A.R.S. tit. 44 ch. 12 — Arizona Revised Statutes Title 44 Chapter 12 — Sales Of Securities

44-1801. Definitions In this chapter and chapter 13 of this title, unless the context otherwise requires: 1. "Blind pool offering" means an offering in which either: (a) The offering materials do not describe specific operational plans. (b) Eighty percent or more of the net offering proceeds are not specifically allocated for the purchase, construction or development of identified property or products, for the payment of indebtedness or overhead expenses, or for other activities set forth in the issuer's business plan. 2. "Commission" means the Arizona corporation commission. 3. "Commodity" means any agricultural, grain or livestock product or by-product, any metal or mineral including a precious metal, any gem or gemstone whether characterized as precious, semiprecious or otherwise, any fuel whether liquid, gaseous or otherwise, any foreign currency and all other goods, articles, products or items of any kind. Commodity does not include a numismatic coin with a fair market value at least fifteen percent higher than the value of the metal it contains, real property or any timber, agricultural or livestock product grown or raised on real property and offered or sold by the owner or lessee of such real property, or any work of art offered or sold by art dealers, at public auction or offered or sold through a private sale by the owner. 4. "Commodity exchange act" means the act of Congress known as the commodity exchange act (7 United States Code, chapter 1). 5. "Commodity futures trading commission" means the independent regulatory agency established by Congress to administer the commodity exchange act. 6. "Commodity investment contract" means any account, agreement or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract or otherwise. Any commodity investment contract offered or sold, in the absence of evidence to the contrary, is presumed to be offered or sold for speculation or investment purposes. A commodity investment contract does not include any contract or agreement that requires, and under which the purchaser receives, within twenty-eight calendar days after the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement. 7. "Commodity option" means any account, agreement or contract giving a party to the account, agreement or contract the right but not the obligation to purchase or sell one or more commodities or one or more commodity investment contracts, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty or otherwise. 8. "CRD system" means the central registration depository system of the national association of securities dealers, incorporated. 9. "Crowdfunding" means the practice of funding a project or venture by raising many small amounts of money from a large number of people. 10. "Dealer": (a) Means a person who directly or indirectly engages full-time or part-time in this state as agent, broker or principal in the business of offering, buying, selling or otherwise dealing or trading in securities issued by another person, and who is not a salesman for a registered dealer or is not a bank or savings institution the business of which is supervised and regulated by an agency of this state or the United States. (b) Means an issuer, other than an investment company, who, directly or through an officer, director, employee or agent who is not registered as a dealer under this chapter, engages in selling securities issued by such issuer. (c) Does not include a person who sells or offers to sell securities exclusively to dealers registered under this chapter, and who has no place of business within this state. (d) Does not include a person who buys or sells securities for his own account, either individually or in a fiduciary capacity, but not as part of a regular business. 11. "Director" means the director of the securities division of the commission. 12. "Division" means the securities division of the commission. 13. "Federal covered security" means any security described as a covered security in section 18 of the securities act of 1933. 14. "Issuer" means any person who issues or proposes to issue any security, except: (a) With respect to certificates of deposit, voting-trust certificates, collateral-trust certificates, certificates of interest or shares in an unincorporated investment trust, whether or not of the fixed, restricted management or unit type, issuer means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued. (b) With respect to equipment-trust certificates or like securities, issuer means the person by whom the equipment or property is or is to be used. (c) With respect to fractional interests in any oil, gas or other mineral lease, permit, claim or right, issuer means the owner thereof or of any interest therein, whether whole or fractional, fractional interests in which are created for the purpose of a public offering. 15. "Numismatic coin": (a) Means a coin that has all of the following characteristics: (i) The coin is of interest primarily to coin collectors rather than to speculators or investors in precious metals. (ii) The fair market value of the coin is determined primarily by its design, subject matter, limited mintage, rarity and relative condition of preservation from wear rather than by its intrinsic precious metal or bullion content. (iii) The fair market value of the coin is directly related to an individual inspection and grading of its relative condition according to an established system of numismatic standards promulgated independently of the offerer of the coin. (iv) With the exception of proof, mint and commemorative coins, the coin is minted or manufactured under authority of the issuing government for the purpose of being used as legal tender. (b) Does not include a coin that has at least one of the following characteristics: (i) The coin is minted, manufactured or advertised for sale primarily to persons who seek to invest or speculate in precious metals rather than to coin collectors or for use in commerce as legal tender. (ii) The coin is advertised or sold with the expectation that it will be purchased or traded for its intrinsic precious metal or bullion content. (iii) The price of the coin is directly related to the spot market price of its intrinsic precious metal or bullion content. (iv) The coin is generally not used as legal tender. (v) The quantity of mintage or manufacture of the coin is based on market demand. (vi) The coin is not sought for its design, subject matter, limited mintage, rarity or relative condition of preservation from wear, but instead is sought for the value of its intrinsic precious metal or bullion content. 16. "Offer to sell" or "offer for sale" means an attempt or offer to dispose of, or solicitation of an order or offer to buy, a security or interest in a security for value or any sale or offer for sale of a warrant or right to subscribe to another security of the same issuer or of another issuer. Any sale or offer for sale of a security that gives the holder thereof a present or future right or privilege to convert such security into another security of the same issuer or of another issuer shall be deemed an offer to sell the security to be acquired pursuant to such right or privilege, but the existence thereof shall not be construed as affecting the registration or exemption under this chapter of the security to which it attaches. 