Chap. 341.—An ACT to amend and re-enact sections 2, 3, 4 and 5 of an act
entitled an act to prevent unfairness, imposition or fraud in the sale or
disposition of certain securities herein defined by requiring an inspection
thereof, providing for such inspection, supervision and regulation of the
business of any person, association, partnership, or corporation, engaged, or
intending to engage, whether as principal, broker or agent, in the sale of
any such securities in the State of Virginia as may be necessary to prevent
unfairness, imposition or fraud in the sale or disposition of said securities,
and prescribing penalties for the violation thereof, approved March 23, 1918,
as heretofore amended. [H B 277]

Approved March 29, 1934

1. Be it enacted by the General Assembly of Virginia, That sections
two, three, four and five of an act entitled an act to prevent unfair-
ness, imposition or fraud in the sale or disposition of certain “securi-
ties” herein defined by requiring an inspection thereof, providing for
such inspection, supervision, and regulation of the business of any
person, association, partnership, or corporation, engaged or intending
to engage, whether as principal, broker or agent, in the sale of any such
securities in the State of Virginia as may be necessary to prevent un-
fairness, imposition or fraud in the sale or disposition of said securities,
and prescribing penalties for the violation thereof, approved March
twenty-third, nineteen hundred and eighteen, as heretofore amended,
be amended and re-enacted so as to read as follows:

Section 2. The term “securities” as used in this act shall be taken
to mean stock, stock certificates, shares, bonds, debentures, certificates
of participation, rights of participation, assignments of interest whether
in writing or by verbal contract, in any enterprise or project, contracts,
contracts of indemnity and/or of insurance, service contracts, member-
ships, whether evidenced by certificate or other writing or not, and
whether in a profit or non-profit business or enterprise, or not, con-
tracts or bonds for the sale and conveyance of land lying outside of
this State on deferred payments or installment plan, subscriptions to
the capital stock or other securities of any corporation or joint stock
company, whether the same has been chartered or organized or not;
or other instruments and rights in the nature thereof by whatsoever
name known or called.

The term “enterprise” or “project” as used in this act shall be taken
to mean any business, undertaking, enterprise, project, venture or ac-
tivity, whether primarily for profit or not, for the promotion or
furtherance of which “securities” as herein defined are made, created,
issued, or otherwise originated, offered or advertised for sale, sold,
disposed of, distributed and/or promoted, and/or for the promotion
of the sale of any land included in the provisions of this act.

The word “promoter” as used in this act shall include any person,
issuer, agent, broker, dealer, promoter, advertiser, partnership, asso-
ciation or corporation who shall sell, offer for sale, advertise for sale,
dispose of, distribute and/or promote, or do any act in furtherance,
of or participation in, the sale, barter or exchange of any “securities”
as defined in, or of any land included in the provisions of, this act.

The term “issuer” as used in this act shall include any person, part-
nership, association, or corporation, who shall issue, make, devise,
create, or otherwise originate any securities such as are designated in
section three of this act.

The word “agent” as used in this act shall include any person,
natural or artificial, who shall, in individual or corporate capacity, sell.
offer for sale, advertise for sale, dispose of, distribute, promote, or dc
any act in furtherance of the sale, barter or exchange, or otherwise in
any manner participate in the sale, offer for sale, advertisement for
sale, disposition, distribution, and/or promotion of the sale, offer for
sale, barter or exchange of, and securities as defined and designated
in, and/or of any land included in the provisions of this act.
The words “advertising” and “advertisement” as used in this act
shall not be taken to refer in any way to newspapers, magazines, peri-
odicals or other regular mediums of advertisement unless the publishers
shall have written notice from the State Corporation Commission that
it has reason to believe that the issue of securities or offering of out o!
the State land being advertised or proposed to be advertised is required
to be qualified or registered under the provisions of this act, such news-
papers, magazines, periodicals or other regular mediums of advertise-
ment not being subject to the provisions of this law, in absence of suck
notice.

Section 3. Before any securities, as defined in this act, and/or
lots, parcels and/or units of land and/or in any subdivision of land
lying outside of this State, within the scope of any one or more of the
designations (a) to (q) of this section of this act, shall be offered for
sale, advertised for sale, sold, disposed of, distributed and/or pro-
moted, in this State, and/or before there be done, or participated in,
any act in furtherance of any such offer, advertisement, sale, barter
or exchange, on and after the day on which this act takes effect, such
securities and/or such lots, parcels and units of land must be first
qualified in accordance with the provisions of this act, unless specifi-
cally excepted or exempted by other provisions of this act:

(a) All securities to promote or induce the sale of which profit,
gain, advantage, incidents and/or features unusual in the ordinary
course of legitimate business is or are in any way advertised or prom-
ised as a material basis of value.

