Chap. 338.—An ACT to amend and re-enact Sections 4 and 5 of an act which, by
amendment and re-enactment of title to, and provisions of, an act approved
March 23, 1918, Chapter 408, Acts of 1918, as thereafter amended pertaining
to prevention of unfairness, imposition or fraud in the sale or disposition of
certain ‘‘securities’”, et cetera, was entitled: ‘‘An act to prevent unfairness,
imposition or fraud in the offer for sale, advertisement for sale, sale, disposition,
distribution, and/or promotion of certain ‘‘securities’’ herein defined and
designated, including subdivisions of land lying outside of the State, in certain
cases, by requiring an inspection and qualification of such securities, and of
such land, providing for such inspection and qualification and for the super-
vision and regulation of the business of, and for the licensing, in certain cases,
of, any person, association, partnership, or corporation, engaged or intending to
engage, whether as issuer, principal, promoter, dealer, broker, agent, or adver-
tiser, in the offer for sale, advertisement for sale, sale, disposition, distribution
and/or promotion, in the State of Virginia, of any such securities and/or of
any such land, as may be necessary to prevent unfairness, imposition or fraud,
and to procure and insure proper disclosure of material facts, in the offer for
sale, advertisement for sale, sale, disposition, distribution and/or promotion of
said securities, and/or of said land, and prescribing penalties for violation
thereof:’’, and which was approved March 28, 1928, as from time to time same
has been amended. [S B 255]

Approved March 29, 1940

1. Be it enacted by the General Assembly of Virginia, That
sections four and five of an act which, by amendment and re-enact-
ment of title to, and provisions of, an act approved March twenty-
third, nineteen hundred and eighteen, chapter four hundred and eight,
Acts of nineteen hundred and eighteen, as thereafter amended, per-
taining to prevention of unfairness, imposition or fraud in the sale or
disposition of certain ‘‘securities’’, et cetera, was entitled: “an act to
prevent unfairness, imposition or fraud in the offer for sale, advertise-
ment for sale, sale, disposition, distribution, and/or promotion of
certain “‘securities’’ herein defined and designated, including sub-
divisions of land lying outside of the State, in certain cases, by re-
quiring an inspection and qualification of such securities, and of such
land, providing for such inspection and qualification and for the
supervision and regulation of the business of, and for the licensing, in
certain cases, of, any person, association, partnership, or corporation,
engaged or intending to engage, whether as issuer, principal, promoter,
dealer, broker, agent, or advertiser, in the offer for sale, advertisement
for sale, sale, disposition, distribution, and/or promotion, in the State
of Virginia, of any such securities and/or of any such land, as may
be necessary to prevent unfairness, imposition or fraud, and to pro-
cure and insure proper disclosure of material facts, in the offer for
sale, advertisement for sale, sale, disposition, distribution and/or pro-
motion of said securities, and/or of said land, and prescribing penalties
for the violation thereof:’’, and which was approved March twenty-
eighth, nineteen hundred and twenty-eight, as from time to time
same has been amended, be and they hereby are amended and re-
enacted so as to read as follows:

Section 4. Except as otherwise expressly provided in this act,
the provisions of this act shall not apply to the sale of any securities
of any of the following kinds nor in any of the following transactions,
notwithstanding that any one or more of the subdivisions of section
three are, or may be, applicable, and the commission shall have juris-
diction, upon formal or informal application, payment of filing fee of
$25.00, and submission of such facts and data as may be necessary,
to determine whether or not particular security or securities, trans-
action or transactions, or series of transactions, is or are exempt
under the provisions of this section, and to issue, if desired, a certifi-
cate to the effect that an exemption applies when so found, and such
certificate shall have the same effect as prescribed in the preceding
section in case of a determination by the commission that the securities
law does not apply:

(a) Any security issued or guaranteed by the United States or
any territory or insular possession thereof, or by the District of
Columbia or by any state or political subdivision or agency thereof.

(c) Any security issued by a national bank or by any Federal
land bank or joint stock land bank or national farm loan association
under the provisions of the Federal farm loan act of July seventeenth,
nineteen hundred and sixteen, or by the war finance corporation or
by any corporation created or acting as an instrumentality of the
government of the United States pursuant to authority granted by
the Congress of the United States or pursuant to other valid Federal
authority.

(d) Any security issued or guaranteed as to principal, by a
corporation Owning or operating a railroad, or by any other public
service utility, provided, that such railroad or other public service
utility is subject to regulation and supervision both as to its rates
and charges and as to the issue of its own securities, and as to the
issuance of its own securities is actually regulated and supervised, by
a public commission, board or officer of the government of the United
States, and/or of the State of Virginia; and equipment notes or bonds
based on chattel mortgages, leases, or agreements for conditional
sales, of cars, motive power, or other rolling stock, mortgaged, leased,
or sold to, or furnished for the use of or upon, any railroad or other
public service utility when the issuance of such equipment notes or
bonds has been regulated and supervised by a public commission,
board or officer of the government of the United States and/or of the
State of Virginia; and equipment trust certificates, equipment notes
and equipment bonds of, or issued by, or on account of, any railroad
or other public service utility, when the ownership or title of such
equipment is pledged or retained in accordance with the provisions of
the laws of the United States and/or of the State of Virginia, to
secure the payment of such equipment trust certificates, notes, or
bonds, and when the issuance of such equipment trust certificates,
notes, or bonds has been regulated and supervised by any public
commission, board or officer of the government of the United States
and/or of the State of Virginia; and all other securities issued and
sold under the actual regulation and supervision of the United States
government and/or of any department and/or of any agency thereof,
and/or under the actual regulation and supervision of the State of
Virginia and/or of any department and/or of any agency thereof;
provided that mere registration of securities with the Securities and
Exchange Commission or otherwise complying with the securities
act of nineteen hundred and thirty-three, as amended, and/or com-
pliance with any other non-pre-emptive, or non-exclusive, Federal
Law, heretofore or hereafter enacted, shall not constitute, nor be
construed to constitute, an exemption within the meaning of this sub-
division (d) of section four of the Virginia securities law, nor within
the meaning of any other provision thereof; provided, further, that
the filing of stock or bond statement under provisions of section one
hundred and sixty-seven of the Constitution and section thirty-seven
hundred and eighty-eight of the Code, as same may be from time to
time amended, shall not constitute, nor be construed to constitute,
such regulation and supervision by the State of Virginia and/or by
any department and/or by any agency thereof within the contempla-
tion of such language as used herein, nor shall such filing constitute
an exemption hereunder; and provided, further, that the securities of
any railroad or other public service utility which are, by appropriate
official action, expressly exempted from the regulatory and super-
visory laws, now or hereafter enacted, of the United States and/or
of the State of Virginia shall not be required to be qualified or regis-
tered under the Virginia securities law.

