Frequently Asked Questions (FAQs) about Securities

The information provided on this website is not comprehensive, is not offered as legal advice, and is not a substitute for competent legal counsel.  The Securities Division provides this information to give you an overview of the topics discussed. You should not rely on the accuracy of this information, but should carefully review all applicable statutes and regulations with the assistance of legal counsel.


How do I know if what I am buying or selling is a security?


What happens if I offer or sell an unregistered security?


How do I raise capital in Arizona without registering the investment with the Securities Division?


What is a covered security?


What are the risks of investing in a private placement?


What is a viatical and its risks to investors?


How do I find an attorney to answer my questions about securities?


Where can I get assistance dealing with a corporation in which I own stock?


How do I find out if old stock certificates are worth anything?


How do I find out about a corporation, limited liability company, or its officers?


What should I do if the Commission's Securities Division has issued a temporary cease and desist order against a company in which I am an investor?


How can I find out about a case or an investigation?


What other helpful websites can I visit?


What is the difference between a stockbroker, investment adviser and financial planner?

Arizona courts look at the substance of a transaction rather than what the transaction is called in order to determine whether a security is involved.  A rule of thumb with which to start is that if the person providing the money is not the person who has control of the transaction and the person providing the capitalization expects to earn a profit, the transaction probably involves a security.  If you want to use someone else’s money to finance your business venture, you are probably offering a security.

Arizona law defines “security” very broadly so that investors are protected and that promoters and issuers of securities bear the burden of complying with the law and making sure the investors understand the deal.

For more information on some specific securities, click on the following links or visit the investment product information section:


In Arizona, whether you mean it or not, if you offer or sell an unregistered security that does not qualify for an exemption from registration, you have violated the Arizona Securities Act. The law requires the registration of securities before they may even be offered for sale in Arizona. Additionally, the person who is doing the offering of the security is required to register.

The Arizona Corporation Commission may bring an administrative action against you for violation of the Arizona Securities Act.  The Commission has the authority to order you to stop the offering and selling of the unregistered security, pay penalties and pay restitution.

The Commission may also bring a civil action against you in the Maricopa County or Superior Court. Additionally, violation of the registration provisions is a class four felony. The Commission may refer the matter for criminal proceedings to a county attorney, the attorney general, or the United States attorney.


Unless an exemption from registration applies, you must register securities before you even offer them to anyone. “Offer” is a broad concept.  Essentially, you are making an offer any time you are providing someone with information in order to generate an interest in buying. You may not intend to make a sale at the time, but by providing the information, you may be making an offer.

Certain types of securities and certain types of securities transactions are exempt from registration requirements. These exemptions typically are based on the quality of the issuer or other types of factors that offer protection to the investors so that the protection afforded through the registration process is not necessary.

For a discussion of the exemptions most commonly relied upon to raise capital in Arizona, see Raising Capital.

For further information, read the notice filing requirement for the Arizona Intrastate Crowdfunding Exemption.


Generally, when you offer or sell a security, you must comply with the registration requirements of both state and federal securities laws.  In 1996, Congress decided that certain securities should only have to comply with federal registration laws. Congress enacted what is commonly referred to as NSMIA—the National Securities Markets Improvement Act of 1996.  In NSMIA, Congress preempted specified state registration requirements.

In other words, state registration requirements do not apply to the securities Congress listed in section 18 of the Securities Act of 1933.  Those listed securities commonly are referred to as “covered securities.” In rule 146, the Securities and Exchange Commission added to the list of covered securities.

Covered securities include:

  • Securities listed on the New York Stock Exchange, the American Stock Exchange, the NASDAQ Capital Market, Tier I of the NYSE Arca, Tier I of the Philadelphia Stock Exchange, the Chicago Board Options Exchange, and options listed on the International Securities Exchange
  • Securities issued by SEC-registered investment companies (e.g. mutual funds)
  • Securities issued in compliance with rule 506 of federal Regulation D

Arizona law requires that sales of some of the covered securities be reported to the Corporation Commission through notice filings. See A.R.S. § 44-1843.02, § 44-3321, and § 44-3325. Arizona law requires registration of persons offering and selling covered securities in or from Arizona. See A.R.S. § 44-1843.02(D).


Private placement offerings allow companies to raise money without having to comply with the registration requirements of a public offering.

Although private placement offerings may offer substantial returns, they may be high-risk investments that might not be easily resold to other investors on a secondary market. These type of private investments are only reserved for accredited investors (individuals or companies who have sufficient wealth to withstand a financial loss) and a limited number of sophisticated investors (individuals who have the experience and sufficient access to knowledge in order to make an informed decision).

Keep in mind that companies raising money through private placement offerings often have a limited operating history and typically have more modest revenue streams than larger, more established companies. Because private placement offerings are not reviewed by regulators, they should be carefully examined prior to investing.

