1. (a) Generally, the Commissioner will not issue a permit authorizing the offer and sale of securities of a mutual water company if the water supply, distribution and fire protection system has not been installed and is not ready to operate. However, upon a showing by the engineer for the mutual water company that the water supply, distribution and fire protection system is substantially completed (i.e., completion of at least 75% of the system), the Commissioner may issue a permit.
2. (b) In addition to the requirement of a showing of substantial completion of the system, the mutual water company must file a completion bond issued to it and naming it as beneficiary in order to protect proposed security holders from unexpected costs attributable to completion of the system. The amount of the completion bond should be at least 120% of the then estimated cost to complete the facilities (as determined by the engineer) and it must state that the water supply, distribution and fire protection system will be complete within six months from the date of purchase of the bond.
3. (c) As an alternative to a completion bond, the mutual water company may propose other arrangements to guarantee completion of the water supply, distribution and fire protection system. A mutual water company proposing other arrangements to guarantee completion of the system must first obtain the written consent of the Commissioner that the arrangement is satisfactory.
4. (d) Where the Commissioner approves a qualification without requiring the water supply, distribution and fire protection system to be installed and ready to operate, as provided for above, a condition will be imposed upon the permit, but not limited to, prohibiting the sale of securities prior to the completion of the system and the filing of the report required by Section 260.140.71.2(a)(viii).

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