Foreign Issuer Exemption

PURPOSE: This rule exempts the securities of foreign issuers that satisfy certain standards. (1) The commissioner, pursuant to the provisions of section 409.2-203, RSMo, of the Missouri Securities Act of 2003 (the Act), exempts the following transactions from the requirements of sections 409.3-301 and 409.5-504 of the Act: (A) Any non-issuer transaction by a registered broker-dealer in a security traded on a foreign stock exchange, foreign automated quotation system, or an American Depository Receipt; provided— 1. The security is sold at a price reasonably related to the current market price of that security at the time of the transaction; 2. The security does not constitute the whole or part of an unsold allotment to, or subscription or participation by, the broker-dealer as an underwriter of that security; and either 3. The securities qualify for inclusion on the list of foreign margin stocks compiled by the United States Federal Reserve Board and meet the requirements of section 220.11(c)1–5 of Regulation T under the Securities Exchange Act of 1934; or 4. At the time of the transaction, Mergent’s Investor Service, Mergent’s International Manual, or, with respect to securities included on the OTCQX or OTCQB markets, OTC Markets Group Inc. contains a description of the issuer’s business or operations, the names of the issuer’s officers and directors or their corporate equivalents in the issuer’s country of domicile, an audited balance sheet of the issuer as of a date within eighteen (18) months, and audited profit and loss statements for each of the issuer’s two (2) fiscal years immediately preceding that date; or 5. The security is senior in rank to the common stock of the issuer, both as to interest or dividends and upon liquidation, and the security has been outstanding in the hands of the public for at least five (5) years and the issuer has not defaulted during the current fiscal year or within the five (5) preceding years of the payment of principal, interest, or dividend on the security; (B) The exemption in subsection (1)(A) of this rule shall not be available for any security unless at the time of the transaction— 1. The security is a class which has been outstanding in the hands of the public for at least ninety (90) days; 2. The issuer of the security is a going concern actually engaged in business and not in the organizational stage or in bankruptcy or receivership; 3. The issuer of the security, including any predecessors, has been in continuous business or operations for at least five (5) years; 4. The issuer has net tangible assets, as reflected in the manual, of at least twenty (20) million dollars; 5. The issuer had an average net income after taxes, as reflected in the manual, of at least one (1) million dollars over the last three (3) years of operation; and 6. There are either two (2) or more authorized market makers for the issuer’s securities in the United States, or at least one (1) market maker who is registered as a broker-dealer under the Securities Exchange Act of 1934 and has net capital of at least twenty-five (25) million dollars. (2) In designating a foreign jurisdiction under section 409.2202(23), RSMo, the commissioner shall determine whether a foreign jurisdiction’s laws provide substantially similar protection to investors as is provided by the Securities Exchange Act of 1934 with respect to securities listed on a national securities exchange in the United States. The exchange in which designation is sought under this exemption shall file with the commissioner an undertaking to supply to him/her copies of public information in its files relating to any particular issuer whose securities are listed on the exchange if the commissioner requests such an undertaking. The commissioner will determine upon application by any interested party whether the laws of any particular country meet the standards of this provision. (3) For purposes of section 409.2-202(23), RSMo, the following are designated securities exchanges: (A) The Montreal Stock Exchange; and (B) The TSX Venture Exchange. AUTHORITY: sections 409.2-202(23), 409.2-203, and 409.6-605, RSMo 2016.* Original rule filed March 27, 1989, effective June 12, 1989. Amended: Filed June 29, 1990, effective Dec. 31, 1990. Emergency amendment filed Aug. 19, 2003, effective Sept. 12, 2003, expired March 9, 2004. Amended: Filed Aug. 27, 2003, effective Feb. 29, 2004. Amended: Filed Nov. 8, 2005, effective May 30, 2006. Amended: Filed May 11, 2016, effective Nov. 30, 2016. Amended: Filed April 12, 2018, effective Sept. 30, 2018. Amended: Filed July 19, 2019, effective Jan. 30, 2020. *Original authority: 409.2-202, RSMo 2003, amended 2005; 409.2-203, RSMo 2003; and 409.6-605, RSMo 2003.