(2) The following transactions are exempted from Sections 61-1-7 and 61-1-15:

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(l) a distribution of securities as a dividend if the person distributing the dividend is the issuer of the securities distributed;

This exemption is not available to a parent company that distributes the securities of a subsidiary as a dividend because under these circumstances the subsidiary would be the issuer and to qualify for the exemption the person distributing the dividend must also be the issuer of the securities.

Spin-offs: A typical spin-off occurs when a parent company distributes a dividend to the parent's shareholders which is comprised of all of the outstanding shares of a subsidiary. Usually, each of the parent's shareholders end up receiving a pro-rata share of the stock of the subsidiary which converts the subsidiary to an independent company now owned by the shareholders of the parent. If the parent company is publicly held, the spun-off company will take on the status of a publicly held company.

Since the parent company is the person distributing the dividend and the spun-off company is the issuer, this transaction does not qualify for the Dividend Transactional Exemption under section 61-1-14(2)(l). If the parent company is privately held, then the transaction would most likely qualify for the Non-Public Offering Exemption under section 61-1-14(2)(n). However, if the parent company is publicly held, the transaction would require registration. The Division has provided Discretionary Exemptions for this type of transaction in the past if the parent can demonstrate that the spin-off was completed because of a valid business purpose and the newly spun-off company registers the securities with the U.S Securities and Exchange Commission under the Securities Exchange Act of 1934 by filing a Form 10. To obtain a discretionary exemption, the issuer must file a request with the Division.

LTC Healthcare, Inc., File # B00073827, July 16, 1998
The dividend distribution of all of the outstanding shares of LTC Healthcare, Inc., a 99%-owned subsidiary of LTC Properties, Inc., to the common stockholders of LTC Properties, constituted a "sale" as defined under § 61-1-13(22) of the Utah Uniform Securities Act.

Kruse, Landa & Maycock, File #A02564-17, November 14, 1989
The distribution (the "Distribution") of the securities of the wholly owned corporate subsidiary by its parent corporation to the shareholders of the parent corporation in the form of a partial liquidating dividend was subject to Rule 177-11-1 of the Utah Admin. Code, even though (1) no cash would be received from the shareholders as a result of the Distribution, (2) no commission or remuneration would be paid in connection with the transaction, and (3) no broker, dealer, or agent would effect any portion of the transaction.