Tag Archives: state hedge fund law

Massachusetts Hedge Fund Exemption

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Exclusion From Definition of Investment Adviser

Generally Massachusetts will require hedge fund managers with a place of business in Massachusetts to register as an investment adviser with the Massachusetts Securities Division.  However, there is an exemption from registration for some hedge fund managers located in Massachusetts.  [Note: to be more accurate, the “exemption” really is an exclusion from the definition of investment adviser under the Massachusetts Securities Act.]

Definition of Investment Adviser

Under Section 401(m) of the Massachusetts Securities Act, the term investment adviser means:

any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities. …“Investment adviser” shall not include: … a person whose only clients in this state are federal covered advisers, other investment advisers, broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, employee benefit plans with assets of not less than $5,000,000, governmental agencies or instrumentalities, or other financial institutions or institutional buyers, whether acting for themselves or as trustees with investment control; (emphasis added)

This definition is similar for most states and is based on the Uniform Securities Act which was designed to help standardize state securities laws.  Normally the definition of “other financial institutions or institutional buyers” is not defined under state law or division regulations and will normally be understood to mean large institutions.

Massachusetts has specifically defined “Institutional Buyer”.

Definition of “Institutional Buyer” for Section 401(m)

Under Massachusetts regulations,

Institutional Buyer shall include any of the following:

a. An organization described in Section 501(c)(3) of the Internal Revenue Code with a securities portfolio of more than $ 25 million.

b. An investing entity whose only investors are accredited investors as defined in Rule 501(a) under the Securities Act of 1933 (17 CFR 230.501(a)) each of whom has invested a minimum of $ 50,000.

c. An entity whose only investors are financial institutions and institutional buyers as set forth in M.G.L. c. 110A, § 401(m) and 950 CMR 12.205(1)(a)6.a. and b.

See 950 CMR Section 12.205(1)(a)(6)

For hedge fund managers, section (b) above is important.  A hedge fund would be considered to be an “institutional buyer” if (i) the fund only accepts accredited investors and if (ii) each investor has contributed at least $50,000 to the fund.  If the fund does not meet both parts of the test, the fund will not be an “institutional buyer” and the fund manager would not be excluded from the definition of investment adviser and would need to register as such with the Massachussetts Securities Division.

Consequences for Not Registering

If a fund manager does not meet the two tests above, the manager will need to be registered or face certain consequences.  These consequences may include:

  • An order to cease and desist conducting business
  • A requirement to register with the division
  • Administrative fines
  • Offer of rescission of fund interests to investors
  • Further division scrutiny

Some managers may be tempted to not register but as we can see from a previous Massachussetts Securities Division Complaint against an unregistered hedge fund manager, the consequences and the time/money/effort spent with a formal division complaint will be far more cumbersome than simply registering with the division in the first place.

Conclusion

Many states have intricate laws with respect to hedge fund manager registration.  These laws will become even more important to understand if/when the Wall Street Reform bill passes in which case many SEC registered advisers will need to switch to state registration.

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Cole-Frieman & Mallon LLP provides comprehensive hedge fund formation and regulatory support.  Bart Mallon, Esq. can be reached directly at 415-868-5345.

State Budget Shortfalls and Investment Adviser Registration

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Financial Reform Bill May Devastate Overburdened State Securities Divisions

As many states are facing huge budget shortfalls, government services have been cutback and certain states have furloughed workers in certain divisions. In a number of states (including California) these budget cuts have affected the state securities divisions and accordingly the many state securities divisions are running dangerously lean. For example, I just recently talked with an examiner in the Oregon Division of Finance and Corporate Securities regarding a state blue sky filing for a hedge fund manager. The examiner told me that because of budget cuts and furlough days, the division will not even have a chance to review the blue sky filing we submit for five months! (Of course, they will cash the check immediately.)

This is obviously a huge issue and is only one instance of a state which does not currently have the resources to adequately perform oversight of the investment and securities activity which occur within its borders. In fact, many states currently don’t have the staff or expertise to adequately oversee the investment advisers and brokers registered with their securities division. While this is troubling, the problem is only going to get worse if the Financial Reform Bill proceeds as currently drafted.

While many have lauded the Senate bill, which will require hedge fund registration for managers with $100MM in AUM or more, an important issue has been overlooked. All investment advisers (in addition to hedge fund managers) with AUM of less than $100MM will be subject to state and not SEC registration. The $100MM threshold is an increase from the current threshold of $25MM. This means that a financial planner overseeing $90MM in assets (which was previously subject to SEC registration and periodic examination) will now be subject to regulation, generally, by the state in which that manager resides.

