Quick Answer
A security sold under the intrastate exemption may be resold only to residents of the issuer's state for six months from that security's own sale date. The issuer must take four precautions to enforce that limit, and it cannot start a new intrastate offering in a different state until that period runs out.
The residency tests from the previous section keep the initial sale in-state. This section covers what keeps the security in-state afterward.
How Long Does the Resale Restriction Last?
- For six months from the date the issuer sells a given security, any resale of that security may go only to persons resident in the issuer's state
- The six-month clock runs separately for each security from its own sale date, not from the date the offering closes
Exam Tip: Gotchas
- The resale clock is per security, not per offering. A security sold in month one and a security sold in month four of the same offering carry two different six-month deadlines.
What Precautions Must the Issuer Take?
To enforce the resale limit, the issuer must:
- Place a legend on the security stating the resale restriction and the six-month period
- Issue stop-transfer instructions to its transfer agent, or make an equivalent internal notation
- Obtain a written representation of residence from each purchaser
- Disclose the in-state-only sale and the six-month resale limit prominently to every offeree when the offer goes out, and in writing to every purchaser a reasonable time before the sale
Can the Issuer Immediately Run a Second Intrastate Offering in a Different State?
No. After completing an intrastate offering, an issuer cannot conduct another intrastate offering in a different state or territory until the six-month resale-limitation period, measured from the date of the last sale in the prior offering, has expired.
Exam Tip: Gotchas
- The lockout is measured from the last sale, not the offering's opening. Count six months forward from the final sale in the prior state before an issuer may start selling in a new one.
What Should You Check on Exam Day?
- Start the six-month resale clock from each security's own sale date, not the offering's closing date.
- Confirm all four precautions are in place: legend, transfer-agent instructions, a written residency representation, and prominent disclosure to offerees and purchasers.
- Measure the different-state lockout from the last sale in the prior offering, not its opening.