71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 2013
House Bill 3170
Sponsored by COMMITTEE ON BUSINESS, LABOR, AND CONSUMER AFFAIRS
(at the request of Clifton Johnson of Bend and Oregon Gifting
Coalition)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Defines gift club. Excludes gift club from regulation under
Oregon Securities Law and from definition of pyramid club.
A BILL FOR AN ACT
Relating to gift clubs; creating new provisions; and amending ORS
59.035 and 646.609.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + (1) As used in this section, 'gift club' means
an organization in which:
(a) Before making a contribution of goods, services or money to
a member of the organization, a person agrees in writing that no
person has promised compensation in return for the contribution
and that the contribution is a gift;
(b) The organization limits membership to seven persons;
(c) A contribution by a member to another member of the
organization is voluntary;
(d) No contribution exceeds $5,000;
(e) A member belongs to no more than one gift club; and
(f) No member receives more than $40,000 from members in a
calendar year.
(2) The Attorney General may by rule prescribe the information
that a gift club must provide to a prospective member of the
club. The information the Attorney General prescribes may not
discourage participation in the club. + }
SECTION 2. ORS 59.035 is amended to read:
59.035. The following transactions are exempt from ORS 59.049
and 59.055 if they are not part of an attempt to evade
fraudulently any provision of the Oregon Securities Law:
(1) Any transaction by a sheriff, marshal or court appointed
fiduciary.
(2) An isolated nonissuer transaction in this state, whether
effected through a broker-dealer or not.
(3) Any transaction by an issuer in its securities pursuant to
a pro rata offering to its existing security holders, if:
(a) No commission or remuneration, other than a standby fee, is
paid or given directly or indirectly in connection with the
transaction; and
(b) The issuer has not had an effective registration under the
Oregon Securities Law nor has used this exemption within one year
prior to the date of the offering or sale.
(4) Any offer, sale, transfer or delivery of securities to a
bank, savings institution, trust company, insurance company,
investment company, pension or profit-sharing trust, or other
financial institution or institutional buyer (including but not
limited to the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Federal Housing
Administration, the United States Department of Veterans Affairs
and the Government National Mortgage Association), or to a
broker-dealer, mortgage broker or mortgage banker, whether the
purchaser is acting for itself or in a fiduciary capacity when
the purchaser has discretionary authority to make investment
decisions.
(5) Any transaction by an offeror with an accredited investor
as defined in section 2 (15)(i) or (ii) of the Securities Act of
1933, as amended, or rules of the Director of the Department of
Consumer and Business Services, but only if there is no public
advertising or general solicitation in connection with the
transaction.
(6) The issue and delivery of any security in exchange for any
other security of the same issuer pursuant to a right of
conversion entitling the holder of the security surrendered in
exchange to make the conversion without the payment of additional
consideration, if the security surrendered was, when issued,
convertible and registered or exempt from registration.
(7) Any transaction in a vendor's interest in a land sale
contract, or a bond or note secured by a mortgage or trust deed
upon real estate, so long as the entire vendor's interest or
mortgage or trust deed, with all the bonds or notes secured
thereby, are sold to a single purchaser, in a single sale.
(8) Agency or principal sales by licensed broker-dealers,
executed upon customers' orders on any exchange or on the
over-the-counter market, but not the solicitation of such orders,
where there is no intent to avoid the provisions of the Oregon
Securities Law and a public offering is not involved. Such
broker-dealers shall keep and maintain, for two years from the
date of the order, a record of all the sales executed upon
customers' orders, giving the name and address of each customer,
the name and identity of the security involved, the dates of the
sales, the price paid or received for the security, and the
commission or other expenses charged to the customer.
(9) The offer or sale by a licensed broker-dealer of any
security acquired in the ordinary and usual course of business,
when such security is a part of an issue which has been
registered in whole or in part, if the offer or sale is made in
good faith and not directly or indirectly for the benefit of the
issuer or for the promotion of any scheme or enterprise effecting
a violation or an evasion of any provisions of the Oregon
Securities Law, unless:
(a) The registration has been revoked or suspended; or
(b) The continued sale of the security has been enjoined.
