secretary and any other individual who performs for a broker-dealer or an issuer, whether incorporated or unincorporated, functions corresponding to those ordinarily performed by the foregoing; (2) a member of an executive or similar committee.(k) "Principal" means general partners, in the case of a partnership, and officer in the case of a corporation.(l) "Promoter" means:(a) Any person who, acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of any issuer.(b) Any person who, in conjunction with the founding and organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services or property, or both services and property, ten percent (10%) or more of any class of securities of the issuer or ten percent (10%) or more of the proceeds from the sale of any class of securities. However, a person who received such securities or proceeds, either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter if such person can demonstrate, by competent evidence, that he did not otherwise take part in founding and organizing the enterprise.(m) "Purchase" of a security includes every purchase, acquisition or exchange and every contract of purchase of, or contract to purchase, a security or interest in a security for value.(n) "Rule" or "Rules" refers to these rules.(o) "SEC" means the Securities and Exchange Commission and/or its staff, as appropriate.(p) "Stockholders" and "Shareholders" mean holders of shares, transferable certificates of participation, or other interests in any corporation.(q) "State" means the State of West Virginia.(r) "Transact Business" includes the solicitation of a person to become a customer, client or subscriber.15.2. Recognized securities manuals. -- The Commissioner recognizes the following securities manuals under paragraph (A), subdivision (2), subsection (b), section four hundred two, article four, chapter thirty-two of the Code: Moody's industrial manual
Moody's transportation manual
Moody's public utility manual
Moody's bank and finance manual
Moody's municipal and government manual
Standard and Poor's Corporation records
Best's life insurance reports
Best's insurance reports (fire and casualty).
15.3. Rules, forms, orders and hearings.(a)(1) The forms prescribed for use under these rules and the Code, to which reference is directed herein for all pertinent purposes, are hereby incorporated by reference and made a part hereof. (A) Uniform Application to Register Securities (Form U-1, used for registration by coordination and registration by qualification);(B) Uniform Consent to Service of Process (Form U-2, used with all applications for registration and every issuer which proposes to offer a security in this State through any person acting on an agency basis in the common-law sense);(C) Uniform Form of Corporate Resolution (Form U-2A, used with Form U-2);(D) Application for registration as a broker-dealer (SEC Form BD, used to register and amend registration as a broker-dealer);(E) Uniform Application for Securities and Commodities Industry Representative and/or Agent (Form U-4, used to register or transfer agents of broker-dealers and issuer-agents);(F) Uniform Termination Notice for Securities Industry Representative and/or Agent (Form U-5, used to terminate employment of agents or issuer-agents);(G) Renewal Form (Form 16, revised 8/77, used to renew broker-dealer's registration);(H) Uniform Application for Registration as an Investment Adviser or to amend such an application under the Investment Advisers Act of 1940 (Form ADV, used to register as an investment adviser);(I) West Virginia Form ADV (W.Va. Form ADV 3-74, used to renew registration as an investment adviser).(2) SEC Form BD may be obtained from the SEC; Forms U-4 and U-5, from any National Securities Exchange or from the NASD. The Commissioner reserves the right to and may issue from time to time revisions or amendments of the forms.(3) Only an executed copy of any form should be filed.(4) All forms and documents shall be printed, lithographed, mimeographed, typewritten or prepared by a photo copying process which, in the opinion of the Commissioner, produces copies suitable for a permanent record. All forms and documents shall be clear, easily readable and suitable for repeated photocopying. Exhibits may be attached to additional sheets or filed separately. A document filed as an exhibit to a prior application may be incorporated by reference into a subsequent application.(5) All applications and other documents received and filed with the Commissioner shall become part of the permanent records of his office and will not be returned to the applicant or correspondent.(6) The Commissioner may by order exempt a person, security or transaction from a specific provision of these rules. The rules supercede any administrative orders, rules and regulations pursuant to section twenty-one, article one, chapter thirty-two, Code of West Virginia, 1931, as amended, as first adopted on November 16, 1964, and as most recently amended on June 7, 1974, with the express exception of S.R. Rule 9, Application to Register Securities Offered on a Continuing Basis, promulgated on July 18, 1979, and effective on August 17, 1979, which is specifically not superceded by these rules.