Chapter 460-99C WAC

CROWDFUNDING
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WAC 460-99C-010 Application. The r ul es i n t hi s chapt er appl y t o
t he exempt i on f r om r egi st r at i on set f or t h i n RCW 21. 20. 880 f or i nt r a
st at e of f er i ngs of secur i t i es exempt under sect i on 3( a) ( 11) of t he
f eder al Secur i t i es Act of 1933 and Secur i t i es and Exchange Commi ssi on
Rul e 147, 17 C. F. R. 230. 147 ( cr owdf undi ng exempt i on) . The r ul es ar e
i nt ended t o assi st Washi ngt on st ar t - up compani es i n accessi ng capi t al
i n smal l secur i t i es of f er i ngs t hr ough equi t y cr owdf undi ng ( cr owdf und
i ng of f er i ng) . I ssuer s may wor k i n col l abor at i on wi t h or gani zat i ons
t hat qual i f y as por t al s t o devel op busi ness pl ans, compl et e di scl osur e
document s, t o seek out ot her t echni cal assi st ance, and t o submi t f i l
i ngs i n connect i on wi t h a publ i c secur i t i es of f er i ng. The exempt i on i s
i nt ended t o r educe t he cost s and bur dens of r ai si ng equi t y capi t al f or
smal l busi nesses wi t hout sacr i f i ci ng i nvest or pr ot ect i on, and t o maxi
mi ze t he amount of of f er i ng pr oceeds avai l abl e t o t he i ssuer f or i n
vest ment i n t he busi ness. I ssuer s el i gi bl e f or t hi s exempt i on shal l
use t he Washi ngt on Cr owdf undi ng For m as t he di scl osur e document f or
t he of f er i ng.
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WAC 460-99C-020 Definitions. ( 1) " Escr ow agent " means a bank,
t r ust company, savi ngs bank, nat i onal banki ng associ at i on, bui l di ng
and l oan associ at i on, mor t gage banker , cr edi t uni on, i nsur ance compa
ny, an escr ow agent t hat i s r egi st er ed under chapt er 18. 44 RCW, or any
ot her i ndependent escr ow agent accept abl e t o t he di r ect or . The ent i t y
act i ng as t he escr ow agent must be i ndependent l y audi t ed or exami ned,
i n a manner accept abl e t o t he di r ect or , on a r egul ar basi s.
( 2) " Local associ at e devel opment or gani zat i on" means a Washi ngt on
associ at e devel opment or gani zat i on as def i ned i n RCW43. 330. 010.
( 3) " Por t di st r i ct " means a por t di st r i ct f or med under chapt er
53. 04 RCW.
( 4) " Por t al " means:
( a) A por t di st r i ct ;
( b) A l ocal associ at e devel opment or gani zat i on; or
( c) A br oker - deal er r egi st er ed wi t h t he di vi si on.
( 5) " Pr omot er " means:
( a) Any per son who, act i ng al one or i n conj unct i on wi t h one or
mor e ot her per sons, di r ect l y or i ndi r ect l y, t akes i ni t i at i ve i n f ound
i ng and or gani zi ng t he busi ness or ent er pr i se of an i ssuer ; or
( b) Any per son who, i n connect i on wi t h t he f oundi ng and or gani z
i ng of t he busi ness or ent er pr i se of an i ssuer , di r ect l y or i ndi r ect
l y, r ecei ves i n consi der at i on of ser vi ces or pr oper t y, or bot h ser v
i ces and pr oper t y, t en per cent or mor e of any cl ass of secur i t i es of
t he i ssuer or t en per cent or mor e of t he pr oceeds f r omt he sal e of any
cl ass of such secur i t i es. However , a per son who r ecei ves such secur i
[ 1 ] OTS- 6460. 3
t i es or pr oceeds ei t her sol el y as under wr i t i ng commi ssi ons or sol el y
i n consi der at i on of pr oper t y shal l not be deemed a pr omot er wi t hi n t he
meani ng of t hi s subsect i on i f such per son does not ot her wi se t ake par t
i n f oundi ng and or gani zi ng t he ent er pr i se.
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WAC 460-99C-030 Availability. ( 1) The cr owdf undi ng exempt i on i n
RCW21. 20. 880 i s i nt ended t o al l ow st ar t - up compani es t o r ai se capi t al
i n smal l secur i t i es of f er i ngs t o Washi ngt on r esi dent s. The r ul es i n
t hi s chapt er pr ovi de f or t he use of a si mpl i f i ed of f er i ng document de
si gned t o pr ovi de adequat e di scl osur e t o i nvest or s concer ni ng t he i s
suer , t he secur i t i es of f er ed, and t he of f er i ng i t sel f . Cer t ai n i ssuer s
may not be abl e t o make adequat e di scl osur e usi ng t he si mpl i f i ed Wash
i ngt on Cr owdf undi ng For m and wi l l , t her ef or e, be unabl e t o ut i l i ze
t hi s exempt i on. The di r ect or f i nds t hat t he Washi ngt on Cr owdf undi ng
For m i s gener al l y unsui t abl e f or t he f ol l owi ng i ssuer s and pr ogr ams
and t hat , t her ef or e, t hey wi l l not be al l owed t o ut i l i ze t he cr owd
f undi ng exempt i on unl ess wr i t t en per mi ssi on i s obt ai ned f r om t he di
r ect or based upon a showi ng t hat adequat e di scl osur e can be made t o
i nvest or s usi ng t he Washi ngt on Cr owdf undi ng For m:
( a) Hol di ng compani es, compani es whose pr i nci pal pur pose i s own
i ng st ock i n, or super vi si ng t he management of , ot her compani es;
( b) I nvest ment compani es subj ect t o t he I nvest ment Company Act of
1940, i ncl udi ng pr i vat e equi t y f unds;
( c) Por t f ol i o compani es, such as r eal est at e i nvest ment t r ust s;
( d) Devel opment st age compani es t hat ei t her have no speci f i c
busi ness pl an or pur pose or have i ndi cat ed t hat t hei r busi ness pl an i s
t o engage i n mer ger or acqui si t i on wi t h an uni dent i f i ed company or
compani es or ot her ent i t y or per son;
( e) Compani es wi t h compl ex capi t al st r uct ur es;
( f ) Bl i nd pool s;
( g) Commodi t y pool s;
( h) Compani es engagi ng i n pet r ol eum expl or at i on or pr oduct i on or
mi ni ng or ot her ext r act i ve i ndust r i es;
( i ) Equi pment l easi ng pr ogr ams; and
( j ) Real est at e pr ogr ams.
( 2) The cr owdf undi ng exempt i on i s avai l abl e onl y t o a cor por at i on
or cent r al l y managed l i mi t ed l i abi l i t y company or l i mi t ed par t ner shi p
t hat i s r esi dent and doi ng busi ness wi t hi n Washi ngt on at t he t i me of
any of f er or sal e of secur i t i es.
( 3) The aggr egat e pur chase pr i ce of al l secur i t i es of f er ed by an
i ssuer i n an of f er i ng made pur suant t o t he cr owdf undi ng exempt i on i n
RCW21. 20. 880 may not exceed one mi l l i on dol l ar s.
( 4) The cr owdf undi ng exempt i on i s avai l abl e onl y t o equi t y of f er
i ngs by t he i ssuer of t he secur i t i es and i s not avai l abl e t o any af
f i l i at e of t hat i ssuer or t o any ot her per son f or r esal e of t he i ssu
er ' s secur i t i es. The exempt i on i s not avai l abl e t o debt of f er i ngs.