For more information, read an investor advisory on private placement offerings issued by the North American Securities Adminstrators Association (NASAA).


In a viatical or life settlement contract, an investor purchases the right to receive a portion of the death benefit of a life insurance policy or pool of policies.  The investor may become a beneficiary of the policy or, less frequently, an owner of the policy.  The insured receives a percentage of the face value of the insurance policy.

This type of investment is referred to as a “viatical settlement” when the insured suffers from a terminal illness; and a “life settlement” when the insured is a healthy senior citizen. Regardless of the condition of the insured and terminology, both investments work in the same manner.  Viatical and life settlements can be legitimate investments and are often promoted as a way for people to do a “good deed” for humanity, providing much-needed financial resources to a family drained from caring for an elderly or terminally-ill person.

In Arizona, viaticals must either be registered or comply with specific disclosure requirements within the Arizona Securities Act.  An individual who sells viaticals is required to be registered with the Securities Division as a securities salesman.

While there are sound, reputable companies that offer viatical or life settlements, commonly known as “viaticals,” these investments pose high risks of financial loss and are fertile ground for abuse by unscrupulous individuals. Viaticals are risky investments for multiple reasons:

  • Lack of liquidity—Investor receives a return only when the insured dies and the death benefit is paid.
  • Rate of return is not guaranteed—Investor’s return is dependent when the viator/insured dies, which is very unpredictable.  Medical advances can further complicate the estimation of life expectancy.
  • Life expectancy estimate may be inaccurate—The person who is predicting the insured’s life expectancy may not have the knowledge and experience to provide a realistic estimate.
  • Death benefit may not be paid—The insurance company may not pay the death benefit if the policy was obtained fraudulently and the contestability period has not expired.  The policy may lapse if the premiums are not paid.

Read more about the risks of investing in viaticals and the questions you need to ask before you invest.


The Securities Division recommends that you consult with legal counsel who is experienced in securities matters, but we cannot refer you to a specific attorney. The following resources are available to assist you with locating a licensed attorney in Arizona:


Differences of opinion may arise within corporations—between officers and directors, between officers or directors and shareholders, or among shareholders—over the direction of the corporation’s activities, or over how the corporation is governed by its officers and directors.

Generally, these types of issues do not fall under state "securities law" (that is, the Arizona Securities Act), but, in fact, concern matters that fall under state corporation law (that is, the Arizona Business Corporation Act, or “ABCA” for short).  Securities laws generally focus on the legality of securities transactions (for example, what is either disclosed, or not disclosed, by the seller to the buyer during the course of a securities transaction), while corporation law focuses on actions taken by those who form the corporation and who oversee its business activities. The Securities Division enforces the Arizona Securities Act.  The ABCA is within the province of the Corporations Division.

Anyone may view a corporation’s articles of incorporation, amendments to articles, merger documents, statements of bankruptcy, annual reports, and miscellaneous memos filed with the Corporations Division of the Arizona Corporation Commission.  These documents, and the names of the officers, directors, and the statutory agent of a corporation, may be obtained from the Corporations Division’s website.

The ABCA does not give the Corporation Commission any authority to resolve the types of internal, corporation-related disputes.  As is typical of most state corporation acts, the ABCA directs parties to the court system to seek resolution of their issues.  Shareholders who believe that there may be an issue regarding the governance of a corporation should confer with private legal counsel experienced in corporation law.

Any questions concerning corporations, officers and directors, and shareholders' rights can be answered by reviewing the ABCA. The ABCA §§ 10-120 through 10-11807) can be reviewed at the Arizona State Legislature’s website.


The U.S. Securities and Exchange Commission (SEC) provides helpful information regarding old stock certificates and bonds at:

http://www.sec.gov/answers/oldcer.htm

The resource list provided by the SEC at the above link is not exhaustive, and the Securities Division cannot recommend or endorse any of the entities, their personnel, or their products and services.


You may search for corporations and limited liability companies and their officers by accessing a database called eCorp, which provides access to corporation and limited liability company records on file with the Arizona Corporation Commission's Corporations Division:

http://eCorp.azcc.gov/

Also, the database includes names of limited partnerships, partnerships and trade names because it is joined with the database maintained by the Secretary of State's office for the purpose of name availability searches. Detailed information on trade names, trademarks and limited partnerships, can be viewed at the business services section of Arizona Secretary of State’s website:

http://www.azsos.gov/

If you have further questions, contact the Corporations Division at 602-542-3026 or toll free, 1-800-345-5819. Also, the Corporations Division's website has helpful information.


Contact the Securities Division's Investigator on Duty by telephone at 602-542-0662 or by email and ask for the investigator assigned to the case if either of the following applies:

Carefully review the information contained in the order. We cannot advise you on specific actions that you should take. The purpose for the temporary order is to enforce the state's securities and investment management laws. You need to take this into account as you evaluate whether to stay in or to get out of the investment.

