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Georgia State Code
Title      10
Chapter       5  
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Title 10, Chapter 5, Section 2 (10-5-2)

(a) As used in this chapter, the term:

(1) "Accredited investor" shall have such meaning as the commissioner may by rule or regulation specify.

(2) "Affiliate" or "person affiliated with" means, when used with reference to a specified person, a person who directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with the person specified. Any beneficial owner of 20 percent or more of the combined voting power of all classes of voting securities of a person or any executive officer, director, trustee, or general partner of a person is an affiliate of such person unless the shareholder, executive officer, director, trustee, or general partner shall prove that he in fact does not control, is not controlled by, and is not under common control with such person.

(3) "Assignment," with respect to an investment advisory contract, means any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or any such transfer or hypothecation of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor; provided, however, that, if an investment adviser is a partnership, no assignment of an investment advisory contract is considered to result from the death or withdrawal of a minority of the members of the investment adviser who have only a minority interest in the business of the investment adviser or from the admission to the investment adviser of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.

(4) "Beneficial owner" means, with regard to any securities, any person who owns the securities or who enjoys benefits substantially equivalent to ownership. A person's beneficial ownership of securities shall be deemed to include, but shall not be limited to, any securities owned by:

(A) His spouse;

(B) His minor children;

(C) Any revocable trust of which he is a settlor;

(D) Any trust of which he, his spouse, or his minor children have an aggregate vested beneficial interest of 20 percent or more in the income or the corpus;

(E) Any partnership in which he is a general partner;

(F) Any corporation of which he is the beneficial owner of 20 percent or more of the outstanding voting securities or of which he is an executive officer if the corporation has no substantial business other than investment in securities; or

(G) Any ancestor, sibling, or lineal descendant of his who resides in his home.

(5) "Blank check offering" means an offering of securities by an issuer which has not had any substantial gross revenues from the sale of products or services or any substantial net income from any source for its latest fiscal year, which offering does not disclose the industry in which the issuer will make asset or business acquisitions or does not disclose guidelines under which such acquisitions will be made.

(6) "Commissioner" means the commissioner of securities of this state.

(7) "Control" (including "controlling," "controlled by," and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.

(8) "Dealer" means every person, other than a salesman registered under this chapter, who engages, either for all or part of his time, directly or indirectly, as agent, broker, or principal in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person but does not include a bank or trust company, or any person insofar as such person buys or sells securities for his own account, either individually or in some fiduciary capacity, other than as a part of a regular business, and does not include any general partner, or executive officer of any general partner, of an issuer or executive officer of an issuer offering or selling securities of such issuer unless he is paid a commission for the sale of such securities. Any remuneration paid which is directly related to the sale of securities shall be considered a commission for the purposes of this paragraph.

(9) "Designated dealer" means a dealer or limited dealer as respectively defined in paragraphs (8) and (17) of this subsection:

(A) Whose commissions, commission equivalents, and markups from transactions in designated securities for one of the immediately preceding three months or for two or more of the immediately preceding 12 months exceeded 5 percent of its total commissions, commission equivalents, and markups from transactions in securities during those months; or

(B) Who has been a market maker in the designated security that is the subject of the transaction in the immediately preceding 12 months.

(10) "Designated salesman" means a salesman or limited salesman as respectively defined in paragraphs (25) and (18) of this subsection who is employed, appointed, or authorized by a designated dealer or by an issuer to sell designated securities.

(11) "Designated security" means any equity security the selling price of which is less than $5.00 (provided, however, if the designated security is a unit composed of one or more securities, that the unit price divided by the number of components of the unit other than warrants, options, rights, or similar securities must be less than $5.00 and that any component of the unit that is a warrant, option, right, or similar security, or a convertible security, must have an exercise price or conversion price of less than $5.00). "Designated security" shall not include a security:

(A) Registered, or approved for registration upon notice of issuance, on a national securities exchange that makes transaction reports available pursuant to Exchange Act Rule 11Aa3-1, as promulgated by the United States Securities and Exchange Commission (17 CFR 11Aa3-1);

(B) Authorized, or approved for authorization upon notice of issuance, for quotation on the National Association of Securities Dealers Automated Quotation (NASDAQ) System;

(C) Issued by an investment company registered under the Investment Company Act of 1940 (15 U.S.C. .8a-1, et seq., as amended);

(D) Which is a put option or call option issued by the Options Clearing Corporation; or

