Title of Regulation: 2VAC5-317. Regulations for the Enforcement of the Noxious Weeds Law (amending 2VAC5-317-10 through 2VAC5-317-60, 2VAC5-317-80, 2VAC5-317-100).

Statutory Authority: § 3.2-802 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: November 15, 2017.

Effective Date: November 30, 2017.

Agency Contact: Debra Martin, Program Manager, Office of Plant Industry Services, Department of Agriculture and Consumer Services, P.O. Box 1163, Richmond, VA 23218, telephone (804) 786-3515, FAX (804) 371-7793, TTY (800) 828-1120, or email debra.martin@vdacs.virginia.gov.

Basis: Section 3.2-109 of the Code of Virginia establishes the Board of Agriculture and Consumer Services as a policy board. Section 3.2-802 of the Code of Virginia authorizes the board to establish regulations under which certain plants can be listed as noxious weeds. Moreover, the board may adopt regulations pertaining to regulated articles and conditions for their movement, under which the Commissioner of the Department of Agriculture and Consumer Services may proceed to conduct eradication or suppression activities to prevent the dissemination of noxious weeds in the Commonwealth. The board may also adopt regulations governing the movement of regulated articles entering the Commonwealth from other locations.

Purpose: The proposed amendments to 2VAC5-317 are necessary in order to align the language of the regulation with changes enacted in the 2016 Session of the General Assembly and to clarify some of the existing regulatory language. This regulation assists in protecting the Commonwealth's agricultural and natural resources from the detrimental impact of noxious weeds. As the establishment of a noxious weed can lead to significant economic losses due to associated eradication and control costs, this regulation also assists in protecting the economic welfare of citizens.

Rationale for Using Fast-Track Rulemaking Process: The proposed changes to the regulation are intended to align the regulation with changes enacted in the 2016 Session of the General Assembly and to clarify some of the existing regulatory language. The Noxious Weeds Advisory Committee, which the existing regulation establishes, has discussed and reached consensus on the proposed changes to the regulation.

Substance: Prior to the 2016 Session of the General Assembly, the Noxious Weeds Law defined "noxious weed" as "any living plant, not widely disseminated, or part thereof, declared by the Board through regulations under this chapter, to be detrimental to crops, surface waters, including lakes, or other desirable plants, livestock, land, or other property, or to be injurious to public health." Chapter 171 of the 2016 Acts of Assembly amended the definition of "noxious weed" by removing the "not widely disseminated" condition and excluding from eligibility for declaration as a noxious weed those living plants or parts thereof for which in-state production is commercially viable or that are commercially propagated in Virginia. In response to the new statutory definition for "noxious weed," the agency proposes to amend the definitions for "Tier 1 noxious weed" and "Tier 2 noxious weed" in the regulation. The proposed amendments also move two weeds from Tier 1 to Tier 2 as a result of the change in definitions. Tier 1 noxious weeds are those noxious weeds not known to be present in the Commonwealth; therefore, the agency proposes to move Beach vitex and Wavyleaf basketgrass from Tier 1 to Tier 2, which is defined as any noxious weed that is present in the Commonwealth and for which successful eradication or suppression is feasible. Additionally, the proposed amendments establish a definition for "Tier 3 noxious weed," but the agency is not prepared to declare any Tier 3 noxious weeds in this regulatory action.

To address the concerns that nurseries and landscapers expressed regarding their ability to continue selling commercially viable plants already in the trade, the General Assembly, in 2016, also added the following requirement to § 3.2-802 of the Code of Virginia, which establishes the board's authority to declare a weed noxious: "Prior to designating a living plant or part thereof as a noxious weed, the board shall review the recommendations of an advisory committee established by the commissioner to conduct a scientific risk assessment of the proposed plant. The assessment shall include the degree to which the plant is detrimental to crops; surface water, including lakes; other desirable plants; livestock; land or other property; public health; the environment; and the economy. The advisory committee shall also include in its recommendations to the Board an analysis of the current and potential in-state commercial viability of the specific plant species and the economic impact on industries affected by the designation of the plant as a noxious weed." The proposed amendments to the regulation will add the items that the law requires the advisory committee to assess to the regulation. The advisory committee is currently working on completing the scientific risk assessment process for plants to be proposed for listing as noxious weeds.

Issues: Aligning the language of the regulation with the Code of Virginia and clarifying existing provisions make the regulation easier to understand and interpret. Additionally, the proposed changes allow for more flexibility in enforcement, which will benefit the agency and the public. There are no disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Board of Agriculture and Consumer Services (Board) proposes to amend this regulation to conform to Chapter 171 of the 2016 Acts of Assembly (Chapter 171)¹ concerning the designation of plants as noxious weeds.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Prior to the 2016 Session of the General Assembly, the Noxious Weeds Law² defined "noxious weed" as "any living plant, not widely disseminated, or part thereof, declared by the Board through regulations under this chapter, to be detrimental to crops, surface waters, including lakes, or other desirable plants, livestock, land, or other property, or to be injurious to public health." Chapter 171 of the 2016 Acts of Assembly (Chapter 171) amended the definition of "noxious weed" by removing the "not widely disseminated" condition and excluding from eligibility for declaration as a noxious weed those living plants or parts thereof for which in-state production is commercially viable or that are commercially propagated in Virginia. In response to the new statutory definition for "noxious weed," the Board proposes to amend the definitions for "Tier 1 noxious weed" and "Tier 2 noxious weed" in the regulation. The Board also proposes to move two weeds from Tier 1 to Tier 2 as a result of the change in definitions. Under the new definition, Tier 1 noxious weeds are those noxious weeds not known to be present in the Commonwealth; therefore, the Board proposes to move beach vitex and wavyleaf basketgrass, which are in Virginia, from Tier 1 to Tier 2, which is defined as any noxious weed that is present in the Commonwealth and for which successful eradication or suppression is feasible.

Section 80 of the current regulation³ states that "The commissioner may conduct eradication or suppression activities to prevent the dissemination of a Tier 1⁴ noxious weed. Eradication or suppression activities may include, but are not limited to, the following: destruction, seizure, stop sale, stop delivery, treatment, or ordering the regulated article to be returned to its point of origin." The Board proposes to amend "Tier 1" to "Tier 1 or Tier 2." Thus, this proposed amendment would keep beach vitex and wavyleaf basketgrass among the plants that could be subject to eradication or suppression activities. Effectively, this would also newly allow eradication or suppression activities of the plants that are currently in Tier 2 and would remain in Tier 2 under the proposed regulation. Those plants are cogon grass, purple loosestrife, and water spinach. The Department of Agriculture and Consumer Services (Department) does not anticipate that this change will affect eradication or suppression activities for those three plants in practice, as these activities are dependent on funding. The Department believes that if funding is made available it is likely that the funds would only be used to eradicate Tier 1 noxious weeds.

To address the concerns that nurseries and landscapers expressed regarding their ability to continue selling commercially viable plants already in the trade, Chapter 171 also added the following requirement to Code of Virginia section § 3.2-802 of the Noxious Weeds Law, which establishes the Board's authority to declare a weed noxious: "Prior to designating a living plant or part thereof as a noxious weed, the Board shall review the recommendations of an advisory committee established by the Commissioner to conduct a scientific risk assessment of the proposed plant. The assessment shall include the degree to which the plant is detrimental to crops; surface water, including lakes; other desirable plants; livestock; land or other property; public health; the environment; and the economy. The advisory committee shall also include in its recommendations to the Board an analysis of the current and potential in-state commercial viability of the specific plant species and the economic impact on industries affected by the designation of the plant as a noxious weed." There already exists a Noxious Weeds Advisory Committee for the purpose of assisting the Department in the evaluation and risk-assessment of plants that may be declared noxious weeds. The Board proposes to add the items described above in the legislation to what should be considered by the committee.

Thus the proposals to: 1) amend the definitions of "Tier 1 noxious weed" and "Tier 2 noxious weed", 2) move beach vitex and wavyleaf basketgrass from Tier 1 to Tier 2, 3) add Tier 2 to those noxious weeds upon which the commissioner may conduct eradication or suppression activities, and 4) add items to be considered when deciding whether a plant is to be designated a noxious weed, will clarify what is effectively required by statute and effectively newly allow eradication or suppression of cogon grass, purple loosestrife, and water spinach. The clarification and avoiding inconsistency with the Code of Virginia is beneficial in that it reduces potential confusion and unintentional actions that may violate the law. As discussed above, the effectively newly allowing eradication or suppression of cogon grass, purple loosestrife, and water spinach will likely have no impact, but does add flexibility.

Businesses and Entities Affected. The proposed amendments will not likely have a large impact on any businesses or other entities. The subject matter concerns nurseries, landscapers, farmers, agribusinesses, various landowners including local governments, conservation organizations, soil and water conservation districts, and weed management businesses and cooperatives.

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

Projected Impact on Employment. The proposed amendments do not significantly affect employment.

Effects on the Use and Value of Private Property. The proposed amendments do not significantly affect the use and value of private property.

Real Estate Development Costs. The proposed amendments do not significantly affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendments do not significantly affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed amendments do not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed amendments do not adversely affect businesses.

Localities. The proposed amendments do not adversely affect localities.

Other Entities. The proposed amendments do not adversely affect other entities.

_________________

¹ See http://leg1.state.va.us/cgi-bin/legp504.exe?161+ful+CHAP0171

² See https://law.lis.virginia.gov/vacode/title3.2/chapter8/

³ See https://law.lis.virginia.gov/admincode/title2/agency5
/chapter317/section80/

⁴ The bold is for emphasis and is not part of the regulatory text.

Agency's Response to Economic Impact Analysis: The agency concurs with the analysis of the Department of Planning and Budget.

Summary:

The amendments align the regulation with Chapter 171 of the 2016 Acts of Assembly regarding the designation of plants as noxious weeds and clarify existing regulatory language.

2VAC5-317-10. Definitions.

The following words and terms shall have the following meanings unless the context clearly indicates otherwise:

"Board" means the Virginia Board of Agriculture and Consumer Services.

"Business day" means a day that is not a Saturday, Sunday, or legal holiday, or a day on which state government offices are closed.

"Certificate" means a document issued by an inspector or by a person operating in accordance with a compliance agreement to allow the movement of regulated articles to any destination or authorized by the commissioner indicating that a regulated article is not contaminated with a noxious weed.

"Commissioner" means the Commissioner of the Virginia Department of Agriculture and Consumer Services.

"Committee" means the Noxious Weeds Advisory Committee established pursuant to 2VAC5-317-100.

"Compliance agreement" means a written agreement between a person engaged in handling, receiving, or moving regulated articles and the Virginia Department of Agriculture and Consumer Services or the United States U.S. Department of Agriculture, or both, wherein the former agrees to fulfill the requirements of the compliance agreement and comply with the provisions of this chapter.

"Consignee" means any person to whom any regulated article is shipped for handling, sale, resale, or any other purpose.

"Department" means the Virginia Department of Agriculture and Consumer Services.

"Infested" or "infestation" means the presence of a listed noxious weed or the existence of circumstances that make it reasonable to believe that life stages of a listed noxious weed are present.

"Inspector" means an employee of the Virginia Department of Agriculture and Consumer Services or other person authorized by the Commissioner of the Virginia Department of Agriculture and Consumer Services to enforce the provisions of this chapter.

"Limited permit" means a document issued by an inspector to allow the movement of regulated articles to a specific destination.

"Listed noxious weed" means any plant listed in this chapter as either a Tier 1 or, Tier 2, or Tier 3 noxious weed.

"Move," "moved," or "movement" means shipped, offered for shipment, received for transportation, transported, carried, or allowed to be moved, shipped, transported, or carried to ship, offer for shipment, receive for transportation, carry, or otherwise transport, move, or allow to be moved.

"Noxious weed" means the term as defined in § 3.2-800 of the Code of Virginia.

"Noxious Weeds Law" means the statute set forth in Chapter 8 (§ 3.2-800 et seq.) of Title 3.2 of the Code of Virginia.

"Permit" means a document issued by the commissioner to provide for movement of regulated articles to restricted destinations for limited handling, utilization, processing, or scientific purposes.

"Person" means the term as defined in § 1-230 of the Code of Virginia.

"Regulated article" means any listed noxious weed or any article or means of conveyance known to be infested or determined by an inspector to present a risk of spreading a listed noxious weed carrying or capable of carrying a listed noxious weed.

"Tier 1 noxious weed" means any noxious weed that is not native to known to be present in the Commonwealth that (i) has no known populations present in the Commonwealth or (ii) is not widely disseminated in the Commonwealth and for which successful eradication or suppression is likely.

"Tier 2 noxious weed" means any noxious weed that (i) is not native to is present in the Commonwealth, (ii) is not widely disseminated in the Commonwealth, and (iii) and for which successful eradication or suppression is feasible but eradication is unlikely.

"Tier 3 noxious weed" means any noxious weed that is present in the Commonwealth and not listed as a Tier 1 or Tier 2 noxious weed.

"Waybill" means a document containing the details of a shipment of goods.

2VAC5-317-20. Tier 1 and, Tier 2, and Tier 3 noxious weeds.

A. The following plants are hereby declared Tier 1 noxious weeds:

1. Vitex rotundifolia, Beach vitex.

2. Salvinia molesta, Giant salvinia.

3. 2. Solanum viarum, Tropical soda apple.

4. 3. Heracleum mantegazzianum, Giant hogweed.

5. Oplismenus hirtellus spp. undulatifolius, Wavyleaf basketgrass.

B. The following plants are hereby declared Tier 2 noxious weeds:

1. Imperata cylindrica, Cogon grass.

2. Lythrum salicaria, Purple loosestrife.

3. Ipomoea aquatica, Water spinach.

4. Vitex rotundifolia, Beach vitex.

5. Oplismenus hirtellus spp. undulatifolius, Wavyleaf basketgrass.

C. No plant is hereby declared a Tier 3 noxious weed.

2VAC5-317-30. Conditions governing the intrastate movement of regulated articles.

The movement of a regulated article is prohibited unless accompanied by a valid certificate or limited permit.

2VAC5-317-40. Issuance and cancellation of certificates and limited permits.

A. A certificate or a limited permit may be issued by an inspector the commissioner for the movement of a regulated article into, within, or out of the Commonwealth when the regulated article meets the following three conditions:

1. The regulated article is to be moved:

a. Intrastate to To a specified destination under conditions that specify the limited handling, utilization, processing, or treatment of the article when the inspector commissioner determines that such movement will not result in the spread of the noxious weed; or

b. By a state or federal agency, or person authorized by the department, for experimental or scientific purposes;

2. The regulated article is to be moved in compliance with all additional conditions deemed necessary under the Noxious Weeds Law to prevent the spread of the noxious weed; and

3. The regulated article is eligible for unrestricted movement under all other domestic plant quarantines and regulations applicable to the regulated article.

B. Any certificate or limited permit that has been issued or authorized may be withdrawn by the inspector commissioner orally or in writing if the inspector commissioner determines that the holder of the certificate or limited permit has not complied with all conditions for the use of the certificate or limited permit, or with any applicable compliance agreement. If the withdrawal is oral, the withdrawal and the reasons for the withdrawal shall be confirmed in writing and communicated to the certificate or limited permit holder as promptly as circumstances allow.

2VAC5-317-50. Assembly and inspection of regulated articles.

A. Any person who desires to move a regulated article and who is required to have a limited permit for such movement shall apply for a limited permit as far in advance as practical but no fewer than five business days before the regulated article is to be moved.

B. The regulated article must be assembled at the place and in the manner the inspector designates as necessary to facilitate inspection and shall be safeguarded to prevent infestation.

2VAC5-317-60. Attachment and disposition of certificates and limited permits.

A. A certificate or limited permit required for the movement of a regulated article into, within, or out of the Commonwealth must be attached at all times during the intrastate movement to the outside of the container that contains the regulated article or to the regulated article itself. The requirements of this section may also be met by attaching the certificate or limited permit to the consignee's copy of the waybill, provided the regulated article is sufficiently described on the certificate or limited permit and on the waybill to facilitate the identification of the regulated article.

B. The certificate or limited permit for the intrastate movement of a regulated article must be furnished by the carrier to the consignee at the destination of the regulated article. A copy of the certificate or the limited permit must be retained by the sender of the regulated article at the place of shipment.

2VAC5-317-80. Eradication and suppression activities for Tier 1 or Tier 2 noxious weeds.

The commissioner may conduct eradication or suppression activities to prevent the dissemination of a Tier 1 or Tier 2 noxious weed. Eradication or suppression activities may include, but are not limited to, the following: destruction, seizure, stop sale, stop delivery, treatment, or ordering the regulated article to be returned to its point of origin.

