1. (a) The following information shall be included in the prospectus of each program:

   1. (1) Information on Cover Page. There should be set forth briefly on the cover page of the prospectus a summary which should include the following:

      The title and general nature of the units being offered; the maximum aggregate amount of the offering; the minimum amount of net proceeds; the minimum subscription price; the period of the offering; the maximum amount of any sales or underwriting commissions to be paid (or if non, or if such commissions are paid by the sponsor), the nature of any sharing arrangement and fees; the estimated amount of organization and offering expenses, the estimated amount to be paid during the first twelve (12) months following commencement of operations for administrative and similar services.

   2. (2) Definitions. Technical terms used in the prospectus should be defined either in a glossary or as they appear in the prospectus.
   3. (3) Risk Factors. Participants should be advised in a carefully organized series of short, concise paragraphs, under subcaptions where appropriate, of the risks to be considered before making an investment in the program. These paragraphs should include a cross-reference to further information in the prospectus. In particular, in those cases where the sponsor has elected the compensation arrangement described in Section 260.140.125.1(a) (Cost and Revenue Sharing), there should be set forth the fact that there is a conflict where the sponsor must decide whether to complete a well which is anticipated to have a marginal return since the tangible costs he would incur would not appear to warrant his investment, although completion of the well would be in the best interests of the participants.
   4. (4) Business Experience. The business experience of the sponsor(s), including general partner(s), principal officers of a corporate general partner (chairman of the board, president, vice president, treasurer, secretary or any person having similar authority or performing like functions) and others responsible for the program, shall be prominently disclosed in the prospectus, such disclosure indicating their business experience for the past ten years. The lack of experience or limited experience of the sponsor, or other person supplying services to the program, shall be prominently disclosed in the prospectus.
   5. (5) Compensation. All indirect and direct compensation which may be paid by the program to the sponsor or any affiliate of every type and from every source shall be summarized in the forepart of the prospectus.
   6. (6) Use of Proceeds. State the purposes for which the net proceeds to the program are intended to be used and the approximate amount intended to be used for each such purpose. Also state the minimum aggregate amount necessary to initiate the program and the disposition of the funds raised if they are not sufficient for that purpose.
   7. (7) Assessments. If provisions for assessments are provided, the method of assessment and the penalty for default shall be prominently set forth.
   8. (8) Investment Objectives and Policies. Describe the investment objectives and policies of the program.
   9. (9) Description of Oil and Gas Interests. State the location and describe the general character of all materially important oil and gas interests now held or presently intended to be acquired by the program.

   10. (10) Performance.

       1. (A) The previous program experience of the sponsor and other relevant parties shall be disclosed in the prospectus for all programs during the past ten years which:

          1. (i) Involved a public offering registered under State or Federal securities laws,
          2. (ii) Involved a private or limited offering, the results of which are material to an informed investment decision by the participant.

       2. (B) Information on previous programs shall include, but not be limited to, the following:

          1. (i) Name of the program, including the type of legal entity and state of incorporation or organization.
          2. (ii) The effective date of the offering, the date it commenced operations and the date of dissolution or termination or, if it is continuing.
          3. (iii) The total amount of units, the gross amount of capital raised by the program, the number of participants, and the amount of investment of the sponsor, if applicable.
          4. (iv) The drilling results of the program, including the number of gross and net wells drilled, both oil and gas, both exploratory and developmental, and both successful and unsuccessful.
          5. (v) Total dollar amounts of federal tax deductible items passed on to participants.
          6. (vi) Cash distribution to participants.
          7. (vii) Compensation and fees to the sponsor, segregated as to type.
          8. (viii) Disclosure of any development wells drilled which did not or have not returned the investment therein within four years.
          9. (ix) Such additional or different disclosures of the success or failure of the programs as may be permitted or required by the Commissioner.
       3. (C) All of the foregoing information shall be set forth on a cumulative basis for each program.
       4. (D) The following caveat should be prominently featured in the presentation of the foregoing information: “It should not be assumed that participants in the offering covered by this prospectus will experience returns, if any, comparable to those experienced by investors in prior programs.”
       5. (E) Information required to be set forth in Subsection (A) above shall be supported in the application for qualification by an affidavit of the sponsor that the performance summary is a fair representation of the information contained in the audited financial statement or the Federal income tax returns of the program or in other reports or data of the program or sponsor.
   11. (11) Operating Data. Include appropriate data with respect to each property which is separately described in answer to paragraph (9) above.
   12. (12) The Program.
2. (a) Date of formation.
3. (b) Place of formation.
4. (c) Sponsor.
5. (d) Address and telephone number of the program and the sponsor.
6. (e) Duration.

