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1. How does the Securities Act affect me?


The provisions of the North Carolina Securities Act can be summarized into the following three principles:


(a) Securities Registration: Before a security may be lawfully offered for sale or sold, that security must be either (i) registered with the Securities Division, (ii) eligible for an exemption from the registration requirement, or (iii) a "covered security " (such as a mutual fund or NYSE-listed security) to which state registration requirements do not apply.


(b) Dealer/ Salesman Registration: Before any person (whether an individual or a company) engages in the business of effecting securities offers, purchases, or sales, that person must be registered with the Securities Division as a securities dealer or securities salesman, unless the person is excluded from the definitions of "dealer" and "salesman".


(c) Antifraud Provisions: In the course of the offer, sale, or purchase of a security:

(i) it is illegal to make an untrue statement of a material fact, or omit to state a material fact if the omission would be misleading, and


(ii) it is illegal to engage in any act, practice, or scheme which would deceive or defraud any person.

There are statutory exemptions and exclusions from the registration requirements described above, but the legal burden of showing eligibility for an exception or exclusion is on the person claiming it. There are no exceptions or exclusions from the antifraud provisions.


The Securities Act gives persons who suffer damage as a result of a violation of certain provisions of the Act the right to demand repayment from the violator. This right is called a right of "rescission", and the events giving rise to it and the conditions on the exercise of it are set forth at N.C. Gen. Stat. §78A-56. The victim has a limited time within which to demand rescission, so prompt action is of the greatest importance.


Willful violations of certain provisions of the Securities Act can be prosecuted by the State as felonies. Criminal penalties for violations of the Act are set forth at N.C. Gen. Stat. §78A-57.


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2. How can I contact the Securities Division?


The Division’s address and phone numbers are:


North Carolina Securities Division
Department of the Secretary of State
PO Box 29622
Raleigh, NC 27626-0622
(919) 733-3924
(800) 688-4507 (toll-free)


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3. What fees are charged under the Securities Act and the Investment Adviser Act?


Registration of a securities dealer - $300 annually


Registration of a securities salesman - $125 annually


Registration of an investment adviser - $300 annually


Registration of an investment adviser representative - $75 annually


Registered public offering of securities - $2000 filing fee


Notice filing for investment company securities - $1725.00 plus $275.00 for each series, fund or portfolio offered in North Carolina


Notice filing for a Rule 506 transaction - $350 flat fee (Eff. July 15, 2003)


Exemption notice for a limited offering subject to Rule .1205(b) - $150 flat fee


Exemption notice for a Rule 505 transaction - $150 flat fee


Renewal of a notice filing for investment company securities - $1725.00 plus $275.00 for each series, fund or portfolio offered in North Carolina


Amendment of mutual fund offering amount - $50


Exemption filing by not-for-profit issuer - no charge


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4. What forms are used to apply for registrations/exemptions with the Securities Division?


Securities dealer - Form BD


Securities salesman - Form U-4


Investment adviser - Form ADV


Investment adviser representative - Form U-4


Public securities offering - Form U-1, plus Form U-2 consent to service of process, plus Form U-2A resolution (for corporate issuer)


Small Company Offering Registration (SCOR) - Form U-7, plus Form U-1, plus Form U-2 (and Form U-2A, for corporate issuer)


Notice filing for mutual fund - Form NF


Rule 506 transaction notice filing - Form D


State filing requirements for Issuers Relying on the Securities Act of 1933, Regulation D, Rule 506 beginning March 16, 2009


Limited offering subject to Rule .1205(b) - Schedule of information in format required by Rule.1205(b)(4), plus Form U-2 (and Form U-2A, for corporate issuer)


Rule 505 transaction - Form D, plus schedule required by Rule .1208(c), plus Form U-2 (and Form U-2A, for corporate issuer)


Exempt not-for-profit offering - Schedule required by Rule.1209(d), plus Form U-2 (and Form U-2A, for corporate issuer)


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5. Where can I obtain the forms listed in Question 4 above?


