South Carolina Code of Regulations › Chapter 13 - ATTORNEY GENERAL › Article 2 - SECURITIES › Subarticle 3 - REGISTRATION OF SECURITIES AND NOTICE FILING OF FEDERAL COVERED SECURITIES › Section 13-303 - Impoundment of Proceeds or Stock

Current through Register Vol. 48, No. 6, June 28, 2024
A.
				The Securities Commissioner may require as a condition of registration that a
				security issued within the previous five (5) years or to be issued to a
				promoter for a consideration substantially less than the public offering price
				or to a person for a consideration other than cash be deposited in escrow; and
				that the proceeds from the sale of the registered security in this State be
				impounded until the issuer receives a specified amount from the sale of the
				security either in this State or elsewhere.
B. Impoundment of Proceeds
(1) When proceeds from the sale of securities
				are required to be impounded pursuant to Section A of this Rule, the proceeds
				must be deposited in an interest bearing escrow or trust account with an
				impoundment agent. The impoundment agent may not be affiliated with the issuer,
				its affiliates, its officers or directors, the underwriter or any promoter and
				a valid impoundment agreement is required.
(2) For an impoundment agreement to be
				considered valid, the following terms and conditions must be met:
(a) A signed copy of the agreement must be
				filed with the Securities Commissioner;
(b) The agreement must be signed by an
				officer of the issuer, an officer of the underwriter (if applicable), and an
				officer of the impoundment agent. The aforesaid individuals must have the
				authority to sign such documents;
(c) The agreement shall provide that the
				impounded proceeds are not subject to claims by creditors, affiliates,
				associates, or underwriters of the issuer until the proceeds have been released
				to the issuer pursuant to the terms of the agreement;
(d) A summary of the principal terms of the
				agreement must be included in the registration statement; and
(e) The agreement must provide that the
				Securities Commissioner has the right to inspect and make or require to be made
				copies of the records of the impoundment agent at any reasonable time wherever
				the records are located.
(3) The impoundment agent shall notify the
				Securities Commissioner in writing upon the release of the proceeds. If the
				proceeds are insufficient to meet the minimum requirements as established by
				the Securities Commissioner in his sole discretion within the time prescribed
				by the agreement the impoundment agent must release and return the proceeds
				directly to the investors with or without interest, depending upon the terms
				and conditions of the agreement, and without deduction for expenses, including
				impoundment agent fees. All interest earned shall be distributed pro-rata to
				the investors, along with the proceeds.
(4) If a person, who is an underwriter or an
				officer, director, promoter, affiliate or associate of the issuer, purchases
				securities that are a part of the public offering being sold pursuant to the
				registration statement and if the proceeds from that purchase are used for the
				purpose of completing the impoundment requirements imposed by this Rule, the
				following conditions must be met:
(a) The
				persons must be purchasing the securities with investment intent rather than
				with intent of resale and on the same terms as unaffiliated public
				investors;
(b) The prospectus must
				contain a disclosure that such persons may purchase securities of the issuer
				for purposes of completing the impoundment requirements imposed by this Rule;
				and
(c) All securities so purchased
				will neither be defined as promotional shares, nor be subject to escrow under
				Section C of this Rule.