7. (f) Information called for in items (a) through (e) hereof shall be given for any other programs in which the program invests.

   1. (13) Summary of Terms of the Program.
8. (a) Powers of the sponsor.
9. (b) Rights and liabilities of the participants.
10. (c) Allocation of costs and revenues.
11. (d) Termination and dissolution.
12. (e) Meetings and reports.
13. (f) Amendment of partnership agreement.
14. (g) Provision for additional assessments.

15. (h) Other pertinent matters.

    1. (14) Federal Tax Consequences.
16. (a) A summary of an opinion of tax counsel acceptable to the Commissioner and/or a ruling from the IRS covering major state and federal tax questions relative to the program, which may be based on reasonable assumptions such as those described in Section 260.140.130.4 of these rules. To the extent the opinion of counsel or IRS ruling is based on the maintenance of or compliance with certain requirements or conditions by the sponsor(s), the prospectus shall to the extent practicable, contain representations that such requirements or conditions have been met and that the sponsors shall use their best efforts to continue to meet such requirements or conditions.
17. (b) Tax treatment of the program.
18. (c) Tax treatment of the participants.
19. (d) Allocation of intangible drilling deductions, depreciation, depletion allowances, etc.
20. (e) Method of allocation of losses or profits and cash distributions upon transfer of a unit or the rights to income or revenues.
21. (f) Any other pertinent information applicable to the tax shelter aspects of the investment.

22. (g) Possibility of requirement for filing tax returns with states in which prospects are located.

    1. (15) Units.
23. (a) Amount.
24. (b) Minimum purchase.
25. (c) Assessability.
26. (d) Transferability.

27. (e) Voting rights.

    1. (16) Plan of Distribution.
28. (a) Discounts and commissions.
29. (b) Estimated fees and expenses paid or reimbursed by the program.
30. (c) Indemnification and hold harmless provisions.
31. (d) Terms of payment.
32. (e) Identity of underwriter, managing dealer and/or principal selling agent.
33. (f) Type of underwriting best efforts or firm commitment.
34. (g) Minimum and maximum sales.
35. (h) Escrow provisions.

36. (i) Material relationship of underwriter to the program, if any.

    1. (17) Pending Legal Proceedings. Briefly describe any legal proceedings to which the program or the sponsor is a party which is material to the program and any material legal proceedings between sponsor and participants in any prior program of the sponsor. Also, describe any material legal proceedings to which any of the program's or sponsor's property is subject.
    2. (18) Transactions with Affiliates. Describe fully any transactions and the dollar amount thereof which may be entered into between the program and the sponsor or any affiliate. Include a full description of the material terms of any agreement and the dollar amount thereof between the program and the sponsor or any affiliate. Where the sponsor sponsors other programs, describe the equitable principles which will apply in resolving any conflict between the programs. In the case where the program has been in existence, include all transactions and contracts of the program with the sponsor or any affiliate during the period of such existence.
    3. (19) Interest of Affiliates in Program Property. If within the past five years the sponsor or any affiliate has been in the chain of title or had a beneficial interest in any property to be acquired by the program this fact must be disclosed.
    4. (20) Interest of Counsel and Experts in the Sponsor or Program. Where counsel for the selling representatives or the sponsor are named in the prospectus as having passed upon the legality of the units being registered or upon other legal matters in connection with the registration or offering of such units, there should be disclosed in the prospectus the nature and amount of any direct or indirect material interests of any such counsel, other than legal fees to be received by such counsel, in the sponsor or any affiliate. Any such interest received or to be received in connection with the registration or offering of the units being registered, including the ownership or receipt by counsel, or by members of the firm participating in the matter, of securities of the sponsor, any affiliate of the program for services shall be disclosed. Employment by the sponsor, other than retainer is legal counsel, should be disclosed in the prospectus.
    5. (21) Investment Company Act of 1940. Where beneficial interests of a program are to be sold, treatment under the Investment Company Act of 1940 must be disclosed.
    6. (22) Financial Statements. As provided elsewhere in these rules.
    7. (23) Additional Information. Any additional information which is material should be included.

Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.

History

1. Editorial correction adding Note filed 11-8-82 (Register 82, No. 46).