2VAC5-317-100. Noxious Weeds Advisory Committee.

A. The commissioner shall establish a Noxious Weeds Advisory Committee for the purpose of assisting the department in the evaluation and risk-assessment of plants that may be declared noxious weeds in 2VAC5-317-20. The committee may also consider the delisting of plants that were previously declared noxious weeds.

B. The committee shall present recommendations to the commissioner regarding the listing or delisting of plants as noxious weeds. The committee shall consider the protection of Virginia's natural resources and the environment, as well as the economic impact on nurseries, landscapers, agricultural producers, and other affected industries in the formulation of its recommendations degree to which the plant is detrimental to crops; surface waters, including lakes; other desirable plants; livestock; land or other property; public health; the environment; and the economy. The committee's recommendation shall include an analysis of the current and potential in-state commercial viability of the specific plant species and the economic impact on industries affected by the designation of the plant as a noxious weed.

C. The commissioner shall convene a meeting of the committee at least once annually, and may convene additional meetings at his discretion. Department staff will coordinate the scheduling and logistics of the meetings, including the posting of meeting notices on the Virginia Regulatory Town Hall and the Commonwealth Calendar.

D. Committee members shall serve at the invitation of the commissioner. For every meeting of the committee, the commissioner shall invite representatives of Virginia's agricultural, horticultural, and environmental industries as well as representatives of Virginia's land grant universities and relevant executive branch agencies, to include but not be limited to:

1. A conservation representative or organization,;

2. An agribusiness representative or organization,;

3. A local government representative or organization,;

4. Virginia Cooperative Extension,;

5. Virginia Department of Conservation and Recreation,;

6. Virginia Department of Forestry,;

7. Virginia Department of Game and Inland Fisheries,;

8. Virginia Department of Transportation,;

9. A farming representative or organization,;

10. A forage-based agriculture representative or organization,;

11. A native plant conservation representative or organization,;

12. A nursery and landscaping representative or organization,;

13. Virginia Polytechnic Institute and State University, and;

14. Virginia State University;

15. A cooperative weed management area representative or organization; and

16. Virginia soil and water conservation districts.

E. The commissioner may invite representatives of local government agencies from localities where a plant of concern has been found or from localities that could be impacted by the declaration of a plant as a noxious weed. The commissioner may invite representatives of other organizations not listed in subsection D of this section that may have a direct interest in the declaration of a plant as a noxious weed.

F. Prior to each meeting of the committee, the commissioner or his designee shall make timely notification to committee members of any plant that the department is considering for possible listing or delisting as a noxious weed. The notification will include the scientific data and rationale for such listing or delisting. The commissioner or his designee shall survey committee members to determine if any member has identified a plant that should be considered for possible listing or delisting as a noxious weed. Any committee member who has identified a plant that should be considered for possible listing or delisting as a noxious weed shall provide department staff with relevant scientific data and the rationale to support the listing or delisting of the plant. The commissioner or his designee will distribute the scientific data and rationale to other committee members for their review and consideration prior to the meeting of the committee.

G. The committee, by majority vote of members, may develop and present to the commissioner a list of plants recommended for listing or delisting as noxious weeds.

H. The commissioner shall consider the recommendations of the committee in his preparation of the list of plants that he presents to the board for listing or delisting as noxious weeds.

I. If a regulatory action to list or delist a noxious weed is under way, the commissioner may delay the pursuit of a new regulatory action to list or delist a new noxious weed until the current action is completed.

Title of Regulation: 4VAC20-260. Pertaining to Designation of Seed Areas and Clean Cull Areas (amending 4VAC20-260-50).

Statutory Authority: §§ 28.2-201 and 28.2-210 of the Code of Virginia.

Effective Dates: September 26, 2017, through October 25, 2017.

Agency Contact: Jennifer Farmer, Regulatory Coordinator, Marine Resources Commission, 2600 Washington Avenue, 3rd Floor, Newport News, VA 23607, telephone (757) 247-2248, or email jennifer.farmer@mrc.virginia.gov.

Preamble:

The amendments establish inspection procedures for oysters kept in individual baskets and clarifies the methods police officers may use to inspect oyster harvests for conformity to culling standards.

4VAC20-260-50. Culling and inspection procedures.

A. All oysters taken from natural public beds, rocks, or shoals shall be placed on the culling board, or in only one basket upon the culling board, and culled by hand at the location of harvest.

1. Culled oysters shall be transferred immediately from the culling board to either the inside open part of the boat, and stored in either a loose pile, or baskets, but only one transfer method may be used on any boat or vessel in any one day.

a. Oysters shall not be stored in both a loose pile and in baskets.

b. A single basket may be on board any boat during transfer of culled oysters from the culling board to the inside open part of the boat in a loose pile.

2. The entire harvest shall be subject to inspection, as provided in subsection F of this section.

B. Any oysters taken lawfully by hand from natural public beds, rocks, or shoals from the seaside of the Eastern Shore, and held in sacks, bags, or containers, shall be culled when taken and placed in those sacks, bags, or containers for inspection by any police officer as described in subsection G of this section.

C. If oysters from leased grounds and oysters from public grounds are mixed in the same cargo on a boat or motor vehicle, the entire cargo shall be subject to inspection under this chapter.

D. It shall be unlawful for any person to buy, sell, or report clean cull oysters by any measure other than those described in § 28.2-526 A of the Code of Virginia filled to level full. The container described in § 28.2-526 A 2 is a basket. It shall be unlawful for any person to sell, purchase, or report the sale or purchase of any clean cull oysters harvested from public grounds, as described in 4VAC20-720-40, in excess of the harvest limits described in 4VAC20-720-80.

E. It shall be unlawful for any person to buy, sell, or report seed oysters by any measure other than as described in § 28.2-526 of the Code of Virginia.

F. Oysters may be inspected by any police officer according to any one of the following provisions:

1. For any oysters transferred from the culling board to the inside open part of the boat, vehicle, or trailer or stored in a loose pile in a vehicle, a trailer, or the inside open part of a boat, any the police officer may shall use a shovel to take at least one bushel or basket of oysters to inspect, at random, provided that the entire bushel or basket shall be taken from one place in the open pile of oysters. The officer may inspect multiple bushels or baskets by repeating this procedure for each bushel or basket of oysters shoveled from the loose pile.

2. For any oysters transferred from a vessel to a motor vehicle or trailer, any stored in baskets in a vehicle, a trailer, or the inside open part of a boat, the police officer may shall select one or more baskets of oysters basket and empty the contents of those baskets that basket into a bushel or basket, as described in § 28.2-526 of the Code of Virginia, or a basket for inspection. The officer may inspect multiple baskets by repeating this procedure for each basket.

G. In the inspection of oysters harvested by hand from waters of the seaside of the Eastern Shore, the police officer may select any sacks, bags, or containers at random to establish a full metallic measuring bushel or basket for purposes of inspection.

H. On the seaside of the Eastern Shore oysters may be sold without being measured if both the buyer and the seller agree to the number of bushels of oysters in the transaction.

Title of Regulation: 4VAC20-510. Pertaining to Amberjack and Cobia (amending 4VAC20-510-25).

Statutory Authority: §§ 28.2-201 and 28.2-210 of the Code of Virginia.

Effective Dates: September 26, 2017, through October 25, 2017.

Agency Contact: Jennifer Farmer, Regulatory Coordinator, Marine Resources Commission, 2600 Washington Avenue, 3rd Floor, Newport News, VA 23607, telephone (757) 247-2248, or email jennifer.farmer@mrc.virginia.gov.

Preamble:

The amendment establishes the closure of the commercial cobia season as September 30, 2017.

4VAC20-510-25. Commercial fishery possession limits and season closure.

A. It shall be unlawful for any person fishing commercially to possess more than two amberjack or more than two cobia at any time, except as described in 4VAC20-510-33. Any amberjack or cobia caught after the possession limit has been reached shall be returned to the water immediately. When fishing from any boat or vessel where the entire catch is held in a common hold or container, the possession limit shall be for the boat or vessel and shall be equal to the number of persons on board legally eligible to fish multiplied by two. The captain or operator of the boat or vessel shall be responsible for any boat or vessel possession limit.

B. In 2017 it shall be unlawful for any person, fishing commercially, to harvest or possess any cobia after September 30.

Title of Regulation: 4VAC20-620. Pertaining to Summer Flounder (amending 4VAC20-620-40).

Statutory Authority: §§ 28.2-201 and 28.2-210 of the Code of Virginia.

Effective Dates: October 1, 2017, through October 31, 2017.

Agency Contact: Jennifer Farmer, Regulatory Coordinator, Marine Resources Commission, 2600 Washington Avenue, 3rd Floor, Newport News, VA 23607, telephone (757) 247-2248, or email jennifer.farmer@mrc.virginia.gov.

Preamble:

The amendments modify the landing period and trip limit for summer flounder harvested commercially from offshore and landed in Virginia.

4VAC20-620-40. Commercial vessel possession and landing limitations.

A. It shall be unlawful for any person harvesting summer flounder outside of Virginia's waters to do any of the following, except as described in subsections B, C, D, and E of this section:

1. Possess aboard any vessel in Virginia waters any amount of summer flounder in excess of 10% by weight of Atlantic croaker or the combined landings, on board a vessel, of black sea bass, scup, squid, scallops and Atlantic mackerel.

2. Possess aboard any vessel in Virginia waters any amount of summer flounder in excess of 1,500 pounds landed in combination with Atlantic croaker.

3. Fail to sell the vessel's entire harvest of all species at the point of landing.

B. Nothing in this chapter shall preclude a vessel from possessing any North Carolina vessel possession limit of summer flounder in Virginia; however, no vessel that possesses the North Carolina vessel possession limit of summer flounder shall offload any amount of that possession limit, except as described in subsection J of this section.

C. From March 1 through April 30, it shall be unlawful for any person harvesting summer flounder outside of Virginia waters to do any of the following:

1. Possess aboard any vessel in Virginia waters any amount of summer flounder in excess of the combined total of the Virginia landing limit described in subdivision 2 of this subsection and the amount of the legal North Carolina landing limit or trip limit.

2. Land in Virginia more than a total of 7,500 pounds of summer flounder.

3. Land in Virginia any amount of summer flounder more than once in any consecutive five-day period.

D. From November 1 October 16 through December 31 of each year, if it has not been announced that 85% of the allowable landings have been taken, it shall be unlawful for any person harvesting summer flounder outside of Virginia waters to do any of the following:

1. Possess aboard any vessel in Virginia waters any amount of summer flounder in excess of the combined total of the Virginia landing limit described in subdivision 2 of this subsection and the amount of the legal North Carolina landing limit or trip limit.

2. Land in Virginia more than a total of 7,500 7,000 pounds of summer flounder.

3. Land in Virginia any amount of summer flounder more than once in any consecutive five-day period.

E. From January 1 through December 31 of each year, any boat or vessel issued a valid federal summer flounder moratorium permit and owned and operated by a legal Virginia Commercial Hook-and-Line Licensee that possesses a Restricted Summer Flounder Endorsement shall be restricted to a possession and landing limit of 200 pounds of summer flounder, except as described in 4VAC20-620-30 F.

F. Upon request by a marine police officer, the seafood buyer or processor shall offload and accurately determine the total weight of all summer flounder aboard any vessel landing summer flounder in Virginia.

G. Any possession limit described in this section shall be determined by the weight in pounds of summer flounder as customarily packed, boxed and weighed by the seafood buyer or processor. The weight of any summer flounder in pounds found in excess of any possession limit described in this section shall be prima facie evidence of violation of this chapter. Persons in possession of summer flounder aboard any vessel in excess of the possession limit shall be in violation of this chapter unless that vessel has requested and been granted safe harbor. Any buyer or processor offloading or accepting any quantity of summer flounder from any vessel in excess of the possession limit shall be in violation of this chapter, except as described by subsection J of this section. A buyer or processor may accept or buy summer flounder from a vessel that has secured safe harbor, provided that vessel has satisfied the requirements described in subsection J of this section.

H. If a person violates the possession limits described in this section, the entire amount of summer flounder in that person's possession shall be confiscated. Any confiscated summer flounder shall be considered as a removal from the appropriate commercial harvest or landings quota. Upon confiscation, the marine police officer shall inventory the confiscated summer flounder and, at a minimum, secure two bids for purchase of the confiscated summer flounder from approved and licensed seafood buyers. The confiscated fish will be sold to the highest bidder and all funds derived from such sale shall be deposited for the Commonwealth pending court resolution of the charge of violating the possession limits established by this chapter. All of the collected funds will be returned to the accused upon a finding of innocence or forfeited to the Commonwealth upon a finding of guilty.

I. It shall be unlawful for a licensed seafood buyer or federally permitted seafood buyer to fail to contact the Marine Resources Commission Operation Station prior to a vessel offloading summer flounder harvested outside of Virginia. The buyer shall provide to the Marine Resources Commission the name of the vessel, its captain, an estimate of the amount in pounds of summer flounder on board that vessel, and the anticipated or approximate offloading time. Once offloading of any vessel is complete and the weight of the landed summer flounder has been determined, the buyer shall contact the Marine Resources Commission Operations Station and report the vessel name and corresponding weight of summer flounder landed. It shall be unlawful for any person to offload from a boat or vessel for commercial purposes any summer flounder during the period of 9 p.m. to 7 a.m.

J. Any boat or vessel that has entered Virginia waters for safe harbor shall only offload summer flounder when the state that licenses that vessel requests to transfer quota to Virginia, in the amount that corresponds to that vessel's possession limit, and the commissioner agrees to accept that transfer of quota.

K. After any commercial harvest or landing quota as described in 4VAC20-620-30 has been attained and announced as such, any boat or vessel possessing summer flounder on board may enter Virginia waters for safe harbor but shall contact the Marine Resources Commission Operation Center in advance of such entry into Virginia waters.

L. When it is projected and announced that 85% of the allowable landings have been taken, it shall be unlawful to land summer flounder in Virginia, except as described in subsection A of this section.

M. It shall be unlawful for any person harvesting summer flounder outside of Virginia waters to possess aboard any vessel, in Virginia, any amount of summer flounder, once it has been projected and announced that 100% of the quota described in 4VAC20-620-30 A has been taken.

Title of Regulation: 6VAC40-11. Public Participation Guidelines (amending 6VAC40-11-50).

Statutory Authority: §§ 2.2-4007.02 and 9.1-1110 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: November 15, 2017.

Effective Date: December 1, 2017.

Agency Contact: Amy M. Curtis, Department Counsel, Department of Forensic Science, 700 North 5th Street, Richmond, VA 23219, telephone (804) 786-6848, FAX (804) 786-6857, or email amy.curtis@dfs.virginia.gov.

Basis: Section 2.2-4007.02 of the Administrative Process Act mandates that each agency develop, adopt, and use public participation guidelines for soliciting the input of interested parties in the formation and development of its regulations. The Forensic Science Board is the promulgating entity, having been granted regulatory power under § 9.1-1110 of the Code of Virginia.

Purpose: The proposed change is to conform the agency's public participation guidelines to the change in the Administrative Process Act enacted by Chapter 795 of the 2012 Acts of the Assembly. Participation by the public in the regulatory process is essential to assist the Forensic Science Board in the promulgation of regulations that will protect the public health and safety.

Rationale for Using Fast-Track Rulemaking Process: As the proposed change merely conforms the regulation to the underlying statute, § 2.2-4007.02 B of the Code of Virginia, the rulemaking is not expected to be controversial and is, therefore, appropriate for the fast-track rulemaking process.

Substance: The proposed change conforms the agency's public participation guidelines to the current language in the Administrative Process Act, Chapter 795 of the 2012 Acts of the Assembly.

Issues: As the proposed change merely conforms the regulation to the underlying statute, the primary advantage is to ensure consistency between the regulation and the law to reduce any confusion. There are no anticipated disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapter 795 of the 2012 Acts of Assembly,¹ the Forensic Science Board (Board) proposes to specify in this regulation that interested persons shall be afforded an opportunity to be accompanied by and represented by counsel or other representative when submitting data, views, and arguments, either orally or in writing, to the agency.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The current Public Participation Guidelines state that: "In considering any nonemergency, nonexempt regulatory action, the agency shall afford interested persons an opportunity to submit data, views, and arguments, either orally or in writing, to the agency." The Board proposes to append "and (ii) be accompanied by and represented by counsel or other representative."