17. "Person" means an individual, corporation, partnership, association, joint stock company or trust, limited liability company, government or governmental subdivision or agency or any other unincorporated organization. 18. "Precious metal" means the following in either coin, bullion or other form: (a) Silver. (b) Gold. (c) Platinum. (d) Palladium. (e) Copper. 19. "Real property investment contract" means a contract for the sale or purchase of a promissory note secured directly or collaterally by a mortgage, deed of trust or other lien on real property, including a contract as defined in section 33-741, or any agreement, arrangement or understanding in connection with such note, lien or contract in which a person agrees, implies to do or does any of the following, whether or not the investor is aware that any of the following actions are contemplated or taken: (a) Guarantee the note, lien or contract against loss at any time. (b) Promise to provide a market for the sale of the note, lien or contract, in connection with a sale or purchase. (c) Offer to accept or accept funds for investment in notes or contracts secured directly or indirectly by a lien on real property, where the real property is unspecified at the time of investment. (d) Pay any interest or premium for a period before actual purchase and delivery of the note or contract. (e) Pay any money to an investor if the note or contract is in arrears. (f) Guarantee that principal or interest will be paid in conformity with the terms of the note or contract. (g) Accept, from time to time, partial payment toward the purchase of the note or contract. (h) Promise to repurchase the note or contract, in connection with sale or purchase. 20. "Registered dealer" means a dealer registered under this chapter. 21. "Registered salesman" means a salesman registered under this chapter. 22. "Sale" or "sell" means a sale or any other disposition of a security or interest in a security for value and includes a contract to make such sale or disposition. A security given or delivered with, or as a bonus on account of, a purchase of securities or other thing shall be conclusively presumed to constitute a part of the subject of the purchase and to have been sold for value. 23. "Salesman" means an individual, other than a dealer, employed, appointed or authorized by a dealer to sell securities in this state. The partners or executive officers of a registered dealer shall not be deemed salesmen within the meaning of this definition. 24. "SEC" means the United States securities and exchange commission. 25. "Securities act of 1933" means the act of Congress known as the securities act of 1933. 26. "Securities exchange act of 1934" means the act of Congress known as the securities exchange act of 1934. 27. "Security": (a) Means any note, stock, treasury stock, bond, commodity investment contract, commodity option, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, viatical or life settlement investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, real property investment contract or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. (b) Notwithstanding subdivision (a) of this paragraph, with respect to a virtual coin shall not be construed more broadly than the term security is construed in the securities act of 1933, the securities exchange act of 1934 or any federal regulations relating to either act. 28. "SRO" means any national securities or commodities exchange, registered association or registered clearing agency. 29. "Underwriter" means a person who has acquired from an issuer with a view to, or sells for an issuer in connection with, the distribution of any securities or participates or has a direct or indirect participation in such undertaking, or participates or has a participation in the direct or indirect underwriting of such undertaking. Underwriter does not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributor's or seller's commission. 30. "Viatical or life settlement investment contract" means an agreement for consideration for the purchase, assignment, transfer, sale, devise or bequest of any portion of the death benefit under or ownership of either an insurance policy or certificate of insurance. A viatical or life settlement investment contract does not include: (a) Any agreement for the original issuance of an insurance policy or certificate of insurance. (b) An assignment, transfer, sale, devise or bequest of a death benefit under or ownership of either an insurance policy or certificate of insurance by the original owner or a person who has an insurable interest in the insured pursuant to section 20-1104 to any of the following: (i) The insured. (ii) A person who has an insurable interest in the insured pursuant to section 20-1104. (iii) A dealer. (iv) A person who is engaged in the business of purchasing the death benefit under or ownership of either insurance policies or certificates of insurance. (c) An assignment of an insurance policy or certificate of insurance to any bank, savings bank, savings and loan association, credit union or other licensed lending institution as collateral for a loan. (d) The exercise of accelerated benefits pursuant to the life insurance policy. 31. "Virtual coin" means a digital representation of value that can be digitally traded and that functions as a medium of exchange, unit of account and store of value. 32. "Virtual coin offering": (a) Means an offer for sale of a virtual coin that either: (i) Meets the definition of a security prescribed in this section. (ii) The issuer elects to treat as a security by complying with section 44-1844, subsection A, paragraph 22. (b) Does not include an offer for sale of a virtual coin that both: (i) Has not been marketed by the issuer as an investment. (ii) Grants to the purchaser, within ninety days after the purchaser's receipt of the virtual coin, the right to use, contribute to the development of or license the use of a platform using blockchain technology as defined in section 44-7061, including a license to use a product or service on the platform or a discount against fees for use of the platform. 44-1811. Director of securities A. The commission shall appoint a director of securities, subject to removal at the pleasure of the commission, at compensation as determined pursuant to section 38-611, who shall, subject to the authority and under the supervision of the commission, be the administrator of the division. The director of securities shall be a person at least thirty years of age and shall be qualified by any or all of the following: 1. At least five years of experience and training in corporate finance, investment banking, accounting principles or securities. 2. A college or graduate degree in business administration, the major subjects of which have relation to investment banking or corporate finance. 