3 Colo. Code Regs. § 704-1-51-3.32

Current through Register Vol. 47, No. 20, October 25, 2024

Section 3 CCR 704-1-51-3.32 - Use of Electronic Offering Documents and Electronic Signatures

A. The following terms are defined for purposes of this section, 51-3.32

1. "Offering documents" include, but are not limited to, the registration statement, prospectus, applicable agreements, charter, by-laws, opinion of counsel and other opinions, specimen, indenture, consent to service of process and associated resolution, sales materials, subscription agreement, and applicable exhibits.

2. "Sales materials" include only those materials to be used in connection with the solicitation of purchasers of the securities approved as sales literature or other related materials by the SEC, FINRA, and the States, as applicable.

B. Use of Electronic Offering Documents and Subscription Agreements

1. An issuer of securities or agent acting on behalf of the issuer may deliver offering documents over the Internet or by other electronic means, or in machine readable format, provided:

a. Each offering document:

i. is prepared, updated and delivered in a manner consistent and in compliance with state and federal securities laws;

ii. satisfies the formatting requirements applicable to printed documents, such as font size and typeface, and which is identical in content to the printer version (other than electronic instructions and/or procedures as may be displayed and non-substantive updates to daily net asset value which can be updated more efficiently in the electronic version);

iii. is delivered as a single, integrated document or file; when delivering multiple offering documents, the documents must be delivered together as a single package or list;

iv. where a hyperlink to documents or content that is external to the offering documents is included, provides notice to investors or prospective investors that the document or content being accessed is provided by an external source; and

v. is delivered in an electronic format that intrinsically enables the recipient to store, retrieve and print the documents;

AND

b. the issuer or agent acting on behalf of the issuer:

i. obtains informed consent from the investor or prospective investor to receive offering documents electronically;

ii. ensures that the investor or prospective investor receives timely, adequate, and direct notice when an electronic offering document has been delivered;

iii. employs safeguards to ensure that delivery of offering documents occurred at or before the time required by law in relation to the time of sale; and

iv. maintains evidence of delivery by keeping records of its electronic delivery of Offering Documents and makes those records available on demand by the Commissioner.

2. Subscription agreements may be provided by an issuer or agent acting on behalf of the issuer electronically for review and completion, provided the subscription process is administered in a manner that is similar to the administration of subscription agreement in paper form, as follows:

a. before completion of any subscription agreement, the issuer or agent acting on behalf of the issuer must review with the prospective investor all appropriate documentation related to the prospective investment including on how to complete the subscription agreement;

b. mechanisms are established to ensure a prospective investor reviews all required disclosure and scrolls through the document in its entirety prior to initialing and/or signing; and

c. unless otherwise allowed by the Securities Commissioner, a single subscription agreement is used to subscribe a prospective investor in no more than one offering

3. Delivery requires that the offering documents be conveyed to and received by the investor or prospective investor, or that the storage media in which the offering documents are stored be physically delivered to the investor or prospective investor in accordance with subsection (A)(1).

4. Each electronic document shall be preceded by or presented concurrently with the following notice: "Clarity of text in this document may be affected by the size of the screen on which it is displayed."

5. Informed consent to receive offering documents electronically pursuant to (A)(2)(a) in this section may be obtained in connection with each new offering or globally, either by an issuer or an agent acting on behalf of the issuer. The investor may revoke this consent at any time by informing the party to whom the consent was give, or, if such party is no longer available, the issuer.

6. Investment opportunities shall not be conditioned on participation in the electronic offering documents and subscription agreements initiative.

7. Investors or prospective investors who decline to participate in an electronic offering documents and subscription agreements initiative shall not be subjected to higher costs-other than the actual direct cost of printing, mailing, processing, and storing offering documents and subscription agreements- as a result of their lack of participation in the initiative, and no discount shall be given for participating in an electronic offering documents and subscription agreements initiative.

8. Entities participating in an electronic initiative shall maintain, and shall require participating underwriters, dealer-managers, placement agents, broker-dealers, and/or other selling agents to maintain written policies and procedures covering the use of electronic offering documents and subscription services.

9. Entities and their contractors and agents having custody and possession of electronic offering documents, including electronic subscription agreements, shall store them in a non-rewriteable and non-erasable format.

10. This section does not change or waive any other requirement of law concerning registration or presale disclosure of securities offerings.

C. Use of Electronic Signatures

1. An issuer of securities or agent acting on behalf of the issuer may provide for the use of electronic signatures provided:

a. The process by which electronic signatures are obtained:

i. will be implemented in compliance with the Electronic Signatures in Global and National Commerce Act ("Federal E-Sign"), and the Uniform Electronic Transactions Act, including an appropriate level for security and assurances of accuracy, and where applicable, required federal disclosures

ii. will employ an authentication process to establish signer credentials;

iii. will employ security features that protect signed records from alteration, and;

iv. will provide for retention of electronically signed documents in compliance with applicable laws and regulations, by either the issuer or agent acting on behalf of the issuer;

b. An investor or prospective investor shall expressly opt-in to the electronic signature initiative, and participation may be terminated at any time; and

c.Investment opportunities shall not be conditioned on participation in the electronic signature initiative.

2. Entities that participate in an electronic signature initiative shall maintain, and shall require underwriters, dealer-managers, placement agents, broker-dealers, and other selling agents to maintain, written policies and procedures covering the use of electronic signatures

3. An election to participate in an electronic signature initiative pursuant to (1)(b) in this section may be obtained in connection with each new offering, or by an agent acting on behalf of the issuer, The investor may revoke this consent at any time informing the party to whom the consent was given, or, if such party is no longer available, the issuer.

D. Incorporation by Reference

1. Electronic Signatures in Global and National Commerce Act ("Federal E-Sign"), as effective on June 30, 2000 is hereby incorporated by reference. No later amendment or edition of Federal E-Sign is incorporated into this Section 51-3.32. All referenced laws and regulations shall be available for copying or public inspection during regular business hours from the Division of Securities, Department of Regulatory Agencies, 1560 Broadway, Suite 900, Denver, CO 80202. The Division of Securities will provide certified copy of the material incorporated at cost or will provide the requester with information on how to obtain a certified copy.

2. Uniform Electronic Transactions Act, C.R.S. section § 24-71.3-102 et seq., as effective on May 30, 2002 is hereby incorporated by reference. No later amendment or edition 24-71.3-101 et seq., is incorporated into this Section 51-3.32. All referenced laws and regulations shall be available for copying or public inspection during regular business hours from the Division of Securities, Department of Regulatory Agencies, 1560 Broadway, Suite 900, Denver, CO 80202. The Division of Securities will provide certified copy of the material incorporated at cost or will provide the requester with information on how to obtain a certified copy.

3 CCR 704-1-51-3.32

38 CR 01, January 10, 2015, effective 1/30/2015

38 CR 08, April 25, 2015, effective 6/1/2015

38 CR 18, September 25, 2015, effective 10/15/2015

39 CR 01, January 10, 2016, effective 1/30/2016

40 CR 01, January 10, 2017, effective 1/30/2017

40 CR 12, June 25, 2017, effective 7/15/2017

41 CR 13, July 10, 2018, effective 7/31/2018

43 CR 05, March 10, 2020, effective 3/30/2020

46 CR 05, March 10, 2023, effective 3/30/2023