Ariz. Admin. Code § 14-4-127

Current through Register Vol. 30, No. 25, June 21, 2024

Section R14-4-127 - Guidelines for Securities Filings Under A.R.S. Section 44-1846

A. Petition for exemption. The issuer shall file a petition for exemption from registration under A.R.S. § 44-1846, which shall contain specific facts demonstrating why registration is not essential to the public interest or the protection of the investors. The petition shall indicate and explain in detail which one or more of the following reasons are relied upon for the exemption.

1. The special characteristics of the securities or transactions.

2. The limited character and duration of the offering.

3. The special characteristics or limited number of offerees or investors.

B. Offers, sales, exchanges, or distributions. No offer, sale, exchange, or distribution of the securities shall be made under A.R.S. § 44-1846 until the Commission has entered a written order granting the exemption.

C. Disclosure document. The issuer shall file a disclosure document with the petition for exemption in a form complying with the terms of this Section. The disclosure document shall contain all material facts relating to the proposed issue including but not limited to the investment objectives, a description of the type of person who could benefit from the investment, the applicable suitability standards under subsection (E), the legend required under subsection (H), and the information required for a prospectus under A.R.S. § 44-1894(A)(1) through (A)(5), (A)(7), and (A)(8). The issuer shall deliver and all offerees shall receive the disclosure document at least 72 hours prior to the sale of any securities.

D. Financial statement. The disclosure document shall include the financial statements required under R14-4-123.

E. Investor suitability standards. Petitions under this Section shall include minimum investor suitability standards for the persons to whom the securities will be offered. The standards may consist of one or more of the following criteria: minimum net worth, minimum income, and income tax bracket. Standards may be stated in the alternative. The Commission will review the standards and may approve or modify the standards based on such factors as, without limitation, liquidity, risk, transferability, specific tax shelter orientation of the investment, leverage, compensation of promoter, cash flow, conflict of interest, unproven nature of the product or mineral or oil reserves, lack of business history, management experience, and financial stability.

F. Final confidential report of the offering. The issuer shall make a final confidential report to the Commission within 30 calendar days after the conclusion of the offering. The final report shall be verified under oath by a company officer and shall include the following information:

1. The names and addresses of purchasers, the number of shares purchased, the date and amount paid.

2. The occupations of the purchasers.

3. An affidavit by the issuer that the purchasers have affirmed in writing that they meet the suitability standards set forth in the Order of Exemption.

G. Sales completion. Sales made under Orders of Exemption under A.R.S. § 44-1846 and this Section shall be completed within one year from the Commission's grant of the exemption. In the event sales are not completed, the issuer shall submit a new petition, which shall be treated as an original filing.

H. Legend on disclosure document. The outside front cover page of every disclosure document used in connection with the offer or sale of securities under A.R.S. § 44-1846 shall contain a prominent legend in plain and concise language stating that the securities are exempt from registration under A.R.S. § 44-1846, but that such exemption is not a finding by the Commission that the disclosure document is true or accurate or that the Commission has passed upon the merits or approved the securities.

I. Promotional securities and promoters' equity. The provisions of R14-4-105 and R14-4-107 shall be applied to this Section when the imposition of such restrictions is necessary because of the speculative nature of the offerings, as defined in R14-4-118(C).

J. Prohibition against advertising and sales commission. The issuer shall not advertise in connection with any offering made under this Section. The issuer shall not pay, directly or indirectly, any remuneration for sales under this Section, other than transfer agent's fees, to any salesman, underwriter, officer, director, or employee of the issuer or to any other person.

K. Limited number of purchasers. Under this Section, issuers may make sales to no more than 35 purchasers.

L. Integration with other offerings. The Commission shall grant exemptions under this Section only once in a six-month period to any corporation, limited liability company, subsidiary, affiliate, or partnership. An issuer shall not use this exemption if an offering was made under this Section by entities controlled by, controlling, or under common control with the issuer within the previous six months. An issuer may not use this exemption if the securities sold under this Section are part of the same program of financing as securities sold under another exemption or a registered offering by virtue of identity of the use of the proceeds, similarity in the method of offering, identity of purchasers, and similarity of security offered.

M. Impound account. The Commission may impound the proceeds of offerings under this Section under the same guidelines and conditions set forth in A.R.S. § 44-1878 and may release the proceeds from impound back to investors after notice and opportunity for hearing is afforded to the issuer.

N. Revocation, suspension, or denial of exemption. The Commission may issue an order denying a petition for exemption under A.R.S. § 44-1846 and this Section, or suspending or revoking an exemption previously issued by the Commission under A.R.S. § 44-1846 and this Section after notice and opportunity for hearing in accordance with A.R.S. § 44-1972, for any grounds set forth in A.R.S. § 44-1921 or for any violation of the Securities Act of Arizona or the rules, regulations, or orders of the Commission issued or promulgated thereunder.

Ariz. Admin. Code § R14-4-127

Adopted effective November 6, 1979 (Supp. 79-6). Amended by final rulemaking at 7 A.A.R. 729, effective January 17, 2001 (Supp. 01-1).