Amendment to Stock Legend Guidance for Restricted Securities
The adopted amendments remove a reference to an outdated North American Securities Administrators Association (“NASAA”) guideline and instead provide the suggested language for the legends in the text itself. A “legend” on a stock certificate is a statement noting restrictions on the transfer of the stock, often due to SEC and state requirements for unregistered securities.
The new suggested legend language in Washington state is as follows:
(d) A written disclosure or legend will be deemed to comply with the provisions of WAC 460-44A-502 (4)(b) or (c) if it states:
“(i) These securities have not been registered under the Securities Act of 1933 or applicable state securities laws;
(ii) These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of the prospectus or any alternative document. Any representation to the contrary is a criminal offense;
(iii) These securities are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act of 1933, as amended, and the applicable state securities laws, pursuant to registration or exemption therefrom;
(iv) Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time.”
While taking these actions will establish the requisite reasonable care, it is not the exclusive method to demonstrate such care. Other actions by the issuer may satisfy this provision. In addition, WAC 460-44A-502 (2)(b)(vii) requires the delivery of written disclosure of the limitations on resale to investors in certain instances.
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