(e) Any security issued by a State bank or trust company in-
corporated under the laws of and subject to the supervision and con-
trol of any state or territory of the United States or of any insular
possession thereof, provided such state bank or trust company is
being, or will be, regularly examined by the proper authorities of such
state or territory of the United States or any insular possession thereof.

(f) Any security issued by a corporation organized exclusively
and solely for religious, benevolent, charitable, educational, fraternal,
or reformatory purposes and not for pecuniary profit, and no part of
the net earnings of which inures to the benefit, directly or indirectly,
of any private stockholder, member, or other individual, and no part
of the dues or other income and/or property of which has inured, is
to inure, or shall inure, directly or indirectly, to any stockholder,
member, officer, director and/or employee, or to any other person,
except as fair compensation for any services rendered or as other fair
consideration upon valid contract, other than as beneficiary under the
purposes of such corporation, and provided that compensation, if
any, to anyone, directly or indirectly on account of the sale or distri-
bution of stock and/or memberships of or in such enterprise, and/or
for the collection of subscriptions or membership fees, shall not be
over ten per centum of the amounts actually collected and paid into
the treasury of such religious, benevolent, charitable, educational,
fraternal, or reformatory, and non-profit enterprise.

(g) Securities issued by any building and loan association which
has been organized and is subject to and is actually supervised and
examined by the proper authorities of this State.

(h) Securities fully listed on New York stock exchange, Chicago
stock exchange, Philadelphia stock exchange, Baltimore stock ex-
change, Richmond stock exchange, Boston stock exchange, New York
curb exchange, board of trade of the city of Chicago, or any other
recognized and responsible stock exchange which has been previously
approved by the Corporation Commission, which securities have
been so listed pursuant to official authorization by such exchange,
provided this exemption shall apply only to sales for execution on
the exchange on which such security is so fully listed, or on an ap-
proved exchange on which such security is also admitted to trading,
and provided this exemption shall not apply to securities merely
admitted to trading privileges, though on an approved exchange,
when such securities are not fully listed on any other approved ex-
change, and provided this exemption shall apply only so long as the
full listing of such securities shall remain in effect and so long as
admission to trading, when applicable as an exemption, shall remain
in effect, and only so long as the exchange involved remains, or the
exchanges involved remain, approved and in good standing under the
provisions of this act. Application for approval may be made by
any organized stock exchange in such manner and upon such forms
as may be prescribed by the commission, accompanied by relevant
facts and data and the payment of an application for approval fee
of one hundred dollars, and the commission shall have such hearing
and make such investigation as may be necessary to determine the
propriety of giving approval, including such inspection as may be
deemed necessary or desirable, the necessary cost of which is to be
borne by the applicant, and in the exercise of its sound discretion the
commission may enter an order of approval upon the finding that the
requirements for listing are such as to effect substantially the pub-
licity and reasonable protection of the public now existing in the cases
of the exchanges herein approved and as contemplated by the Virginia
securities law. The commission shall have jurisdiction, after due
notice, opportunity to be heard, investigation and hearing, to revoke
the approval of any exchange which has been approved by it and/or
to revoke the recognition of any of the exchanges approved herein
upon finding that the practices or requirements of any such exchange
so approved or recognized herein, as the case may be, have been so
changed or modified or are in their actual operation found to be such
that the publicity and protection contemplated by this law is no
longer given or as a matter of fact is not given, and the principles of
res adjudicata ordinarily applicable in civil matters shall not be
applicable to this matter which is hereby declared to be administra-
tive rather than judicial. Notice hereunder may be by registered
mail, at least ten days before such hearing, and acceptance of approval
by this act and securing approval thereunder shall constitute consent
to such notice.

(i) Securities of any insurance, surety, guaranty, or other such
company, subject to, and actually licensed and supervised, or expressly
and clearly exempted, under the insurance laws, provided that this
exemption shall not apply to flotation of securities of such company
prior to the actual licensing and taking effect of such supervisory
powers or of such exemption, provided, further, that it shall not be
necessary to qualify such securities under the securities law in any
case in which section forty-two hundred and thirty-seven, Code of
nineteen hundred and nineteen, or any amendment or revision thereof
embodying the substantial provisions of section forty-two hundred
and thirty-seven of the Code, has been complied with.

