# COMAR Title 02 — Office of the Attorney General

## Subtitle 02 — Division of Securities

### Chapter 04 — Exemption from Registration Regulations

**Authority:** Corporations and Associations Article, §§11-203, 11-405, 11-501, 11-506, 11-601(3), 11-601(12), and 11-602, Annotated Code of Maryland

**Administrative History:** Effective date: April 1, 1983 (10:6 Md. R. 551)

**Administrative History:** Regulations .01—.05 adopted effective April 15, 1991 (18:7 Md. R. 770)

**Administrative History:** Regulation .06 repealed and new Regulations .06 and .07 adopted effective November 11, 1991 (18:22 Md. R. 2393)

**Administrative History:** Regulations .10 and .11 adopted as an emergency provision effective October 1, 1992 (19:17 Md. R. 1602); adopted permanently effective November 23, 1992 (19:23 Md. R. 2039)

**Administrative History:** Regulation .12 adopted effective June 3, 1985 (12:11 Md. R. 1046)

**Administrative History:** Regulation .12 amended and recodified to Regulation .06 effective April 15, 1991 (18:7 Md. R. 770)

**Administrative History:** Chapter revised effective September 1, 1995 (22:17 Md. R. 1314)

#### Regulation .01 Requirements for Compliance with Not-for-Profit Exemption.

*COMAR 02.02.04.01*

A. Securities offered pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-601(9)(i), Annotated Code of Maryland, shall be deemed exempt securities if the nationwide aggregate offering price does not exceed $150,000.

B. Securities offered pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-601(9)(ii), Annotated Code of Maryland, shall be deemed exempt securities if the following conditions are satisfied:

  (1) Exempt Securities—General Conditions.

    (a) The issuer shall notify the Commissioner in writing at least 10 days before the first sale of the securities in this State.

    (b) The notification shall contain the following information:

      (i) Name, address, and telephone number of the issuer;

      (ii) Name, address, telephone number, and CRD number, if applicable, of the broker-dealer or issuer's agent registered in this State who will offer the securities.

    (c) An affirmation that a commission or remuneration for soliciting any prospective buyer may not be paid except to a broker-dealer or issuer's agent registered in this State.

    (d) An affirmation that all prospective buyers will receive, before any sale, a disclosure document containing the information required by Form MLOE-2 of Regulation .12 of this chapter. The financial information required by Item 19, Part I of Form MLOE-2, need not be provided.

  (2) The issuer shall pay the filing fee pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.

C. The exemption for an offering made pursuant to this exemption shall be effective for 1 year from the date that the notification filing is accepted by the Commissioner. The exemption may be extended for successive 1-year periods by complying with the provisions of §B of this regulation.

#### Regulation .02 Employee Benefit Plans.

*COMAR 02.02.04.02*

A. Securities offered pursuant to a nonqualified benefit plan as described in the Maryland Securities Act, Corporations and Associations Article, §11-601(11), Annotated Code of Maryland, shall be deemed exempt securities if the following conditions are satisfied:

  (1) The issuer shall notify the Commissioner in writing at least 30 days before any offer or sale in this State. The notification shall include the following information:

    (a) Name, address, and telephone number of the issuer;

    (b) Name, address, and telephone number of the administrator of the plan; and

    (c) A copy of the plan.

  (2) The issuer shall pay the filing fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.

  (3) The Commissioner may waive the 30-day prior notice requirement of §A(1) of this regulation, if the Commissioner finds that the waiver is appropriate in the public interest.

B. The exemption for an offering made pursuant to this exemption shall be effective from the date that the notification filing is accepted by the Commissioner. If there is a material change or amendment to the plan during the offering period, the issuer shall notify the Commissioner by complying with the provisions of §A of this regulation.

#### Regulation .03 Existing Security Holder Exemption.

*COMAR 02.02.04.03*

A. Transactions involving existing security holders pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-602(11)(ii), Annotated Code of Maryland, shall be deemed exempt transactions if the following conditions are satisfied:

  (1) The issuer shall notify the Commissioner in writing at least 5 business days before the offer or sale in this State. The notification shall include the following information:

    (a) Name, address, and telephone number of the issuer;

    (b) Name, address, telephone number, and CRD number, if applicable, of any entity or individual receiving any commission or remuneration in connection with the offer or sale of the securities; and

    (c) A description of the terms of the offering.

  (2) The issuer shall pay the filing fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.

