[§211F-52]  Formation of Hawaii technologyinvestment program.  (a)  The corporation shall establish the Hawaiitechnology investment program for the purpose of allowing individual investorsto contribute to the program to invest venture capital in businesses in Hawaii.

(b)  The corporation may implement the Hawaiitechnology investment program through a regulated investment company under theterms and conditions established by this section.  The corporation may makechanges to the program as required for participants to obtain the federal andstate income tax benefits or treatment provided by sections 851 to 855 of thefederal Internal Revenue Code of 1986, as amended.

The corporation may establish a program inwhich the dividends distributed by the regulated investment company are exemptfrom income taxation under chapter 235.  If the corporation establishes aprogram that is proposed to be exempt from income taxation under chapter 235,it shall furnish sufficient information and notify the department of taxationand investors of the tax exempt status of that program.

(c)  The corporation may implement the programthrough the use of financial organizations as program managers.  Under theprogram, individuals may establish accounts directly with a program manager.

(d)  The corporation may solicit proposals fromone or more financial organizations to act as a program manager.  Financialorganizations submitting proposals shall describe the investment instrument. The corporation shall select as program managers the financial organizationsfrom among the bidding financial organizations that demonstrate the mostadvantageous combination, both to potential program participants and thisState, based on the following factors:

(1)  The financial stability and integrity of thefinancial organization;

(2)  The ability of the financial organization toestablish or act as a regulated investment company for the purposes of thispart;

(3)  The ability of the financial organization tosatisfy recordkeeping and reporting requirements for the purposes of a programthat allows a program that is exempt from taxation under chapter 235;

(4)  The financial organization's plan for promotingthe program and the resources it is willing to allocate to promote the program;

(5)  The fees, if any, proposed to be charged topersons for opening accounts;

(6)  The minimum initial deposit and minimumcontributions, subject to this section that the financial organization willrequire;

(7)  Other benefits to the State or its residentsincluded in the proposal, including fees payable to the State to cover expensesto operate the program.

(e)  The corporation may enter into amanagement contract of up to ten years with a financial organization.  Thefinancial organization shall provide investment instruments meeting therequirements of this section.  The management contract shall include, at aminimum, terms requiring the financial organization to:

(1)  Take any action required to keep the program incompliance with requirements of this section and to manage the program to meetthe requirements of sections 851 to 855 of the federal Internal Revenue Code of1986, as amended;

(2)  Keep adequate records of each account, keep eachaccount segregated from each other's account, and provide the corporation withthe information necessary to prepare any necessary statements;

(3)  Provide the corporation with the informationnecessary to determine compliance with this section;

(4)  Provide the corporation access to the books andrecords of the financial organization to the extent needed to determinecompliance with the contract;

(5)  Hold all accounts for the benefit of the accountowner;

(6)  Be audited at least annually by a firm ofindependent certified public accountants selected by the financial organization,and provide the results of the audit to the corporation; and

(7)  Provide the corporation with copies of allregulatory filings and reports related to the program made by the financialorganization during the term of the management contract or while it is holdingany accounts, other than confidential filings or reports that will not becomepart of the program.  The financial organization shall make available forreview by the corporation, the results of any periodic examination of thefinancial organization by any state or federal banking, insurance, orsecurities commission, except to the extent that the report or reports may notbe disclosed under applicable law or the rules of the examining agency.

(f)  The corporation may require an audit to beconducted of the operations and financial position of the program manager atany time if the corporation has any reason to be concerned about the financialposition, the recordkeeping practices, or the status of accounts of the programmanager.

(g)  During the term of any contract with aprogram manager, the corporation shall conduct an examination of the programmanager and its handling of accounts.  The examination shall be conducted atleast biennially if the program manager is not otherwise subject to periodicexamination by the commissioner of financial institutions, the Federal DepositInsurance Corporation, or other similar entity.

(h)  If selection of a financial organizationas a program manager is not renewed, after the end of the term:

(1)  Accounts previously established and held ininvestment instruments at the financial organization may be terminated;

(2)  Additional contributions may be made to theaccounts;

(3)  No new accounts may be placed with the financialorganization; and

(4)  Existing accounts held by the financialorganization shall remain subject to all oversight and reporting requirementsestablished by the corporation.

If the corporation terminates a financialorganization as a program manager, the corporation shall take custody of accountsheld by the financial organization and shall seek to promptly transfer theaccounts to another financial organization that is selected as a programmanager and into investment instruments as similar to the original instrumentsas possible.

(i)  The corporation may enter into contractsfor the services of consultants for rendering professional and technicalassistance and advice and any other contracts that are necessary and proper forthe implementation of the program.

(j)  The program shall only allow contributionsfrom individual investors in amounts ranging from a minimum of $1,000 to amaximum of $100,000 per investor.

(k)  The program manager shall invest allcontributions received from investors in securities not limited to legalinvestments under state laws relating to the investment of trust fund assets bytrust companies, including those authorized by article 8 of chapter 412. Contributions shall be used for venture capital investment.  Investment may bemade in any manner the program deems correct.  If no venture capital investmentis available at the time a contribution is made to the program, the programmanager may invest the contribution in any manner allowed a regulatedinvestment company until a venture capital investment opportunity occurs. While the program manager should make a best effort to make venture capitalinvestments as defined in section 211F-51, if no such venture capitalinvestment is available in Hawaii, then the program manager may make venturecapital investments outside Hawaii.

(l)  The corporation may adopt any necessaryrules under chapter 91. [L 2000, c 297, pt of §33]

 

Revision Note

 

  Paragraphs (3) to (7)in subsection (e) redesignated pursuant to §23G-15(1).