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



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



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



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



(d)  The corporation may solicit proposals from
one or more financial organizations to act as a program manager.  Financial
organizations submitting proposals shall describe the investment instrument. 
The corporation shall select as program managers the financial organizations
from among the bidding financial organizations that demonstrate the most
advantageous combination, both to potential program participants and this
State, based on the following factors:



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



(2)  The ability of the financial organization to
establish or act as a regulated investment company for the purposes of this
part;



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



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



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



(6)  The minimum initial deposit and minimum
contributions, subject to this section that the financial organization will
require;



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



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



(1)  Take any action required to keep the program in
compliance with requirements of this section and to manage the program to meet
the requirements of sections 851 to 855 of the federal Internal Revenue Code of
1986, as amended;



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



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



(4)  Provide the corporation access to the books and
records of the financial organization to the extent needed to determine
compliance with the contract;



(5)  Hold all accounts for the benefit of the account
owner;



(6)  Be audited at least annually by a firm of
independent 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 all
regulatory filings and reports related to the program made by the financial
organization during the term of the management contract or while it is holding
any accounts, other than confidential filings or reports that will not become
part of the program.  The financial organization shall make available for
review by the corporation, the results of any periodic examination of the
financial organization by any state or federal banking, insurance, or
securities commission, except to the extent that the report or reports may not
be disclosed under applicable law or the rules of the examining agency.



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



(g)  During the term of any contract with a
program manager, the corporation shall conduct an examination of the program
manager and its handling of accounts.  The examination shall be conducted at
least biennially if the program manager is not otherwise subject to periodic
examination by the commissioner of financial institutions, the Federal Deposit
Insurance Corporation, or other similar entity.



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



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



(2)  Additional contributions may be made to the
accounts;



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



(4)  Existing accounts held by the financial
organization shall remain subject to all oversight and reporting requirements
established by the corporation.



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



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



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



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



(l)  The corporation may adopt any necessary
rules 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).