1. (a) No issuer of securities shall incur more selling expenses than are reasonably necessary for the sale and issuance of such securities. Selling expenses which do not exceed 15 percent of the aggregate offering price (before deducting discounts and commissions) are presumed to be reasonable if the percentage is computed only on the portion of the aggregate offering price when and as paid to the issuer. “Selling expenses,” as used in this Article, means the total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys paid by the issuer) paid in connection with the offering plus all other expenses incurred by the issuer relating to printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders, depositaries, and engineers and other experts, expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, and any other expenses incurred by the issuer directly related to the offering and sale of the securities, but excluding accountants' and the issuer's attorneys' fees and options to underwriters.

   Stock acquired or to be acquired by the underwriter, a person associated with an underwriter, underwriter's counsel, finder, financial advisor, or related parties in connection with the offering is considered part of the underwriter's compensation and is valued for such purposes on a formula basis taking into account the difference between the cost of such stock and the public offering price and other factors. However, the fact that stock has been held, or that there is an obligation to hold it, for a substantial period of time, and the method of payment therefor, may alter the valuation placed thereon.

2. (b) Where the issuer is a small business issuer and the proposed maximum aggregate offering price for all the securities to be sold in the offering does not exceed $5,000,000 anywhere, selling expenses which do not exceed 18 percent of the aggregate offering price (before deducting discounts and commissions) are presumed to be reasonable provided the total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys paid by the issuer) do not exceed 13 percent of the aggregate offering price and the percentages are computed only on the portion of the aggregate offering price when and as paid to the issuer.
3. (c) Where the issuer is a small business issuer and the proposed maximum aggregate offering price for all the securities to be sold in the offering do not exceed $3,000,000 anywhere, selling expenses which does not exceed 20 percent of the aggregate offering price (before deducting discounts and commissions) are presumed to be reasonable provided the total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys paid by the issuer) do not exceed 15 percent of the aggregate offering price and the percentages are computed only on the portion of the aggregate offering price when and as paid to the issuer.

Note: Authority cited: Section 25610, Corporations Code. Reference: Sections 25113(b)(2) and 25140, Corporations Code.

History

1. Amendment filed 7-20-72; effective thirtieth day thereafter (Register 72, No. 30).

2. Amendment filed 5-3-83; effective thirtieth day thereafter (Register 83, No. 19).

3. New subsection (a) designator, new subsections (b)-(c) and amendment of Note filed 12-19-95; operative 1-18-96 (Register 95, No. 51).