(7) Any rule requiring compliance with a federal statute, rule or interpretative opinion of the SEC or other administrative agency, incorporates said statute, rule or interpretative opinion, as amended from time to time, by reference and makes it a part of these rules as fully as if it were set forth herein.15.4. Financial statements. (1) All financial statements required by chapter thirty-two of the Code, or these rules, shall be: (a) Prepared in accordance with generally accepted accounting principles; and(b) Examined and reported upon by an independent certified public accountant: Provided, That this requirement may be waived by the Commissioner, in a manner such as that provided for in Section 14.3(1)(b) of these rules, and does not apply to interim financial statements or financial statements of independent advisers that are prepared by an independent accountant, unless otherwise required by the Commissioner in particular cases. The accountant's report shall meet the requirements of Regulation S-X of the SEC, and shall accompany the financial statements included in the prospectus, private offering memorandum, or like document.(2) Financial statements meeting the requirements of Regulation S-X are deemed to satisfy the requirements of Subsection (1).(3) The Commissioner may permit the omission of one or more of the statements required under this section or the filing in substitution therefor of appropriate statements of comparable character, in a manner such as that provided for in Section 14.3(1)(b). The Commissioner may also require the filing of other statements when necessary or appropriate for an adequate presentation of the financial condition of any issuer or person whose financial statements are required, or whose statements are otherwise necessary for the protection of investors.15.5. Filing of sales and advertising literature.(a) Pursuant to section four hundred three, article four, chapter thirty-two of the Code, the Commissioner requires the issuer of any security to file sales literature used by or on behalf of the issuer in connection with the sale of such a security, if such sales literature is intended for distribution to prospective investors, including clients or prospective clients of an investment adviser, before it is used, disseminated or distributed unless the security or transactions are exempted by section four hundred two, article four, chapter thirty-two of the Code.(b) Pursuant to section four hundred three, article four, chapter thirty-two of the Code, the Commissioner requires any person other than the issuer to file sales literature used in connection with the sale of a security, under the same circumstances as in Subsection (a) above.(c) The term "Sales Literature" includes, but is not limited to, brochures, circulars, advertisements, notices of sale, bid forms, official statements and all other written disclosure statements used in connection with the sale of a security. Sales literature does not include working papers, drafts or internal memoranda.(d) One (1) copy of each item of sales literature shall be filed with the Commissioner simultaneously with each item's first use.15.6. Exemptions. (a)(1) For the purposes of subdivision (1), subsection (a), section four hundred two, article four, chapter thirty-two of the Code only, the term "Other Intrumentality" shall include any political subdivision of any state other than this State.(2) Through (7) (Reserved)(8) For the purposes of subdivision (8), subsection (a), section four hundred two, article four, chapter thirty-two of the Code only, the term "Any Regional Stock Exchange" shall not include the Boston Stock Exchange.(10) To coordinate the interpretation and administration of the Code with related federal regulations, "Commercial Paper," as used in subdivision (10), subsection (a), section four hundred two, article four, chapter thirty-two of the Code, includes prime quality negotiable commercial paper of a type not ordinarily purchased by the general public, that is, paper used to facilitate well recognized types of current operational business requirements and a type eligible for discounting by Federal Reserve Banks, as set forth in SEC Release No. 33-4412.(11)(A) No notice pursuant to subdivision (11), subsection (a), section four hundred two, article four, chapter thirty-two of the Code, need be given for the following: (i) An employees' benefit plan qualified under Section 401 of the Internal Revenue Code of 1954, as amended from time to time, or which does not permit voluntary contributions by participating employees;(ii) Blue Cross group life, wage continuation, medical reimbursement or any other plan whose primary purpose is to insure employees against a specified risk or loss; or(iii) An employees' benefit plan which requires the employees to contribute in order to participate therein.(B) The notice requirement the aforecited Code section requires shall include: (i) A description or summary of the plan;(ii) A copy of the plan and any literature describing its details and method of distribution;(iii) A description of the method by which full disclosure of material facts will be made to each offeree;(iv) An undertaking that the offeror will notify the Commissioner of any material change in the offering or method or cost of distribution thereof, within thirty (30) days of such change, including a copy of the plan, marked to indicate the change.(b) (1) Through (8) (Reserved) (9) Limited offering exemption. Preliminary notes.
