Today's Law As Amended

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AB-2096 Securities transactions: qualification: notification: small company.(2013-2014)



SECTION 1.

 Section 25112 of the Corporations Code is amended to read:

25112.
 (a) (1)  Any security issued by a person which is the issuer of any security registered under Section 12 of the Securities Exchange Act of 1934 or issued, issued  by an investment company registered under the Investment Company Act of 1940, and which is not eligible for qualification under Section 25111, may be qualified by notification under this section.
(2) Any offer or sale of any security that meets all of the following criteria may be qualified by notification under this section:
(A) The aggregate amount of securities sold to all investors by the issuer within any 12-month period is not more than one million dollars ($1,000,000).
(B) The aggregate amount of securities sold to any investor by the issuer, including any amount sold during the 12-month period preceding the date of the transaction, does not exceed five thousand dollars ($5,000), or a greater amount as the commissioner may provide by rule or order, unless the investor is an accredited investor as defined in Section 230.501 of Title 17 of the Code of Federal Regulations.
(C) The offering meets the requirements of the federal exemption for limited offerings and sales of securities not exceeding one million dollars ($1,000,000) in Section 230.504 of Title 17 of the Code of Federal Regulations.
(D) The issuer files with the commissioner, provides to investors, and makes available to potential investors the following:
(i) A Small Company Offering Registration disclosure document on Form U-7, as adopted by the North American Securities Administrators Association, prior to the commencement of the offering of securities. The issuer shall ensure that the cover page of Form U-7 includes all of the following statements, in bold typeface no smaller than 12-point type:
(I) The Commissioner of Business Oversight has in no way passed upon the merits or qualifications of, or recommended or given approval to, any person, security, or transaction associated with this offering.
(II) The company described in this disclosure form is seeking to raise a minimum offering of [insert minimum offering amount].
(III) If the sum of the investment commitments received by the company does not equal or exceed the minimum offering amount by [insert date] your investment in the company will be returned to you.
(ii) For offerings that, together with all other offerings of the issuer within the preceding 12-month period, have, in the aggregate, offering amounts of one hundred thousand dollars ($100,000) or less, the following:
(I) The income tax returns filed by the issuer for the most recently completed year, if any.
(II) The financial statements of the issuer certified by the principal executive officer of the issuer to be true and complete in all material respects.
(iii) For offerings that, together with all other offerings of the issuer within the preceding 12-month period, have, in the aggregate, offering amounts of more than one hundred thousand dollars ($100,000), but not more than five hundred thousand dollars ($500,000), all financial statements reviewed by a public accountant who is independent of the issuer, using professional standards and procedures for the review or standards and procedures established by the commissioner by rule.
(iv) For offerings that, together with all other offerings of the issuer within the preceding 12-month period, have, in the aggregate, offering amounts of more than five hundred thousand dollars ($500,000), audited financial statements.
(E) The issuer sets aside in a separate third-party escrow account all funds raised as part of the offering, to be held in escrow until the time that the minimum offering amount is reached. If the minimum offering amount is not reached within one year of the effective date of the offering, the issuer shall return all funds to investors.
(F) The issuer, a predecessor of the issuer, an affiliated issuer, a director, executive officer, or other officer participating in the offering, a general partner or managing member of the issuer, a beneficial owner of 20 percent or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power, a promoter connected with the issuer in any capacity at the time of the sale, an investment manager of an issuer that is a pooled investment fund, a person that has been or will be paid, directly or indirectly, remuneration for solicitation of purchasers in connection with the sale of securities, a general partner or managing member of the investment manager or solicitor, or any director, executive officer, or other officer participating in the offering of the investment manager or solicitor or general partner or managing member of the investment manager or solicitor would not be disqualified as a “bad actor” under subdivision (d) of Section 230.506 of Title 17 of the Code of Federal Regulations.
(G) Any other requirement set forth by rule adopted by the commissioner.
(b) An application for qualification under this section shall contain such all  information and be accompanied by such all  documents as shall be required by rule of the commissioner, in addition to the information specified in Section 25160 and the consent to service of process required by Section 25165. For this purpose, the commissioner may classify issuers and types of securities.
(c) If no stop order or order under subdivision (a) of Section 25143 is in effect under this law, qualification of the sale of the securities under this section automatically becomes effective (and the securities may be offered and sold in accordance with the terms of the application as amended) at 12 o’clock noon  p.m.  California time of the 10th business day after the filing of the application or the last amendment thereto or at such an  earlier time as the commissioner determines.

SEC. 2.

 Section 25503 of the Corporations Code is amended to read:

25503.
 (a)  Any person who violates Section 25110, 25130 25130,  or 25133, or a condition of qualification under Chapter 2 (commencing with Section 25110) of this part, imposed pursuant to Section 25141, or an order suspending trading issued pursuant to Section 25219, shall be liable to any person acquiring from him the security sold in violation of such that  section, who may sue to recover the consideration he paid for such security with interest thereon at the legal rate, less the amount of any income received therefrom, upon the tender of such the  security, or for damages, if he no longer owns the security, or if the consideration given for the security is not capable of being returned. Damages, if the plaintiff no longer owns the security, shall be equal to the difference between (a) his the plaintiff’s  purchase price plus interest at the legal rate from the date of purchase and (b)  the value of the security at the time it was disposed of by the plaintiff plus the amount of any income received therefrom by the plaintiff.
Damages, (b)   if  If  the consideration given for the security is not capable of being returned, damages  shall be equal to the value of that consideration plus interest at the legal rate from the date of purchase, provided the security is tendered; and if the plaintiff no longer owns the security, damages in such case shall be equal to the difference between (a)  the value of the consideration given for the security plus interest at the legal rate from the date of purchase and (b)  the value of the security at the time it was disposed of by the plaintiff plus the amount of any income received therefrom by the plaintiff. Any A  person who violates Section 25120 or a condition of qualification under Chapter 3 (commencing with Section 25120) of this part imposed pursuant to Section 25141, shall be liable to any person acquiring from him the security sold in violation of such that  section who may sue to recover the difference between (a)  the value of the consideration received by the seller and (b)  the value of the security at the time it was received by the buyer, with interest thereon at the legal rate from the date of purchase. Any A  person on whose behalf an offering is made and any underwriter of the offering, whether on a best efforts or a firm commitment basis, shall be jointly and severally liable under this section, but section. However,  in no event shall any underwriter (unless such underwriter shall have an underwriter be liable, unless the underwriter  knowingly received from the issuer for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interest in the underwriting) be liable  underwriting,  in any suit or suits authorized under this section section,  for damages in excess of the total price at which the securities underwritten by him  the underwriter  and distributed to the public were offered to the public. Any A  tender specified in this section may be made at any time before entry of judgment. No A  person shall not  be liable under this section for violation of Section 25110, 25120 25120,  or 25130 if the sale of the security is qualified prior to the payment or receipt of any part of the consideration for the security sold, even though an offer to sell or a contract of sale may have been made or entered into without qualification.
(c) The court shall award attorney’s fees and costs to a prevailing purchaser in an action brought against any person who violates Section 25110 for failure to comply with paragraph (2) of subdivision (a) of Section 25112 and may award treble or punitive damages.