3. A law degree and at least five years of legal experience and training in securities. B. The director of securities shall devote the director's entire time to the discharge of the duties of the office. 44-1812. Assistant director of securities The commission shall appoint an experienced assistant to the director of securities whose compensation shall be as determined pursuant to section 38-611 to assist in the proper discharge of the duties imposed upon the securities division. 44-1813. Employment of personnel; criminal records check A. The director, with the approval of the commission, may employ from time to time examiners, investigators who are commissioned peace officers, clerical employees and other officers and employees necessary for the administration of this chapter, and regulatory officers and employees who are members of the state bar of Arizona who shall be paid at the same rate as the rate established by the department of administration for attorneys, and who shall perform the duties the director requires. B. The director may obtain criminal history record information regarding applicants for employment for the purpose of hiring personnel. Before making a final offer of employment, the director shall require the preferred applicants to submit a full set of fingerprints. The director shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. C. The director shall not disclose information obtained pursuant to subsection B of this section except to the director's or the commission's staff solely for the purpose of the director's employment of the applicant. 44-1814. Travel and other necessary expenses of employees The director, and any person under the director's supervision shall be paid, in addition to that person's regular compensation, the transportation expense, board, lodging and other necessary traveling expenses actually incurred in the performance of that person's duties. Traveling expenses shall include the expenses of the director in attending the annual convention of the national association of securities administrators. 44-1815. Cooperation with other securities agencies The director shall cooperate with the administrators of the securities laws of other states and of the United States with a view to achieving maximum uniformity in the interpretation and enforcement of like provisions of the laws administered by them. 44-1821. General rule-making power of commission; delegation of authority; limitation A. The commission may from time to time make, amend and rescind rules and regulations reasonably necessary to carry out the provisions of this chapter. B. The commission may from time to time in its discretion delegate such authority to the director of securities as is convenient or necessary to the efficient administration of this chapter, except that the commission may not delegate authority to adopt, amend or rescind rules and regulations or to enter any final order of denial or revocation of registration of securities, dealers or salesmen. 44-1822. Investigations The commission, the director or other agent or agents designated by the commission may make such public or private investigations within or outside of this state as the commission deems necessary to determine whether any person has violated or is about to violate any provisions of this chapter or any rule or order hereunder, or to aid in the enforcement of this chapter, or to aid in prescribing rules and forms hereunder, and may at any time either prior to or subsequent to the registration of any securities or any dealer or salesman, investigate and examine into the affairs of any person issuing or dealing in or selling or buying or intending to issue, deal in or sell or buy securities or into the affairs of any person when the commission believes that such person is or may be issuing or dealing in or selling or buying securities. 44-1823. Power to require testimony and production of records; order of nondisclosure A. For the purpose of investigations or hearings which, in the opinion of the commission, are necessary and proper for the enforcement of this chapter, any member of the commission, the director or any officer or officers designated by the commission may administer oaths and affirmations, subpoena witnesses, take evidence and require by subpoena duces tecum or by citation the production of books, papers, contracts, agreements or other documents, records or information, whether filed or kept in original form or electronically stored or recorded which the commission deems relevant or material to the inquiry. B. The commission may issue and apply to enforce a subpoena in this state at the request of a securities agency or administrator of another state if the activities constituting an alleged violation for which the information is sought would be a violation of this chapter if the activities had occurred in this state. C. In connection with the power to enforce the production of evidence by subpoena vested in the commission by article XV of the Constitution of Arizona and the commission's power to conduct private investigations pursuant to section 44-1822, the commission has the authority to order a financial institution not to disclose the existence or content of the subpoena to persons not affiliated with the financial institution other than to the financial institution's legal counsel. The commission shall exercise such power if the commission finds it necessary or appropriate in the public interest or for the protection of investors. 44-1824. Dealer examination assessment; foreign examination cost; payment A. The commission shall assess a charge at the rate of two hundred dollars a day for each examiner employed in examining a dealer. For a dealer maintaining an office outside this state, in addition to the examination assessment, the commission shall make an assessment equal to the travel and subsistence expense incurred in the examination of the office in another state or country. Reimbursement for examination assessments and examiners' expenses shall be credited to the state general fund. B. Examination assessments are due and payable to the commission within thirty days after the date of the notice of assessment. A penalty assessment of fifty dollars shall be made for each day the payment is overdue following the thirty day period. The total penalty assessment shall not exceed twenty-five per cent of the examination assessment. 