3 Colo. Code Regs. § 704-1-51-3.30

Current through Register Vol. 47, No. 22, November 25, 2024

Section 3 CCR 704-1-51-3.30 - Crowdfunding - Disqualification from Relying on Crowdfunding Exemption

A. No exemption under section 11-51-308.5 shall be available for a sale of securities if the issuer; any predecessor of the issuer; any affiliated issuer; any director, executive officer, other officer participating in the offering, general partner or managing member or manager of the issuer; any beneficial owner of 20% or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power; any promoter connected with the issuer in any capacity at the time of such sale; any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of securities; any general partner or managing member of any such solicitor; or any director, executive officer or other officer participating in the offering of any such solicitor or general partner or managing member of such solicitor:

1. Has a conviction that became final within ten years before such sale, of any felony or misdemeanor:

a. In connection with the purchase or sale of any security;

b. Involving the making of any false filing with the Securities and Exchange Commission or a state securities regulatory agency;

c. Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities; or

d. Involving fraud or deceit in which the loss to the victim or victims exceeds $10,000;

2. Is subject to any final order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:

a. In connection with the purchase or sale of any security;

b. Involving the making of any false filing with the Securities and Exchange Commission or a state securities regulatory agency; or

c. Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

3. Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); a federal banking agency; the Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission; the Federal Trade Commission, the Consumer Financial Protection Bureau, or the National Credit Union Administration that:

a. At the time of such sale, bars the person from:

i. Association with an entity regulated by such commission, authority, agency, bureau or officer;

ii. Engaging in the business of securities, insurance or banking; or

iii. Engaging in savings association or credit union activities; or

b. Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct, including making untrue statements of material facts or omitting to state material facts, entered within five years before such sale;

4. Is subject to a final order of the Securities and Exchange Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b- 3(e) or (f)) that, at the time of such sale:

a. Suspends or revokes such person's registration as a broker, dealer, municipal securities dealer or investment adviser;

b. Places limitations on the activities, functions or operations of such person; or

c. Bars such person from being associated with any entity or from participating in the offering of any penny stock;

5. Is subject to any final order of the Securities and Exchange Commission entered within five years before such sale that orders the person to cease and desist from committing or causing a violation or future violation of:

a. Any scienter based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10 b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other Rule or regulation thereunder; or

b. Section 5 of the Securities Act of 1933 (15 U.S.C. 77e);

6. Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission constituting conduct inconsistent with just and equitable principles of trade;

7. Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Securities and Exchange Commission that, within five years before such sale, was the subject of a final refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued;

8. Is subject to a final United States Postal Service false representation order entered within five years before such sale, or is, at the time of such sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations;

9. Has filed a registration statement which is subject to a final stop order entered under section 11-51-306, or any other state's securities law, within five years before such sale; or

10. Is currently subject to any final state administrative enforcement order or judgment, including Colorado, entered by the Commissioner, or any other state's securities administrator, within five years prior to such sale.

B. For purposes of paragraph A. of this Rule, "final order" shall mean a written directive or declaratory statement issued by a federal or state agency described in subparagraph A.3. under applicable statutory authority that provides for notice and an opportunity for hearing, which constitutes a final disposition or action by that federal or state agency.

C. The Commissioner may, following a written request, and in the exercise of discretion, waive, either before or after an offering has commenced, subparagraphs 5. through 10. of paragraph A. of this Rule and subsections (d)(1)(v) through (viii) of Rule 506 (17 CFR 230.506(d)(1)(v) -(viii)) if upon a showing of good cause and without prejudice to any other action by the Commissioner, the Commissioner determines that, in balancing all relevant factors, granting the waiver is consistent with the objective of the Colorado Securities Act to protect investors and maintain public confidence in securities markets while avoiding unreasonable burdens on participants in capital markets.

3 CCR 704-1-51-3.30

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