§485-10 Registration by qualification; application to commissioner, etc. (a) All securities required by this chapter to be registered before being sold in the State and not entitled to registration by notification shall be registered only by qualification in the manner provided by this section.

(b) The commissioner of securities shall receive and act upon applications for registration of securities by qualification and may prescribe forms upon which the commissioner may require the applications to be submitted. Applications shall be in writing and shall be duly signed by the applicant and sworn to by any person having knowledge of the facts and shall be filed in the office of the commissioner and may be made either by the issuer of the securities for which registration is applied for, or by any registered dealer desiring to sell the same within the State. Application for registration of securities by qualification shall be made by the filing in the office of the commissioner of the following:

(1) An application for registration which, in the case of an offering or distribution by or in whole or in part for the account of an issuer, shall include the information specified in subparagraphs (A) through (E) of this paragraph (1), and in the case of a nonissuer offering or distribution shall contain such of the information specified in subparagraphs (A) through (E) of this paragraph (1) as the commissioner may prescribe, together, in every case, with such other information as the commissioner prescribes:

(A) Name and address of issuer and address of issuer's principal office in the State, if any;

(B) Title of securities to be registered and total amount of each class of the securities to be offered in the State and elsewhere;

(C) Amount of each class of securities to be offered in the State, offering price per unit and in the aggregate and the amount of the registration fee;

(D) If a registration statement as to the securities has been filed under the Securities Act of 1933, the effective date of registration statement, if effective, and a statement as to whether any stop order has been made with respect thereto pursuant to the Securities Act of 1933, or whether any notice of intent to issue a stop order has been given or to the best knowledge of the applicant is threatened;

(E) The states, territories, or other jurisdiction, if any, which have refused by order or otherwise to authorize the sale of the securities to the public or have revoked or suspended the right to sell the securities or in which any proceeding for the revocation or suspension of such right is pending, or in which an application for qualification has been withdrawn.

(2) In the case of an offering or distribution by or in whole or in part for the account of an issuer, a copy of each of the following, and in the case of a nonissuer offering or distribution, copies of such of the following as the commissioner prescribes:

(A) The issuer's charter or articles of association or other instrument of organization, together with all amendments thereto, certified by the officer of the State of the issuer's incorporation or organization having custody thereof, if not already on file in the office of the commissioner;

(B) The issuer's bylaws, together with all amendments thereto, certified by the secretary or any other duly authorized officer of the issuer;

(D) The basic underwriting agreement, if any, and any agreement or agreements among underwriters and dealers pertaining to the distribution of the securities within the State;

(E) An opinion or opinions of counsel as to the legality and validity of the securities and their issuance;

(F) A specimen copy of each certificate to be registered.

Any of the foregoing documents may be submitted in preliminary form, clearly marked as such, in which case a definitive copy of each shall be filed promptly after execution, adoption or filing, as the case may be.

(3) A prospectus which shall have set forth on the outside front cover page, in capital letters in type as large as that used generally in the body of the prospectus, the statement that "NEITHER THIS PROSPECTUS NOR THE SECURITIES DESCRIBED HEREIN HAVE BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF SECURITIES OF THE STATE OF HAWAII NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS", and in the case of an offering or distribution by or in whole or in part for the account of an issuer shall include the information specified in subparagraphs (A) through (P) of this paragraph (3), or in the case of a nonissuer offering or distribution shall contain such of the information specified in subparagraphs (A) through (P) of this paragraph (3) as the commissioner may prescribe, together, in every case, with such other information as the commissioner may prescribe:

(A) The name and address of the issuer, the name of the jurisdiction under the laws of which it was organized, and the date of its organization;

(B) A statement in tabular form of the following information on a per share or other unit basis: offering price to the public; underwriting discounts or commissions; and proceeds to the issuer or other persons;

(C) A statement of the amount of securities offered, the aggregate offering price to the public, the aggregate underwriting discounts or commissions, an estimate of the amount of expenses of the issuer and the amount of expenses of the underwriters to be borne by the issuer, and the aggregate proceeds to the issuer or securities holders for whose accounts the securities are offered;

