Intrastate Offering Compliance (Rule 147/147A)
One out-of-state sale destroys the exemption — potentially retroactively for all investors. Unlike Rule 506, no NSMIA preemption exists; the issuer must also satisfy full state registration. This skill prevents the common failures: inadequate residency verification, uncontrolled advertising reach, failed doing-business tests, and integration with concurrent offerings.
Intake (Mandatory)
Gather before drafting unless the user says "use defaults" or "just draft":
- Issuer details — state of formation, principal office, org chart
- Operations by state — revenues, assets, employees, locations; current financials
- Offering terms — security type, size, pricing, use of proceeds, escrow, commissions
- Draft materials — term sheet, offering document, subscription agreement, marketing copy
- Distribution plan — channels, internet use
- Residency verification process — online/offline workflow, document retention
- Prior and planned offerings — types, dates, investor pools (6-month look-back/forward)
- State blue sky rules — registration forms, examiner guidance, filing requirements
Defaults if no response: Rule 147A; registration by qualification; standard residency documentation. Label all defaults.
Step 1: Select Safe Harbor (Rule 147 vs. 147A)
| Factor |
Rule 147 [VERIFY] |
Rule 147A [VERIFY] |
Decision |
| Issuer formation |
Must be in offering state |
Out-of-state OK |
Formed elsewhere → 147A |
| Principal place of business |
Required |
Required |
Document "nerve center" |
| General solicitation |
Restricted |
Permitted with legends |
Broad internet → 147A |
| Offers to out-of-state |
Risky |
OK if sales in-state only |
Confirm offer definition |
Verify current text: 17 CFR 230.147, 230.147A, 230.152; Securities Act §§ 3(a)(11), 5, 17(a) [VERIFY].
Step 2: Analyze Doing-Business Tests
All four must be met. Document evidence for each:
| Test [VERIFY] |
Threshold |
Evidence |
| Revenue |
≥ 80% in-state |
Revenue by customer/location |
| Assets |
≥ 80% in-state |
Balance sheet, fixed asset register |
| Proceeds |
≥ 80% used in-state |
Use-of-proceeds budget and tracking |
| Employees |
Majority in-state |
Payroll and headcount by state |
Step 3: Build Residency Verification Protocol
| Investor Type |
Standard [VERIFY] |
Minimum Documents |
| Individual |
Principal residence in state |
Driver license + utility bill or tax record |
| Entity |
Principal place of business in state |
Operating agreement + business address proof |
| Entity formed for offering |
Look-through to owners |
Residency docs for all beneficial owners |
- Require documentary proof before subscription acceptance; retain in investor file
- IP checks and online gating are supplemental only — not sufficient alone
- Apply look-through for entities formed to purchase the securities
Step 4: Advertising and Offer Controls
- Place legends on all materials and landing pages
- Gate access to offering materials by state before disclosure
- No paid ads targeting beyond the offering state
- Train all personnel: no discussions with non-residents
- Preserve copies of all ads, targeting settings, and gating records
Step 5: Resale Restrictions and Transfer Controls
- Restricted period: six months from issuer sale [VERIFY]
- Restrictive legends on certificates or book-entry statements
- Stop-transfer instructions to transfer agent or internal ledger
- Require approval of any transfer during restricted period
Legend template:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. FOR A PERIOD OF SIX MONTHS FROM THE DATE OF SALE BY THE ISSUER, ANY RESALE MUST BE MADE ONLY TO PERSONS RESIDENT WITHIN THE STATE OF [STATE]. ANY TRANSFER IN VIOLATION OF THIS RESTRICTION IS VOID.
Subscription representation template:
Subscriber represents that Subscriber's principal residence (or principal place of business) is in the State of [STATE], and agrees to provide documentation reasonably requested to confirm residency. Subscriber acknowledges the securities are restricted and may not be transferred to non-residents during the applicable restricted period.
Step 6: Integration Risk and State Registration
Integration analysis:
| Item |
Risk |
Mitigation |
| Recent offerings |
Integration with intrastate |
Rule 152 framework and spacing [VERIFY] |
| Concurrent offerings |
Confusing investor pools |
Separate materials and investor lists |
| General solicitation elsewhere |
Contaminates intrastate |
Pause or segregate campaigns |
State registration by qualification:
- Confirm registration path under state law [VERIFY]
- Assemble forms, consents to service, filing fees
- Confirm financial statement and audit requirements [VERIFY]
- Address merit review: escrow, commissions, pricing, dilution
- Align offering document, state forms, and marketing materials
- Pre-clear advertising if required [VERIFY]
Step 7: Deliverables
- Compliance memo — rule selection, eligibility, residency controls, advertising controls, resale restrictions, integration analysis
- Execution checklist for issuer and counsel
- Legend and subscription representations
- State registration filing checklist
- Assumptions, open items, and risk flags
Every output must begin with:
- Assumptions — rule selected, doing-business test results, residency standard
- Open Items — missing financials, unresolved state requirements, [VERIFY] items
Contingencies: Reject non-resident subscriptions and document; if residency error discovered, consult counsel immediately; if controls are unenforceable, recommend alternative exemptions.