44-1825. Contempt; penalty A. In case of contumacy or refusal to obey a subpoena or citation issued by the commission, any member of the commission, the director or any officer designated by the commission, the superior court in Maricopa county, on application by the commission, shall issue to the person an order requiring the person to appear before the commission, the director or the officer designated by the commission to produce documentary evidence if so ordered and to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt of court. B. In the case of wilful noncompliance with a nondisclosure order included in a subpoena issued pursuant to section 44-1823, on application by the commission, the superior court in Maricopa county may exercise its contempt powers. For the purposes of this subsection, "wilful" has the same meaning as that prescribed to wilfully in section 1-215. C. The court shall award reasonable expenses, including attorney fees, to the commission if the refusal to obey a subpoena or citation issued by the commission was not substantially justified, unless other circumstances make an award of expenses unjust. D. Process in any proceeding pursuant to this section may be served on the defendant in any county of this state in which the defendant transacts business or is found. E. Any expenses, including attorney fees, collected pursuant to this section shall be deposited, pursuant to sections 35-146 and 35-147, in the state general fund. 44-1826. No-action requests A. The director may formally respond to written requests from interested persons for interpretative no-action letters that confirm that the division will not institute enforcement proceedings against certain specified persons for engaging in certain specified activities. B. A person shall submit a no-action request in writing and a nonrefundable filing fee pursuant to section 44-1861, subsection M. The request shall contain the following: 1. A brief summary of the statutory and regulatory provisions to which the request pertains. 2. A detailed statement of the relevant facts. 3. A detailed discussion and analysis of the law as it relates to the facts. 4. A statement of the legal authority for granting the request. 5. A statement of the reasons a no-action letter is appropriate. 6. A statement explaining any adverse or beneficial effect on the public interest resulting from the granting of the request. 7. A certification that, within the knowledge of the person on whose behalf the request is made, the transaction described is not directly or indirectly the subject of any pending or final judicial, SRO or administrative proceeding. 8. A certification that the transaction described has not been commenced or, if the transaction has commenced, a statement concerning the status. 9. An acknowledgment by the person on whose behalf the request is made that the request, together with any documents or information submitted and any response from the division, is public information that may be released for publication, except as otherwise provided by law. C. Unless otherwise specified in writing by the division, a no-action letter is limited to the specific security, case, matter, facts, person or transaction described in the request and has no precedential value in any other context. 44-1841. Sale of unregistered securities prohibited; classification A. It is unlawful to sell or offer for sale within or from this state any securities unless the securities have been registered pursuant to article 6 or 7 of this chapter or are federal covered securities if the securities comply with section 44-1843.02 or chapter 13, article 12 of this title. B. A person violating this section is guilty of a class 4 felony. 44-1842. Transactions by unregistered dealers and salesmen prohibited; classification A. It is unlawful for any dealer to sell or purchase or offer to sell or buy any securities, or for any salesman to sell or offer for sale any securities within or from this state unless the dealer or salesman is registered as such pursuant to the provisions of article 9 of this chapter. B. A person violating this section is guilty of a class 4 felony. 44-1843. Exempt securities; fee; filing A. Sections 44-1841 and 44-1842, section 44-1843.02, subsections B and C and sections 44-3321 and 44-3325 do not apply to any of the following classes of securities: 1. Securities issued or guaranteed by the United States, by any state, territory or insular possession of the United States, by any political subdivision of such state, territory or insular possession, by the District of Columbia or by any agency or instrumentality of one or more of any of the foregoing. This exemption shall not apply to securities regulated pursuant to section 44-1843.01. 2. Securities issued by a national bank, a bank or a credit or loan association organized pursuant to an act of Congress and supervised by the United States or an agency of the United States, or issued by a state bank or savings institution the business of which is supervised and regulated by an agency of this state or of the United States. 3. Securities issued by a savings and loan association subject to supervision by an agency of this state. 4. Insurance or endowment policies, variable contracts, annuity contracts or optional annuity contracts issued by a person subject to the supervision of and licensed by the insurance commissioner, the bank commissioner or any agency of the United States, any state or the District of Columbia performing like functions. 5. Securities issued or guaranteed either as to principal, interest or dividend by a railroad or public utility if the issuance of its securities is regulated by an agency of the United States, a state, territory or insular possession of the United States, an agency of the District of Columbia or an agency of the Dominion of Canada or any province of the Dominion of Canada, and also equipment trust certificates in respect to equipment conditionally sold or leased to a railroad or public utility, if other securities issued by such railroad or public utility would be exempt under this paragraph. 6. Securities issued by a person that is organized and operated exclusively for religious, educational, benevolent, fraternal, charitable or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder or individual and securities issued by or any interest or participation in any pooled income fund, collective trust fund, collective investment fund or similar fund that is excluded from the definition of an investment company under section 3(c)(10)(B) of the investment company act of 1940. The exemption prescribed in this paragraph does not apply to any of the following, unless excluded from the definition of an investment company under section 3(c)(10)(B) of the investment company act of 1940: (a) Securities made liens upon revenue producing property subject to taxation. (b) Securities issued by a nonprofit organization that is engaged in, intends to engage in, controls, finances or lends funds or property to other entities engaged in the construction, operation, maintenance or management of a hospital, sanitarium, rest home, clinic, medical hotel, mortuary, cemetery, mausoleum or other similar facilities. (c) Interest bearing or noninterest bearing debt securities except for first mortgage bonds issued by individual churches and affiliated religious schools in an aggregate outstanding amount not to exceed twenty-five million dollars by any one single issuer provided that no commission or remuneration of any kind, other than transfer agent's fees, is paid, directly or indirectly, to any person other than a registered dealer or registered salesman in connection with the offer for sale or sale of such bonds. (d) Securities whose terms include significant features that are common to debt securities and that the commission finds are the functional equivalent of debt securities. 