(E) Whose issuer has net tangible assets in excess of $2 million, as demonstrated by financial statements dated less than 15 months previously that the designated dealer has reviewed and has a reasonable basis to believe are true and complete in relation to the date of the transaction with the person, and:

(i) In the event the issuer is other than a foreign private issuer, are the most recent financial statements for the issuer that have been audited and reported on by an independent public accountant in accordance with the provisions of Rule 210.2-02, as promulgated by the United States Securities and Exchange Commission (17 CFR 210.2-02); or

(ii) In the event the issuer is a foreign private issuer, are the most recent financial statements for the issuer that have been filed with the United States Securities and Exchange Commission; furnished to the United States Securities and Exchange Commission pursuant to SEC Rule 12g3-2(b) (17 CFR 240.12g3-2(b)); or prepared in accordance with generally accepted accounting principles in the country of incorporation, audited in compliance with the requirements of that jurisdiction, and reported on by an accountant duly registered and in good standing in accordance with the regulations of that jurisdiction.

(12) "Established customer" means any person for whom the dealer or limited dealer, or a clearing broker-dealer on behalf of such dealer or limited dealer, carries an account, and who with such dealer or limited dealer:

(A) Has effected a securities transaction, or made a deposit of funds or securities, more than one year prior to the date of determination; or

(B) Has made three purchases of designated securities that occurred on separate days and involved different issuers.

(13) "Executive officer" means the chief executive officer, the president, the principal financial officer, the principal operating officer, each vice president with responsibility involving policy-making functions for a significant aspect of a person's business, the secretary, the treasurer, or any other person performing similar functions with respect to any organization, whether incorporated or unincorporated.

(13.1) "Federal covered adviser" means a person who is registered with the Securities and Exchange Commission pursuant to Section 203 of the federal Investment Advisers Act of 1940.

(13.2) "Federal covered security" means any security that is a covered security under Section 18(b) of the Securities Act of 1933 or regulations promulgated thereunder.

(14) "Investment adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities. As used in this chapter, the term "certified public accountant" means a certified public accountant or a firm thereof, registered pursuant to Chapter 3 of Title 43. "Investment adviser" shall also include any person who holds himself or herself out as a "financial planner" or "investment adviser" other than a certified public accountant. The term "investment adviser" does not include a person who is excluded from the definition of "investment adviser" under Section 202(a)(11) of the federal Investment Advisers Act of 1940; a "federal covered adviser" as defined in paragraph (13.1) of this subsection; or a certified public accountant whose performance of investment advisory services is solely incidental to the practice of his or her profession or who does not accept or receive, directly or indirectly, any commission, payment, referral, or other form of remuneration as a result of the purchase or sale of a specific security by a client, does not recommend the purchase or sale of specific securities, and does not have custody of client funds or securities for investment purposes. A person shall not be considered an investment adviser solely as a result of using a nationally recognized designation such as Certified Financial Planner, Chartered Financial Consultant, Personal Financial Specialist, or a similar designation as determined by the office of Secretary of State. Unless a person holds himself or herself out as such, the term "investment adviser" also does not include (i) an investment adviser representative; (ii) a lawyer, engineer, or teacher whose performance of investment advisory services is solely incidental to the practice of his or her profession; (iii) a securities dealer or his or her agent whose performance of these services is solely incidental to the conduct of his or her business as a securities dealer and who receives no special compensation for such services; (iv) a publisher of any newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific situation of each client; or (v) such other persons not within the intent of this paragraph as the commissioner may designate by rule or order.

(15) "Investment adviser representative" means:

(A) With respect to an investment adviser, any individual, other than an investment adviser, who is a partner, officer, or director (or a person occupying a similar status or performing similar functions) of an investment adviser or any other individual who, on behalf of an investment adviser, engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; or

(B) With respect to a federal covered adviser, any individual defined as an "investment adviser representative" by Rule 203A-3 of the Securities and Exchange Commission under the federal Investment Advisers Act of 1940, Section 275.203A, provided such representative has a "place of business," as defined by Rule 203A-3, in this state.