This means that if the financial reform bill goes through as currently drafted in the senate, the states are suddenly going to be responsible for overseeing a larger pool of managers. Even though the state will have increased responsibility, it is unlikely that state budgets will provide the securities divisions with more funding to properly oversee the new managers the divisions will be responsible for regulating. We find this troubling for investor protection reasons and for manager business continuity – that is, managers would be better off registered at the SEC level and subject to examination by SEC staff better trained (presumably) than state regulators.

We concede that the SEC has its own problems with funding and this provision allows them to focus on larger, more systemically important managers. However, we believe that states are going to be greatly burdened by the increase in jurisdictional oversight. Accordingly, we believe either Congress or the SEC provide a grandfathering provision which would allow current managers who exceed the $25MM threshold (but not the new $100MM threshold) to register or remain registered with the SEC.

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Other related hedge fund law articles:

Cole-Frieman & Mallon LLP is one of the top hedge fund law firms and provides comprehensive formation and regulatory support for hedge fund managers.  Bart Mallon, Esq. can be reached directly at 415-868-5345.

Investment Advisory Fees | Hedge Fund Performance Fees and Management Fees

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Review of State Investment Advisory Fee Rules

One of the things I have tried to emphasize within this blog is that there is no “one size fits all” legal solution to hedge fund formation.  Each client/manager has a unique set of circumstances and will be subject to a potentially different sets of laws or regulations depending on those circumstances.  This is especially true with regard to those managers who must register in a state that requires hedge fund manager registration.  Because no two sets of state laws and regulations are the same, the manager must make sure that he understands the rules which are specific to his state.

High Asset Management Fees and Disclosure

One issue which comes up every now and again is whether or not disclosure will be required when the manager charges an annual asset management fee in excess of 3% of AUM.  Generally regulators will require that certain disclosures be made to investors through the manager’s disclosure documents (generally in both the Form ADV and the hedge fund offering documents).  Sometimes the regulator will require such disclosures based on a general provision (see CO IA fee rule discussion below) or on more explicit provisions (see 116.13(a) of the Texas Administrative Code).  In either case managers will generally be required to make a prominent disclosure to investors that a 3% (or higher) annual asset management fee is in excess of industry norms and that similar advisory services may be obtained for less (whether or not this is true).  While such a disclosure would, in most instances, be a best practice, managers should be aware that it may also be required if they are registered with a particular state.

State Performance Fee Rules

Like management fee disclosures, the rules for performance fees may differ based on the state of registration.  For example, here are how four different states deal with performance fee issue:

Texas – Like most states, Texas allows state-registered investment advisers to charge performance fees only to those investors in a fund which are “qualified clients” as defined in Rule 205-3 of the Investment Advisers Act. This means that a hedge fund manager can only charge performance fees to investors in the fund which have a $1.5 million net worth or who have $750,000 of AUM with the manager (can be in the fund and through other accounts).  See generally  116.13(b) of the Texas Administrative Code reprinted below.

New Jersey – Many states adopted laws and regulations based on the 1956 version of the Uniform Securities Act and have yet to make the most recent update to their laws and regulations (generally those found in the 2002 version of the Uniform Securities Act).  Under the New Jersey laws a manager can charge performance fees to those clients with a $1 million net worth.

Indiana – similar to New Jersey, Indiana has laws which allow a manager to charge performance fees to those investors with a $1 million  net worth.  Additionally, Indiana allows a manager to charge performance fees or to those investors who have $500,000 of AUM with the manager (can be in the hedge fund and through other separately managed accounts).  Indiana also has an interesting provision which specifies the manner in which the performance fee may be calculated – it requires that the fee be charged on a period of no less than one year.  This rule is based on an earlier version of SEC Rule 205-3.  What this means, essentially, is that managers who are registered in Indiana cannot charge quarterly performance fees, but must charge their performance fees only on an annual basis (or longer).

Michigan – Unlike any other state, Michigan actually forbids all performance fees for Michigan-registered investment advisors.  The present statute is probably an unintended consequence of some sloppy drafting.  Nonetheless, it is a regulation on the books.  Hedge Fund Managers registered with Michigan, however, should see the bright spot – Michigan is in the process of updating its securities laws and regulations.  This means that sometime in late 2009 or early 2010 it should be legal for investment advisors in Michigan to charge their clients a performance fee under certain circumstances (likely to mirror the SEC rules).

