California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2 - Corporate Securities › Article 4 - Standards for the Exercise of the Commissioner's Authority › Subarticle 11 - Oil and Gas Interests › Disclosure and Marketing Requirements › Section 260.140.130.2 - Contents of Prospectus

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) The following information shall be
						included in the prospectus of each program:
(1) Information on Cover Page. There should
						be set forth briefly on the cover page of the prospectus a summary which should
						include the following:
The title and general nature of the units being
						  offered; the maximum aggregate amount of the offering; the minimum amount of
						  net proceeds; the minimum subscription price; the period of the offering; the
						  maximum amount of any sales or underwriting commissions to be paid (or if non,
						  or if such commissions are paid by the sponsor), the nature of any sharing
						  arrangement and fees; the estimated amount of organization and offering
						  expenses, the estimated amount to be paid during the first twelve (12) months
						  following commencement of operations for administrative and similar
						  services.
(2) Definitions.
						Technical terms used in the prospectus should be defined either in a glossary
						or as they appear in the prospectus.
(3) Risk Factors. Participants should be
						advised in a carefully organized series of short, concise paragraphs, under
						subcaptions where appropriate, of the risks to be considered before making an
						investment in the program. These paragraphs should include a cross-reference to
						further information in the prospectus. In particular, in those cases where the
						sponsor has elected the compensation arrangement described in Section
						260.140.125.1(a)
						(Cost and Revenue Sharing), there should be set forth the fact that there is a
						conflict where the sponsor must decide whether to complete a well which is
						anticipated to have a marginal return since the tangible costs he would incur
						would not appear to warrant his investment, although completion of the well
						would be in the best interests of the participants.
(4) Business Experience. The business
						experience of the sponsor(s), including general partner(s), principal officers
						of a corporate general partner (chairman of the board, president, vice
						president, treasurer, secretary or any person having similar authority or
						performing like functions) and others responsible for the program, shall be
						prominently disclosed in the prospectus, such disclosure indicating their
						business experience for the past ten years. The lack of experience or limited
						experience of the sponsor, or other person supplying services to the program,
						shall be prominently disclosed in the prospectus.
(5) Compensation. All indirect and direct
						compensation which may be paid by the program to the sponsor or any affiliate
						of every type and from every source shall be summarized in the forepart of the
						prospectus.
(6) Use of Proceeds.
						State the purposes for which the net proceeds to the program are intended to be
						used and the approximate amount intended to be used for each such purpose. Also
						state the minimum aggregate amount necessary to initiate the program and the
						disposition of the funds raised if they are not sufficient for that
						purpose.
(7) Assessments. If
						provisions for assessments are provided, the method of assessment and the
						penalty for default shall be prominently set forth.
(8) Investment Objectives and Policies.
						Describe the investment objectives and policies of the program.
(9) Description of Oil and Gas Interests.
						State the location and describe the general character of all materially
						important oil and gas interests now held or presently intended to be acquired
						by the program.
(10) Performance.
(A) The previous program experience of the
						sponsor and other relevant parties shall be disclosed in the prospectus for all
						programs during the past ten years which:
(i)
						Involved a public offering registered under State or Federal securities
						laws,
(ii) Involved a private or
						limited offering, the results of which are material to an informed investment
						decision by the participant.
(B) Information on previous programs shall
						include, but not be limited to, the following:
(i) Name of the program, including the type
						of legal entity and state of incorporation or organization.
(ii) The effective date of the offering, the
						date it commenced operations and the date of dissolution or termination or, if
						it is continuing.
(iii) The total
						amount of units, the gross amount of capital raised by the program, the number
						of participants, and the amount of investment of the sponsor, if
						applicable.
(iv) The drilling
						results of the program, including the number of gross and net wells drilled,
						both oil and gas, both exploratory and developmental, and both successful and
						unsuccessful.
(v) Total dollar
						amounts of federal tax deductible items passed on to participants.
(vi) Cash distribution to
						participants.
(vii) Compensation
						and fees to the sponsor, segregated as to type.
(viii) Disclosure of any development wells
						drilled which did not or have not returned the investment therein within four
						years.
(ix) Such additional or
						different disclosures of the success or failure of the programs as may be
						permitted or required by the Commissioner.
(C) All of the foregoing information shall be
						set forth on a cumulative basis for each program.
(D) The following caveat should be
						prominently featured in the presentation of the foregoing information: "It
						should not be assumed that participants in the offering covered by this
						prospectus will experience returns, if any, comparable to those experienced by
						investors in prior programs."
