N.D. Cent. Code § 10-04-08.1

10-04-08.1. Authority of commissioner

1. The right to sell securities in this state shall not be granted in any case when it

appears to the commissioner that the sale of such securities would work a fraud or

deception on purchasers or the public, or that the proposed disposal of the securities

is on unfair terms, or if the proposed plan of business of the applicant appears to be

unfair, unjust, or inequitable. When the commissioner deems it necessary the

commissioner has power, in connection with pending applications and at the expense

of the applicant, to require the applicant to furnish additional information, to order

appraisals, audits, or other examinations and reports, and, when the applicant is the

issuer of the securities, or the proposed sale is to be on behalf of the issuer, to make

an investigation of the books, records, property, business, and affairs of such issuer.

2. Upon compliance with all the provisions of this chapter relating to applications for

approval or registration by announcement, coordination, or qualification and the

requirements of the commissioner, the commissioner shall either approve or register

such securities or if the commissioner is of the opinion that sale of the securities would

be contrary to the provisions of this section, the commissioner shall deny the

application. The commissioner has power to place such conditions, limitations, and

restrictions on any approval or registration as may be necessary to carry out the

purposes of this chapter. Registration or approval must be by entry in the register of

securities, which entry must show the securities approved or registered and for whom

approved or registered, and the conditions, limitations, and restrictions, if any, or shall

make proper reference to a formal order of the commissioner on file showing such

conditions, limitations, and restrictions. Included among any other reasonable

conditions, limitations, and restrictions which the commissioner may deem necessary

are the following:

a. The commissioner may by rule, order, or directive require that any security issued

or to be issued to a promoter for a consideration different from the public offering

price, or to any person for a consideration other than cash, be deposited in

escrow with the commissioner or some other depository satisfactory to the

commissioner under an escrow agreement that the owners of such securities

shall not be entitled to sell or transfer such securities or to withdraw such

securities from escrow until all other stockholders who have paid for their stock in

cash shall have been paid a dividend or dividends aggregating not less than six

percent of the initial offering price shown to the satisfaction of the commissioner

to have been held actually earned on the investment in any common stock as

held. In case of dissolution or insolvency during the time such securities are held

in escrow, the owners of such securities shall not participate in the assets until

after the owners of all other securities have been paid in full.

b. The commissioner may by rule, order, or directive require that all the proceeds

from the sale of the approved or registered security be impounded until the issuer

receives a specified amount of funds, which amount shall be determined by the

commissioner.

c. The commissioner may refuse to allow the granting of any stock options to any

person, but if such an option is allowed, the commissioner may prescribe that the

price at which the option can be exercised shall be increased each year in which

it is not exercised in an amount to be determined by the commissioner and that

the option shall lapse altogether after a specified period to be set by the

commissioner.

d. If any stock is given for past services or consideration, the commissioner may

require that the issuer submit to the commissioner a strict and comprehensive

evaluation of such past services or consideration and may limit the amount of
xercised in an amount to be determined by the commissioner and that

the option shall lapse altogether after a specified period to be set by the

commissioner.

d. If any stock is given for past services or consideration, the commissioner may

require that the issuer submit to the commissioner a strict and comprehensive

evaluation of such past services or consideration and may limit the amount of

stock so given in order that it is commensurate with the value of the past services

and in no case shall the commissioner allow stock to be given for future services.

e. The commissioner may limit the price at which the securities, either of par or no

par value, may be sold, and if such securities are quoted by a recognized

quotation list, such price shall be limited to an amount not unreasonably in excess

of the amount quoted.

f. The commissioner may by rule, order, or directive limit compensation, and all

other expenses paid or incurred, directly or indirectly, in connection with the

organization, approval, registration, or sale of securities, to an amount not in

excess of compensation paid or expenses incurred in connection with the

organization, approval, registration, or sale of similar securities.

g. If more than one class of stock is issued and one class of stock is issued for the

purpose of giving preference as to dividends, the commissioner may require that

a greater consideration, commensurate with the value of the dividend preference,

be paid per share for such stock.

h. The commissioner may by rule, order, or directive require that any security

approved or registered be sold only on a specified form of subscription or sale

contract, and that a signed or conformed copy of each contract be filed with the

commissioner or preserved by the corporation, partnership, or limited liability

company for any period up to three years specified in the rule, order, or directive.

i. So long as the approval or registration is effective, the commissioner may by rule

or order require the person who filed for approval or registration to file reports, not

more often than quarterly, to provide reasonably current information upon the

matters contained in the application or registration statement, and to disclose the

progress of the offering.

j. The commissioner has the authority to disapprove an application for approval or

registration of any security when it is established that one or more of the

promoters are not of good business reputation or character.

3. The provisions of this section do not apply to a federal covered security.