(j) Securities of companies subject to supervision and actually
supervised by the Bureau of Banking, other than those herein other-
wise excepted, provided that this exemption shall not apply to the
original flotation of the securities of such company or enterprise, nor
to any securities issued prior to the actual taking effect of the super-
visory powers of the Bureau of Banking, and provided further that
this exemption shall not apply to the securities of corporations, firms
or individuals engaged in, or proposing to engage in, business under
the uniform small loan law, and/or under the industrial loan law,
even though supervisory powers have taken effect and are in effect.

(k) Securities of an enterprise or project which for the three
years next preceding has paid dividends, out of earnings only, at the
guaranteed rate in the case of preferred stock, in case of other than
preferred stock at a rate of not less than five per centum annually of
the par value in the case of par stock, or, in case of no par stock, not
less than five per centum annually of the book value during the three
year period, on the stock of the same class as that being so offered
and sold or on an issue inferior in right to participate in earnings or
profits to the security being so offered and sold, provided that in
cases in which the enterprise or project is new but consists of a com-
bination of two or more previously going concerns, this exemption
shall apply only if the accumulated combined earnings applicable to
dividends for the three years next preceding were sufficient to have
paid dividends on the securities of the new enterprise at the rates
above mentioned.

(m) Securities, otherwise subject to qualification under this act,
offered for sale, sold, and advertised for sale only at the place or places
of business of regularly established dealers in securities duly licensed
under this act, and/or through the regularly retained and employed
licensed salesmen or solicitors of such dealers outside the regular place
or places of business of such licensed dealer, provided such securities
have been duly registered, or notification of intention to register has
been given, as severally provided hereinafter.

The exemption contained in this subsection (m) of section four
shall not be operative unless such dealer has been duly licensed under
the provisions of this act, and shall have, prior to such sale, or offering,
or advertisement, filed with the State Corporation Commission a
registration of such offering accompanied by a statement duly exe-
cuted by such dealer that such dealer has no information which leads
him to believe that the maximum total overhead expense of organiza-
tion and flotation, including commissions, exceeds a named per
centum, not over fifteen per centum, of the total selling price of such
issue of securities, and such other information as may have been
previously prescribed by the commission. But, if such dealer shall
give to the State Corporation Commission on or prior to date of such
sale, offering, or advertisement, notification of the intention to register
a security, such dealer shall have two days, excluding day of notifica-
tion and the day of registration, from the time of giving such pre-
liminary notice, or from date designated for such sale, offering or
advertisement, to file a complete registration, and such notification
may be given by telegram or telephone, as well as by mail, or by
personal, written or verbal, notice; and pending such period, that is
to say, on the effective date of such notification, the two intervening
days and the day of making registration, such dealer may proceed
with offering, sale and advertisement of such securities as if the regis-
tration had been completed on the day on which notification was
effective, provided that such registration shall be completed before
the expiration of the third day after the effective date of such notifica-
tion.

This exemption is subject to the qualifications and provisos, that
if the selling commission, direct or indirect, to such licensed regular
dealer and/or so far as known to the dealer, to any other person or
persons whomsoever, in any form whatsoever, be over seven and one-
half per centum, and/or if the total overhead of organization, pro-
motion, flotation and/or selling expenses, including commissions, be
over fifteen per centum of the selling price to the public,.and such
fact be known to the dealer or if the dealer has notice of any facts
which would put a reasonably prudent person on notice that such
might be the fact, such fact or facts shall be fairly and fully disclosed
to the public, to all prospects, and to all subscribers and purchasers,
and if these qualifications and provisos be not complied with any sale
so made shall be voidable and any offer, sale, advertisement and/or
participation shall be a misdemeanor to the same extent, in the same
manner and in the same cases as otherwise provided in this act, not-
withstanding this exemption, provided that compliance with re-
quirements of the Securities Act of nineteen hundred and thirty-three,
as amended, relative to delivery of prospectus, shall be a sufficient
compliance, when applicable, with the foregoing requirements as to
disclosure of the percentage of commissions and/or overhead.

This exemption is further subject to the qualification and proviso
that it shall not apply in any case in which the total overhead of
organization, promotion, flotation, and/or selling expenses, including
commissions, direct or indirect, and/or in any form whatsoever
and/or to any person or persons, corporation or corporations whatso-
ever, is in excess of twenty per centum of the selling price to the pub-
lic, unless, upon application to the commission for a certificate of
exemption, the commission, in the exercise of its judicial discretion as
to the propriety, fairness, and reasonable necessity of greater commis-
sions and/or overhead, shall approve same and issue a certificate of ex-
emption based on the registration or notification, as the case may be,
but in no case shall the overhead exceed thirty per centum of the
selling price to the public.

It is the contemplation of the foregoing and other similar pro-
visions that that percentage of the amount paid by the subscriber or
purchaser which represents the difference between the maximum per-
mitted overhead and/or commission and one hundred shall go to the
treasury of the enterprise or project for the legitimate purposes
thereof, and to serve as a fund and source for earning the hoped for
return upon the investment.

Nothing herein shall be construed, however, to exempt from
qualification subdivisions of land lying outside of Virginia when the
provisions of this act are otherwise applicable thereto.

In cases of secondary distributions, registrations may be made in
such form and manner, and with such modifications of requirements,
as shall be necessary or convenient in view of the difference between
primary and secondary distributions, and as shall be prescribed or
permitted by the commission, to the end of accomplishing the objects
in contemplation in the registration of securities by dealers licensed
hereunder.

