In order to open Rule 147 up to more issuers, the SEC has adopted changes to the rule that go into effect starting April 20, 2017. These changes will be of interest to anyone studying for the Series 7, Series 24, Series 62, Series 63, Series 65, Series 66, Series 79, or the Series 82.
Rule 147 exempts issuers from registering a securities offering with the SEC if the issuer conducts almost all its business in one state.
The changes to Rule 147 give businesses fewer requirements to meet in order to take advantage of the exemption. According to the revised rule, a business must have its “principal place of doing business” in the state and must satisfy at least one of the following four requirements. Previously, issuers were required to meet each of the first three requirements in order to be eligible for Rule 147.
- 80% of revenues come from within the state where it does business
- 80% of business assets come from within the state where it does business
- 80% of the proceeds are used in-state
- A majority of people employed by the issuer lives in the state
Additionally, the amended rule requires the issuer to have a reasonable belief that each purchaser of the security is a resident of the state, and purchasers must verify their residence in writing.
Investors may resell the securities to out-of-state residents after six months from the time of purchase. Previously, investors were required to wait at least nine months before reselling.
Additionally, the SEC created new Rule 147A, which is virtually identical to Rule 147. However, 147A allows issuers to make an offer to out-of-state residents as long as sales are only made to in-state residents. This allows a business to advertise an offer on social media or an unrestricted website.