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 › Section 260.140.01 - Suitability of Investors

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) If a limited offering qualification is
				  approved pursuant to a condition imposed by the Commissioner, or a
				  representation by the applicant, confining the sale of securities under the
				  qualification to persons meeting specified standards of experience, financial
				  responsibility, tax status or other specification, any sale of such securities
				  pursuant to the qualification to persons not meeting such specified standards
				  is a violation of the terms and conditions of qualification.
(b) The responsibility for assuring that
				  sales of securities are limited to persons meeting the suitability standards
				  applicable to an offering is upon the issuer and upon each person, including
				  broker-dealers and agents, who participates in the distribution of the
				  securities. Issuers and participating broker-dealers should adopt reasonable
				  procedures to assure (i) that persons charged with selling the securities are
				  familiar with the suitability standards, (ii) that appropriate means are at
				  hand to obtain the information required to comply with such standards, (iii)
				  reasonable steps are taken to assure that persons selling the securities comply
				  with the limitations imposed under the suitability standards; provided that
				  nothing herein contained is a limitation upon liability under Section
				  25503 of the Code (or under
				  Section 25504 insofar as it pertains to
				  Section 25503).
(c) Adherence to a suitability standard
				  imposed in connection with a qualification, by condition or otherwise, shall
				  not relieve a broker-dealer from compliance with Section
				  260.218.2 of these rules or Rule
				  15b10-3 under the Securities Exchange Act of 1934.
(d) Any prospectus used in connection with an
				  offering on which suitability standards are imposed under the terms and
				  conditions of qualification shall include a description of such suitability
				  standards. (See Sections
				  260.140.112.1 and
				  260.140.123.2 of these
				  rules.)
(e) Where the issuer is a
				  small business issuer and the proposed maximum aggregate offering price for all
				  the securities to be sold in the offering anywhere does not exceed $5,000,000,
				  Sections 260.140.05 (except for subsection
				  (c) of that rule), 260.140.31 and 260.140.50 (except for the requirement that
				  the initial offering price shall not be less than $2.00 per share) shall be
				  waived, if the issuer seeks a limited offering or open qualification (depending
				  on the class of prospective investors) to sell its securities only:
(1) to investors each of whom
(A) has a minimum net worth of at least
				  $75,000 and had minimum gross income of $50,000 during the last tax year and
				  will have (based on a good faith estimate) minimum gross income of $50,000
				  during the current tax year, or
(B)
				  in the alternative, has a minimum net worth of $150,000, provided that in
				  either case the investment shall not exceed 10 percent of the net worth of the
				  investor; or