Chapter 795 of the 2012 Acts of Assembly added to the Code of Virginia § 2.2-4007.02. "Public participation guidelines" that interested persons also be afforded an opportunity to be accompanied by and represented by counsel or other representative. Since the Code of Virginia already specifies that interested persons shall be afforded an opportunity to be accompanied by and represented by counsel or other representative, the Board’s proposal to add this language to the regulation will not change the law in effect, but will be beneficial in that it will inform interested parties who read this regulation but not the statute of their legal rights concerning representation.

Businesses and Entities Affected. The proposed amendment potentially affects all individuals who comment on pending regulatory changes.

Localities Particularly Affected. The proposed amendment does not disproportionately affect particular localities.

Projected Impact on Employment. The proposed amendment does not significantly affect employment.

Effects on the Use and Value of Private Property. The proposed amendment does not affect the use and value of private property.

Real Estate Development Costs. The proposed amendment does not affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed amendment does not affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed amendment does not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed amendment does not adversely affect businesses.

Localities. The proposed amendment does not adversely affect localities.

Other Entities. The proposed amendment does not adversely affect other entities.

____________________________

¹ See http://leg1.state.va.us/cgi-bin/legp504.exe?121+ful+CHAP0795+hil

Agency's Response to Economic Impact Analysis: The agency has no comment on the economic impact analysis.

Summary:

Pursuant to § 2.2-4007.02 of the Code of Virginia, the amendment provides that interested persons submitting data, views, and arguments on a regulatory action may be accompanied by and represented by counsel or another representative.

Part III
Public Participation Procedures

6VAC40-11-50. Public comment.

A. In considering any nonemergency, nonexempt regulatory action, the agency shall afford interested persons an opportunity to (i) submit data, views, and arguments, either orally or in writing, to the agency; and (ii) be accompanied by and represented by counsel or other representative. Such opportunity to comment shall include an online public comment forum on the Town Hall.

1. To any requesting person, the agency shall provide copies of the statement of basis, purpose, substance, and issues; the economic impact analysis of the proposed or fast-track regulatory action; and the agency's response to public comments received.

2. The agency may begin crafting a regulatory action prior to or during any opportunities it provides to the public to submit comments.

B. The agency shall accept public comments in writing after the publication of a regulatory action in the Virginia Register as follows:

1. For a minimum of 30 calendar days following the publication of the notice of intended regulatory action (NOIRA).

2. For a minimum of 60 calendar days following the publication of a proposed regulation.

3. For a minimum of 30 calendar days following the publication of a reproposed regulation.

4. For a minimum of 30 calendar days following the publication of a final adopted regulation.

5. For a minimum of 30 calendar days following the publication of a fast-track regulation.

6. For a minimum of 21 calendar days following the publication of a notice of periodic review.

7. Not later than 21 calendar days following the publication of a petition for rulemaking.

C. The agency may determine if any of the comment periods listed in subsection B of this section shall be extended.

D. If the Governor finds that one or more changes with substantial impact have been made to a proposed regulation, he may require the agency to provide an additional 30 calendar days to solicit additional public comment on the changes in accordance with § 2.2-4013 C of the Code of Virginia.

E. The agency shall send a draft of the agency's summary description of public comment to all public commenters on the proposed regulation at least five days before final adoption of the regulation pursuant to § 2.2-4012 E of the Code of Virginia.

Titles of Regulations: 21VAC5-20. Broker-Dealers, Broker-Dealer Agents and Agents of the Issuer (amending 21VAC5-20-90, 21VAC5-20-110, 21VAC5-20-155, 21VAC5-20-160, 21VAC5-20-180).

21VAC5-30. Securities Registration (amending 21VAC5-30-80).

21VAC5-40. Exempt Securities and Transactions (repealing 21VAC5-40-30).

21VAC5-45. Federal Covered Securities (adding 21VAC5-45-40).

21VAC5-80. Investment Advisors (amending 21VAC5-80-70, 21VAC5-80-90).

Statutory Authority: §§ 12.1-13 and 13.1-523 of the Code of Virginia.

Public Hearing Information: A public hearing will be held upon request.

Public Comment Deadline: November 1, 2017.

Agency Contact: Jude C. Richnafsky, Senior Examiner, Division of Securities and Retail Franchising, State Corporation Commission, 1300 East Main Street, 9th Floor, Richmond, VA 23219, mailing address: P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9415, FAX (804) 371-9911, or email jude.richnafsky@scc.virginia.gov.

Summary:

The proposed regulatory action pertains to the administration and enforcement of the Virginia Securities Act and affects several regulatory chapters. Proposed amendments to 21VAC5-20, Broker-dealers, Broker-dealer Agents and Agents of the Issuer, and 21VAC5-80, Investment Advisors, increase the registration and annual renewal filing fee to $40 for broker-dealer agents, agents of the issuer, and investment advisor representatives. Proposed amendments to 21VAC5-30, Securities Registration, update the Oil and Gas Programs statements of policy and add four statements of policy of the North American Securities Administrators Association, as follows: Promotional Shares, Loans & Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The proposed action repeals the section of 21VAC5-40, Exempt Securities and Transactions, regarding the Regulation D, Rule 505 exemption due to the repeal of Rule 505 by the U.S. Securities and Exchange Commission (SEC) in October 2016. A new section is proposed in 21VAC5-45, Federal Covered Securities, to establish a notice filing requirement for issuers conducting a federal crowdfunding securities offering. In May of 2016, the SEC adopted the final rules for federal crowdfunding that preempted the requirement of the registration of these offerings. However, a state that is home to the principal place of business of the issuer or in which residents have purchased 50% or more of the offering amount may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

AT RICHMOND, SEPTEMBER 26, 2017

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. SEC-2017-00034

Ex Parte: In the matter of
Adopting a Revision to the Rules
Governing the Virginia Securities Act

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia ("Code") provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction. Section 13.1-523 of the Virginia Securities Act ("Act"), § 13.1-501 et seq. of the Code provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of the Act.

The rules and regulations issued by the Commission pursuant to the Act are set forth in Title 21 of the Virginia Administrative Code. A copy also may be found at the Commission's website: http://www.scc.virginia.gov/case.

Proposed Revision to Chapter 20. Registration and Renewal Filing Fees for Agents: The proposed amendment to Chapter 20 provides for an increase in the registration and annual renewal filing fee for broker-dealer agents (including Canadian agents) and agents of the issuer from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee. The Division of Securities and Retail Franchising ("Division") will apply the additional fees towards the cost to conduct audits.

Proposed Revision to Chapter 30. Adoption of Statements of Policy: The Division is a member of the North American Securities Administrators Association ("NASAA"), a trade association of state regulators. As a member of NASAA, the Division participates in a nationwide effort to use a uniform approach to the review of offerings registered in the states. From time to time, NASAA revises and adds to the list of standard policies applicable to certain offerings. The Division is updating and revising its list of these statements to add four additional items: Promotional Shares, Loans and Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The last item, Electronic Offering Documents and Electronic Signatures, will allow issuers to move away from providing investors with large cumbersome prospectuses and provide for the electronic delivery and signatures.

Proposed Revision to Chapter 40. Repeal of Regulation D, Rule 505: In 1983, the Division adopted by rule (as amended) an exemption promulgated by the United States Securities and Exchange Commission ("SEC") known as Regulation D that provided for an exemption for offerings of up to $5 million of securities in any 12-month period to an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors, as long as non-accredited investors are provided certain prescribed information about the issuer and the securities. Regulation D, Rule 505 of Section 3(a)(11) of the Securities Act of 1933 ("1933 Act"), and Rule 147 thereunder provide an exemption from the 1933 Act registration for offerings within a single state by issuers incorporated or organized, having their principal office and doing business in such state. In October 2016, the SEC repealed Rule 505, making the companion subsection under the current Commission regulations unnecessary. The Division proposes that the section be repealed.

Revision to Chapter 45. Adoption of Federal Crowdfunding: In 2015, the Division proposed an exemption from registration for certain intrastate offerings known as crowdfunding. The Virginia Intrastate Crowdfunding Exemption was adopted by the Commission in July 2015 under Commission Rule 21VAC5-40-190. At the time that the Commission developed the intrastate crowdfunding exemption, the SEC was working on a crowdfunding proposal for interstate offerings. In May 2016, the SEC adopted the final rules for federal crowdfunding. The final rule can be found at https://www.sec.gov/rules/final/2015/33-9974.pdf.

When the SEC adopted the final rules governing interstate crowdfunding, the states were preempted from requiring the registration of such offerings. However, a state that is home to the principal place of business of the issuer, or in which residents have purchased 50% or greater of the aggregate offering amount, may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

In order to facilitate that process, NASAA developed a model notice filing so that the states could adopt the notice filing in a consistent manner. This will allow interstate offerings to comply with the federal crowdfunding rule and make the appropriate state notice filings.

The Division proposes that the Commission adopt the notice filing requirement for federal crowdfunding offerings to include the Form U-CF for notice filing.

Proposed Revision to Chapter 80. Registration and Renewal Filing Fees for Investment Advisor Representatives: The proposed amendment to Chapter 80 provides for an increase in the registration and annual renewal filing fee for investment advisor representatives from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee.  The Division will apply the additional fees to the cost to conduct audits.

The Division recommended to the Commission that the proposed revisions should be considered for adoption. The Division also has recommended to the Commission that a hearing should be held only if requested by those interested parties who specifically indicate that a hearing is necessary and the reasons therefore.

A copy of the proposed revisions may be requested by interested parties from the Division by telephone, regular mail or email request, and also can be found at the Division's website: http://www.scc.virginia.gov/srf. Any comments to the proposed rules must be received by November 1, 2017.

Accordingly, IT IS ORDERED THAT:

(1) The proposed revisions are appended hereto and made a part of the record herein.

(2) On or before November 1, 2017, comments or request for hearing on the proposed revisions must be submitted in writing to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Requests for hearing shall state why a hearing is necessary and why the issues cannot be adequately addressed in written comments. All correspondence shall reference Case No. SEC-2017-00034. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

(3) The proposed revisions shall be posted on the Commission's website at http://www.scc.virginia.gov/case and on the Division's website at http://www.scc.virginia.gov/srf. Interested persons also may request a copy of the proposed revisions from the Division by telephone, mail, or email.

AN ATTESTED COPY hereof, together with a copy of the proposed revisions, shall be provided to the Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

AN ATTESTED COPY hereof shall be sent to the Director of the Division of Securities and Retail Franchising who shall forthwith provide notice of this Order via U.S. mail or a copy of this Order may be sent by e-mail to any interested persons as he may designate.

Part II
Broker-Dealer Agents

21VAC5-20-90. Application for registration as a broker-dealer agent.

A. Application for registration as an agent of a FINRA member shall be filed on and in compliance with all requirements of CRD and in full compliance with the forms and regulations prescribed by the commission. The application shall include all information required by such forms.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

B. Application for registration for non-FINRA member broker-dealer agents shall be filed on and in compliance with all requirements and forms prescribed by the commission.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-110. Renewals.

A. To renew the registration or registrations of its broker-dealer agent or agents, a FINRA member broker-dealer will be billed by CRD the statutory fee of $30 $40 per broker-dealer agent. A renewal of registration or registrations shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Code of Virginia.

B. A non-FINRA member broker-dealer shall file with the commission at its Division of Securities and Retail Franchising the following items at least 30 days prior to the expiration of registration.

1. Agents to be Renewed (Form S.D.4.A) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

2. If applicable, Agents to be Canceled with clear records (Form S.D.4.B).

3. If applicable, Agents to be Canceled without clear records (Form S.D.4.C).

21VAC5-20-155. Limited Canadian broker-dealer agent registration.

A. An agent of a Canadian broker-dealer who has no office or other physical presence in the Commonwealth of Virginia may, provided the broker-dealer agent is registered under this section, effect transactions in securities as permitted for a broker-dealer registered under 21VAC5-20-85.

B. Application for registration as a broker-dealer agent under this section shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

C. An application for registration as a broker-dealer agent under this section shall be deemed incomplete for purposes of applying for registration unless the following executed forms, fee, and information are submitted to the commission:

1. An application in the form required by the jurisdiction in which the broker-dealer maintains its principal place of business.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

3. Evidence that the applicant is registered as a broker-dealer agent in the jurisdiction from which it is effecting the transactions.

4. Any other information the commission may require.

D. A broker-dealer agent registered under this section shall:

1. Maintain his provincial or territorial registration in good standing;

2. Immediately notify the commission of any criminal action taken against him or of any finding or sanction imposed on him as a result of any self-regulatory or regulatory action involving fraud, theft, deceit, misrepresentation or similar conduct.

E. A broker-dealer agent's registration under this section, and any renewal thereof, shall expire annually at midnight on the 31st day of December unless renewed in accordance with subsection F of this section.

F. To renew the registrations of its agents, a broker-dealer registered under this section shall file with the commission at its division the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer maintains its principal place of business, or if no such renewal application is required, the most recent application filed pursuant to subdivision C 1 of this section along with the statutory fee in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

G. A Canadian broker-dealer agent registered under this section and acting in accordance with the limitations set out in this section is exempt from all other rules applicable to a broker-dealer agent except the anti-fraud provisions of the Act and the requirements set out in this section.

Part III
Agents of the Issuer

21VAC5-20-160. Application for registration as an agent of the issuer.

A. Application for registration as an agent of the issuer shall be filed on and in compliance with all requirements and forms prescribed by the commission.

B. An application shall be deemed incomplete for registration as an agent of the issuer unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any individual who meets the qualifications set forth in subdivision B 3 of this section and has been registered in any state jurisdiction requiring registration within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirement set forth in subdivision B 3 of this section, except that the Director of Securities and Retail Franchising may require additional examinations for any individual found to have violated any federal or state securities laws. 

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-180. Renewals.

An issuer, on behalf of its agent or agents, shall file with the commission at its Division of Securities and Retail Franchising at least 30 days prior to the expiration of registration a registration renewal form (Form S.D.4) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

21VAC5-30-80. Adoption of NASAA North American Securities Administration Association, Inc. statements of policy.

The commission adopts the following NASAA North American Securities Administration Association, Inc. (NASAA) statements of policy that shall apply to the registration of securities in the Commonwealth. It will be considered a basis for denial of an application if an offering fails to comply with an applicable statement of policy. While applications not conforming to a statement of policy shall be looked upon with disfavor, where good cause is shown, certain provisions may be modified or waived by the commission.

1. Options and Warrants, as amended March 31, 2008.

2. Underwriting Expenses, Underwriter's Warrants, Selling Expenses and Selling Security Holders, as amended March 31, 2008.

3. Real Estate Programs, as amended May 7, 2007.

4. Oil and Gas Programs, as amended May 7, 2007 6, 2012.

5. Cattle-Feeding Programs, as adopted September 17, 1980.

6. Unsound Financial Condition, as amended March 31, 2008.

7. Real Estate Investment Trusts, as amended May 7, 2007.

8. Church Bonds, as adopted April 29, 1981.

9. Small Company Offering Registrations, as adopted April 28, 1996.

10. NASAA Guidelines Regarding Viatical Investment, as adopted October 1, 2002.

11. Corporate Securities Definitions, as amended March 31, 2008.

12. Church Extension Fund Securities, as amended April 18, 2004.

13. Promotional Shares, as amended March 31, 2008.

14. Loans and Other Material Transactions, as amended March 31, 2008.

15. Impoundment of Proceeds, as amended March 31, 2008.

16. Electronic Offering Documents and Electronic Signatures, as adopted May 8, 2017.

21VAC5-40-30. Uniform limited offering exemption. (Repealed.)

A. Nothing in this exemption is intended to relieve, or should be construed as in any way relieving, issuers or persons acting on their behalf from providing disclosure to prospective investors adequate to satisfy the anti-fraud provisions of the Act.

In view of the objective of this section and the purpose and policies underlying the Act, this exemption is not available to an issuer with respect to a transaction which, although in technical compliance with this section, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this section.

Nothing in this section is intended to exempt registered broker-dealers or agents from the due diligence standards otherwise applicable to such registered persons.

Nothing in this section is intended to exempt a person from the broker-dealer or agent registration requirements of Article 3 (§ 13.1-504 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia, except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision B 2 of this section.

B. For the purpose of the limited offering exemption referred to in § 13.1-514 B 13 of the Act, the following securities are determined to be exempt from the securities registration requirements of Article 4 (§ 13.1-507 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia.

Any securities offered or sold in compliance with the Securities Act of 1933, Regulation D (Reg. D), Rules 230.501-230.503 and 230.505 and which satisfy the following further conditions and limitations:

1. The issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that all persons who offer or sell securities subject to this section are registered in accordance with § 13.1-505 of the Act except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision 2 of this subsection.

