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Securities & Investment Regulation
OTHER PFR AGENCIES
The term security is defined broadly. It includes all of the readily recognizable investment vehicles such as stocks, bonds, limited partnership interests, and notes, as well as lesser known items. In general, any transaction that involves an investment of money in an enterprise, with an expectation of profits to be earned through the efforts of someone other than the investor, is a security.
The principal mission of the Office of Securities is to protect Maine investors. To accomplish this mission, the Office of Securities: administers and enforces the Maine Uniform Securities Act; reviews applications to register securities for sale in Maine; reviews filings for exemptions from registration; licenses broker-dealers, agents, investment advisers and investment advisor representatives doing business in Maine; suspends or revokes such licenses for misconduct, as defined in the Securities Act and promulgated thereunder; responds to consumer complaints; investigates possible violations of the securities laws; and when warranted by the circumstances, issues cease and desist orders and other administrative orders or refers matters to the Attorney General for civil or criminal action. The Office of Securities also enforces the Business Opportunity Law and the State Commodity Code.
If you intend to raise capital through the offer and sale of securities, the securities must either be registered or qualify for an exemption from registration. The amount of money being raised, the means by which the securities are being offered, and the types of investors you are soliciting may all play a part in determining the registration or exemption requirements. You would be well advised to consult an attorney at the outset to assist you in determining these requirements.
Yes. The Small Company Offering Registration (SCOR) program allows for the public offering of securities of up to $1,000,000 without the need for registration with the Securities and Exchange Commission (SEC). In addition, there are many exemptions from state registration requirements which small businesses often utilize, such as private placements and other limited non-public offerings. Visit our Small Business Programs section for a summary of the statutory provisions that are particularly well suited to small businesses. A complete list of registration exemptions can be found under Subchapter 2 - §16201 and 16202 of the Maine Uniform Securities Act. Remember, however, that regardless of what provision of Maine law you utilize for the registration or exemption of your securities, you are still subject to the anti-fraud provisions of the securities laws which require that all disclosures to be accurate, complete, and not misleading.
The Form U-7 is used in most states, including Maine, to register securities under SCOR. It is a question-and-answer form of disclosure document that meets the requirements of Maine law. It is available from the North American Securities Administrators Association (NASAA).
There are generally no rules stating that a company must be in business for a certain period of time before it can sell its securities, although there are rules that would make it difficult for a newly formed company to make a public offering of debt securities. Please be aware, however, that a company without significant operating history may find it difficult to answer the questions on the SCOR form. At the very least, a company should complete a thorough and realistic business plan before attempting to draft a securities disclosure document. Because companies without significant operating histories may have a more difficult time attracting investors to their offerings, many start-ups rely on personal contacts, especially family, to provide the initial capital infusion.
There is no legal requirement that a lawyer be retained to fill out the SCOR form. It will be necessary to obtain a legal opinion on the legality and validity of the offering - that is, an opinion that the corporation has been correctly formed and the securities will be legally issued. SCOR was designed as a "do-it-yourself" form. It is usually quite helpful, however, to at least get input from a lawyer familiar with securities matters during the process of completing the form. It is also a good idea to consult a lawyer to make sure your company is properly structured for your proposed offering.
The filing fee for most registrations in Maine is $1000 for each security offered. The filing fee for an offering of $1,000,000 or less (including SCOR) is $300 for each security offered. While many exemption filings do not require payment of a filing fee, certain exemptions do require a fee of up to $300. See Subchapter 3 - §16305 of the Maine Uniform Securities Act for additional information.
A securities issuer is required to provide prospective investors with full and accurate information, including detailed financial information, about the company and the offering. In preparing a disclosure document for investors, the issuer must clearly explain the company's business, the precise way that the funds from the offering will be used, and the specific risks associated with investing in the business. If the disclosure document will contain any earnings or cost projections, it must carefully explain and justify the assumptions on which the projections are based. If the entrepreneur is required to register the offering with the Office of Securities, then the disclosure document must contain financial statements prepared in accordance with generally accepted accounting principles. If the offering is required to be registered with the Office of Securities and is for an amount of $500,000 or more, the financial statements must be audited by an independent auditor.
In a third-party claim, you have no such contractual obligation, but refusal to provide information in the manner the insurer has requested could also lead to denial of the claim.
If registration is required in Maine, the offering will receive a substantive review by the Office of Securities. This review is comprehensive and normally results in some changes to the disclosure document. The initial review focuses on identifying problems with the terms of the offering and the adequacy of the information contained in the offering document. Several reviews and modifications may be required before the offering is ready to be cleared. The length of the review period varies with the number of comments made and the response time of the company. This process can often take from several weeks to several months to complete. The completion time can often be reduced if the applicant engages legal and financial professionals to assist in the process. In addition, if securities are being registered under SCOR, the applicant can benefit from the New England Regional Review program, which is designed to streamline the application review process for multi-state filings.
No. The company must generally register or qualify for an exemption from registration in each state in which it wishes to sell. Issuers should also note that the federal government, through the Securities and Exchange Commission (SEC), also regulates securities. The federal system is similar to the state system in that federal registration is required unless an exemption from registration is available. Many issuers making an offering entirely within one state rely on the intrastate exemption from federal registration. This exemption could be lost by making offers or sales in more than one state. For information on federal securities regulation, contact the SEC's Office of Small Business at (202) 942-2950. The SEC maintains Information for Small Businesses on its Web site.
Officers, directors, employees, or other persons representing an issuer in the sale of its securities usually need to be licensed as sales representatives. There are some exceptions to this licensing requirement, such as when the securities being offered qualify under certain registration exemptions or if transactions are being effected solely with existing employees, partners, officers or directors of the issuer and no direct or indirect remuneration is being paid to the party soliciting or effecting transactions. See the Licensing/Registration section of this Web site for more information.
Last Updated: July 10, 2012
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