(16) "Issuer" means every person who issues or proposes to issue any security, except that, with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors (or persons performing similar functions) or of the fixed, restricted management, or unit type, the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such securities are issued; except that, in the case of an unincorporated association which provides by its articles for limited liability of any or all of its members or in the case of a trust, committee, or other legal entity, the trustees or members thereof shall not be individually liable as issuers of any security issued by the association, trust, committee, or other legal entity; except that, with respect to equipment-trust certificates or like securities, the term "issuer" means the person by whom the equipment or property is or is to be used; and except that, with respect to fractional undivided interests in oil, gas, or other mineral rights, the term "issuer" means the owner of any such right or of any interest in such right (whether whole or fractional) who creates fractional interests therein for the purpose of public offering.

(17) "Limited dealer" means a dealer who is authorized under this chapter to act as a dealer only with respect to a certain issue of or a certain class or type of securities specified by the commissioner.

(18) "Limited salesman" means a salesman who is authorized under this chapter to sell or offer for sale only a certain issue of or a certain class or type of securities specified by the commissioner. A limited salesman may be authorized to sell or offer for sale securities of one or more issuers either concurrently or successively, provided such issuers are affiliates and provided, further, that one of such issuers shall enter into and file with the commissioner a written agreement which shall provide that such issuer shall be primarily responsible for supervising the limited salesman and shall assume all duties, responsibilities, and liabilities imposed by this chapter for the securities transactions of the limited salesman to the same extent as if the limited salesman were only registered with respect to such issuer. Nothing in such agreement shall relieve any issuer on whose behalf the limited salesman is acting of the responsibilities imposed upon such issuer by this chapter for the securities transactions of the limited salesman.

(19) "Majority owned subsidiary" means a subsidiary more than 50 percent of whose outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors is owned by the subsidiary's parent, by one or more of the parent's other majority owned subsidiaries, or by the subsidiary's parent and one or more of the parent's other majority owned subsidiaries.

(20) "Market maker" means any specialist permitted to act as a dealer, any dealer acting in the capacity of block positioner, and any dealer who, with respect to a security, holds himself out (by entering quotations in an inter-dealer communications system or otherwise) as being willing to buy and sell such security for his own account on a regular or continuous basis.

(21) "Parent" means, when used with reference to a specified person, an affiliate controlling such person directly, or indirectly through one or more intermediaries.

(22) "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint-stock company, a trust, or any unincorporated organization.

(23) "Prospectus" means any prospectus, notice, circular, advertisement, sales literature, letter, offering circular, offering sheet, or communication, written or by radio or television, which offers any security for sale or which is used in connection with any such offer or which confirms the sale of any security, except that:

(A) A confirmation of the sale of a security which is sent or given after the effective date of the registration statement shall not be deemed a prospectus if it is proved that prior to or at the same time with such confirmation a written prospectus, meeting the requirements of paragraph (3) of subsection (b), paragraph (3) of subsection (e), or paragraph (4) of subsection (f) of Code Section 10-5-5 as appropriate to form of registration under this chapter, at the time of such confirmation, was sent or given to the person to whom the confirmation was sent or given; and

(B) A notice, circular, advertisement, sales literature, letter, or communication in respect of a security shall not be deemed to be a prospectus if it states from whom a written prospectus meeting the requirements of paragraph (3) of subsection (b), paragraph (3) of subsection (e), or paragraph (4) of subsection (f) of Code Section 10-5-5 may be obtained and, in addition, does no more than identify the security, state the price thereof, state by whom orders will be executed, and contain such other information as the commissioner, by rules or regulations, deemed necessary or appropriate in the public interest and for the protection of investors, and subject to such terms and conditions as may be prescribed therein, may permit.

(24) "Sale" or "sell" means and shall include every contract of sale or disposition of a security or interest in a security for value. The term "offer to sell," "offer for sale," or "offer" shall include every attempt or offer to dispose of or solicitation of an offer to buy a security or interest in a security for value. The terms defined in this paragraph shall not include preliminary negotiations or agreements between an issuer or any person on whose behalf an offering is to be made and any underwriter or among underwriters who are or are to be in privity of contract with an issuer or any person on whose behalf an offering is to be made. Any security given or delivered with or as a bonus on account of any purchase of securities or any other thing shall be conclusively presumed to constitute a part of the subject of such purchase and to have been offered and sold for value. The issue or transfer of a right or privilege, when originally issued or transferred with a security, giving the holder of such security the right to convert such security into another security of the same issuer or of another person or giving a right to subscribe to another security of the same issuer or of another person, which right cannot be exercised until some future date, shall not be deemed to be an offer or sale of such other security; but the issue or transfer of such other security upon the exercise of such right of conversion or subscription shall be deemed a sale of such other security.

