Submitted by nsscadmin on
Our series on prospectus exemptions continues this week with a look at the family, friends, and business associate’s exemption.
Under this exemption securities can be sold to the following people without disclosure being required:
- A director, senior officer, or control person of the issuer,
- A family member or a director, senior officer, or control person of the issuer, or
- A close personal friend or close business associate of a director, senior officer or control person of the issuer.
How do you tell if someone is a close person friend, or a close business associate?
A close personal friend is someone that has known the person for a long enough period of time to be able to ascertain that person’s capability and trustworthiness. Someone is not considered a close personal friend simply because they belong to the same organization, they go to the same church, or are friends or connected with them through social media like Facebook, Instagram, or LinkedIn.
A close business associate is someone who has had enough prior business dealings with the person or issuer to be able to ascertain their capability and trustworthiness. Someone who is simply a business contact or has been introduced to a person by another business associate would not be considered a close business associate of that person.
You should consult with legal counsel familiar with securities laws if you have any questions about the prospectus exemptions and how to comply with the requirements to rely on the prospectus exemption.