( 5) For t he pur poses of t hi s sect i on, " equi t y" i ncl udes conver t i
bl e pr ef er r ed st ock t hat i s aut hor i zed and i ssued pur suant t o char t er
document s t hat pr ovi de hol der s of t he conver t i bl e pr ef er r ed st ock wi t h
t he f ol l owi ng pr ot ect i ons:
( a) A pr ovi si on r est r i ct i ng t he payment of di vi dends on common
st ock or ot her out st andi ng secur i t i es of t he i ssuer unl ess compar abl e
[ 2 ] OTS- 6460. 3
di vi dends ar e pai d on al l conver t i bl e pr ef er r ed st ock based on t he
number of common shar es i nt o whi ch t hey ar e conver t i bl e;
( b) A l i qui dat i on pr ef er ence t hat pr ovi des t hat t he hol der s of
t he conver t i bl e pr ef er r ed st ock ar e ent i t l ed t o r ecei ve i n pr ef er ence
t o t he hol der s of any out st andi ng common st ock an amount t hat i s at
l east equal t o t he amount at whi ch t he conver t i bl e pr ef er r ed st ock was
pur chased f r omt he company pl us any accr ued but unpai d di vi dends;
( c) A conver si on f eat ur e t hat al l ows hol der s of t he conver t i bl e
pr ef er r ed st ock t o conver t t hei r shar es i nt o common st ock of t he com
pany at any t i me at t he conver si on r at e of at l east one common shar e
per shar e of conver t i bl e pr ef er r ed st ock. The pr ef er r ed st ock may ei
t her be par t i ci pat i ng or nonpar t i ci pat i ng pr ef er r ed st ock;
( d) An appr opr i at e ant i di l ut i on pr ovi si on pr ovi di ng f or an ad
j ust ment of t he number of shar es i nt o whi ch such st ock i s conver t i bl e
upon any st ock spl i t , st ock di vi dend, or si mi l ar event . Such char t er
document s must al so pr ovi de f or a si mi l ar adj ust ment upon t he i ssuance
of addi t i onal common st ock, pr ef er r ed st ock, or conver t i bl e debt by
t he i ssuer f or consi der at i on l ess t han ei t her t he consi der at i on pai d
t o t he company f or t he conver t i bl e pr ef er r ed st ock or t he cur r ent mar
ket pr i ce f or t he common st ock;
( e) Vot i ng r i ght s t hat pr ovi de t hat hol der s of conver t i bl e pr e
f er r ed st ock shal l be ent i t l ed t o t hat number of vot es on al l mat t er s
pr esent ed t o st ockhol der s equal t o t he number of shar es of common
st ock t hen i ssuabl e upon conver si on of such shar es;
( f ) Vot i ng r i ght s t hat pr ovi de t hat as l ong as at l east f i f t y
per cent of t he conver t i bl e pr ef er r ed st ock i ssued r emai ns out st andi ng,
t he appr oval by at l east f i f t y per cent of t he vot i ng i nt er est s i n t he
out st andi ng shar es of conver t i bl e pr ef er r ed st ock i s r equi r ed i n con
nect i on wi t h:
( i ) The cr eat i on of any seni or or par i passu secur i t y t o t he con
ver t i bl e pr ef er r ed st ock;
( i i ) The r epur chase of secur i t i es;
( i i i ) Any i ncr ease or decr ease i n t he number of aut hor i zed secur
i t i es;
( i v) The adopt i on or amendment of any i ncent i ve compensat i on
pl an;
( v) Any adver se change t o t he r i ght s, pr ef er ences, and pr i vi l eges
of t he conver t i bl e pr ef er r ed st ock;
( vi ) Any r edempt i on, r epur chase, or ot her acqui si t i on f or val ue
of any of t he company' s equi t y secur i t i es, ot her t han f r om pr esent or
f or mer consul t ant s, di r ect or s, or empl oyees pur suant t o t he t er ms of a
st ock opt i on pl an of t he company;
( vi i ) Any mat er i al change i n t he company' s l i ne of busi ness;
( vi i i ) The mer ger , consol i dat i on, or r eor gani zat i on of t he compa
ny wi t h and i nt o anot her company or ent i t y, or of any ot her company or
ent i t y wi t h and i nt o t he company;
( i x) The acqui si t i on of a subst ant i al por t i on of t he asset s or
busi ness of anot her company or ent i t y or any ot her acqui si t i on of ma
t er i al asset s;
( x) A sal e of al l or subst ant i al l y al l of t he company' s asset s;
( xi ) Di ssol ut i on or l i qui dat i on of t he company; and
( xi i ) Any ot her act i on mat er i al l y adver sel y af f ect i ng t he i nt er
est s of t he hol der s of t he conver t i bl e pr ef er r ed st ock.
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WAC 460-99C-040 Filing requirements. I n addi t i on t o f i l i ng a
pr oper l y compl et ed Washi ngt on Cr owdf undi ng For m, i ssuer s seeki ng t o
r el y on t he cr owdf undi ng exempt i on i n RCW 21. 20. 880 shal l f i l e t he
f ol l owi ng wi t h t he di vi si on:
( 1) The f i l i ng f ee as pr escr i bed i n WAC 460- 99C- 260;
( 2) The i ssuer ' s ar t i cl es of i ncor por at i on or ot her char t er docu
ment s pur suant t o whi ch t he i ssuer i s or gani zed i n t hi s st at e and al l
amendment s t her et o;
( 3) The i ssuer ' s by- l aws or oper at i ng agr eement , and al l amend
ment s t her et o;
( 4) A copy of any r esol ut i ons by di r ect or s set t i ng f or t h t er ms
and pr ovi si ons of capi t al st ock t o be i ssued or by managi ng member s
set t i ng f or t h t er ms and or capi t al owner shi p i nt er est t o be i ssued;
( 5) The i ssuer ' s f i nanci al st at ement s as of t he end of t he i ssu
er ' s most r ecent f i scal year , pr epar ed i n accor dance wi t h gener al l y
accept ed account i ng pr i nci pl es i n t he Uni t ed St at es. I f t he dat e of
t he most r ecent f i scal year end i s mor e t han ni net y days pr i or t o t he
dat e of f i l i ng, t he i ssuer must al so submi t an unaudi t ed bal ance sheet
and unaudi t ed st at ement of i ncome or oper at i ons pr epar ed i n accor dance
wi t h gener al l y accept ed account i ng pr i nci pl es i n t he Uni t ed St at es f or
t he i ssuer ' s most r ecent f i scal quar t er ;
( 6) A copy of any agr eement s bet ween t he i ssuer and any por t al ;
( 7) A copy of t he escr ow agr eement bet ween t he i ssuer and an es
cr ow agent l ocat ed i n t he st at e of Washi ngt on i n whi ch of f er i ng pr o
ceeds wi l l be deposi t ed;
( 8) A copy of any subscr i pt i on agr eement f or t he pur chase of se
cur i t i es i n t hi s of f er i ng;
( 9) A speci men or copy of t he secur i t y t o be of f er ed, i ncl udi ng
r equi r ed l egends, i f t he i ssuer wi l l i ssue physi cal cer t i f i cat es;
( 10) A copy of al l adver t i si ng and ot her mat er i al s di r ect ed t o or
t o be f ur ni shed t o i nvest or s i n t hi s of f er i ng; and
( 11) Any ot her document r easonabl y r equest ed by t he di r ect or .