7. Securities listed or approved for listing upon the issuance thereof upon the New York stock exchange, the American stock exchange, the midwest stock exchange or any other national securities exchange that is registered under the securities exchange act of 1934 and that is designated by the commission as provided in this paragraph, and securities designated or approved for designation on notice of issuance on the national market system of a national securities association registered under the securities exchange act of 1934, and all securities senior or equal in rank to any securities so listed or approved for listing, designated or approved for designation or represented by subscription rights or warrants that have been so listed, designated or approved and any warrant or right to purchase or subscribe to any of the foregoing. In addition to the securities exchanges prescribed in this paragraph, the commission may by order designate any registered national securities exchange if it finds that it would be in the public interest for securities listed on the exchange to be exempt. The commission may at any time by order withdraw a designation of an exchange or association made under this paragraph. 8. Commercial paper that arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, that evidences an obligation to pay cash within nine months of the date of issuance or sale, exclusive of days of grace, or any renewal of such paper that is likewise limited, or any guarantee of such paper or of any such renewal. 9. Securities issued or guaranteed by any foreign government with which the United States is at the time of the sale maintaining diplomatic relations, or securities issued or guaranteed by a political subdivision of such foreign government having the power of taxation, if none of the securities of the foreign government or political subdivision are in default either as to principal or interest, and which securities when offered for sale in this state are acknowledged as valid obligations by the foreign government or political subdivision and registered under the securities act of 1933. 10. Notes or bonds secured by a mortgage or deed of trust on real estate or chattels, or a contract or agreement for the sale of real estate or chattels, if the entire mortgage, contract or agreement together with all notes or bonds secured thereby is sold or offered for sale as a unit, except for real property investment contracts. 11. Mortgage related securities, as defined in section 3(a)(41) of the securities exchange act of 1934. B. Issuers of securities that are exempt under subsection A, paragraphs 6, 7 and 9 of this section, within thirty days after the first sale of the securities in this state, shall pay to the commission a fee of two hundred dollars for each offering, and the commission shall deposit the fees in the office of economic opportunity operations fund established by section 41-5302. C. Any securities that are offered and sold pursuant to section 4(5) of the securities act of 1933 or that are mortgage related securities as the term is defined in section 3(a)(41) of the securities exchange act of 1934 are not preempted by federal law. These instruments, commonly referred to as private mortgage backed securities, may be exempt from the registration requirements of this chapter if the transaction or the securities are otherwise exempt under this chapter. This subsection specifically overrides the preemption of state law contained in section 106(c) of the secondary mortgage market enhancement act of 1984 (P.L. 98-440). D. Noncompliance with the requirements in subsection B of this section to pay fees shall not result in the loss of the exemption allowed by this section. 44-1843.01. Nonexempt government securities; covered securities; exemptions A. Notwithstanding section 44-1843, subsection A, paragraph 1, sections 44-1841 and 44-1842 apply to the following classes of securities that are issued by a person who is located in this state, unless the requirements of subsection B or C of this section are met. The requirements of subsection C of this section apply to the following classes of securities that are described as covered securities in section 18(b)(4)(C) of the securities act of 1933: 1. Any obligations or securities that are industrial development bonds as defined in section 103 of the United States internal revenue code of 1954, as amended, with no exception for the small issue exemptions contained in section 103(b)(6) or 103(d), except that the provisions of this paragraph shall not apply to any issue where substantially all of the proceeds are to be used to provide residential real property for family units, airports, docks, wharves, mass commuting facilities, parking facilities, sewage or solid waste disposal facilities, air or water pollution control facilities, or facilities for the furnishing of water if available on reasonable demand to members of the general public. 2. Bond anticipation notes authorized pursuant to title 48, chapter 6, article 1. 3. Improvement district bonds authorized pursuant to title 48, chapter 6, article 2. 4. Bonds of issuers located outside the state secured only by special assessments. 5. Securities of public subdivisions used to provide monies to finance the acquiring, constructing, improving, equipping or furnishing of medical office buildings, sanitariums, clinics, medical hotels, mortuaries, cemeteries, mausoleums, rest homes, nursing homes, skilled nursing facilities or other similar facilities for use by corporations or entities other than municipal which bonds or notes are not fully secured by payments to be made by an entity owning or operating, repurchasing or leasing a hospital from a political subdivision. B. Sections 44-1841 and 44-1842 do not apply to the securities that are issued by a person who is located in this state and to which subsection A of this section applies if the following conditions are met: 1. With respect to the nongovernmental entity responsible for making the payments pledged to repay the obligations, there shall be filed with the commission a notice of the proposed offering, the trust indenture, if any, a two hundred dollar filing fee and an official statement or prospectus which includes the financial disclosures required by section 44-1894. The filing shall be by the nongovernmental user with respect to obligations to which subsection A, paragraphs 1 and 5 of this section apply and by the underwriter or dealer with respect to obligations to which subsection A, paragraph 2, 3 or 4 of this section applies. The trust indenture, official statement or prospectus may be filed in draft form if substantially complete. In the case of special assessment bonds to which this section applies, the commission may waive the requirement for filing an official statement or prospectus, modify the information to be contained in the official statement or prospectus or permit the filing of information concerning the bonds in lieu of an official statement or prospectus. The notice, among other things, shall include a statement as to whether a rating on the securities will be sought and from whom the rating will be sought. 