North Carolina Administrative Code

18 NCAC 06A .1717 Cash Payments for Client Solicitations (a) It shall be unlawful for any investment adviser required to be registered pursuant to G.S. 78C-16 to pay a cash fee, directly or indirectly, to a solicitor with respect to solicitation activities unless: (1) The investm…

SECTION .1800 - MISCELLANEOUS PROVISIONS - INVESTMENT ADVISERS 18 NCAC 06A .1801 DISHONEST OR UNETHICAL PRACTICES (a) An investment adviser or an investment adviser covered under federal law is a fiduciary and has a duty to act primarily for the benefit of its clients. The provis…

18 NCAC 06A .1802 CUSTODY/CLIENT FUNDS OR SECURITIES BY INVESTMENT ADVISERS (a) It shall be unlawful for any investment adviser to take or have custody of any securities or funds of any client unless: (1) the investment adviser notifies the administrator in writing that the inves…

18 NCAC 06A .1803 AGENCY CROSS TRANSACTIONS (a) For purposes of this Rule, "agency cross transaction for an advisory client" means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, or any person controlling…

18 NCAC 06A .1804 EXEMPTION/SECTION 78C-8(A)(3)/CERTAIN BROKER-DEALERS (a) For purposes of this Rule: (1) "Publicly distributed written materials" means written materials which are distributed to 35 or more persons who pay for those materials; (2) "Publicly made oral statements" …

18 NCAC 06A .1805 PERFORMANCE-BASED COMPENSATION EXEMPTION (a) For purposes of this Rule: (1) "Affiliate" shall have the same definition as in Section 2(a)(3) of the federal Investment Company Act of 1940; (2) "Client's independent agent" means any person who agrees to act as an …

18 NCAC 06A .1806 TRANSACTIONS DEEMED NOT TO BE ASSIGNMENTS For purposes of Section 78C-8(c)(2) of the Act, a transaction which does not result in a change of actual control or management of an investment adviser or investment adviser covered under federal law is not an assignmen…

18 NCAC 06A .1807 REQUEST FOR INTERPRETATIVE OPINIONS (a) Requests for interpretative opinions shall be directed to the administrator and shall contain the following: (1) Specific facts surrounding the proposed transaction in letter form with the identity of the persons involved;…

18 NCAC 06A .1808 SUPERVISION OF INVESTMENT ADVISER REPRESENTATIVES (a) An investment adviser shall be responsible for the acts, practices, and conduct of its investment adviser representatives in connection with advisory services until such time as the investment adviser represe…

18 NCAC 06A .1809 PUBLIC INFORMATION (repealed) History Note: Filed as a Temporary Rule Eff. January 2, 1989, for a period of 180 days to expire on June 30, 1989; Authority G.S. 78C-27(a); 78C-30(a); 78C-30(g); 78C-31(c); 132-1; 132-1.1; Eff. February 1, 1989; Repealed Eff. Augus…

18 NCAC 06A .1810 FORM OF CONSENT TO SERVICE OF PROCESS If the filing of a consent to service of process is required by statute or rule, the consent shall name the Secretary of State as service agent and shall be filed using the Uniform Consent to Service of Process (Form U-2) an…

18 NCAC 06A .1811 FORMS (repealed) History Note: Filed as a Temporary Rule Eff. January 2, 1989, for a period of 180 days to expire on June 30, 1989; Authority G.S. 78C-30(a); 78C-30(b); Eff. February 1, 1989; Amended Eff. September 1, 1990; Temporary Amendment Eff. October 1, 19…

SECTION .2000 – INVEST NC EXEMPTION (CROWDFUNDING) 18 NCAC 06A .2001 PURPOSE The purpose of the rules in this Section is to promote the overall economic health of North Carolina by: (1) facilitating responsible and competitive intrastate capital formation by North Carolina compan…

18 NCAC 06A .2002 SCOPE (a) The Secretary of State establishes and enforces the rules in this Section pursuant to the authority delegated by: (1) the North Carolina PACES Act, S.L. 2016-103, the Invest NC Exemption under G.S. 78A; and (2) G.S. 78A-45(a). (b) The rules in this Sec…

18 NCAC 06A .2003 DEFINITIONS Except as otherwise provided, the following definitions apply to G.S. 78A-17.1 and this Section: (1) The definitions in: (a) G.S. 78A-2; (b) Rule .1104 of this Subchapter; and (c) 18 NCAC 06B .0102. (2) "Bank" means: (a) a banking institution organiz…

18 NCAC 06A .2004 EXEMPTION LIMITATIONS (a) An issuer shall set a target offering amount, a target date, and a minimum offering amount for the securities offering. (b) An issuer conducting a securities offering shall: (1) set a target offering amount of no more than two million d…

