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5.8: Intrastate Offering Exemption: Section 3(a)(11) and Rule 147
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Abstract
Section 3(a)(11) of the Securities Act of 1933 provides an exemption for: "Any security which is part of an issue offered and sold only to persons resident within a single State or Territory, where the issuer of such security is a person resident and doing business within or, if a corporation, incorporated by and doing business within, such State or Territory."[1] This exemption applies only if the securities are both offered and sold exclusively to domiciliaries (not merely "residents")[2] of the state in which the issuer is organized and doing at least 80 percent of its business and if the proceeds of the offering are going to be used for local purposes in that state. The local thrust of the exemption-both as to purchase and seller-has been codified in Rule 147, adopted in 1974. The Rule is deceptive, since it appears to open up offerings which can proceed without...
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