(D) If any of the securities are to be offered for the account of any person other than the issuer, the name and address of each such security holder, the total amount the security holder owns, and the amount to be offered for the security holder's account;

(E) If the securities are not to be offered for cash, a statement of the basis on which the offering is to be made;

(F) A brief description of the method by which the securities are to be offered and if the offering is to be made by or through underwriters, the name and address of each underwriter and the amount of the participation of each underwriter, with a statement of any material relationship between the issuer and such underwriter;

(G) A reasonably itemized statement of the purposes for which the net cash proceeds to the issuer from the sale of the securities are to be used and the amount to be used for each such purpose, indicating in what order of priority the proceeds will be used for the respective purposes;

(H) A description of any arrangements for the return of funds to subscribers if all of the securities to be offered are not sold, or if there are no such arrangements, a statement to that effect;

(I) A brief description of the securities to be offered, including:

(i) In the case of shares the par or stated value, if any; the rate of dividend, if fixed, and whether cumulative or noncumulative; the preference, if any; and if convertible, the conversion rate;

(ii) In the case of debt securities, the rate of interest; the date of maturity or, if the issue matures serially, a brief indication of the serial maturities; if the issue is redeemable before maturity, a brief statement of the redemption date or dates and price or prices; if payment of principal or interest is contingent, an indication of the contingency; a brief indication of the priority of the issue; and if convertible, the conversion rate;

(iii) In the case of any other kind of security, appropriate information of a comparable character;

(J) A brief description of the business or proposed business of the issuer, including:

(i) The nature of the issuer's present or proposed products or services, the principal market therefor, and the length of time the issuer has been in commercial production;

(ii) The location and general character of the plants or other physical properties held or proposed to be acquired by the issuer and the nature of the title under which such properties are held or proposed to be held;

(iii) If the issuer intends to exploit or develop any new invention or process, a statement of how the invention or process is to be applied commercially and whether or not it is covered by any patent, issued or pending, identifying by date and serial number any such patent or patent application;

(K) The names and residence addresses of all directors and officers of the issuer and of any person or persons controlling the issuer and, if the issuer was organized within the last three years, the names and addresses of all promoters of the issuer;

(L) A description of all direct and indirect interests, by security holdings or otherwise, of each director and officer of the issuer and, if the issuer was organized within the last three years, of each promoter of the issuer:

(i) In the issuer or its affiliates;

(ii) In any material transactions within the past two years or in any material proposed transactions to which the issuer or any of its predecessors or affiliates was or is to be a party, stating the cost to such persons of any property or services for which payment by or for the account of the issuer has been or is to be made;

(M) If the issuer was organized within the last three years, a statement of the percentage of outstanding securities of the issuer which will be held by directors, officers, and promoters as a group, and the percentage thereof which will be held by the public if all of the securities to be offered are sold, and the respective amounts of cash (including cash expended for property transferred to the issuer) paid therefor by such group and by the public;

(N) A brief description of all options or warrants presently outstanding or proposed to be granted to purchase securities of the issuer, including the names of the holders thereof, the cost thereof to the holders, the terms and conditions on which they may be exercised, and the price at which the securities may be acquired pursuant thereto;

(O) A balance sheet of the issuer at the close of the issuer's last fiscal year preceding the date of filing of the prospectus and a profit and loss statement and analysis of surplus for the fiscal year ended at the date of the balance sheet, all certified by a public accountant, together with a balance sheet of the issuer as of a date within ninety days prior to the date of filing of the prospectus and a statement of profit and loss for the period from the close of the last preceding fiscal year to the date of the balance sheet, both verified by a duly authorized officer of the issuer, or, if the issuer has been in existence for less than one year, a balance sheet of the issuer as of a date within ninety days prior to the date of filing and a statement of profit and loss for the period from the date of the issuer's organization to the date of the balance sheet, both certified by a public accountant;

(P) No prospectus filed pursuant hereto shall set forth in any manner any estimate or projection of future income, earnings, or profits of the issuer or any subsidiary, parent, or affiliate of the issuer, unless clearly identified as an estimate and unless the basis of estimation is clearly set forth.