B. The exemption for an offering made pursuant to this exemption shall be effective for 1 year from the date that the notification filing is accepted by the Commissioner. The exemption may be extended for successive 1-year periods by complying with the provisions of §A of this regulation.

#### Regulation .04 Designated Institutional Investor.

*COMAR 02.02.04.04*

A. Definitions.

  (1) “Accredited investor” has the same meaning as set forth in Regulation D, 17 CFR §230.501(a)(1)—(3), (7), and (8), which is incorporated by reference.

  (2) “Qualified institutional buyer” has the same meaning as set forth in Rule 144A, 55 FR 17933 (1990), which is incorporated by reference.

B. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-602(8), Annotated Code of Maryland, an institutional investor includes the following:

  (1) An accredited investor; or

  (2) A qualified institutional buyer.

#### Regulation .05 Recognized Securities Manuals.

*COMAR 02.02.04.05*

A. The following publications are designated recognized securities manuals for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-602(2), Annotated Code of Maryland:

  (1) Mergent's Industrial Manual;

  (2) Mergent's Transportation Manual;

  (3) Mergent's Public Utility Manual;

  (4) Mergent's Bank and Finance Manual; and

  (5) Standard and Poor's Standard Corporation Descriptions.

B. This designation may be revoked if the Commissioner finds that the information provided in the manual has been so changed or insufficiently applied that the protection of investors contemplated by the exemption is no longer afforded.

#### Regulation .06 Designated Exchange Exemption.

*COMAR 02.02.04.06*

A. Definitions.

  (1) “CBOE” means The Chicago Board Options Exchange.

  (2) “NASDAQ/NMS” means the National Association of Securities Dealers Automated Quotations/National Market System.

  (3) “Release” means Securities Act Release 33-6810 published at 53 FR 52550 (1988), which is incorporated by reference.

  (4) “SEC” means the Securities and Exchange Commission.

B. Exempt Securities. The following securities shall be exempted from the provisions of the Maryland Securities Act, Corporations and Associations Article, §§11-205 and 11-501, Annotated Code of Maryland:

  (1) Any security listed or approved for listing upon notice of issuance on NASDAQ/NMS, provided that this designation may be revoked if the Commissioner finds that the listing standards have been so changed or insufficiently applied that the protection of investors contemplated by the standards for listing in the Release is no longer afforded;

  (2) Any security listed or approved for listing upon notice of issuance on the CBOE, provided that this designation may be revoked if the Commissioner finds that the:

    (a) Listing standards have been so changed or insufficiently applied that the protection of investors contemplated by the standards for listing in the Release is no longer afforded; or

    (b) CBOE has failed to promptly notify the Commissioner in writing that it has:

      (i) Made a rule filing with the SEC proposing to list a type of security not provided for in the listing standards contained in the Release and has failed to provide the Commissioner with a copy of the rule filing, or

      (ii) Proposed to list a security under its listing standards for “other securities” that raises significant new regulatory issues requiring a rule filing with the SEC and has failed to provide the Commissioner with a copy of the rule filing;

  (3) Any other security of the same issuer that is of senior or substantially equal rank;

  (4) Any security called for by subscription rights or warrants that are exempted under §B(1) or (2) of this regulation; and

  (5) Any warrant or right to purchase or subscribe to any security that is exempted under §B(1) or (2) of this regulation.

#### Regulation .07 Designated Clearing Agency Exemption.

*COMAR 02.02.04.07*

A. The Options Clearing Corporation (OCC) shall be designated as a “clearing agency” for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-601(13), Annotated Code of Maryland.

B. This designation may be revoked if the Commissioner finds that this action is advisable for the protection of investors or in the public interest.

#### Regulation .08 Bank Securities.

*COMAR 02.02.04.08*

A. Federal Savings Banks. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-601(3), Annotated Code of Maryland, the term “bank” includes a savings bank organized under the laws of the United States.

B. Exclusions. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-601(3), Annotated Code of Maryland, the terms “bank”, “savings institution”, and “trust company” do not include a bank, savings institution, or trust company that:

  (1) Has not received its permanent charter or final approval to operate from the governmental agency to which application is made or that regulates the entity;

  (2) Has received a conditional approval to operate for the purpose of raising capital or meeting other regulatory requirements;

  (3) Has its charter revoked; or

  (4) Is on any form of conditional status.