In order for such regular dealer to be entitled to offer for sale and
advertise for sale and sell securities, otherwise subject to regular
qualification under this act, in regular, established place or places of
business and/or through regularly employed and duly licensed sales-
men and solicitors outside of such place or places of business, such
dealer must be a regular dealer in securities and must have been
engaged in business in this State as a dealer in securities, actually or
in substantial respects, and have had a regular place of such business
in this State for a period of at least six months, mediately or imme-
diately, prior to the date of application for license as a licensed dealer
under this act, and must, in addition to other requirements applicable,
obtain from the State Corporation Commission a dealer’s license,
and each salesman or solicitor who offers, sells, or participates in the
sale of securities outside of such regular place or places of business
must obtain a salesman’s or solicitor’s license. Before the State
Corporation Commission shall be authorized or empowered to issue
such dealer’s license in order to entitle the holder thereof to the
benefit of this exemption it shall be furnished, in such manner as may
be required and upon such forms as may be prescribed, satisfactory
evidence of the facts constituting the basis of the claim of eligibility
and of the good character, standing, reputation and integrity, of the
individuals composing the officers and directorate of the corporation,
and of the corporation, if the dealer be a corporation, and of the
members of the partnership if it be a partnership, and of the individual
if it be an individual, and of the dealer’s reasonable financial re-
sponsibility. The commission may, in its discretion, accept a bond
with satisfactory surety and with conditions analogous to those pre-
scribed in section five (r) hereof, and in such penalty as the com-
mission may determine, in lieu of, or in supplement to, evidence of
reasonable financial responsibility.

No salesman’s or solicitor’s license shall be issued by the State
Corporation Commission to any regular employee of any such dealer
entitling such employee to offer, sell or participate in the sale of
securities outside of the regular place or places of business of such
dealer unless and until satisfactory evidence of the good character of
such regular employee shall first have been furnished in such manner
and upon such forms as may be prescribed.

Every licensed dealer shall pay an annual fee of twenty-five dollars
($25.00); every salesman or solicitor of such dealer authorized to sell
securities under the provisions of this subsection (m) shall pay an
annual license fee of ten dollars, subject to apportionment as herein
provided in the case of salesmen’s licenses under subsection (h) of
section five; and such dealer shall pay a registration fee of one dollar
for each registration of each class or kind of securities registered
under the provisions of this subsection. All such licenses shall be for
the year beginning May first and ending April thirtieth next following;
fees shall be paid to the clerk of the State Corporation Commission,
and no license shall be issued hereunder or registration of a security
be valid until the requisite fee has been paid.

The license herein provided for and the license fees herein provided
to be paid shall be in addition to any other license or fees required
under any other statute.

Upon application for dealer’s license there shall be paid a fee of
twenty-five dollars, in addition to any costs or expenses incident to
the investigation, but such application fee shall serve as payment of
license for the portion of the year intervening between the granting
of such license and the first day of May following, in case dealer’s
license is granted in pursuance of the application, but in case the
license is for any reason not granted the application fee of twenty-five
dollars shall not be returnable.

Upon application for salesman’s license, an application fee shall be
paid, in all respects as provided in section five (h), relative to salesmen
under authorizations.

The commission shall have jurisdiction, upon formal or informal
application and the payment of the filing fee of twenty-five dollars,
and subject to payment by applicant of any necessary expenses of
investigation, to determine whether a registration, as provided for
herein, is necessary, and if it be found not necessary, to issue an order,
in the nature of a certificate, to such effect, and the commission may
issue an order to the effect that due registration, or notification, has
been made or given, and such order shall be conclusive in the same
manner and to the same extent as in the case of orders in the nature
of certificates of non-applicability, or of exemption, as elsewhere pro-
vided in this act. .

The commission shall have jurisdiction in any case, after due
notice, hearing and consideration, to revoke any regular dealer’s
license and/or salesman’s or solicitor’s license issued hereunder upon
finding that such licensee has been guilty of any fraudulent conduct
or is otherwise of such moral or financial status as to constitute such
dealer, salesman, or solicitor, unworthy to hold a license under the
provisions of this law, or that the practices of such licensee are such
that the measure of protection to the public contemplated by this
law has not as a fact been given or is no longer given.

(n) By the owner of any security, or land, not being the under-
writer of such security, nor the purchaser of such securities or land
in wholesale quantity for purpose of distribution thereof to the public,
not the maker or issuer of such security, nor the promoter of such
land, who shall have acquired and shall sell the same for his own
account in the usual and ordinary course of business and not for th
direct or indirect promotion of any enterprise or scheme within th
purview of this act, providing that such ownership and sale are i
good faith. Repeated or successive sales of any such security o
securities or land shall be prima facie evidence that the claims o
ownership and sale in ordinary course are not bona fide, but mer
shifts or devices to evade the provisions of this act.

(0) The sale, transfer, or delivery to any bank, banker, trus
company or dealer in securities, or to any stock or mutual insuranc
company, provided that the exemption hereby provided shall no
extend to any distribution of securities so sold, et cetera, by the pur
chaser when any provision of section three of this law is applicabl
and there is no provision of section four thereof which is applicabl.
to such distribution.

