The purpose and effect is to amend the existing rules to incorporate by reference the current versions of general industry standards, to implement Chapter 2024-168, Laws of Florida, to conform the definition of “development-stage ....

 

DEPARTMENT OF FINANCIAL SERVICES

Securities

RULE NOS.:RULE TITLES:

69W-200.001Definitions

69W-200.002General Industry Standards Incorporated by Reference

PURPOSE AND EFFECT: The purpose and effect is to amend the existing rules to incorporate by reference the current versions of general industry standards, to implement Chapter 2024-168, Laws of Florida, to conform the definition of “development-stage company” to federal law, for clarity and consistency, to update cross-references, and to delete unnecessary definitions.

SUMMARY: The rules are amended to incorporate by reference the current versions of general industry standards, to implement Chapter 2024-168, Laws of Florida, to conform the definition of “development-stage company” to federal law, for clarity and consistency, to update cross-references, and to delete unnecessary definitions for the terms “carrying dealer” and “introducing dealer.”

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: The Agency expressly relies on an analysis of potential economic impact conducted by persons with subject matter knowledge of these rules.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 517.03, 517.1215, 517.1217, FS.

LAW IMPLEMENTED: 517.07, 517.12, 517.021, 517.051, 517.061, 517.081, 517.1215, 517.1217, 517.161, FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE SCHEDULED AND ANNOUNCED IN THE FAR.

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Ryann White, Office of General Counsel [phone], [e-mail].

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69W-200.001 Definitions.

As used in Chapter 517, F.S., and the rules promulgated thereunder, unless the context otherwise specifically requires:

(1) through (3) No change.

(4) “Applicant” means shall mean a person executing or submitting an application for registration under Chapter 517, F.S.

(5)(a) “Associated person” as defined in 517.021(4) 517.021(3), F.S., shall include any person who for compensation refers for the purchase or sale of securities and/or of investment advisory services. A person whose activities fall within this definition is required to register with the Office of Financial Regulation as an associated person pursuant to Section 517.12(1) or (3), F.S.

(b) No change.

(6) “Bona Fide Employee” includes an employee, is deemed to be a partner, officer, director, manager, managing member, or trustee representing of the issuer in the purchase, sale, or distribution of the issuer’s own securities if such employee, partner, officer, director, manager, managing member, or trustee, or any employee of such partner, officer, director or trustee, who has not participated in the distribution or sale of any securities within the preceding twelve (12) months and, and who primarily performs, or is intended to perform at the end of the distribution, substantial duties for, or on behalf of the issuer, other than in connection with transactions in securities.

(7)(a) Except as otherwise provided in this subsection, the term “Branch Office” means shall mean any location in this state of a dealer or investment adviser at which one or more associated persons regularly conduct the business of rendering investment advice or effecting any transactions in, or inducing or attempting to induce the purchase or sale of, any security or any location that is held out as such. Pursuant to Section 517.021(6) 517.021(5), F.S., the Financial Services Commission may adopt exceptions to this definition. The following locations shall not be deemed branch offices for purposes of Section 517.12(4), F.S., and are considered exceptions to the definition of a branch office under Section 517.021(6) 517.021(5), F.S.:

1. through 2. No change.

3. Any location, other than a primary residence, that is used for securities business for less than 30 business days in any one calendar year, provided the registrant complies with the provisions of this rule in sub-subparagraphs (7)(a)2.a. (8)(a)2.a. through i., above;

4. through 7. No change.

8. The principal office and place of business of an investment adviser registered with the Office of Financial Regulation pursuant to Section 517.12(3) 517.12(4), F.S.

9. No change.

(b) Notwithstanding the exclusions provided in subparagraph (7)(a)2. (8)(a)2., above, any location of a dealer that is responsible for supervising the activities of persons associated with the registrant at one or more non-branch locations of the registrant is considered to be a branch office.

(c) The term “business day” as used in subparagraph (7)(a)3. (8)(a)3., above, shall not include any partial business day provided that the associated person spends at least four hours on such business day at his or her designated branch office during the hours that such office is normally open for business.

