Rule 147

Rule 147 is an SEC safe harbor that exempts intrastate offerings from federal registration under the Securities Act of 1933. The logic is jurisdictional: if a security is offered and sold entirely within one state, regulation is left to that state's securities regulator rather than the federal government. The offering must still comply with the state's own blue sky laws.

To qualify, the issuer must have its principal place of business in the state and must genuinely do business there — for example, by generating the majority of its revenues, holding the majority of its assets, using the majority of the offering proceeds, or employing the majority of its workforce in that state. Every purchaser must be a resident of the state at the time of sale.

Resales are restricted as well. Securities purchased in a Rule 147 offering cannot be resold to out-of-state residents for a set period after purchase (six months under the modernized rule), preventing issuers from using the exemption as a back door to an unregistered interstate distribution. A companion rule, Rule 147A, offers similar relief with more flexibility, such as permitting general advertising that may reach out-of-state audiences so long as sales are made only to in-state residents.

Exempt transactions are a staple of the primary market material on the SIE, Series 6, and Series 7 exams. Know that Rule 147 covers intrastate offerings, the doing-business and residency requirements, and the limitation on resales to out-of-state buyers.