New York – Sometimes, states will have some wacky rules.  In the case of New York, there are no rules regarding performance fees.

Other Issues

With regard to performance fees, the other issue which should be discussed with your hedge fund lawyer is whether or not the state “looks through” to the underlying investor to determine “qualified client” status.  Generally most states will follow the SEC rule on this issue and look through the fund to the underlying investors to make this determination.

While these cases are just a couple of examples of the disparate treatment of similarly situated managers, they serve as a reminder that investment advisor (and securities) laws may differ wildly from jurisdiction to jurisdiction.  Managers should be aware of the possibility of completely different laws and should be ready to discuss the issue with legal counsel.

The various rules discussed above have been reprinted below.

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Texas Rule

The full text of the Texas IA fee rules can be found here and are copied below.

§116.13.Advisory Fee Requirements.

(a) Any registered investment adviser who wishes to charge 3.0% or greater of the assets under management must disclose that such fee is in excess of the industry norm and that similar advisory services can be obtained for less.

(b) Any registered investment adviser who wishes to charge a fee based on a share of the capital gains or the capital appreciation of the funds or any portion of the funds of a client must comply with SEC Rule 205-3 (17 Code of Federal Regulations §275.205-3), which prohibits the use of such fee unless the client is a “qualified client.” In general, a qualified client may include:

(1) a natural person or company who at the time of entering into such agreement has at least $750,000 under the management of the investment adviser;

(2) a natural person or company who the adviser reasonably believes at the time of entering into the contract:  (A) has a net worth of jointly with his or her spouse of more than $1,500,000; or (B) is a qualified purchaser as defined in the Investment Company Act of 1940, §2(a)(51)(A) (15 U.S.C. 80a-2(51)(A)); or

(3) a natural person who at the time of entering into the contract is: (A) An executive officer, director, trustee, general partner, or person serving in similar capacity of the investment adviser; or (B) An employee of the investment adviser (other than an employee performing solely clerical, secretarial, or administrative functions with regard to the investment adviser), who, in connection with his or her regular functions or duties, participates in the investment activities of such investment adviser, provided that such employee has been performing such functions and duties for or on behalf of the investment adviser, or substantially similar function or duties for or on behalf of another company for at least 12 months.

CO Rule

The full text of the Colorado laws and regulations can be found here.  The fee discussion is reprinted below.

51-4.8(IA) Dishonest and Unethical Conduct

Introduction

A person who is an investment adviser or an investment adviser representative is a fiduciary and has a duty to act primarily for the benefit of its clients. While the extent and nature of this duty varies according to the nature of the relationship between an investment adviser and its clients and the circumstances of each case, an investment adviser or investment adviser representative shall not engage in dishonest or unethical conduct including the following:

J. Charging a client an advisory fee that is unreasonable in light of the type of services to be provided, the experience of the adviser, the sophistication and bargaining power of the client, and whether the adviser has disclosed that lower fees for comparable services may be available from other sources.

New Jersey

The full text of the New Jersey performance fee rules can be found here and are copied below.

13:47A-2.10 Performance fee compensation

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(b) The client entering into the contract subject to this regulation must be a natural person or a company as defined in Rule 205-3, who the registered investment advisor (and any person acting on the investment advisor’s behalf) entering into the contract reasonably believes, immediately prior to entering into the contract, is a natural person or a company as defined in Rule 205-3, whose net worth at the time the contract is entered into exceeds $1,000,000. The net worth of a natural person shall be as defined by Rule 205-3 of the Investment Advisors Act of 1940.

http://www.njconsumeraffairs.gov/bos/bosregs.htm

Indiana

The Indiana rule can be found here and is reprinted below.

(f) The client entering into the contract must be either of the following:

(1) A natural person or a company who immediately after entering into the contract has at least five hundred thousand dollars ($500,000) under the management of the investment adviser.

(2) A person who the investment adviser and its investment adviser representatives reasonably believe, immediately before entering into the contract, is a natural person or a company whose net worth, at the time the contract is entered into, exceeds one million dollars ($1,000,000). The net worth of a natural person may include assets held jointly with that person’s spouse.

Michigan

The current law (until October 1, 2009) can be found here and is copied below.

451.502 Investment adviser; unlawful practices.

(b) It is unlawful for any investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing all of the following:

(1) That the investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client.

New York

No laws regarding performance fees for state registered investment advisers.

