La. Admin. Code tit. 10 § XIII-509

Current through Register Vol. 50, No. 11, November 20, 2024

Section XIII-509 - Promotional Securities of "Cheap Stock"

A. Securities which have been issued within two years of the date of filing, or are to be issued to underwriters, promoters or insiders for an amount less than the public offering price or for a consideration other than cash (unless the value of such consideration can be conclusively established) will be subject to the following conditions and restrictions.

1. The issue of such securities in connection with a public offering may be permitted if the application discloses:

a. a reasonable relationship between:

i. the consideration paid by such persons and the public offering price;

ii. the number of shares issued and the total amount of securities to be outstanding upon completion of the offering; and

iii. the ratio of the promoters' equity to the amount of their investment;

b. a representation by the grantees that such shares were acquired for investment and will not be traded, transferred or sold for a period of at least one year from date of commencement of the offering, or upon completion thereof, and until there has been compliance with all legal requirements imposed for the redistribution thereof;

c. that the shares issued (together with commission and expenses of sale) will not result in a dilution of more than 33 1/3 percent of the value of the shares outstanding in the hands of the public at any time, based on the public offering price.

2. Such shares will ordinarily be required held in escrow in accordance with the following provisions:

a. an escrow holder may be the commissioner or a bank or trust company, approved by him in this or any other state;

b. an application for escrow arrangements shall contain, in addition to whatever other information the commissioner may require, the following:

i. a list of the owners of such shares and respective amounts held;

ii. copy of resolution of the board of directors or letter of authorization selecting the agent, and written consent of the latter to act as such;

iii. copies of escrow agreements, instruments and instructions;

c. the escrow conditions shall provide that the securities subject thereto will not be released without notification and consent of the commissioner.

3. The same standards shall apply to shares acquired from selling shareholders unless it appears that they are so separated from the issuer and lacking in control as to permit waiver or modification of these requirements.

La. Admin. Code tit. 10, § XIII-509

Adopted by the Commissioner of Securities, November 9, 1971.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:707 and R.S. 51:708.