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WAC 460-99C-050 Information requirements. The i ssuer shal l f ur
ni sh t o pr ospect i ve i nvest or s, at a r easonabl e t i me pr i or t o t he sal e
of secur i t i es i n r el i ance on t he cr owdf undi ng exempt i on i n RCW
21. 20. 880, t he most r ecent Washi ngt on Cr owdf undi ng For m decl ar ed ex
empt by t he di r ect or , i ncl udi ng al l r equi r ed exhi bi t s t her et o.
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WAC 460-99C-060 Declaration of exempt offering. An of f er i ng
made i n r el i ance on t he cr owdf undi ng exempt i on i n RCW 21. 20. 880 shal l
not commence unt i l t he di r ect or has decl ar ed t he of f er i ng exempt . Nei
t her t he f act t hat an of f er i ng has been decl ar ed exempt under RCW
21. 20. 880 nor t he f act t hat a Washi ngt on Cr owdf undi ng For m has been
[ 4 ] OTS- 6460. 3
f i l ed const i t ut es a f i ndi ng by t he di r ect or t hat any document f i l ed
under t hese r ul es i s t r ue, compl et e, and not mi sl eadi ng. Nei t her any
such f act nor t he f act t hat a cr owdf undi ng exempt i on i s avai l abl e
means t hat t he di r ect or has passed i n any way upon t he mer i t s of or
qual i f i cat i ons of , or r ecommended or gi ven appr oval t o, any per son,
secur i t y, or t r ansact i on. I t i s unl awf ul t o make, or cause t o be made,
t o any pr ospect i ve pur chaser , cust omer , or cl i ent any r epr esent at i on
i nconsi st ent wi t h t hi s sect i on.
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WAC 460-99C-070 Duration of exempt offering. A cr owdf undi ng of
f er i ng under RCW 21. 20. 880 may be decl ar ed exempt f or a maxi mum of
t wel ve mont hs. An exempt of f er i ng may be r enewed f or one addi t i onal
t wel ve- mont h per i od i n accor dance wi t h WAC 460- 99C- 100.
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WAC 460-99C-080 Pending offeringNotice of termination. The
di r ect or may i n hi s or her di scr et i on send not i ce t o t he i ssuer i n any
pendi ng cr owdf undi ng of f er i ng under RCW 21. 20. 880 i n whi ch no act i on
has been t aken f or ni ne mont hs i mmedi at el y pr i or t o t he sendi ng of
such not i ce, advi si ng t he i ssuer t hat t he pendi ng f i l i ng wi l l be t er
mi nat ed t hi r t y days f r om t he dat e of sendi ng unl ess on or bef or e t he
t er mi nat i on dat e t he i ssuer makes appl i cat i on i n wr i t i ng t o t he di r ec
t or showi ng good cause why i t shoul d be cont i nued as a pendi ng of f er
i ng. I f such appl i cat i on i s not made or good cause not shown, t he di
r ect or may t er mi nat e t he pendi ng of f er i ng.
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WAC 460-99C-090 Amendments to Washington Crowdfunding FormMa
terial changes. I n an of f er i ng made i n r el i ance on t he cr owdf undi ng
exempt i on i n RCW21. 20. 880, i f at any t i me whi l e t he of f er i ng i s ongo
i ng t her e i s a mat er i al change t hat woul d af f ect t he accur acy of t he
i nf or mat i on cont ai ned i n t he Washi ngt on Cr owdf undi ng For m af t er t he
of f er i ng i s decl ar ed exempt by t he di r ect or , t he i ssuer shal l amend
t he f or m. I n no event shal l t he Washi ngt on Cr owdf undi ng For m be r e
vi sed l ess of t en t han ever y t wel ve mont hs. Al l amendment s must f i r st
be f i l ed wi t h t he di vi si on and be decl ar ed exempt pr i or t o t hei r use.
[ 5 ] OTS- 6460. 3
NEWSECTI ON
WAC 460-99C-100 Renewal filing requirements. ( 1) A cr owdf undi ng
of f er i ng decl ar ed exempt under RCW 21. 20. 880 may be r enewed by f i l i ng
a r enewal not i ce no l at er t han t hi r t y days pr i or t o t he expi r at i on of
t he or i gi nal exempt of f er i ng per i od decl ar ed by t he di r ect or .
( 2) A r enewal not i ce shal l consi st of t he f ol l owi ng:
( a) A r epor t of sal es as of t he most r ecent pr act i cabl e dat e;
( b) A copy of t he i ssuer ' s updat ed Washi ngt on Cr owdf undi ng For m;
( c) The i ssuer ' s f i nanci al st at ement s as of t he end of t he i ssu
er ' s most r ecent f i scal year , pr epar ed i n accor dance wi t h gener al l y
accept ed account i ng pr i nci pl es i n t he Uni t ed St at es. I f t he dat e of
t he most r ecent f i scal year end i s mor e t han ni net y days pr i or t o t he
dat e of r enewal , t he i ssuer must al so submi t an unaudi t ed bal ance
sheet and unaudi t ed st at ement of i ncome or oper at i ons pr epar ed i n ac
cor dance wi t h gener al l y accept ed account i ng pr i nci pl es i n t he Uni t ed
St at es f or t he i ssuer ' s most r ecent f i scal quar t er ; and
( d) The f i l i ng f ee pr escr i bed i n WAC 460- 99C- 260.
( 3) A cr owdf undi ng of f er i ng shal l not be consi der ed r enewed unt i l
t he di r ect or has decl ar ed t he r enewal of f er i ng exempt .
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WAC 460-99C-110 Minimum target offering amount. ( 1) The i ssuer
shal l speci f y a mi ni mum t ar get of f er i ng amount and deadl i ne t o r ai se
t he mi ni mum t ar get of f er i ng amount i n i t s Washi ngt on Cr owdf undi ng
For m. The i ssuer must demonst r at e t o t he di r ect or t hat t he mi ni mum
t ar get of f er i ng amount , t oget her wi t h ot her sour ces of f i nanci ng, i s
suf f i ci ent t o i mpl ement t he busi ness pl an of t he i ssuer . I f t he pr o
ceeds ar e i nsuf f i ci ent , t he di r ect or may r equi r e a r evi sed mi ni mum
t ar get of f er i ng amount .
( 2) The deadl i ne by whi ch t he i ssuer must r ai se i t s mi ni mum t ar
get of f er i ng amount may be no l onger t han t wel ve mont hs f r om t he dat e
t he of f er i ng i s decl ar ed exempt by t he di r ect or .
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WAC 460-99C-120 Investor right of cancellation. ( 1) I n an of
f er i ng conduct ed under RCW 21. 20. 880, an i nvest or may cancel an i n
vest ment commi t ment f or any r eason unt i l such t i me as t he t ar get mi ni
mumof f er i ng amount has been r ai sed.
( 2) I f t her e i s a mat er i al change t o t he t er ms of t he of f er i ng or
t o t he i nf or mat i on pr ovi ded by t he i ssuer i n t he Washi ngt on Cr owdf und
i ng For m bef or e t he mi ni mum t ar get of f er i ng amount has been r ai sed,
t he i ssuer must gi ve or send t o any i nvest or who has made an i nvest
ment commi t ment not i ce of t he mat er i al change and not i ce t hat t he i n
vest or may cancel an i nvest ment commi t ment f or any r eason unt i l such
t i me as t he t ar get mi ni mumof f er i ng amount has been r ai sed.