(10) The offer or sale by licensed broker-dealer, acting either
as principal or agent, of securities theretofore sold and
distributed to the public, if the sale meets the requirements of
paragraphs (a), (b) and (c) or (a), (b) and (d) of this
subsection:
(a) Such securities are sold at prices reasonably related to
the current market price thereof at the time of sale, and, if
such licensed broker-dealer is acting as agent, the commission
collected by such licensed broker-dealer on account of the sale
thereof is not in excess of usual and customary commissions
collected with respect to securities and transactions having
comparable characteristics;
(b) Such securities do not constitute an unsold allotment to or
subscription by such broker-dealer as a participant in the
distribution of such securities by the issuer or by or through an
underwriter;
(c) Either Moody's or Standard and Poor's securities manuals,
or any other recognized securities manuals approved by the
director, contains the names of the issuer's officers and
directors, a balance sheet of the issuer as of a date not more
than 18 months prior to the date of such sale, and a profit and
loss statement for either the fiscal year preceding the date of
the balance sheet or the most recent year of operations; and
(d) The securities are authorized for quotation on a nationwide
automated quotations system approved by rule or order of the
director.
(11) An offer, but not the sale, of a security meeting either
of the following descriptions:
(a) A security for which registration statements have been
filed under both the Oregon Securities Law and the Securities Act
of 1933, as amended, if no stop or refusal order or order under
ORS 59.105 is in effect and no public proceeding or examination
looking toward such an order is pending. However, an offer for
such a security may not be accepted until the securities have
been registered as provided in the Oregon Securities Law.
(b) A security for which a registration statement has been
filed under the Oregon Securities Law and the offer is allowed by
the director. However, an offer for such a security may not be
accepted until the securities have been registered as provided in
the Oregon Securities Law.
(12)(a) Any transactions in securities by an offeror within or
without this state that meet all of the requirements of
subparagraph (A) or (B) of this paragraph and all of the
requirements of subparagraphs (C), (D) and (E) of this paragraph:
(A) When the offeror is an issuer, the transactions result in
not more than 10 purchasers within this state of securities of
the issuer during any 12 consecutive months.
(B) When the offeror is a nonissuer the securities must have
been bought and held for at least 12 consecutive months and the
transactions result in not more than 10 purchasers within this
state of securities from the nonissuer during any 12 consecutive
months.
(C) No commission or other remuneration is paid or given
directly or indirectly in connection with the offer or sale of
the securities.
(D) No public advertising or general solicitation is used in
connection with any transaction under this exemption.
(E) At the time of any transaction under this exemption the
offeror does not have under the Oregon Securities Law an
application for registration or an effective registration of
securities which are part of the same offering.
(b) In connection with transactions under paragraph (a) of this
subsection:
(A) Purchasers of securities of the offeror registered under
ORS 59.065, exempt under ORS 59.025, exempt under any other
subsection of this section, or for which a notice has been filed
under ORS 59.049, are not counted as purchasers under this
exemption.
(B) Repeat transactions with persons who are counted as
purchasers within Oregon under paragraph (a) of this subsection
do not increase the number of purchasers. However, a purchaser
remains a purchaser for 12 months following the month of the last
sale to that purchaser.
(C) No limitations are placed on the number of transactions or
purchasers without this state. No limitations are placed on the
number of offers under this exemption.
(13) A transaction with security holders, pursuant to a
statutory vote by such security holders on a merger,
consolidation, partial or complete liquidation, reclassification
of securities, plan of exchange or sale of assets, in
consideration of the issuance of securities of another issuer.
(14) { + Issuance of + } capital stock { - issued - } by a
professional corporation organized under ORS chapter 58.
{ + (15) Participation in a gift club as defined in section 1
of this 2001 Act. + }
{ - (15) - } { + (16) + } Any other transaction exempted by
rule of the director.
SECTION 3. ORS 646.609 is amended to read:
646.609. { + (1)(a) + } As used in ORS 646.608 (1)(r),
'pyramid club' means a sales device whereby a person, upon
condition that the person make an investment, is granted a
license or right to solicit or recruit for economic gain one or
more additional persons who are also granted such license or
right upon condition of making an investment and who may further
perpetuate the chain of persons who are granted such license or
right upon such condition. 'Pyramid club' also includes any such
sales device
{ - which - } { + that + } does not involve the sale or
distribution of any real estate, goods or services, including but
not limited to a chain letter scheme. A limitation as to the
number of persons who may participate, or the presence of
additional conditions affecting eligibility for such license or
right to recruit or solicit or the receipt of economic gain
therefrom, does not change the identity of the scheme as a
pyramid club. { + ' Pyramid club' does not include a gift club
as defined in section 1 of this 2001 Act.
(b) + } As used { - herein - } { + in this subsection + },
'investment' means any acquisition, for a consideration other
than personal services, of property, tangible or intangible, and
includes without limitation, franchises, business opportunities
and services. { - It - } { + ' Investment' + } does not
include sales demonstration equipment and materials furnished at
cost for use in making sales and not for resale.
{ + (2) + } For the purpose of ORS 646.608 (1)(r), any person
who organizes or induces or attempts to induce membership in a
pyramid club is acting in the course of the person's business,
vocation or occupation.
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