2. No exemption under this section shall be available for the securities of any issuer if any of the persons described in the Securities Act of 1933, Regulation A, Rule 230.262(a), (b), or (c) (17 CFR 230.262):

a. Has filed a registration statement which is the subject of a currently effective stop order entered pursuant to any state's securities law within five years prior to the beginning of the offering.

b. Has been convicted within five years prior to the beginning of the offering of a felony or misdemeanor in connection with the purchase or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.

c. Is currently subject to a state's administrative order or judgment entered by that state's securities administrator within five years prior to the beginning of the offering or is subject to a state's administrative order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within five years prior to the beginning of the offering.

d. Is currently subject to a state's administrative order or judgment which prohibits the use of any exemption from registration in connection with the purchase or sale of securities.

e. Is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of any court of competent jurisdiction, entered within five years prior to the beginning of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of a false filing with a state.

f. The prohibitions of subdivisions a, b, c and e of this subdivision shall not apply if the party subject to the disqualifying order, judgment or decree is duly licensed or registered to conduct securities related business in the state in which the administrative order, judgment or decree was entered against such party.

g. A disqualification caused by this subsection is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification, or the State Corporation Commission, determines upon a showing of good cause that it is not necessary under the circumstances that the exemption under this section be denied.

3. The issuer shall file with the commission no later than 15 days after the first sale in this state from an offering being made in reliance upon this exemption:

a. A notice on Form D (17 CFR 239.500), as filed with the SEC.

b. A filing fee of $250 payable to the Treasurer of Virginia.

4. In sales to nonaccredited investors, the issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the investment is suitable for the purchaser as to the purchaser's other security holdings and financial situation and needs.

5. Offers and sales of securities which are exempted by this section shall not be combined with offers and sales of securities exempted by another regulation or section of the Act; however, nothing in this limitation shall act as an election. The issuer may claim the availability of another applicable exemption should, for any reason, the securities or persons fail to comply with the conditions and limitations of this exemption.

6. In any proceeding involving this section, the burden of proving the exemption or an exception from a definition or condition is upon the person claiming it.

C. The exemption authorized by this section shall be known and may be cited as the "Uniform Limited Offering Exemption."

21VAC5-45-40. Federal crowdfunding offerings.

A. An issuer that offers and sells securities in the Commonwealth in an offering exempt under federal Regulation Crowdfunding (17 CFR 227.100 through 17 CFR 227.503) and §§ 4(a)(6) and 18(b)(4)(c) of the Securities Act of 1933 (15 USC § 77a), and that either (i) has its principal place of business in the Commonwealth or (ii) sells 50% or greater of the aggregate amount of the offering to residents of the Commonwealth, shall file the following with the commission:

1. A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission (SEC); and

2. A consent to service of process on Form U-2 if not filing on the Uniform Notice of Federal Crowdfunding form.

B. If the issuer has its principal place of business in the Commonwealth, the filing required under subsection A of this section shall be filed with the commission when the issuer makes its initial Form C filing concerning the offering with the SEC. If the issuer does not have its principal place of business in the Commonwealth but residents of the Commonwealth have purchased 50% or greater of the aggregate amount of the offering, the filing required under subsection A of this section shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 30 days from the date of completion of the offering.

C. The initial notice filing is effective for 12 months from the date of the filing with the commission.

D. For each additional 12-month period in which the same offering is continued, an issuer conducting an offering under federal Regulation Crowdfunding may renew its notice filing by filing on or before the expiration of the notice filing a completed Uniform Notice of Federal Crowdfunding Offering form marked "renewal" or a cover letter or other document requesting renewal.

E. An issuer may increase the amount of securities offered in the Commonwealth by submitting a completed Uniform Notice of Federal Crowdfunding Offering form marked "amendment" or other document describing the transaction.

FORMS (21VAC5-45)

Form D, Notice of Exempt Offering of Securities, U.S. Securities and Exchange Commission, SEC1972 (rev. 2/2012)

Uniform Consent to Service of Process, Form U-2 (7/1981)

Uniform Notice of Regulation A - Tier 2 Offering (undated, filed 10/2016)

Uniform Notice of Federal Crowdfunding Offering, Form U-CF (undated, filed 9/2017)

Part II
Investment Advisor Representative Registration, Expiration, Updates and Amendments, Termination, and Changing Connection from One Investment Advisor to Another

21VAC5-80-70. Application for registration as an investment advisor representative.

A. Application for registration as an investment advisor representative shall be filed in compliance with all requirements of CRD and in full compliance with forms and regulations prescribed by the commission. The application shall include all information required by such forms.

B. An application shall be deemed incomplete for registration as an investment advisor representative unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence of passing: (i) the Uniform Investment Adviser Law Examination, Series 65; (ii) the Uniform Combined State Law Examination, Series 66, and the General Securities Representative Examination, Series 7; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. All individuals listed on Part 1 of Form ADV in Schedule A and Item 2. A. of Part 1B as having supervisory responsibilities of the investment advisor shall take and pass the examinations as required in subdivision 3 of this subsection, and register as a representative of the investment advisor.

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-80-90. Renewals.

To renew the registration of its investment advisor representatives, an investment advisor or federal covered advisor will be billed by IARD the statutory fee of $30 $40 per investment advisor representative. A renewal of registration shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Act.

Titles of Regulations: 21VAC5-20. Broker-Dealers, Broker-Dealer Agents and Agents of the Issuer (amending 21VAC5-20-90, 21VAC5-20-110, 21VAC5-20-155, 21VAC5-20-160, 21VAC5-20-180).

21VAC5-30. Securities Registration (amending 21VAC5-30-80).

21VAC5-40. Exempt Securities and Transactions (repealing 21VAC5-40-30).

21VAC5-45. Federal Covered Securities (adding 21VAC5-45-40).

21VAC5-80. Investment Advisors (amending 21VAC5-80-70, 21VAC5-80-90).

Statutory Authority: §§ 12.1-13 and 13.1-523 of the Code of Virginia.

Public Hearing Information: A public hearing will be held upon request.

Public Comment Deadline: November 1, 2017.

Agency Contact: Jude C. Richnafsky, Senior Examiner, Division of Securities and Retail Franchising, State Corporation Commission, 1300 East Main Street, 9th Floor, Richmond, VA 23219, mailing address: P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9415, FAX (804) 371-9911, or email jude.richnafsky@scc.virginia.gov.

Summary:

The proposed regulatory action pertains to the administration and enforcement of the Virginia Securities Act and affects several regulatory chapters. Proposed amendments to 21VAC5-20, Broker-dealers, Broker-dealer Agents and Agents of the Issuer, and 21VAC5-80, Investment Advisors, increase the registration and annual renewal filing fee to $40 for broker-dealer agents, agents of the issuer, and investment advisor representatives. Proposed amendments to 21VAC5-30, Securities Registration, update the Oil and Gas Programs statements of policy and add four statements of policy of the North American Securities Administrators Association, as follows: Promotional Shares, Loans & Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The proposed action repeals the section of 21VAC5-40, Exempt Securities and Transactions, regarding the Regulation D, Rule 505 exemption due to the repeal of Rule 505 by the U.S. Securities and Exchange Commission (SEC) in October 2016. A new section is proposed in 21VAC5-45, Federal Covered Securities, to establish a notice filing requirement for issuers conducting a federal crowdfunding securities offering. In May of 2016, the SEC adopted the final rules for federal crowdfunding that preempted the requirement of the registration of these offerings. However, a state that is home to the principal place of business of the issuer or in which residents have purchased 50% or more of the offering amount may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

AT RICHMOND, SEPTEMBER 26, 2017

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. SEC-2017-00034

Ex Parte: In the matter of
Adopting a Revision to the Rules
Governing the Virginia Securities Act

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia ("Code") provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction. Section 13.1-523 of the Virginia Securities Act ("Act"), § 13.1-501 et seq. of the Code provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of the Act.

The rules and regulations issued by the Commission pursuant to the Act are set forth in Title 21 of the Virginia Administrative Code. A copy also may be found at the Commission's website: http://www.scc.virginia.gov/case.

Proposed Revision to Chapter 20. Registration and Renewal Filing Fees for Agents: The proposed amendment to Chapter 20 provides for an increase in the registration and annual renewal filing fee for broker-dealer agents (including Canadian agents) and agents of the issuer from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee. The Division of Securities and Retail Franchising ("Division") will apply the additional fees towards the cost to conduct audits.

Proposed Revision to Chapter 30. Adoption of Statements of Policy: The Division is a member of the North American Securities Administrators Association ("NASAA"), a trade association of state regulators. As a member of NASAA, the Division participates in a nationwide effort to use a uniform approach to the review of offerings registered in the states. From time to time, NASAA revises and adds to the list of standard policies applicable to certain offerings. The Division is updating and revising its list of these statements to add four additional items: Promotional Shares, Loans and Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The last item, Electronic Offering Documents and Electronic Signatures, will allow issuers to move away from providing investors with large cumbersome prospectuses and provide for the electronic delivery and signatures.

Proposed Revision to Chapter 40. Repeal of Regulation D, Rule 505: In 1983, the Division adopted by rule (as amended) an exemption promulgated by the United States Securities and Exchange Commission ("SEC") known as Regulation D that provided for an exemption for offerings of up to $5 million of securities in any 12-month period to an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors, as long as non-accredited investors are provided certain prescribed information about the issuer and the securities. Regulation D, Rule 505 of Section 3(a)(11) of the Securities Act of 1933 ("1933 Act"), and Rule 147 thereunder provide an exemption from the 1933 Act registration for offerings within a single state by issuers incorporated or organized, having their principal office and doing business in such state. In October 2016, the SEC repealed Rule 505, making the companion subsection under the current Commission regulations unnecessary. The Division proposes that the section be repealed.

Revision to Chapter 45. Adoption of Federal Crowdfunding: In 2015, the Division proposed an exemption from registration for certain intrastate offerings known as crowdfunding. The Virginia Intrastate Crowdfunding Exemption was adopted by the Commission in July 2015 under Commission Rule 21VAC5-40-190. At the time that the Commission developed the intrastate crowdfunding exemption, the SEC was working on a crowdfunding proposal for interstate offerings. In May 2016, the SEC adopted the final rules for federal crowdfunding. The final rule can be found at https://www.sec.gov/rules/final/2015/33-9974.pdf.

When the SEC adopted the final rules governing interstate crowdfunding, the states were preempted from requiring the registration of such offerings. However, a state that is home to the principal place of business of the issuer, or in which residents have purchased 50% or greater of the aggregate offering amount, may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

In order to facilitate that process, NASAA developed a model notice filing so that the states could adopt the notice filing in a consistent manner. This will allow interstate offerings to comply with the federal crowdfunding rule and make the appropriate state notice filings.

The Division proposes that the Commission adopt the notice filing requirement for federal crowdfunding offerings to include the Form U-CF for notice filing.

Proposed Revision to Chapter 80. Registration and Renewal Filing Fees for Investment Advisor Representatives: The proposed amendment to Chapter 80 provides for an increase in the registration and annual renewal filing fee for investment advisor representatives from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee.  The Division will apply the additional fees to the cost to conduct audits.

The Division recommended to the Commission that the proposed revisions should be considered for adoption. The Division also has recommended to the Commission that a hearing should be held only if requested by those interested parties who specifically indicate that a hearing is necessary and the reasons therefore.

A copy of the proposed revisions may be requested by interested parties from the Division by telephone, regular mail or email request, and also can be found at the Division's website: http://www.scc.virginia.gov/srf. Any comments to the proposed rules must be received by November 1, 2017.

Accordingly, IT IS ORDERED THAT:

(1) The proposed revisions are appended hereto and made a part of the record herein.

(2) On or before November 1, 2017, comments or request for hearing on the proposed revisions must be submitted in writing to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Requests for hearing shall state why a hearing is necessary and why the issues cannot be adequately addressed in written comments. All correspondence shall reference Case No. SEC-2017-00034. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

(3) The proposed revisions shall be posted on the Commission's website at http://www.scc.virginia.gov/case and on the Division's website at http://www.scc.virginia.gov/srf. Interested persons also may request a copy of the proposed revisions from the Division by telephone, mail, or email.

AN ATTESTED COPY hereof, together with a copy of the proposed revisions, shall be provided to the Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

AN ATTESTED COPY hereof shall be sent to the Director of the Division of Securities and Retail Franchising who shall forthwith provide notice of this Order via U.S. mail or a copy of this Order may be sent by e-mail to any interested persons as he may designate.

Part II
Broker-Dealer Agents

21VAC5-20-90. Application for registration as a broker-dealer agent.

A. Application for registration as an agent of a FINRA member shall be filed on and in compliance with all requirements of CRD and in full compliance with the forms and regulations prescribed by the commission. The application shall include all information required by such forms.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

B. Application for registration for non-FINRA member broker-dealer agents shall be filed on and in compliance with all requirements and forms prescribed by the commission.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-110. Renewals.

A. To renew the registration or registrations of its broker-dealer agent or agents, a FINRA member broker-dealer will be billed by CRD the statutory fee of $30 $40 per broker-dealer agent. A renewal of registration or registrations shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Code of Virginia.

B. A non-FINRA member broker-dealer shall file with the commission at its Division of Securities and Retail Franchising the following items at least 30 days prior to the expiration of registration.

1. Agents to be Renewed (Form S.D.4.A) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

2. If applicable, Agents to be Canceled with clear records (Form S.D.4.B).

3. If applicable, Agents to be Canceled without clear records (Form S.D.4.C).

21VAC5-20-155. Limited Canadian broker-dealer agent registration.

A. An agent of a Canadian broker-dealer who has no office or other physical presence in the Commonwealth of Virginia may, provided the broker-dealer agent is registered under this section, effect transactions in securities as permitted for a broker-dealer registered under 21VAC5-20-85.

B. Application for registration as a broker-dealer agent under this section shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

C. An application for registration as a broker-dealer agent under this section shall be deemed incomplete for purposes of applying for registration unless the following executed forms, fee, and information are submitted to the commission:

1. An application in the form required by the jurisdiction in which the broker-dealer maintains its principal place of business.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

3. Evidence that the applicant is registered as a broker-dealer agent in the jurisdiction from which it is effecting the transactions.

4. Any other information the commission may require.

D. A broker-dealer agent registered under this section shall:

1. Maintain his provincial or territorial registration in good standing;

2. Immediately notify the commission of any criminal action taken against him or of any finding or sanction imposed on him as a result of any self-regulatory or regulatory action involving fraud, theft, deceit, misrepresentation or similar conduct.

E. A broker-dealer agent's registration under this section, and any renewal thereof, shall expire annually at midnight on the 31st day of December unless renewed in accordance with subsection F of this section.

F. To renew the registrations of its agents, a broker-dealer registered under this section shall file with the commission at its division the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer maintains its principal place of business, or if no such renewal application is required, the most recent application filed pursuant to subdivision C 1 of this section along with the statutory fee in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

G. A Canadian broker-dealer agent registered under this section and acting in accordance with the limitations set out in this section is exempt from all other rules applicable to a broker-dealer agent except the anti-fraud provisions of the Act and the requirements set out in this section.

Part III
Agents of the Issuer

21VAC5-20-160. Application for registration as an agent of the issuer.

A. Application for registration as an agent of the issuer shall be filed on and in compliance with all requirements and forms prescribed by the commission.

B. An application shall be deemed incomplete for registration as an agent of the issuer unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any individual who meets the qualifications set forth in subdivision B 3 of this section and has been registered in any state jurisdiction requiring registration within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirement set forth in subdivision B 3 of this section, except that the Director of Securities and Retail Franchising may require additional examinations for any individual found to have violated any federal or state securities laws. 

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-180. Renewals.

An issuer, on behalf of its agent or agents, shall file with the commission at its Division of Securities and Retail Franchising at least 30 days prior to the expiration of registration a registration renewal form (Form S.D.4) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

21VAC5-30-80. Adoption of NASAA North American Securities Administration Association, Inc. statements of policy.

The commission adopts the following NASAA North American Securities Administration Association, Inc. (NASAA) statements of policy that shall apply to the registration of securities in the Commonwealth. It will be considered a basis for denial of an application if an offering fails to comply with an applicable statement of policy. While applications not conforming to a statement of policy shall be looked upon with disfavor, where good cause is shown, certain provisions may be modified or waived by the commission.

1. Options and Warrants, as amended March 31, 2008.

2. Underwriting Expenses, Underwriter's Warrants, Selling Expenses and Selling Security Holders, as amended March 31, 2008.