[ 6 ] OTS- 6460. 3
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WAC 460-99C-130 Escrow agreement provisions. ( 1) The i ssuer
must ent er i nt o an escr ow agr eement wi t h an i ndependent escr ow agent ,
as def i ned i n WAC 460- 99C- 020, l ocat ed i n t he st at e of Washi ngt on t hat
i ncl udes t he f ol l owi ng t er ms:
( a) Al l of f er i ng pr oceeds shal l be mai nt ai ned i n an account con
t r ol l ed by t he escr ow agent ;
( b) Al l of f er i ng pr oceeds wi l l be r el eased t o t he i ssuer onl y
when t he aggr egat e capi t al r ai sed f r om al l pur chaser s i s equal t o or
gr eat er t han t he mi ni mumt ar get of f er i ng amount speci f i ed i n t he Wash
i ngt on Cr owdf undi ng For m;
( c) I f t he pr oceeds do not meet t he mi ni mum r equi r ement s by t he
deadl i ne set f or t h i n t he Washi ngt on Cr owdf undi ng For m, t he escr ow
agent must :
( i ) Rel ease and r et ur n t he pr oceeds di r ect l y t o t he i nvest or s;
( i i ) Pay t o i nvest or s, on a pr o r at a basi s, any i nt er est ear ned
on t he pr oceeds; and
( i i i ) Not deduct any expenses, i ncl udi ng f ees of t he escr ow
agent .
( d) No cr edi t or or af f i l i at e of t he i ssuer , por t al s engaged by
t he i ssuer , or escr ow agent wi l l have any cl ai m t o t he escr owed pr o
ceeds;
( e) The escr ow agent agr ees t o mai nt ai n i t s i ndependence f r omt he
i ssuer and i t s of f i cer s, di r ect or s, managi ng member s, and af f i l i at es.
( f ) The di r ect or may i nspect t he r ecor ds of t he i mpound account
mai nt ai ned by t he escr ow agent at any r easonabl e t i me at t he l ocat i on
of t he r ecor ds, and copy any r ecor d t hat i s i nspect ed.
( 2) The escr ow agr eement must be si gned by an of f i cer of t he i s
suer and an aut hor i zed r epr esent at i ve of t he escr ow agent .
( 3) The escr ow agent may not be af f i l i at ed wi t h t he i ssuer or i t s
of f i cer s, di r ect or s, managi ng member s, or af f i l i at es.
NEWSECTI ON
WAC 460-99C-140 Issuer compliance with investor limitations.
Pr i or t o accept i ng i nvest or f unds or an i r r evocabl e commi t ment t o i n
vest , t he i ssuer must obt ai n t he f ol l owi ng f r omeach i nvest or :
( 1) Evi dence of r esi dency of t he i nvest or i n t he st at e of Wash
i ngt on;
( 2) A copy of t he I nvest or Cer t i f i cat i ons and Acknowl edgement s
For mpr escr i bed by t he di r ect or t hat has been ei t her manual l y or el ec
t r oni cal l y si gned by t he i nvest or .
NEWSECTI ON
WAC 460-99C-150 Aggregate investment limitations. ( 1) I n each
sal e of secur i t i es i n r el i ance on t he cr owdf undi ng exempt i on under RCW
21. 20. 880, t he i ssuer must r easonabl y bel i eve t hat t he aggr egat e
amount of secur i t i es sol d t o any i nvest or by one or mor e i ssuer s of
[ 7 ] OTS- 6460. 3
f er i ng or sel l i ng secur i t i es under t he cr owdf undi ng exempt i on dur i ng
t he t wel ve- mont h per i od pr ecedi ng t he dat e of t he sal e, t oget her wi t h
t he secur i t i es t o be sol d by t he i ssuer t o t he i nvest or , does not ex
ceed t he l esser of :
( a) Two t housand dol l ar s or f i ve per cent of t he annual i ncome or
net wor t h of t he i nvest or , whi chever i s gr eat er , i f ei t her t he annual
i ncome or t he net wor t h of t he i nvest or i s l ess t han one hundr ed t hou
sand dol l ar s; or
( b) Ten per cent of t he annual i ncome or net wor t h of t he i nvest
or , as appl i cabl e, up t o one hundr ed t housand dol l ar s, i f ei t her t he
annual i ncome or net wor t h of t he i nvest or i s one hundr ed t housand
dol l ar s or mor e.
( 2) For t he pur pose of det er mi ni ng t he annual i ncome of an i n
vest or under t hi s sect i on, t he annual i ncome of an i nvest or shal l be
t he i nvest or ' s l owest annual net i ncome out of t he t wo most r ecent l y
compl et ed cal endar or f i scal year s, pr ovi ded t hat t he i nvest or has a
r easonabl e expect at i on of havi ng at l east t hat amount of net i ncome i n
t he cur r ent cal endar or f i scal year .
( 3) For t he pur pose of cal cul at i ng t he net wor t h of an i nvest or
under t hi s sect i on:
( a) The i nvest or ' s pr i mar y r esi dence shal l not be i ncl uded as an
asset ;
( b) I ndebt edness t hat i s secur ed by t he i nvest or ' s pr i mar y r esi
dence, up t o t he est i mat ed f ai r mar ket val ue of t hat pr i mar y r esi dence
at t he t i me of t he sal e of secur i t i es, shal l not be i ncl uded as a l i a
bi l i t y ( except t hat i f t he amount of such i ndebt edness out st andi ng at
t he t i me of t he sal e of secur i t i es exceeds t he amount out st andi ng si x
t y days bef or e such t i me, ot her t han as a r esul t of t he acqui si t i on of
t he pr i mar y r esi dence, t he amount of such excess shal l be i ncl uded as
a l i abi l i t y) ; and
( c) I ndebt edness t hat i s secur ed by t he i nvest or ' s pr i mar y r esi
dence i n excess of t he est i mat ed f ai r mar ket val ue of t he pr i mar y r es
i dence shal l be i ncl uded as a l i abi l i t y.
NEWSECTI ON
WAC 460-99C-160 Evidence of residency. ( 1) At or bef or e t he
t i me an i ssuer accept s any f unds or an i r r evocabl e commi t ment t o i n
vest by any per son i n an of f er i ng conduct ed i n r el i ance on t he cr owd
f undi ng exempt i on under RCW 21. 20. 880, ei t her t he i ssuer or an agent
r epr esent i ng t he i ssuer must obt ai n evi dence of t he r esi dency of t he
per son i n t he st at e of Washi ngt on.
