Commissioner's Release: 100-C: OFFERS OF SECURITIES MADE ON THE INTERNET

Pete Wilson, Governor
Date: November 5, 1996

Keith Paul Bishop, Commissioner


The definition of "offer" or "offer to sell" under the Corporate Securities Law of 1968 (the "Law") includes "every attempt or offer to dispose of, or solicitation of an offer to buy," a security or interest in a security for value. Corporations Code Section 25017(b). This definition is broad enough to include an attempt or offer to dispose of, or the solicitation of an offer to buy, a security or an interest in a security for value, that is made on or through the Internet (otherwise known as the World Wide Web) or a similar proprietary or common carrier electronic system (hereinafter, the "Internet"). Consequently, such an "offer" made "in this state" (Section 25008) would require prior qualification under Section 25110, 25120 or 25130 of the Law, unless an exemption from qualification exists. Moreover, such "offers" made over the Internet are "advertisements" (Section 25002) required to be filed with the Commissioner of Corporations, insofar as they concern a security sold or offered for sale in California, unless otherwise exempted (Section 25300).

Notwithstanding the broadness of the definition of "offer" under the Law to encompass transactions on the Internet, the Commissioner acknowledges that use of the Internet may be a legitimate means of economically raising capital, and that communications made on the Internet may be directed not only to particular recipients but also to anyone with access to the Internet. Because of the nature of communications made on the Internet, the Commissioner finds that the qualification of certain Internet offers is not necessary or appropriate in the public interest or for the protection of investors.

With respect to offers made on the Internet, the Commissioner finds that the issuance of this Order is necessary to carry out the provisions of the Law. Accordingly, pursuant to Section 25610 of the Law, offers of securities made by, or on behalf of, issuers on or through the Internet shall be exempt from Section 25110 if all of the following conditions are met:

  1. The Internet offer originates from outside California and indicates, directly or indirectly, that the securities are not being offered or sold to residents of California;
  2. The Internet offer originates from outside California and is not directed to any person in California by, or on behalf of, the issuer of the securities; and
  3. No sales of the issuer's securities will be made in California as a result of the Internet offer under paragraphs 1. and 2., above, until such time as the sale of the securities being offered have been qualified under Section 25111, 25112 or 25113 of the Law and a final prospectus or Form U-7 is delivered to California investors prior to such sales, or the security or the sale is exempt from qualification.

Nothing in this Order shall preclude an issuer, or a person acting on behalf of an issuer, that offers securities on the Internet or effects sales to California residents following such an offer from relying upon any other applicable exemption under the Law, nor shall this Order relieve such persons from liability under Section 25400, 25401 or 25402 of the Law.

This Order shall remain in effect until amended or rescinded by the Commissioner.

WILLIAM KENEFICK
Assistant Commissioner
Office of Policy