18 NCAC 06A .2005 COUNTING SALES Sales by the issuer to its controlling persons, its funding portal, or its registered dealer shall not be included in the calculations of the minimum offering amount or the target offering amount. For purposes of this Rule and Rule .2061, "control…

18 NCAC 06A .2006 RESERVED FOR FUTURE CODIFICATION

18 NCAC 06A .2007 ISSUER FILING REQUIREMENTS (a) An issuer shall file the following with the Administrator at least 10 business days before it intends to offer securities pursuant to the Exemption: (1) a Notice of Intrastate Claim of Exemption Form ("Form NCE") that complies with…

18 NCAC 06A .2008 NOTICE OF INTRASTATE CLAIM OF EXEMPTION FORM REQUIREMENTS An issuer shall file with the Administrator an original, legible Form NCE and required attachments. The Form NCE shall include the following: (1) the issuer's attestation: (a) to the issuer's name or lega…

18 NCAC 06A .2009 SIGNING FORM NCE The issuer shall sign the Form NCE. The Form NCE shall be legibly signed: (1) by a person authorized to sign pursuant to G.S. 55-1-20 for a domestic or foreign corporation; (2) by a person authorized to sign pursuant to G.S. 55A-1-20 for a domes…

18 NCAC 06A .2010 CONTENT OF DISCLOSURE DOCUMENT An issuer shall prepare and sign a disclosure document with all facts material to a reasonable investor's decision as to whether to invest in the issuer's securities offering. In addition, the disclosure document shall include: (1)…

18 NCAC 06A .2011 REQUIRED STATEMENTS TO INCLUDE IN ISSUER DISCLOSURE DOCUMENT (a) An issuer shall include the legend required by G.S. 78A-17.1(a)(7) in its disclosure document as specified by this Rule. (b) The text of the legend shall be separated into these paragraphs: (1) "In…

18 NCAC 06A .2012 CIRCUMSTANCES WHEN ADDITIONAL DISCLOSURE DOCUMENT CONTENT REQUIRED (a) If the issuer has chosen a target offering amount that exceeds one million dollars ($1,000,000) and is no more than two million dollars ($2,000,000), the issuer shall include in its disclosur…

18 NCAC 06A .2013 ISSUER TO CEASE OFFERING AND AMEND THE DISCLOSURE DOCUMENT (a) The issuer shall immediately cease the offer or sale of the securities and amend the disclosure document if: (1) there is any material change in the securities or securities offering; (2) the disclos…

18 NCAC 06A .2014 FACTORS CONSIDERED WHEN reviewING THE CLAIM OF EXEMPTION (a) When determining whether the securities offering complies with the conditions of the Exemption, the Administrator may consider the following factors and any reported material changes: (1) whether all f…

18 NCAC 06A .2015 ADMINISTRATOR'S NOTICE OF COMPLIANCE After review of the relevant information, the Administrator may issue a notice of compliance: (1) with the filing requirements of Rule .2007 of this Section; or (2) with Rule .2013(b)(1) of this Section with regard to any mat…

18 NCAC 06A .2016 DENIAL OR REVOCATION OF THE EXEMPTION The Administrator may by order, deny or revoke the Exemption pursuant to G.S. 78A-18(a) if: (1) the issuer fails to comply with the Exemption requirements after receiving a notice of deficiency; (2) the issuer fails to furni…

18 NCAC 06A .2017 ESCROW ACCOUNT (a) An issuer shall be responsible for the establishment and maintenance of an escrow account for investor fund deposits. (b) The escrow account shall: (1) be administered by an escrow agent; (2) be a segregated account for each securities offerin…

18 NCAC 06A .2018 ISSUER TO PROVIDE INFORMATION TO THE ESCROW AGENT An issuer shall provide accurate and timely information to the escrow agent in order to establish and maintain the escrow account and escrow agreement, including the minimum offering amount and the target date se…

18 NCAC 06A .2019 TERMS OF ESCROW AGREEMENT The escrow agreement shall include: (1) the identity of the escrow agent including the name, address where notices may be directed, telephone number, website of the agent, and the name of the person responsible for responding to inquiri…

18 NCAC 06A .2020 review of the Escrow Agreement (a) The Administrator may consider the following factors when reviewing an issuer's escrow agreement to determine whether to approve it: (1) the contents of the escrow agreement; (2) the contents of any contracts with the escrow ag…

18 NCAC 06A .2021 ADMINISTRATOR'S REJECTION OF ESCROW AGREEMENT The Administrator may reject the issuer's escrow agreement if the Administrator determines that: (1) the escrow agreement does not comply with the rules of this Section; (2) one or more of the factors listed in Rule …