2. On the receipt of the notice and official statement or prospectus, the exemption shall be effective within twenty days, or less than twenty days if accelerated by order of the director for good cause shown. The exemption shall not become effective if, within such twenty-day period, the commission issues an order to show cause why the exemption should not be denied. If such order to show cause is issued, the applicant shall be given notice and opportunity to be heard pursuant to article 11 of this chapter. The commission may deny an exemption if it finds that the official statement or prospectus is incomplete, inaccurate or misleading. C. For securities to be offered in this state that are described as covered securities in section 18(b)(4)(C) of the securities act of 1933 a person shall file all of the following with the commission: 1. A cover letter that describes the offering to be made in this state. 2. Any documents that are filed with the SEC and that are required by the commission. 3. A filing fee of two hundred dollars. 44-1843.02. Special filing requirements for certain exempt or federal covered securities A. Any advertising and sales material, other than the notices required by law to be published or posted, that is used in connection with offers or sales to the public of any of the securities to which section 44-1843.01, subsection A applies shall be filed with the division three business days before its proposed use. The filing required by this section shall be made by the nongovernmental user, dealer or underwriter. B. Issuers of securities that are described as covered securities in section 18(b)(3) of the securities act of 1933 shall file concurrently with the commission any document filed with the SEC under the securities act of 1933. If the issuer is not a corporation or other entity organized under the laws of this state, the issuer shall file a consent to service of process that complies with section 44-1862. At the time of the issuer's initial filing with the commission, the issuer shall pay a fee of one hundred dollars. C. Issuers of securities that are described as covered securities in section 18(b)(4)(D) of the securities act of 1933 shall file with the commission not later than fifteen calendar days after the first sale of securities in or from this state one copy of a notice on form D. The notice on form D shall contain a manual or facsimile signature of a person duly authorized by the issuer and is considered filed with the commission on receipt at the commission's Phoenix office or as of the date on which the notice is mailed by United States registered or certified mail to the commission's Phoenix office if the notice is delivered to that office after the date on which the notice is required to be filed. The issuer shall pay the initial filing fee prescribed in section 44-1861, subsection E. D. Section 44-1842 applies to federal covered securities transactions unless an exemption is available under another provision of this chapter. 44-1844. Exempt transactions A. Except as provided in subsections B and C of this section, sections 44-1841 and 44-1842, section 44-1843.02, subsections B and C and sections 44-3321 and 44-3325 do not apply to any of the following classes of transactions: 1. Transactions by an issuer not involving any public offering. 2. The sale of securities by an executor, administrator, guardian or conservator or by a bank the business of which is supervised and regulated by an agency of this state or of the United States, as trustee under a will or trust agreement, or by a receiver or trustee in insolvency or bankruptcy approved by a court of competent jurisdiction of this state or the United States. 3. The sale in good faith and not for the purpose of avoiding the provisions of this chapter by a pledgee of securities pledged for a bona fide debt. 4. The sale in good faith and not for the purpose of avoiding the provisions of this chapter of securities, including securities that when originally issued were exempt pursuant to paragraph 22 of this subsection, by the bona fide owner of such securities, other than an issuer or underwriter, in an isolated transaction, in which the securities are sold either directly or through a dealer as agent for the owner but where the sales are not made in the course of repeated or successive transactions of similar character by the owner and are not made directly or indirectly for the benefit of the issuer or an underwriter of the securities. For the purposes of this paragraph, the sale is not considered to be made in the course of repeated or successive transactions of similar character by the owner if both of the following apply: (a) The sale is of a security that when originally issued was exempt pursuant to paragraph 22 of this subsection. (b) At least six months have passed after the date of the last sale of the security by the issuer to a resident of this state. 5. The distribution by a corporation of capital stock or other securities to its stockholders or other security holders as a stock dividend or other distribution out of retained earnings. 6. Any transaction or series of transactions incident to a statutory or judicially approved reorganization, merger, triangular merger, consolidation, or sale of assets, incident to a vote by securities holders pursuant to the articles of incorporation, the applicable corporate statute or other controlling statute, a partnership agreement or the controlling agreement among securities holders. 7. The exchange of securities by an issuer with its existing security holders exclusively, where no commission or remuneration is paid or given, directly or indirectly, for soliciting the exchange, if such exchange has been duly authorized and has been approved by the holders of not less than a majority of the outstanding securities of each class affected by the exchange. 8. An offer or sale of securities to a bank, a savings institution, a trust company, an insurance company, an investment company as defined in the investment company act of 1940, a pension or profit sharing trust or other financial institution or institutional buyer or a dealer whether the purchaser is acting for itself or in a fiduciary capacity. 9. The issuance and delivery of securities in exchange for other securities of the same issuer pursuant to a right of conversion entitling the holder of the securities surrendered in exchange to make such conversion. 10. The issuance and delivery of securities of a corporation, limited liability company or limited partnership to the original incorporators, organizers or general partners, not exceeding ten in number, where the securities are not acquired by the incorporators, organizers or general partners for the purpose of sale to others and are not directly or indirectly sold to a third party within twenty-four months unless an incorporator, organizer or general partner experiences a bona fide change of financial circumstances within such time period, providing original incorporators, organizers or general partners are notified of their right pursuant to title 10 or 29 to review the financial books and records of the corporation, limited liability company or limited partnership at reasonable times. 