Hawaii Administrative Rules › Title 16 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS › Chapter 38 - SECURITIES - REPEALED › Subchapter 6 - STATEMENTS OF POLICY RELATING TO REGISTRATION OF SECURITIES › Section 16-38-11.5 - Impoundment of proceeds

Current through June, 2024
(a) The
				commissioner shall ordinarily require, as a condition to registration of
				speculative and promotional securities, that all proceeds from the sale of
				securities less selling expenses be impounded in escrow until the time that a
				sufficient amount has been realized to accomplish the purposes of the offering.
				For purposes of this chapter, "speculative and promotional securities" means
				securities issued by a company that is organized within three years of the
				filing, that has no earnings record, is in the development, exploratory or
				promotional stage, and is financing an initial or proposed enterprise, or is a
				company in poor financial condition intending to raise additional working
				capital to continue its operation. An executed copy of the escrow agreement
				shall be filed with the commissioner and shall contain the following
				information in addition to whatever other information the commissioner may
				require:
(1) Funds required to be impounded
				shall be deposited in a separate trust account with a bank, a corporate
				trustee, or similar institution authorized to do business in this State, or
				other person acceptable to the commissioner;
(2) Net proceeds shall be returned directly
				to the investors by the escrow holder and not through the intermediary of the
				issuer in the event that the minimum prescribed amount is not obtained within
				the specified period, in the event the depositor certifies to the commissioner
				that the terms and conditions of the escrow agreement have not been met and
				requests authorization to return the impounded funds to the purchasers. If the
				minimum prescribed amount is obtained within the specified period, the escrow
				depository shall so certify to the commissioner and request authorization to
				release the impounded funds to the issuer;
(3) No certificates evidencing securities
				purchased (other than subscription agreements or receipts) shall be issued
				until after release of the funds from escrow;
(4) In the event that checks, drafts, money
				orders or other remittances are not made payable to the escrow depository, all
				monies received from the sale of securities, after collection, and deduction
				for allowable selling commission and expenses, the issuer, or dealer, if any,
				shall promptly (and in no event later than ten days after receipt thereof)
				transmit to the escrow depository the net amount required to be
				impounded;
(5) A commitment by the
				escrow depository to furnish to the commissioner or the commissioner's staff,
				upon request for information, data concerning the status of, or amounts on
				deposit in, the escrow account;
(6)
				Ordinary and standard terms and conditions which are generally required by
				escrow agents in connection with the payment of fees, charges and expenses,
				liability, claims, litigation, notice and hold-harmless and indemnification
				clauses, etc.; and
(7) That no
				funds are to be released from impoundment, and no changes effectuated in the
				agreement except by written consent and authorization of the
				commissioner.