Section 203.188. Cooperative Business Associations Exemption

(a) Under section 203(r) of the act (70 P. S. § 1-203(r)), the Commission finds that it is not in the public interest or necessary for the protection of investors to require registration of securities transactions under section 201 of the act (70 P. S. § 1-201) where the following conditions are met:

(1) The issuance, offer and sale of securities of a cooperative business association is made only to persons who are members of the cooperative business association or, upon the purchase of the security offered, will become members of a cooperative business association.

(2) The transfer of the securities for value is restricted to the cooperative business association, members of the cooperative business association or a successor in interest of a transferor who qualifies for membership, as may be further limited by the articles of incorporation of the cooperative business association, if certificates evidencing the securities bear a legend setting forth the restrictions.

(3) No person receives a commission or other compensation directly or indirectly as a result of or based upon the sale of securities of a cooperative business association other than in connection with the solicitation of nonmembers for membership.

(b) When used in this section, the following terms have the following meanings:

Cooperative business association—A person which is organized exclusively as a retail or wholesale cooperative and admits to membership only persons which bona fide engage, in whole or in part, in the line of business for which the cooperative was organized.

Securities—An equity or debt security, membership agreement, membership certificate, patronage dividend or form of advice which evidences a member’s interest in a fund, capital investment or other asset of a cooperative business association or the apportionment, distribution or payment to a member of the net proceeds or savings of a cooperative business association.

(c) Section 209.010(b) (relating to required records; report on sales of securities and use of proceeds) is not applicable to the offer and sale of securities without registration under this section.

The provisions of this § 203.188 adopted January 30, 1987, effective January 31, 1987, 17 Pa.B. 561; transferred and renumbered from 64 Pa. Code § 203.188, December 14, 2012, effective December 15, 2012, 42 Pa.B. 7533. Immediately preceding text appears at serial pages (324422) to (324423).

Notation

Authority

The provisions of this § 203.188 issued under section 203(r) of the Pennsylvania Securities Act of 1972 (70 P. S. § 1-203(r)).