Ariz. Admin. Code § 14-4-140

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

Section R14-4-140 - Accredited Investor Exemption

A. As used in this Section, the following terms shall have the meaning indicated:

1. "Accredited investor" shall have the meaning provided in R14-4-126.

2. "Form D" shall mean Form D of Regulation D ( 17 CFR 239.500 ) promulgated by the SEC under the Securities Act of 1933.

3. "Rule 504" shall mean Rule 504 of Regulation D ( 17 CFR 230.504(1999) ) promulgated by the SEC under the Securities Act of 1933, which is incorporated by reference and is on file with the office of the Secretary of State. The incorporated material contains no later editions or amendments. Copies of rule 504 are available from the Commission and from the Superintendent of Documents, Government Printing Office, Washington, D.C. 20402.

4. "Securities Act" shall mean the Arizona Securities Act, A.R.S. §§ 44-1801 through 44-2126.

5. "SEC" shall mean the United States Securities and Exchange Commission.

B. Offers and sales of securities by an issuer in compliance with Rule 504 shall be exempt from the registration requirements of A.R.S. §§ 44-1841 and 44-1842, subject to the satisfaction of the provisions of this Section. The exemption from A.R.S. § 44-1842 is available for the issuer's employees, officers, and directors who make offers or sales on behalf of the issuer if they were not retained for the primary purpose of making such offers or sales. The exemption from A.R.S. § 44-1842 is not available for third parties or dealers.

C. This exemption is not available to a "blind pool offering" within the meaning of A.R.S. § 44-1801, an issuer that either has no specific business plan or purpose or whose business plan is to engage in a merger or acquisition with an unidentified entity or person, or an issuer that is excluded from the exemption pursuant to subsection (M).

D. Offers of securities must specify that sales shall be made only to accredited investors. Sales of securities shall be made exclusively to accredited investors.

E. The issuer shall reasonably believe, after inquiry, that each purchaser is buying the security for the purchaser's own account and not with the view to distribute, or for sale in connection with a distribution of, the security. Any resale of a security sold in reliance on this Section within 12 months of the initial purchase from the issuer, except a resale to an accredited investor or pursuant to a registration statement effective under A.R.S. Title 44, Chapter 12, Article 7, shall be presumed to be with a view to distribution and not for investment. Securities issued under this Section may only be resold pursuant to registration or an exemption under the Securities Act.

F. A general announcement of the proposed offering may be made by any means. The general announcement shall include only the following information.

1. The name, address, and telephone number of the issuer of the securities.

2. The name, a brief description, and price, if known, of any security to be issued.

3. A brief description of the issuer's business.

4. The type, number, and aggregate amount of securities being offered.

5. The name, address, and telephone number of the person to contact for additional information.

6. A statement that discloses all of the following terms and conditions:

a. Sales will only be made to accredited investors.

b. No money or other consideration is being solicited or will be accepted in connection with the general announcement.

c. The securities have not been registered with or approved by any state securities agency or the SEC and are being offered and sold under an exemption from registration.

G. Dissemination of the general announcement of the proposed offering to persons who are not accredited investors shall not disqualify the issuer from claiming the exemption under this rule.

H. In connection with an offer made under this Section, the issuer may provide information in addition to the general announcement under subsection (F) if such information meets one of the two following conditions:

1. Is delivered through an electronic database that is restricted to persons who have been identified as accredited investors.

2. Is delivered after the issuer reasonably believes, after inquiry, that the prospective purchaser is an accredited investor.

I. No telephone solicitation shall be permitted unless prior to placing the call the issuer reasonably believes, after inquiry, that the prospective purchaser to be solicited is an accredited investor.

J. The cover page of any offering documents, or any subscription documents if there are no other offering documents, shall include a conspicuous legend that states that:

1. The securities may be sold only to accredited investors for investment and not in connection with a distribution.

2. Investors may not resell the securities unless the securities are first registered or qualify for an exemption from registration.

3. The securities have not been approved or disapproved by the SEC or the Arizona Corporation Commission nor have they passed upon the merits of or otherwise approved the offering.

K. A legend regarding resale restrictions shall be conspicuously set forth on the front of any certificate that represents a security issued or resold in accordance with this rule. Any certificate legend shall no longer be required on the termination of any resale restrictions in accordance with this Section or 12 months after the initial purchase from the issuer, whichever occurs first.

L. The issuer shall file with the Commission a copy of Form D within 15 calendar days after the first sale within or from Arizona, a consent to service of process, a copy of the general announcement, and the fee set forth in A.R.S. § 44-1861(G).

M. This exemption is not available to an issuer if it, or any of its predecessors, affiliates, directors, officers, general partners, beneficial owners of 10% or more of any class of its equity securities, promoters, or any underwriter of the securities or any partner, director, or officer of such underwriter:

1. Has been convicted within the 10 years preceding the filing of the notice required by this Section, or at any time thereafter prior to the termination of the offering, of a felony or misdemeanor involving racketeering or a transaction in securities, or of which fraud is an essential element.

2. Is subject to an order, judgment, or decree of any court of competent jurisdiction entered within five years of the date of filing of the notice required by this Section, temporarily, preliminarily, or permanently enjoining or restraining any conduct or practice in connection with the sale or purchase of securities, or involving fraud, deceit, or racketeering.

3. Has been subject to any state or federal administrative order or judgment in connection with the purchase or sale of securities entered within five years preceding the filing of the notice required by this Section, or at any time thereafter prior to the termination of the offering.

4. Is subject to an order of any state or federal agency denying or revoking registration or licensure as a broker or dealer in securities or as an investment adviser or investment adviser representative, or is subject to an order denying or revoking membership in a national securities association registered under the Securities Exchange Act of 1934, or has been suspended for a period exceeding six months or expelled from membership in a national securities exchange registered under the Securities Exchange Act of 1934.

N. Any disqualification caused by subsection (M) shall cease to exist if any of the following occurs:

1. The basis for the disqualification has been removed by the jurisdiction creating it.

2. The jurisdiction in which the disqualifying event occurred issues a written waiver of the disqualification.

3. The jurisdiction in which the disqualifying event occurred declines in writing to enforce the disqualification.

Ariz. Admin. Code § R14-4-140

Adopted effective August 14, 1995 (Supp. 95-3). Section repealed; new Section adopted by final rulemaking at 6 A.A.R. 4737, effective November 22, 2000 (Supp. 00-4).