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Bart Mallon, Esq. runs hedge fund law blog and has written most all of the articles which appear on this website.  Mr. Mallon’s legal practice, Cole-Frieman & Mallon LLP, is devoted to helping emerging and start up hedge fund managers successfully launch a hedge fund.  If you are a hedge fund manager who is looking to start a hedge fund, please call Mr. Mallon directly at 415-296-8510.

NASAA Proposes Multi-State No-Action Request Process

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Currently each state has their own securities laws and their own interpretation of those laws.  While many of the laws and regulations are based on the same set of model rules, no two states seem to take the same interpretation with regard to the rules.  Enforcement is completely different as well.  This presents many problems for those involved in the securities and investment management industries because of the disparate treatment under similar circumstances in different states.

NASAA is taking a step forward to try to unify the laws of the states through a multi-state no-action request process.  Basically questions on the application or interpretation of state securities laws would be decided on a multi-state level instead of at just a single state(each state would have the ability to issue a distinct opinion or opt out of the discussion, see below for more details).  This is good because it (1) allows all states to address an issue which may be applicable (currently or in the future) to a resident of their state and (2) it will promote discussion between the states as to how to handle certain situations.  Hopefully this create a more uniform set of laws between the states which will decrease lawyer fees in the future and will increase certainty in the application of current laws and regulation.

With regard to the specific proposal we will likely respond to the NASAA with the following comments:

Section 5, number 7 – this section should be deleted unless it goes directly to an issue with the request at hand.  Disclosing this information otherwise would serve no purpose with regard to the request.

Suggestion – NASAA should also create a database on their website to track all of requests as well as the rulings on the requests.

We will be covering this in greater detail over the next few weeks.  Please contact us if you have questions or ideas with regard to the proposal.

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Notice of Request for Public Comment on NASAA’s Proposed Adoption of a Statement of Policy Regarding Multi-State Review of Requests for Interpretive Opinions and No-Action Letters

The NASAA Coordinated Interpretations Project Group requests comment from the public on the adoption of a new Statement of Policy Regarding Multi-State Review of Requests for Interpretative Opinions and No-Action Letters.

The comment period begins February 20, 2009 and will remain open for 30 days.  Accordingly, all comments should be submitted on or before March 22, 2009.  Comments should be directed by email or in writing to:

Rick A. Fleming
General Counsel
Office of the Securities Commissioner
618 S. Kansas Avenue
Topeka, Kansas  66603
[email protected]

Rex Staples
General Counsel
NASAA
750 First Street, NE, Suite 1140
Washington, DC  20002-4251
[email protected]

Background and Purpose of the Proposed Statement of Policy

Many state securities regulators have the authority issue “no-action letters” in which staff confirms that a transaction carried out under a set of assumed facts will not result in a recommendation for enforcement action.  Some states also issue “interpretive opinions” in which staff provides guidance by indicating how a provision of law applies to a situation presented.  These types of no-action letters and interpretive opinions are authorized by subsection 413(e) of the Uniform Securities Act of 1956, as amended, and subsection 605(d) of the Uniform Securities Act (2002).

Subsection 420(b)(7) of the 1956 USA and subsection 608(c)(9) of the 2002 USA authorize the states to cooperate with each other in the development of no-action letters and interpretive opinions in order to encourage uniform interpretation of laws and maximize the effectiveness of regulation.  Toward those ends, NASAA proposes this Statement of Policy.

Summary of the Proposed Statement of Policy

The proposed Statement of Policy describes the application and review process for multi-state consideration of requests for interpretive opinions and no-action letters.  The proposed Statement of Policy contains the following major elements:

  • Section II contains definitions, including the terms “interpretive opinion” and “no-action letter.”
  • Section III places restrictions on the types of matters that qualify for multi-state review.  For example, it prohibits requests concerning purely hypothetical situations and transactions that have already occurred.
  • Sections IV and V contain rules governing the content of the request letter, citation to state laws, payment of fees, etc.
  • Section VI describes the review process.  Conference calls and a list-serve will be used to facilitate communication between states, and responses to requests for interpretive opinions and no-action letters should be generated within 60 days.
  • Section VII contains optional disclaimers for the states to consider using.

The full policy statement, reprinted below, can also be found here.

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STATEMENT OF POLICY REGARDING
MULTI-STATE REVIEW OF REQUESTS FOR
INTERPRETIVE OPINIONS AND NO-ACTION LETTERS

(Adopted ____)

I. OVERVIEW

1. This Statement of Policy of the North American Securities Administrators Association (NASAA) describes the application and review process for multi-state consideration of requests for Interpretive Opinions and No-Action Letters.

