O.C.G.A. § 10-5-13 (2019)

Annotations

Law reviews. For article, “The Georgia Uniform

Securities Act of 2008: An Analysis of Significant Changes to Georgia’s Blue Sky Law,” see 14 (No. 6) Ga. St. B. J. 18 (2009).

ARTICLE 3 REGISTRATION OF SECURITIES JUDICIAL DECISIONS Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Ga. L. 1957, p. 134, as amended, former Code 1933, § 97-105, and former O.C.G.A. § 10-5-5, which were subsequently repealed but were succeeded by provisions in this article, are included in the annotations for this article. Nonprofit corporations. - Prior to April 24, 1975, nonprofit corporations were not subject to registration or regulation under the securities law, but by Ga. L. 1975, p. 928, § 11, the statute became applicable to non-profit corporations. Blau v. Redmond, 143 Ga. App. 897, 240 S.E.2d 273, 1977 Ga. App. LEXIS 2554 (1977) (decided under former Code 1933, § 97-105). Chapter inapplicable if neither promoter nor investor seeks profit. - If the promoter is not engaged in a profit-making enterprise and the investor cannot secure any financial advantage, the security provisions did not apply. Dunwoody Country Club of Atlanta, Inc. v. Fortson, 243 Ga. 236, 253 S.E.2d 700, 1979 Ga. LEXIS 866 (1979) (decided under former Code 1933, § 97-105). Chapter may apply if either promoter or investor anticipates financial return. - If the promoter is engaged in a profit-making enterprise but the investor will receive no financial return or if the promoter is a nonprofit corporation but the investor anticipates a financial return (e.g., sale of interest-bearing bonds), the securities provisions may apply. Dunwoody Country Club of Atlanta, Inc. v. Fortson, 243 Ga. 236, 253 S.E.2d 700, 1979 Ga. LEXIS 866 (1979) (decided under former Code 1933, § 97-105). Securities of nonprofit corporation promising profit to investor. - Former Code 1933, § 97-105 covered instruments issued by nonprofit corporations since the incentive to purchase was the promise of profit to the investor. An example of this

type of security would be the sale of interest-bearing bonds by a nonprofit corporation. Dunwoody Country Club of Atlanta, Inc. v. Fortson, 243 Ga. 236, 253 S.E.2d 700, 1979 Ga. LEXIS 866 (1979) (decided under former Code 1933, § 97-105). Individual desiring to sell stock owned by an individual, not otherwise registered, would have to register as a limited dealer under former O.C.G.A. § 10-5-5. Jorges v. Griffin, 161 Ga. App. 439, 288 S.E.2d 356, 1982 Ga. App. LEXIS 1908 (1982) (decided under former O.C.G.A. § 10-5-5). Stock not exempt from registration. - Exemption under former Code 1933, § 97-109 did not apply since the stock was sold to an individual, not a corporation and the fact that the buyer later transferred some of the stock to new investors was of no import because the relevant period for determining whether the stock had to be registered was at the time it was offered for sale. Bell v. Sasser, 238 Ga. App. 843, 520 S.E.2d 287, 1999 Ga. App. LEXIS 966 (1999) (decided under former O.C.G.A. § 10-5-5). Right of rescission. - Although security provisions did not define “purchaser” to whom the election of voiding an illegal sale was given, it was apparent that this referred to the one to whom the sale or disposition was made, especially when the certificate was issued directly to a party, designating him or her by name. The word “purchaser” may be used in a broad sense to include those who acquire title for a monetary consideration; however, as commonly employed and as ordinarily used a “purchaser” was understood to be one who obtains through negotiation or the like for a consideration. Utzman v. Caribbean & S.E. Dev. Corp., 107 Ga. App. 56, 129 S.E.2d 62, 1962 Ga. App. LEXIS 568 (1962) (decided under former Ga. L. 1957, p. 134, as amended). Transaction held not taking place in Georgia. - If a plaintiff, a Georgia resident, and a defendant, a Tennessee

resident, discussed by telephone an arrangement whereby the defendant’s company would serve as plaintiff’s investment advisor in trading of commodity futures and the defendant mailed to the plaintiff two letter agreements, setting out the contract terms and the plaintiff signed the

agreements and returned the agreements for signature of the other party, under Georgia law the transaction did not take place in Georgia. Rasmussen v. Thomson & McKinnon Auchincloss Kohlmeyer, Inc., 608 F.2d 175, 1979 U.S. App. LEXIS 9744 (5th Cir. 1979) (decided under former Code 1933, § 97-105).

OPINIONS OF THE ATTORNEY GENERAL Editor’s notes. - In light of the similarity of the statutory provisions, opinions under former Ga. L. 1957, p. 134, as amended, former Code 1933, § 97-105, and former O.C.G.A. § 10-5-5, which were subsequently repealed but were succeeded by provisions in this article, are included in the annotations for this article. Limited partnership interest. - Offering for sale of limited partnerships constitutes the offering for sale of a “security”. Unless exempted or involved in an exempt transaction, such securities must be registered. 1969 Op. Att’y Gen. No. 69-328 (decided under former Ga. L. 1957, p. 134, as amended). Limited partnership is explicitly defined to be a “security” by former Code 1933, § 97-102. 1974 Op. Att’y Gen. No. 74-75 (decided under former Code 1933, § 97-105). Investment club interest. - If the formation of an investment club were essentially the same as that for a limited partnership, such an interest would be a security. 1969 Op. Att’y Gen. No. 69-328 (decided under former Ga. L. 1957, p. 134, as amended). Time-sharing units in condominium with profit-sharing arrangement. - Sale of time-sharing units in a condominium when coupled with a rental pool or other profit-sharing arrangement constituted a “security” within the definition of former Code 1933, § 97-102 and, unless exempt, must be registered pursuant to the statutory provisions on securities. 1976 Op. Att’y Gen. No. 76-75 (decided under former Code 1933, § 97-105). Mortgages structured or promoted as investment contracts. - Sales of mortgages described in paragraph (10) of

