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Karen Tyler

Commissioner
ND Securities Department
600 East Boulevard Avenue
State Capitol, 5th Floor
Bismarck, ND 58505-0510
Phone: (701)-328-2910
Toll Free: (800)-297-5124
Fax: (701)-328-2946
Grafton Office
701 W 6th Street, #312
Grafton, ND 58237
Phone: 701-352-4592

Exemptions and Registration Requirements

Pen Checking off boxes

Overview of the filing requirements for certain exemptions from registration or registration for offerings of securities.

The following is a general discussion of the exemptions from the registration requirements and the registration process most commonly used by issuers who plan to offer a security for the purpose of raising capital in North Dakota. This discussion is not to be considered a complete or comprehensive treatise on the applicable securities law and should not be viewed as a substitute for competent legal counsel. An issuer should review the applicable state and federal securities statutes and rules for the specific requirements to be meet to qualify for an exemption or for registration.

Securities Exemptions:

Nonprofit Organization

This exemption provides for a filing and approval process for the offer and sale of a security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, fraternal, charitable, social, or reformatory purposes.

Filing Requirements:

  • Statute Cite 10-04-05(5), N.D.C.C.
  • Filing Fee: $150.00, Non-refundable
  • Make check payable to the NORTH DAKOTA SECURITIES DEPARTMENT
  • Form Required: Nonprofit Organization Claim of Exemption - Form NP
  • Exhibits Required
    1. Proof of current tax status under the Internal Revenue Code
    2. Offering disclosure document
    3. Consent to Service of Process - Form U-2
  • Approval Required Prior to Use of Exemption: Yes
  • Offering Period: One year from the date of approval
  • Renewal for additional period of one year $100.00

Limited Offeree

Offers to sell a security may be made to not more than thirty-five persons who are residents of North Dakota. Certain institutional and accredited investors need not be counted for purposes in calculating the limit of offers. The issuer must reasonably believe that all buyers in this state are purchasing for investment, with the exception of institutional buyers. No commission or other remuneration is paid for soliciting any prospective buyer except to dealers and agents registered in North Dakota. The commissioner may withdraw or condition the exemption, or increase or decrease the number of offerees permitted, or waive the condition relating to the purchasing for investment purposes.

Filing Requirements:

Limited Offering for North Dakota Issuers

Offers and sales may be made in this state of common stock, preferred stock, limited liability company membership interests, or limited partnership interests of an issuer. The issuer must reasonably believe that all buyers in this state are purchasing for investment, with the exception of institutional buyers. No commission or other remuneration is paid for soliciting any prospective buyer except to dealers and agents registered in North Dakota. The commissioner may withdraw or condition this exemption or waive the conditions for delivery of an offering disclosure document and the gross proceeds of an offering.

The following steps, in summary form, must be followed by an issuer in order to use the exemption:

  1. The issuer is both organized and has its principal place of business in this state.
  2. No public advertising or general solicitation except tombstone advertisements approved by commissioner is used.
  3. An offering disclosure document approved by the commissioner must be delivered to each offeree no less than seventy-two hours prior to the sale.
  4. The gross offering proceeds may not exceed five million dollars.
  5. All funds are placed in an escrow account until the total offering amount has been sold.

Filing Requirements:

  • Statute Cite: Section 10-04-06(9)(b), N.D.C.C.
  • Filing Fee: $150.00, Non-refundable
  • Make check payable to the NORTH DAKOTA SECURITIES DEPARTMENT
  • Form Required: North Dakota Issuer Exemption Application - Form E(S)
  • Exhibits Required: Stated in Item 9 of the application
  • Approval Required Prior to Use of Exemption: Yes
  • Offering Period: Twelve months from date of approval
  • Final Sales Report Required: Yes
  • Form Required: North Dakota Issuer Exemption Final Report of Sales
  • Form for Escrow of Funds: Impoundment Agreement - Form S-9
  • Approval of Tombstone Advertisement: Yes

Solicitations of Interest - "Test the Waters"

To use this exemption, the issuer must intend to either use an exemption from the registration requirements or register the security in North Dakota and with the Securities and Exchange Commission. However, no security may be sold, no money can be accepted, and no commitment to purchase the security can be accepted from potential investors during the "test the waters" process. This procedure will permit a business to only solicit indications of interest from potential investors in a proposed securities offering.

There are certain detailed steps, in addition to the following, that an issuer must observe in order to use this exemption.

  1. An issuer must file a solicitation of interest form and copies of any advertising or marketing materials with the securities commissioner for approval at least ten business days before the issuer begins soliciting indications of interest from potential investors.
  2. The issuer must file and obtain the approval of the commissioner for any amendments or changes in previously filed material.
  3. The text of any published notice or script for broadcast, and any printed material delivered must include certain disclosures and information as stated in the Form SOI.
  4. The issuer must stop all communications with prospective investors after filing an application to register or qualify the securities with the commissioner or with the Securities and Exchange Commission.

Filing Requirements:

  • Statute Cite: Section 10-04-06(15), N.D.C.C.
  • Filing Fee: None
  • Form Required: Solicitation of Interest Form - Form SOI
  • Exhibits Required: Any material to be used to conduct the solicitations of interest.
  • Approval Required Prior to Use of Exemption: Yes
  • Solicitation Period: Twelve months from date of approval

Incorporation Stage

This exemption allows for the issuance of common stock, limited liability membership interests or limited partnership interests to a person or other subscribers. The following conditions are contained in the exemption:

  1. The number of subscribers may not exceed ten in number.
  2. The offer or sale of the security is for the sole purpose of organization in this state.
  3. The security may not be resold to others for a period of twelve months.
  4. No advertising can be published or circulated.
  5. All sales are consummated within ten days after the date of organization.