(8) “Carrying Dealer” means any dealer maintaining a fully/principally disclosed agreement/arrangement with an introducing dealer, whereby the carrying dealer is responsible for customer monies and securities, and confirms transactions to the customer accounts introduced; such dealer who carries accounts for Florida residents must be registered pursuant to the provisions of Section 517.12, F.S.

(9) “Development-Stage Company Developmental Stage Entities” means a company shall be defined as those entities which devotes are devoting substantially all of its efforts to establishing a new business and for which either of the following conditions exist exists:

(a) Planned principal operations have not commenced.; or

(b) Planned principal operations have commenced, but there has been no significant revenue therefrom whose annual net earnings for each of the last two (2) consecutive fiscal years or whose average annual net earnings for the last five (5) fiscal years prior to the public offering have been less than five percent (5%) of the aggregate public offering.

(9) (10) “Dilution” for purposes of Rules 69W-700.008 and 69W-700.015, F.A.C., shall be determined by subtracting the maximum sales commissions and expenses set forth in the prospectus from the gross proceeds of the offering and adding the net worth prior to the offering. Divide this sum by the total number of shares to be outstanding at the conclusion of the offering to determine book value. Subtract the book value from the proposed offering price and divide the result by the proposed offering price to arrive at the percentage of dilution. For the purpose of calculating “dilution” or “book value,” intangible assets such as patents, copyrights, franchises, trademarks, operating rights and goodwill are deducted from total assets.

Dilution Formula:

NP	=	Gross Proceeds minus Maximum Sales Commissions and Expenses
NW	=	Net Worth prior to the offering
TS	=	Total Number of shares to be outstanding after a successful offering
BV	=	Book Value
OP	=	Offering Price

Example:

NP + NW

________=BV

TS

 

OP – BV

_________=Dilution

OP

(10) (11) “Independent Director” shall be defined as a member of the issuer’s board of directors who:

(a) No change,

(b) Is not a promoter as defined in Section 517.021(22)(b) 517.021(20)(b), F.S.; and,

(c) No change.

(12) “Introducing Dealer” means any dealer maintaining a formal agreement/arrangement with another dealer whereby the introducing dealer does not carry (i.e., holds funds or securities, or confirms transactions) customer accounts; such dealer who introduces Florida resident accounts must be registered pursuant to Section 517.12, F.S.

(11) (13) “Issuer” for purposes of Rules 69W-400.001, 69W-500.005, 69W-500.006 and 69W-500.008, F.A.C., shall not include a promoter of the issuer.

(12) (14) “Principal Office” or “Home Office” means shall mean the place where the chief or principal affairs and business of the applicant or registrant are transacted.

(13) (15) “Promoter” shall not include a person with respect to an issuer which is duly qualified to transact business under the laws of the jurisdiction in which it is organized and which has actively been engaged in business for a continuous period of one year.

(14) (16) “Qualified Institutional Buyer” for purposes of Section 517.061(7), F.S., shall be defined as provided in Securities and Exchange Commission rule 144A(a) (17 C.F.R. §230.144A(a)), which is incorporated by reference in Rule 69W-200.002, F.A.C.

(15) (17) “Registrant” means shall mean an applicant for whom a registration has been declared effective by the Office of Financial Regulation.

(16) (18) “Reportable Act” means shall mean:

(a) through (d) No change.

(17) (19) “Securities Act of 1933,” 15 U.S.C. §§77a through 77mm, “Securities Exchange Act of 1934,” 15 U.S.C. §§78a through 78oo, “Investment Company Act of 1940,” 15 U.S.C. §§80a-1 through 80a-64, “Investment Advisers Act of 1940,” 15 U.S.C. §§80b-1 through 80b-21, and “Internal Revenue Code,” 26 U.S.C. Subtitles A through K, mean means the federal statutes of those names.

Rulemaking Authority 517.03(1) FS. Law Implemented 517.07, 517.12, 517.021, 517.051, 517.061, 517.081, 517.161 FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-200.01, Amended 12-8-87, 10-14-90, 7-31-91, 6-16-92, 1-10-93, 5-5-94, 10-20-97, 8-9-98, 8-19-99, 10-30-03, Formerly 3E-200.001, Amended 5-15-07, 9-30-10, 11-11-13, 9-22-14, 11-15-16, 1-18-21, 2-14-23, 3-21-24,                 _______.