3. Real Estate Programs, as amended May 7, 2007.

4. Oil and Gas Programs, as amended May 7, 2007 6, 2012.

5. Cattle-Feeding Programs, as adopted September 17, 1980.

6. Unsound Financial Condition, as amended March 31, 2008.

7. Real Estate Investment Trusts, as amended May 7, 2007.

8. Church Bonds, as adopted April 29, 1981.

9. Small Company Offering Registrations, as adopted April 28, 1996.

10. NASAA Guidelines Regarding Viatical Investment, as adopted October 1, 2002.

11. Corporate Securities Definitions, as amended March 31, 2008.

12. Church Extension Fund Securities, as amended April 18, 2004.

13. Promotional Shares, as amended March 31, 2008.

14. Loans and Other Material Transactions, as amended March 31, 2008.

15. Impoundment of Proceeds, as amended March 31, 2008.

16. Electronic Offering Documents and Electronic Signatures, as adopted May 8, 2017.

21VAC5-40-30. Uniform limited offering exemption. (Repealed.)

A. Nothing in this exemption is intended to relieve, or should be construed as in any way relieving, issuers or persons acting on their behalf from providing disclosure to prospective investors adequate to satisfy the anti-fraud provisions of the Act.

In view of the objective of this section and the purpose and policies underlying the Act, this exemption is not available to an issuer with respect to a transaction which, although in technical compliance with this section, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this section.

Nothing in this section is intended to exempt registered broker-dealers or agents from the due diligence standards otherwise applicable to such registered persons.

Nothing in this section is intended to exempt a person from the broker-dealer or agent registration requirements of Article 3 (§ 13.1-504 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia, except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision B 2 of this section.

B. For the purpose of the limited offering exemption referred to in § 13.1-514 B 13 of the Act, the following securities are determined to be exempt from the securities registration requirements of Article 4 (§ 13.1-507 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia.

Any securities offered or sold in compliance with the Securities Act of 1933, Regulation D (Reg. D), Rules 230.501-230.503 and 230.505 and which satisfy the following further conditions and limitations:

1. The issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that all persons who offer or sell securities subject to this section are registered in accordance with § 13.1-505 of the Act except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision 2 of this subsection.

2. No exemption under this section shall be available for the securities of any issuer if any of the persons described in the Securities Act of 1933, Regulation A, Rule 230.262(a), (b), or (c) (17 CFR 230.262):

a. Has filed a registration statement which is the subject of a currently effective stop order entered pursuant to any state's securities law within five years prior to the beginning of the offering.

b. Has been convicted within five years prior to the beginning of the offering of a felony or misdemeanor in connection with the purchase or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.

c. Is currently subject to a state's administrative order or judgment entered by that state's securities administrator within five years prior to the beginning of the offering or is subject to a state's administrative order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within five years prior to the beginning of the offering.

d. Is currently subject to a state's administrative order or judgment which prohibits the use of any exemption from registration in connection with the purchase or sale of securities.

e. Is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of any court of competent jurisdiction, entered within five years prior to the beginning of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of a false filing with a state.

f. The prohibitions of subdivisions a, b, c and e of this subdivision shall not apply if the party subject to the disqualifying order, judgment or decree is duly licensed or registered to conduct securities related business in the state in which the administrative order, judgment or decree was entered against such party.

g. A disqualification caused by this subsection is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification, or the State Corporation Commission, determines upon a showing of good cause that it is not necessary under the circumstances that the exemption under this section be denied.

3. The issuer shall file with the commission no later than 15 days after the first sale in this state from an offering being made in reliance upon this exemption:

a. A notice on Form D (17 CFR 239.500), as filed with the SEC.

b. A filing fee of $250 payable to the Treasurer of Virginia.

4. In sales to nonaccredited investors, the issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the investment is suitable for the purchaser as to the purchaser's other security holdings and financial situation and needs.

5. Offers and sales of securities which are exempted by this section shall not be combined with offers and sales of securities exempted by another regulation or section of the Act; however, nothing in this limitation shall act as an election. The issuer may claim the availability of another applicable exemption should, for any reason, the securities or persons fail to comply with the conditions and limitations of this exemption.

6. In any proceeding involving this section, the burden of proving the exemption or an exception from a definition or condition is upon the person claiming it.

C. The exemption authorized by this section shall be known and may be cited as the "Uniform Limited Offering Exemption."

21VAC5-45-40. Federal crowdfunding offerings.

A. An issuer that offers and sells securities in the Commonwealth in an offering exempt under federal Regulation Crowdfunding (17 CFR 227.100 through 17 CFR 227.503) and §§ 4(a)(6) and 18(b)(4)(c) of the Securities Act of 1933 (15 USC § 77a), and that either (i) has its principal place of business in the Commonwealth or (ii) sells 50% or greater of the aggregate amount of the offering to residents of the Commonwealth, shall file the following with the commission:

1. A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission (SEC); and

2. A consent to service of process on Form U-2 if not filing on the Uniform Notice of Federal Crowdfunding form.

B. If the issuer has its principal place of business in the Commonwealth, the filing required under subsection A of this section shall be filed with the commission when the issuer makes its initial Form C filing concerning the offering with the SEC. If the issuer does not have its principal place of business in the Commonwealth but residents of the Commonwealth have purchased 50% or greater of the aggregate amount of the offering, the filing required under subsection A of this section shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 30 days from the date of completion of the offering.

C. The initial notice filing is effective for 12 months from the date of the filing with the commission.

D. For each additional 12-month period in which the same offering is continued, an issuer conducting an offering under federal Regulation Crowdfunding may renew its notice filing by filing on or before the expiration of the notice filing a completed Uniform Notice of Federal Crowdfunding Offering form marked "renewal" or a cover letter or other document requesting renewal.

E. An issuer may increase the amount of securities offered in the Commonwealth by submitting a completed Uniform Notice of Federal Crowdfunding Offering form marked "amendment" or other document describing the transaction.

FORMS (21VAC5-45)

Form D, Notice of Exempt Offering of Securities, U.S. Securities and Exchange Commission, SEC1972 (rev. 2/2012)

Uniform Consent to Service of Process, Form U-2 (7/1981)

Uniform Notice of Regulation A - Tier 2 Offering (undated, filed 10/2016)

Uniform Notice of Federal Crowdfunding Offering, Form U-CF (undated, filed 9/2017)

Part II
Investment Advisor Representative Registration, Expiration, Updates and Amendments, Termination, and Changing Connection from One Investment Advisor to Another

21VAC5-80-70. Application for registration as an investment advisor representative.

A. Application for registration as an investment advisor representative shall be filed in compliance with all requirements of CRD and in full compliance with forms and regulations prescribed by the commission. The application shall include all information required by such forms.

B. An application shall be deemed incomplete for registration as an investment advisor representative unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence of passing: (i) the Uniform Investment Adviser Law Examination, Series 65; (ii) the Uniform Combined State Law Examination, Series 66, and the General Securities Representative Examination, Series 7; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. All individuals listed on Part 1 of Form ADV in Schedule A and Item 2. A. of Part 1B as having supervisory responsibilities of the investment advisor shall take and pass the examinations as required in subdivision 3 of this subsection, and register as a representative of the investment advisor.

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-80-90. Renewals.

To renew the registration of its investment advisor representatives, an investment advisor or federal covered advisor will be billed by IARD the statutory fee of $30 $40 per investment advisor representative. A renewal of registration shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Act.

Titles of Regulations: 21VAC5-20. Broker-Dealers, Broker-Dealer Agents and Agents of the Issuer (amending 21VAC5-20-90, 21VAC5-20-110, 21VAC5-20-155, 21VAC5-20-160, 21VAC5-20-180).

21VAC5-30. Securities Registration (amending 21VAC5-30-80).

21VAC5-40. Exempt Securities and Transactions (repealing 21VAC5-40-30).

21VAC5-45. Federal Covered Securities (adding 21VAC5-45-40).

21VAC5-80. Investment Advisors (amending 21VAC5-80-70, 21VAC5-80-90).

Statutory Authority: §§ 12.1-13 and 13.1-523 of the Code of Virginia.

Public Hearing Information: A public hearing will be held upon request.

Public Comment Deadline: November 1, 2017.

Agency Contact: Jude C. Richnafsky, Senior Examiner, Division of Securities and Retail Franchising, State Corporation Commission, 1300 East Main Street, 9th Floor, Richmond, VA 23219, mailing address: P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9415, FAX (804) 371-9911, or email jude.richnafsky@scc.virginia.gov.

Summary:

The proposed regulatory action pertains to the administration and enforcement of the Virginia Securities Act and affects several regulatory chapters. Proposed amendments to 21VAC5-20, Broker-dealers, Broker-dealer Agents and Agents of the Issuer, and 21VAC5-80, Investment Advisors, increase the registration and annual renewal filing fee to $40 for broker-dealer agents, agents of the issuer, and investment advisor representatives. Proposed amendments to 21VAC5-30, Securities Registration, update the Oil and Gas Programs statements of policy and add four statements of policy of the North American Securities Administrators Association, as follows: Promotional Shares, Loans & Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The proposed action repeals the section of 21VAC5-40, Exempt Securities and Transactions, regarding the Regulation D, Rule 505 exemption due to the repeal of Rule 505 by the U.S. Securities and Exchange Commission (SEC) in October 2016. A new section is proposed in 21VAC5-45, Federal Covered Securities, to establish a notice filing requirement for issuers conducting a federal crowdfunding securities offering. In May of 2016, the SEC adopted the final rules for federal crowdfunding that preempted the requirement of the registration of these offerings. However, a state that is home to the principal place of business of the issuer or in which residents have purchased 50% or more of the offering amount may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

AT RICHMOND, SEPTEMBER 26, 2017

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. SEC-2017-00034

Ex Parte: In the matter of
Adopting a Revision to the Rules
Governing the Virginia Securities Act

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia ("Code") provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction. Section 13.1-523 of the Virginia Securities Act ("Act"), § 13.1-501 et seq. of the Code provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of the Act.

The rules and regulations issued by the Commission pursuant to the Act are set forth in Title 21 of the Virginia Administrative Code. A copy also may be found at the Commission's website: http://www.scc.virginia.gov/case.

Proposed Revision to Chapter 20. Registration and Renewal Filing Fees for Agents: The proposed amendment to Chapter 20 provides for an increase in the registration and annual renewal filing fee for broker-dealer agents (including Canadian agents) and agents of the issuer from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee. The Division of Securities and Retail Franchising ("Division") will apply the additional fees towards the cost to conduct audits.

Proposed Revision to Chapter 30. Adoption of Statements of Policy: The Division is a member of the North American Securities Administrators Association ("NASAA"), a trade association of state regulators. As a member of NASAA, the Division participates in a nationwide effort to use a uniform approach to the review of offerings registered in the states. From time to time, NASAA revises and adds to the list of standard policies applicable to certain offerings. The Division is updating and revising its list of these statements to add four additional items: Promotional Shares, Loans and Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The last item, Electronic Offering Documents and Electronic Signatures, will allow issuers to move away from providing investors with large cumbersome prospectuses and provide for the electronic delivery and signatures.

Proposed Revision to Chapter 40. Repeal of Regulation D, Rule 505: In 1983, the Division adopted by rule (as amended) an exemption promulgated by the United States Securities and Exchange Commission ("SEC") known as Regulation D that provided for an exemption for offerings of up to $5 million of securities in any 12-month period to an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors, as long as non-accredited investors are provided certain prescribed information about the issuer and the securities. Regulation D, Rule 505 of Section 3(a)(11) of the Securities Act of 1933 ("1933 Act"), and Rule 147 thereunder provide an exemption from the 1933 Act registration for offerings within a single state by issuers incorporated or organized, having their principal office and doing business in such state. In October 2016, the SEC repealed Rule 505, making the companion subsection under the current Commission regulations unnecessary. The Division proposes that the section be repealed.

Revision to Chapter 45. Adoption of Federal Crowdfunding: In 2015, the Division proposed an exemption from registration for certain intrastate offerings known as crowdfunding. The Virginia Intrastate Crowdfunding Exemption was adopted by the Commission in July 2015 under Commission Rule 21VAC5-40-190. At the time that the Commission developed the intrastate crowdfunding exemption, the SEC was working on a crowdfunding proposal for interstate offerings. In May 2016, the SEC adopted the final rules for federal crowdfunding. The final rule can be found at https://www.sec.gov/rules/final/2015/33-9974.pdf.

When the SEC adopted the final rules governing interstate crowdfunding, the states were preempted from requiring the registration of such offerings. However, a state that is home to the principal place of business of the issuer, or in which residents have purchased 50% or greater of the aggregate offering amount, may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

In order to facilitate that process, NASAA developed a model notice filing so that the states could adopt the notice filing in a consistent manner. This will allow interstate offerings to comply with the federal crowdfunding rule and make the appropriate state notice filings.

The Division proposes that the Commission adopt the notice filing requirement for federal crowdfunding offerings to include the Form U-CF for notice filing.

Proposed Revision to Chapter 80. Registration and Renewal Filing Fees for Investment Advisor Representatives: The proposed amendment to Chapter 80 provides for an increase in the registration and annual renewal filing fee for investment advisor representatives from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee.  The Division will apply the additional fees to the cost to conduct audits.

The Division recommended to the Commission that the proposed revisions should be considered for adoption. The Division also has recommended to the Commission that a hearing should be held only if requested by those interested parties who specifically indicate that a hearing is necessary and the reasons therefore.

A copy of the proposed revisions may be requested by interested parties from the Division by telephone, regular mail or email request, and also can be found at the Division's website: http://www.scc.virginia.gov/srf. Any comments to the proposed rules must be received by November 1, 2017.

Accordingly, IT IS ORDERED THAT:

(1) The proposed revisions are appended hereto and made a part of the record herein.

(2) On or before November 1, 2017, comments or request for hearing on the proposed revisions must be submitted in writing to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Requests for hearing shall state why a hearing is necessary and why the issues cannot be adequately addressed in written comments. All correspondence shall reference Case No. SEC-2017-00034. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

(3) The proposed revisions shall be posted on the Commission's website at http://www.scc.virginia.gov/case and on the Division's website at http://www.scc.virginia.gov/srf. Interested persons also may request a copy of the proposed revisions from the Division by telephone, mail, or email.

AN ATTESTED COPY hereof, together with a copy of the proposed revisions, shall be provided to the Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

AN ATTESTED COPY hereof shall be sent to the Director of the Division of Securities and Retail Franchising who shall forthwith provide notice of this Order via U.S. mail or a copy of this Order may be sent by e-mail to any interested persons as he may designate.

Part II
Broker-Dealer Agents

21VAC5-20-90. Application for registration as a broker-dealer agent.

A. Application for registration as an agent of a FINRA member shall be filed on and in compliance with all requirements of CRD and in full compliance with the forms and regulations prescribed by the commission. The application shall include all information required by such forms.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

B. Application for registration for non-FINRA member broker-dealer agents shall be filed on and in compliance with all requirements and forms prescribed by the commission.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-110. Renewals.

A. To renew the registration or registrations of its broker-dealer agent or agents, a FINRA member broker-dealer will be billed by CRD the statutory fee of $30 $40 per broker-dealer agent. A renewal of registration or registrations shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Code of Virginia.

B. A non-FINRA member broker-dealer shall file with the commission at its Division of Securities and Retail Franchising the following items at least 30 days prior to the expiration of registration.

1. Agents to be Renewed (Form S.D.4.A) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

2. If applicable, Agents to be Canceled with clear records (Form S.D.4.B).

3. If applicable, Agents to be Canceled without clear records (Form S.D.4.C).

21VAC5-20-155. Limited Canadian broker-dealer agent registration.

A. An agent of a Canadian broker-dealer who has no office or other physical presence in the Commonwealth of Virginia may, provided the broker-dealer agent is registered under this section, effect transactions in securities as permitted for a broker-dealer registered under 21VAC5-20-85.

B. Application for registration as a broker-dealer agent under this section shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

C. An application for registration as a broker-dealer agent under this section shall be deemed incomplete for purposes of applying for registration unless the following executed forms, fee, and information are submitted to the commission:

1. An application in the form required by the jurisdiction in which the broker-dealer maintains its principal place of business.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

3. Evidence that the applicant is registered as a broker-dealer agent in the jurisdiction from which it is effecting the transactions.

4. Any other information the commission may require.

D. A broker-dealer agent registered under this section shall:

1. Maintain his provincial or territorial registration in good standing;

2. Immediately notify the commission of any criminal action taken against him or of any finding or sanction imposed on him as a result of any self-regulatory or regulatory action involving fraud, theft, deceit, misrepresentation or similar conduct.

