HAR §16-39-352. Availability

(a) SCOR is intended to allow small companies to conduct limited offerings of securities. SCOR uses a simplified offering format designed to provide adequate disclosure to investors concerning the issuer, the security offered, and the offering itself. Certain issuers may not be able to make adequate disclosure using the SCOR format and will, therefore, be unable to utilize SCOR. (b) The commissioner finds that SCOR is generally unsuitable for the following issuers and programs: (1) Holding companies, and companies whose principal purpose is owning stock in or supervising the management of other companies; (2) Portfolio companies, including but not limited to real estate investment trusts as defined in NASAA’s "Statement of Policy Regarding Real Estate Investment Trusts" referenced in section 16-39-315(11); (3) Issuers with complex capital structures; (4) Commodity pools; (5) Equipment leasing programs; (6) A "blind pool" or other offering for which the specific business to be engaged in or property to be acquired by the issuer cannot be specified; and (7) Real estate programs. (c) SCOR registrations are available only to the issuer of the securities and not to any affiliate of that issuer or to any other person for resale of the issuer's securities. (d) In addition, each of the following requirements shall be met: §16-39-352 39-38 (1) The issuer shall be a corporation or centrally managed limited liability company organized under the law of the United States or Canada, or any state, province, or territory or possession thereof, or the District of Columbia, and have its principal place of business in one of the foregoing; (2) The issuer shall be required to engage in a business other than petroleum exploration or production or mining or other extractive industries; (3) The issuer shall not be a development stage company that either has no specific business plan or purpose or has indicated that its business plan is to engage in merger or acquisition with an unidentified company or companies or other entity or person; (4) The offering price for common stock (and the exercise price, if the securities offered are options, warrants, or rights for common stock, and the conversion price, if the securities are convertible into common stock) shall be equal to or greater than one dollar per share. The offering price for common ownership interests in a limited liability company (and the exercise price, if the securities are options, warrants, or rights for common ownership interests, and the conversion price, if the securities are convertible into common ownership interests) shall be equal to or greater than one dollar per unit of interest; (5) The aggregate offering price of the securities offered (within or outside this State) shall not exceed $1,000,000 less the aggregate offering price of all securities sold within the twelve months before the start of and during the offering of the securities under the Securities Act, 17 CFR section 230.504, in reliance on any exemption under section 3(b) of the §16-39-352 39-39 Securities Act, in reliance on the exemption under section 3(a)(11) of the Securities Act, or in violation of section 5(a) of the Securities Act; (6) Commissions, fees, or other remuneration for soliciting any prospective purchaser in connection with the offering in this State shall only be paid to persons who, if required to be registered or licensed, the issuer believes or has reason to believe are appropriately registered or licensed in this State; and (7) Financial statements shall be prepared in accordance with either U.S. or Canadian generally accepted accounting principles. If appropriate, a reconciliation note should be provided. If the issuer has not conducted significant operations, statements of receipts and disbursements shall be included in lieu of statements of income. Interim financial statements may be unaudited. All other financial statements shall be audited by independent certified public accountants; provided that if each of the following four conditions are met, such financial statements in lieu of being audited may be reviewed by independent certified public accountants in accordance with the Accounting and Review Service Standards promulgated by the American Institute of Certified Public Accountants or the Canadian equivalent: (A) The issuer shall not have previously sold securities through an offering involving the general solicitation of prospective investors by means of advertising, mass mailing, public meetings, "cold call" telephone solicitation, or any other method directed toward the public; (B) The issuer has not been previously required under federal, state, §16-39-352 39-40 provincial, or territorial securities laws to provide audited financial statements in connection with any sale of its securities; (C) The aggregate amount of all previous sales of securities by the issuer (exclusive of debt financing with banks and similar commercial lenders) shall not exceed U.S. $1,000,000; and (D) The amount of the present offering does not exceed U.S. $1,000,000. (e) SCOR registration shall not be available to investment companies subject to the Investment Company Act, nor shall it be available to issuers subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act. [Eff 6/30/08; am and comp 11/18/23] (Auth: HRS §485A-606) (Imp: HRS §§485A-303, 485A-606) §16-39-353 Disqualification from use of SCOR registration. (a) SCOR registration shall not be available for the security of any issuer if that issuer or any of its officers, directors, ten per cent shareholders, promoters or any selling agents of the security to be offered, or any officer, director, or partner of such selling agent: (1) Has filed an application for registration which is the subject of a currently effective registration stop order entered pursuant to any federal, state, or provincial securities law within five years prior to the filing of the SCOR registration application; (2) Has been convicted within five years prior to the filing of