§ 78A-29. Denial, suspension, and revocation of registration.
§ 78A‑29. Denial,suspension, and revocation of registration.
(a) The Administratormay issue a stop order denying effectiveness to, or suspending or revoking theeffectiveness of, any registration statement if he finds
(1) That the order is inthe public interest and
(2) That:
a. The registrationstatement as of its effective date or as of any earlier date in the case of anorder denying effectiveness, or any amendment under G.S. 78A‑28(j) as ofits effective date, or any report under G.S. 78A‑28(i) is incomplete inany material respect or contains any statement which was, in the light of thecircumstances under which it was made, false or misleading with respect to anymaterial fact; or
b. Any provision ofthis Chapter or any rule, order, or condition lawfully imposed under thisChapter has been willfully violated, in connection with the offering, by (i)the person filing the registration statement, (ii) the issuer, any partner,officer, or director of the issuer, any person occupying a similar status or performingsimilar functions, or any person directly or indirectly controlling orcontrolled by the issuer, but only if the person filing the registrationstatement is directly or indirectly controlled by or acting for the issuer, or(iii) any underwriter; or
c. The securityregistered or sought to be registered is the subject of an administrative stoporder or similar order or a permanent or temporary injunction of any court ofcompetent jurisdiction entered under any other federal or state act applicableto the offering; but (i) the Administrator may not institute a proceedingagainst an effective registration statement under paragraph c more than oneyear from the date of the order or injunction relied on, and (ii) he may notenter an order under paragraph c on the basis of an order or injunction enteredunder any other state act unless that order or injunction was based on factswhich would currently constitute a ground for a stop order under this section;or
d. The issuer'senterprise or method of business includes or would include activities which areillegal where performed; or
e. The offering hasworked or tended to work a fraud upon purchasers or would so operate; or
f. The offering hasbeen or would be made with unreasonable amounts of underwriters' and sellers'discounts, commissions, or other compensation, or promoters' profits orparticipation, or unreasonable amounts or kinds of options; or
g. When a security issought to be registered by notification, it is not eligible for suchregistration; or
h. When a security issought to be registered by coordination, there has been a failure to complywith the undertaking required by G.S. 78A‑26(b)(4); or
i. The applicant orregistrant has failed to pay the proper fees; but the Administrator may enteronly a denial order under this paragraph and he shall vacate any such orderwhen the deficiency has been corrected.
The Administrator may notinstitute a stop‑order proceeding against an effective registrationstatement on the basis of a fact or transaction known to him when theregistration statement became effective unless the proceeding is institutedwithin the next 30 days.
(b) The followingprovisions govern the application of G.S. 78A‑29(a)(2)f:
(1) The Administratormay not enter a stop order against a registration statement based on one ormore of the grounds set forth in paragraph f of G.S. 78A‑29(a)(2) if theoffering, or the dealer, or any dealers, making or participating in theoffering, is subject to rules, promulgated by any national securities associationregistered with the Securities and Exchange Commission pursuant to section 15Aof the Securities Exchange Act of 1934, providing safeguards againstunreasonable profits or unreasonable rates or commissions or other charges, andsuch rules are complied with.
(2) The Administratormay by rule or order require such evidence of compliance with such rules as hemay deem advisable.
(c) The Administratormay by order summarily postpone or suspend the effectiveness of theregistration statement pending final determination of any proceeding under thissection. Upon the entry of the order, the Administrator shall promptly notifyeach person specified in subsection (d) that it has been entered and of thereasons therefor and that within 20 days after the receipt of a written requestthe matter will be scheduled for hearing in accordance with chapter 150B of theGeneral Statutes. If no hearing is requested and none is ordered by theAdministrator, the order will remain in effect until it is modified or vacatedby the Administrator. If a hearing is requested or ordered, the Administrator,after notice of an opportunity for hearing to each person specified insubsection (d), may modify or vacate the order or extend it until finaldetermination.
(d) No stop order may beentered under any part of this section except the first sentence of subsection(c) without (i) appropriate prior notice to the applicant or registrant, theissuer, and the person on whose behalf the securities are to be or have beenoffered, (ii) opportunity for hearing, and (iii) written findings of fact andconclusions of law.
(e) The Administratormay vacate or modify a stop order if he finds that the conditions whichprompted entry have changed or that it is otherwise in the public interest todo so. (1973, c.1380; 2001‑126, s. 2.)