FILED 11/29/2017 2:16 PM ARCHIVES DIVISION SECRETARY OF STATE

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1 OFFICE OF THE SECRETARY OF STATE DENNIS RICHARDSON SECRETARY OF STATE LESLIE CUMMINGS DEPUTY SECRETARY OF STATE NOTICE OF PROPOSED RULEMAKING INCLUDING STATEMENT OF NEED & FISCAL IMPACT CHAPTER 441 DEPARTMENT OF CONSUMER AND BUSINESS SERVICES FINANCE AND SECURITIES REGULATION ARCHIVES DIVISION MARY BETH HERKERT DIRECTOR 800 SUMMER STREET NE SALEM, OR FILED 11/29/2017 2:16 PM ARCHIVES DIVISION SECRETARY OF STATE FILING CAPTION: Adopts notice requirement for federal crowdfunded offers and sales under the JOBS Act. LAST DAY AND TIME TO OFFER COMMENT TO AGENCY: 01/16/2018 5:00 PM The Agency requests public comment on whether other options should be considered for achieving the rule's substantive goals while reducing negative economic impact of the rule on business. CONTACT: Karen Winkel Winter St NE Salem,OR Filed By: Karen Winkel Rules Coordinator HEARING(S) Auxilary aids for persons with disabilities are available upon advance request. Notify the contact listed above. DATE: 01/09/2018 TIME: 2:00 PM OFFICER: Aeron Teverbaugh ADDRESS: Labor & Industries Building 350 Winter St NE Basement, Conference Room F Salem, OR NEED FOR THE RULE(S): The federal JOBS Act (2012) required the adoption of rules for federal crowdfunded securities. Federal crowdfunding offerings are covered securities under 18(b)(4) of the Securities Act of 1933, which preempts state registration. However, states may require notice of federal crowdfunded securities when the business issuing the security has their principal place of business in the state or when a state s residents purchase 50% or more of the available securities. The federal rules became effective on May 16, In September 2016, the North American Securities Administrator s Association (NASAA), of which Oregon is a member, adopted a model rule for notice filings of federal crowdfunding offers. Oregon s Securities Law currently cites to covered securities under section 18(b)(4) but there are no procedures outlined for accepting notice of federal crowdfunded securities. The proposed rules would adopt a version of the NASAA model rule to provide procedures for filing notice of federal crowdfunded securities. DOCUMENTS RELIED UPON, AND WHERE THEY ARE AVAILABLE: Draft rules are available from the rules coordinator, located at the Division of Financial Regulation, Labor and Industries Building, 350 Winter St. NE, Salem, OR or upon request from Karen.j.winkel@oregon.gov. The model rule is available here. The rules for Regulation Crowdfunding can be accessed here.

2 FISCAL AND ECONOMIC IMPACT: The proposed rules will result in an approximately $200 fiscal impact to businesses conducting federal crowdfunding offers if they either have their principal place of business in Oregon or if 50% or more of the outstanding securities are purchased by Oregon residents. COST OF COMPLIANCE: (1) Identify any state agencies, units of local government, and members of the public likely to be economically affected by the rule(s). (2) Effect on Small Businesses: (a) Estimate the number and type of small businesses subject to the rule(s); (b) Describe the expected reporting, recordkeeping and administrative activities and cost required to comply with the rule(s); (c) Estimate the cost of professional services, equipment supplies, labor and increased administration required to comply with the rule(s). (1) The proposed rules may have a slight fiscal impact to the division due to receiving notice of federally crowdfunded securities. Existing rules require the payment of a $200 notice filing fee for covered securities offered under the federal Securities Act of 1933 section 18(b)(4), which should offset any impact to the division. Units of local government and the public should not see any fiscal impact from the procedural rules. (2)(a) Offering securities is an optional method of raising capital. It is unknown at this time how many small businesses may opt to issue securities under the federal Regulation Crowdfunding or how many issuers may be small businesses. Because the rules require copies of materials required to be submitted to the Securities and Exchange Commission as part of the federal regulations issuers will be able to rely on already prepared documents for compliance with the proposed rules. Oregon small businesses choosing to issue federal crowdfunded securities will see a $200 impact due to the filing fee. (2)(b) The proposed rules require submission of copies of materials submitted to the federal agency as part of the federal filing. The proposed rules should have a minimal fiscal impact on reporting, recordkeeping, or administrative activities over that caused by federal requirements. The exact impact is unknown at this time because it is unknown how many businesses will opt to issue federally crowdfunding offerings. (2)(c) The proposed rules require submission of copies of materials submitted to the federal agency as part of the federal filing. The proposed rules should have a minimal fiscal impact on equipment, labor, or administrative activities over that caused by federal requirements. The exact impact is unknown at this time because it is unknown how many businesses will opt to issue federally crowdfunding offerings. DESCRIBE HOW SMALL BUSINESSES WERE INVOLVED IN THE DEVELOPMENT OF THESE RULE(S): Small businesses were represented on the rulemaking advisory committee. WAS AN ADMINISTRATIVE RULE ADVISORY COMMITTEE CONSULTED? YES RULES PROPOSED: , , AMEND: RULE SUMMARY: OAR is amended to provide a definition of a federal crowdfunded offering consistent with the JOBS Act and 17 CFR 227 (Regulation Crowdfunding).