11. A nonissuer transaction in an outstanding security, including the sale by a dealer, including an underwriter no longer acting as an underwriter in respect to the securities involved, of securities sold and distributed to the public, but not including securities constituting an unsold allotment to or subscription by the dealer as a participant in the distribution of the securities by the issuer or by or through an underwriter, if the class of security has been outstanding in the hands of the public for not less than ninety days preceding the date of the transaction and a recognized manual of securities designated by the commission by rule or order at the time of sale contains the names of the issuer's officers and directors, a statement of financial condition of the issuer as of a date within eighteen months of the date of the sale and a statement of income or operations for each of the two fiscal years next before the date of the statement of financial condition or for the period from the commencement of the issuer's existence to the date of the statement of financial condition if the period is less than two years. 12. The sale by a dealer, including an underwriter no longer acting as an underwriter in respect to the securities involved, of securities of an issue sold and distributed to the public, but not including securities constituting an unsold allotment to or subscription by the dealer as a participant in the distribution of the securities by the issuer or by or through an underwriter, if securities of such issue have been registered by description under sections 44-1871 through 44-1875 or registered by qualification under sections 44-1891 through 44-1902. 13. The sale of commodity investment contracts traded on a commodities exchange recognized by the commission at the time of sale. 14. The sale or issuance of any investment contract or other security in connection with an employee's pension, profit sharing, stock purchase, stock bonus, savings, thrift, stock option or other similar employee benefit plan that meets the requirements for qualification under the United States internal revenue code. 15. Transactions within the exclusive jurisdiction of the commodity futures trading commission as granted under the commodity exchange act. 16. Transactions involving the purchase of one or more precious metals that require, and under which the purchaser receives, within seven calendar days after the payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased by such payment. For the purposes of this paragraph, physical delivery is deemed to have occurred if, within such seven day period, the quantity of precious metals purchased by such payment is delivered, whether in specifically segregated or fungible bulk form, into the possession of a depository other than the seller which is a financial institution, a depository the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the commodity futures trading commission or a storage facility licensed or regulated by the United States or any agency of the United States and such depository or other person that qualifies as a depository issues and the purchaser receives a certificate, document of title, confirmation or other instrument evidencing that such quantity of precious metals has been delivered to the depository and is being and will continue to be held by the depository on the purchaser's behalf, free and clear of all liens and encumbrances, other than liens of the purchaser, tax liens, liens agreed to by the purchaser, or liens of the depository for fees and expenses, that have previously been disclosed to the purchaser. For the purposes of this paragraph, "financial institution" means a bank, savings institution or trust company organized under, or supervised pursuant to, the laws of the United States or of this state. 17. Transactions involving a commodity investment contract solely between persons engaged in producing, processing, using commercially or handling as merchants each commodity subject to the contract or any by-product. 18. A nonissuer transaction in an outstanding security, including the sale by a dealer, including an underwriter no longer acting as an underwriter in respect to the securities involved, of securities sold and distributed to the public, but not including securities constituting an unsold allotment to or subscription by the dealer as a participant in the distribution of the securities by the issuer or by or through an underwriter if both of the following apply: (a) The class of security has been outstanding in the hands of the public for not less than ninety days preceding the date of the transaction. (b) The securities are listed on an automated quotation system of a national securities association registered under the securities exchange act of 1934. 19. Transactions involving the sale of securities to persons who are not residents of this state and are not present in this state if all of the following conditions are met: (a) The securities being offered are not blind pool offerings. (b) At least ten days before the offering date: (i) The issuer certifies that the securities being offered will be offered and sold in compliance with the securities act of 1933 and the laws and regulations of those states in which the offers and sales will be made. (ii) The issuer files as a notice filing one copy of any offering materials that may be required by the SEC or the laws and rules of those states in which the offers and sales will be made. (iii) The issuer submits a filing fee of $200. (c) Within ten working days of completion of the offering the issuer files a description of the actions taken as to compliance with the securities act of 1933 and the laws and rules of those states in which the offers and sales were made. (d) The transaction complies with any rule adopted by the commission further restricting the exemption created by this paragraph to prevent any fraudulent practices. 20. Transactions involving offers or sales of one or more promissory notes directly secured by a first lien on a single parcel of real estate on which is located a dwelling or other residential or commercial structure and participation interest in those notes that are exempt under section 4(5) of the securities act of 1933. 