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Proposed ECSRC Rules for Comment

In exercise of the powers conferred on it by Section 161 of the Securities Act, 2001, the Eastern Caribbean Securities Regulatory Commission makes the following rules in respect of the issue of corporate securities via a private placement.

These Rules may be cited as the Securities (Private Placement) Rules No.3 of 2002 and shall come into force on the date issued by the Commission.Any company that proposes to issue securities via a 'private placement' must apply to the Commission for a determination under section 92 (1) (c) of whether its proposed issue qualifies as a private placement, unless it qualifies for a blanket exemption.

In these Rules, unless the context otherwise require:Blanket Exemption:
refers to an exemption from the prospectus requirement for the issue of corporate securities pursuant to Rule 3.2 of these rules. Commission: means the Eastern Caribbean Securities Regulatory Commission

ECSM: refers to the Eastern Caribbean Securities Market; the securities market for the territories of Anguilla, Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia and St Vincent and The Grenadines.Notice of Sale: refers to a document containing a complete list of all purchasing investors, indicating investors' names, addresses and the quantity purchased.Registered Private Placement: refers to an exemption that has been granted from the prospectus requirement for the issue of corporate securities pursuant to Section 92 (1) (c) of the Securities Act, 2001, based on an application made to the Commission under Rule 4.2 of these rules. Securities Act: means the Securities Act 2001Sophisticated Investor: refers to any legal person who falls within any one of the following categories, or who the issuer reasonably believes falls within any one of the following categories at the time of the sale of securities to that person:

a) financial institutions licensed under the Banking Act; b) insurance companies; c) broker-dealers; d) principals and representatives on the ECSM; e) investment advisors; f) investment companies/pension funds; g) directors and officers of the issuer; h) companies/partnerships/organisations with capital in excess of EC$5.0 million; i) individuals with net worth in excess of EC$1.0 million; j) individuals whose income exceeds EC$200,000 annually or whose joint income with a spouse exceeds    EC$300,000 annually.

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1.0 APPLICATION/NOTIFICATION PROCEDURES AND FEE

i) All applications/notifications subject to these Rules, along with supporting documents, must be filed with the Commission at the following address:

The Secretary
Eastern Caribbean Securities Regulatory Commission
ECCB Financial Complex
P O Box 1855
BASSETERRE
St Kitts

ii) A non-refundable application processing fee of One Thousand Eastern Caribbean Dollars (EC$1,000.00) is payable to the Commission in respect of each private placement application.

A non-refundable notification processing fee of Two Hundred and Fifty Eastern Caribbean Dollars (EC$250.00) is payable to the Commission in respect of each private placement notification.

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2.0 PRIVATE PLACEMENT QUALIFICATION

i) The issuer must be a company registered or incorporated in a member territory of the Eastern Caribbean Securities Market.ii) The issue must be made only to select investors by invitation.iii) The issue must not be part of a wider offer of securities made or to be made to the general public;      i.e. the issue must not be one of a series of related public offerings.iv) The issuer must not have a public offer in the market that will be running concurrently with the private placement issue.

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3.0 CONDITIONS ON SECURITIES ISSUED VIA PRIVATE PLACEMENT

An issue of securities qualifying as a private placement must, at a minimum, comply with the following conditions.

3.1 GENERAL CONDITIONSAll issuers of corporate securities via a private placement must adhere to the following conditions:

i) The issuer must maintain a separate register of securities sold via private placement.ii) An issuer is limited to one private placement issue per 12-month period.iii) The issue should target no more than 50 prospective investors, and the securities should be sold to no more than 50 investors.iv) The transfer of securities acquired via a private placement is to be restricted to persons within the initial group of investors, sophisticated investors and the issuer. The express permission of the Commission must be obtained for a transfer of securities not meeting the foregoing requirement.v) The issuer must inform all prospective investors that if they are in doubt as to the action they should take in relation to the private placement, they are recommended to seek their own personal financial advice.vi) The issuer must inform all prospective investors of the restriction on the transfer of securities as detailed in item iv above.vii) All information required to be communicated to prospective investors in items v and vi must be displayed prominently in the memorandum/prospectus or other documents marketing the issue of securities.viii) The issuer must provide the Commission with a signed declaration from each purchasing investor indicating that the investor understands the issues raised in items iv and v above, and is willing to comply with the restriction on the transfer of securities.