(p) The sale, transfer, or delivery of securities, subject to th
securities law and not otherwise exempt, when sold by, or on behal
of a domestic corporation, to and in confirmation of previously mad
tentative and conditional agreements with not more than thirty (30
persons, inclusive of the directors, managers, or trustees, officers, anc
incorporators, or such of them as shall be prospective purchasers
provided that statement, or statements, containing the names, addres:
and signatures of, or on behalf of, such persons as prospective pur
chasers, in such form and containing such additional information a:
shall have been prescribed or as shall be permitted by the Stat
Corporation Commission, has or have been filed in the clerk’s office o
the commission for lodgment in the charter, or amendment, jacket
and for attachment to stock or bond statement, if any, with duplicate
or authenticated copy, for lodgment in the office of the Securities
Division of the commission, provided that such sale, et cetera, be
for permanent or indefinite investment or speculation, or operation ot!
a non-profit activity, and for the purpose of forming a bona fide close
corporation or operation of a non-profit activity, and provided that
the exemption hereof shall not extend to any voluntary offer, sale, o1
distribution of said securities by any of the not over thirty persons tc
whom such sale, et cetera, shall have been made hereunder, while
any provision of section three of this law is applicable and there is nc
provision of section four thereof which is applicable to such offer,
sale or distribution, and provided further that any voluntary offer,
sale or distribution by, or on behalf of, any person so named as a
prospective purchaser within one year from date of consummation of
sale, et cetera, under this exemption, shall be prima facie a violation
of this law in any prosecution or proceeding thereunder.

Successive lists may be filed, covering additional sales to the same
vce ing other purchasers, provided the ultimate total be not over
thirty.

Upon the filing of each list of prospective purchasers, original or
successive, as hereinbefore required, there shall be paid, in the same
manner, and the same disposition thereof shall be made, as in case
of other fees under the securities law, a fee of one-hundredth of one
yer centum (.0001 of 1%) of the par value in case of par securities
and of the selling price in case of securities having no par value, or
upon the maximum selling price of land, not less than $2.00, and not
in excess of $25.00, provided that, in case of successive statements
after the amount, or the amounts, paid, on account of such fee, shall
have reached the maximum of $25.00, the minimum fee of $2.00 shall
be paid on each successive statement thereafter filed.

(q) The distribution by a corporation actively engaged in the
business authorized by its charter, of capital stock, bonds or other
securities to its stockholders or security holders as a stock dividend
or other distribution out of earnings or surplus; or the issue of securities
to the security holders or other creditors of a corporation in the pro-
cess of a bona fide reorganization of such corporation, either as such,
or through medium of other corporate entity or entities, made in
good faith and not for the purpose of evading the provisions of this
act, either in exchange for the securities of such security holders or
claims of such creditors or partly for cash and partly in exchange for
the securities or claims of such security holders or creditors.

(r) Securities of any domestic corporation organized and/or
operating under the Cooperative Marketing Act, provided the over-
head of organization, flotation and commissions be not in excess of
ten per centum of the selling price.

(s) Securities consisting of memberships, and incidental benefits
included therewith, issued only to their members by bona fide non-
profit organizations, when offered, sold and distributed by any strictly
non-profit association or organization, whether incorporated or not,
provided, however, that whenever any provision of section three of
this law be applicable and no other provision of section four of this
law is applicable or is made available, it shall be necessary, in order
to obtain the benfit of this exemption, that any such organization
shall, before offering, selling and/or distributing any such member-
ships and in order to obtain and enjoy the benefit of this exemption,
apply for and secure, and upon any subsequent material alteration
or change in the scope, terms or provisions of any such membership
apply for and secure from time to time, a certificate of exemption in
accordance with the first paragraph of section four of the securities
law; and any such organization shall be entitled to such certificate
of exemption only when it has been established, to the satisfaction of
the commission, that the organization is bona fide, that the contract,
or undertakings incident to membership, in effect or proposed, are
fair and equitable, that the organization appears to the commission
to possess a reasonable capacity to perform the undertakings of the
contract and the obligations arising by virtue of membership therein,
and that there is reasonable probability that the organization will be
able to continue to function, and that the amounts paid or proposed
to be paid on account of overhead of organization and/or flotation are
not excessive; and the commission may, in its discretion, require
bond according and analogous to the provisions of section five (r) of
the securities law as a condition precedent to issuance of a certificate
of exemption hereunder; and provided, further, that nothing herein
contained shall have the effect of superseding or obviating the jurisdic-
tion of the State Corporation Commission under section six of the
securities law, for the issuance of cease and desist order, when appli-
cable in a particular case, as to any of the types of organizations hereby
conditionally exempted from necessity of qualification under the
securities law, and notwithstanding previous issuance of certificate
of exemption, nor as to any such organization to memberships in
which this exemption is applicable, when a certificate of exemption
is required hereunder and shall not have been secured as herein re-
quired; nor shall anything herein have the effect of excusing from, or
in any way affecting, the necessity of complying with the insurance
laws of the State when applicable, nor with the laws of the State gov-
erning the conduct of intrastate business by any foreign corporation
when applicable, nor with any other applicable law of the State of
Virginia. ,

After obtaining a certificate of exemption as hereinbefore re-
quired, there shall be a continuing jurisdiction for supervision, exami-
nation, et cetera, on the part of the commission, analogous to that
prescribed as to licensees under the securities law, and an annual fee
of one-hundredth of one per centum (.0001 of 1%) of the ultimate
payment amount of the outstanding memberships, et cetera, during
the preceding period of one year, May first to April thirtieth, inclu-
sive, shall be paid on or before May fifteenth for each ensuing year,
beginning May first, during which any such certificate of exemption
shall be outstanding and in effect, but such annual fee shall not be less
than twenty-five dollars ($25.00) nor more than one hundred dollars
($100.00) and any such certificate of exemption shall be and become
automatically suspended upon failure to pay such annual fee as and
when herein required.