#### Regulation .09 Maryland Limited Offering Exemption (MLOE): Scope and Definitions.

*COMAR 02.02.04.09*

A. Scope.

  (1) The Maryland Limited Offering Exemption (MLOE) creates under the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, two exemptions from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland.

  (2) Regulation .10 sets forth conditions that apply to both a local issuer exemption under Regulation .11 and a general transactional exemption under Regulation .12.

  (3) Regulation .11 sets forth additional conditions that apply to the local issuer exemption.

  (4) Regulation .12 sets forth additional conditions that apply to the general transactional exemption.

  (5) Regulation .13 provides that the MLOE exemption will remain available in the event of certain insignificant deviations from the conditions set forth in Regulations .10—.12.

  (6) The MLOE and the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, do not provide an exemption from the antifraud provisions of the Maryland Securities Act, Corporations and Associations Article, Subtitles 3 and 7, Annotated Code of Maryland.

  (7) The MLOE and the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, do not exempt from registration the offer or sale of securities:

    (a) For which a registration statement or Regulation A notification has been filed with the SEC under the Securities Act of 1933; or

    (b) Exempt from registration with the SEC under 17 CFR §230.505 (SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) or 17 CFR §230.506 (SEC Rule 506, Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering).

B. Definitions. For purposes of MLOE and the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, the following terms have the meanings indicated:

  (1) Accredited Investor.

    (a) “Accredited investor” has the meaning stated in 17 CFR §230.501(a) (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D), which is incorporated by reference.

    (b) “Accredited investor” includes a relative, spouse, or relative of the spouse of an individual described in 17 CFR §230.501(a)(4) (SEC Rule 501, Definitions and Terms Used in Regulation D), who has the same principal residence as the individual.

  (2) “Affiliate” has the meaning stated in 17 CFR §230.501 (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D), which is incorporated by reference.

  (3) “Aggregate offering price” has the meaning stated in 17 CFR §230.501 (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D).

  (4) “Beneficial owner” has the meaning stated in 17 CFR §240.13d-3 (1994) (SEC Rule 13d-3, Determination of Beneficial Owner), which is incorporated by reference, except that all references to §13(d) or 13(g) of the Securities Exchange Act of 1934 shall refer, instead, to this regulation, and further, that Rule 13d-3(d)(ii) is not incorporated by reference.

  (5) “Executive officer” has the meaning stated in 17 CFR §230.501 (SEC Rule 501, Definitions and Terms Used in Regulation D).

  (6) “MLOE” means the Maryland Limited Offering Exemption created by Regulations .09—.13 of this chapter.

  (7) Promoter.

    (a) “Promoter” means a person that:

      (i) Acting alone or together with one or more persons, directly or indirectly founds or organizes the business or enterprise of an issuer; or

      (ii) In connection with founding or organizing the business or enterprise of an issuer, directly or indirectly receives in consideration of services, property, or both services and property, 10 percent or more of a class of securities of the issuer, or 10 percent or more of the proceeds from the sale of a class of securities of the issuer.

    (b) “Promoter” does not include a person that receives 10 percent or more of a class of securities of the issuer or 10 percent or more of the proceeds from the sale of a class of securities of the issuer, either solely as brokerage commissions or solely in consideration of property, if the person does not directly or indirectly found or organize the business or enterprise of the issuer.

  (8) “Purchaser representative” has the meaning stated in 17 CFR §230.501 (SEC Rule 501, Definitions and Terms Used in Regulation D).

#### Regulation .10 MLOE: Generally Applicable Conditions.

*COMAR 02.02.04.10*

A. General Requirements.

  (1) Transactions by an issuer involving the offer or sale of securities of the issuer that are part of an offering that satisfies the terms of MLOE are exempt under the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland.

  (2) The burden of proving an exemption under MLOE is on the person claiming the exemption.

  (3) Notwithstanding the failure of a transaction to satisfy one or more of the terms of MLOE, upon application, the Commissioner may order that the transaction is exempt under the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, if the Commissioner finds that the:

    (a) Transaction demonstrates substantial compliance in good faith with the conditions of MLOE; and

    (b) Order would be consistent with the public interest.

B. Integration.

  (1) Offers and sales of securities that are part of the same offering of securities under MLOE shall satisfy all of the applicable terms of MLOE.

