California 25102(f) and 25102(o) Securities Filings

Yes, if you issued securities in California. Securities issued in California must either be exempted or qualified. You can rely on the limited offering exemption provided by Corporations Code section 25102(f) if you meet all of the requirements in that section. To claim this exemption, a Limited Offering Exemption Notice (LOEN) must be filed with the Department.

A new Limited Offering Exemption Notice must be filed if a later issuance of securities is not part of the exempted transaction.

The Limited Offering Exemption Notice must be filed within 15 calendar days after the first sale of a security in California or within 15 business days after discovery of the failure to file the notice or after demand by the commissioner, whichever occurs first. The notice may be filed in advance of the first sale of a security.

The notice is filed and effective when it is date-stamped as received by DFPI.

The requirements for claiming this exemption are in Corporations Code section 25102(o). They are the following:

1. the securities that are the subject of the plan be exempt, at the time of issuance or grant, from registration under the Securities Act of 1933 pursuant to federal Rule 701;

2. the stock option plan or stock purchase plan should comply with each of the merit review regulations specified in Section 25102(o). They can be found at California Code of Regulations, Title 10, sections 260.140.40- 260.140.46; and

3. the employee benefit plan exemption notice set forth in California Code of Regulations, Title 10, section 260.102.19 be filed with the Department of Financial Protection and Innovation together with the appropriate filing fee and, if applicable, a consent to service of process, no later than 30 days after the initial issuance of a security under the plan.

No. The Section 25102(o) exemption is a “transaction” exemption, and it is assumed that all the securities that are subject to the plan will be issued as part of the same transaction. Therefore, when the notice is initially filed it should exempt all securities issuable under the plan. The only circumstance that would require a second notice filing would be an amendment to the plan that increases the number of securities subject to the plan. The second notice would pertain only to the securities added to the plan.

A “flexible” plan is an employee benefit plan that combines both stock option and stock purchase programs.

A waiver of the excess fee is not available under the Code or the Rules. The balance fee due however, can be broken up into multiple payments over time to ease the financial burden. The notice will not be completed and considered filed until the full balance has been received.