(t) Securities consisting of certificates of accumulation and/or of
investment, whether by installment or single payments, and inci-
dental benefits included therewith, issued only to employees and
transferable, if at all, only to employees, by, or on behalf of, an em-
ployer, in the operation of a bona fide savings and investment plan
by, or under the control of, an employer, for the sole benefit of, or
right of participation on the part of, bona fide and regular employees;
provided, however, that whenever any provision of section three of
this law be applicable and no other provision of section four of this
law is applicable, or shall be made available, it shall be necessary, in
order to obtain the benefit of this exemption, that any such employer
shall, alone or together with subsidiary or other agency or agencies
for the operation and conduct of any such plan, before offering,
selling, and/or distributing any such securities, and in order that the
benefit of this exemption may be obtained and enjoyed, apply for and
secure, and upon any subsequent material alteration or change in the
scope, terms or provisions of any such plan, apply for and secure from
time to time, certificate of exemption in accordance with the first para-
graph of this section, four (4), of the securities law; such certificate of
exemption shall be issued only when it shall have been established, to
the satisfaction of the commission, that the proposal involves a bona
fide plan for systematic savings, accumulation and/or investment to
be conducted by or on behalf of an employer for the benefit of, and
right of participation only on the part of, bona fide regular employees
of such employer, that the provisions of contract and/or undertakings
incident to the plan are fair and equitable, that the employer appears
to the commission to possess reasonable capacity to perform such
contracts, undertakings, and obligations to be entered into and arising
by virtue of participation therein on the part of such employees, that
there is reasonable probability that the employer will be able to
continue to function, that the amount paid or proposed to be paid
on account of overhead of organization, flotation, and operation are
not excessive, and that, on the whole, in the judgment of the com-
mission, the proposed plan will probably be promotive of the welfare
and interests of employees and generally promotive of wholesome
relations between employer and employee; and the commission may,
in its discretion, require bond, or other appropriate security, analogous
and according to provisions of section five (r) of the securities law
(except that the penalty of any such bond, or amount of any such
security, shall be at the discretion of the commission, and except that
the statute of limitations upon action shall be that prescribed by
general laws), as a condition precedent to issuance of a certificate of
exemption hereunder, and the commission shall have discretionary
authority to prescribe and impose such other conditions, terms and
practices as shall, in the judgment of the commission, promote the
general purpose of this provision for obtaining a certificate of exemp-
tion, but which shall not unduly impede, burden, or obstruct the
formulation and operation of any such plan, and provided further,
that nothing herein contained shall have the effect of superseding or
obviating the jurisdiction of the State Corporation Commission under
section six of the securities law, for the issuance of cease and desist
order, when applicable in a particular case, as to any such plan or
enterprise, the securities of which are hereby conditionally exempted
from necessity of qualification under the securities law, and not-
withstanding previous issuance of certificate of exemption, nor as to
any such plan or enterprise to the securities of which this conditional
exemption is applicable, when a certificate of exemption is required
hereunder and shall not have been secured as herein required; nor
shall anything herein have the effect of excusing from, or in any way
affecting, the necessity of complying with the banking or insurance
laws of the State, nor with the laws governing the conduct of intra-
state business by any foreign corporation, nor with any other law of
the State of Virginia, when applicable.

After obtaining a certificate of exemption as hereinbefore required,
there shall be a continuing jurisdiction for supervision, examination,
et cetera, on the part of the commission, analogous to that prescribed
as to licensees under the securities law, and an annual fee of one-
hundredth of one per centum (.0001 of 1%) of the accumulated value
of the securities outstanding during the preceding period of one year,
May first to April thirtieth, inclusive, shall be paid on or before May
fifteenth, for each ensuing year, beginning May first, during which
any such certificate of exemption shall be outstanding and in effect,
but such annual fee shall not be less than twenty-five dollars ($25.00)
nor more than one hundred dollars ($100.00), and any such certificate
of exemption shall be and become automatically suspended upon
failure to pay such annual fee as and when herein required.

Section 5. Before any securities, designated in section three of
this act, which are not excepted or exempted from its operation, or
land lying outside of the State, subject to its provisions and not
excepted or exempted thereby, can be lawfully sold, offered for sale,
advertised, or otherwise promoted in the State of Virginia, it shall
be necessary on and after the day on which this act shall take effect
that the issuer and/or owner and/or promoter and/or agent shall
first have obtained from the State Corporation Commission, hereafter
called the commission authorization, or license, and no such authoriza-
tion, or license shall be granted until the provisions and requirements
of this act shall have been otherwise complied with and until there
first shall have been filed with the commission an application for
authorization or license, upon such forms as may be prescribed or
permitted by the commission, by the owner, issuer, promoter and/or
agent, duly executed and sworn to, and there shall be furnished and
filed with such application, to the satisfaction of the commission in
its exercise of a sound discretion, the following data and information,
so far as applicable to the particular case:

(a) A copy of the securities so to be promoted and, when appli-
cable, a plat of the lands to be sold.

(b) A statement in substantial detail of the assets and liabilities
of the person or company making and issuing such securities and of
any person or company guaranteeing the same, including specifically
the total amount of such securities and of any securities prior thereto
in interest or lien, authorized or issued by any such person or company.

(c) Ifsuch securities are secured by mortgage or other lien, a copy
of such mortgage or of the instrument creating such lien, and a com-
petent appraisal or valuation of the property covered thereby, with
a specific statement of all prior liens thereon, if any.

(d) Any abstract and a certificate of title may be required in
any case in which the commission deems it necessary, and if the
securities to be sold are lands, or an interest in lands, an abstract of
title thereto and the certificate of a competent attorney at law as to
the title to such lands shall be filed unless the commission shall for
good cause shown dispense with it.

(e) A full statement of facts showing the gross and net earnings,
if any, of any person or company making, issuing or guaranteeing
“ap securities, or of any property covered by any such mortgage or
ien.