Post-Draft Alignment (Mandatory)
After delivering, ask:
- Are doing-business calculations confirmed against current financials?
- Is the advertising/distribution plan finalized?
- Should residency verification be tested with a sample workflow?
- Are there concurrent or recent offerings needing integration analysis?
Checks and Pitfalls
Quality gate — verify before finalizing:
- Safe harbor selection documented with rationale
- All four doing-business tests analyzed with evidence
- Residency protocol requires documentary proof
- Legend language matches correct rule and state
- Advertising controls enforceable for planned channels
- Integration analysis covers 6-month look-back and look-forward
- State registration path confirmed with forms and fees
- Subscription representations match legend language
- All citations verified or flagged [VERIFY]
- Assumptions and open items listed prominently
Rules:
- Output is not legal advice; attorney review required before use
- Mark unverified rule text, thresholds, or dates with
[VERIFY]
- Resolve federal vs. state conflicts in favor of the more restrictive rule
- If controls cannot be enforced, recommend a different exemption
- Maintain single source of truth across forms, disclosures, and marketing
- Flag broker-dealer or finder compensation for separate review
- Do not fabricate rule thresholds, state requirements, or registration procedures — every citation must be verified or flagged
- Treat confidentiality and truthfulness as mandatory (Model Rules 1.1, 1.3, 1.6, 3.3, 4.1) [VERIFY]
1---2name: intrastate-offering3description: Produces a compliance memo and execution plan for U.S. intrastate securities offerings under Rule 147 or Rule 147A with state registration by qualification. Covers safe harbor selection, doing-business tests, residency verification, advertising controls, resale restrictions, integration analysis, and blue sky registration. Trigger when the user mentions intrastate offering, Rule 147, Rule 147A, registration by qualification, single-state offering, Section 3(a)(11), state-only fundraising, in-state investor requirements, resale restriction legends, or says "we're only raising in one state."4---5
6# Intrastate Offering Compliance (Rule 147/147A)
7
8One out-of-state sale destroys the exemption — potentially retroactively for all investors. Unlike Rule 506, no NSMIA preemption exists; the issuer must also satisfy full state registration. This skill prevents the common failures: inadequate residency verification, uncontrolled advertising reach, failed doing-business tests, and integration with concurrent offerings.
9
10## Intake (Mandatory)
11
12Gather before drafting unless the user says "use defaults" or "just draft":
13
141. **Issuer details** — state of formation, principal office, org chart
152. **Operations by state** — revenues, assets, employees, locations; current financials
163. **Offering terms** — security type, size, pricing, use of proceeds, escrow, commissions
174. **Draft materials** — term sheet, offering document, subscription agreement, marketing copy
185. **Distribution plan** — channels, internet use
196. **Residency verification process** — online/offline workflow, document retention
207. **Prior and planned offerings** — types, dates, investor pools (6-month look-back/forward)
218. **State blue sky rules** — registration forms, examiner guidance, filing requirements
22
23**Defaults if no response:** Rule 147A; registration by qualification; standard residency documentation. Label all defaults.
24
25## Step 1: Select Safe Harbor (Rule 147 vs. 147A)
26
27| Factor | Rule 147 [VERIFY] | Rule 147A [VERIFY] | Decision |
28|---|---|---|---|
29| Issuer formation | Must be in offering state | Out-of-state OK | Formed elsewhere → 147A |
30| Principal place of business | Required | Required | Document "nerve center" |
31| General solicitation | Restricted | Permitted with legends | Broad internet → 147A |
32| Offers to out-of-state | Risky | OK if sales in-state only | Confirm offer definition |
33
34Verify current text: 17 CFR 230.147, 230.147A, 230.152; Securities Act §§ 3(a)(11), 5, 17(a) [VERIFY].