18 NCAC 06A .2022 ADMINISTRATOR NOTICE OF APPROVAL OR REJECTION OF ESCROW AGREEMENT The Administrator shall not issue a notice of compliance pursuant to Rule .2015(1) of this Section unless the escrow agreement has been approved by the Administrator. History Note: Authority G.S. …

18 NCAC 06A .2023 ESCROW AGENT Duties, Responsibilities, and STANDARDS OF CONDUCT An escrow agent and all persons associated with it shall: (1) observe high standards of commercial honor and just and equitable principles of trade in the conduct of its business; (2) give particula…

18 NCAC 06A .2024 NOTICE TO ADMINISTRATOR minimum OFFERING amount REACHED, FUNDS RELEASED FROM The ESCROW Account, AND TERMINATION OF ESCROW AGREEMENT (a) An escrow agent shall file a written notice to the Administrator within 10 days: (1) after reaching the minimum offering amou…

18 NCAC 06A .2025 CONTENT OF NOTICE OF RELEASE OF FUNDS FROM ESCROW ACCOUNT The notice provided pursuant to Rule .2024 of this Section shall include the following: (1) the aggregate amount of securities sold during the offering, expressed as: (a) numbers of units of securities so…

18 NCAC 06A .2026 REgistered Dealer ACTING AS AN ESCROW AGENT A registered dealer that acts as an escrow agent for the issuer's securities offering shall: (1) be registered with the SEC and the State of North Carolina to offer and sell the intrastate securities offering; (2) depo…

18 NCAC 06A .2027 ESCROW AGENT REQUIREMENTS Pursuant to the escrow agreement consistent with Rules .2017 through .2028 of this Section, an escrow agent for the issuer's securities offering, including a lawyer, shall: (1) collect at least the following information from the issuer …

18 NCAC 06A .2028 TREATMENT OF INFORMATION Information that is received or transmitted directly or indirectly from a bank or depository institution to the Administrator pursuant to G.S. 78A-17.1(a)(10) shall be designated as confidential and trade secrets while in the possession …

18 NCAC 06A .2029 RESERVED FOR FUTURE CODIFICATION

18 NCAC 06A .2030 FUNDING PORTAL REGISTRATION (a) A funding portal shall apply for registration as a North Carolina Intrastate Funding Portal by filing with the Administrator a Form North Carolina Intrastate Funding Portal (Form NCFP) at least 10 business days before it intends t…

18 NCAC 06A .2031 CONTENTS OF FORM NCFP The Form NCFP shall include: (1) all information that the funding portal is required to provide under G.S. 78A-17.1(a)(9)c, including: (a) the funding portal's legal identity; (b) the funding portal's physical location; (c) the name and add…

18 NCAC 06A .2032 REQUIRED FUNDING PORTAL ATTESTATIONS A funding portal shall attest in the Form NCFP that it: (1) is registered with the Secretary of State and has North Carolina as its principal place of business; (2) is being used to offer and sell securities under G.S. 78A-17…

18 NCAC 06A .2033 review OF THE FUNDING PORTAL REGISTRATION (a) When determining whether a registration is effective, the Administrator may consider: (1) the contents of Form NCFP and any amendments; (2) the contents of any contracts provided with the Form NCFP; (3) the escrow ag…

18 NCAC 06A .2034 ADMINISTRATOR DENIAL OR REVOCATION OF FUNDING PORTAL REGISTRATION The Administrator may deny or revoke registration of a funding portal if the Administrator determines that: (1) the funding portal has not complied with the rules in this Section; (2) the funding …

18 NCAC 06A .2035 ADMINISTRATOR NOTICE OF effective FUNDING PORTAL REGISTRATION After the Administrator considers the Form NCFP and the factors in Rules .2033 and .2034, the Administrator shall either provide the funding portal with written notice of effectiveness or denial of th…

18 NCAC 06A .2036 FUNDING PORTAL NOTICE TO ADMINISTRATOR OF changes (a) Within 30 days of any changes to information on the Form NCFP, a funding portal shall file an amended Form NCFP with the Administrator. A funding portal shall comply with Rule .2030(d) if there is a change in…

18 NCAC 06A .2037 FUNDING PORTAL FINANCIAL INTEREST IN ISSUER A funding portal shall not have a financial interest in an issuer that is offering or selling securities on its platform unless: (1) the funding portal receives the financial interest as compensation for the services p…

18 NCAC 06A .2038 FUNDING PORTAL DENIAL OF ACCESS (a) A funding portal shall exercise due diligence in determining whether an issuer's securities offering presents the potential for fraud or other investor protection concerns. (b) A funding portal shall deny access to its platfor…