CHAPTER 186

An Act to amend and reenact §§ 18.1-501 and 18.1-514 of the Code of
Virginia, relating, respectively, to definitions as used in the Securities
Act and, securities which are exempted from registration require.
ments under the Act.

{S 102)
Approved March 81, 1966

Be it enacted by the General Assembly of Virginia:
1. That §§ 18.1-501 and 13.1-514 of the Code of Virginia be amended anc
reenacted as follows:

§ 138.1-501. When used in this chapter, unless the context otherwis«
requires:

(a) “Commission” means the State Corporation Commission 0!

nia.

(b) “Agent” means any individual who, as a director, officer, partner
associate, employee or sales representative of a broker-dealer or issuer
effects or undertakes to effect sales of securities, otherwise than on behalf
of an issuer offering a security exempted by clause (1), (2), (3), (7), (10)
or (11) of § 18.1-514 (a).

(c) “Broker-dealer” means any person engaged in the business of
selling securities for the account of others or for his own account otherwise
than with or through a broker-dealer or agent, but does not include a bank
an issuer or an agent. *

(d) “Guaranteed” means guaranteed as to payment of principal
interest or dividends.

(e) “Issuer” means any person who issues or proposes to issue :
security, except that

(1) with respect to certificates of deposit, voting trust certificate:
or collateral-trust certificates, and with respect to certificates of interes’
or shares in an unincorporated investment trust not having a board of direc
tors (or persons performing similar functions) or of the fixed, restrictec

(2) with respect to equipment trust certificates or like securities
“issuer” means the person by whom the equipment is or is to be used;

(8) with respect to oil, gas or other mineral leases, rights or royalties
or interests therein, “issuer” means the owner of any such lease, right,
royalty or interest (whether whole or fractional) who creates fractional
interests therein for the purpose of offering to more than five persons.

(f) “Nonissuer distribution” means any transaction not directly or
indirectly for the benefit of the issuer.

(zg) “Person” means an individual, a partnership, a corporation, an
unincorporated association, a government, a subdivision of a government or
a trust in which the interests of the beneficiaries are evidenced by securities.

(h) (1) The term “sale” or “sell” includes every contract of sale
of, contract to sell, or disposition of, a security or interest in a security
for value.

(2) The term “offer” includes every attempt or offer to dispose of,
or solicitation of an offer to buy, a security or interest in a security for value.

(3) For the purposes of article 4 (§ 18.1-507 et seq.) of this chapter
the terms defined in this subsection shall not include negotiations or agree-
ments between the issuer and any underwriter or among underwriters;
or any transaction by the pledgee of a security unless made directly or in-
directly for the benefit of the issuer.

(4) Any security given or delivered with, or as a bonus on account
of, any purchase of securities or any other thing shall be deemed to consti-
— part of the subject of such purchase and to have been offered and sold

or value.

(5) Every sale or offer of a warrant or right to purchase or subscribe
to another security of the same issuer or of another person, and every sale
or offer, of a security which 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 person, shall be deemed to include an offer of
such other security.

(i) “Securities Act of 1933’, “Securities Exchange Act of 1934” and
“Investment Company Act of 1940” mean the federal statutes of those
names as now or hereafter amended.

(j) “Security” means any note; stock; treasury stock; bond; de-
benture; evidence of indebtedness; certificate of interest or participation
in any profit sharing agreement; collateral trust certificate; preorganiza-
tion certificate of subscription; transferable share; investment contract;
voting-trust certificate; certificate of deposit for a security; oil, gas or
other mineral lease, right or royalty, or any interest therein; or, in general,
any interest or instrument commonly known as a “security,” or any cer-
tificate of interest or participation in, temporary or interim certificate for,
guarantee of, or warrant or right to subscribe to or purchase, any of the
foregoing.

(k) “State” means any state, territory or possession of the United
States, including the District of Columbia and Puerto Rico.

§ 18.1-514. (a) The following securities are exempted from the
securities registration requirements of this chapter:

Any security (including a revenue obligation) issued or guaran-
teed by the United States, any state, any political subdivision of a state or
any agency or corporate or other instrumentality of one or more of the
foregoing; or any certificate of deposit for any of the foregoing;

(2) Any security issued or guaranteed by Canada, any Canadian
province, any political subdivision of any such province, any agency or
corporate or other instrumentality of one or more of the foregoing or any
other foreign government with which the United States currently maintains
diplomatic relations, if the security is recognized as a valid obligation by
such issuer or guarantor;
(8) Any security issued by and representing an interest in or a debt
of, or guaranteed by, the International Bank for Reconstruction and De-
velopment, or any national bank, or any bank or trust company organized
under the laws of any state and supervised by the banking commissioner
or similar official of that state or this State;

Any security issued by and representing an interest in or a debt
of, or guaranteed by, any federal building and loan association, or by any
building and loan association which is organized under the laws of this
State and is supervised and examined by the Commission;

