1. (a) General policy.

   1. (1) Each application for registration shall comply with the requirements set forth in this section unless a request for a deviation is granted by the Securities Commissioner.
   2. (2) All requests for deviation from registration policies must be in writing and submitted to the commissioner who shall set forth in writing the reason for granting any request, if a request is granted.
   3. (3) For a registration raising questions not herein covered, policies adopted by NASAA will generally be used as a guideline.

2. (b) Financial statements.

   1. (1) Preparation.

      1. (A) Financial statements required to be included in a registration statement shall be prepared, audited, and certified by independent certified public accountants in accordance with generally accepted accounting procedures and practices, applied on a consistent basis, and accompanied by an opinion acceptable to the commissioner.
      2. (B) Audited financial reports may be waived if the financial reports meet the requirements of Form U-7 or offerings under Regulation A promulgated under the Securities Act of 1933.

   2. (2) Annual financial reports.

      1. (A) The commissioner may require as a condition for registration that financial reports be filed to keep reasonably current the financial information contained in any effective registration statement.
      2. (B) Financial reports, when required, shall be submitted annually within ninety (90) days after the close of each fiscal year unless other arrangements are approved in advance by the commissioner.
3. (c) Promotional securities or cheap stock. Promotional securities, or “cheap stock”, securities that have been issued within three (3) years of the date of filing or are to be issued to underwriters, promoters, or insiders for an amount less than the public offering price shall be in compliance with the NASAA Statement of Policy Regarding Promotional Shares and the Guidelines for the Model Promotional Shares Escrow Agreement.
4. (d) Impoundment of proceeds. The commissioner may require as a condition to registration that all proceeds from sales of securities be impounded in accordance with NASAA Statement of Policy Regarding the Impoundment of Proceeds.
5. (e) Commissions and expenses. Commissions and expenses allowable to broker-dealers and issuers must in every instance be reasonable and justified and in compliance with NASAA Statement of Policy Regarding Underwriting Expenses, Underwriter’s Warrants, Selling Expenses, and Selling Security Holders.
6. (f) Options and warrants. Options or warrants to purchase securities must be justified by the applicant and in compliance with NASAA Statement of Policy Regarding Options and Warrants.
7. (g) Promoter’s equity investment. Where an issuer is in the promotional, exploratory, or development stage, the ratio of investment by promoters or insiders must be determined as reasonable and equitable in the light of the facts and circumstances presented in each particular case, but will be considered objectionable if not in compliance with the guidelines of NASAA Statement of Policy Regarding Promoter’s Equity Investment.
8. (h) Nonvoting common stock. Securities of an issuer having more than one (1) class of common stock must be in compliance with NASAA Statement of Policy Regarding Unequal Voting Rights.

9. (i) Offering price.

   1. (1) In the case of an issuer that has been actually engaged in business or operation, the amount for which a security is being offered to the public must bear some reasonable relationship to the market value, if any, or the price-earnings ratio as reflected by its financial statements covering an average of the preceding three (3) years, or a shorter duration of business or operation as may be applied.
   2. (2) In the absence of an established or determinable market value or price-earnings ratio, the book value or asset value of the issuer may be taken into consideration in justifying or substantiating the reasonableness of the offering price.
10. (j) Preferred stock. The offering or sale of preferred stock of an issuer may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Regarding Preferred Stock.
11. (k) Debt securities. The offering or sale of debt securities, including debentures, notes, and bonds of an issuer may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Regarding Debt Securities.

12. (l) Nonexempt reorganizations. In the case of any reorganization for which an exemption from registration is not available under Arkansas Code §§ 23-42-503 and 23-42-504 of the Arkansas Securities Act, Arkansas Code § 23-42-101 et seq., and registration of any securities to be issued as a part of the reorganization is required pursuant to Arkansas Code § 23-42-401, Arkansas Code § 23-42-402, or Arkansas Code § 23-42-403 of the Arkansas Securities Act, the commissioner may waive all or any part of the standards of review imposed upon registration by this section, if the following are met:

    1. (1) No constituent party to the reorganization or any officer, director, or person owning ten percent (10%) or more of the outstanding shares of any class of equity securities of the constituent party is an affiliate; and
    2. (2) The final prospectus or other comparable document filed with the application for registration of the securities contains a representation that the terms of the reorganization have been negotiated at arms’ length by all constituent parties.

13. (m) Issuer completion report. For registrants paying less than the maximum filing fee, a final report which may be in letter form or on a form provided by the commissioner specifying the amount of securities sold in this state shall be provided to the commissioner within thirty (30) days after the earlier of the following:

    1. (1) The expiration of the effectiveness of a registration statement filed under the Arkansas Securities Act; or
    2. (2) The termination of the offering through which the securities offered by the registration statement have been fully sold and distributed to the public.
14. (n) Unsound financial condition. The offer or sale of securities by an issuer may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy on Unsound Financial Condition.
15. (o) Specificity in use of proceeds. The prospectus shall disclose all information required to be in compliance with NASAA Statement of Policy Regarding Specificity in Use of Proceeds.
16. (p) Loans and other material affiliated transactions. Loans and other material affiliated transactions must be disclosed with NASAA Statement of Policy Regarding Loans and other Material Affiliated Transactions.
17. (q) Mortgage program guidelines. Direct participation mortgage programs must follow NASAA Statement of Policy on Mortgage Program Guidelines.
18. (r) Registration of asset-backed securities. Asset-backed securities shall register and comply with NASAA Statement of Policy on Registration of Asset-Backed Securities.
19. (s) Real estate investment trusts. The offering or sale of real estate investment trusts may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Regarding Real Estate Investment Trusts.
20. (t) Real estate programs. The offering or sale of real estate programs may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Regarding Real Estate Programs.
21. (u) Omnibus guidelines. The offering or sale of programs involving omnibus by an issuer may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Omnibus Guidelines.
22. (v) Equipment programs. The offering or sale of equipment programs of an issuer may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Equipment Programs.
23. (w) Registration of commodity pool programs. The offering or sale of commodity pool programs must be properly registered by an issuer and may be deemed unfair and inequitable to purchasers if not in compliance with NASAA Statement of Policy Regarding Registration of Commodity Pool Programs.
24. (x) Use of electronic offering documents and electronic signatures. An issuer of securities or agent acting on behalf of the issuer may deliver offering documents over the internet or by other electronic means and may provide for the use of electronic signatures if done in compliance with NASAA Statement of Policy Regarding Use of Electronic Offering Documents and Electronic Signatures.

Codification Notes: The Securities Act of 1933 is codified at 15 U.S.C. § 77a et seq.