2. The policy is intended to promote efficiency in the review of applications and produce responses to requests within 60 days.

3. This policy is intended to promote consistency in the interpretation of blue sky laws, particularly when the laws are based upon uniform or model provisions. However, the issuance of Interpretive Opinions and No-Action Letters is done solely at the discretion of each state, and each state is ultimately responsible for interpreting and enforcing its own law.

II. DEFINITIONS

1. “Interpretive Opinion” means a letter that states a conclusion regarding the applicability of a relevant provision of law to a situation presented. An Interpretive Opinion represents a judgment based solely on the fact situation as described by the applicant and an analysis of existing law and judicial, legislative, and administrative history.

2. “No-Action Letter” means a letter by which a person is advised that a transaction carried out under a set of assumed facts will not result in a recommendation by staff that an enforcement action be taken. An Interpretive Opinion often includes an assurance of “no action;” however, a No-Action Letter does not necessarily include any interpretation of law.

3. “Participating Jurisdictions” means those states that have agreed to accept applications for multi-state review of requests for Interpretive Opinions or No-Action Letters in accordance with this Statement of Policy. Authority for a multi-state review is provided in section 608(c)(9) of the Uniform Securities Act of 2002 and section 420(b)(7) of the Uniform Securities Act of 1956, as amended by NASAA. All Participating Jurisdictions are listed on Form MS-ONA.

4. “Selected Jurisdictions” means the states from whom an applicant seeks an Interpretive Opinion or No-Action Letter, as indicated by the applicant on Form MS-ONA.

III. CRITERIA FOR ELIGIBILITY

1. An application for multi-state review of a request for an Interpretive Opinion or No-Action Letter shall not involve a hypothetical situation, a past transaction, or an issue that is currently subject to or in preparation for litigation.

2. An application shall not involve a matter that the applicant knows or should know is currently under investigation or subject to regulatory action.

3. An application shall not relate to an interpretation of antifraud provisions.

IV. APPLICATION PROCESS

1. To apply for multi-state review of a request for an Interpretive Opinion or No-Action Letter, the applicant shall file the following documents with each Selected Jurisdiction and the Program Administrator:

a.  A copy of “Form MS-ONA – Application for Multi-State Review of Request for Interpretive Opinion or No-Action Letter.” The form is available on the NASAA web site at [insert current web address] and contact information for each state is available at [insert current web address].

b.  A request letter that complies with the requirements set forth below; and

c.  Any supporting materials.

2. The applicant shall submit an application fee directly to each Selected Jurisdiction in the amount indicated on Form MS-ONA.

V. CONTENT OF REQUEST LETTER

1. A request for an Interpretive Opinion or No-Action Letter shall succinctly present the issue to be considered and provide a thorough recitation of all material facts. The request shall contain the applicant’s reasoning and legal analysis, including references to applicable law and previous Interpretive Opinions or No-Action Letters that support the interpretation or relief requested. Additionally, the request should include a discussion of previous Interpretive Opinions or No-Action Letters that militate against granting the interpretation sought or relief requested and set forth the applicant’s reasoning and legal analysis distinguishing them from the facts and issues presented in the request.

2. The request should be limited to one legal issue and should be narrowly tailored to resolve the specific issue. The request should not attempt to discuss every possible situation.

3. The request must identify the persons or entities that are the subject of the request or will rely upon the response and identify the states in which such persons reside or maintain their principal places of business. The request may state that the person or entity seeks confidential treatment to the extent permitted by the open records or public records laws of the Selected Jurisdictions (e.g., state laws modeled after section 607 of the Uniform Securities Act of 2002). However, the applicant should take note that the laws of some states do not permit confidential treatment, and this Statement of Policy does not assure that any state will maintain the confidentiality of the person or entity or any other information contained in the application.

4. If a request for an Interpretive Opinion or No-Action Letter relates to a definition, exemption, or other provision that is derived from the Uniform Securities Act of 1956, the Uniform Securities Act of 2002, a NASAA model rule, or a NASAA Statement of Policy (SOP), the request letter shall include in the heading a citation to the relevant provision(s) of each applicable uniform act, model rule, or SOP.

5. The request shall set forth in tabular form, as an appendix, a specific citation to the relevant laws of each Selected Jurisdiction.

6. The request shall include a representation that any proposed transaction has not yet been consummated, that the matter is not currently subject to or in preparation for litigation, and that the applicant is not aware of any regulatory investigation involving the matter.

