Rule 147 l The Intrastate Exemption

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Section 3(a)(11) of the Securities Act of 1933, as amended (“Securities Act”), is generally known as the “intrastate offering exemption.” It provides an exemption from the registration requirements of the Securities Act for “any security which is a part of an issue offered and sold only to persons who reside in a single State or Territory, where the issuer of such security is a person resident and doing business within or, if a corporation, incorporated by and doing business within, such State or Territory.” 

Rule 147 promulgated under the Securities Act provides a safe harbor for offerings conducted pursuant to the Intrastate Exemption.

Availability of the Intrastate Exemption and Application of SEC Rule 147

The Intrastate Exemption is available to both public and private companies domiciled within the United States. Both SEC reporting and non-reporting issuers are eligible to rely upon the Intrastate Exemption if the requirements of the exemption are met. The intrastate offering exemption does not limit the size of the offering or the number of investors. An issuer should determine the residence of each offeree and purchaser. If any of the securities are offered or sold to even one out-of-state person, the exemption may be lost. Without the exemption, the issuer could be in violation of state and federal securities laws.

The Intrastate Exemption & SEC Rule 147 Requirements

The Intrastate Exemption requires that the issuer must be a resident of, and doing business in, the same state in which all offers and sales are made, and the offering may not be offered or sold to non-residents.

For the purposes of the Rule 147 Intrastate Exemption, an issuer will be deemed to be a resident of the state where: (i) it is incorporated or organized, if it is an entity requiring incorporation or organization; (ii) its principal office is located, if it is an entity not requiring incorporation or organization; or (iii) his or her principal residence is located, if an individual.

Doing Business Within a State for Purposes of Rule 147 Intrastate Exemption

The Rule 147 Intrastate Exemption provides that an issuer will be deemed to be doing business within a state if: (i) the Issuer derives at least 80% of its gross revenues in the past six months from that state; (ii) the Issuer had 80% of its assets located in that state in the most recent semi-annual fiscal year; (iii) the Issuer intends to use and uses at least 80% of the net proceeds from the Intrastate offering in connection with the operation of a business or of real property, the purchase of real property located in, or the rendering of services in that state; and (iv) the principal office of the Issuer is located within such state.

Rule 147 provides that the determination of an offeree or Purchaser’s residence will depend on the following: (i)  a corporation, partnership, trust or other form of business organization shall be deemed to be a resident of a state if, at the time of the offer and sale, it has its principal office within such state; (ii) an individual shall be deemed to be a resident of a state if, at the time of the offer and sale, his or her principal residence is within that state; and (iii) a corporation partnership, trust or other form of business organization formed specifically to take part in an Intrastate offering, will not be resident of the state unless all of its beneficial owners are resident of that state.

Rule 147 & Integration of Other Offerings

Issuers conducting concurrent or consecutive offerings should ensure that the multiple offerings are not integrated.  Offerings are integrated if two or more offerings are considered a single offering. Under these circumstances all requirements for the exemption relied upon in each of the offerings must be present. One investor from outside the issuer’s state of domicile could cause it to lose the Rule 147 Intrastate Exemption.

Resales of Securities Purchased in Intrastate Offerings

Securities purchased in Intrastate Offerings are restricted securities unless they are registered with the SEC. If an investor in an Intrastate Offering resells any of the securities it purchased to a person who resides outside the state within a short period of time after the issuer’s offering is complete (the usual test is nine months), the entire transaction, including the original sales made within the required state, might violate the Securities Act.

Rule 502(a) Guidance on Offerings Conducted Under the Intrastate Exemption

Rule 502(a) and SEC Release 33-4434 set forth factors considered in determining whether two or more offerings are integrated.

These factors include whether the offerings:

♦   are part of a single plan of financing;

♦   involve issuance of the same class of securities;

♦   are made at or about the same time;

♦   involve the same type of consideration; and

♦   are made for the same general purpose.

Safe Harbor Provisions of Rule 147

Rule 147(b)(2) contains an integration safe harbor providing that offerings made under Section 3 or Section 4(2) of the Securities Act or pursuant to a registration statement will not be integrated with an offering made pursuant to the Rule 147 Intrastate Exemption if the offerings take place six months prior to the beginning or six months after the end of the Rule 147 Intrastate Exemption. For the safe harbor to be available, an issuer may not make any other offers or sales of securities of the same class as those offered in the Rule 147 intrastate offering during the two six month periods.

Resale Prohibitions in Rule 147 Intrastate Offerings

Even though securities issued relying on the Intrastate Exemption are not restricted securities for purposes of Rule 144, Rule 147(e) prohibits the resales of any such securities for a period of nine months except for resales made in the same state as the Intrastate Offering. Moreover, market makers or dealers desiring to quote such securities after the nine month period must comply with all the requirements of Rule 15c2-11 regarding current public information.

There is no prohibition in Rule 147 regarding general advertising or general solicitation as long as it complies with applicable state law and does not result in an offer or sale to non-residents of such state.

Although the Intrastate Exemption is available for sales by issuers only, and not for resales, the SEC has interpreted the rule to permit offers and sales by control persons of the issuer as well. The Intrastate Exemption rule is not available to any person with respect to any offering which, although in technical compliance with the rules, is part of a plan or scheme to make interstate offers or sales of securities.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855