1. Nothing in this exemption is intended to relieve, or should be construed as in any way relieving, issuers or persons acting on their behalf from providing disclosure to prospective investors adequate to satisfy the anti-fraud provisions of the Code.2. In view of the objective of this rule and the purpose and policies underlying the Act, this exemption is not available to any issuer with respect to any transaction which, although in technical compliance with this rule, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this rule.3. Nothing in this rule is intended to exempt registered broker-dealers or agents from the due diligence standards otherwise applicable to such registered persons.4. Nothing in this rule is intended to exempt any person from the broker-dealer or agent registration requirements of the Code. Rule
Pursuant to the authority delegated to the Commissioner by subdivision (9), subsection (b), section four hundred two, article four, chapter thirty-two, and section four hundred twelve, article four, chapter thirty-two of the Code, the following transaction is determined to be exempt from the registration provisions of the Code:
A. Any offer or sale of securities offered or sold in compliance with Securities Act of 1933, Regulation D ("Reg. D"), Rules 230.501-230.503 and 230.505 or 203.506 as made effective in Release No. 33-6389 and which satisfies the following further conditions or limitations: 1. No commission, fee or other remuneration shall be paid or given, directly or indirectly, to any person for soliciting any prospective purchaser in this State unless such person is appropriately registered in this State pursuant to the applicable provisions of the Code and these rules.2. No exemption under this rule shall be available for the securities of any issuer if any of the persons described in Paragraphs (c) through (f) of Rule 230.252 of Regulation A, as promulgated under the Securities Act of 1933: a. Has filed a registration statement which is the subject of a currently effective registration Stop Order entered pursuant to any state's securities law within five (5) years prior to the commencement of the offering.b. Has been convicted within five (5) years prior to the commencement of the offering of any felony or misdemeanor in connection with the offer, purchase or sale of any security or any felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.c. Is currently subject to any state's administrative enforcement order or judgment entered by that state's securities administrator within five (5) years prior to the commencement of the offering or is subject to any state's administrative order or judgment in which fraud or deceit, including, but not limited to, making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within five (5) years prior to the commencement of the offering.d. Is subject to any state's administrative order or judgment which prohibits, denies or revokes the use of any exemption from registration in connection with the offer, purchase or sale of securities.e. Is subject to any order, judgment or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five (5) years prior to the commencement of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with any state.f. The prohibitions of Paragraphs a, c and e above shall not apply if the party is subject to the disqualifying order, judgment or decree is duly licensed or registered to conduct securities related business in the state in which the administrative order, judgment or decree was entered against such party.g. Any disqualification caused by this subsection is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification determined upon a showing of good cause that is not necessary under the circumstances that the exemption under this rule be denied.3. The issuer shall file with the Commissioner:a. A copy of each notice on Form D as prescribed under the Securities Act of 1933 in 17 CFR 239 - 500 of each notice on Form D at the same time, and in the same manner as prescribed by Rule 230.503(a) or (b) as applicable, except that the filing of Form D required by Rule 230.503(a)(1) shall be filed no later than fifteen (15) days after the first sale of securities in reliance upon this exemption; the filing of the Form D required by Rule 230.503(a)(3) of Reg. D shall be within thirty (30) days after the termination of the offering; each notice required by this paragraph shall be manually signed by a person duly authorized by the issuer;b. An undertaking by the issuer to promptly provide to the Commissioner, upon written request, the information furnished to the offerees by the issuer, which undertaking shall be in written form;c. An executed consent to service of process on Form U-2 unless a currently effective consent to service of process is on file with the Commissioner; the consent to service of process and the undertaking required by Paragraph (b), above, shall be filed with the notice of the first sale, the time