N.J. Admin. Code § 13:47A-12A.5

Current through Register Vol. 56, No. 24, December 18, 2024

Section 13:47A-12A.5 - Issuer and Internet site operator requirements and duties

(a) For an offering to qualify for the transaction exemption set forth in N.J.S.A. 49:3-50(b)(14), the issuer seeking to offer securities that meet those requirements shall provide, and the Internet site operator shall publish on its internet site through which the offering is made, the following information to the prospective investors in writing:

1. A copy of the legend as required in (c) below;

2. Evidence that the issuer is a business organization organized under the laws of this State and is authorized to do business in this State;

3. A description of the company, which includes the following:

i. Its form and date of business organization;

ii. The address and telephone number of its principal office;

iii. Its history;

iv. Its business plan;

v. A description of material agreements;

vi. A description of the intended use of the offering proceeds, at least 65 percent of which shall be specifically disclosed in dollar amount and percentage terms in a Use of Proceeds section and which shall also include any amounts to be paid, as compensation or otherwise, to any owner, executive officer, director, managing member, or other person occupying a similar status or performing similar functions on behalf of the issuer;

4. The identity of each person owning more than 10 percent of the ownership interests of any class of securities of the company, with a description of options or other contingent securities outstanding and a description of the amount of those options or other contingent securities that those persons own;

5. The identity of the executive officers, directors, managing members, and other persons occupying a similar status or performing similar functions in the name of and on behalf of the issuer, including their titles and their prior experience, with a description of options or other contingent securities outstanding and a description of the amount of those options or other contingent securities that those persons own;

6. The terms and conditions of the securities being offered and of any outstanding securities of the company, the minimum and maximum amount of securities being offered, if any, and the percentage ownership of the company represented by the offered securities and the valuation of the company implied by the price of the offered securities. The minimum and maximum amount of securities being offered shall be stated in both dollars and number of shares or units;

7. The minimum offering amount, stated in both dollars and number of shares or units, that is necessary to implement the business plan, and a notice that the funds will only be released to the issuer if the minimum offering amount is reached;

8. The time and date, which may be no more than 12 months from the date of the offering, by which the minimum offering amount, stated in both dollars and number of shares or units, must be reached before the funds will be returned to investors;

9. A provision stating that the investors may cancel their commitment to invest for up to 30 days following the date the investment is made, except that investors who invest within 30 days of the time and date by which the minimum offering amount must be reached as provided in (a)8 above shall only have the amount of time left before the time and date by which the minimum offering amount must be reached in which to cancel their commitment to invest, even if that amount of time is less than 30 days;

10. The identity of any person who has been or will be retained by the issuer to assist the issuer in conducting the offering and sale of the securities, including any Internet site operator, but excluding persons acting solely as accountants or attorneys and employees whose primary job responsibilities involve the operating business of the issuer, rather than assisting the issuer in raising capital;

11. A description of the consideration being paid for assistance to each person identified under (a)10 above;

12. A description of any litigation or legal proceedings involving the company or its management;

13. A discussion of significant factors that make the offering speculative or risky;

14. A description of any conflicts of interest;

15. Financial statements, including a balance sheet, income statement, cash flow statement, and capitalization of issuer;

16. A statement of current liabilities outstanding, including obligations past due and obligations due within 12 months;

17. The internet site address, if applicable, at which the quarterly report required in (e) below will be made available; and

18. Any additional information material to the offering.

(b) For an exempted transaction that meets the requirements of N.J.S.A. 49:3-50(b)(14), the issuer shall execute an escrow agreement as set forth in N.J.A.C. 13:47A-12A.7.

(c) To satisfy the legend requirement of N.J.S.A. 49:3-79, the issuer shall ensure that the:

1. Internet site of the Internet site operator through which the offering is being conducted displays the legend as it appears, as of five business days prior to the first offering date, on the Bureau's website at http://www.njsecurities.gov;

2. Internet site operator requires each prospective investor to acknowledge that he or she has viewed the legend prior to accessing the terms of the offering; and

3. Legend is prominently and conspicuously displayed on the internet site of the Internet site operator, that it appears in at least 12 point font, Times New Roman typeface, black ink, with at least 1.5 line spacing.

(d) For an exempted transaction that meets the requirements of N.J.S.A. 49:3-50(b)(14), the issuer shall, prior to the consummation of a purchase, obtain from the investor in the securities the investor certification as it appears, as of five business days before the first offering date, on the Bureau's website at http://www.njsecurities.gov. The investor shall certify in writing or electronically that the investor understands:

1. The investment may be a high-risk speculative business venture;

2. The offering has not been reviewed or approved by any State or Federal securities regulatory authority and no person or authority has confirmed the accuracy or determined the adequacy of disclosures made related to this offering;

3. The securities are illiquid, there is no ready market for the sale of the securities, and it may be difficult or impossible to sell or otherwise dispose of the investment;

4. The investor may be subject to tax on the taxable income and losses of the company;

5. The investor may contact the Bureau to research the professional background of a financial professional and file complaints;

6. The investor is a New Jersey resident; and

7. Any additional information the Bureau finds relevant.

(e) For an exempted transaction that meets the requirements of N.J.S.A. 49:3-50(b)(14), the issuer shall provide, free of charge, a quarterly report to the issuer's investors.

1. An issuer may satisfy the reporting requirement of this subsection by making the information available on the internet site of the issuer or Internet site operator, if the information is made available within 45 days after the end of each fiscal quarter and remains available until the succeeding quarterly report is issued.

2. A written copy of the quarterly reports shall be provided to an investor upon request.

3. The quarterly report shall include a statement of the compensation received by each director and executive officer, including cash compensation earned since the previous report, as well as any bonuses, stock, stock options, other rights to receive securities of the issuer or any affiliate of the issuer, or any compensation received. For purposes of this paragraph, "compensation" shall also include non-equity compensation, such as incentives, deferred compensation, and any personal benefits, including, but not limited to, use or maintenance of equipment or vehicles, travel expenses, entertainment expenses, and tax gross-ups.

4. The quarterly report shall include an analysis by management of the issuer of the business operations and financial condition of the issuer.

(f) For an exempted transaction that meets the requirements of N.J.S.A. 49:3-50(b)(14), the issuer shall comply with the recordkeeping requirements of N.J.A.C. 13:47A-12A.6.

(g) If there is a material change to the terms of the offering or to the information provided by the issuer, the issuer shall, within three business days of the change, provide each investor who has made an investment notice of the material change and shall update the information on the internet site through which the offering is made.

(h) The issuer shall provide to the Internet site operator, if the Internet site operator does not otherwise have it, documentation evidencing compliance with:

1. The investor investment limitations set forth in N.J.A.C. 13:47A-12A.2(a)6, including, if applicable, documentation that an investor qualifies as an accredited investor or institutional buyer;

2. The investor residency requirements set forth in N.J.A.C. 13:47A-12A.2(a)7; and

3. The disclosure requirements set forth in (a) above.

N.J. Admin. Code § 13:47A-12A.5

Adopted by 48 N.J.R. 1964(a), effective 9/19/2016

Adopted by 49 N.J.R. 2538(b), effective 8/7/2017