Section 4(a)(1) Exemption for an affiliated charity foundation

Section 4(a)(1) provides exemptions for transactions by any person other than an issuer, underwriter, or dealer.  Under the Act, a “dealer” means any person who engages for all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person. A charitable foundation that is affiliated with an issuer (the "Foundation"), when trying to offer and sell shares of the issuer it received from the issuer, is not a dealer because it does not engage in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person and is unlikely to be considered the “issuer” in the offering.  As a result, whether the Section 4(a)(1) exemption is available for the such offering turns on the question of whether the Foundation is considered an “underwriter.” Under the Securities Act of 1933, an “underwriter” means any person who (i) has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, (ii) participates or has a direct or indirect participation in any such undertaking, or (iii) participates or has a participation in the direct or indirect underwriting of any such undertaking.  The longer the Foundation has held such shares the less it is likely that the Foundation is considered to have had the intent to distribute the shares when it acquired those shares. The question then, is whether the Foundation is participating “in any such undertaking.”  One can argue that this language refers to an undertaking involving the purchase of shares from an issuer with a view to distribution.