Section 207.071. Escrow of promotional securities

(a) The Commission will, where it deems necessary for the protection of investors, or in the public interest, and subject to the limitation of section 207(g) of the act (70 P. S. § 1-207(g)), require as a condition to the registration of securities, whether to be sold by the issuer or another person, that promotional securities be placed in escrow. The escrow depository shall be a bank or trust company approved by the Commission, provided, that, if the escrow depository does not maintain an office in this Commonwealth, the depository shall file with the Commission an irrevocable consent to service of process with respect to actions arising out of its duties as escrow depository.

(b) For the purposes of this section, the term ‘‘promotional securities’’ includes securities which are:

(1) Issued within the 5-year period immediately preceding the date of the filing of a registration statement for a consideration substantially different from the proposed public offering price and for which price differential there is no commensurate change in the earnings or financial position of the issuer.

(2) Issued in consideration for services.

(3) Issued in consideration for tangible or intangible property, such as patents, copyrights, licenses or goodwill.

(4) Issued within the 5-year period immediately preceding the date of the filing of a registration statement to a promoter or proposed to be issued to a promoter at a price substantially lower than or on terms and conditions substantially more favorable than those on which securities of the same or a similar class or series have been or are to be sold to public investors.

(5) The subject of an order by the Commission which includes findings that the securities are promotional securities.

(c) The escrow of promotional securities shall be covered by an agreement which shall be subject to the approval of the Commission. One manually signed copy of the agreement shall be filed with the Commission prior to the effectiveness of a registration of the issuer’s securities.

The provisions of this § 207.071 adopted October 11, 1974, effective October 12, 1974, 4 Pa.B. 2174; amended April 4, 1975, effective April 5, 1975, 5 Pa.B. 722; amended December 30, 1999, effective January 1, 2000, 30 Pa.B. 18; transferred and renumbered from 64 Pa. Code § 207.071, December 14, 2012, effective December 15, 2012, 42 Pa.B. 7533. Immediately preceding text appears at serial pages (324434) to (324435).

Notation

Authority

The provisions of this § 207.071 amended under sections 202(g) and (i), 203(d), (i.1), (j) and (n)—(t), 204(a), 205(b), 207(g), (j.1) and (n), 209(b), 211(a) and (b), 504(d), 513, 603(a), 606(d) and 609(a) of the Pennsylvania Securities Act of 1972 (70 P. S. § § 1-202(g) and (i), 1-203(d), (i.1), (j) and (n)—(t), 1-204(a), 1-205(b), 1-207(g), (j.1) and (n), 1-209(b), 1-211(a) and (b), 1-504(d), 1-513, 1-603(a), 1-606(d) and 1-609(a)).