PURPOSE: This rule prescribes standards of fairness in connection with the registration of preferred stock and of debt securities.

1. (1) In connection with the offering or proposed offering of preferred stock, the net earnings of the issuer, exclusive of nonrecurring items for—

   1. (A) Its last year prior to the public offering; or
   2. (B) The average of its last three (3) years prior to the public offering, or the substantiated future earnings capability of the issuer, shall be sufficient to cover the dividends on the securities proposed to be offered to the public.

2. (2) In connection with the offering or proposed offering of debt securities, including debentures, notes and bonds of an issuer, the cash flow of the issuer, exclusive of nonrecurring items and adjusted for the issuance of the debt securities, for—

   1. (A) Its last year prior to the public offering; or
   2. (B) The average of its last three (3) years prior to the public offering, or the substantiated future cash flow capability of the issuer, shall be sufficient to cover all debt service requirements including the interest on the securities proposed to be offered to the public.
3. (3) If the issuer has made any material acquisitions subsequent to the latest year for which actual figures are stated in the prospectus, the computation of earnings or cash flow for the purpose of this policy shall be made on a pro forma basis to include those acquisitions.
4. (4) Debt securities, unless otherwise permitted by the commissioner, shall be issued under a trust indenture providing for one (1) or more trustees, one (1) of which shall usually be a corporation and containing other provisions as the commissioner may require.
5. (5) The issuance of preferred stock or debt securities by an issuer in the promotional or developmental stage (see 15 CSR 30-52.080) will not be permitted unless justified by the applicant.

AUTHORITY: sections 409.306 and 409.413(a), RSMo (1986).* Original rule 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. Original authority: 409.306, RSMo (1967), amended 1977 and 409.413(a), RSMo (1967).