October 26, 1990
TO: CONTRACTUAL PLANS COMMITTEE NO. 12-90
RE: COMMENTS ON NEW MEXICO PROPOSED RULES
__________________________________________________________
The New Mexico Securities Division recently asked for
comments regarding a comprehensive package of proposed rules, two
of which would specifically impact contractual plans. Proposed
Rule 5.133.C. would deny the use of the blue chip exemption to
contractual plans "whereby more than a pro-rata portion of the
load or commission is deducted from any installment." Likewise,
proposed Rule 4.400.B. provides that "[a] registration will not
be approved for the sale of ... a contractual plan whereby more
than a pro-rata portion of the load or commission is deducted
from any installment payment." (See Memorandum to Contractual
Plan Committee No. 9-90, dated September 19, 1990.)
The Institute submitted an extensive comment letter to the
Securities Division that specifically focused on the scope of the
Director's ability to promulgate rules that would deny the
availability of the blue chip exemption from registration to
contractual plans absent a violation of the New Mexico Securities
Act. The Institute also questioned whether the Director had the
authority to deny administratively a registration statement for a
contractual plan without making an inquiry or finding that the
operation of a contractual plan constitutes a "fraud" or "deceit"
as required pursuant to the Act. In addition, the Institute
noted due to the highly detailed regulation of contractual plans
under the federal securities laws, that it would be extremely
doubtful that the Director could properly find that the offering
or selling of a contractual plan would rise to the level of a
fraud or deceit.
A copy of the Institute's comment letter is attached. We
will keep you informed of developments.
Patricia Louie
Assistant General Counsel
Attachment