 

69W-200.002 General Industry Standards Incorporated by Reference.

The following general industry standards as expressed in the statutes, rules and regulations of the various federal and self-regulatory agencies and regulatory associations and referenced in Division 69W, F.A.C., are hereby incorporated by reference and adopted by this rule. The material incorporated by reference in this rule may also be obtained from the Florida Office of Financial Regulation (Office), Division of Securities’ website at https://flofr.gov/sitePages/MaterialsDS.htm, except where noted for copyright restrictions. Materials subject to copyright restrictions may be inspected and examined by contacting the Florida Office of Financial Regulation, Division of Securities, at 200 E. Gaines Street, Tallahassee, Florida 32399, [phone] or the Florida Department of State at 500 S. Bronough Street, Tallahassee, Florida 32399, [phone].

(1) through (13) No change.

(14) SEC Rules 134, 134a, 135a, 144, 156, 419, 481 and 482, (17 C.F.R. §§230.134, 230.134a, 230.135a, 230.144, 230.156, 230.419, 230.481 and 230.482) (4-1-23 4-1-22 edition as amended in 87 FR 72846-72847 (Nov. 25, 2022) and 88 FR 17710 (Mar. 24, 2023)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16481.

(15) through (22) No change.

(23) SEC Rules 10b-1, 10b-3, 10b-5, 10b5-1, 10b5-2, 10b-9, 10b-10, 10b-16, 10b-17, 10b-18, and 10b-21 (17 C.F.R. §§240.10b-1, 240.10b-3, 240.10b-5, 240.10b5-1, 240.10b5-2, 240.10b-9, 240.10b-10, 240.10b-16, 240.10b-17, 240.10b-18, and 240.10b-21) (4-1-23 4-1-14 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-04538.

(24) through (27) No change.

(28) SEC Rule 15c3-3 and Exhibit A (17 C.F.R. §§240.15c3-3 and 240.15c3-3a) (4-1-23 4-1-21 edition), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15091.

(29) through (34) No change.

(35) Regulation M (17 C.F.R. §§242.100 through 242.105) (4-1-23 4-1-22 edition as amended in 88 F.R. 39994 (June 20, 2023)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16484.

(36) through (38) No change.

(39) SEC Rules 204-1, 204-2, 204-3, 205-1, 205-2, 205-3, 206(3)-1, 206(3)-2, 206(4)-1 (17 C.F.R. §§275.204-1; 275.204-2; 275.204-3; 275.205-1; 275.205-2; 275.205-3; 275.206(3)-1; 275.206(3)-2; 275.206(4)-1 (4-1-23 4-1-21 edition as amended in 86 FR 13024, 13138-13142 (Mar. 5, 2021) and 87 F.R. 22444, 22447 (April 15, 2022)), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-15095.

(40) No change.

(41) FINRA Rules 1020 and 1240 (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16486.

(42) FINRA Rule 2000 Series (2010 through 2370) (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16489.

(43) FINRA Rule 3000 Series (3110 through 3310) (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16490.

(44) FINRA Rule 4000 Series (4110 through 4590) (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16491.

(45) FINRA Rule 5000 Series (5110 through 5350) (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16493.

(46) FINRA Rule 6000 Series (6110 through 6898) (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16494.

(47) FINRA Rule 7000 Series (7110 through 7730) (existing as of 5-7-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16495.

(48) FINRA Rule 11000 Series (11100 through 11900) (existing as of 5-8-24 7-5-23), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16496.

(49) MSRB Definitional Rules D-1 to D-15, and General Rules G-1 to G-48 (existing as of 10-1-23 10-1-22), accessible at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-16497.

(50) through (53) No change.

Rulemaking Authority 517.03(1), 517.1215(2), 517.1217 FS. Law Implemented 517.081, 517.12(4), 517.1215, 517.1217, 517.161(1) FS. History–New 9-22-14, Amended 5-6-15, 11-26-19, 1-18-21, 2-14-23, 3-21-24,                      .

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Alisa G. Goldberg, Director, Division of Securities

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Financial Services Commission

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: June 12, 2024

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: June 20, 2024