(b) The securities of any enterprise, association, partnership or
corporation where there is offered or paid more than ten per centum
of the selling price of such securities either in money, stock, property
or otherwise, either directly or indirectly as promotion fee and/or as
compensation for the organization of the issuing enterprise, association,
partnership or corporation, and/or the flotation and sale of its securi-
ties, including attorney fees, and all other expenses, but excluding
charter fees and fees under this act.

(c) The securities of any enterprise, association, partnership or
corporation which has included or proposes to include in its assets as
a material part thereof, oil, gas, coal or mineral lands, services of any
person or persons, leases or rights, options, patents, trademarks, copy-
rights, formulae, goodwill, promotion, or other similar tangible and/or
intangible assets, or which has issued or proposes to issue a material
part of its securities in payment for formulae, options, patents, trade-
marks, copyrights, goodwill, promotion, or other similar intangible
assets, oil, gas, coal or mineral lands, services of any person or persons,
or any consideration of a similar nature other than money, and for
the purposes of this subdivision (c), of section three, materiality shall
be determined from the standpoint of inducement to the prospective
purchaser and not from the standpoint of the monetary valuation car-
ried in the financial statement and/or stock statement in case of
domestic corporations and/or otherwise.
(d) Lots or units of unimproved or undeveloped land lying outside
of this State sold or offered for sale on any deferred payment or in-
stallment plan, where the value of such land materially depends on
the future performance of any stipulation or promise to furnish irri-
gation or transportation facilities, sidewalks, sewers, gas, light, streets,
or other value enhancing utility or improvements, or contracts made
or issued for the sale of, or interest in, such lots or units of land.

(e) Securities (certificates, contracts) issued by persons or com-
panies which purport to entitle the holder thereof to a loan from the
issuer after the payment of certain installments or dues, or contracts
of a similar nature by whomsoever issued, or by whatsoever named
called, other than an insurance contract or a promise to pay a certain
sum of money.

(£) Securities (certificates, contracts) which purport to permit
persons, associations, partnerships or corporations to purchase any
property, real, personal, or intangible at a less price or upon more
favorable terms than the general public is permitted to purchase same,
and/or which purport to entitle the purchaser, holder, or other party,
to services, forbearances, acts, or rights, and at less price, or upon
more favorable terms, than available to the general public, and/or as
incidental to the sale of property of any kind, or any interest therein,
when such sale of property is in pursuance of a general plan for sale
to the public and providing that possession be retained by the seller
or distributor.

(g) Units or lots of oil or mineral lands or any interest therein,
or oil, or any other mineral royalties, or royalty rights, or which par-
take of the substantial character of oil, or other mineral, royalties or
royalty rights, by whatsoever name known or called.

(h) Units or lots of land lying outside of this State, which land
is divided so as to be planted in trees, vines or shrubs or is divided
or to be divided into town or suburban lots, or any interest therein,
whether or not there be any deferment of payment and regardless of
whether there be any value enhancing promises, and notwithstanding
that such units or lots of land or the interests therein are owned out-
right by the seller and are fully paid for, provided that in case such
absolute ownership and outright sale by the owner, this section of the
securities law shall not apply unless there be a systematic and gen-
eral plan for the disposition of such lots or units or interests therein
and whether the seller has divided the property up into such town or
suburban lots for the purpose of sale in units or lots or has purchased
such units or lots in wholesale quantities for purpose of resale in
individual lots or units and is so selling or proposes to so sell, to the
public.

(i) Shares, participations, rights or interests, by whatsoever name
or term designated or described, in investment trusts and/or in any
enterprise or project having the essential characteristics of what is
commonly known as an investment trust, whether under the English
or American theory or plan, and by whatsoever term or name knowr
or called, and also the securities thereof for capital purposes.

(j) Securities in or under a declaration of trust or other such
agreement and/or of any enterprise or project having the essential
elements of a declaration of trust by whatsoever term or name known
or called, whether for capital purposes or as participations in the trust
or other such agreement.