35
36## Step 2: Analyze Doing-Business Tests
37
38All four must be met. Document evidence for each:
39
40| Test [VERIFY] | Threshold | Evidence |
41|---|---|---|
42| Revenue | ≥ 80% in-state | Revenue by customer/location |
43| Assets | ≥ 80% in-state | Balance sheet, fixed asset register |
44| Proceeds | ≥ 80% used in-state | Use-of-proceeds budget and tracking |
45| Employees | Majority in-state | Payroll and headcount by state |
46
47## Step 3: Build Residency Verification Protocol
48
49| Investor Type | Standard [VERIFY] | Minimum Documents |
50|---|---|---|
51| Individual | Principal residence in state | Driver license + utility bill or tax record |
52| Entity | Principal place of business in state | Operating agreement + business address proof |
53| Entity formed for offering | Look-through to owners | Residency docs for all beneficial owners |
54
55- Require documentary proof before subscription acceptance; retain in investor file
56- IP checks and online gating are supplemental only — not sufficient alone
57- Apply look-through for entities formed to purchase the securities
58
59## Step 4: Advertising and Offer Controls
60
61- Place legends on all materials and landing pages
62- Gate access to offering materials by state before disclosure
63- No paid ads targeting beyond the offering state
64- Train all personnel: no discussions with non-residents
65- Preserve copies of all ads, targeting settings, and gating records
66
67## Step 5: Resale Restrictions and Transfer Controls
68
69- Restricted period: six months from issuer sale [VERIFY]
70- Restrictive legends on certificates or book-entry statements
71- Stop-transfer instructions to transfer agent or internal ledger
72- Require approval of any transfer during restricted period
73
74**Legend template:**
75
76> THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. FOR A PERIOD OF SIX MONTHS FROM THE DATE OF SALE BY THE ISSUER, ANY RESALE MUST BE MADE ONLY TO PERSONS RESIDENT WITHIN THE STATE OF [STATE]. ANY TRANSFER IN VIOLATION OF THIS RESTRICTION IS VOID.
77
78**Subscription representation template:**
79
80> Subscriber represents that Subscriber's principal residence (or principal place of business) is in the State of [STATE], and agrees to provide documentation reasonably requested to confirm residency. Subscriber acknowledges the securities are restricted and may not be transferred to non-residents during the applicable restricted period.
81
82## Step 6: Integration Risk and State Registration
83
84**Integration analysis:**
85
86| Item | Risk | Mitigation |
87|---|---|---|
88| Recent offerings | Integration with intrastate | Rule 152 framework and spacing [VERIFY] |
89| Concurrent offerings | Confusing investor pools | Separate materials and investor lists |
90| General solicitation elsewhere | Contaminates intrastate | Pause or segregate campaigns |
91
92**State registration by qualification:**
93- Confirm registration path under state law [VERIFY]
94- Assemble forms, consents to service, filing fees
95- Confirm financial statement and audit requirements [VERIFY]
96- Address merit review: escrow, commissions, pricing, dilution
97- Align offering document, state forms, and marketing materials
98- Pre-clear advertising if required [VERIFY]
99
100## Step 7: Deliverables
101
1021. **Compliance memo** — rule selection, eligibility, residency controls, advertising controls, resale restrictions, integration analysis
1032. **Execution checklist** for issuer and counsel
1043. **Legend and subscription representations**
1054. **State registration filing checklist**
1065. **Assumptions, open items, and risk flags**
107
108Every output must begin with:
109- **Assumptions** — rule selected, doing-business test results, residency standard
110- **Open Items** — missing financials, unresolved state requirements, [VERIFY] items
111
112**Contingencies:** Reject non-resident subscriptions and document; if residency error discovered, consult counsel immediately; if controls are unenforceable, recommend alternative exemptions.
113
114## Post-Draft Alignment (Mandatory)
115
116After delivering, ask:
1171. Are doing-business calculations confirmed against current financials?
1182. Is the advertising/distribution plan finalized?
1193. Should residency verification be tested with a sample workflow?
1204. Are there concurrent or recent offerings needing integration analysis?
121
122## Checks and Pitfalls
123
124**Quality gate — verify before finalizing:**
125- Safe harbor selection documented with rationale
126- All four doing-business tests analyzed with evidence
127- Residency protocol requires documentary proof
128- Legend language matches correct rule and state
129- Advertising controls enforceable for planned channels
130- Integration analysis covers 6-month look-back and look-forward
131- State registration path confirmed with forms and fees
132- Subscription representations match legend language
133- All citations verified or flagged [VERIFY]
134- Assumptions and open items listed prominently
135
136**Rules:**
137- Output is not legal advice; attorney review required before use
138- Mark unverified rule text, thresholds, or dates with `[VERIFY]`
139- Resolve federal vs. state conflicts in favor of the more restrictive rule
140- If controls cannot be enforced, recommend a different exemption
141- Maintain single source of truth across forms, disclosures, and marketing
142- Flag broker-dealer or finder compensation for separate review
143- Do not fabricate rule thresholds, state requirements, or registration procedures — every citation must be verified or flagged
144- Treat confidentiality and truthfulness as mandatory (Model Rules 1.1, 1.3, 1.6, 3.3, 4.1) [VERIFY]