  (2) Offers and sales of securities that are made more than 6 months before the commencement or more than 6 months after the completion of an offering of securities under MLOE are not considered part of the offering of securities under MLOE if during those 6 month periods there are no offers or sales of securities by or for the issuer that are of the same or similar class as those offered or sold under MLOE, other than offers or sales of securities under an employee benefit plan of the type referred to in the Maryland Securities Act, Corporations and Associations Article, §11-601(11), Annotated Code of Maryland.

  (3) If securities of the same or similar class as those offered or sold under MLOE are offered or sold within 6 months before the commencement or 6 months after the completion of an offering of securities under MLOE, those offers to sell and sales, depending on the particular facts and circumstances, may be considered to be integrated with the offering, under §B(1) of this regulation.

  (4) In determining whether offers and sales should be integrated for purposes of this regulation, the Commissioner may consider whether the offers or sales:

    (a) Are part of a single plan of financing;

    (b) Involve issuance of the same class of securities;

    (c) Have been made at or about the same time;

    (d) Involve the same type of consideration; and

    (e) Are made for the same general purpose.

C. Manner of Offering.

  (1) The issuer or a person acting on the issuer's behalf may not offer or sell securities under MLOE by any form of general solicitation or advertising in Maryland.

  (2) The issuer or a person acting on the issuer's behalf may not offer or sell securities under MLOE by any form of general solicitation or advertising outside Maryland, if the:

    (a) Issuer or person acting on the issuer's behalf reasonably believes that the general solicitation or advertising would be disseminated into Maryland;

    (b) General solicitation or advertising is disseminated into Maryland.

  (3) For purposes of this section, “general solicitation” and “advertising” include, but are not limited to:

    (a) An advertisement, article, notice, or other communication published in a newspaper, magazine, or similar media, or broadcast over, transmitted through, or otherwise disseminated by television, radio, information databases, or similar media; and

    (b) A seminar or meeting whose attendees have been invited by an advertisement, article, notice, or other communication published in a newspaper, magazine, or similar media or broadcast over, transmitted through, or otherwise disseminated by television, radio, information databases, or similar media.

D. Remuneration for Solicitation or for Sales.

  (1) Except as provided in §D(2) of this regulation, a commission or similar remuneration may not be paid or given, directly or indirectly, for the solicitation of a prospective purchaser or in connection with sales of securities under MLOE.

  (2) A commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under MLOE may be paid or given to:

    (a) A broker-dealer that the issuer reasonably believes is registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland; or

    (b) An individual who the issuer reasonably believes has not received a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities on behalf of more than one other issuer within a 12-month period immediately before the first sale by the individual in the offering of securities under MLOE.

E. Resales.

  (1) Securities acquired in a transaction under MLOE may not be resold unless they are registered under the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, or qualify for an exemption from registration under the Maryland Securities Act, Corporations and Associations Article, §11-602, Annotated Code of Maryland.

  (2) The issuer or a person acting on the issuer's behalf shall exercise reasonable care to assure that each purchaser of the securities in an offering under MLOE purchases for investment and not with a view to distribution of the securities.

  (3) For purposes of §E(2) of this regulation, reasonable care may be demonstrated if the issuer or the person acting on the issuer's behalf:

    (a) Made a reasonable inquiry to determine whether the purchaser is acquiring the securities for other persons;

    (b) Delivered written disclosure to each purchaser before a sale that the securities have not been registered under the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, and, therefore, may not be resold unless the securities are registered under that section or qualify for an exemption from registration under the Maryland Securities Act, Corporations and Associations Article, §11-602, Annotated Code of Maryland;

    (c) Obtained from the purchaser a signed agreement that the securities will not be resold unless they are registered or qualify for an exemption from registration under the Maryland Securities Act, Corporations and Associations Article, §11-602, Annotated Code of Maryland;

    (d) Placed a restrictive legend on the certificate or other document evidencing the securities, which legend may be in the following form:

    (e) Acted in another manner that demonstrated reasonable care.