21. Offerings of securities of not more than $1,000,000 or the limit established under 17 Code of Federal Regulations section 230.504 as follows: (a) An unlimited number of sophisticated purchasers may be involved. (b) Written offering documents providing full and adequate disclosure of material facts must be provided to each purchaser. (c) Advertising is not allowed without a waiver from the director. (d) The sum of the following amounts may not exceed the greater of $1,000,000 or the limit established under 17 Code of Federal Regulations section 230.504: (i) The dollar value for the amount of securities being offered. (ii) The aggregate offering price of all securities of the issuer sold within the twelve months before the date of the offering. (iii) The aggregate offering price of all securities of the issuer sold during the course of the offering if the securities were sold in reliance on 15 United States Code section 77c(b) or in violation of 15 United States Code section 77e(a). (e) Provisions on offerings to sophisticated purchasers are as follows: (i) An offering to sophisticated purchasers under this section allows sales to either an accredited investor as defined in 17 Code of Federal Regulations section 230.501 or a person, acting alone or with a purchaser representative, who the dealer reasonably believes has the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the proposed investment. The dealer must reasonably believe that the person has knowledge and experience before a person becomes a purchaser. (ii) The issuer shall display the following notice on the cover page of the disclosure document in a conspicuous manner in at least twelve-point boldface type: In making an investment decision, investors shall rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or division or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense. These securities are subject to restrictions on transferability and resale and may not be transferred or resold, except as allowed by 17 Code of Federal Regulations and applicable state securities laws, pursuant to registration or exemption from registration. Investors must be aware that they are required to bear the financial risks of this investment for an indefinite period of time. (f) One copy of the notice on form D filed with the SEC is filed with the commission not later than fifteen calendar days after the first sale of securities in or from this state. (g) An offering to purchasers under this section allows all of the following: (i) Sales to be made only by a dealer who is not the issuer and who is registered in this state. (ii) The dealer to conduct the sales if the dealer reasonably believes that adequate diligence and review have been applied in connection with the offering and the dealer adequately determines the suitability of the offering to a purchaser. (iii) Sales if the dealer reasonably believes that the security is suitable for the purchaser after reasonable inquiry concerning the purchaser's investment objectives, financial situation and needs and after consideration of any other information known by the dealer. (h) The exemption may not be used if an issuer or person affiliated with the issuer or offering is subject to disqualification pursuant to any of the following: (i) This chapter. (ii) A rule or order of the commission. (iii) The securities act of 1933 (15 United States Code section 77c(a)(11)). (iv) The securities act of 1933, 17 Code of Federal Regulations section 230.262. (i) The commission may set aside disqualification if: (i) On a showing of good cause and without prejudice to any other action by the commission, the commission determines that it is not necessary that an exemption be denied under the circumstances. (ii) The issuer establishes that it made a factual inquiry into whether any disqualification existed under subdivision (h) of this paragraph but did not know and could not have known with the exercise of reasonable care that a disqualification existed. The nature and scope of the requisite inquiry will vary based on the circumstances of the subject issuer and the other offering participants. 22. Transactions involving an intrastate offering, including crowdfunding or virtual coin offerings, if all of the following conditions are met: (a) The issuer is authorized to do business in this state. (b) The transaction meets the requirements of the federal exemption for intrastate offerings under 15 United States Code section 77c(a)(11) or 17 Code of Federal Regulations section 230.147 or 230.147A, or any subsequently amended or expanded versions of those sections. For the purposes of this chapter, a corporation, partnership, trust or other form of business organization is not deemed to be organized for the specific purpose of acquiring securities offered under 17 Code of Federal Regulations section 230.147 or 230.147A if the corporation, partnership, trust or other form of business organization either: (i) Was created before January 1, 2018. (ii) Invests ninety-five percent or less of its investable assets in offerings authorized by this chapter. (c) The issuer obtains from each prospective purchaser evidence that the prospective purchaser is a resident of this state and, if applicable, is an accredited investor. A prospective purchaser's residence shall be determined in accordance with 17 Code of Federal Regulations section 230.147(d) or 230.147A(d). If the purchaser is an entity, an affirmative representation made by the entity that the entity is a resident of this state is sufficient evidence that the entity is a resident of this state if the entity also submits proof that the entity is incorporated or organized in this state, is qualified as a resident pursuant to any of the categories identified in 17 Code of Federal Regulations section 230.147(c)(1) or 230.147A(c)(1) or uses an internet protocol address originating from this state to purchase the offering. If the purchaser is an individual, an affirmative representation made by the individual that the individual is a resident of this state is sufficient evidence that the individual is a resident of this state if the individual also submits proof of any of the following: (i) The individual has a valid driver license or nonoperating identification license issued pursuant to title 28. (ii) The individual is registered to vote in this state. (iii) General property tax records show the individual owns and occupies property in this state as the individual's principal residence. (iv) The individual uses an internet protocol address originating from this state to purchase the offering. (d) The issuer informs all purchasers that the securities have not been registered and that the securities are subject to the limitation on resales contained in either: (i) 17 Code of Federal Regulations section 230.147(e), in the manner described in 17 Code of Federal Regulations section 230.147(f). (ii) 17 Code of Federal Regulations section 230.147A(e), in the manner described in 17 Code of Federal Regulations section 230.147A(f). (e) Before an offer is made in reliance on this exemption, the issuer pays a filing fee to be prescribed by the director and files a notice with the director, in writing or in electronic form, that contains all of the following: (i) The name of the issuer, including the issuer's type of entity and the address and telephone number of the issuer's principal office. (ii) The intended use of the offering proceeds, including any amounts to be paid, as compensation or otherwise, to any owner, executive officer, director, managing member or other person occupying a similar status or performing similar functions on behalf of the issuer. (iii) The identity of all persons who will be involved in the offer or sale of securities on behalf of the issuer. (iv) The identity of each person that owns more than ten percent of the ownership interests of any class of securities of the issuer. (v) The identity of the executive officers, directors and managing members of the issuer and any other individuals who occupy similar status or pe