Filing Requirements:

Accredited Investor

The exemption provides for the offer and sale of a security by an issuer provided that certain conditions are met, some of which are listed below in summary form:

  1. Sales of the security are made only to persons who are or the issuer reasonably believes are accredited investors as defined in Regulation D, Rule 501, as promulgated by the Securities and Exchange Commission.
  2. The exemption is not available to an issuer that is in the development stage or having no specific business plan or purpose.
  3. The issuer reasonably believes all purchasers are purchasing for investment and will hold such security for at least twelve months.
  4. A general announcement of the proposed offering may be made by inclusion of only certain information.
  5. No telephone solicitation is permitted, unless the issuer reasonably believes the prospective purchaser is an accredited investor.

Filing Requirements:

Securities Registrations:

If an offering of securities does not or the issuer elects not to qualify for an exemption from the registration requirements, then the securities must be registered before being offered for sale or sold in North Dakota, unless the offering involves a federal covered security. Some types of securities offerings may be exempt from federal registration, but still require registration in North Dakota or other states in which the offers or sales will be made. The registration for a primary offering of securities may be accomplished through Registration by Qualification or Registration by Coordination.

Every securities offering registered in North Dakota must be offered by a broker-dealer and agent registered in North Dakota. This requirement can be accomplished by having the offering sold by a broker-dealer registered with the Financial Industry Regulatory Authority (FINRA) and the state of North Dakota, or by the issuer registering as an Issuer-Dealer.

Registration by Qualification under N.D.C.C. 10-04-08

Summary of Filing Requirements:

  • Filing Fee: 1/10 of 1% of the aggregate amount of each security or class of security to be registered but not more than $2,500.00 with a minimum of $150.00 for each security or class of security to be registered.
  • Forms U-1, U-2, and U-2A with applicable exhibits.
  • Registration is required prior to making offers and sales.
  • Offering is effective for twelve months from date of registration.
  • To renew the offering, a renewal request letter, sales report, and $150.00 renewal fee must be received by the Department at least 15 days prior to the registration expiration date.
  • Issuer may register additional securities by filing a written request and fee.
  • Checks are made payable to the North Dakota Securities Department.

Registration by Coordination under N.D.C.C. 10-04-07.2

A security for which a registration statement has been filed under the federal Securities Act of 1933 [15 U.S.C. 77a et seq.] in connection with the same offering may be registered by coordination under 10-04-07.2. Only the issuer of the security or a broker-dealer registered under section 10-04-10 may make an application for registration of securities by coordination.

Summary of Filing Requirements:

  • Filing Fee: 1/10 of 1% of the aggregate amount of each security or class of security to be registered but not more than $2,500.00 with a minimum of $150.00 for each security or class of security to be registered.
  • Forms U-1, U-2, and U-2A with applicable exhibits.
  • A copy of the latest form of prospectus filed under the federal Securities Act of 1933 [15 U.S.C. 77a et seq.].
  • A copy of the articles of incorporation and bylaws, or substantial equivalents, currently in effect; a copy of any agreement with or among underwriters; a copy of any indenture or other instrument governing the issuance of the security to be registered; and a specimen, copy, or description of the security that is required by rule adopted or order issued under this chapter.
  • Copies of any other information or any other records filed by the issuer under the federal Securities Act of 1933 [15 U.S.C. 77a et seq.] requested by the commissioner.
  • An undertaking to forward each amendment to the federal prospectus, other than an amendment that delays the effective date of the registration statement, promptly after filing with the federal Securities and Exchange Commission.
  • Registration is required prior to offering and sales.
  • Offering is effective for 12 months from date of registration.
  • To renew the offering, a renewal request letter, sales report, and $150.00 renewal fee must be received by the Department at least 15 days prior to the registration expiration date.

Coordinated Review Programs

North Dakota participates in Coordinated Review programs facilitated through the North American Securities Administrators Association (NASAA). These programs provide coordinated review protocols for federally registered equity offerings, Small Company Offering Registrations (SCOR), direct participation programs such as real estate investment trusts, and Regulation A offerings. 

Coordinated Review programs for state registration of securities offerings streamline the process for issuers seeking multi-state registrations of their securities offerings. In addition to establishing uniform review standards, coordinated review is designed to expedite the registration process, saving the issuer time and money. Coordinated review is voluntary, and there is no additional cost for choosing to register an offering through coordinated review.  More information can be found at  www.coordinatedreview.org.

Address for Securities Filings:

North Dakota Securities Department
600 E. Boulevard Ave., 5th Floor
Bismarck, ND 58505-0510

Related Items

Century Code

N.D.C.C. 10-04 - Securities Act

The North Dakota Securities Department administers and enforces the North Dakota Securities Act, N.D.C.C. Chapter 10-04, by registering securities; reviewing exemptions; issuing no-action letters and interpretive opinions; and licensing broker-dealers and their agents, and investment advisers and their representatives.  The Securities Department investigates complaints alleging violations of the Securities Act and rules and if violations are found, the Securities Commissioner may bring an administrative or civil action or make a referral for criminal prosecution.

Other Regulators

Forms

North Dakota Issuer Exemption Application (E(S)) (SFN51949)

Intrastate Limited Offering Exemption