F. Calculation of the Number of Purchasers.

  (1) For the purpose of calculating the number of purchasers under MLOE, the following conditions apply:

    (a) The following purchasers are excluded:

      (i) A relative, spouse, or relative of the spouse of a purchaser, who has the same principal residence as the purchaser,

      (ii) A trust or estate in which a purchaser and any of the persons related to the purchaser as specified in §F(1)(a)(i) or (iii) of this regulation collectively are beneficial owners of more than 50 percent of the interests, excluding contingent interests,

      (iii) A corporation, limited liability company, partnership, or other entity of which a purchaser and any of the persons related to the purchaser as specified in §F(1)(a)(i) or (ii) of this regulation collectively are beneficial owners of more than 50 percent of the equity interests (excluding directors' qualifying shares), and

      (iv) Accredited investors;

    (b) A corporation, limited liability company, partnership, or other entity is considered one purchaser, unless the corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer;

    (c) If a purchaser that is a corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer and is not an accredited investor under 17 CFR §230.501(a)(8) (SEC Rule 501, Definitions and Terms Used in Regulation D), then each beneficial owner of an equity interest in the corporation, limited liability company, partnership, or other entity is considered a separate purchaser, except to the extent provided in §F(2) of this regulation;

    (d) A noncontributory employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 is considered one purchaser, if the plan's trustee makes all investment decisions for the plan;

    (e) Regardless of the amount of discretion given to the investment adviser or broker-dealer to act on behalf of a client or customer, a client of an investment adviser or a customer of a broker-dealer is considered a “purchaser” under MLOE.

  (2) The provisions of MLOE apply to each purchaser whether or not the purchaser is included in calculating the number of purchasers under §F(1) of this regulation.

G. Disqualification.

  (1) An exemption under MLOE is not available if the issuer, any of its directors, officers, general partners, trustees, beneficial owners of 10 percent or more of a class of its equity interests, or promoters currently connected with it in any capacity, or any person, other than a broker-dealer currently registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland, that has been or will be paid or given, directly or indirectly, a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under MLOE:

    (a) Within 5 years before the first sale of securities in an offering under MLOE, has filed a registration statement or application for exemption from registration that is currently subject to a stop order under a state's securities laws;

    (b) Within 5 years before the first sale of securities in an offering under MLOE, has been convicted of or has pleaded nolo contendere to a felony or misdemeanor in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or with a state securities administrator, or a felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, conspiracy to defraud, or theft;

    (c) Is subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment, or decree of a court of competent jurisdiction entered within 5 years before the first sale of securities in an offering under MLOE and permanently restraining or enjoining, that person from engaging in or continuing any conduct or practice in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or a state securities administrator;

    (d) Is subject to a United States Postal Service false representation or cease and desist order entered under 39 U.S.C. §3005 within 5 years before the first sale of securities in an offering under MLOE or is subject to a temporary restraining order or preliminary injunction entered under 39 U.S.C. §3007 or 18 U.S.C. §1345 with respect to conduct alleged to have violated 39 U.S.C. §3005; or

    (e) Is subject to a state administrative order entered by a state securities administrator in which fraud or deceit was found, if the final order was entered within 5 years before the first sale of securities in an offering under MLOE.

  (2) An exemption under MLOE is not available if the issuer or any of its predecessors or affiliates is subject to an order issued by the Commissioner or is subject to an order, judgment, or decree of a court of competent jurisdiction temporarily, preliminarily, or permanently restraining or enjoining the person for failure to comply with §D of Regulation .12 of this chapter.

  (3) Waiver of Disqualification.

    (a) The Commissioner may waive by order a disqualification under §G(1) or (2) of this regulation, if the Commissioner determines that the order would be consistent with the public interest.

    (b) A waiver by the Commissioner of a disqualification under §G(1) or (2) of this regulation is without prejudice to the Commissioner in other proceedings or matters with respect to the issuer or any other person.

#### Regulation .11 MLOE: Local Issuer Exemption.

*COMAR 02.02.04.11*

A. Nature of Issuer.

  (1) Exemption under MLOE and this regulation is available only to local issuers.

  (2) The Commissioner may extend by order the exemption under this regulation to a limited liability company, partnership, or other entity that satisfies all of the elements of the definition of local issuer except that it is not a corporation, if the Commissioner determines that the order would be consistent with the public interest.

B. Definition.

  (1) “Local issuer” means a corporation that:

    (a) Is organized under the laws of Maryland or is organized under the laws of another jurisdiction and is qualified to do business in Maryland under Corporations and Associations Article, §7-203, Annotated Code of Maryland;

    (b) Has its principal place of business in Maryland; and

    (c) In the reasonable belief of the issuer, has 50 or fewer beneficial owners of its securities, both immediately before and immediately after the sale of securities under MLOE.

