SECTIONS 25140-25151 - California Statutes

CORPORATIONS CODE

SECTION 25140-25151

25140. (a) (1) The commissioner may issue a stop order denying
effectiveness to, or suspending or revoking the effectiveness of, any
qualification of an underwritten offering of securities under
Section 25111, 25112 or 25131 or may suspend or revoke any permit
issued under Section 25113 or 25122 if he or she finds (A) that the
order is in the public interest and (B) that the proposed plan of
business of the issuer or the proposed issuance or sale of securities
is not fair, just, or equitable, or that the issuer does not intend
to transact its business fairly and honestly, or that the securities
proposed to be issued or the method to be used in issuing them will
tend to work a fraud upon the purchaser thereof.
(2) In the case of an application for or qualification of
securities under Section 25111, 25112, or 25131 that is not an
underwritten offering of securities, the commissioner may issue a
stop order denying effectiveness to, or suspending or revoking the
effectiveness of the qualification unless he or she finds (A) that
the stop order is not in the public interest and (B) that the
proposed plan of business of the applicant or the proposed issuance
of securities is fair, just, and equitable, that the issuer intends
to transact its business fairly and honestly, and that the securities
that the issuer proposes to issue or the method to be used in
issuing them are not such as will work a fraud upon the purchaser
thereof.
(b) The commissioner may refuse to issue a permit under Section
25113 unless he or she finds that the proposed plan of business of
the applicant and the proposed issuance of securities are fair, just,
and equitable, that the applicant intends to transact its business
fairly and honestly, and that the securities which it proposes to
issue and the methods to be used by it in issuing them are not such
as, in his or her opinion, will work a fraud upon the purchaser
thereof.
(c) The commissioner may refuse to issue a permit under Section
25122 unless he or she finds that the proposed plan of
recapitalization or reorganization and the proposed issuance of
securities are fair, just, and equitable to all security holders
affected.
(d) Notwithstanding the provisions of subdivisions (a) and (b) of
this section, the commissioner shall not have authority to issue any
stop order or to refuse to issue or to suspend or revoke any permit
on the basis that the price at which the security is to be offered is
unfair, unjust or inequitable in any case where the security is
being publicly offered for cash pursuant to a registration statement
under the Securities Act of 1933 and the offering is the subject of a
firm commitment underwriting by an underwriter or syndicate of
underwriters all of whom are registered under the Securities Exchange
Act of 1934. For the purposes of this subdivision a firm commitment
underwriting means an underwriting pursuant to which the underwriter
or syndicate of underwriters is committed to take up and pay for the
securities subject only to the usual or customary conditions, but not
including any "market out" or similar condition operative after the
time of commencement of the offering. (A condition relating to the
suspension of all trading on a national securities exchange, a
banking holiday, war, civil insurrection, or the like is not a
"market out" or similar condition within the meaning of this
subdivision.) Nothing contained in this subdivision shall deny
authority to the commissioner to issue a stop order or to refuse to
issue or to suspend or revoke a permit because of unreasonable
discounts, commissions or other compensation to underwriters, sellers
or others, unreasonable promoters' profits or participations or
unreasonable amounts or kinds of options.

25141. The commissioner may impose as a condition of qualification
under Chapter 2 (commencing with Section 25110) or Chapter 3
(commencing with Section 25120) of this part conditions requiring the
deposit in escrow of securities, imposing a legend condition
restricting the transferability thereof, impounding the proceeds from
the sale thereof, limiting the expense in connection with the sale
thereof, requiring the waiver of assets, dividends or voting rights
by the holders of promotional securities, or any other condition if
the commissioner finds that without such condition the offering will
be unfair, unjust or inequitable. The commissioner may in his or her
discretion modify or remove any such conditions when in his or her
opinion they are no longer necessary or appropriate.

