PURPOSE: This rule facilitates the formation of capital consistent with protection of investors under the Missouri Uniform Securities Act.

1. (1) The offering price of any security shall be fair and equitable to purchasers. With respect to common stock, if the offering is made pursuant to a firm commitment underwriting by a broker-dealer that is not affiliated with the issuer by means of direct or indirect common control and where the offering price of the common stock is at least five dollars ($5) per share, the offering price shall be presumed fair and equitable to purchasers.
2. (2) With respect to common stock of issuers not in the promotional or developmental stage, the offering of which does not meet the requirements of section (1) of this rule, the offering price may be deemed unfair or inequitable to purchasers unless it meets one

3. (1) of the following requirements:

   1. (A) The price for the stock does not exceed twenty-five (25) times the issuer’s net earnings per share for the last fiscal year, does not exceed twenty-five (25) times its average annual net earnings per share for the last three (3) years prior to the proposed offering date, or does not exceed such other multiple of net earnings for such other period as the commissioner may determine;

   2. (B) Information is filed with the commissioner showing there exists an adequate public market for the stock. A public market will be presumed adequate if—

      1. 1. The stock is traded on a national or

regional stock exchange registered under the Securities Exchange Act of 1934; or

1. 2. The stock is quoted on the National

Association of Securities Dealers, Inc. Automated Quotation System; or

1. 3. Each of the following criteria are met:

1) there were at least three hundred (300) holders of the stock at the beginning and end of the six (6)-month period preceding the date of the filing, 2) at least two hundred thousand (200,000) shares of the stock are publicly outstanding (exclusive of shares held by officers, directors and five percent (5%) shareholders), 3) at least two (2) broker-dealers regularly make a market in the stock, 4) at least one (1) financial publication regularly quotes the market price, and 5) trading of the stock in the six (6)-month period preceding the date of the filing averaged at least one hundred (100) transactions or at least five percent (5%) of the outstanding shares (not including shares held by officers, directors and five percent (5%) shareholders) per month; and

1. (C) If no adequate public market exists, information satisfactory to the commissioner is filed justifying the proposed offering priceearnings ratio in relation to price-earnings ratios of companies comparable to the issuer in terms of size, history of operations, industry and products, and other relevant factors. This information may be contained in an underwriter’s memorandum prepared in connection with the proposed offering.

1. (3) The offering price of common stock of issuers in the promotional or developmental stage shall be reasonable under all the facts and circumstances. Facts and circumstances to be considered shall include, but not be limited to, the following: the price paid for the stock by promoters or controlling persons of the issuer in transactions effected within two
2. (2) years prior to the public offering, the value of the common stock, the market value of corporate assets and the sophistication of proposed purchasers.
3. (4) For purposes of this rule, an issuer in the promotional or developmental stage means a corporation which has no public market for its shares and has no significant earnings within the past five (5) years (or shorter period of its existence).

AUTHORITY: sections 409.306 and 409.413(a), RSMo (1986).* Original rule filed June 25, 1968, effective Aug. 1, 1968. Amended: Filed May 21, 1969, effective Aug. 1, 1969. Amended: Filed July 21, 1972, effective Aug. 1, 1972. Amended: Filed Nov. 15, 1974, effective Nov. 25, 1974. Rescinded and readopted: Filed Aug. 1, 1984, effective Nov. 11, 1984. Amended: Filed Jan. 3, 1990, effective March 11, 1990. *Original authority: 409.306, RSMo (1967), amended 1977 and 409.413, RSMo (1967).