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
Universal Citation: SC Code Regs 13-303
Current through Register Vol. 48, 12, December 27, 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.
C. Escrow of Security
(1) When a security is required to be
escrowed pursuant to Section A of this Rule, the security shall be escrowed
with an escrow agent who is not affiliated with the issuer, its affiliates,
officers or directors, the underwriter or any promoter and a valid escrow
agreement is required.
(2) In order
for an escrow agreement to be considered valid pursuant to this Rule, a signed
copy of the agreement must be filed with and accepted by the Securities
Commissioner who, in his discretion, may require additional terms and condition
prior to acceptance.
Disclaimer: These regulations may not be the most recent version. South Carolina 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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