Ariz. Admin. Code § 14-4-144

Current through Register Vol. 30, No. 50, December 13, 2024

Section R14-4-144 - Suitability Standards Pursuant to A.R.S. Section 44-1845

A. Any issuer applying for registration under A.R.S. Title 44, Chapter 12, Article 7, and engaging in a transaction of a type specified in A.R.S. § 44-1845(B)(1) may apply for a special registration. Pursuant to A.R.S. § 44-1845(C), the special registration will impose the suitability standards of subsections (B) or (C) on the transaction in lieu of the conditions and standards prescribed under A.R.S. §§ 44-1876, 44-1877, 44-1878, 44-1921(1), (3), and (4), and the rules under those Sections, except when the sale of securities works or would tend to work a fraud or deceit upon the investors.

B. For all offerings listed on the Nasdaq SmallCapSM Market, the dealer, or the issuer if engaging in the sale of its securities, must have a reasonable belief that the potential investor satisfies any of the following conditions:

1. Minimum of $100,000, or $150,000 when combined with spouse, in gross income during the prior year and a reasonable expectation that the investor will have such income in the current year; or

2. Minimum net worth of $250,000, or $300,000 when combined with spouse, exclusive of home, home furnishings and automobiles, with the investment not exceeding 10% of the net worth of the investor, together with spouse, if applicable.

C. For offerings not listed on the Nasdaq SmallCapSM Market, the dealer, or the issuer if engaging in the sale of its securities, must have a reasonable belief that the potential investor satisfies any of the following conditions:

1. Minimum of $150,000, or $200,000 when combined with spouse, in gross income during the prior year and a reasonable expectation that the investor will have such income in the current year; or

2. Minimum net worth of $350,000, or $400,000 when combined with spouse, exclusive of home, home furnishings and automobiles, with the investment not exceeding 10% of the net worth of the investor, together with spouse, if applicable.

D. The suitability standards specified in this Section are not available for direct participation programs, including real estate programs, real estate investment trusts, commodity pools, oil and gas programs, equipment leasing programs, and other similar programs that let investors participate directly in the cash flow and tax benefits of the underlying investments.

E. The issuer, or any of its predecessors, affiliates, directors, officers, general partners or beneficial owners of 10% or more of any class of its equity securities, or any underwriter of the securities shall not fall within any of the disqualification provisions of A.R.S. § 44-1901(G)(1) though (6).

F. The Commission may, at its discretion, waive any disqualification caused by subsection (E).

G. Any disqualification caused by subsection (E) 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.

H. Adherence to a suitability standard imposed in connection with an offering subject to this Section, by condition or otherwise, shall not relieve a dealer from compliance with R14-4-130(A)(4).

I. Any offering document used in connection with an offering in which suitability standards are imposed under this Section shall prominently and conspicuously include a description of the applicable suitability standards.

Ariz. Admin. Code § R14-4-144

Adopted effective September 11, 1998 (Supp. 98-3). Amended by final rulemaking at 7 A.A.R. 729, effective January 17, 2001 (Supp. 01-1).