FAQs

In Arizona, whether you mean to 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. A.R.S. § 44-1841 requires the registration of securities before they may even be offered for sale in Arizona.  Additionally, A.R.S. § 44-1842 requires the persons making the offers 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 cease and desist, pay penalties, and pay restitution. The Commission may also bring a civil action against you in the Maricopa County Superior Court or in federal court.  Additionally, violation of the registration provisions is a class four felony.  The Commission may refer the matter to a county attorney, the attorney general, or the United States attorney for criminal proceedings. A.R.S. § 44-2032.

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, 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.

“Security” means any note, stock, treasury stock, bond, commodity investment contract, commodity option, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, viatical or life settlement investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, real property investment contract or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 
A.R.S. § 44-1801(26).

For more information on some specific securities, click here.

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.

The exemptions provided by the Securities Act are listed at A.R.S. § 44-1843 and § 44-1844. The Corporation Commission also has adopted rules that provide exemptions from registration, such as A.A.C. R14-4-101, R14-4-102, R14-4-126, and R14-4-140.

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).
  

Both federal and Arizona law include an exemption from registration for offers and sales of securities that are made privately—are not made to the general public.  Both federal and Arizona law have “safe harbors” for private placements.  A safe harbor is a rule that specifies what you must do in order to be deemed to have complied with the statutory exemption. The federal law statute is section 4(2) of the Securities Act of 1933 and the safe harbor is Rule 506 of Regulation D. Arizona’s private placement statute is A.R.S. § 44-1844(A)(1) and the safe harbor is A.A.C. R14-4-126(F).

What constitutes a “private” rather than a “public” offering has been interpreted in numerous court opinions and by the regulatory agencies that enforce securities laws.  Self-education regarding private placements would be very time consuming and would require extensive reading of court opinions, regulatory actions, interpretative releases, and no-action letters issued by the Securities and Exchange Commission.  If you intend to make a private placement of securities, you must exercise great caution to comply with all of the requirements of the exemption.

A very important component of a private placement is that you do not advertise to the general public. You cannot conduct general solicitation. Information about the offering on your web site constitutes general solicitation. Running an ad in a newspaper or on the radio constitutes general solicitation. Sending offering materials, brochures, letters, or advertisements to people you do not know may constitute general solicitation. If you engage in general solicitation, if you advertise your offering to the public, your offering will not qualify for the private placement exemption.

The Securities Division recommends that you consult with a securities attorney.  You may obtain an overview of private placements in:

• Raising Capital

• SEC Release No. 33-4552 Nonpublic Offering Exemption

• SEC Release No. 33-7233, Example 20

• Agristar Global Networks, Ltd., SEC No-Action Letter

NASAA Financial Professionals

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

• Arizona State Bar

• Pima County Bar Association Lawyer Referral Service

• American Bar Association

• Martindale.com

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 type 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 under the Corporation Commission's 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. See above for a list of attorney referral resources. Many questions concerning corporations, officers and directors, and shareholders' rights can be answered by reviewing the ABCA. The ABCA (A.R.S. §§ 10-120 through 10-11807) can be reviewed at the Corporations Division's website or at the Arizona State Legislature's website.

The Arizona Securities Division is not in a position to research the value of old stock certificates. However, the Division has provided the following steps to assist with your own research. Please note that the Arizona Securities Division is providing this information as a service to investors and does not endorse or recommend any of the companies or publications listed below:

• Verify if the company is publicly traded on an exchange. If the company is publicly traded, you may find additional information and the companies electronic filings in the Securities and Exchange Commission’s Edgar database.

• See if a transfer agent is listed on the stock certificate or contact the company directly. You can contact the Secretary of State where the company was incorporated for information on the registration status, last known address, and statutory agent of the company. If the company is incorporated in Arizona, you can conduct a search online here.

• Research the stock certificate at your local library. Helpful resources at the library include: Financial Stock Guide Service (contains an annually updated directory of active and obsolete securities), Robert D. Fisher Manual of Valuable & Worthless Securities, Moody’s Industrial Manual and Moody’s OTC Industrial Manual (provides history and background information on companies including mergers and acquisitions)

• Contact a local stockbroker or banker to determine if the stock certificate has value.

• Retain a third party company to conduct the research. A simple search with the Better Business Bureau for "collectible stock research" will provide a list of companies that may be able to assist. You may also use a web search engine to find additional companies by using similar search terms, "stock certificate research" or "old stock certificates".

No. The SEC has implemented Form CRS as a required filing for federally registered investment advisers, and requires the form be completed by June 30, 2020. Arizona does not currently have a requirement that state registered investment advisers file Form CRS with the Securities Division. If Form CRS becomes a requirement for registration in Arizona, the Securities Division will be providing proper notice of the requirement to allow current advisers time to comply.

For federally registered investment advisers notice filing in Arizona, per A.R.S. § 44-3153(F)(1) the notice filing must include “copies of those documents that are filed with the SEC”. As such, after June 30, 2020, federally registered investment advisers notice filing in Arizona will need to provide Form CRS along with their other required filings.

See Enforcement > Procedure

If you know the phone number or email of the attorney or investigator working on the matter, you can contact them 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 phone our inquiry number, (602) 542-0662, or send us an email.

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.

To find out about the process involved in our cases, please see the Administrative Action Procedure page.