E. A broker-dealer agent's registration under this section, and any renewal thereof, shall expire annually at midnight on the 31st day of December unless renewed in accordance with subsection F of this section.

F. To renew the registrations of its agents, a broker-dealer registered under this section shall file with the commission at its division the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer maintains its principal place of business, or if no such renewal application is required, the most recent application filed pursuant to subdivision C 1 of this section along with the statutory fee in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

G. A Canadian broker-dealer agent registered under this section and acting in accordance with the limitations set out in this section is exempt from all other rules applicable to a broker-dealer agent except the anti-fraud provisions of the Act and the requirements set out in this section.

Part III
Agents of the Issuer

21VAC5-20-160. Application for registration as an agent of the issuer.

A. Application for registration as an agent of the issuer shall be filed on and in compliance with all requirements and forms prescribed by the commission.

B. An application shall be deemed incomplete for registration as an agent of the issuer unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any individual who meets the qualifications set forth in subdivision B 3 of this section and has been registered in any state jurisdiction requiring registration within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirement set forth in subdivision B 3 of this section, except that the Director of Securities and Retail Franchising may require additional examinations for any individual found to have violated any federal or state securities laws. 

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-180. Renewals.

An issuer, on behalf of its agent or agents, shall file with the commission at its Division of Securities and Retail Franchising at least 30 days prior to the expiration of registration a registration renewal form (Form S.D.4) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

21VAC5-30-80. Adoption of NASAA North American Securities Administration Association, Inc. statements of policy.

The commission adopts the following NASAA North American Securities Administration Association, Inc. (NASAA) statements of policy that shall apply to the registration of securities in the Commonwealth. It will be considered a basis for denial of an application if an offering fails to comply with an applicable statement of policy. While applications not conforming to a statement of policy shall be looked upon with disfavor, where good cause is shown, certain provisions may be modified or waived by the commission.

1. Options and Warrants, as amended March 31, 2008.

2. Underwriting Expenses, Underwriter's Warrants, Selling Expenses and Selling Security Holders, as amended March 31, 2008.

3. Real Estate Programs, as amended May 7, 2007.

4. Oil and Gas Programs, as amended May 7, 2007 6, 2012.

5. Cattle-Feeding Programs, as adopted September 17, 1980.

6. Unsound Financial Condition, as amended March 31, 2008.

7. Real Estate Investment Trusts, as amended May 7, 2007.

8. Church Bonds, as adopted April 29, 1981.

9. Small Company Offering Registrations, as adopted April 28, 1996.

10. NASAA Guidelines Regarding Viatical Investment, as adopted October 1, 2002.

11. Corporate Securities Definitions, as amended March 31, 2008.

12. Church Extension Fund Securities, as amended April 18, 2004.

13. Promotional Shares, as amended March 31, 2008.

14. Loans and Other Material Transactions, as amended March 31, 2008.

15. Impoundment of Proceeds, as amended March 31, 2008.

16. Electronic Offering Documents and Electronic Signatures, as adopted May 8, 2017.

21VAC5-40-30. Uniform limited offering exemption. (Repealed.)

A. Nothing in this exemption is intended to relieve, or should be construed as in any way relieving, issuers or persons acting on their behalf from providing disclosure to prospective investors adequate to satisfy the anti-fraud provisions of the Act.

In view of the objective of this section and the purpose and policies underlying the Act, this exemption is not available to an issuer with respect to a transaction which, although in technical compliance with this section, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this section.

Nothing in this section is intended to exempt registered broker-dealers or agents from the due diligence standards otherwise applicable to such registered persons.

Nothing in this section is intended to exempt a person from the broker-dealer or agent registration requirements of Article 3 (§ 13.1-504 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia, except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision B 2 of this section.

B. For the purpose of the limited offering exemption referred to in § 13.1-514 B 13 of the Act, the following securities are determined to be exempt from the securities registration requirements of Article 4 (§ 13.1-507 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia.

Any securities offered or sold in compliance with the Securities Act of 1933, Regulation D (Reg. D), Rules 230.501-230.503 and 230.505 and which satisfy the following further conditions and limitations:

1. The issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that all persons who offer or sell securities subject to this section are registered in accordance with § 13.1-505 of the Act except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision 2 of this subsection.

2. No exemption under this section shall be available for the securities of any issuer if any of the persons described in the Securities Act of 1933, Regulation A, Rule 230.262(a), (b), or (c) (17 CFR 230.262):

a. Has filed a registration statement which is the subject of a currently effective stop order entered pursuant to any state's securities law within five years prior to the beginning of the offering.

b. Has been convicted within five years prior to the beginning of the offering of a felony or misdemeanor in connection with the purchase or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.

c. Is currently subject to a state's administrative order or judgment entered by that state's securities administrator within five years prior to the beginning of the offering or is subject to a state's administrative order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within five years prior to the beginning of the offering.

d. Is currently subject to a state's administrative order or judgment which prohibits the use of any exemption from registration in connection with the purchase or sale of securities.

e. Is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of any court of competent jurisdiction, entered within five years prior to the beginning of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of a false filing with a state.

f. The prohibitions of subdivisions a, b, c and e of this subdivision shall not apply if the party subject to the disqualifying order, judgment or decree is duly licensed or registered to conduct securities related business in the state in which the administrative order, judgment or decree was entered against such party.

g. A disqualification caused by this subsection is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification, or the State Corporation Commission, determines upon a showing of good cause that it is not necessary under the circumstances that the exemption under this section be denied.

3. The issuer shall file with the commission no later than 15 days after the first sale in this state from an offering being made in reliance upon this exemption:

a. A notice on Form D (17 CFR 239.500), as filed with the SEC.

b. A filing fee of $250 payable to the Treasurer of Virginia.

4. In sales to nonaccredited investors, the issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the investment is suitable for the purchaser as to the purchaser's other security holdings and financial situation and needs.

5. Offers and sales of securities which are exempted by this section shall not be combined with offers and sales of securities exempted by another regulation or section of the Act; however, nothing in this limitation shall act as an election. The issuer may claim the availability of another applicable exemption should, for any reason, the securities or persons fail to comply with the conditions and limitations of this exemption.

6. In any proceeding involving this section, the burden of proving the exemption or an exception from a definition or condition is upon the person claiming it.

C. The exemption authorized by this section shall be known and may be cited as the "Uniform Limited Offering Exemption."

21VAC5-45-40. Federal crowdfunding offerings.

A. An issuer that offers and sells securities in the Commonwealth in an offering exempt under federal Regulation Crowdfunding (17 CFR 227.100 through 17 CFR 227.503) and §§ 4(a)(6) and 18(b)(4)(c) of the Securities Act of 1933 (15 USC § 77a), and that either (i) has its principal place of business in the Commonwealth or (ii) sells 50% or greater of the aggregate amount of the offering to residents of the Commonwealth, shall file the following with the commission:

1. A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission (SEC); and

2. A consent to service of process on Form U-2 if not filing on the Uniform Notice of Federal Crowdfunding form.

B. If the issuer has its principal place of business in the Commonwealth, the filing required under subsection A of this section shall be filed with the commission when the issuer makes its initial Form C filing concerning the offering with the SEC. If the issuer does not have its principal place of business in the Commonwealth but residents of the Commonwealth have purchased 50% or greater of the aggregate amount of the offering, the filing required under subsection A of this section shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 30 days from the date of completion of the offering.

C. The initial notice filing is effective for 12 months from the date of the filing with the commission.

D. For each additional 12-month period in which the same offering is continued, an issuer conducting an offering under federal Regulation Crowdfunding may renew its notice filing by filing on or before the expiration of the notice filing a completed Uniform Notice of Federal Crowdfunding Offering form marked "renewal" or a cover letter or other document requesting renewal.

E. An issuer may increase the amount of securities offered in the Commonwealth by submitting a completed Uniform Notice of Federal Crowdfunding Offering form marked "amendment" or other document describing the transaction.

FORMS (21VAC5-45)

Form D, Notice of Exempt Offering of Securities, U.S. Securities and Exchange Commission, SEC1972 (rev. 2/2012)

Uniform Consent to Service of Process, Form U-2 (7/1981)

Uniform Notice of Regulation A - Tier 2 Offering (undated, filed 10/2016)

Uniform Notice of Federal Crowdfunding Offering, Form U-CF (undated, filed 9/2017)

Part II
Investment Advisor Representative Registration, Expiration, Updates and Amendments, Termination, and Changing Connection from One Investment Advisor to Another

21VAC5-80-70. Application for registration as an investment advisor representative.

A. Application for registration as an investment advisor representative shall be filed in compliance with all requirements of CRD and in full compliance with forms and regulations prescribed by the commission. The application shall include all information required by such forms.

B. An application shall be deemed incomplete for registration as an investment advisor representative unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence of passing: (i) the Uniform Investment Adviser Law Examination, Series 65; (ii) the Uniform Combined State Law Examination, Series 66, and the General Securities Representative Examination, Series 7; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. All individuals listed on Part 1 of Form ADV in Schedule A and Item 2. A. of Part 1B as having supervisory responsibilities of the investment advisor shall take and pass the examinations as required in subdivision 3 of this subsection, and register as a representative of the investment advisor.

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-80-90. Renewals.

To renew the registration of its investment advisor representatives, an investment advisor or federal covered advisor will be billed by IARD the statutory fee of $30 $40 per investment advisor representative. A renewal of registration shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Act.

Titles of Regulations: 21VAC5-20. Broker-Dealers, Broker-Dealer Agents and Agents of the Issuer (amending 21VAC5-20-90, 21VAC5-20-110, 21VAC5-20-155, 21VAC5-20-160, 21VAC5-20-180).

21VAC5-30. Securities Registration (amending 21VAC5-30-80).

21VAC5-40. Exempt Securities and Transactions (repealing 21VAC5-40-30).

21VAC5-45. Federal Covered Securities (adding 21VAC5-45-40).

21VAC5-80. Investment Advisors (amending 21VAC5-80-70, 21VAC5-80-90).

Statutory Authority: §§ 12.1-13 and 13.1-523 of the Code of Virginia.

Public Hearing Information: A public hearing will be held upon request.

Public Comment Deadline: November 1, 2017.

Agency Contact: Jude C. Richnafsky, Senior Examiner, Division of Securities and Retail Franchising, State Corporation Commission, 1300 East Main Street, 9th Floor, Richmond, VA 23219, mailing address: P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9415, FAX (804) 371-9911, or email jude.richnafsky@scc.virginia.gov.

Summary:

The proposed regulatory action pertains to the administration and enforcement of the Virginia Securities Act and affects several regulatory chapters. Proposed amendments to 21VAC5-20, Broker-dealers, Broker-dealer Agents and Agents of the Issuer, and 21VAC5-80, Investment Advisors, increase the registration and annual renewal filing fee to $40 for broker-dealer agents, agents of the issuer, and investment advisor representatives. Proposed amendments to 21VAC5-30, Securities Registration, update the Oil and Gas Programs statements of policy and add four statements of policy of the North American Securities Administrators Association, as follows: Promotional Shares, Loans & Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The proposed action repeals the section of 21VAC5-40, Exempt Securities and Transactions, regarding the Regulation D, Rule 505 exemption due to the repeal of Rule 505 by the U.S. Securities and Exchange Commission (SEC) in October 2016. A new section is proposed in 21VAC5-45, Federal Covered Securities, to establish a notice filing requirement for issuers conducting a federal crowdfunding securities offering. In May of 2016, the SEC adopted the final rules for federal crowdfunding that preempted the requirement of the registration of these offerings. However, a state that is home to the principal place of business of the issuer or in which residents have purchased 50% or more of the offering amount may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

AT RICHMOND, SEPTEMBER 26, 2017

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. SEC-2017-00034

Ex Parte: In the matter of
Adopting a Revision to the Rules
Governing the Virginia Securities Act

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia ("Code") provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction. Section 13.1-523 of the Virginia Securities Act ("Act"), § 13.1-501 et seq. of the Code provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of the Act.

The rules and regulations issued by the Commission pursuant to the Act are set forth in Title 21 of the Virginia Administrative Code. A copy also may be found at the Commission's website: http://www.scc.virginia.gov/case.

Proposed Revision to Chapter 20. Registration and Renewal Filing Fees for Agents: The proposed amendment to Chapter 20 provides for an increase in the registration and annual renewal filing fee for broker-dealer agents (including Canadian agents) and agents of the issuer from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee. The Division of Securities and Retail Franchising ("Division") will apply the additional fees towards the cost to conduct audits.

Proposed Revision to Chapter 30. Adoption of Statements of Policy: The Division is a member of the North American Securities Administrators Association ("NASAA"), a trade association of state regulators. As a member of NASAA, the Division participates in a nationwide effort to use a uniform approach to the review of offerings registered in the states. From time to time, NASAA revises and adds to the list of standard policies applicable to certain offerings. The Division is updating and revising its list of these statements to add four additional items: Promotional Shares, Loans and Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The last item, Electronic Offering Documents and Electronic Signatures, will allow issuers to move away from providing investors with large cumbersome prospectuses and provide for the electronic delivery and signatures.

Proposed Revision to Chapter 40. Repeal of Regulation D, Rule 505: In 1983, the Division adopted by rule (as amended) an exemption promulgated by the United States Securities and Exchange Commission ("SEC") known as Regulation D that provided for an exemption for offerings of up to $5 million of securities in any 12-month period to an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors, as long as non-accredited investors are provided certain prescribed information about the issuer and the securities. Regulation D, Rule 505 of Section 3(a)(11) of the Securities Act of 1933 ("1933 Act"), and Rule 147 thereunder provide an exemption from the 1933 Act registration for offerings within a single state by issuers incorporated or organized, having their principal office and doing business in such state. In October 2016, the SEC repealed Rule 505, making the companion subsection under the current Commission regulations unnecessary. The Division proposes that the section be repealed.

Revision to Chapter 45. Adoption of Federal Crowdfunding: In 2015, the Division proposed an exemption from registration for certain intrastate offerings known as crowdfunding. The Virginia Intrastate Crowdfunding Exemption was adopted by the Commission in July 2015 under Commission Rule 21VAC5-40-190. At the time that the Commission developed the intrastate crowdfunding exemption, the SEC was working on a crowdfunding proposal for interstate offerings. In May 2016, the SEC adopted the final rules for federal crowdfunding. The final rule can be found at https://www.sec.gov/rules/final/2015/33-9974.pdf.

When the SEC adopted the final rules governing interstate crowdfunding, the states were preempted from requiring the registration of such offerings. However, a state that is home to the principal place of business of the issuer, or in which residents have purchased 50% or greater of the aggregate offering amount, may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

In order to facilitate that process, NASAA developed a model notice filing so that the states could adopt the notice filing in a consistent manner. This will allow interstate offerings to comply with the federal crowdfunding rule and make the appropriate state notice filings.

The Division proposes that the Commission adopt the notice filing requirement for federal crowdfunding offerings to include the Form U-CF for notice filing.

Proposed Revision to Chapter 80. Registration and Renewal Filing Fees for Investment Advisor Representatives: The proposed amendment to Chapter 80 provides for an increase in the registration and annual renewal filing fee for investment advisor representatives from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee.  The Division will apply the additional fees to the cost to conduct audits.

The Division recommended to the Commission that the proposed revisions should be considered for adoption. The Division also has recommended to the Commission that a hearing should be held only if requested by those interested parties who specifically indicate that a hearing is necessary and the reasons therefore.

A copy of the proposed revisions may be requested by interested parties from the Division by telephone, regular mail or email request, and also can be found at the Division's website: http://www.scc.virginia.gov/srf. Any comments to the proposed rules must be received by November 1, 2017.

Accordingly, IT IS ORDERED THAT:

(1) The proposed revisions are appended hereto and made a part of the record herein.

(2) On or before November 1, 2017, comments or request for hearing on the proposed revisions must be submitted in writing to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Requests for hearing shall state why a hearing is necessary and why the issues cannot be adequately addressed in written comments. All correspondence shall reference Case No. SEC-2017-00034. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

(3) The proposed revisions shall be posted on the Commission's website at http://www.scc.virginia.gov/case and on the Division's website at http://www.scc.virginia.gov/srf. Interested persons also may request a copy of the proposed revisions from the Division by telephone, mail, or email.

AN ATTESTED COPY hereof, together with a copy of the proposed revisions, shall be provided to the Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

AN ATTESTED COPY hereof shall be sent to the Director of the Division of Securities and Retail Franchising who shall forthwith provide notice of this Order via U.S. mail or a copy of this Order may be sent by e-mail to any interested persons as he may designate.

