August 15, 1990
TO: UNIT INVESTMENT TRUST COMMITTEE NO. 36-90
RE: INSTITUTE LAWSUIT CHALLENGING MINNESOTA REGISTRATION FEES
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As you know, the Institute has been working for several
years to establish caps on the registration fees paid to states.
There remain only six states, including Minnesota, that do not
have fee caps. Moreover, Minnesota is unique in that the
registration fees paid by all issuers, other than mutual funds
and unit trusts, are capped at $300.00.
The Institute filed a lawsuit against the State of
Minnesota and the Commissioner of Commerce challenging the
constitutionality of the disparate registration fee structure on
December 21, 1987. The lawsuit is currently in the discovery
process and a hearing on the Institute's motion for summary
judgment has been tentatively scheduled for early November.
Minnesota is claiming that the disparity in the fee
structure is justified because issuers of securities other than
mutual funds and unit trusts have a "direct economic benefit" to
Minnesota. To support this claim, the Securities Division
conducted a survey of non-investment company issuers that applied
for registration during the calendar year 1987 and found that
approximately 34% of these issuers had "a connection with
Minnesota that directly impacted upon the state's economic
growth". According to the State, the term "connection with
Minnesota" primarily means one or more of the following: the
issuer is located in Minnesota; employees are located in
Minnesota; legal counsel is located in Minnesota; the underwriter
is located in Minnesota; the security is issued on behalf of a
Minnesota corporation; the accountant is located in Minnesota.
No effort was made on behalf of the State to quantify these
findings.
To show that the foregoing factors are not valid
distinctions in justifying the disparity in the fee structure, we
would appreciate your completing the attached form and returning
it to me by September 5, 1990 so that this information can be
included in the Institute's brief.
If you have any questions regarding the foregoing, please
feel free to contact me at (202) 955-3517. We will keep you
informed of developments.
Patricia Louie
Assistant General Counsel
Attachment