All securities offered for sale in South Carolina must be registered, unless the particular securities are exempt.
A security can be a stock, a bond or an option on futures. A security is any investment contract, transaction or scheme in which a person invests money in a common enterprise and is led to expect profits.
To find out if a security is registered in South Carolina or to learn more about exemptions from registrations, contact the Securities Division at 803-734-9916.
How can a person determine whether they are offering securities when seeking capital for their business or organization?
Section 35-1-102(29) of the South Carolina Uniform Securities Act of 2005 (the “Act”) provides the definition of a security. The definition is very broad and includes those things commonly known as securities, such as notes, stocks, bonds, and options. Also included are much broader concepts such as “investment contracts” and investments in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor. Please review the relevant code section for more information.
Which exemptions from securities registration or federal covered securities require a notice filing and fee?
The exemptions found in Section 35-1-202 of the Act, which includes the “Limited Offering Exemption,” are self-executing and do not require a notice filing or fee. However, the issuer bears the burden of proving that they actually meet the requirements of the relied upon exemption. Additionally, many of the exemptions found in Section 35-1-201 of the Act are also self-executing. The following federal covered securities and exemptions do require a notice filing and fee:
- Regulation D, Rule 506 offerings, as required by SC Regulation 13-308.
- The Accredited Investor Exemption under SC Regulation 13-205.
- Non-Profit debt offerings under SC Regulation 13-202.
- Regulation D, Rule 504 offerings, in compliance with SC Regulation 13-204.
- The Intrastate Offering Exemption under SC Regulation 13-206.
- Mutual Funds and Unit-Investment Trusts as required by SC Regulation 13-301.
What are the requirements for requesting a “No Action” or “Interpretative Opinion” letter?
Requests for no action or an interpretative opinion can be filed with the Securities Division pursuant to Section 35-1-605(d). The request should include an extensive description of the proposed activity along with all relevant facts and related documents. It is recommended that requests be prepared by securities counsel and that the request include an analysis of regulatory treatment and arguments for no action or interpretation by counsel for consideration by the Securities Division. The request must be accompanied by a fee of $150.00.
If officers of a company (the issuer) will be actively involved in soliciting investors and making offers and sales of securities, do they need to be registered with the Securities Division as agents?
If agents of an issuer do not receive any direct or indirect compensation or remuneration in connection with offers and sales of the issuer’s securities, then those individuals would be exempt from registration as agents under provisions of Section 35-1-402(b). However, if any of their compensation or salary is based on securities transactions, in addition to performing various other duties for an issuer, then registration as an agent would be necessary.
How long are securities registrations and notice filings effective?
Securities registrations and notice filings are effective for 12 months. To continue offering beyond the initial 12 month period, the issuer must file to renew the offering with the Securities Division.
What are the filing requirements for Regulation D Rule 504 or Rule 506 offerings?
Regulation D Rule 506 offerings must be submitted through the Electronic Filing Depository (“EFD”), a web based system that allows you to submit notice filings and pay the associated filing fee electronically. Information regarding the EFD can be found at https://www.efdnasaa.org/. For more information on filing requirements for Regulation D offerings, please click here.
Are amendments to Form D required to be filed for a Rule 506 offering?
Although the Act does not specify requirements for filing an amended Form D, the instructions on page five of Form D should be followed for a few types of corrections or changes that would be necessary by filing an amended Form D with the Securities Division. Generally, amendments to Form D are only necessary for correcting identifying information for the issuer or descriptions of the offering. The instructions on page five of Form D also indicate when an amendment is not required for various changes or updates of information on the original Form D. That guidance should also be followed for filings with the Securities Division. Annual filings are required in South Carolina for continuous offerings.
What are the requirements for a Regulation A Tier 2 offering in South Carolina?
An issuer conducting a Regulation A Tier 2 offering shall comply with Regulation 13-309. An issuer must submit the following at least 21 calendar days prior to the initial sale in this state:
- A completed Uniform Notice of Regulation A – Tier 2 Offering filing form, or copies of all documents filed with the SEC;
- A consent to service of process on Form U-2 if not filing the Uniform Notice; and
- A non-refundable fee of $500.
What are the requirements to utilize the Intrastate Offering Exemption (State Crowdfunding)?
The Intrastate Offering Exemption is an exemption from state registration requirements for issuers based in South Carolina. Similar to donation-based crowdfunding, where a person or business collects donations to fund projects, equity crowdfunding is a way for businesses to raise capital by accepting small investments from a large number of people. In other words, the “crowd” helps to fund the business.
Any single purchaser may invest a maximum of $5,000 in a single offering under this exemption, unless the purchaser is an Accredited Investor. A business may raise up to $1 million annually under this exemption. An issuer must submit the Intrastate Notice Filing Form and a fee of $300. For more information, please see the following: