Statute: Wis. Stat. s. 551.201(1)(a) and (b)

Administrative Code: Wis. Admin. Code s. DFI-Sec 1.02(11), 2.01(1), 3.03, 3.04, 7.02, and 7.06

Used for: Securities issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporate or other instrumentality of one or more of the foregoing. Revenue obligations payable from payments to be made in respect of property or money used under a lease, sale, or loan arrangement by or for a non-governmental industrial or commercial enterprise (Industrial Revenue Bonds (IRBs), Industrial Development Bonds  (IDBs), collectively referred to as IRB/IDBs) are also exempt subject to rules adopted by the Division of Securities under Wis. Admin. Code s. DFI-Sec 2.01(1)(a).

Filing requirement:

Frequently asked questions:

Q: How did The National Securities Markets Improvement Act of 1996 (NSMIA) affect availability of the exemption for general obligation governmental securities?

A: The exemption requirements for Wisconsin governmental entities were not changed. Since the enactment of NSMIA, there are no longer any filing requirements for non-Wisconsin entities offering general obligation governmental securities.

Q: How did changes to the "governmental security" exemption because of 2007 Wisconsin Act 196 (effective January 1, 2009) affect the filing requirements for IRB/IDBs of state governmental issuers?

A: Because 2007 Wisconsin Act 196 and related rules amended the governmental security exemption to remove the filing requirement for non-Wisconsin IRB/IDBs after January 1, 2009, only Wisconsin IRB/IDBs that involve payments from a "non-governmental industrial or commercial enterprise" require a notice filing with the division to claim the exemption.

Q: What are the "designated financial institutions" that may issue a letter of credit for the purposes of Wis. Stat. s. 551.201(1)(b)?

A: Banks, savings banks, and savings and loan associations.

Q: If a portion of the revenues of a Rule 501(c)(3) not-for-profit issuer of revenue bonds comes from commercial sources (e.g., parking revenue, gift shops, physician office rentals, etc.), is the exemption still self-executing?

A: Yes, if the Rule 501(c)(3) issuer/obligor retains its non-profit status. See Wis. Admin. Code s. DFI-Sec 1.02(11).

Q: If an IRB/IDB is payable under a lease-type arrangement with a public utility or its subsidiary, is a self-executing exemption available?

A: Yes, but only if the lessee is a public utility meeting the definition set forth at Wis. Stat. s. 551.201(5), which has securities registered under section 12 of the Securities Exchange Act of 1934, or is a wholly-owned subsidiary of such a utility. See Wis. Admin. Code s. DFI-Sec 2.01(1)(a)1.

Q: Are general obligation bonds issued by a Wisconsin governmental entity exempt under this section?

A: Yes.   

Q: Is this exemption self-executing for the issuance by a municipality of revenue bonds, such as sewer bonds, which are payable only from assessments against individual real estate lots?

A: Yes.

Important interpretive letters under predecessor statute, but still applicable after January 1, 2009.   

October 31, 1990 letter re: Wisconsin Housing and Economic Development Authority Single Family Housing Revenue Bonds. A determination of whether paragraph (a) or paragraph (b) of Wis. Stat. s. 551.22(1) is applicable to a revenue bond offering depends upon the source of revenues for the payment of principal and interest on the revenue bonds. Specifically, paragraph (a) exempts, "any security, including a revenue obligation, issued or guaranteed by ... any political subdivision of state; but any revenue obligation payable from payments to be made in respect of property or money used under a lease, sale or loan arrangement by or for a non-governmental industrial or commercial enterprise is exempted only as provided under par. (b) ...." The division concluded that the two single-family home improvement revenue bond programs of WHEDA did not trigger the restriction-from-use language in Wis. Stat. s. 551.22(1)(a) relating to "non-governmental industrial or commercial enterprises" based on equivalent federal Rule 131 language analysis as discussed in the January-February, 1990 Securities Bulletin article. Consequently, the bonds would qualify for the exemption under Wis. Stat. s. 551.22(1)(a) without the need to comply with the provision of sub. (b).

Securities Bulletin January-February, 1990 article re: Non-Governmental Enterprise Exemption (set forth here in its entirety):

Recently our opinion was requested about whether the municipal securities exemption (Wis. Stat. s. 551.22(1)) would apply to an offering of student loan revenue bonds issued by student assistance commissions (SAC) of different states. According to the Official Statement for the bonds, the proceeds from the bond offering would be used by the SAC to purchase, from the lending institutions, student loan notes which are warranted by the states' guaranteed loan programs and reinsured under the Federal Higher Education Act of 1965 or reimburse the SAC for such loan purchases. The bonds would be limited obligations of the SAC payable only from revenues derived from repayment of student loans and would not constitute a debt or obligation of the state.