(E)
						Information required to be set forth in Subsection (A) above shall be supported
						in the application for qualification by an affidavit of the sponsor that the
						performance summary is a fair representation of the information contained in
						the audited financial statement or the Federal income tax returns of the
						program or in other reports or data of the program or
						sponsor.
(11) Operating
						Data. Include appropriate data with respect to each property which is
						separately described in answer to paragraph (9) above.
(12) The Program.
(a) Date of formation.
(b) Place of formation.
(c) Sponsor.
(d) Address and telephone number of the
						program and the sponsor.
(e)
						Duration.
(f) Information called
						for in items (a) through (e) hereof shall be given for any other programs in
						which the program invests.
(13) Summary of Terms of the Program.
(a) Powers of the sponsor.
(b) Rights and liabilities of the
						participants.
(c) Allocation of
						costs and revenues.
(d) Termination
						and dissolution.
(e) Meetings and
						reports.
(f) Amendment of
						partnership agreement.
(g)
						Provision for additional assessments.
(h) Other pertinent
						matters.
(14) Federal Tax
						Consequences.
(a) A summary of an opinion of
						tax counsel acceptable to the Commissioner and/or a ruling from the IRS
						covering major state and federal tax questions relative to the program, which
						may be based on reasonable assumptions such as those described in Section
						260.140.130.4 of these rules. To
						the extent the opinion of counsel or IRS ruling is based on the maintenance of
						or compliance with certain requirements or conditions by the sponsor(s), the
						prospectus shall to the extent practicable, contain representations that such
						requirements or conditions have been met and that the sponsors shall use their
						best efforts to continue to meet such requirements or conditions.
(b) Tax treatment of the program.
(c) Tax treatment of the
						participants.
(d) Allocation of
						intangible drilling deductions, depreciation, depletion allowances,
						etc.
(e) Method of allocation of
						losses or profits and cash distributions upon transfer of a unit or the rights
						to income or revenues.
(f) Any
						other pertinent information applicable to the tax shelter aspects of the
						investment.
(g) Possibility of
						requirement for filing tax returns with states in which prospects are
						located.
(15) Units.
(a) Amount.
(b) Minimum purchase.
(c) Assessability.
(d) Transferability.
(e) Voting rights.
(16) Plan of Distribution.
(a) Discounts and commissions.
(b) Estimated fees and expenses paid or
						reimbursed by the program.
(c)
						Indemnification and hold harmless provisions.
(d) Terms of payment.
(e) Identity of underwriter, managing dealer
						and/or principal selling agent.
(f)
						Type of underwriting best efforts or firm commitment.
(g) Minimum and maximum sales.
(h) Escrow provisions.
(i) Material relationship of underwriter to
						the program, if any.
(17)
						Pending Legal Proceedings. Briefly describe any legal proceedings to which the
						program or the sponsor is a party which is material to the program and any
						material legal proceedings between sponsor and participants in any prior
						program of the sponsor. Also, describe any material legal proceedings to which
						any of the program's or sponsor's property is subject.
(18) Transactions with Affiliates. Describe
						fully any transactions and the dollar amount thereof which may be entered into
						between the program and the sponsor or any affiliate. Include a full
						description of the material terms of any agreement and the dollar amount
						thereof between the program and the sponsor or any affiliate. Where the sponsor
						sponsors other programs, describe the equitable principles which will apply in
						resolving any conflict between the programs. In the case where the program has
						been in existence, include all transactions and contracts of the program with
						the sponsor or any affiliate during the period of such existence.
(19) Interest of Affiliates in Program
						Property. If within the past five years the sponsor or any affiliate has been
						in the chain of title or had a beneficial interest in any property to be
						acquired by the program this fact must be disclosed.
(20) Interest of Counsel and Experts in the
						Sponsor or Program. Where counsel for the selling representatives or the
						sponsor are named in the prospectus as having passed upon the legality of the
						units being registered or upon other legal matters in connection with the
						registration or offering of such units, there should be disclosed in the
						prospectus the nature and amount of any direct or indirect material interests
						of any such counsel, other than legal fees to be received by such counsel, in
						the sponsor or any affiliate. Any such interest received or to be received in
						connection with the registration or offering of the units being registered,
						including the ownership or receipt by counsel, or by members of the firm
						participating in the matter, of securities of the sponsor, any affiliate of the
						program for services shall be disclosed. Employment by the sponsor, other than
						retainer is legal counsel, should be disclosed in the prospectus.
(21) Investment Company Act of 1940. Where
						beneficial interests of a program are to be sold, treatment under the
						Investment Company Act of 1940 must be disclosed.
(22) Financial Statements. As provided
						elsewhere in these rules.
(23)
						Additional Information. Any additional information which is material should be
						included.