Rules

Question 1

Rule 147

Answer 1

Under Rule 147 and Rule 147A, if a company is conducting an offering and only selling its securities to its state residents, the offering is exempt from registration. A condition of this exemption is that the issuer must meet at least one of the four doing business requirements that are listed below:

1. At least 80% of its consolidated gross revenues are derived from the operation of a business or of real property that is located in the state or territory or from the rendering of services within the state or territory;
2. At least 80% of its consolidated assets are located within the state or territory at the end of its most recent semiannual fiscal period prior to the first offer of securities under the exemption
3. At least 80% of the net proceeds from the offering are intended to be used by the issuer, and are in fact used in connection with the operation of a business or of real property, the purchase of real property located in, or the rendering of services within the state or territory;
4. A majority of the issuer’s employees are based in the state or territory (this fourth requirement was not included in the original Rule 147) The choice “At least 80% of the issuer’s employees are based in one state” is not a requirement since the threshold is for a majority of the issuer’s employees to be based in the state, not at least 80% of them.

Question 2

Acceptable Uses of Soft Dollar Arrangements

Answer 2

• Traditional research reports and related publications
• Discussions with research analysts
• Software for analyzing portfolios
• Certain types of trading software
• Market and economic data services
• Coverage of attendance fees for a conference/seminar where company executives discuss their company’s performance

Question 3

Unacceptable Uses of Soft Dollar Arrangements

Answer 3

• Payments for advertising and marketing
• Travel expense reimbursement (including meals and entertainment)
• Overhead and administrative expenses
• Employee salaries
• Accounting and professional licensing fees
• Computer terminals
• Correction of trading errors

Question 4

SEC Rule 482

Answer 4

An application to invest may not be included in an advertisement