( 2) For pur poses of subsect i on ( 1) of t hi s sect i on, t he f ol l owi ng
i s a nonexcl usi ve l i st of pr i ma f aci e evi dence of t he r esi dency of any
per son pr ovi ded, however , t hat t he i ssuer or i t s agent does not have
knowl edge t hat such per son i s not a r esi dent of t he st at e of Washi ng
t on:
( a) A val i d dr i ver ' s l i cense, chauf f eur ' s l i cense, or of f i ci al
per sonal i dent i f i cat i on car d i ssued by t he st at e of Washi ngt on;
( b) A cur r ent Washi ngt on vot er r egi st r at i on;
( c) A conceal ed weapons per mi t ;
( d) A homeowner ' s i nsur ance pol i cy or i nvoi ce showi ng t he addr ess
of t he i nsur ed pr oper t y or r esi dence;
[ 8 ] OTS- 6460. 3
( e) A home ut i l i t y bi l l ( such as gas, el ect r i ci t y, wat er , gar
bage, l andl i ne t el ephone, or cabl e) or hook- up wor k or der dat ed wi t hi n
t he past si xt y days. A ut i l i t y bi l l or wor k or der i s not accept abl e i f
t wo unr el at ed peopl e ar e l i st ed;
( f ) Mor t gage document s;
( g) A pr oper t y t ax bi l l or st at ement dat ed wi t hi n t he past t wel ve
mont hs;
( h) The per son' s name and addr ess i n a cur r ent phone book made by
a t el ephone book publ i sher ;
( i ) A moor age bi l l or cont r act showi ng t he per son l i ves on a boat
i n a mar i na i n t he st at e of Washi ngt on;
( j ) A f eder al or st at e gover nment agency- i ssued check;
( k) A t r i bal I D t hat cont ai ns t he per son' s cur r ent r esi dent i al
addr ess;
( l ) A f i l ed pr oper t y deed or t i t l e f or t he per son' s cur r ent r esi
dence;
( m) An aut o i nsur ance pol i cy;
( n) A Washi ngt on st at e busi ness l i cense;
( o) Busi ness mai l dat ed wi t hi n t he past si xt y days. Mai l must i n
cl ude t he per son' s f i r st and l ast name, and must be f r omst at e or f ed
er al r evenue depar t ment s, t he Soci al Secur i t y Admi ni st r at i on, t he U. S.
Tr easur y, or t he I nt er nal Revenue Ser vi ce. I t may not be addr essed " i n
car e of , " " f or , " or " par ent of " ;
( p) Medi cal r ecor ds pai d by i nsur ance or a medi cal bi l l ;
( q) A medi cai d car d or depar t ment of soci al and heal t h ser vi ces
medi cal coupon;
( r ) A pay st ub t hat cont ai ns t he per son' s name, t he per son' s cur
r ent r esi dence addr ess, t he empl oyer ' s name, and t he empl oyer ' s phone
number or addr ess;
( s) A pr of essi onal l i cense;
( t ) A sel ect i ve ser vi ce car d showi ng a Washi ngt on st at e addr ess;
( u) A pr of essi onal l y f i l ed t ax r et ur n or f i l ed copy sent t o t he
per son by t he I nt er nal Revenue Ser vi ce f or t he most r ecent t ax f i l i ng
year ;
( v) A W- 2 f or mf or t he pr evi ous year ;
( w) A Washi ngt on st at e vehi cl e r egi st r at i on.
NEWSECTI ON
WAC 460-99C-170 Restrictions on resale. ( 1) Secur i t i es i ssued
i n r el i ance on t he cr owdf undi ng exempt i on i n RCW 21. 20. 880 may not be
t r ansf er r ed by t he pur chaser dur i ng a one- year per i od begi nni ng on t he
dat e of pur chase, unl ess t he secur i t i es ar e t r ansf er r ed:
( a) To t he i ssuer of t he secur i t i es;
( b) To an accr edi t ed i nvest or ;
( c) Pur suant t o an ef f ect i ve r egi st r at i on st at ement under t he Se
cur i t i es Act of Washi ngt on, chapt er 21. 20 RCW; or
( d) To a member of t he f ami l y of t he pur chaser or t he equi val ent ,
or i n connect i on wi t h t he deat h or di vor ce or ot her si mi l ar ci r cum
st ances, i n t he di scr et i on of t he di r ect or .
( 2) Secur i t i es i ssued under t he cr owdf undi ng exempt i on i n RCW
21. 20. 880 ar e al so r est r i ct ed by t he r equi r ement s f or t he f eder al ex
empt i on f r om r egi st r at i on f or i nt r ast at e of f er i ngs under sect i on 3( a)
( 11) of t he f eder al Secur i t i es Act of 1933, 15 U. S. C. 77c( a) ( 11) , and
[ 9 ] OTS- 6460. 3
secur i t i es and exchange commi ssi on Rul e 147, 17 C. F. R. 230. 147, i n
cl udi ng r est r i ct i ons on t r ansf er of secur i t i es by t he pur chaser .
Note: Rule 147 generally provides that during the period in which securities that are part of an issue are being offered and sold by the issuer, and for
a period of nine months fromthe date of last sale by the issuer of such securities, all resales of any part of the issue, by any person, shall be
made only to persons residing within the state of Washington. Issuers are cautioned to carefully review and implement safeguards to ensure
their compliance with the restrictions contained in Rule 147, as well as the restrictions contained in RCW 21.20.880.
NEWSECTI ON
WAC 460-99C-180 Quarterly reporting requirements. For as l ong
as secur i t i es i ssued under t he cr owdf undi ng exempt i on i n RCW21. 20. 880
r emai n out st andi ng, t he i ssuer shal l pr ovi de a quar t er l y r epor t t o t he
i ssuer ' s shar ehol der s by maki ng such r epor t publ i cl y accessi bl e, f r ee
of char ge, at t he i ssuer ' s i nt er net web si t e addr ess wi t hi n f or t y- f i ve
days of t he end of each f i scal quar t er . The r epor t must cont ai n t he
f ol l owi ng i nf or mat i on:
( 1) Execut i ve of f i cer and di r ect or compensat i on, i ncl udi ng spe
ci f i cal l y t he cash compensat i on ear ned by t he execut i ve of f i cer s and
di r ect or s si nce t he pr evi ous r epor t and on an annual basi s, and any
bonuses or ot her compensat i on, i ncl udi ng st ock opt i ons or ot her r i ght s
t o r ecei ve equi t y secur i t i es of t he i ssuer or any af f i l i at e of t he i s
suer , r ecei ved by t hem;
( 2) The names of t he i ssuer ' s owner s of t went y per cent or mor e of
a cl ass of out st andi ng secur i t i es, di r ect or s, of f i cer s, managi ng mem
ber s and/ or ot her per sons occupyi ng si mi l ar st at us or per f or mi ng si mi
l ar f unct i ons on behal f of t he i ssuer ;
( 3) Fi nanci al st at ement s f or t he i ssuer ' s most r ecent f i scal year
end pr epar ed i n accor dance wi t h gener al l y accept ed account i ng pr i nci
pl es i n t he Uni t ed St at es; and
( 4) A br i ef anal ysi s by management of t he i ssuer of t he busi ness
oper at i ons and f i nanci al condi t i on of t he i ssuer .
NEWSECTI ON
WAC 460-99C-190 Final sales report. Upon compl et i on of an of
f er i ng made i n r el i ance on t he cr owdf undi ng exempt i on i n RCW
21. 20. 880, an i ssuer shal l f i l e a f i nal sal es r epor t i n t he f or m pr e
scr i bed by t he di r ect or no l at er t han t hi r t y days af t er t he l ast sal e
i n t he of f er i ng wi t h t he di r ect or t hat i ncl udes t he f ol l owi ng i nf or ma
t i on:
( 1) The t i me per i od i n whi ch t he of f er i ng was open;
( 2) The number of shar es or uni t s sol d i n t he of f er i ng;
( 3) The number of i nvest or s t hat pur chased shar es or uni t s i n t he
of f er i ng; and
( 4) The dol l ar amount sol d i n t he of f er i ng.