  • You have invested money with an individual or a company named in the temporary order.
  • You know someone who has invested with an individual or company named in the order.
  • You have specific information about the activities of a named individual or company that you believe might assist the Securities Division in evaluating or pursuing the case.

When you call, be prepared to leave a message, including your name and a telephone number.


If you know the telephone number or email of the Securities Division's attorney or investigator working on the matter, you can contact that person directly.  However, please be aware that due to a confidentiality statute, staff members of the Securities Division are limited in the amount of information they can provide to the public.

If you do not know the name of the staff member working on an investigation or case, you can contact the Investigator on Duty at (602) 542-0662, or send an email message regarding your case inquiry.

If a public case has already been filed, you can find the administrative complaint on our Enforcement Actions page. Click on the date of the action to see administrative complaint. To access the eDocket file containing all of the public documents filed in a case, click on the Respondent's name. EDocket also contains a schedule of all public events in a case such as prehearings, hearings and Commission open meetings.

Proposed orders will be considered by the Commission at a scheduled open meeting.  If an order you are interested in is scheduled to be heard, you can watch the Open Meeting on your computer.

If a final order has been entered in the case, you can find it in on our Enforcement Orders page.


Below is a list of suggested websites where you can obtain objective and non-sales oriented information about investing and fraud prevention.  NOTE:  This list was compiled for your convenience only and is not an endorsement of any site, link, or organization.

With at least a third of its members’ enforcement actions involving senior investors, NASAA developed this website to provide resources for senior investors, family caregivers, the securities industry, and policymakers. Senior financial exploitation causes the loss of millions of dollars each year.

North American Securities Administrators Association (NASAA)

The oldest international organization devoted to investor protection and the voice of the U.S. state securities agencies, the District of Columbia, Puerto Rico, Canada, and Mexico.

Financial Industry Regulatory Authority (FINRA)

FINRA is self-regulatory association that regulates its member brokerage firms and exchange markets.

Financial Literacy and Education Commission

A comprehensive resource that offers financial education information from various state and local government agencies.

Securities and Exchange Commission (SEC)

A federal agency that oversees the U.S. stock exchanges, FINRA, and the nation's securities markets.

Investing Online (IORC)

Online Resource Center (IORC) is the only independent, non-commercial organization dedicated solely to seving the individual consumer who invests online or is considering doing so.

Municipal Securities Rulmaking Board (MSRB)

A centralized online source for free access to municipal disclosures, market transparency data and educational materials about the municipal securities market.

A federal government site that provides practical tips from the and the technology industry to help you be on guard against Internet fraud, secure your computer, and protect your personal information.


It is important to know the differences between financial service providers.  Stockbrokers (also called brokers, broker-dealer agents, financial advisers, investment consultants, securities salespeople, or registered representatives) sell securities and other investment products and receive a sales commission for the transaction. Stockbrokers are obligated to sell you securities that are suitable for you based upon factors such as risk tolerance, age, and investment goals.

Investment adviser representatives give advice about securities and other investment products and provide ongoing management of investments based on clients’ objectives. Investment advisers have a fiduciary responsibility to put clients’ interests ahead of their own when providing investment advice.

Financial planners design an overall plan for their clients to save, invest, and manage their money. Planners who provide specific investment advice—such as recommending particular financial products or investments—must be registered or licensed as investment adviser representatives and are subject to a fiduciary duty.

Whether you choose a stockbroker, investment adviser, or financial planner, make certain to verify the person’s registration or license, background, and employment history by contacting the Securities Division's Investigator on Duty by telephone at 602-542-0662 or by email, info@azinvestor.gov.

Read more about the differences between investment professionals and the questions you should ask before you hand over your money.

How do I contact the Securities Division?

TEL:

602-542-0662 Telephone Directory or General Inquiries

1-866-VERIFY-9 (837-4399, toll free within Arizona)

ADDRESS:

1300 W. Washington St., 3rd Floor, Phoenix, AZ 85007

EMAIL:

info@azinvestor.gov (for investor education information and to schedule a presentation)

securitiesdiv@azcc.gov (to inquire about an investment professional or file notice of your complaint)

FAX:

(602) 388-1335

DIRECTIONS:

The Securities Division is located near the Arizona Capitol, which is east of I-17 and west of 7th Avenue.  Ours is a three-story building that sits between Washington and Adams Streets.  The Division is on the 3rd floor.  See location map.

OTHER INFO:

Other Arizona Corporation Commission Divisions

Hours of Operation:  8:00 am - 5:00 pm, Mon-Fri

Closed on State Observed Holidays

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Arizona Corporation Commission

1200 W. Washington Street

Phoenix, AZ 85007

 

Corporations Division

1300 W. Washington Street

Phoenix, AZ 85007

 

Tucson Office (Walk-ins only)

400 W. Congress Street

Tucson, AZ 85701