(k) Securities, issued by an enterprise or project, whether styling
itself by the term “home company” or by some other title, by which
there shall be received single payments, installment payments, or con-
tributions to be held or used in any plan of accumulation or invest-
ment, and/or for the collection and payment on the partial payment or
installment or single payment plan when under the terms of the con-
tract constituting such security all or a part of the total amount re-
ceived is to be repaid as a loan, annuity, accumulation, or otherwise,
and/or the securities, whether issued for capital or in the conduct of
its business, of any enterprise or project having the essential charac-
teristics of the foregoing, or substantially similar thereto, by whatso-
ever name known or called.

(1) Securities for construction purposes when the total amount
secured by and/or based on the property involved is over twenty-five
thousand dollars and the securities are in any way dependent upon
the enhancement in value by the proposed improvements and construc-
tion for security and/or safety as a conservative investment. Nothing
herein shall be construed to apply to loans secured by deed of trust or
otherwise when there is not a distribution to the public, if there be a
bona fide loan as an investment even though for construction purposes.

(m) Securities issued by operators, and for the purpose of raising
capital for operation, under the uniform small loan law and/or under
the industrial loan law, whether to be so used, directly or indirectly,
and whether to be so used in this State and/or elsewhere, as distin-
guished from securities subsequently issued in the regular course of
business.

(n) Any security of, and issued by, and/or distributed by and/or
on behalf of, any holding company, and the term “holding company’’
shall be construed to mean and include any corporation, company, or
enterprise authorized by its charter, or by any amendment thereof, or
by its articles of association, trust instrument, declaration of trust, or
otherwise, to hold stock or securities or participating interests or evi-
dences of indebtedness in, or of, other corporations, companies or enter-
prises, and which exercises such right and power to any substantial
extent other than as a purely incidental and immaterial extent in con-
nection with the operation of the business of such corporation, com-
pany or enterprise;

(o) Collateral trust securities, whether the securities held in the
collateral trust are, or purport to be, first liens upon real estate or are
otherwise secured, or are unsecured, and regardless of whether guaran-

teed either as to principal or interest or both, unless the guarantee is
such as to effect an exemption under provision of section four-d or
other provision of section four.

(p) Securities giving, or purporting to give, any kind of insurance
or indemnity benefit when the corporation, association, firm or person
issuing such securities, making such contracts, or issuing such member-
ships or other evidences of right, whether a domestic or foreign cor-
poration or a resident or non-resident, shall not have fully qualified to
carry on such business under the applicable laws of the State of Vir-
ginia, and especially the insurance laws, and regardless of whether the
insurance laws are applicable and a qualification thereunder can be
effected, provided the essential features of insurance, indemnity, or
sickness, accident, health, or other similar benefits are in any way
involved, and the fact that the particular securities may not he subject
to qualification under the securities law because of inability to qualify
under any other applicable law, especially, the foreign corporation
and/or insurance laws, shall not prevent the application of this sub-
division (p) of section three, nor shall jurisdiction of the commission
under section six of the securities law be precluded because of inability
to comply with the insurance or other applicable laws of the State.

(q) Any security as to which non-applicability of the law or ap-
plication of an exemption is voluntarily waived, and the securing of
an authorization or license without obtaining an official ruling by ex-
press order of the commission shall constitute such voluntary waiver.

he State Corporation Commission shall have jurisdiction upon
application, payment of the filing fee and submission of such facts
and data as may be necessary for the purpose, after full hearing and
due consideration, to determine whether or not a particular security,
enterprise or project, is within the scope of any one or more of the
subdivisions of this section of this act, and it shall have jurisdiction
to enter an order to such effect, which, subject to the right of appeal,
shall be conclusive on the same state of facts in any court, in which
the matter may come for adjudication whether in a civil or a criminal
case, and it shall have authority, and it shall be its duty if desired, to
issue a certificate to such effect in a case in which it determines, whether
upon formal or informal application, that a certain security, enter-
prise or project, is not within the scope of any one or more of the
subdivisions of this section.

Should it be determined by the commission upon such application
that the security or land is within the scope of the provisions of this
act requiring a qualification, it shall proceed, if desired by the appli-
cant, to determine, upon the data then filed, or as subsequently filed,
whether an authorization or permit should issue.

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,
and submission of such facts and data as may be necessary, to deter-
mine whether or not particular security or securities, transaction or
transactions, or series of transactions, is or are exempt under the
provisions of this section, and to issue, if desired, a certificate 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 Colum-
bia 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 gov-
ernment of the United States pursuant to authority granted by the
congress of the United States or pursuant to other valid Federal au-
thority.