Part II
Broker-Dealer Agents

21VAC5-20-90. Application for registration as a broker-dealer agent.

A. Application for registration as an agent of a FINRA member shall be filed on and in compliance with all requirements of CRD and in full compliance with the forms and regulations prescribed by the commission. The application shall include all information required by such forms.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

B. Application for registration for non-FINRA member broker-dealer agents shall be filed on and in compliance with all requirements and forms prescribed by the commission.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-110. Renewals.

A. To renew the registration or registrations of its broker-dealer agent or agents, a FINRA member broker-dealer will be billed by CRD the statutory fee of $30 $40 per broker-dealer agent. A renewal of registration or registrations shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Code of Virginia.

B. A non-FINRA member broker-dealer shall file with the commission at its Division of Securities and Retail Franchising the following items at least 30 days prior to the expiration of registration.

1. Agents to be Renewed (Form S.D.4.A) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

2. If applicable, Agents to be Canceled with clear records (Form S.D.4.B).

3. If applicable, Agents to be Canceled without clear records (Form S.D.4.C).

21VAC5-20-155. Limited Canadian broker-dealer agent registration.

A. An agent of a Canadian broker-dealer who has no office or other physical presence in the Commonwealth of Virginia may, provided the broker-dealer agent is registered under this section, effect transactions in securities as permitted for a broker-dealer registered under 21VAC5-20-85.

B. Application for registration as a broker-dealer agent under this section shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

C. An application for registration as a broker-dealer agent under this section shall be deemed incomplete for purposes of applying for registration unless the following executed forms, fee, and information are submitted to the commission:

1. An application in the form required by the jurisdiction in which the broker-dealer maintains its principal place of business.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

3. Evidence that the applicant is registered as a broker-dealer agent in the jurisdiction from which it is effecting the transactions.

4. Any other information the commission may require.

D. A broker-dealer agent registered under this section shall:

1. Maintain his provincial or territorial registration in good standing;

2. Immediately notify the commission of any criminal action taken against him or of any finding or sanction imposed on him as a result of any self-regulatory or regulatory action involving fraud, theft, deceit, misrepresentation or similar conduct.

E. A broker-dealer agent's registration under this section, and any renewal thereof, shall expire annually at midnight on the 31st day of December unless renewed in accordance with subsection F of this section.

F. To renew the registrations of its agents, a broker-dealer registered under this section shall file with the commission at its division the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer maintains its principal place of business, or if no such renewal application is required, the most recent application filed pursuant to subdivision C 1 of this section along with the statutory fee in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

G. A Canadian broker-dealer agent registered under this section and acting in accordance with the limitations set out in this section is exempt from all other rules applicable to a broker-dealer agent except the anti-fraud provisions of the Act and the requirements set out in this section.

Part III
Agents of the Issuer

21VAC5-20-160. Application for registration as an agent of the issuer.

A. Application for registration as an agent of the issuer shall be filed on and in compliance with all requirements and forms prescribed by the commission.

B. An application shall be deemed incomplete for registration as an agent of the issuer unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any individual who meets the qualifications set forth in subdivision B 3 of this section and has been registered in any state jurisdiction requiring registration within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirement set forth in subdivision B 3 of this section, except that the Director of Securities and Retail Franchising may require additional examinations for any individual found to have violated any federal or state securities laws. 

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-180. Renewals.

An issuer, on behalf of its agent or agents, shall file with the commission at its Division of Securities and Retail Franchising at least 30 days prior to the expiration of registration a registration renewal form (Form S.D.4) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

21VAC5-30-80. Adoption of NASAA North American Securities Administration Association, Inc. statements of policy.

The commission adopts the following NASAA North American Securities Administration Association, Inc. (NASAA) statements of policy that shall apply to the registration of securities in the Commonwealth. It will be considered a basis for denial of an application if an offering fails to comply with an applicable statement of policy. While applications not conforming to a statement of policy shall be looked upon with disfavor, where good cause is shown, certain provisions may be modified or waived by the commission.

1. Options and Warrants, as amended March 31, 2008.

2. Underwriting Expenses, Underwriter's Warrants, Selling Expenses and Selling Security Holders, as amended March 31, 2008.

3. Real Estate Programs, as amended May 7, 2007.

4. Oil and Gas Programs, as amended May 7, 2007 6, 2012.

5. Cattle-Feeding Programs, as adopted September 17, 1980.

6. Unsound Financial Condition, as amended March 31, 2008.

7. Real Estate Investment Trusts, as amended May 7, 2007.

8. Church Bonds, as adopted April 29, 1981.

9. Small Company Offering Registrations, as adopted April 28, 1996.

10. NASAA Guidelines Regarding Viatical Investment, as adopted October 1, 2002.

11. Corporate Securities Definitions, as amended March 31, 2008.

12. Church Extension Fund Securities, as amended April 18, 2004.

13. Promotional Shares, as amended March 31, 2008.

14. Loans and Other Material Transactions, as amended March 31, 2008.

15. Impoundment of Proceeds, as amended March 31, 2008.

16. Electronic Offering Documents and Electronic Signatures, as adopted May 8, 2017.

21VAC5-40-30. Uniform limited offering exemption. (Repealed.)

A. Nothing in this exemption is intended to relieve, or should be construed as in any way relieving, issuers or persons acting on their behalf from providing disclosure to prospective investors adequate to satisfy the anti-fraud provisions of the Act.

In view of the objective of this section and the purpose and policies underlying the Act, this exemption is not available to an issuer with respect to a transaction which, although in technical compliance with this section, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this section.

Nothing in this section is intended to exempt registered broker-dealers or agents from the due diligence standards otherwise applicable to such registered persons.

Nothing in this section is intended to exempt a person from the broker-dealer or agent registration requirements of Article 3 (§ 13.1-504 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia, except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision B 2 of this section.

B. For the purpose of the limited offering exemption referred to in § 13.1-514 B 13 of the Act, the following securities are determined to be exempt from the securities registration requirements of Article 4 (§ 13.1-507 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia.

Any securities offered or sold in compliance with the Securities Act of 1933, Regulation D (Reg. D), Rules 230.501-230.503 and 230.505 and which satisfy the following further conditions and limitations:

1. The issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that all persons who offer or sell securities subject to this section are registered in accordance with § 13.1-505 of the Act except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision 2 of this subsection.

2. No exemption under this section shall be available for the securities of any issuer if any of the persons described in the Securities Act of 1933, Regulation A, Rule 230.262(a), (b), or (c) (17 CFR 230.262):

a. Has filed a registration statement which is the subject of a currently effective stop order entered pursuant to any state's securities law within five years prior to the beginning of the offering.

b. Has been convicted within five years prior to the beginning of the offering of a felony or misdemeanor in connection with the purchase or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.

c. Is currently subject to a state's administrative order or judgment entered by that state's securities administrator within five years prior to the beginning of the offering or is subject to a state's administrative order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within five years prior to the beginning of the offering.

d. Is currently subject to a state's administrative order or judgment which prohibits the use of any exemption from registration in connection with the purchase or sale of securities.

e. Is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of any court of competent jurisdiction, entered within five years prior to the beginning of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of a false filing with a state.

f. The prohibitions of subdivisions a, b, c and e of this subdivision shall not apply if the party subject to the disqualifying order, judgment or decree is duly licensed or registered to conduct securities related business in the state in which the administrative order, judgment or decree was entered against such party.

g. A disqualification caused by this subsection is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification, or the State Corporation Commission, determines upon a showing of good cause that it is not necessary under the circumstances that the exemption under this section be denied.

3. The issuer shall file with the commission no later than 15 days after the first sale in this state from an offering being made in reliance upon this exemption:

a. A notice on Form D (17 CFR 239.500), as filed with the SEC.

b. A filing fee of $250 payable to the Treasurer of Virginia.

4. In sales to nonaccredited investors, the issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the investment is suitable for the purchaser as to the purchaser's other security holdings and financial situation and needs.

5. Offers and sales of securities which are exempted by this section shall not be combined with offers and sales of securities exempted by another regulation or section of the Act; however, nothing in this limitation shall act as an election. The issuer may claim the availability of another applicable exemption should, for any reason, the securities or persons fail to comply with the conditions and limitations of this exemption.

6. In any proceeding involving this section, the burden of proving the exemption or an exception from a definition or condition is upon the person claiming it.

C. The exemption authorized by this section shall be known and may be cited as the "Uniform Limited Offering Exemption."

21VAC5-45-40. Federal crowdfunding offerings.

A. An issuer that offers and sells securities in the Commonwealth in an offering exempt under federal Regulation Crowdfunding (17 CFR 227.100 through 17 CFR 227.503) and §§ 4(a)(6) and 18(b)(4)(c) of the Securities Act of 1933 (15 USC § 77a), and that either (i) has its principal place of business in the Commonwealth or (ii) sells 50% or greater of the aggregate amount of the offering to residents of the Commonwealth, shall file the following with the commission:

1. A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission (SEC); and

2. A consent to service of process on Form U-2 if not filing on the Uniform Notice of Federal Crowdfunding form.

B. If the issuer has its principal place of business in the Commonwealth, the filing required under subsection A of this section shall be filed with the commission when the issuer makes its initial Form C filing concerning the offering with the SEC. If the issuer does not have its principal place of business in the Commonwealth but residents of the Commonwealth have purchased 50% or greater of the aggregate amount of the offering, the filing required under subsection A of this section shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 30 days from the date of completion of the offering.

C. The initial notice filing is effective for 12 months from the date of the filing with the commission.

D. For each additional 12-month period in which the same offering is continued, an issuer conducting an offering under federal Regulation Crowdfunding may renew its notice filing by filing on or before the expiration of the notice filing a completed Uniform Notice of Federal Crowdfunding Offering form marked "renewal" or a cover letter or other document requesting renewal.

E. An issuer may increase the amount of securities offered in the Commonwealth by submitting a completed Uniform Notice of Federal Crowdfunding Offering form marked "amendment" or other document describing the transaction.

FORMS (21VAC5-45)

Form D, Notice of Exempt Offering of Securities, U.S. Securities and Exchange Commission, SEC1972 (rev. 2/2012)

Uniform Consent to Service of Process, Form U-2 (7/1981)

Uniform Notice of Regulation A - Tier 2 Offering (undated, filed 10/2016)

Uniform Notice of Federal Crowdfunding Offering, Form U-CF (undated, filed 9/2017)

Part II
Investment Advisor Representative Registration, Expiration, Updates and Amendments, Termination, and Changing Connection from One Investment Advisor to Another

21VAC5-80-70. Application for registration as an investment advisor representative.

A. Application for registration as an investment advisor representative shall be filed in compliance with all requirements of CRD and in full compliance with forms and regulations prescribed by the commission. The application shall include all information required by such forms.

B. An application shall be deemed incomplete for registration as an investment advisor representative unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence of passing: (i) the Uniform Investment Adviser Law Examination, Series 65; (ii) the Uniform Combined State Law Examination, Series 66, and the General Securities Representative Examination, Series 7; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. All individuals listed on Part 1 of Form ADV in Schedule A and Item 2. A. of Part 1B as having supervisory responsibilities of the investment advisor shall take and pass the examinations as required in subdivision 3 of this subsection, and register as a representative of the investment advisor.

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-80-90. Renewals.

To renew the registration of its investment advisor representatives, an investment advisor or federal covered advisor will be billed by IARD the statutory fee of $30 $40 per investment advisor representative. A renewal of registration shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Act.

Titles of Regulations: 21VAC5-20. Broker-Dealers, Broker-Dealer Agents and Agents of the Issuer (amending 21VAC5-20-90, 21VAC5-20-110, 21VAC5-20-155, 21VAC5-20-160, 21VAC5-20-180).

21VAC5-30. Securities Registration (amending 21VAC5-30-80).

21VAC5-40. Exempt Securities and Transactions (repealing 21VAC5-40-30).

21VAC5-45. Federal Covered Securities (adding 21VAC5-45-40).

21VAC5-80. Investment Advisors (amending 21VAC5-80-70, 21VAC5-80-90).

Statutory Authority: §§ 12.1-13 and 13.1-523 of the Code of Virginia.

Public Hearing Information: A public hearing will be held upon request.

Public Comment Deadline: November 1, 2017.

Agency Contact: Jude C. Richnafsky, Senior Examiner, Division of Securities and Retail Franchising, State Corporation Commission, 1300 East Main Street, 9th Floor, Richmond, VA 23219, mailing address: P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9415, FAX (804) 371-9911, or email jude.richnafsky@scc.virginia.gov.

Summary:

The proposed regulatory action pertains to the administration and enforcement of the Virginia Securities Act and affects several regulatory chapters. Proposed amendments to 21VAC5-20, Broker-dealers, Broker-dealer Agents and Agents of the Issuer, and 21VAC5-80, Investment Advisors, increase the registration and annual renewal filing fee to $40 for broker-dealer agents, agents of the issuer, and investment advisor representatives. Proposed amendments to 21VAC5-30, Securities Registration, update the Oil and Gas Programs statements of policy and add four statements of policy of the North American Securities Administrators Association, as follows: Promotional Shares, Loans & Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The proposed action repeals the section of 21VAC5-40, Exempt Securities and Transactions, regarding the Regulation D, Rule 505 exemption due to the repeal of Rule 505 by the U.S. Securities and Exchange Commission (SEC) in October 2016. A new section is proposed in 21VAC5-45, Federal Covered Securities, to establish a notice filing requirement for issuers conducting a federal crowdfunding securities offering. In May of 2016, the SEC adopted the final rules for federal crowdfunding that preempted the requirement of the registration of these offerings. However, a state that is home to the principal place of business of the issuer or in which residents have purchased 50% or more of the offering amount may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

AT RICHMOND, SEPTEMBER 26, 2017

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. SEC-2017-00034

Ex Parte: In the matter of
Adopting a Revision to the Rules
Governing the Virginia Securities Act

ORDER TO TAKE NOTICE

Section 12.1-13 of the Code of Virginia ("Code") provides that the State Corporation Commission ("Commission") shall have the power to promulgate rules and regulations in the enforcement and administration of all laws within its jurisdiction. Section 13.1-523 of the Virginia Securities Act ("Act"), § 13.1-501 et seq. of the Code provides that the Commission may issue any rules and regulations necessary or appropriate for the administration and enforcement of the Act.

The rules and regulations issued by the Commission pursuant to the Act are set forth in Title 21 of the Virginia Administrative Code. A copy also may be found at the Commission's website: http://www.scc.virginia.gov/case.

Proposed Revision to Chapter 20. Registration and Renewal Filing Fees for Agents: The proposed amendment to Chapter 20 provides for an increase in the registration and annual renewal filing fee for broker-dealer agents (including Canadian agents) and agents of the issuer from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee. The Division of Securities and Retail Franchising ("Division") will apply the additional fees towards the cost to conduct audits.

Proposed Revision to Chapter 30. Adoption of Statements of Policy: The Division is a member of the North American Securities Administrators Association ("NASAA"), a trade association of state regulators. As a member of NASAA, the Division participates in a nationwide effort to use a uniform approach to the review of offerings registered in the states. From time to time, NASAA revises and adds to the list of standard policies applicable to certain offerings. The Division is updating and revising its list of these statements to add four additional items: Promotional Shares, Loans and Other Material Transactions, Impoundment of Proceeds, and Electronic Offering Documents and Electronic Signatures. The last item, Electronic Offering Documents and Electronic Signatures, will allow issuers to move away from providing investors with large cumbersome prospectuses and provide for the electronic delivery and signatures.

Proposed Revision to Chapter 40. Repeal of Regulation D, Rule 505: In 1983, the Division adopted by rule (as amended) an exemption promulgated by the United States Securities and Exchange Commission ("SEC") known as Regulation D that provided for an exemption for offerings of up to $5 million of securities in any 12-month period to an unlimited number of accredited investors and up to 35 non-accredited but sophisticated investors, as long as non-accredited investors are provided certain prescribed information about the issuer and the securities. Regulation D, Rule 505 of Section 3(a)(11) of the Securities Act of 1933 ("1933 Act"), and Rule 147 thereunder provide an exemption from the 1933 Act registration for offerings within a single state by issuers incorporated or organized, having their principal office and doing business in such state. In October 2016, the SEC repealed Rule 505, making the companion subsection under the current Commission regulations unnecessary. The Division proposes that the section be repealed.