former Code 1933, § 97-108 were exempt from the registration requirement of former Code 1933, § 97-105 but mortgage offerings which are structured or promoted in such a way that the mortgages become investment contracts must be registered pursuant to § 97-105 unless the mortgages qualify for some exemption from registration other than paragraph (10) of § 97-108. 1974 Op. Att’y Gen. No. 74-153 (decided under former Code 1933, § 97-102). Registration not required unless activity occurs in Georgia. - Georgia courts would probably hold that the securities registration provisions of this chapter do not apply to transactions involving a Georgia issuer when no sale or offer to sell occurs within Georgia; but if certain activities were carried on in Georgia, this could bring the transactions under the law of this state. 1970 Op. Att’y Gen. No. U70-88 (decided under Ga. L. 1957, p. 134, as amended). Small issue registration and exemption provisions. - It would be consistent with the intent of the General Assembly as manifested in the security law as a whole for a syndicator to sell interests to 40 persons concurrently if the investor was afforded the disclosures and rescission right of subsection (e) of former Code 1933, § 97-105, the prohibitions against public advertising of paragraph (13) of former Code 1933, § 97-109 are observed, and the legend and investment letter provisions of the two sections are complied with. 1974 Op. Att’y Gen. No. 74-75 (decided prior to 1975 amendment to paragraph (13) of former Code 1933, § 97-109; decided under former Code 1933, § 97-105). Syndicator may sell interests to 40 investors in any 12-month period utilizing the

small issue registration procedure of subsection (e) of former Code 1933, § 97-105 and the registration exemption of paragraph (13) of former Code 1933, § 97-109; if this is done in such a way that purchasers pursuant to paragraph (13) of § 97-109 are not clearly identifiable, all investors must be accorded the rights and disclosures provided for in subsection (e) of § 97-105. 1974 Op. Att’y Gen. No. 74-75 (decided under former Code 1933, § 97-105). In determining whether the maximum number of purchasers pursuant to paragraph (13) of former Code 1933, § 97-109 or subsection (e) of former Code 1933, § 97-105 had been exceeded, the syndicator and the syndicator’s affiliates must be counted as purchasers if the syndicators obtain or retain an interest. 1974 Op. Att’y Gen. No. 74-75 (decided under former Code 1933, § 97-105). Integration would be virtually demanded if the syndicator commingles funds and other assets belonging to purportedly separate syndications; such commingling reduces the separate syndications to the level of mere window dressing and would preclude treatment of the syndications as separate entities in determining the number of purchasers to which sales have been made. 1974 Op. Att’y Gen. No. 74-75 (decided under former Code 1933, § 97-105).

National banks. - National bank should be viewed as a corporation within the purview of subparagraph (f)(3)(B) of former O.C.G.A. § 10-5-5. 1982 Op. Att’y Gen. No. 82-47 (decided under former O.C.G.A. § 10-5-5). National banks whose principal offices are located within Georgia must as a matter of federal law be deemed qualified to do business in Georgia. 1982 Op. Att’y Gen. No. 82-47 (decided under former O.C.G.A. § 10-5-5). In the absence of a superseding provision of federal law, a national bank whose principal office is located in a state other than Georgia may qualify to do business in Georgia under subparagraph (f)(3)(B) of former O.C.G.A. § 10-5-5 by compliance with either former Art. 14, Ch. 2, T. 44 or former Ch. 16, T. 53. 1982 Op. Att’y Gen. No. 82-47 (decided under former O.C.G.A. § 10-5-5). Fee for application for exemption not refundable. - The $250.00 filing fee required by paragraph (5) of former Code 1933, § 97-109 for applications seeking a transactional exemption from the requirements of former Code 1933, § 97-105 is nonrefundable, since the legislature, had it intended that a refund be implied, would have explicitly provided for one. 1975 Op. Att’y Gen. No. 75-79 (decided under former Code 1933, § 97-105).

RESEARCH REFERENCES Am. Jur. 2d. 69A Am. Jur. 2d, Securities Regulation - State, §§ 17 et seq., 25 et seq., 31, 54. C.J.S. 79A C.J.S., Securities Regulation and Commodity Futures Trading Regulation, § 493 et seq. ALR. Applicability of Blue Sky Laws to preincorporation subscriptions, A.L.R.2d 1103. Sale of memberships in club or similar organization as sale of securities within provisions of securities Acts, 87 A.L.R.2d 1140.

Sales as “isolated” or “successive” or the like, under state securities Acts, 1 A.L.R.3d 614. Attorney’s preparation of legal document incident to sale of securities as rendering him liable under state securities regulation statutes, 62 A.L.R.3d 252. What securities are exempt from registration under § 402(a) of the Uniform Securities Act, 84 A.L.R.3d 575. Persons entitled to relief under civil liability provisions of § 12 of Securities Act of 1933 (15 USC § 77l), 113 A.L.R. Fed. 575.