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3.2 BLANKET EXEMPTIONWhere the conditions set out in this Rule are met, in addition to the general conditions set out in Rule 3.1, an issuer may make a private placement without applying to the Commission for an exemption.a.    i) The issuer must be a private company, with paid up capital of no more than Five Hundred Thousand           Eastern Caribbean Dollars (EC$500,000.00).

ii) The issuer must never have previously issued securities via a public offer.iii) The issue must not raise more than EC$1.0 million.iv) Only sophisticated investors are allowed to purchase securities that are part of an issue valued in excess of One Hundred Thousand Eastern Caribbean Dollars (EC$100,000.00).

b. Notification in accordance with Rule 3.3 of these rules must be given to the Commission at least sixty (60) days prior to any issue of securities under this Rule.

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3.3 NOTIFICATION OF BLANKET EXEMPTIONThe following documents/information must be submitted along with a private placement (blanket exemption) notification (see form 1 of the schedule):

i) Copies of the incorporation/registration documents of the issuer.ii) The purpose for which the capital is being raised.iii) The capitalisation of the issuer before the issue and after the issue (if the issue is successful).iv) The types of securities being issued and the rights attached to these securities. The effect, if any, that the issue of these securities will have on the rights of existing shareholders.v) Any and all documents that will be disseminated to prospective investors.vi) A statement from the issuer, providing the Commission with an undertaking that:

a) the issuer has never previously issued securities via a public offer;b) only sophisticated investors will be sold securities valued in excess of One Hundred Thousand Eastern Caribbean Dollars (EC$100,000.00);c) the issue will not be sold to more than 50 investors; and d) the issue is not part of a wider offer of securities made or to be made to the general public i.e. a public offering of securities.

vii) An issuer of securities via a private placement issue subject to a blanket exemption is required to submit to the Commission a notice of sale, within 15 days of the first sale of securities, every three months thereafter, and no later than 30 days after the last sale of securities.

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4.0 REGISTERED PRIVATE PLACEMENTS

i) Securities must be offered only to sophisticated investors by way of invitation. No general solicitation is allowed.ii) A complete list of targeted investors is to be provided to the Commission prior to the issue of any securities. Where any changes to the list occur during the life of the issue an uptdated list must be provided to the Commission within 15 days of the change.iii) A complete list of purchasing investors is to be provided to the Commission on completion of the issue; this list should only include persons identified on the targeted list of investors.iv) The issue must raise no more than EC$5.0 million by way of equity and EC$10.0 million by way of debt.v) A notice of sale must be filed with the Commission within 15 days of the first sale of securities via a private placement and every three months thereafter, and no later than 30 days after the last sale of securities.

An application under rule 4.1 of these rules, for a registered private placement exemption from the prospectus requirement for the issue of corporate securities must be made to, and granted by, the Commission.

4.1 APPLICATION FOR REGISTERED PRIVATE PLACEMENT

1. The following documents must be submitted in support of a registered private placement application
    (see form 2 of the schedule):

i) Copies of incorporation/registration documents of the issuer.ii) The registered address or principal place of business of the issuer in the Eastern Caribbean Securities Market.
iii) Private placement memorandum/prospectus or any document promoting the issue.iv) Any and all documents that will be disseminated to prospective investors.vii) A statement from the issuer, providing the Commission with an undertaking that:

a) the issuer has not negotiated with, or made general solicitation to, an unrestricted group of prospective investors for the purpose of ascertaining who would be willing to accept the offer.b) the issue is not part of a wider offer made or to be made to the general public, i.e. the issue is not one of a series of related public offerings.c) the issuer does not have a public offer in the market that will be running concurrently with the private placement issue.

i) Contact information for the issuer, and underwriter or agent (if any).ii) The name of any person(s) underwriting or guaranteeing the offer (if any). iii) The ownership structure of the issuer.iv) The business of the issuer.v) The purpose for which the capital is being raised.vi) The capitalisation of the issuer before the issue and after the issue (if the issue is successful)vii) The types of securities being issued and the rights attached to these securities. The effect, if any, that the issue of these securities will have on the rights of existing shareholdersviii) The period during which the offer of securities will be open.ix) The price at which the securities are offered or, if applicable, the procedure, method and timetable for fixing a price.x) Any other information that the issuer may deem important in evaluating the eligibility of its proposed issue to be considered a private placement.

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