for filing of which is covered by Paragraph (a), above.d. Any person who utilizes any limited offering exemption which the Commissioner established pursuant to the rule-making authority provided by subdivision (9), subsection (b), section four hundred two, article four, chapter thirty-two of the West Virginia Code, 1931, as amended, shall be assessed a nonrefundable filing fee in the amount of one hundred twenty-five dollars ($125). Said fee shall accompany the notice of first sale which is required to be filed with the Commissioner no later than fifteen (15) days after the first sale in reliance upon said exemption. Failure to pay such fee as required by this subsection shall constitute grounds for the Commissioner to deny or revoke said exemption pursuant to subsection (c), section four hundred two, article four, chapter thirty-two of the West Virginia Code, 1931, as amended. Fees collected under this subsection shall be deposited in the state treasury and credited to the general revenue fund.4. In all sales to nonaccredited investors (as the term is defined in Regulation D under the Securities Act of 1933), the issuer and any person acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the investment is suitable for the purchaser upon the basis of the facts, if any, disclosed by the purchaser as to his/her other security holdings and financial situation and needs.5. Offers and sales of securities which are exempted by this rule may not be combined with offers and sales of securities exempted by any other rule or section of the Code; however, nothing in this limitation shall act as an election. The issuer may claim the availability of any other applicable exemptions should, for any reason, the persons fail to comply with the conditions of this exemption.6. In any proceeding involving this rule, the burden of proving the exemption or any exception from a definition or conditions is upon the person claiming it.B. The exemption authorized by this rule shall be known and may be cited as the "Uniform Limited Offering Exemption." (11) The notices subdivision (11), subsection (a), and subdivision (11), subsection (b), article four, chapter thirty-two of the Code, require shall be filed by furnishing the Commissioner the following: (B) The issuer's name and address, and the type and amount of securities offered;(C) The number of persons in this State to whom the offeror expects to direct the offer;(E) The person or persons to whom the commission or other remuneration will be given;(F) Information from which the Commissioner can determine whether the commission or other remuneration to be paid is consistent with the policy set forth in Section 14 of these rules;(G) A copy of any prospectus, pamphlet, circular or other sales literature or advertising communication, regarding the offer and intended for distribution to persons in this State;(H) Additional information or documents which the Commissioner may request within five (5) full business days after the notice is filed.15.7. Cease and desist orders. -- The Commissioner may afford persons an opportunity to enter into voluntary agreements to cease and desist from certain acts and practices when it appears that such procedure fully safeguards the public interest. All such agreements and orders shall be matters of public record.15.8. Files and records. (1) Except as otherwise provided by law or as specified in Subsection (2) below, any record or document in the Commissioner's possession or control of which the Commissioner is the legal custodian, may be inspected or copied by any person during regular business hours.(2) The following records may be excluded from disclosure under this section if the Commissioner finds the public interest in nondisclosure outweighs the benefits of open access. (a) Personnel files of office employees, former employees and job applicants.(b) Communications with legal counsel.(c) Records obtained under a pledge or reasonable expectation of confidentiality.(d) Memoranda and work papers of employees, the Commissioner or the Deputy Commissioner prepared with the reasonable expectation of confidentiality.(e) Information and documents the Commissioner obtains pursuant to an investigation under section four hundred seven, article four, chapter thirty-two of the Code.(4) A request for records shall be addressed to the Commissioner, who shall produce the records or a refusal with the specific reasons therefor within ten (10) business days after the request is received.15.9. Irrevocable consent to service of process. -- An applicant for registration under the Code and an issuer which proposes to offer a security in this State through a broker-dealer as his agent shall file, or have on file, with the Commissioner an irrevocable Consent to Service of Process pursuant to subsection (g), section four hundred fourteen, article four, chapter thirty-two of the Code in the form prescribed in Section 15.3 of these rules.W. Va. Code R. § 111-1-15