3 Scope and Definitions (1)(a) Scope of rule. The Notice Filing Rules (OAR to ) provide Oregon procedures for notice filings and renewals under ORS (b) Application of Notice Filing Rules: (A) An offering under the Notice Filing Rules does not have to comply with OAR 441 Division 065 Registration of Securities or 441 Division 070 Renewal of Securities Registrations; and (B) An effective offering under former OAR or an effective registered offering that qualifies for the Notice Filing Rules shall become subject to the Notice Filing Rules when the person that previously filed under former or securities offering registrant files under the notice filing renewal procedures in (6). (2) Definitions. As used in the Notice Filing Rules: (a) "Federal Crowdfunding Offering" means a security that is a federal covered security under section 18(b)(4)(C) of the Securities Act of 1933 by virtue of the fact that the offering is exempt under Sections 4(a)(6) of the Securities Act of 1933, as amended, and Regulation Crowdfunding promulgated thereunder (17 CFR 227) or will be such a covered security upon completion of the transaction, and the issuer either has its principal place of business in Oregon, or sells 50% or greater of the aggregate amount of the offering to residents of Oregon; (b) "Investment company notice filing" means a filing by a mutual fund, unit investment trust or other investment company, that covers a security that would be a federal covered security pursuant to section 18(b)(2) of the Securities Act of 1933, as amended; (bc) "NASAA" means the North American Securities Administrators Association Inc.; (cd) "NASAA Form NF" means the Uniform Investment Company Notice Filing form adopted by the NASAA; (de) "Notice Filing Rules" means the rules in OAR to ; (ef) "Offering to qualified purchaser," "federally exempt security" or "federally exempt transactions" means offerings of federal covered securities that are subject to section 18(b)(3) or 18(b)(4) of the Securities Act of 1933, as amended, but does not include section 18(b)(4)(E) of that Act; (fg) "Rule 506 offering" means an offering of federal covered securities that is subject to section 18(b)(4)(E) of the Securities Act of 1933, as amended; (gh) "SEC" means the Securities and Exchange Commission; and (hi) "SEC Form D" means " Form D; Notice of Exempt Offering of Securities. [ED. NOTE: Forms referenced are available from the agency.] Statutory/Other Authority: 17 CFR 227, ORS ,

4 AMEND: RULE SUMMARY: is amended to clarify that the rule does not apply to federal crowdfunded securities Offering to Qualified Purchaser, Federally Exempt Securities and Federally Exempt Transactions (1) Except as provided in section (2) of this rule, an issuer offering a security that is a covered security under section 18(b)(3) or (4), other than sections 18(b)(4)(C) or 18(b)(4)(E), of the Securities Act of 1933, as amended, shall: (a) File a written notice of such offering identifying the issuer and seller if other than the issuer; and (b) Pay a fee as set in OAR (2) An issuer offering a security that is a variable annuity is exempt from notice filing and the fee requirements under ORS and OAR provided the security is: (a) A covered security under section 18(b)(4) by virtue of being an exempted security under section 3(a)(8) of the Securities Act of 1933; and (b) In a form filed with and approved by the Director of the Department of Consumer and Business Services under the Oregon Insurance Code. Statutory/Other Authority: 17 CFR 227, ORS ,

5 ADOPT: RULE SUMMARY: establishes procedures for filing a notice of federal crowdfunding securities consistent with NASAA s model notice rules Federal Crowdfunding Offerings (1) An issuer that offers and sells securities in Oregon in an offering exempt under federal Regulation Crowdfunding adopted pursuant to section 18(b)(4)(C) of the Securities Act of 1933, and that either has its principal place of business in Oregon or sells 50% or greater of the aggregate amount of the offering to residents of Oregon, shall file the following with the Director: (a) A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission; and (b) The filing fee as set out in (2) If the issuer has its principal place of business in Oregon, the filing required under subsection (1) shall be filed with the Director when the issuer makes its initial Form C filing concerning the offering with the Securities and Exchange Commission. If the issuer does not have its principal place of business in this state but residents of Oregon have purchased 50% or greater of the aggregate amount of the offering, the filing required under paragraph (1) shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than thirty (30) days from the date of completion of the offering. Statutory/Other Authority: 17 CFR 227, ORS