Forms U-1, U-2, U-2A, and NF can be obtained by following the instructions on the North American Securities Administrators Association (NASAA) website at


http://www.nasaa.org/industry-resources/investment-advisers/uniform-forms/


Persons wishing to register as securities dealers, securities salesmen, investment advisers, and investment adviser representatives are required to use the electronic registration systems known as the CRD (Central Registration Depository) and the IARD (Investment Adviser Registration Depository). The forms and procedures used for these types of registration are found at:


 http://www.finra.org/Industry/Compliance/Registration/CRD/index.htm and www.iard.com


The Form U-7 and its Issuer’s Manual are found on the NASAA website at:

http://www.nasaa.org/industry-resources/corporation-finance/


Form D can be found at the Securities and Exchange Commission’s website at:

http://www.sec.gov/about/forms/formd.pdf


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6. To whom should I make checks for fees payable?


Checks for filing fees related to the offer and sale of securities, such as registration fees, exemption filing fees, and notice filing fees for investment company securities offerings, should be made payable to “Secretary of State.”


Payments for registration fees of securities dealers, securities salesmen, investment advisers, and investment adviser representatives should be made in accordance with the instructions on the CRD and IARD websites.


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7. Does North Carolina permit a securities salesman to be registered with more than one securities dealer, or an investment adviser representative to be registered with more than one investment adviser?


The Securities Act prohibits a securities salesman from becoming registered with more than one securities dealer. The Investment Advisers Act permits an investment adviser representative to be registered with more than one investment adviser only in the two following situations: (a) all of the investment advisers with whom the investment adviser representative wishes to be associated are under common ownership or control, or (b) the investment adviser representative is acting as a "solicitor" for more than one investment adviser firm. A "solicitor" is a person who receives compensation for referring business to an investment adviser firm.


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8. Where do I find the state laws that govern stockbrokers and investment advisers?


Securities transactions and the persons who engage in the securities business in North Carolina are regulated by the North Carolina Securities Act, which is Chapter 78A of the North Carolina General Statutes. Persons who do business as investment advisers are regulated by the North Carolina Investment Advisers Act, which is Chapter 78C of the North Carolina General Statutes. Provisions of these two acts are supplemented by requirements found in administrative rules issued by the Securities Division, found in Chapter 6 of Title 18 of the North Carolina Administrative Code. These authorities can be found in most public libraries, and the statutes appear on the N.C. General Assembly’s Homepage at http://www.ncga.state.nc.us/. Copies of the statutes may be purchased from Lexis Law Publishing, whose phone number is 1-800-446-3410.


In addition to the state laws mentioned above, securities offerings, stockbrokers, and investment advisers are also subject to extensive regulation under federal securities laws and regulations, which are administered by the Securities and Exchange Commission.


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9. What is the Qualified Business Tax Credit Program, and how does it work?


The Securities Division is responsible for reviewing applications from business enterprises that wish to be registered as "Qualified Business Ventures" or "Qualified Grantee Businesses". If the Division approves the application submitted by the business, a person who makes an investment in the business during the time its registration is in effect is permitted to make a claim for a credit against his or her North Carolina state income tax liability based on the amount of the investment. The credit is generally 25% of the amount invested, with an annual cap of $50,000 per individual investor.


The business does not get the credit; it is the investor who gets the tax benefit of the credit, and that benefit cannot be applied against tax liability until the year following the year of the investment. Unused credits can be carried forward for another five years before they expire.


Only businesses which meet the conditions specified in the governing statutes may register as Qualified Businesses. The conditions are generally limitations on the nature of business activities and the amount of gross revenues earned by the business in the past. Those statutes are found at N.C. Gen. Stat. §§105-163.010 through 105-163.014.


There is a fee of $100 charged for applying for registration as a Qualified Business. 



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