(f) All material facts in the possession of applicant relative to
the character or value of such securities or of the property or earning
power of the person or company making, issuing or guaranteeing the
same.

(zg) A copy of any prospectus or advertising matter which is to
be used in connection with such promotion, and no such prospectus
or advertising matter shall be used, unless the same has been filed
hereunder, but same may be amended from time to time, by filing
copies of the amendments with the commission.

(h) The name, address, and selling territory in this State (which
may be, subject to discretion of the commission to the contrary,
state-wide) of each and every agent, salesman, or solicitor by or
through whom any such securities are to be offered, sold, advertised,
or otherwise distributed or promoted, and no such agent, et cetera,
natural or corporate, shall be employed unless such statement with
respect to such proposed agent, salesman or solicitor, together with
satisfactory evidence of good character on the part of such natural
person or on the part of the personnel of such corporate agent, et
cetera, has been filed and furnished hereunder, in manner and form
as shall be prescribed or permitted by the commission, and until the
license fee, as hereinafter provided, shall have been paid and the
license to act as such agent, salesman or solicitor shall have been
issued, and it shall be unlawful for any person, natural or corporate,
to act as such agent, salesman or solicitor until the license hereby
required shall have been issued, provided that no such license shall
be required on the part of the person or corporation in the name of
whom or which an authorization or license as issuer or promoter shall
have been issued.

Every application for a salesman’s license shall be accompanied by
a filing fee in the amount of five dollars, which amount, after presenta-
tion of application and payment thereof, shall in no case be returnable,
but the said filing fee shall be credited upon, or shall be in discharge
of, the annual license fee for the license year or the remainder thereof,
as the case may be, in the event the license shall be issued as applied
for.

All agents’, salesmen’s, or solicitors’ licenses shall be annual, and
the license year shall be from May first to April thirtieth following,
inclusive. The license fees which shall be payable hereunder shall
be as follows:

(1) For an original license issued and effective:

(a) Between May first and October thirty-first, inclusive,
ten dollars;

(b) Between Movember first and january thirty-first of
the following year, inclusive, seven dollars and fifty cents;

(c) Between February first and April thirtieth, inclusive,
five dollars;

, (2) Renewal license and re-license after expiration, or after
revocation or cancellation without prejudice, as agent of same holder
of authorization, or of same licensed dealer, issued and effective
within one year from expiration or cancellation, five dollars;

(3) License to a former licensee, issued and effective more than
one year from date of expiration or cancellation, to be considered an
original license, ten dollars, seven dollars and fifty cents, or five
dollars, according to effective date;

(4) If a person be holder of more than one license for the same
holder of an authorization, only one fee shall be payable;
(5) A-license in favor of one who holds, or has held during the
license year, a license under a dealer licensed under section four-(m),
and vice versa, shall be subject to the payment of fee, as upon an
original license, of ten dollars, seven dollars and fifty cents, or five
dollars, according to effective date, and shall be considered separately
for purposes of renewal fees;

(6) Every additional license, to be effective along with other
license or licenses of the same character, except as in number four
provided, will involve payment of license fee, original or renewal, of
five dollars;

(7) Every substitute salesman’s license, for a different issuer, pro-
moter or dealer, as the case may be, issued and effective upon the
cancellation of pre-existing license of the same character, will involve
payment of fee of two dollars and fifty cents;

(8) No fee shall be chargeable upon the mere removal from
suspense, during the same license year, of a salesman’s license which
has been placed in voluntary suspense and without prejudice;

(9) Upon the issuance of a re-license in any case in which a
license shall have been cancelled or revoked for cause, the filing fee
upon making application, and the annual fee in case such application
be granted, shall be as upon an original application.

(i) The name and address of such promoter, including the names
and addresses of all partners, if the promoter be a partnership, and
the names and addresses of the officers and directors or trustees, if
the promoter be a corporation or association.

(j) A statement showing in detail the plan on which the business
enterprise is to be conducted.

(k) The articles of co-partnership or association and all other
papers pertaining to its organization, if the securities be issued or
guaranteed by a co-partnership or unincorporated association.

(1) A copy of its charter and by-laws, if the securities be issued
or guaranteed by a corporation; provided, however, that if the corpora-
tion has not been chartered, a copy of the proposed charter and pro-
posed by-laws shall be filed.

(m) A copy of the contract to be used in taking subscriptions for
such securities wherein shall be set out a complete and accurate state-
ment, without unnecessary verbiage, of any stock or security of the
corporation whose securities are being offered for sale, which has been
or is proposed to be issued for any consideration, other than par value
or more in money.

It shall be unlawful for any person or corporation to engage in
selling, offering to sell or contracting to sell any security such as
designated in section three of this act or any land lying outside of
this State and embraced in the provisions of this act (unless some
exemption under section four is also applicable or shall have been
made available), except by contract, printed in at least ten point
type, in some color other than red, as to the body thereof, the form
of which shall be approved by the commission and in which shall be
plainly set out, without unnecessary verbiage, the material facts,
and the exact amount of money, fees, commissions, stock or securities
which any person has received or is to receive by reason of the pro-
motion or sale of such securities or land or which has been or is to be
given or paid for any property, patents, options, formulae, copyrights,
leases or promotion or intangible assets either directly or indirectly,
by any shift or device whatsoever, and it shall be unlawful for any
corporate officer or other person in any capacity whatsoever to pay or
issue or cause to be issued or paid for any such consideration, or as
a bonus any money, stock or securities except as set forth in such
subscription contract, unless any changed plan together with a
properly changed form of contract shall have first been approved by
the commission and such change shall be agreed to in a regularly
called stockholders’ meeting or in the event the promoter be not a
corporation, then same must be agreed to by those persons or their
assignees, who have purchased at par or more the majority of such
securities. In every such contract as provided for in this section the
following shall be stated in twelve point bold face type in red: ‘The
value of the stock or securities or land referred to in this contract has
not been passed upon by the State Corporation Commission.”’