Wis. Stat. s. 551.22(1)(a) states:

(a) Any security, including a revenue or obligation, issued or guaranteed by . . . any political sub-division of a state . . .; but any revenue obligation payable from payments to be made in respect of property or money used under a lease, sale or loan arrangement by or for a non-governmental industrial or commercial enterprise is exempted only as provided under para. (b) . . . (Emphasis supplied [in the original letter]).

The underscored language was added to Section 402(a)(1) of the Uniform Securities Act when the Wisconsin Uniform Securities Law was enacted on January 1, 1970, to restrict use of the exemption for "industrial revenue bonds" (IRB/IDBs). Although the issuer of an IRB/IDB offering might be a city or municipality, the proceeds would be received and used by a commercial business which would also be the source for payment of the principal and interest on the bonds. The letter requesting our opinion indicated that the "industrial or commercial enterprise" language in the Wisconsin exemption paralleled language in Rule 131 of the federal Securities Act of 1933.  This language provides criteria to determine the existence of a "separate security." The correspondence also indicated that the U.S. Securities and Exchange Commission (SEC) issued eight "no action" letters between 1977 and 1988 which involve student loan revenue bonds.

The letter we received stated that two exceptions under SEC Rule 131 were applicable to the SAC's bonds.

[The division stated that because the federal Rule 131 "non-governmental industrial or commercial enterprise" language was not triggered for the bonds, due to the "substantial public nature" of the enterprise, the equivalent language in Wis. Stat. s. 551.22(1)(a) was not triggered.]  Accordingly, the bonds would qualify for the Wis. Stat. s. 551.22(1)(a) exemption on a self-executing basis without needing to comply with provision Wis. Stat. s. 551.22(1)(b)​.

Securities Bulletin November-December, 1989 article. A territory of the United States sought an opinion regarding use of Wis. Stat. s. 551.22(1) to their issuance of revenue bonds on the basis that they were a U.S. governmental instrumentality. The division determined that the territory was not an "agency or corporate instrumentality of the United States" because of the statutory definition of "state" in Wis. Stat. s. 551.02(14)​, as "any state, territory, or possession of the United States, the District of Columbia and Puerto Rico."  A U.S. territory, having been defined by statute as a "state" cannot also be construed as an "agency or corporate instrumentality of the United States."

Securities Bulletin September, 1988 article re: Insurance as a "Guarantee."  Bond payment insurance is not a "guarantee" for purposes of Wis. Stat. s.  551.22(1). Although the term "security" as defined in Wis. Stat. s. 551.02(13)(a) includes the term "guarantee," an insurance policy constitutes a guarantee neither in a legal context nor for securities regulatory purposes.  An insurance policy is a contract to indemnify for losses suffered, or to pay a sum certain upon the occurrence of a specified contingency. In contrast, a guarantee is an undertaking by the guarantor to perform as, and in the place of, a primary obligor. Thus, the legal effect of an insurance policy differs from that of a guarantee, in that the guarantee guarantees the performance of an obligation according to its terms as contrasted with an insurance policy, which pays money upon the occurrence of a contingency.

Securities Bulletin September, 1988 article re: Letter of Credit from a Domestic Branch of a Foreign Bank.  A letter of credit from a domestic branch of a foreign bank covering industrial revenue bond principal and interest payments can be used for purposes of the letter of credit requirement in Wis. Stat. s. 551.22(1)(b). However, to qualify for the exemption, the letter of credit cannot expire before the due date of the bonds.

June 3, 1988 letter re: Alexandria (Virginia) Redevelopment and Housing Authority. The existence of FDIC insurance relating to the Certificates of Deposit (which were the underlying assets and the primary source for payment of principal and interest on the subject bonds) would not result in exempt status for the subject bonds under Wis. Stat. s. 551.22(1) as being securities "guaranteed" by an agency of the United States, because the FDIC insurance is not a "guarantee."

History: Predecessor statute Wis. Stat. s. 551.22(1) adopted January 1, 1970. Repealed and recreated as Wis. Stat. s. 551.201(1) effective January 1, 2009.

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