Administrative Code

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Virginia Administrative Code
Title 21. Securities And Retail Franchising
Agency 5. State Corporation Commission, Division of Securities And Retail Franchising
Chapter 40. Exempt Securities and Transactions

21VAC5-40-20. Exchange and automated quotations system.

In accordance with § 13.1-514 A 12 of the Act, the National Association of Securities Dealers Automated Quotations System (NASDAQ) is approved by the commission; provided, however, that the securities for which the NASDAQ exemption is being claimed, and the issuer of such securities, meet the following conditions:

1. If the issuer is not organized under the laws of the United States or a state, it has appointed a duly authorized agent in the United States for service of process and has set forth the name and address of such agent in its prospectus.

2. A class of the issuer's securities is required to be and is registered under § 12 of the Securities Exchange Act of 1934, and has been so registered for the three years immediately preceding the offering date.

3. Neither the issuer nor a significant subsidiary has had a material default during the last seven years (or the issuer's existence if less than seven years) in the payment of (i) principal, interest, dividend, or sinking fund installment on preferred stock or indebtedness for borrowed money, or (ii) rentals under leases with terms of three years or more.

4. The issuer has had consolidated net income (before extraordinary items and the cumulative effect of accounting changes) of at least $1 million in four of its last five fiscal years including its last fiscal year; and if the offering is of interest bearing securities, has had for its last fiscal year, such net income, but before deduction for income taxes and depreciation, of at least one and one-half times the issuer's annual interest expense, giving effect to the proposed offering and the intended use of the proceeds. "Last fiscal year" means the most recent year for which audited financial statements are available, provided that such statements cover a fiscal period ended not more than 15 months prior to the commencement of the offering.

5. If the offering is of stock or shares, other than preferred stock or shares, such securities have voting rights and such rights include (i) the right to have at least as many votes per share, and (ii) the rights to vote on at least as many general corporate decisions, as each of the issuer's outstanding classes of stock or shares, except as otherwise required by law.

6. If the offering is of stock or shares, other than preferred stock or shares, such securities are owned beneficially or of records, on any date within six months prior to the commencement of the offering, by at least 1,200 persons, and on such date there are at least 750,000 such shares outstanding with an aggregate market value, based on the average bid price for that day, of at least $3,750,000. In connection with the determination of the number of persons who are beneficial owners of the stock or shares of an issuer, the issuer or broker-dealer may rely in good faith for the purposes of this section upon written information furnished by the record owners.

7. Any securities issued or guaranteed as to both principal and interest by an international bank of which the United States is a member is so exempted without regard to the conditions in this section.

8. If the offering is of interest bearing securities of a finance company with liquid assets of at least 105% of its liabilities (other than deferred income taxes, deferred investment tax credits, capital stock and surplus) at the end of each of its last five fiscal years, the applicable net income requirement of subdivision 4 of this section, but before deduction for interest expense, shall be one and one-quarter times the issuer's annual interest expense. "Finance company" means a company engaged primarily in the business of wholesale, retail, installment, mortgage, commercial, industrial or consumer financing, banking or factoring. "Liquid assets" means cash, receivables payable on demand or not more than 12 years following the close of the company's last fiscal year, and readily marketable securities, in each case less applicable reserves and unearned income.

Statutory Authority

§§ 12.1-13 and 13.1-523 of the Code of Virginia.

Historical Notes

Derived from Rule 502, Case No. SEC810005, eff. July 1, 1981; amended to renumber, June 25, 1991 by Case No. SEC910057, eff. July 1, 1991; amended, Virginia Register Volume 14, Issue 22, eff. July 1, 1998.

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