SENATE BILL REPORT

SB 5865

BYSenators Moore, Bender, Metcalf and Pullen

Limiting the authority to establish regulations regarding promotional shares of securities.

Senate Committee on Financial Institutions

Senate Hearing Date(s):February 24, 1987

Senate Staff:Stephanie Yates (786-7416)

AS OF FEBRUARY 23, 1987

BACKGROUND:

Unless otherwise authorized by administrative rule, the founders or promoters of a company may retain only 40 percent of the promotional shares in an initial public offering of the stock of that company.

Promotional shares are those securities issued within five years prior to the initial public offering date for value lower than the proposed public offering price of such securities.

SUMMARY:

The founders or promoters of a company are authorized to retain 55 percent of the promotional shares in an initial public offering of the stock of that company.  The Director of the Department of Licensing may require that all or part of such shares be placed in escrow for a period not exceeding two years.

Promotional shares are those securities issued, or proposed to be issued, within the recent past prior to the initial public offering date at a price substantially lower than the initial public offering price.

Fiscal Note:      none requested