(d) Any security issued or guaranteed as to principal, by a cor-
poration owning or operating a railroad, or by any other public ser-
vice 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 com-
mission, 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 equip-
ment 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 un-
der 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 Federal Trade Commis-
sion or otherwise as the securities act of nineteen hundred and thirty-
three may be amended, shall not constitute, nor be construed to con-
stitute, an exemption within the meaning of this subdivision (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 of the State of Virginia and/or of any department
and/or of any agency thereof within the contemplation of such lan-
guage 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 expressly exempted or ex-
cepted from the regulatory and supervisory laws, now or hereafter
enacted, of the United States and/or of the State of Virginia shall
not be required to be qualified or registered under the Virginia se-
curities 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.

({) 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 distribution of stock
and/or memberships of or in such enterprise, and/or for the collec-
tion of subscriptions or membership fees, shall not be over ten per
cent of the amounts actually collected and paid into the treasury of
religious, benevolent, charitable, educational, fraternal, or reformatory,
and non-profit enterprises.

(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 approved exchange
on which such security is also admitted to trading, and provided this
exemption shall not apply to securities merely admitted to trading priv-
ileges, though on an approved exchange, when such securities are
not fully listed on any other approved exchange, 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 appli-
cable as an exemption, shall remain in effect, and only so long as the
exchange involved remains, or the exchanges involved remain, ap-
proved and in good standing under the provisions of this act. Ap-
plication 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 pay-
ment 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 publicity and reasonable protection
of the public now existing in the cases of the exchanges herein ap-
proved and as contemplated by the Virginia securities law. The com-
mission shall have jurisdiction, after due notice, opportunity to be
heard, investigation, and hearing, to revoke the approval of any ex-
change 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 here-
in, 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 pro-
tection 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 administrative 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.

(1) Securities of any insurance, surety, guaranty, or other such
company, subject to, and actually licensed and supervised by the Bureau
of Insurance and Banking, provided that this exemption shall not apply
to flotation of securities of such company prior to the actual licensing
and taking effect of the supervisory powers of the Bureau of Insurance
and Banking, but provided 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 Insurance and Banking, other than those
herein otherwise 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 supervisory powers of the Bureau of Insurance and Banking,
and provided further that this exemption shall not apply to the se-
curities of corporations, firms or individuals engaged in, or proposing
to engage in, business under the uniform small loan law, and/or un-
der 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 of-
fered 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 are sufficient to pay div-
idends on the securities of the new enterprise at the rates above men-
tioned.

(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 em-
ployed licensed salesmen or solicitors of such dealers outside the reg-
ular place or places of business of such licensed dealer, provided such
securities have been duly registered, or notification of intention to reg-
ister 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 un-
der the provisions of this act, and shall have, prior to such sale, or
offering, or advertisement, filed with the State Corporation Commis-
sion a registration of such offering accompanied by a statement duly
executed by such dealer that such dealer has no information which
leads him to: believe that the maximum total overhead expense of
organization 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 prior to such sale, or offer-
ing, or advertisement, notification of the intention to register a se-
curity, such dealer shall have two days, excluding day of notification
and the day of registration, from the time of giving such preliminary
notice 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 day of giving such notification, the two intervening days and the
day of making registration, such dealer may proceed with sales of
such securities as if the registration had been completed, on the day on
which notification was given, provided that such registration shall be
completed before the expiration of the third day after the day of noti-
fication.

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, promo-
tion, 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 man 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 par-
ticipation shall be a misdemeanor to the same extent, in the same man-
ner and in the same cases as otherwise provided in this act, notwith-
standing this exemption. 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 whatsoever, is in excess of twenty per centum of the
selling price to the public.

It is the contemplation of the foregoing and other similar provisions
that that percentage of the amount paid by the subscriber or pur-
chaser which represents the difference between the maximum permitted
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 qual-
ification subdivisions of land lying outside of Virginia when the pro-
visions of this act are otherwise applicable thereto.

