AN OUTLINE TO THE DIVISION and
OHIO SECURITIES ACT
The information contained in this outline should not be
used in place of the Ohio Securities Act, the regulations implementing
the Ohio Securities Act, or the policies or procedures of the Division
This material is merely being presented in a generalized outline format
to familiarize the public with the Ohio Securities Act and is only an
introduction and partial guide to the Ohio Securities Act and Division
I. PRELIMINARY INFORMATION
A. Revised Code Chapter 1707. is the Ohio Securities Act.
B. Ohio Administrative Code Chapters 1301:6-01 and 1301:6-03
contain the rules implementing the Ohio Securities Act.
C. The address at this web site is http://www.com.ohio.gov/secu
D. Our postal service address is:
Ohio Division of Securities
77 South High Street, 22nd Floor
Columbus, Ohio 43215-6131
E. Division Telephone numbers:
Receptionist (614) 644-7381
Facsimile (614) 466-3316
Enforcement "800" number (800) 788-1194
II. WHAT IS A SECURITY?
A. Refer to RC 1707.01(B). The definition of the term,
"security" is broad. In very general terms, think of a security
as an ownership interest or evidence of indebtedness....
B. What is not a security? Again, refer to RC 1707.01(B) for
guidance. Keep in mind the difference between something being a
security BUT having an exemption from the registration provisions
of the Ohio Securities Act, and something that is NOT a security
Among those things NOT regulated by the Division of Securities are:
1. Franchise -- Not a security and not a term used under
Ohio law. See the Business Opportunity Purchasers Protection Act,
RC Chapter 1334. This act is not regulated by an agency, but the
Attorney General's office will investigate complaints.
2. Insurance -- Per RC 1707.32, jurisdiction over insurance
is given to the Superintendent of the Ohio Department of Insurance.
Contact that Department by calling (614) 644-2658. This includes
III. "SALE" OR "SELL" DEFINED
Refer to RC 1707.01(C). As with the term, "security,"
the terms "sale" and "sell" are defined broadly, and include
an offer to sell. Notably, the definition includes every
disposition or attempt to dispose of a security or an interest
in a security. The Ohio provision does not require that a
disposition of a security be for value.
IV. OTHER DEFINITIONS THAT MAY BE USEFUL
Refer to RC 1707.01 for definitions of terms used in the Ohio
Securities Act. For those not familiar with the Ohio Securities
Act, you may wish to review the definitions in this section including
the terms, "dealer," "institutional investor," and "issuer."
V. THREE AREAS OF CONCERN IN ANY SECURITIES TRANSACTION.
A. In any transaction involving the sale of a security, the
issuer must always be concerned with three things:
1. Compliance with federal securities laws. Three of the federal
statutes with which you may be most concerned are:
a. Securities Act of 1933. An Act to provide full and fair
disclosure of the character of securities sold in interstate and
foreign commerce and through the mails, and to prevent frauds in
the sale thereof, and for other purposes.
b. Securities Exchange Act of 1934. To provide for the
regulation of securities exchanges and of over-the-counter markets
operating in interstate and foreign commerce and through the mails,
to prevent inequitable and unfair practices on such exchanges and
markets, and for other purposes.
c. Investment Company Act of 1940. To provide for the registration
and regulation of investment companies and investment advisers, and
for other purposes.
2. Compliance with the state securities laws in each state where
a sale takes place.
3. Compliance with the applicable laws concerning who may conduct
a. In Ohio, refer to RC 1707.14, the controlling provision
pertaining to who may conduct sales of securities in Ohio.
b. Refer to RC 1707.01(E) as well, which defines the term,
"Dealer." Note what the definition does NOT include. For example,
a bank is not considered a dealer.
c. Securities dealers and securities salespersons must pass an
approved NASD examination--no state tests are given.
d. Keep in mind that securities dealers not domiciled in Ohio
may need to register with the Secretary of State as a foreign
corporation conducting business in Ohio. See Chapter 1703. of the
B. A sale of even one security is subject to the Ohio Securities Act.
This would include sales by the issuer or by a current owner of the security.
A. Exemptions from the registration provisions of the Ohio Securities
Act. Keep in mind that the burden of proof is on the one claiming the
benefits of the exemption regardless of whether a filing is made to claim
the exemption. Refer to RC 1707.45.
Issuers may wish to first review the 40+ exemptions from the registration
provisions contained in the Ohio Securities Act.
1. RC 1707.02 pertains to exempt securities. This provision
contains self-executing exemptions meaning there is nothing to file
with the Division in order to claim the exemption.
2. RC 1707.03 pertains to exempt transactions. All but 4 of the
exemptions in this section are self-executing. The four exemptions
for which a filing is necessary are RC 1707.03(Q), 1707.03(W) 1707.03(X)
3. RC 1707.03(V) gives the Division the authority to determine
by rule that a sale of a security is exempt if it is in the public
interest. OAC 1301:6-3-03(E) therefore contains additional exemptions,
all of which require no filing with the Division of Securities.
B. Some Federal Exemptions
Review the federal securities laws carefully to determine whether
you may be able to benefit from an exemption from the registration
requirements of the Securities Act of 1933.
