Md. Code Regs. 02.02.03.12

Current through Register Vol. 51, No. 24, December 2, 2024

Section 02.02.03.12 - Small Corporate Offering Registration

A. Registration by Qualification. An issuer may register securities by qualification under the Maryland Securities Act, Corporations and Associations Article, § 11-504, Annotated Code of Maryland, by using Form U-7 (Small Corporate Offering Registration Form) if the conditions set forth in this regulation and in the instructions to Form U-7 are satisfied.

B. Small Corporate Offering Registration Form.

(1) An application to register securities under this regulation shall be prepared in accordance with the instructions set forth in Form U-7 (Small Corporate Offering Registration Form) adopted by the North American Securities Administrators Association, Inc., on April 29, 1989, which is incorporated by reference.

(2) A completed Form U-7 that has been declared effective by the Commissioner shall serve as the prospectus for an offering registered under this regulation.

C. Eligibility of Issuer. To be eligible to register securities under this regulation, the issuer shall satisfy the following conditions:

(1) The issuer is a corporation organized under the laws of one of the states or possessions of the United States;

(2) The issuer engages in, or proposes to engage in, a business other than petroleum exploration or mining or other extractive industries;

(3) The issuer is not an investment company subject to the Investment Company Act of 1940, 15 U.S.C. §§ 80a - 1 - 80a - 52;

(4) The issuer is not subject to the reporting requirements of § 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m, 78o(d)).

D. Eligibility of Offering. To be eligible for registration under this regulation, an offering shall satisfy the following conditions:

(1) The aggregate offering price does not exceed $1,000,000 in any 12-month period, less the aggregate offering price for all securities sold within 12 months before the start of and during the offering of the securities under 17 CFR § 230.504 (SEC Rule 504, Exemptions for Limited Offerings and Sales of Securities Not Exceeding $500,000) in reliance on any exemption under § 3(b) or in violation of § 5(a) of the Securities Act of 1933 (15 U.S.C. §§ 77c(b), 77e(a));

(2) The offering is not a "blind pool" offering or other offering for which the specific business or properties cannot be described at the time of the offering;

(3) The securities are to be offered and sold only on behalf of the issuer and not on behalf of any selling security holder;

(4) If the securities are common stock, the offering price equals or exceeds $5 per share;

(5) If the securities are options, warrants, or rights for common stock, the exercise price equals or exceeds $5 per share;

(6) If the securities are convertible into common stock, the conversion price equals or exceeds $5 per share; and

(7) The offering is exempt from registration with the SEC under 17 CFR §§ 230.501- 230.508 (SEC Regulation D, Rules Governing the Limited Offer and Sale of Securities Without Registration under the Securities Act of 1933).

E. Disqualifications.

(1) Bases of Disqualification. An issuer may not register an offering under this regulation if the issuer, any of its officers, directors, beneficial owners of 10 percent or more of any class of its equity securities, any promoters currently connected with it in any capacity, any selling agents of the securities to be offered, or any officer, director, or partner of the selling agent:

(a) Within 5 years before the filing of the application for registration under this regulation, has filed a registration statement which is currently the subject of a stop order under any state's securities law;

(b) Within 5 years before the filing of the application for registration under this regulation, has been convicted 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 under false pretenses, larceny, or conspiracy to defraud;

(c) Is currently subject to any state administrative enforcement order or judgment:

(i) That was entered within 5 years before the filing of the application for registration under this regulation, and

(ii) In which fraud or deceit, including untrue statements of material facts or omissions of material facts, was found;

(d) Is subject to any state administrative enforcement order or judgment that prohibits, denies, or revokes the use of any exemption from registration in connection with the current offer, purchase, or sale of securities; or

(e) Is currently subject to any order, judgment, or decree of any court of competent jurisdiction, entered within 5 years before the filing of the application for registration under this regulation, temporarily, preliminarily, or permanently restraining or enjoining the 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 a state.

(2) Limitation of Disqualification. The disqualifications set forth in §E(1)(a)-(c) and (e) of this regulation do not apply if the:

(a) Person subject to the disqualification is licensed or registered to conduct securities-related business in the state in which the disqualifying administrative order or judgment was entered or the broker-dealer employing the person is registered in Maryland; and

(b) Form BD or Form U-4 filed with the Commissioner discloses the disqualifying event.

(3) Waiver of Disqualification. The Commissioner, by order, may waive a disqualification set forth in §E of this regulation if the Commissioner finds that the waiver is consistent with the public interest and within the purposes fairly intended by the policy and provisions of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland.

F. Undertaking Not to Split Stock.

(1) By execution and filing of a Form U-7, the issuer undertakes not to split its common stock, or declare a stock dividend, for 2 years after the effectiveness of the registration.

(2) Notwithstanding §F(1) of this regulation, an issuer may apply to the Commissioner for approval to split its common stock or declare a stock dividend in connection with a subsequent registered public offering.

G. Filing Requirements.

(1) An application for registration under this regulation shall be filed with the Commissioner.

(2) An application for registration under this regulation shall contain:

(a) All forms and exhibits required by the instructions in Form U-7;

(b) If the issuer does not make the offering through a registered broker-dealer, an application for issuer agent registration prepared in accordance with Regulation .11 of this chapter;

(c) The filing fee set forth in the Maryland Securities Act, Corporations and Associations Article, § 11-506(a).

H. Reports Filed with the Commissioner. The issuer shall file quarterly reports that shall:

(1) Contain the information required by Regulation .04 of this chapter; and

(2) Certify that no changes or amendments were made to Form U-7 or any sales or advertising materials other than changes or amendments filed with and declared effective by the Commissioner.

I. Reports to Investors. The issuer shall deliver to each investor any:

(1) Reports required by Form U-7; and

(2) Other reports that the Commissioner may require.

J. Sales and Advertising Literature. The issuer shall file sales and advertising literature with the Commissioner as required by Regulation .08 of this chapter.

Md. Code Regs. 02.02.03.12

Regulation .12 adopted effective May 9, 1994 (21:9 Md. R. 749)