the SCOR registration application of any felony or misdemeanor in connection with the offer, purchase, or sale of any security or any felony involving fraud or deceit; including but not limited to forgery, embezzlement, obtaining money §16-39-353 39-41 under false pretenses, larceny, or conspiracy to defraud; (3) Is currently subject to any federal, state, or provincial administrative enforcement order or judgment entered by any state or provincial securities commissioner or the SEC within five years prior to the filing of the SCOR registration application; (4) Is subject to any federal, state, or provincial administrative enforcement order or judgment in which fraud or deceit, including but not limited to making untrue statements of material facts and omitting to state material facts, was found and the order or judgment was entered within five years prior to the filing of the SCOR registration application; (5) Is subject to any federal, state, or provincial administrative enforcement order or judgment which prohibits, denies, or revokes the use of any exemption from registration in connection with the offer, purchase, or sale of securities; (6) Is currently subject to any order, judgment, or decree of any court of competent jurisdiction temporarily, preliminarily, or permanently restrains or enjoins such party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security, or involving the making of any false filing with any state or with the SEC, entered within five years prior to the filing of the SCOR registration application; or (7) Has violated the law of a foreign jurisdiction governing or regulating any aspect of the business of securities or banking or, within the past five years, has been the subject of an action of a securities regulator of a foreign jurisdiction denying, revoking, or suspending the right to engage in the §16-39-353 39-42 business of securities as a broker-dealer, agent, or investment adviser, or investment adviser representative or is the subject of an action of any securities exchange or self-regulatory organization operating under the authority of the securities regulator of a foreign jurisdiction suspending or expelling such person from membership in the exchange or self-regulatory organization. (b) The prohibitions of subsection (a)(1) through (3) and (a)(5) shall not apply if the person subject to the disqualification is duly licensed or registered to conduct securities-related business in the state or province in which the administrative order or judgment was entered against the person, or if the broker-dealer employing the person is licensed or registered in this State and the Form BD filed in this State discloses the order, conviction, judgment, or decree relating to the person. (c) No person disqualified under this section may act in any capacity other than that for which the person is licensed or registered. Any disqualification under this section shall be automatically rescinded if the jurisdiction that created the basis for the disqualification determines upon a showing of good cause that it is not necessary to deny or sanction the registration. [Eff 6/30/08; comp 11/18/23] (Auth: HRS §485A-606) (Imp: HRS §§485A-303, 485A-606) §16-39-354 Agreement by registrant on splits and dividends of stock or ownership interests. By filing for SCOR registration in this State, the registrant agrees that it shall not split its common stock or common ownership interests, or declare a stock or ownership interest dividend, for two years after the effective date of the registration. [Eff 6/30/08; comp 11/18/23] (Auth: HRS §485A-606) (Imp: HRS §§485A-303, 485A-606) §16-39-355 39-43 §16-39-355 Documents to be filed for SCOR registration. In addition to filing a properly completed SCOR form, an applicant for SCOR registration shall file the following exhibits with the commissioner: (1) Form of selling agency agreement; (2) The issuer's articles of incorporation, articles of organization, or other charter documents, and all amendments thereto; (3) The issuer's bylaws or operating agreement, as amended to date; (4) Copies of any resolutions by directors setting forth terms and provisions of capital stock to be issued or by managers or managing members setting forth terms and provisions of capital ownership interest to be issued; (5) Any indenture, form of note, or other contractual provision containing terms of notes or other debt, or of options, warrants, or rights to be offered; (6) Specimen of security or ownership interest certificate to be offered (including any legend restricting resale); (7) Consent to service of process accompanied by appropriate corporate or company resolution; (8) Copy of all advertising or other materials directed to or to be provided to investors in the offering; (9) Form of escrow agreement for the escrow of proceeds; (10) Consent to inclusion in the disclosure document of the accountant's report; (11) Consent to inclusion in the disclosure document of any tax adviser's opinion or description of tax consequences; (12) Consent to inclusion in the disclosure document of any evaluation of litigation or administrative action by counsel; §16-39-355 39-44 (13) Form of any subscription agreement for the purchase of securities in this offering; (14) Opinion of an attorney licensed to practice in a state or territory of the United States that the securities to be sold in the offering have been duly authorized and when issued upon payment of the offering price shall be legally and validly issued, fully paid, and nonassessable and binding on the issuer in accordance with their terms; and (15) Agreement by the registrant that the registrant shall not split its common stock or common ownership interests, or declare a stock or ownership interest dividend, for two years after the effectiveness of the registration. [Eff 6/30/08; comp 11/18/23] (Auth: HRS §485A-606) (Imp: HRS §485A- 303) SUBCHAPTER 4 REGISTRATION OF BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, AND INVESTMENT ADVISER REPRESENTATIVES A. Broker-Dealers