1. Section 3 of the Securities Act of 1933 contains several
exemptions from the registration provisions of that Act for certain
2. Section 4 of the Securities Act of 1933 contains several
exemptions from the registration provisions of that Act for certain
Applications for securities registration require filings with the
Division of Securities and the federal Securities and Exchange Commission
prior to the issuer making sales. These applications will probably receive
a merit review--in other words, the Division will review the substance of
the offerings. You may wish to review the Division policy guidelines also
contained here on the Division web site, in the Ohio Securities Bulletin,
and the Blue Sky Reporter volume by Commerce Clearing House. A brief summary
of the three types of registrations available under the Ohio Securities Act
are as follows:
A. Registration by Description. Refer to RC 1707.06. If the offering
is $250,000 or more, the issuer will need an offering circular. Offering
materials will be reviewed with an eye to substance and disclosure.
B. Registration by Qualification. Refer to RC 1707.09. Full blown
registration with full merit review of the substance of the offering.
C. Registration by Coordination. Refer to RC 1707.091. Full blown
registration with full merit review of the substance of the offering. A
registration by coordination is used when the effective date in Ohio is
to be coordinated with the effective date granted by the Securities and
VIII. A QUICK SUMMARY OF APPLICATION FEES
3(Q) $100 for first filing by issuer during calendar year, $50 for
3(W) -- $100
3(X) -- $100
3(Y) -- $100
6(A)(1) -- $50
6(A)(2) -- $50
6(A)(3) -- $50
6(A)(4) -- $50
09/091/092 -- $100 flat fee, plus a calculated fee, of one tenth of
one per cent of the aggregate amount to be registered or sold in Ohio.
The calculated fee will be a minimum of $100 and a maximum of $1000.
11 -- No separate fee. The consent to service of process is submitted
in conjunction with a filing.
391 -- Twice the fee that should have been paid had the filing been
39 -- $100 flat fee, plus a calculated fee, of one fifth of one per
cent of the aggregate amount to be qualified. The calculated fee will be
a minimum of $100 and a maximum of $2000.
Checks should be made payable to the "Ohio Division of Securities"
IX. COMMON QUESTIONS
"I want to start a company. What do I do?"
Determine the type of entity you want to create: partnership, trust,
limited liability company, corporation, and so on. You may wish to contact
the Ohio Secretary of State's office for information on how to proceed.
You may contact the Corporation Section of the Secretary of State's office
by calling (614) 466-3910.
You may also wish to contact the 1st Stop Business Connection of the
Office of Small Business of the Ohio Department of Development. 1st Stop
can put together a comprehensive packet of materials for you with information
on the various aspects of starting a business.
1-800-248-4040 or 614-466-4232
Once the entity is created and you wish to issue the securities created
to a person or persons, that is when the securities laws come into play.
Remember to review both the federal and state securities laws.
"How is ownership of a corporation determined?"
When you file your articles of incorporation with the Secretary of
State's office, you create a paper entity with X number of shares authorized.
When the company issues some of those shares--puts them in someone's name--an
ownership interest is created. The percentage of your ownership interest is
based on the shares issued and outstanding and not on the amount of shares
For example, if you file articles of incorporation for ABC, Inc. and have
850 shares of common stock, no par value, authorized in the articles, no one
has an ownership interest in the company until shares are issued. If the
company issues 10 shares of common stock to John and 10 shares of common
stock to Sally, each has a fifty per cent interest in the company.
Subsequently, if the company issues 10 shares to Mark, each of the three
shareholders has a one third interest in the company.
"I have an old stock certificate. Is it worth anything?"
Possibly--but the Division of Securities will not be able to make that
determination. You'll need to do some legwork to find out what happened
to the company.
You might wish to check with the Division of Unclaimed Funds to determine
whether that agency is holding any unclaimed monies owed you from dividends.
The Division of Unclaimed Funds is responsible for the collection, safekeeping
and return of monies designated as "unclaimed." Contact the Division of
Unclaimed Funds by calling (614) 466-4433 or visiting their web site at
If you know the state of origination or creation of the company, you may
wish to check with that state's agency where such documentation is filed.
For example, if the company was created under the Ohio Corporation Act,
you may wish to contact the Ohio Secretary of State's office by calling
(614) 466-3910 or going to http://serForm2.sos.state.oh.us/sos/ and clicking
on Business Services. The Secretary of State's office may have information
in their active or inactive files as to whether the company dissolved,
merged into another company, changed its name, and so on.
"I want to see if a company filed an application twelve years ago."
Per RC 1707.48, the Ohio Division of Securities retains registration
filings only for eight years. After that, the documents are destroyed.
X. FORMS -- Copies of forms that may be filed with the Division
may be found by clicking on Forms on our Home page.
XI. OTHER SOURCES OF INFORMATION
A. 1st Stop Business Connection
Ohio Department of Development
Post Office Box 1001
Columbus, Ohio 43216-1001
B. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Securities and Exchange Commission
Midwest Regional Office
175 W. Jackson Blvd.
Chicago, Illinois 60604
C. National Association Securities Dealers
55 W. Monroe Street
D. North American Securities Administrators Association, Inc.
10 G. Street N.E.
Washington, D.C. 20002
facsimile (202) 783-3571
E. Ohio Secretary of State
30 East Broad Street, 14th Floor
Columbus, Ohio 43215
General Information 466-3251
General Information/Corporations 466-3910
Corporations/Name Availability 466-0590
Web site http://www.state.oh.us/sos/