[ 10 ] OTS- 6460. 3
NEWSECTI ON
WAC 460-99C-200 Integration. ( 1) Al l sal es t hat ar e par t of t he
same of f er i ng i n r el i ance on t hese r ul es must meet al l of t he t er ms
and condi t i ons of t hese r ul es. Of f er s and sal es t hat ar e made mor e
t han si x mont hs bef or e t he st ar t of an of f er i ng or ar e made mor e t han
si x mont hs af t er compl et i on of an of f er i ng, wi l l not be consi der ed
par t of t hat of f er i ng, so l ong as dur i ng t hose si x mont h per i ods t her e
ar e no of f er s or sal es of secur i t i es by or f or t he i ssuer t hat ar e of
t he same or a si mi l ar cl ass as t hose of f er ed or sol d under t hese
r ul es, ot her t han t hose of f er s or sal es of secur i t i es under an empl oy
ee benef i t pl an.
( 2) The f ol l owi ng f act or s shoul d be consi der ed i n det er mi ni ng
whet her of f er s and sal es shoul d be i nt egr at ed f or pur poses of t he
cr owdf undi ng exempt i on under t hese r ul es:
( a) Whet her t he sal es ar e par t of a si ngl e pl an of f i nanci ng;
( b) Whet her t he sal es i nvol ve i ssuance of t he same cl ass of se
cur i t i es;
( c) Whet her t he sal es have been made at or about t he same t i me;
( d) Whet her t he same t ype of consi der at i on i s r ecei ved; and
( e) Whet her t he sal es ar e made f or t he same gener al pur pose.
NEWSECTI ON
WAC 460-99C-210 Activities of portals. ( 1) A por t al shal l r e
qui r e, at a mi ni mum, t he f ol l owi ng i nf or mat i on f r oman i ssuer pl anni ng
a cr owdf undi ng of f er i ng under RCW21. 20. 880 pr i or t o of f er i ng ser vi ces
t o t he i ssuer or f or war di ng t he i ssuer ' s mat er i al s t o t he di r ect or :
( a) A descr i pt i on of t he i ssuer , i ncl udi ng t ype of ent i t y, l oca
t i on, and busi ness pl an, i f any;
( b) The i ssuer ' s i nt ended use of pr oceeds f r om t he cr owdf undi ng
of f er i ng under RCW21. 20. 880;
( c) I dent i t i es of of f i cer s, di r ect or s, managi ng member s and t en
per cent benef i ci al owner s, as appl i cabl e;
( d) A descr i pt i on of any out st andi ng secur i t i es; and
( e) A descr i pt i on of any l i t i gat i on or l egal pr oceedi ngs i nvol v
i ng t he i ssuer , i t s of f i cer s, di r ect or s, managi ng member s, or t en per
cent benef i ci al owner s, as appl i cabl e.
( 2) Upon r ecei pt of t he i nf or mat i on set f or t h i n subsect i on ( 1)
of t hi s sect i on, t he por t al may of f er ser vi ces t o t he i ssuer t hat t he
por t al deems appr opr i at e or necessar y t o meet t he cr i t er i a f or t he ex
empt i on. Such act i vi t i es may i ncl ude:
( a) Assi st ance wi t h t he devel opment of a busi ness pl an;
( b) Mi ni st er i al assi st ance i n compl et i on of cr owdf undi ng exemp
t i on f i l i ngs under t hese r ul es;
( c) Ref er r al t o l egal ser vi ces;
( d) Ref er r al t o busi ness consul t i ng and account i ng ser vi ces t o
assi st wi t h compi l i ng and r epor t i ng f i nanci al i nf or mat i on r equi r ed by
t hese r ul es;
( e) Ot her t echni cal assi st ance i n pr epar at i on f or a cr owdf undi ng
of f er i ng by t he i ssuer ; and
( f ) Submi ssi on of exempt i on mat er i al s t o t he di r ect or .
[ 11 ] OTS- 6460. 3
( 3) Por t al s ar e pr ohi bi t ed f r omengagi ng i n t he f ol l owi ng act i vi
t i es:
( a) Pr ovi di ng i nvest ment advi ce or r ecommendat i ons i f t he por t al
i s not r egi st er ed or exempt f r om r egi st r at i on as an i nvest ment advi s
er ;
( b) Sol i ci t i ng pur chases, sal es, or of f er s t o buy secur i t i es of
f er ed i n connect i on wi t h i t s ser vi ces unl ess t he por t al i s a br oker -
deal er r egi st er ed wi t h t he di vi si on;
( c) Compensat i ng empl oyees, agent s, or ot her per sons f or t he so
l i ci t at i on of pur chases, sal es, or of f er s i n connect i on wi t h i t s ser v
i ces unl ess t he por t al i s a br oker - deal er r egi st er ed wi t h t he di vi
si on;
( d) Hol di ng, managi ng, possessi ng, handl i ng i nvest or f unds or se
cur i t i es, or ot her wi se act i ng i n t he manner of an escr ow agent on be
hal f of an i ssuer ; or
( e) Engagi ng i n conduct const i t ut i ng t hat of an under wr i t er or
any ot her act i vi t y t hat const i t ut es pur chasi ng secur i t i es f or t he pur
pose of di st r i but i on.
NEWSECTI ON
WAC 460-99C-220 Bad actor disqualification. ( 1) The cr owdf und
i ng exempt i on under RCW 21. 20. 880 shal l not be avai l abl e i f t he i ssu
er ; any pr edecessor of t he i ssuer ; any af f i l i at ed i ssuer ; any di r ec
t or , execut i ve of f i cer , ot her of f i cer par t i ci pat i ng i n t he of f er i ng,
gener al par t ner , or managi ng member of t he i ssuer ; any benef i ci al own
er of t went y per cent or mor e of t he i ssuer ' s out st andi ng vot i ng equi t y
secur i t i es, cal cul at ed on t he basi s of vot i ng power ; any pr omot er con
nect ed wi t h t he i ssuer i n any capaci t y at t he t i me of maki ng an exemp
t i on f i l i ng under RCW 21. 20. 880; any per son t hat has been or wi l l be
pai d ( di r ect l y or i ndi r ect l y) r emuner at i on f or sol i ci t at i on of pur
chaser s i n connect i on wi t h t he of f er i ng of secur i t i es; or any di r ec
t or , execut i ve of f i cer or ot her of f i cer par t i ci pat i ng i n t he of f er i ng
of any such sol i ci t or , gener al par t ner , or managi ng member of such so
l i ci t or :
( a) Has been convi ct ed, wi t hi n t en year s bef or e maki ng an exemp
t i on f i l i ng under RCW21. 20. 880 or f i ve year s, i n t he case of i ssuer s,
t hei r pr edecessor s, and af f i l i at ed i ssuer s, of any f el ony or mi sde
meanor :
( i ) I n connect i on wi t h t he pur chase or sal e of any secur i t y;
( i i ) I nvol vi ng t he maki ng of any f al se f i l i ng wi t h t he secur i t i es
and exchange commi ssi on or a st at e secur i t i es commi ssi on ( or an agency
or of f i cer of a st at e per f or mi ng l i ke f unct i ons) ; or
( i i i ) Ar i si ng out of t he conduct of t he busi ness of an under wr i t
er , br oker , deal er , muni ci pal secur i t i es deal er , i nvest ment advi ser ,
or pai d sol i ci t or of pur chaser s of secur i t i es;
( b) I s subj ect t o any or der , j udgment or decr ee of any cour t of
compet ent j ur i sdi ct i on, ent er ed wi t hi n f i ve year s bef or e maki ng an ex
empt i on f i l i ng under RCW 21. 20. 880, t hat , at t he t i me of f i l i ng, r e