  (2) For the purpose of calculating the number of beneficial owners under §B(1)(c) of this regulation:

    (a) A corporation, limited liability company, partnership, or other entity is considered one beneficial owner, unless the corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer;

    (b) If an owner that is a corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer, then each beneficial owner of an equity interest in the corporation, limited liability company, partnership, or other entity is considered a separate owner of the issuer;

    (c) A relative, spouse, or relative of the spouse of a beneficial owner, who has the same principal residence as the beneficial owner, is considered together with the beneficial owner to be one beneficial owner of the issuer;

    (d) A holder of a purchase money mortgage is excluded; and

    (e) A person enumerated in 17 CFR §230.501(a)(1) (SEC Rule 501, Definitions and Terms Used in Regulation D) (1994), which is incorporated by reference, is excluded.

C. Number of Purchasers. In an offering under this regulation:

  (1) There may be not more than, or the issuer shall have a reasonable belief that there are not more than, ten purchasers, wherever located, of securities from the issuer during any 12-month period; and

  (2) The number of purchasers shall be calculated in accordance with Regulation .10F of this chapter.

D. Aggregate Offering Price. In an offering under this regulation, the aggregate offering price during any 12-month period may not exceed $150,000.

E. Disclosure. Availability of the exemption under this regulation does not depend upon the issuer's delivery to a purchaser of a specific disclosure document.

#### Regulation .12 MLOE: General Transactional Exemption.

*COMAR 02.02.04.12*

A. Nature of Security.

  (1) Exemption under MLOE and this regulation is available for the following securities issued by a corporation, limited liability company, partnership, or real estate investment trust:

    (a) A note, stock, bond, debenture, evidence of indebtedness, voting trust certificate, partnership interest, limited liability company interest, share of beneficial interest of a real estate investment trust, or American Depositary Receipt;

    (b) A warrant or right to purchase or subscribe for a security listed in §A(1)(a) of this regulation; or

    (c) A security convertible into a security listed in §A(1)(a) or (b) of this regulation.

  (2) The Commissioner may extend by order the exemption under this regulation to other types of securities or issuers, if the Commissioner determines that the order would be consistent with the public interest.

B. Number of Purchasers. In an offering under this regulation:

  (1) There may be not more than, or the issuer shall have a reasonable belief that there are not more than, 35 purchasers in Maryland of securities from the issuer; and

  (2) The number of purchasers shall be calculated in accordance with Regulation .10F of this chapter.

C. Disclosure.

  (1) In an offering under this regulation, the issuer shall:

    (a) Deliver a Form MLOE-2, or a disclosure document containing the information required by Form MLOE-2, to each prospective purchaser before a sale to the purchaser;

    (b) Sell securities only to accredited investors;

    (c) Sell securities only to purchasers that, immediately before the sale, possess the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment, or that the issuer believes after reasonable inquiry possess that knowledge and experience;

    (d) Sell securities only to purchasers that, immediately before the sale, are able to bear, or that the issuer believes after reasonable inquiry are able to bear, the economic risk of the investment and that, together with a purchaser representative, possess the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment, or that the issuer believes after reasonable inquiry possess that knowledge and experience; or

    (e) Sell securities only to a combination of purchasers that are described in §C(1)(b), (c), or (d) of this regulation.

  (2) Notwithstanding the applicability of §C(1)(b)—(e) of this regulation, an issuer shall deliver Part II of Form MLOE-2, or a disclosure document containing the information required by Part II of Form MLOE-2, to all purchasers, if:

    (a) Within 18 months before the first sale of securities under this regulation, the issuer issued or committed to be issued securities of the same or similar class for consideration of a per share value 25 percent or more below the offering price of securities to be sold under this regulation, if the securities so issued or committed to be issued constitute 10 percent or more of the securities of the same or similar class outstanding at the commencement of the offering under this regulation, or if the securities were issued or committed to be issued to an officer, director, general partner, or any other person that performs similar functions, or promoter of the issuer; or

    (b) Any part of the proceeds of an offering under this regulation are not to be escrowed in a bank or other depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation, or with another person approved as escrow agent by order of the Commissioner, until completion of the offering.

D. Notice Filing.

  (1) If the anticipated aggregate offering price of an offering exempt from registration under MLOE and this regulation exceeds $150,000, the issuer shall file with the Commissioner not later than 15 days after the first sale of securities under MLOE and this regulation:

    (a) A Form MLOE-1, or a document containing the information required by Form MLOE-1; and

    (b) The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506, Annotated Code of Maryland.

  (2) Exclusions.