(5) <Any security issued or guaranteed by an insurance company
licensed to transact insurance business in this State, or the sale of whose
stock has been licensed pursuant to § 38.1-123;

(6) Any security issued or guaranteed by any credit union or indus-
trial loan association which is organized under the laws of this State and
is supervised and examined by the Commission;

(7) Any security issued or guaranteed by any railroad, other common
carrier or public service company supervised as to its rates and the issuance
of its securities by a governmental authority of the United States, any
state, Canada or any Canadian province;

(8) Any security which is listed or approved for listing upon notice
of issuance on the New York Stock Exchange, the American Stock Ex-
change or the Midwest Stock Exchange, or which is listed on the Richmond
Stock Exchange; any other security of the same issuer which is of senior
or substantially equal rank; any security called for by subscription rights
or warrants admitted to trading in any of said exchanges; or any warrant
or right to subscribe to any of the foregoing securities; |

Any security issued by any person organized and operated not
for private profit but exclusively for religious, educational, benevolent,
charitable, fraternal, social, athletic or reformatory purposes, or as a cham-
ber of commerce or trade or professional association ;

(10) Any commercial paper which arises out of a current transaction
or the proceeds of which have been or are to be used for current transactions,
and which evidences an obligation to pay cash within nine months after
the date of issuance, exclusive of days of grace, or any renewal thereof
which i, likewise limited, or any guaranty of such paper or of any such
renewa

(11) Any security issued in connection with an employees’ stock

hase, savings, pension, profit-sharing or similar benefit plan;

(12) Any security issued by a cooperative association organized as a
corporation under the laws of this State;

(b) The following transactions are exempted from the securities
registration and the broker-dealer registration requirements of this chapter
except as in this subsection expressly provided:

(1) Any isolated transaction by the owner or pledgee of a security,
whether effected through a broker-dealer or not, which is not directly or
indirectly for the benefit of the issuer;

(2) Any non-issuer distribution by a registered broker-dealer of a
security if information regarding the issuer of such security is included
in one or more of the standard securities manuals in general use;

(3) Any non-issuer distribution by a registered broker-dealer of a
security that has been outstanding in the hands of the public for the past
five years, if the issuer in each of the past three fiscal years has lawfully
paid dividends on its common stock aggregating at least four per cent of
its current market price;

(4) Any transaction by a registered broker-dealer pursuant to an
unsolicited order or offer to buy;

(5) Any transaction in a bond or other evidence of indebtedness
secured by a real or chattel mortgage or deed of trust or by an agreement
for the sale of real estate or chattels, if the entire indebtedness secured
thereby is offered and sold as a unit;

(6) Any transaction in his official capacity by a receiver, trustee in
bankruptcy or other judicially appointed officer selling securities pursuant
to court order;

(7) <Any offer or sale to a corporation, investment company or pension
or profit-sharing trust or to a broker-dealer ;

(8) * Any sale of its securities by an issuer if, after the sale, it has
not more than thirty security holders, and if its securities have not been
offered to the general public by advertisement or solicitation. The number
of security holders of a corporation shall be deemed to include the security
holders of any other corporation that was organized to raise capital for tt.
Notwithstanding the provisions of subsection (c) (2), the merger or con-
solidation of corporations shall be a violation of this chapter tf the surviving
or new corporation has more than thirty security holders and all the
securities of the parties thereto were issued under this exemption, unless
all of the parties thereto have been engaged in transacting business for
more than two years prior to the merger or consolidation.

(9) Any transaction pursuant to an offer to existing security holders
of the issuer including holders of transferable warrants issued to existing
security holders and exercisable within ninety days of their issuance, if
either (A) no commission or other remuneration (other than a standby
commission) is paid or given directly or indirectly for soliciting any security
holder in this State, or (B) the issuer first notifies the Commission in writing
of the terms of the offer and the Commission does not by order disallow
the exemption within five full business days after the date of the receipt
of the notice;

(10) Any offer (but not a sale) of a security for which registration
statements have been filed under both this chapter and the Securities Act
of 1933; but this exemption shall not apply while a stop order is in effect
or, after notice to the issuer, while a proceeding or examination looking
toward such an order is pending under either act;

(11) The issuance of not more than three shares of common stock
ie one or more of the incorporators of a corporation and the initial transfer
ereof.
(c) The following transactions are exempted from all the provisions
of this chapter:

(1) The issuance of any stock dividend, whether the corporation
distributing the dividend is the issuer of the stock or not, if nothing of value
is given by stockholders for the distribution other than the surrender of a
right to a cash dividend where the stockholder can elect to take a dividend
in cash or stock; |

(2) Any transaction incident to a right of conversion or a statutory
or judicially approved reclassification, recapitalization, reorganization,
quasi-reorganization, stock split, reverse stock split, merger, consolidation
or sale of assets.

(d) In any proceeding under this chapter, the burden of proving an
exemption shall be upon the person claiming it.