18 NCAC 06A .1313          REGISTRATION OF DIRECT PARTICIPATION PROGRAM SECURITIES

(a)  As a condition to the registration of direct participation program securities, the issuer or dealer(s) effecting sales of such securities pursuant to such registration shall:

(1)           deliver to each offeree of the security in this State prior to any sale of the security to such offeree, a written statement of the investor suitability standards which each offeree must meet in order to purchase the security.  The statement may be contained in any offering circular, prospectus or other written document delivered to the offeree; and

(2)           determine, prior to the sale of the security to each person in this State, that the person meets the investor suitability standards applicable to the security.  For purposes of this determination, the issuer or dealer(s) shall be entitled to rely conclusively upon a written statement or questionnaire signed by the person and received in good faith and without knowledge that the information stated therein is inaccurate.

(b)  The minimum investor suitability standards which shall be imposed for registered offerings of direct participation program securities are as follows:

(1)           The investor shall either have a minimum net worth of two hundred twenty‑five thousand dollars ($225,000) or a minimum net worth of sixty thousand dollars ($60,000) and had during the last tax year or estimates that the investor will have during the current tax year, taxable income of at least sixty thousand dollars ($60,000) without regard to the investment in the security.

(2)           Net worth shall be determined exclusive of principal residence, mortgage thereon, home furnishings and automobiles.  In the case of sales to fiduciary accounts, the investor suitability standards shall be met by the fiduciary or the fiduciary account or by the donor who directly or indirectly supplies the funds to purchase the securities.

(c)  The administrator will permit the substitution of lower suitability standards if such lower standards are consistent with the standards outlined in the NASAA policy statement for that specific type of program.  (See CCH NASAA Reports for such policy statements.)

(d)  The administrator may modify or waive, upon the showing of good cause, the requirements of Paragraphs (a), (b) and (c) of this Rule, in whole or in part, with respect to a particular security, offering or transaction or the administrator may require higher investor suitability standards with respect to a particular security offering or transaction where necessary for the protection of investors.  For purposes of this Rule, "good cause" means a substantial reason related to the investor protection goals intended to be served by the investor suitability requirements of Paragraphs (a), (b), or (c) of this Rule, determined with respect to the relative investment experience, financial sophistication, and financial substance of the offerees; the amounts of the proposed individual investments in the proposed offering; the business history and financial substance of the issuer of the securities; and the relative risk of loss presented by the particular business activity of the issuer.

 

History Note:        Authority G.S. 78A‑49(a);

Eff. April 1, 1981;

Amended Eff. May 1, 2005; October 1, 1988; January 1, 1984;

Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. December 6, 2016.