    (a) The requirements of §D(1) of this regulation do not apply to an offer of securities made by an issuer to one person that, after completion of the offering, is the sole beneficial owner of the issuer.

    (b) The requirements of §D(1) of this regulation do not apply to an offer of securities made in connection with the initial organization of an issuer to five or fewer individuals who will be principals of the issuer and will be substantially involved in the operations of the issuer.

    (c) If a corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer, and equity interests in the corporation, limited liability company, partnership, or other entity are beneficially owned by more than one person, then the corporation, limited liability company, partnership, or other entity is considered to be more than one person for purposes of §D(2)(a) of this regulation.

    (d) For purposes of calculating the number of beneficial owners in §D(2)(c) of this regulation, a relative, spouse, or relative of the spouse of a beneficial owner, who has the same principal residence as the beneficial owner, is considered together with the beneficial owner to be one person.

#### Regulation .13 MLOE: Insignificant Deviations.

*COMAR 02.02.04.13*

A. Conditions. A failure to comply with a term of MLOE does not result in the loss of an exemption from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, for an offer or sale to a particular individual or entity, if the issuer or other person relying on the exemption demonstrates that the:

  (1) Failure to comply did not pertain to a term directly intended to protect that particular individual or entity or class of individuals or entities;

  (2) Failure to comply did not pertain to Regulation .10C or G, Regulation .11B or C, or Regulation .12B of this chapter;

  (3) Failure to comply was insignificant with respect to the offering as a whole; and

  (4) Issuer made a good faith and reasonable attempt to comply with all applicable terms of MLOE.

B. Rights of Commissioner. The Commissioner retains the right to take action under the Maryland Securities Act against an issuer or other person that fails to comply with a term of MLOE, including Regulation .12D of this chapter, and establishes an exemption under MLOE only through reliance upon §A of this regulation.

#### Regulation .14 Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-601(16), Annotated Code of Maryland, for Certain Securities.

*COMAR 02.02.04.14*

The following securities are exempt from registration filings under the Maryland Securities Act, Corporations and Associations Article, §§11-205 and 11-501, Annotated Code of Maryland, provided that the exemption may be revoked with respect to a specific security pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-603: Mortgage-related securities, as defined under §3(A)(41) of the federal Securities Exchange Act of 1934, and the rules, regulations, and interpretive releases promulgated under it.

#### Regulation .15 Coordination with SEC Rule 505 or 506.

*COMAR 02.02.04.15*

A. Scope.

  (1) This regulation exempts under the Maryland Securities Act, Corporations and Associations Article, §11-602(15), Annotated Code of Maryland, certain transactions from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland.

  (2) This regulation and the Maryland Securities Act, Corporations and Associations Article, §11-602(15), Annotated Code of Maryland, do not provide an exemption from the antifraud provisions of the Maryland Securities Act, Corporations and Associations Article, Subtitles 3 and 7, Annotated Code of Maryland.

B. Conditions.

  (1) An offering under this regulation shall satisfy the terms of 17 CFR §230.505 (1994) (SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) or 17 CFR §230.506 (1994) (SEC Rule 506, Exemption for Limited Offers Without Regard to Dollar Amount of Offering), which are incorporated by reference.

  (2) The burden of proving an exemption under this regulation is on the person claiming the exemption.

  (3) Remuneration for Solicitation or for Sales.

    (a) Except as provided in §B(3)(b) of this regulation, a commission or similar remuneration may not be paid or given, directly or indirectly, for the solicitation of a prospective purchaser or in connection with sales of securities under this regulation.

    (b) A commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under this regulation may be paid or given to:

      (i) A broker-dealer that the issuer reasonably believes is registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland; or

      (ii) An individual who the issuer reasonably believes has not received a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities on behalf of more than one other issuer within a 12-month period immediately before the first sale by the individual in the offering of securities under this regulation.

