Arizona Administrative Code
Title 14 - PUBLIC SERVICE CORPORATIONS; CORPORATIONS AND ASSOCIATIONS; SECURITIES REGULATION
Chapter 4 - Corporation Commission - Securities
Article 3 - RULES OF PROCEDURE FOR INVESTIGATIONS, EXAMINATIONS, AND ADMINISTRATIVE PROCEEDINGS
Section R14-4-308 - Rescission and Restitution
Universal Citation: AZ Admin Code R 14-4-308
Current through Register Vol. 30, No. 38, September 20, 2024
A. When a person or persons have violated the Securities Act or the IM Act, or any rule or order of the Commission, the Commission may require the person or persons to make rescission and/or restitution as provided herein.
B. If a rescission offer is ordered by the Commission,
1. The respondent shall submit
the following materials to the Division and, upon approval from the Director,
distribute the materials to the purchasers:
a. A written offer to repurchase stating in
reasonable detail the facts out of which liability arose and, in the event of a
violation of A.R.S. §§
44-1991,
44-1992,
or
44-3241,
the correct, true, or omitted facts. An offer to repurchase the security shall
include an offer of:
i. Cash equal to the
fair market value of the consideration paid, determined as of the date such
payment was originally paid by the buyer; together with
ii. Interest at a rate pursuant to A.R.S.
§
44-1201
for the period from the date of the purchase payment to the date of repayment;
less
iii. The amount of any
principal, interest, or other distributions received on the security for the
period from the date of purchase payment to the date of repayment.
b. The offer to repurchase shall
be accompanied by a prospectus and other documents making full written
disclosure about the financial and business condition of the issuer and the
financial and business risks associated with the retention of the
securities.
c. The offer to
repurchase shall state that such offer may be accepted by the purchaser at any
time within a specified period of not less than 30 days after the date of
receipt thereof.
2. The
offer and any other materials required to be presented to the purchaser shall
be made within a period specified by the Commission.
3. Financial statements prepared in
accordance with
R14-4-120,
A.R.S. §
44-3159,
or other documents relating to the business of the respondent as requested by
the Director or the Commission, shall be provided to the Director. If a
respondent demonstrates that it cannot obtain audited financial statements
without unreasonable effort or expense, then the respondent shall provide to
the Director a notarized statement of financial condition. The financial
statements or documentation shall demonstrate that the person or persons
funding the rescission offer has or have adequate funds to pay the amount
ordered pursuant to subsection (B)(1)(a) to all purchasers of the securities
who are eligible to accept the rescission offer. The seller, issuer, or other
third party may fund the rescission offer.
4. The Commission may order that funds be
deposited in escrow.
5. When the
rescission offer has been completed and the appropriate funds paid, the person
funding the rescission offer shall verify to the Director that the rescission
offer was made in accordance with this rule. The verification may be performed
by an independent third party, such as an accountant or escrow agent, by
providing the pertinent records documenting the rescission offer to the
Director. All of the following information must be included:
a. Names, addresses, and telephone numbers of
all securities holders of the issuer who had a right to receive the rescission
offer, the amount and purchase dates of securities held by such securities
holders, and the amount of principal, interest, or other distributions on all
securities held by such securities holders.
b. Names, addresses, and telephone numbers of
all securities holders of the issuer who did not receive the rescission offer
and the reason why they did not receive the rescission offer, the amount and
purchase dates of securities held by such securities holders, and the amount of
principal, interest, or other distributions on all securities held by such
securities holders.
c. Verification
of receipt of the rescission offer by all securities holders who had a right to
and did receive the rescission offer.
d. A list of securities holders who accepted
the rescission offer and those who did not accept.
e. Verification of payment of principal and
interest ordered to be paid to all such securities holders who accepted the
rescission offer.
6.
Based on the circumstances of the respondent and the purchasers, if necessary
or appropriate to the public interest and consistent with the protection of the
investors, the Commission may prescribe by order alternative rescission offer
terms, including:
a. The offer of other
identified assets in lieu of cash if the respondent lacks sufficient cash to
offer the amount required under subsection (B)(1)(a).
b. The offer of a specified lesser amount
than the amount required under subsection (B)(1)(a) if the respondent lacks
sufficient assets to offer the amount required under subsection
(B)(1)(a).
c. The inclusion in the
repurchase offer of information material to an understanding of the issuer, in
addition to that required by subsection (B)(1)(b), if such information would be
required if the securities were being registered.
d. A shorter period of time during which the
offer to repurchase may be accepted.
e. Waiver of specified information required
by subsection (B)(5) if the Commission determines that producing such
information will be unduly burdensome.
C. If restitution is ordered by the Commission,
1. The amount payable as damages
to each purchaser shall include:
a. Cash
equal to the fair market value of the consideration paid, determined as of the
date such payment was originally paid by the buyer; together with
b. Interest at a rate pursuant to A.R.S.
§
44-1201
for the period from the date of the purchase payment to the date of repayment;
less
c. The amount of any
principal, interest, or other distributions received on the security for the
period from the date of purchase payment to the date of repayment.
2. Financial statements prepared
in accordance with
R14-4-120,
A.R.S. §
44-3159,
or other documents relating to the business of the respondent as requested by
the Director or the Commission, shall be provided to the Director. If a
respondent demonstrates that it cannot obtain audited financial statements
without unreasonable effort or expense, then the respondent shall provide to
the Director a notarized statement of financial condition. The financial
statements or documentation shall demonstrate that the person paying
restitution has adequate funds to pay all purchasers the amount computed in
subsection (C)(1).
3. The
Commission may order that funds be deposited in escrow.
4. The Commission may order the respondent to
provide the following information to the Division:
a. Names, addresses, and telephone numbers of
all securities purchasers who had a right to receive restitution under the
Commission's order; amount and purchase dates of securities purchased by such
purchasers; fair market value of any non-cash consideration received by
respondent from each purchaser of such securities; and any payment of
principal, interest, or any other distribution on such security.
b. Verification of payment of principal and
interest ordered to be paid to all such purchasers.
5. Based on the circumstances of the
respondent and the purchasers, if necessary or appropriate to the public
interest and consistent with the protection of the investors, the Commission
may prescribe by order alternative restitution terms, including:
a. The payment of other identified assets in
lieu of cash if the respondent lacks sufficient cash to pay the amount required
under subsection (C)(1).
b. The
payment of a specified lesser amount than required under subsection (C)(1) if
the respondent lacks sufficient assets to meet the subsection (C)(1)
requirement.
Disclaimer: These regulations may not be the most recent version. Arizona may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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