The immediately foregoing requirement may be modified, in the
discretion of the commission, by the use of substitute language more
appropriately and accurately descriptive of the character of the sub-
ject matter of the offer and sale, and the commission may in its dis-
cretion dispense with the use of the said caveat entirely only if and
when the particular offering being authorized is strictly limited to
existing, record stockholders of the issuing corporation.

(n) If the securities are lands or interest in land, or in cases of
lands, et cetera, subject to the Securities law, a statement as to the
fixed price or the maximum and minimum prices at which such lands
or interests in land are to be offered or sold.

(o) A full statement of the exact amount which is being paid, or
is proposed or promised or contracted to be paid, directly, or in-
directly, in money, securities or otherwise, for the promotion of such
corporation and/or the flotation of such securities, either directly or
indirectly, to any person whatsoever.

(p) Any other information concerning the said promotion, its
assets or the persons interested therein, which the commission may
require.

(q) A filing fee of twenty-five dollars.

(r) In any case the commission shall have the right to require of
any promoter either before or after granting an authorization, or
license, for the sale of securities, or land, a bond, the form whereof
shall be prescribed and the surety approved by the commission,
penalty whereof shall be fixed by the commission at not more than
twenty per centum of the sales price of the securities or land proposed
or authorized to be sold. The said bond shall be with surety and
payable to the Commonwealth, condition that the facts set forth in
the application for such authorization, or license, and in all other
documents required by this act to be filed with the commission are
true, and that the provisions of this act shall be strictly complied
with, and that all moneys from the sale of such securities or land will
be used for the proper purpose or purposes as set forth in the sub-
scription contract and/or in the security sold and in the papers filed
with the commission; and that the contract of the promoter as set
forth in subscription and/or in the securities issued will be complied
with. Except when the surety offered is a surety company authorized
to do business in this State, it shall be the duty of the commission to
satisfy itself that such surety is amply solvent before accepting the
same; provided that the commission may, in its discretion, permit
some other form or method of giving the security contemplated by
this provision in lieu of requiring a bond as provided.

When the application shall have been approved by the commission,
the applicant shall before receiving an authorization, or license, to sell
securities or land required to be qualified under this act in the State,
pay a license fee, which license fee shall be computed at the rate of
one-tenth of one per centum upon the par value of all securities, or
maximum selling price of land, permitted to be sold in the State, pro-
vided, however, that if the security has no par value, such fee shall be
based on the selling price of the security. The maximum fee to be
charged or collected hereunder shall not exceed two hundred and fifty
dollars. The amount of the filing fee hereinbefore provided for shall
be deducted from the amount of license fee so ascertained.

The filing fee shall not be returnable, regardless of whether or not
an authorization or license issues and regardless of the withdrawal
of application, nor in cases in which the only action of the commission
is to issue or refuse to issue a certificate of exemption or order to the
effect that no qualification or registration by notification is necessary
as provided for in this act, nor shall any fee be returnable after au-
thorization or license issues or notification has been filed.

Upon every application for an additional authorization, or license,
after the maximum fee has been paid, a filing fee of twenty-five dollars
shall be paid.

On and after the effective date of this amendment to the Securities
Law, all authorizations, or licenses, for the offer, sale, et cetera, of
securities, under the Securities Law as such (to the exclusion of any
laws now or hereafter enacted by which any provisions of the said
Securities Law have been, or shall be, incorporated or adopted, in
whole or in part) and all such authorizations, or licenses, (subject to
a like exclusion) which shall be outstanding on the effective date of
this amendment, shall be upon an annual basis and shall become and
be in suspense, automatically, at midnight, April thirtieth, following
date of issuance after effective date of this amendment or on and
following the next ensuing May first, after the effective date of this
amendment in cases of such outstanding authorizations, or licenses,
and hereafter each and every authorization, or license, whether here-
tofore or hereafter issued, shall be and become automatically in
suspense, at midnight, April thirtieth, following date of issuance, or
of renewal, as the case may be, unless and until renewal authorization,
or license, shall have been issued as herein provided.

Upon application for renewal of authorization, or license, for an
ensuing license year, or for any portion thereof, the commission shall
have jurisdiction to determine, as of such time, the propriety of the
issuance of such renewal authorization, or license.

It shall be unlawful for any person, et cetera, after midnight of
April thirtieth following the issuance, removal from suspense, or
renewal of any authorization, or license, to offer, sell, advertise, or
otherwise act in pursuance of any such authorization, or license,
heretofore or hereafter issued under the Securities Law, unless and
until such renewal authorization, or license, shall have been obtained
and such annual license fee shall have been paid, as herein provided,
and any person, et cetera, doing any act hereby declared to be unlawful,
shall be amenable to the criminal, penal and civil consequences pre-
scribed by section fifteen of the Securities Law.

In addition to fees herein before prescribed, each holder of any
such authorization, or license, shall pay, upon renewal thereof on or
after May first, on account of annual license fee for such ensuing
license year, or part thereof, for the purpose of defraying, or con-
tributing to, the expenses of current regulation and supervision, the
amount of one-tenth of one per centum (.001 of 1%) of the amount
authorized and unsold, calculated as hereinbefore provided with
reference to original ultimate fee, provided that such annual renewal
fee shall not be less than ten dollars nor more than one hundred dollars.