25142. When application is made for a permit to issue securities or
to deliver other consideration (whether or not the security or
transaction is exempt from qualification or not required to be
qualified) in exchange for one or more bona fide outstanding
securities, claims, or property interests, or partly in such exchange
and partly for cash, the commissioner is expressly authorized to
approve the terms and conditions of such issuance and exchange or
such delivery and exchange and the fairness of such terms and
conditions, and is expressly authorized to hold a hearing upon the
fairness of such terms and conditions, at which all persons to whom
it is proposed to issue securities or to deliver such other
consideration in such exchange have the right to appear. The
application for a permit to deliver consideration other than
securities shall be in such form, contain such information and be
accompanied by such documents as shall be required by rule of the
commissioner or, in the absence thereof, in substantially the form of
an application filed pursuant to Section 25121.

25143. (a) The commissioner may by order summarily postpone or
suspend the effectiveness of any qualification pending final
determination of any proceeding under this chapter. Upon the entry of
the order, the commissioner shall promptly notify each person
specified in subdivision (b) of this section that it has been entered
and of the reasons therefor and that upon the receipt of a written
request the matter will be set down for hearing to commence within 15
business days after such receipt unless the applicant consents to a
later date. If no hearing is requested and none is ordered by the
commissioner, the order will remain in effect until it is modified or
vacated by the commissioner. If a hearing is requested or ordered,
the commissioner, after notice and hearing in accordance with
subdivision (b) of this section, may modify or vacate the order or
extend it until final determination.
(b) No stop order may be entered under this chapter except under
subdivision (a) of this section without appropriate prior notice to
the applicant, the issuer, and the person on whose behalf the
securities are to be or have been offered and hearing in accordance
with the provisions of the Administrative Procedure Act, Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, in connection with which the commissioner shall
have all of the powers granted thereunder. In the case of
qualification by permit, such hearing shall be held upon such notice
within 20 business days after a written request therefor by the
applicant unless the permit is issued prior to the expiration of such
period or the applicant consents to a later date.

25144. The commissioner may vacate or modify a stop order if he
finds that the conditions which caused its entry have changed or that
it is otherwise in the public interest to do so.

25145. Every issuer qualifying securities for sale in this state
shall at all times keep and maintain a complete set of books,
records, and accounts of such sales and the disposition of the
proceeds thereof, and shall thereafter, at such times as are required
by the commissioner, make and file in the office of the commissioner
a report, setting forth the securities sold by it under such
qualification, the proceeds derived therefrom and the disposition
thereof.

25146. For a period of 18 months after the qualification is
effective, the commissioner may by rule or order require an issuer
who has filed an application to file reports not more often than
semiannually for the purpose of keeping reasonably current the
information contained in the application; provided, that the
commissioner may not require the filing of any such report after
completion of the offering if a nonissuer transaction in the security
would be entitled to exemption under Section 25101.

25147. The commissioner may by rule or order require as a condition
of qualification that any security qualified under Section 25113 be
sold only on a specified form of subscription or sale contract, and
that a signed or conformed copy of each contract be preserved for any
period up to three years specified in the rule or order.

25148. Except in cases where the delivery of a prospectus or proxy
statement is required under the Securities Act of 1933 or the
Securities Exchange Act of 1934, the commissioner may by rule or
order require as a condition of qualification under Section 25112,
25113, 25122 or 25131 that a prospectus or proxy statement containing
any designated part of the information required in the application
be given to each person to whom an offer is made before the sale of
the security to be issued under the permit or order.

25149. The commissioner may act as escrow holder for securities
required to be deposited in escrow by his order.

25150. The commissioner may accept and act upon the opinions,
appraisements and reports of any engineers, appraisers, or other
experts which may be presented by an applicant on any question of
fact concerning or affecting the securities proposed to be offered
and sold. In lieu of, or in addition to, such opinions,
appraisements, and reports, the commissioner may have any or all
matters concerning or affecting such securities investigated,
appraised, passed upon and certified to him by engineers, appraisers,
or other experts selected by him.

25151. (a) Upon the filing of a written request for the consent to
transfer securities referred to in Section 25133, accompanied by such
information and documents as the commissioner may by rule require,
the commissioner shall issue such consent if the commissioner finds
that the transfer requested will be fair, just, and equitable to the
proposed transferees, and otherwise the commissioner shall deny such
consent.
(b) The issuance of the commissioner's consent pursuant to this
section shall not be a qualification of the transaction pursuant to,
nor an exemption from the qualification requirements of, Section
25110, 25120, or 25130.