7. The request shall disclose whether any of the persons who are the subject of the request or will rely upon the response, or any of the persons’ predecessors, affiliates, directors, officers, general partners, beneficial owners of 10 percent or more of any class of its equity securities, any promoter presently connected with the persons in any capacity, any underwriter to be involved in a transaction described in the request, or any partner, director or officer of the underwriter:

a.  Within the last five years, has filed a registration statement which is the subject of a currently effective registration stop order entered by any state securities administrator or the United States Securities and Exchange Commission;

b.  within the last five years, has been convicted of any criminal offense in connection with the offer, purchase or sale of any security, or involving fraud or deceit;

c.  is currently subject to any state or federal administrative enforcement order or judgment, entered within the last five years, finding fraud or deceit in connection with the purchase or sale of any security; or

d.  is currently subject to any order, judgment or decree of any court of competent jurisdiction, entered within the last five years, temporarily, preliminary or permanently restraining or enjoining such party from engaging in or continuing to engage in any conduct or practice involving fraud or deceit in connection with the purchase or sale of any security.

8. If the applicant has communicated with any state securities administrator concerning the transaction or subject matter that is the subject of the request, the applicant shall disclose the nature of the communication and any response received from the state. If a separate request for an Interpretive Opinion or No-Action Letter has already been filed with one or more states in connection with the same transaction or subject matter, the applicant shall (1) provide a copy of any requests that have been filed and disclose the status of each state’s response; (2) provide a copy of any response that has been issued by a state; and (3) explain the reason that it did not initially seek multi-state review.

VI. REVIEW PROCESS

1. Within 5 business days after receipt of an application, the Program Administrator will determine whether the application is eligible for multi-state review and in proper form. If the application is ineligible or deficient, the Program Administrator will notify the applicant and the Selected Jurisdictions. If the application is eligible for multi-state review, the Program Administrator will notify the applicant and Selected Jurisdictions of the deadline to review the application and issue responses in accordance with paragraph VI.3. The Program Administrator will also send a copy of the application to any other state that provides contact information in accordance with Paragraph VI.6.

2. Within 45 days after receipt of a proper application by the Program Administrator, the Program Administrator shall arrange for a conference call to discuss the application and shall provide notice of the call to all states who submit contact information in accordance with paragraph VI.6. The Program Administrator may appoint a facilitator for the conference call, and the Program Administrator or facilitator may schedule additional conference calls as needed.

3. Within 60 days after receipt of a proper application by the Program Administrator, each Selected Jurisdiction shall use its best efforts to issue its response to the applicant. The response may include an Interpretive Opinion, No-Action Letter, or letter declining to give any such assurance. Failure of a Selected Jurisdiction to issue a response does not indicate assent to the granting of the interpretation or relief requested. A copy of the response should be sent to the Program Administrator and added to an electronic library containing the Interpretive Opinions and No-Action Letters issued under this Statement of Policy.

4. The Program Administrator may seek additional information from the applicant on behalf of any Selected Jurisdiction, and the applicant shall file copies of all supplemental material with each Selected Jurisdiction and the Program Administrator. If supplemental material is requested, the review period may be extended up to 30 additional days after receipt of the supplemental material at the discretion of the Program Administrator. The Program Administrator will notify the applicant and Selected Jurisdictions of the extension and send copies of the supplemental material to states that are not Selected Jurisdictions.

5. The timelines contained herein may be postponed at the discretion of the Program Administrator in extenuating circumstances. The Program Administrator will notify the applicant and the Selected Jurisdictions of the new deadlines and the reasons for any postponement.

6. Each Participating Jurisdiction and any other state that wants to receive notices from the Program Administrator must provide and update the Program Administrator with the name, title, address, phone number, fax number, and e-mail address of one or more contact persons. The Program Administrator will maintain a list-serve or other electronic system to facilitate communication between such persons.

VII. DISCLAIMERS

1. Each Participating Jurisdiction is encouraged to use the following disclaimers in any letter issued under this policy:

a.  The letter applies only to the party requesting it, and persons having similar fact situations should submit a separate request.

b.  The letter is conditioned upon the specific facts set forth in the request and the accuracy of any representations that are required to be made under this Statement of Policy.

c.  The conclusions are based upon current law, should not be regarded as precedent, and are not binding on any court, agency, or tribunal.

d.  The letter does not preclude investors, other regulatory agencies, or other persons from asserting their rights under the law.