Revision to Chapter 45. Adoption of Federal Crowdfunding: In 2015, the Division proposed an exemption from registration for certain intrastate offerings known as crowdfunding. The Virginia Intrastate Crowdfunding Exemption was adopted by the Commission in July 2015 under Commission Rule 21VAC5-40-190. At the time that the Commission developed the intrastate crowdfunding exemption, the SEC was working on a crowdfunding proposal for interstate offerings. In May 2016, the SEC adopted the final rules for federal crowdfunding. The final rule can be found at https://www.sec.gov/rules/final/2015/33-9974.pdf.

When the SEC adopted the final rules governing interstate crowdfunding, the states were preempted from requiring the registration of such offerings. However, a state that is home to the principal place of business of the issuer, or in which residents have purchased 50% or greater of the aggregate offering amount, may require a notice filing that contains all documents filed with the SEC together with a consent to service of process.

In order to facilitate that process, NASAA developed a model notice filing so that the states could adopt the notice filing in a consistent manner. This will allow interstate offerings to comply with the federal crowdfunding rule and make the appropriate state notice filings.

The Division proposes that the Commission adopt the notice filing requirement for federal crowdfunding offerings to include the Form U-CF for notice filing.

Proposed Revision to Chapter 80. Registration and Renewal Filing Fees for Investment Advisor Representatives: The proposed amendment to Chapter 80 provides for an increase in the registration and annual renewal filing fee for investment advisor representatives from $30 to $40. The fee has not been raised since it was adopted by rule in 1981. From that time to the present, the number and complexity of audits of these registrants' offices has increased, necessitating the increase in the registration fee.  The Division will apply the additional fees to the cost to conduct audits.

The Division recommended to the Commission that the proposed revisions should be considered for adoption. The Division also has recommended to the Commission that a hearing should be held only if requested by those interested parties who specifically indicate that a hearing is necessary and the reasons therefore.

A copy of the proposed revisions may be requested by interested parties from the Division by telephone, regular mail or email request, and also can be found at the Division's website: http://www.scc.virginia.gov/srf. Any comments to the proposed rules must be received by November 1, 2017.

Accordingly, IT IS ORDERED THAT:

(1) The proposed revisions are appended hereto and made a part of the record herein.

(2) On or before November 1, 2017, comments or request for hearing on the proposed revisions must be submitted in writing to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218. Requests for hearing shall state why a hearing is necessary and why the issues cannot be adequately addressed in written comments. All correspondence shall reference Case No. SEC-2017-00034. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

(3) The proposed revisions shall be posted on the Commission's website at http://www.scc.virginia.gov/case and on the Division's website at http://www.scc.virginia.gov/srf. Interested persons also may request a copy of the proposed revisions from the Division by telephone, mail, or email.

AN ATTESTED COPY hereof, together with a copy of the proposed revisions, shall be provided to the Registrar of Regulations for appropriate publication in the Virginia Register of Regulations.

AN ATTESTED COPY hereof shall be sent to the Director of the Division of Securities and Retail Franchising who shall forthwith provide notice of this Order via U.S. mail or a copy of this Order may be sent by e-mail to any interested persons as he may designate.

Part II
Broker-Dealer Agents

21VAC5-20-90. Application for registration as a broker-dealer agent.

A. Application for registration as an agent of a FINRA member shall be filed on and in compliance with all requirements of CRD and in full compliance with the forms and regulations prescribed by the commission. The application shall include all information required by such forms.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

B. Application for registration for non-FINRA member broker-dealer agents shall be filed on and in compliance with all requirements and forms prescribed by the commission.

An application shall be deemed incomplete for registration as a broker-dealer agent unless the applicant submits the following executed forms, fee, and information:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-110. Renewals.

A. To renew the registration or registrations of its broker-dealer agent or agents, a FINRA member broker-dealer will be billed by CRD the statutory fee of $30 $40 per broker-dealer agent. A renewal of registration or registrations shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Code of Virginia.

B. A non-FINRA member broker-dealer shall file with the commission at its Division of Securities and Retail Franchising the following items at least 30 days prior to the expiration of registration.

1. Agents to be Renewed (Form S.D.4.A) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

2. If applicable, Agents to be Canceled with clear records (Form S.D.4.B).

3. If applicable, Agents to be Canceled without clear records (Form S.D.4.C).

21VAC5-20-155. Limited Canadian broker-dealer agent registration.

A. An agent of a Canadian broker-dealer who has no office or other physical presence in the Commonwealth of Virginia may, provided the broker-dealer agent is registered under this section, effect transactions in securities as permitted for a broker-dealer registered under 21VAC5-20-85.

B. Application for registration as a broker-dealer agent under this section shall be filed with the commission at its Division of Securities and Retail Franchising or such other entity designated by the commission on and in full compliance with forms prescribed by the commission and shall include all information required by such forms.

C. An application for registration as a broker-dealer agent under this section shall be deemed incomplete for purposes of applying for registration unless the following executed forms, fee, and information are submitted to the commission:

1. An application in the form required by the jurisdiction in which the broker-dealer maintains its principal place of business.

2. Statutory fee payable to the Treasurer of Virginia in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

3. Evidence that the applicant is registered as a broker-dealer agent in the jurisdiction from which it is effecting the transactions.

4. Any other information the commission may require.

D. A broker-dealer agent registered under this section shall:

1. Maintain his provincial or territorial registration in good standing;

2. Immediately notify the commission of any criminal action taken against him or of any finding or sanction imposed on him as a result of any self-regulatory or regulatory action involving fraud, theft, deceit, misrepresentation or similar conduct.

E. A broker-dealer agent's registration under this section, and any renewal thereof, shall expire annually at midnight on the 31st day of December unless renewed in accordance with subsection F of this section.

F. To renew the registrations of its agents, a broker-dealer registered under this section shall file with the commission at its division the most recent renewal application, if any, filed in the jurisdiction in which the broker-dealer maintains its principal place of business, or if no such renewal application is required, the most recent application filed pursuant to subdivision C 1 of this section along with the statutory fee in the amount of $30 $40 United States currency pursuant to § 13.1-505 G of the Act.

G. A Canadian broker-dealer agent registered under this section and acting in accordance with the limitations set out in this section is exempt from all other rules applicable to a broker-dealer agent except the anti-fraud provisions of the Act and the requirements set out in this section.

Part III
Agents of the Issuer

21VAC5-20-160. Application for registration as an agent of the issuer.

A. Application for registration as an agent of the issuer shall be filed on and in compliance with all requirements and forms prescribed by the commission.

B. An application shall be deemed incomplete for registration as an agent of the issuer unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee in the amount of $30 $40. The check must be made payable to the Treasurer of Virginia.

3. Evidence in the form of a FINRA exam report of passing within the two-year period immediately preceding the date of the application: (i) the Uniform Securities Agent State Law Examination, Series 63; (ii) the Uniform Combined State Law Examination, Series 66; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. Any individual who meets the qualifications set forth in subdivision B 3 of this section and has been registered in any state jurisdiction requiring registration within the two-year period immediately preceding the date of the filing of an application shall not be required to comply with the examination requirement set forth in subdivision B 3 of this section, except that the Director of Securities and Retail Franchising may require additional examinations for any individual found to have violated any federal or state securities laws. 

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-20-180. Renewals.

An issuer, on behalf of its agent or agents, shall file with the commission at its Division of Securities and Retail Franchising at least 30 days prior to the expiration of registration a registration renewal form (Form S.D.4) accompanied by the statutory fee of $30 $40 for each agent whose registration is to be renewed. The check must be made payable to the Treasurer of Virginia.

21VAC5-30-80. Adoption of NASAA North American Securities Administration Association, Inc. statements of policy.

The commission adopts the following NASAA North American Securities Administration Association, Inc. (NASAA) statements of policy that shall apply to the registration of securities in the Commonwealth. It will be considered a basis for denial of an application if an offering fails to comply with an applicable statement of policy. While applications not conforming to a statement of policy shall be looked upon with disfavor, where good cause is shown, certain provisions may be modified or waived by the commission.

1. Options and Warrants, as amended March 31, 2008.

2. Underwriting Expenses, Underwriter's Warrants, Selling Expenses and Selling Security Holders, as amended March 31, 2008.

3. Real Estate Programs, as amended May 7, 2007.

4. Oil and Gas Programs, as amended May 7, 2007 6, 2012.

5. Cattle-Feeding Programs, as adopted September 17, 1980.

6. Unsound Financial Condition, as amended March 31, 2008.

7. Real Estate Investment Trusts, as amended May 7, 2007.

8. Church Bonds, as adopted April 29, 1981.

9. Small Company Offering Registrations, as adopted April 28, 1996.

10. NASAA Guidelines Regarding Viatical Investment, as adopted October 1, 2002.

11. Corporate Securities Definitions, as amended March 31, 2008.

12. Church Extension Fund Securities, as amended April 18, 2004.

13. Promotional Shares, as amended March 31, 2008.

14. Loans and Other Material Transactions, as amended March 31, 2008.

15. Impoundment of Proceeds, as amended March 31, 2008.

16. Electronic Offering Documents and Electronic Signatures, as adopted May 8, 2017.

21VAC5-40-30. Uniform limited offering exemption. (Repealed.)

A. Nothing in this exemption is intended to relieve, or should be construed as in any way relieving, issuers or persons acting on their behalf from providing disclosure to prospective investors adequate to satisfy the anti-fraud provisions of the Act.

In view of the objective of this section and the purpose and policies underlying the Act, this exemption is not available to an issuer with respect to a transaction which, although in technical compliance with this section, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this section.

Nothing in this section is intended to exempt registered broker-dealers or agents from the due diligence standards otherwise applicable to such registered persons.

Nothing in this section is intended to exempt a person from the broker-dealer or agent registration requirements of Article 3 (§ 13.1-504 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia, except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision B 2 of this section.

B. For the purpose of the limited offering exemption referred to in § 13.1-514 B 13 of the Act, the following securities are determined to be exempt from the securities registration requirements of Article 4 (§ 13.1-507 et seq.) of Chapter 5 of Title 13.1 of the Code of Virginia.

Any securities offered or sold in compliance with the Securities Act of 1933, Regulation D (Reg. D), Rules 230.501-230.503 and 230.505 and which satisfy the following further conditions and limitations:

1. The issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that all persons who offer or sell securities subject to this section are registered in accordance with § 13.1-505 of the Act except in the case of an agent of the issuer who receives no sales commission directly or indirectly for offering or selling the securities and who is not subject to subdivision 2 of this subsection.

2. No exemption under this section shall be available for the securities of any issuer if any of the persons described in the Securities Act of 1933, Regulation A, Rule 230.262(a), (b), or (c) (17 CFR 230.262):

a. Has filed a registration statement which is the subject of a currently effective stop order entered pursuant to any state's securities law within five years prior to the beginning of the offering.

b. Has been convicted within five years prior to the beginning of the offering of a felony or misdemeanor in connection with the purchase or sale of a security or a felony involving fraud or deceit, including but not limited to forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud.

c. Is currently subject to a state's administrative order or judgment entered by that state's securities administrator within five years prior to the beginning of the offering or is subject to a state's administrative order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts or omitting to state material facts, was found and the order or judgment was entered within five years prior to the beginning of the offering.

d. Is currently subject to a state's administrative order or judgment which prohibits the use of any exemption from registration in connection with the purchase or sale of securities.

e. Is currently subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment or decree of any court of competent jurisdiction, entered within five years prior to the beginning of the offering, permanently restraining or enjoining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of a false filing with a state.

f. The prohibitions of subdivisions a, b, c and e of this subdivision shall not apply if the party subject to the disqualifying order, judgment or decree is duly licensed or registered to conduct securities related business in the state in which the administrative order, judgment or decree was entered against such party.

g. A disqualification caused by this subsection is automatically waived if the state securities administrator or agency of the state which created the basis for disqualification, or the State Corporation Commission, determines upon a showing of good cause that it is not necessary under the circumstances that the exemption under this section be denied.

3. The issuer shall file with the commission no later than 15 days after the first sale in this state from an offering being made in reliance upon this exemption:

a. A notice on Form D (17 CFR 239.500), as filed with the SEC.

b. A filing fee of $250 payable to the Treasurer of Virginia.

4. In sales to nonaccredited investors, the issuer and persons acting on its behalf shall have reasonable grounds to believe, and after making reasonable inquiry shall believe, that the investment is suitable for the purchaser as to the purchaser's other security holdings and financial situation and needs.

5. Offers and sales of securities which are exempted by this section shall not be combined with offers and sales of securities exempted by another regulation or section of the Act; however, nothing in this limitation shall act as an election. The issuer may claim the availability of another applicable exemption should, for any reason, the securities or persons fail to comply with the conditions and limitations of this exemption.

6. In any proceeding involving this section, the burden of proving the exemption or an exception from a definition or condition is upon the person claiming it.

C. The exemption authorized by this section shall be known and may be cited as the "Uniform Limited Offering Exemption."

21VAC5-45-40. Federal crowdfunding offerings.

A. An issuer that offers and sells securities in the Commonwealth in an offering exempt under federal Regulation Crowdfunding (17 CFR 227.100 through 17 CFR 227.503) and §§ 4(a)(6) and 18(b)(4)(c) of the Securities Act of 1933 (15 USC § 77a), and that either (i) has its principal place of business in the Commonwealth or (ii) sells 50% or greater of the aggregate amount of the offering to residents of the Commonwealth, shall file the following with the commission:

1. A completed Uniform Notice of Federal Crowdfunding Offering form or copies of all documents filed with the Securities and Exchange Commission (SEC); and

2. A consent to service of process on Form U-2 if not filing on the Uniform Notice of Federal Crowdfunding form.

B. If the issuer has its principal place of business in the Commonwealth, the filing required under subsection A of this section shall be filed with the commission when the issuer makes its initial Form C filing concerning the offering with the SEC. If the issuer does not have its principal place of business in the Commonwealth but residents of the Commonwealth have purchased 50% or greater of the aggregate amount of the offering, the filing required under subsection A of this section shall be filed when the issuer becomes aware that such purchases have met this threshold and in no event later than 30 days from the date of completion of the offering.

C. The initial notice filing is effective for 12 months from the date of the filing with the commission.

D. For each additional 12-month period in which the same offering is continued, an issuer conducting an offering under federal Regulation Crowdfunding may renew its notice filing by filing on or before the expiration of the notice filing a completed Uniform Notice of Federal Crowdfunding Offering form marked "renewal" or a cover letter or other document requesting renewal.

E. An issuer may increase the amount of securities offered in the Commonwealth by submitting a completed Uniform Notice of Federal Crowdfunding Offering form marked "amendment" or other document describing the transaction.

FORMS (21VAC5-45)

Form D, Notice of Exempt Offering of Securities, U.S. Securities and Exchange Commission, SEC1972 (rev. 2/2012)

Uniform Consent to Service of Process, Form U-2 (7/1981)

Uniform Notice of Regulation A - Tier 2 Offering (undated, filed 10/2016)

Uniform Notice of Federal Crowdfunding Offering, Form U-CF (undated, filed 9/2017)

Part II
Investment Advisor Representative Registration, Expiration, Updates and Amendments, Termination, and Changing Connection from One Investment Advisor to Another

21VAC5-80-70. Application for registration as an investment advisor representative.

A. Application for registration as an investment advisor representative shall be filed in compliance with all requirements of CRD and in full compliance with forms and regulations prescribed by the commission. The application shall include all information required by such forms.

B. An application shall be deemed incomplete for registration as an investment advisor representative unless the following executed forms, fee, and information are submitted:

1. Form U4.

2. The statutory fee made payable to FINRA in the amount of $30 $40.

3. Evidence of passing: (i) the Uniform Investment Adviser Law Examination, Series 65; (ii) the Uniform Combined State Law Examination, Series 66, and the General Securities Representative Examination, Series 7; or (iii) a similar examination in general use by securities administrators which, after reasonable notice and subject to review by the commission, the Director of the Division of Securities and Retail Franchising designates.

4. All individuals listed on Part 1 of Form ADV in Schedule A and Item 2. A. of Part 1B as having supervisory responsibilities of the investment advisor shall take and pass the examinations as required in subdivision 3 of this subsection, and register as a representative of the investment advisor.

5. Any other information the commission may require.

C. The commission shall either grant or deny each application for registration within 30 days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the commission may extend such period as much as 90 days by giving written notice to the applicant. No more than three such extensions may be made by the commission on any one application. An extension of the initial 30-day period, not to exceed 90 days, shall be granted upon written request of the applicant.

21VAC5-80-90. Renewals.

To renew the registration of its investment advisor representatives, an investment advisor or federal covered advisor will be billed by IARD the statutory fee of $30 $40 per investment advisor representative. A renewal of registration shall be granted as a matter of course upon payment of the proper fee or fees unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 of the Act.