(4) If the securities for which application for registration is being made have been or are to be registered under the Securities Act of 1933, there may be filed in lieu of the prospectus prescribed by paragraph (3) of subsection (b) of this section, the definitive prospectus of the issuer filed under the Securities Act of 1933, if the same shall be dated within one hundred and twenty days of the application for registration under this section.

(c) With respect to securities required to be registered by qualification under this section, the commissioner may, by order duly recorded, fix the maximum amount of commission or other form of remuneration to be paid in cash or otherwise, directly or indirectly, for or in connection with the sale or offering for sale of the securities in the State.

(d) At the time of filing the application for registration as prescribed in this section, the applicant shall pay to the commissioner, a fee of one-tenth of one per cent of the aggregate offering price of the securities to be sold in the State for which the applicant is seeking registration, but in no case shall the fee be less than $250 nor more than $2,500.

(e) If, upon examination of any application and the documents required to be filed therewith, the commissioner finds that the sale of the security referred to therein would not be fraudulent and would not work or tend to work a fraud upon the purchaser and that the enterprise or business of the issuer is not based upon unsound business principles, the commissioner shall record the registration of the security in the register of securities and thereupon the security so registered may be sold by the issuer or any registered dealer who has notified the commissioner of the issuer's or dealer's intention so to do in the manner provided in section 485-14, subject, however, to this chapter and to the further order of the commissioner as hereinafter provided.

(f) Registration under this section is effective for a period of one year and may be renewed for additional periods of one year by filing, by a date not later than fifteen days prior to expiration of registration, a prospectus meeting the requirements of subsection (b)(3) or (4), and containing information as of a date not more than ninety days prior to the date of filing, together with the payment of a renewal fee of $250.

(g) With respect to options on commodity futures contracts the following shall be observed:

(1) An application for registration of options on commodities futures contracts shall contain the same information specified in paragraph (b) of this section, except in the case of subparagraph (b)(3).

(2) The prospectus shall contain the following information in lieu of the information required in subparagraph (b)(3) of this section:

(A) Name and address of issuer and issuer's principal office in the State, if any;

(B) Total dollar value of contracts to be offered, specifying the commodities involved;

(D) A brief description of the method by which the contracts are to be offered, and if the offering is to be made through underwriters, the name and address of each underwriter and the amount of the participation of each underwriter with a statement of any material relationship between the issuer and underwriter;

(E) The policy which the issuer plans to follow to assure that it will have sufficient funds to pay its investors upon the exercise of option contracts;

(F) Summary of the terms and conditions of the customers agreement;

(G) Information requested by the following provisions in paragraph (b)(3) shall be stated: (I), (J), (K), (L), (N), and (O);

(H) Such information that may be required by rules and regulations.

(3) No option contracts shall be offered or sold in the State under this section, unless the issuer has a paid- in capital of at least $100,000, and unless its net cash value is 1.25 times its open option cash position.

(4) As used in this section, the following meanings shall apply:

(A) "Option on a commodity futures contract" means right to buy or sell a commodity futures contract at a fixed price during a predetermined period of time;

(B) "Net issuers cash value" means all cash in customers accounts, less customers accounts payable, plus net value of issuers hedging account;

(C) "Hedging account" means account which issuer maintains to buy or sell commodity futures as a protection against loss due to price fluctuation;

(D) "Open option cash position" means the value of all outstanding open options.

(5) The net issuers cash value and the open option cash position shall be compiled at the end of each business day. In the event the issuer's cash value goes below one hundred twenty-five per cent of its open option cash position, the issuer shall be prohibited to sell new options and will be limited to liquidating its existing options and it shall immediately notify the director of commerce and consumer affairs.

(6) Options on commodity futures contracts registered with the Securities and Exchange Commission under the Securities Act of 1933, shall be exempt from registration under this section. [L 1957, c 314, pt of §1; am L 1959, c 137, §§4 to 6; Supp, §199-8; HRS §485-10; am L 1973, c 208, §3; am L 1974, c 131, §1; am L 1982, c 204, §8; am L 1983, c 124, §17; gen ch 1985; am L 1986, c 240, §§2, 3; am L 1992, c 14, §2; am L 1996, c 181, §§12, 13]