In order for such regular dealer to be entitled to offer for sale
and advertise for sale and sell securities, otherwise subject to regular
qualifications 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 in
business in this State and have had a regular place of business in this
State for a period of six months prior to the date of his 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 regu-
lar place or places of business must obtain a salesman’s or solicitor’s li-
cense. 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 corpora-
tion, 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 reason-
able financial responsibility. ‘The commission may, in its discretion,
accept a bond with satisfactory surety and with conditions analogous
to those prescribed in section five-r hereof, and in such penalty as
the commission may determine, in lieu of, or in supplement to, evi-
dence 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 securi-
ties 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 securities under the provisions of this sub-
section. All such licenses shall be for the year beginning May first
and ending April thirtieth next following; 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 un-
der 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
investigation, but such application fee shall serve as payment of li-
cense for the portion of the year intervening between the granting of
such license and the first day of May following, in case dealer’s li-
cense 1s granted in pursuance of the application, but in case the li-
cense is for any reason not granted the application fee of twenty-
five dollars shall not be returnable.

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 in-
vestigation, to determine whether a registration by notification is
necessary, and if it be found not necessary, to issue an order, in the
nature of a certificate, to such effect, 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 exemption, as elsewhere provided in this
act.

The commission shall have jurisdiction in any case, after due no-
tice, hearing and consideration, to revoke any regular dealer’s license
and/or salesmen’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 pub-
lic, is 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 the
direct or indirect promotion of any enterprise or scheme within the
purview of this act, providing that such ownership and sale are in
good faith. Repeated or successive sales of any such security or
securities or land shall be prima facie evidence that the claims of own-
ership and sale in ordinary course are not bona fide, but mere shifts
or devices to evade the provisions of this act.

(o) The sale, transfer, or delivery to any bank, banker, trust com-
pany or dealer in securities.

(p) The sale, transfer, or delivery to those persons named in the
charter as directors, officers or incorporators, provided there be not such
sale, et cetera, to a total of more than ten such directors, officers, and/or
incorporators, or not to more than twenty-five persons, inclusive of
the directors, officers, and incorporators, the names of which persons

as prospective purchasers have been filed with the State Corporation
Commission.

(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 securi-
ties to the security holders or other creditors of a corporation in the
process of a bona fide reorganization of such corporation made in
good faith and not for the purpose of avoiding 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.

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 com-
mission, a permit, authorization, and/or license, as the case may be,
and no such permit, authorization, and/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 com-
mission an application for permit or authorization and/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 discre-
tion, 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 applica-
ble, 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 com-
pany.
(c) If such securities are secured by mortgage or other lien,
a copy of such mortgage or of the instrument creating such lien, and
a competent 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 se-
curities 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 such
securities, or of any property covered by any such mortgage or lien.

(f) All material facts in the possession of such promoter rela-
tive to the character or value of such securities or of the property or
earning power of the person or company making, issuing or guaran-
teeing the same.

(g) 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 names, addresses and selling territory in this State of
any agents by or through whom any such securities are to be sold,
and no such agents shall be employed unless such statement with re-
spect to them, together with satisfactory evidence of their good char-
acter, has been filed hereunder and there shall have been paid to the
commission a license fee of ten dollars for each such agent; provided,
however, that if such agent’s license shall be granted on or after March
first of any year, the fee for such license shall be the sum of five dol-
lars.

(1) 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 bus-
iness enterprise is to be conducted.

(h) 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 cor-
poration has not been chartered, a copy of the proposed charter and
proposed 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
statement, 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 des-
ignated in section three of this act or any land lying outside of this
State and embraced in the provisions of this act, except by printed
contract, the form of which shall be approved by the commission and

in which shall be plainly set out in type not smaller than ten point, in
some color other than red, without unnecessary verbiage, the exact
amount of money, fees, commissions, stock or securities which any
person has received or is to receive by reason of the promotion 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 pur-
chased 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 se-
curities or land referred to in this contract has not been passed upon
by the State Corporation Commission.”

(n) If the securities are lands or interests in land, 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 granting a permit or after granting a
permit for the sale of securities, or land, a bond, the form whereof
shall be prescribed and the surety approved by the commission, pen-
alty 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, conditioned that the facts set forth in the
application for such permit and in all other documents required by
this act to be filed with the commission are true, and that the pro-
visions 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 subscription 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 re-
quiring a bond as provided.

When the application shall have been approved by the commission,
the applicant shall before receiving a permit 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, provided, 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 de-
ducted from the amount of license fee so ascertained.

The filing fee shall not be returnable, regardless of whether or
not a permit or authorization 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 nec-
essary as provided for in this act, nor shall any fee be returnable af-
ter authorization or license issues or notification has been filed.

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