(25) "Salesperson" means an individual, other than a dealer or limited dealer registered under this chapter, employed or appointed or authorized by a dealer, limited dealer, or issuer to sell securities in this state. The general partners or executive officers of a dealer or a limited dealer engaged in the offer or sale of securities and any general partners of an issuer or executive officers of any general partner of an issuer or executive officers of an issuer offering or selling securities of such issuer shall not be deemed to be salespersons within the meaning of this definition unless they are paid a commission for the sale of such securities. Any remuneration paid which is directly related to the sale of securities shall be considered a commission for the purposes of this paragraph. The term "salesperson" does not include an individual who represents a dealer in effecting only transactions in this state which are described in Section 15(h)(2) of the Securities Exchange Act of 1934 or an individual who represents an issuer in effecting transactions in a federal covered security as described in Sections 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933.

(26) "Security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of indebtedness, investment certificate, certificate of interest or participation in any profit-sharing agreement, certificate of interest in oil, gas, or other mineral rights, collateral trust certificates, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, limited partnership interest, or beneficial interest in profits or earnings, or any other instrument commonly known as a security, including any certificate of interest or participation in, temporary or interim certificate for, receipt for, guaranty of, or warrant or right to subscribe to or purchase, any of the foregoing. The term "investment contract" shall include but is not limited to an investment which holds out the possibility of return on risk capital even though the investor's efforts are necessary to receive such return if: (A) Such return is dependent upon essential managerial or sales efforts of the issuer or its affiliates; and

(B) One of the inducements to invest is the promise of promotional or sales efforts of the issuer or its affiliates in the investor's behalf; and

(C) The investor shall thereby acquire the right to earn a commission or other compensation from sales of rights to sell goods, services, or other investment contracts of the issuer or its affiliates.

"Security" shall not mean any insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed number of dollars either in a lump sum or periodically for life or some other specified period nor any variable annuity contract as provided for and regulated under Title 33 and issued by a life insurance company licensed to do business in the State of Georgia nor shall it mean any interest in a residential unit and a rental management arrangement relating to such residential unit so long as the owner-participants under the rental management arrangement, whether optional or mandatory, do not participate directly in the income derived from the rental of units owned by others.

(27) "Securities of the same class" means:

(A) All common stock of an issuer, regardless of varying series or designations, and all securities convertible into common stock or conferring the right to acquire common stock; or

(B) All preferred stock of an issuer, regardless of varying preferences, series, or designations, and all securities convertible into preferred stock or conferring the right to acquire preferred stock.

(28) "Significant subsidiary" means a subsidiary meeting any one of the following conditions:

(A) The assets of the subsidiary or the investments in and advances to the subsidiary by its parent and the parent's other subsidiaries, if any, exceed 10 percent of the assets of the parent and its subsidiaries on a consolidated basis.

(B) The sales and operating revenues of the subsidiary exceed 10 percent of the sales and operating revenues of its parent and the parent's subsidiaries on a consolidated basis.

(C) The subsidiary is the parent of one or more subsidiaries and, together with such subsidiaries, would, if considered in the aggregate, constitute a significant subsidiary.

(29) "State" means any state, territory, or possession of the United States, the District of Columbia, Puerto Rico, and the Virgin Islands.

(30) "Subsidiary" means, when used with reference to a specified person, an affiliate controlled by such person, directly or indirectly, through one or more intermediaries. (31) "Underwriter" means any person who has purchased from an issuer or an affiliate of an issuer with a view to or offers or sells for an issuer or an affiliate of an issuer in connection with the distribution of any security or participates or has a direct or indirect participation in any such undertaking or participates or has a participation in the direct or indirect underwriting of any such undertaking; provided, however, that a person shall be presumed not to be an underwriter with respect to any securities which he has owned beneficially for at least one year; and provided, further, that a dealer shall not be considered an underwriter with respect to any securities which do not represent part of an unsold allotment to or subscription by the dealer as a participant in the distribution of such securities by the issuer or an affiliate of the issuer; provided, further, that, in the case of securities acquired on the conversion of another security without payment of additional consideration, the length of time such securities have been beneficially owned by a person shall include the period during which the convertible security was beneficially owned and the period during which the security acquired on conversion has been beneficially owned.

(b) The rules of statutory construction contained in Chapter 3 of Title 1 shall apply to this chapter.

Defined terms referenced in this section:
Saturday May 23 14:21 EDT


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