Exemptions for small security transactions advanced

Senators gave first-round approval April 9 to a bill that would change provisions relating to small securities transactions.

As introduced, LB205, sponsored by Columbus Sen. Paul Schumacher, would have added a new section to the Securities Act of Nebraska to exempt certain small offers and sales of securities.

Schumacher said securities law in Nebraska is complex and geared toward large businesses attempting to raise millions of dollars. LB205 would allow small entities to issue stock and sell shares to people through a less cumbersome process, he said.

“This is a very simple bill,” Schumacher said. “It facilitates the organization of capital in small communities, it helps entrepreneurs and it doesn’t cost the taxpayers anything.”

A Banking, Commerce and Insurance Committee amendment, adopted 27-0, restructured the proposed transactional exemption within the existing act rather than inserting a new section.

As amended, the bill would exempt from registration a transaction by a Nebraska issuer selling solely to Nebraska residents when:
• the proceeds in any three-year period do not exceed $250,000;
• no commission is paid except to a registered agent of a registered broker-dealer;
• the issuer or a connected individual has not engaged in a state or federal securities law violation;
• the issuer files a notice with the director of Banking and Finance;
• the offeree receives a disclosure statement;
• the purchaser signs a subscription agreement; and
• the issuer files a statement with the director.

The amendment also stipulates that no fine shall be imposed for a statement or omission of material fact related to an exempted transaction unless made with the intent to defraud or mislead.

In addition, a person who sells a qualifying security by means of an untrue statement of material fact, made with intent to defraud or mislead, could be held liable to a buyer in a civil action to recover the consideration, interest and attorney fees. The burden of proof would be on the claimant.

Bellevue Sen. Sue Crawford supported the bill and the amendment, saying it could spur economic development.

“Most of the jobs that are created are created through small business,” she said.

LB205 advanced to select file on a 26-0 vote.