C. Disqualification.

  (1) An exemption under this regulation is not available if the issuer, any of the issuer's directors, officers, general partners, trustees, or any other person that performs similar functions, beneficial owners of 10 percent or more of a class of its equity interests, or promoters currently connected with it in any capacity, or any person, other than a broker-dealer currently registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland, that has been or will be paid or given, directly or indirectly, a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under this regulation:

    (a) Within 5 years before the first sale of securities in an offering under this regulation, has filed a registration statement or application for exemption from registration that is currently subject to a stop order under a state's securities laws;

    (b) Within 5 years before the first sale of securities in an offering under this regulation, has been convicted of or has pleaded nolo contendere to a felony or misdemeanor in connection with the purchase or sale of a security or in connection with the making of a false filing with the SEC or with a state securities administrator, or a felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, conspiracy to defraud, or theft;

    (c) Is subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment, or decree of a court of competent jurisdiction entered within 5 years before the first sale of securities in an offering under this regulation and permanently restraining or enjoining, that person from engaging in or continuing any conduct or practice in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or a state securities administrator;

    (d) Is subject to a United States Postal Service false representation or cease and desist order entered under 39 U.S.C. §3005 within 5 years before the first sale of securities in an offering under this regulation or is subject to a temporary restraining order or preliminary injunction entered under 39 U.S.C. §3007 or 18 U.S.C. §1345 with respect to conduct alleged to have violated 39 U.S.C. §3005; or

    (e) Is subject to a state administrative order entered by a state securities administrator in which fraud or deceit was found, if the final order was entered within 5 years before the first sale of securities in an offering under this regulation.

  (2) An exemption under this regulation is not available if the issuer or any of its predecessors or affiliates is subject to an order issued by the Commissioner or an order, judgment, or decree of a court of competent jurisdiction temporarily, preliminarily, or permanently restraining or enjoining the person for failure to comply with §D of this regulation.

  (3) Waiver of Disqualification.

    (a) The Commissioner may waive by order a disqualification under §C(1) or (2) of this regulation, if the Commissioner determines that the order would be consistent with the public interest.

    (b) A waiver by the Commissioner of a disqualification under §C(1) or (2) of this regulation is without prejudice to the Commissioner in other proceedings or matters with respect to the issuer or any other person.

D. Notice Filing. Not later than 15 days after the first sale of securities under this regulation, the issuer shall file with the Commissioner:

  (1) A manually signed notice on a completed SEC Form D (Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption), as filed with the SEC and as that form may be amended from time to time, which filing or filings shall:

    (a) Constitute the issuer's representation and affirmation to the Commissioner that it has complied with 17 CFR §230.505 (SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) or 17 CFR §230.506 (SEC Rule 506, Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering), and

    (b) Include in the Appendix, the information requested in the fifth column with respect to Maryland;

  (2) A statement by the issuer or issuer's counsel of the first date of a sale of securities in Maryland made under this regulation; and

  (3) The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506, Annotated Code of Maryland.

E. Insignificant Deviations.

  (1) A failure to comply with a term of §B or D of this regulation, including a failure to comply with a term of SEC Rule 505 or Rule 506, does not result in the loss of an exemption from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, for an offer or sale to a particular individual or entity, if the issuer or other person relying on the exemption demonstrates that:

    (a) The failure to comply did not pertain to a term directly intended to protect that particular individual or entity or class of individuals or entities;

    (b) The failure to comply did not pertain to 17 CFR §230.502(c) (SEC Rule 502, General Conditions to Be Met), 17 CFR §230.505(b)(2)(i), (ii), or (iii) (SEC Rule 505, Exemption For Limited Offers and Sales of Securities Not Exceeding $5,000,000), 17 CFR §230.506(b)(2)(i) (SEC Rule 506, Exemption For Limited Offers and Sales Without Regard to Dollar Amount of Offering);

    (c) The failure to comply was insignificant with respect to the offering as a whole; and

    (d) The issuer made a good faith and reasonable attempt to comply with all applicable terms of this regulation.

  (2) The Commissioner retains the right to take action under the Maryland Securities Act against an issuer or other person that fails to comply with a term of this regulation, and establishes an exemption only through reliance upon §E(1) of this regulation.

#### Regulation .16 Vacant

*COMAR 02.02.04.16*

#### Regulation .17 Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-602(17), Annotated Code of Maryland, for Certain Transactions.

*COMAR 02.02.04.17*

The following transactions are exempt from registration filings under the Maryland Securities Act, Corporations and Associations Article, §§11-205 and 11-501, Annotated Code of Maryland, provided that the exemption may be revoked with respect to a specific transaction pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-603: A transaction involving the offer or sale of one or more promissory notes directly secured by a first lien on a single parcel of real estate upon which is located a dwelling or other residential or commercial structure, and participation interest in the notes, that are exempt under §4(5) of the federal Securities Act of 1933, and the rules, regulations, and interpretive releases promulgated under it.