st r ai ns or enj oi ns such per son f r om engagi ng or cont i nui ng t o engage
i n any conduct or pr act i ce:
( i ) I n connect i on wi t h t he pur chase or sal e of any secur i t y;
[ 12 ] OTS- 6460. 3
( i i ) I nvol vi ng t he maki ng of any f al se f i l i ng wi t h t he secur i t i es
and exchange commi ssi on or a st at e secur i t i es commi ssi on ( or an agency
or of f i cer of a st at e per f or mi ng l i ke f unct i ons) ; or
( i i i ) Ar i si ng out of t he conduct of t he busi ness of an under wr i t
er , br oker , deal er , muni ci pal secur i t i es deal er , i nvest ment advi ser ,
or pai d sol i ci t or of pur chaser s of secur i t i es;
( c) I s subj ect t o a f i nal or der of a st at e secur i t i es commi ssi on
( or an agency or of f i cer of a st at e per f or mi ng l i ke f unct i ons) ; a
st at e aut hor i t y t hat super vi ses or exami nes banks, savi ngs associ a
t i ons, or cr edi t uni ons; a st at e i nsur ance commi ssi on ( or an agency or
of f i cer of a st at e per f or mi ng l i ke f unct i ons) ; an appr opr i at e f eder al
banki ng agency; t he U. S. Commodi t y Fut ur es Tr adi ng Commi ssi on; or t he
Nat i onal Cr edi t Uni on Admi ni st r at i on t hat :
( i ) At t he t i me of maki ng an exempt i on f i l i ng under RCW
21. 20. 880, bar s t he per son f r om:
( A) Associ at i on wi t h an ent i t y r egul at ed by such commi ssi on, au
t hor i t y, agency, or of f i cer ;
( B) Engagi ng i n t he busi ness of secur i t i es, i nsur ance or banki ng;
or
( C) Engagi ng i n savi ngs associ at i on or cr edi t uni on act i vi t i es;
or
( i i ) Const i t ut es a f i nal or der based on a vi ol at i on of any l aw or
r egul at i on t hat pr ohi bi t s f r audul ent , mani pul at i ve, or decept i ve con
duct ent er ed wi t hi n t en year s bef or e maki ng an exempt i on f i l i ng under
RCW21. 20. 880;
( d) Has f i l ed a r egi st r at i on st at ement whi ch i s t he subj ect of a
cur r ent l y ef f ect i ve r egi st r at i on st op or der ent er ed pur suant t o t he
Secur i t i es Act of Washi ngt on, chapt er 21. 20 RCW, or any ot her st at e' s
secur i t i es l aw, wi t hi n f i ve year s pr i or t o maki ng an exempt i on f i l i ng
f or an of f er i ng under RCW21. 20. 880;
( e) I s cur r ent l y subj ect t o any st at e admi ni st r at i ve enf or cement
or der or j udgment ent er ed by t he Washi ngt on st at e admi ni st r at or of se
cur i t i es or any ot her st at e' s secur i t i es admi ni st r at or wi t hi n f i ve
year s pr i or t o maki ng an exempt i on f i l i ng f or an of f er i ng under RCW
21. 20. 880 or i s subj ect t o any st at e' s admi ni st r at i ve enf or cement or
der or j udgment i n whi ch f r aud or decei t i ncl udi ng, but not l i mi t ed
t o, maki ng unt r ue st at ement s of mat er i al f act s and omi t t i ng t o st at e
mat er i al f act s, was f ound and t he or der or j udgment was ent er ed wi t hi n
f i ve year s pr i or t o maki ng an exempt i on f i l i ng f or an of f er i ng under
RCW21. 20. 880;
( f ) I s subj ect t o an or der of t he Secur i t i es and Exchange Commi s
si on ent er ed pur suant t o sect i on 15( b) or 15B( c) of t he Secur i t i es Ex
change Act of 1934 ( 15 U. S. C. 78o( b) or 78o- 4( c) ) or sect i on 203( e) or
( f ) of t he I nvest ment Advi ser s Act of 1940 ( 15 U. S. C. 80b- 3( e) or ( f ) )
t hat , at t he t i me of maki ng an exempt i on f i l i ng under RCW21. 20. 880:
( i ) Suspends or r evokes such per son' s r egi st r at i on as a br oker ,
deal er , muni ci pal secur i t i es deal er or i nvest ment advi ser ;
( i i ) Pl aces l i mi t at i ons on t he act i vi t i es, f unct i ons or oper a
t i ons of such per son; or
( i i i ) Bar s such per son f r om bei ng associ at ed wi t h any ent i t y or
f r ompar t i ci pat i ng i n t he of f er i ng of any penny st ock;
( g) I s subj ect t o any or der of t he Secur i t i es and Exchange Com
mi ssi on ent er ed wi t hi n f i ve year s bef or e maki ng an exempt i on f i l i ng
under RCW21. 20. 880 t hat , at t he t i me of f i l i ng, or der s t he per son t o
cease and desi st f r omcommi t t i ng or causi ng a vi ol at i on or f ut ur e vi o
l at i on of :
[ 13 ] OTS- 6460. 3
( i ) Any sci ent er - based ant i - f r aud pr ovi si on of t he f eder al secur
i t i es l aws, i ncl udi ng wi t hout l i mi t at i on sect i on 17( a) ( 1) of t he Se
cur i t i es Act of 1933 ( 15 U. S. C. 77q( a) ( 1) ) , sect i on 10( b) of t he Se
cur i t i es Exchange Act of 1934 ( 15 U. S. C. 78j ( b) ) and 17 C. F. R.
240. 10b- 5, sect i on 15( c) ( 1) of t he Secur i t i es Exchange Act of 1934 ( 15
U. S. C. 78o( c) ( 1) ) and sect i on 206( 1) of t he I nvest ment Advi ser s Act of
1940 ( 15 U. S. C. 80b- 6( 1) ) , or any ot her r ul e or r egul at i on t her eunder ;
or
( i i ) Sect i on 5 of t he Secur i t i es Act of 1933 ( 15 U. S. C. 77e) .
( h) I s suspended or expel l ed f r om member shi p i n, or suspended or
bar r ed f r omassoci at i on wi t h a member of , a r egi st er ed nat i onal secur
i t i es exchange or a r egi st er ed nat i onal or af f i l i at ed secur i t i es asso
ci at i on f or any act or omi ssi on t o act const i t ut i ng conduct i nconsi s
t ent wi t h j ust and equi t abl e pr i nci pl es of t r ade;
( i ) Has f i l ed ( as a r egi st r ant or i ssuer ) , or was named as an un
der wr i t er i n, any r egi st r at i on st at ement or Regul at i on A of f er i ng
st at ement f i l ed wi t h t he secur i t i es and exchange commi ssi on t hat ,
wi t hi n f i ve year s bef or e such sal e, was t he subj ect of a r ef usal or
der , st op or der , or or der suspendi ng t he Regul at i on A exempt i on, or
i s, at t he t i me of such sal e, t he subj ect of an i nvest i gat i on or pr o
ceedi ng t o det er mi ne whet her a st op or der or suspensi on or der shoul d
be i ssued; or
( j ) I s subj ect t o a Uni t ed St at es Post al Ser vi ce f al se r epr esen
t at i on or der ent er ed wi t hi n f i ve year s bef or e t he maki ng of an exemp
t i on f i l i ng under RCW 21. 20. 880, or i s, at t he t i me of such f i l i ng,
subj ect t o a t empor ar y r est r ai ni ng or der or pr el i mi nar y i nj unct i on
wi t h r espect t o conduct al l eged by t he Uni t ed St at es Post al Ser vi ce t o
const i t ut e a scheme or devi ce f or obt ai ni ng money or pr oper t y t hr ough
t he mai l by means of f al se r epr esent at i ons.
( 2) For pur poses of subsect i on ( 1) of t hi s sect i on, " f i nal or der "
shal l mean a wr i t t en di r ect i ve or decl ar at or y st at ement i ssued by a
f eder al or st at e agency descr i bed i n subsect i on ( 1) ( c) of t hi s sect i on
under appl i cabl e st at ut or y aut hor i t y t hat pr ovi des f or not i ce and an
oppor t uni t y f or hear i ng, whi ch const i t ut es a f i nal di sposi t i on or ac
t i on by t hat f eder al or st at e agency.
( 3) Subsect i on ( 1) of t hi s sect i on shal l not appl y:
( a) Upon a showi ng of good cause and wi t hout pr ej udi ce t o any
ot her act i on by t he di r ect or , i f t he di r ect or det er mi nes t hat i t i s
not necessar y under t he ci r cumst ances t hat an exempt i on be deni ed;
( b) I f , bef or e t he r el evant f i l i ng, t he cour t or r egul at or y au
t hor i t y t hat ent er ed t he r el evant or der , j udgment or decr ee advi ses i n
wr i t i ng ( whet her cont ai ned i n t he r el evant j udgment , or der or decr ee
or separ at el y t o t he di r ect or or i t s st af f ) t hat di squal i f i cat i on un
der subsect i on ( 1) of t hi s sect i on shoul d not ar i se as a consequence
of such or der , j udgment , or decr ee; or
( c) I f t he i ssuer est abl i shes t hat i t di d not know and, i n t he
exer ci se of r easonabl e car e, coul d not have known t hat a di squal i f i ca
t i on exi st ed under subsect i on ( 1) of t hi s sect i on. An i ssuer wi l l not
be abl e t o est abl i sh t hat i t has exer ci sed r easonabl e car e unl ess i t
has made, i n l i ght of t he ci r cumst ances, f act ual i nqui r y i nt o whet her
any di squal i f i cat i ons exi st . The nat ur e and scope of t he f act ual i n
qui r y wi l l var y based on t he f act s and ci r cumst ances concer ni ng, among
ot her t hi ngs, t he i ssuer and t he ot her of f er i ng par t i ci pant s.
( 4) For pur poses of subsect i on ( 1) of t hi s sect i on, event s r el at
i ng t o any af f i l i at ed i ssuer t hat occur r ed bef or e t he af f i l i at i on
ar ose wi l l be not consi der ed di squal i f yi ng i f t he af f i l i at ed ent i t y i s
not :
[ 14 ] OTS- 6460. 3
( a) I n cont r ol of t he i ssuer ; or
( b) Under common cont r ol wi t h t he i ssuer by a t hi r d par t y t hat
was i n cont r ol of t he af f i l i at ed ent i t y at t he t i me of such event .
NEWSECTI ON
WAC 460-99C-230 Disqualification based on reporting failures.
An i ssuer t hat has sol d secur i t i es i n r el i ance on RCW 21. 20. 880 and
has not compl i ed wi t h t he quar t er l y r epor t i ng r equi r ement s set f or t h
i n WAC 460- 99C- 180 dur i ng t he t wo year s i mmedi at el y pr ecedi ng t he f i l
i ng of t he Washi ngt on Cr owdf undi ng For mi s i nel i gi bl e t o of f er secur i
t i es i n r el i ance on RCW21. 20. 880.
NEWSECTI ON
WAC 460-99C-240 Books and recordsInspection rights. ( 1) An
i ssuer t hat has f i l ed or i s r equi r ed t o f i l e under t he cr owdf undi ng
exempt i on must keep and mai nt ai n wr i t t en or el ect r oni c r ecor ds r el at
i ng t o of f er s and sal es of secur i t i es made i n r el i ance on t he cr owd
f undi ng exempt i on f or at l east si x year s f ol l owi ng t he t er mi nat i on of
t he of f er i ng. These r ecor ds shal l i ncl ude:
( a) The i ssuer ' s Washi ngt on Cr owdf undi ng For m and al l exhi bi t s,
t oget her wi t h al l amendment s t her et o;
( b) Evi dence of r esi dency f r omeach i nvest or i n t he of f er i ng;
( c) A manual l y or el ect r oni cal l y si gned copy of t he I nvest or Cer
t i f i cat i ons and Acknowl edgement s For m f or each i nvest or i n t he of f er
i ng;
( d) Fi nal sal es r epor t s f i l ed wi t h t he di r ect or ; and
( e) Quar t er l y r epor t s and al l ot her communi cat i ons wi t h shar e
hol der s.
( 2) The di r ect or may access, i nspect , r evi ew, copy, and r emove
f or i nspect i on any r ecor ds descr i bed i n subsect i on ( 1) of t hi s sec
t i on.
NEWSECTI ON
WAC 460-99C-250 AdvertisingFiling requirements. ( 1) Al l ad
ver t i si ng di r ect ed t o or t o be f ur ni shed t o i nvest or s i n an of f er i ng
under RCW 21. 20. 880 shal l be f i l ed wi t h t he di r ect or no l at er t han
seven days pr i or t o publ i cat i on or di st r i but i on.
( 2) The f ol l owi ng f or ms and t ypes of adver t i si ng ar e per mi t t ed
wi t hout t he necessi t y f or f i l i ng or pr i or aut hor i zat i on by t he admi n
i st r at or , unl ess speci f i cal l y pr ohi bi t ed.
( a) So- cal l ed " t ombst one" adver t i si ng, cont ai ni ng no mor e t han
t he f ol l owi ng i nf or mat i on:
( i ) Name and addr ess of i ssuer ;
( i i ) I dent i t y or t i t l e of secur i t y;
[ 15 ] OTS- 6460. 3
( i i i ) Per uni t of f er i ng pr i ce, number of shar es and amount of of
f er i ng;
( i v) Br i ef , gener al descr i pt i on of busi ness;
( v) Name and addr ess of br oker - deal er or under wr i t er , or addr ess
wher e of f er i ng ci r cul ar or pr ospect us can be obt ai ned; and
( vi ) Dat e of i ssuance.
( b) Di vi dend not i ces, pr oxy st at ement s and r epor t s t o shar ehol d
er s, i ncl udi ng per i odi c f i nanci al r epor t s.
( c) Sal es l i t er at ur e, adver t i si ng or mar ket l et t er s pr epar ed i n
conf or mi t y wi t h t he appl i cabl e r egul at i ons and i n compl i ance wi t h t he
f i l i ng r equi r ement s of t he SEC, FI NRA, or an appr oved secur i t i es ex
change.
NEWSECTI ON
WAC 460-99C-260 Filing fees. The f ol l owi ng f ees appl y t o cr owd
f undi ng f i l i ngs:
( 1) The f ee f or f i l i ng an i ni t i al Washi ngt on Cr owdf undi ng For m
wi t h t he di r ect or i s si x hundr ed dol l ar s.
( 2) The r enewal f i l i ng f ee i s one hundr ed dol l ar s.
[ 16 ] OTS- 6460. 3