January 24, 1991
TO: CONTRACTUAL PLANS COMMITTEE NO. 1-91
RE: NEW MEXICO AMENDS PROPOSED REGULATIONS
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As we previously informed you, the New Mexico Securities
Division proposed regulations that would have denied the use of
the blue chip exemption and the registration process to
contractual plans "whereby more than a pro-rata portion of the
load or commission is deducted from any installment." The
Institute submitted an extensive comment letter to the Securities
Division that focused on the Director’s ability to promulgate
rules that would deny the blue chip exemption to contractual
plans absent a violation of the New Mexico Securities Act. The
Institute’s comment letter 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 offering constituted a "fraud" or "deceit". The
Institute also testified at the public hearing held on the
proposed rules. (See Memoranda to Contractual Plan Committee
Nos. 9-90, dated September 19, 1990 and 12-90, dated October 26,
1990.)
The Securities Division has amended the original proposal
to provide that a contractual plan cannot register, or claim the
blue chip exemption, unless:
1. each investor is required to read and execute a
specified disclosure document;
2. all proceeds of the contractual plan investment are
placed in portfolios dedicated exclusively to
contractual plan sponsors for the investment
objective of long term capital growth; and
3. the contract provides that an investor electing at
any time to surrender his certificate cannot be
charged a sales load of more than 15% of his total
payments.
A copy of the applicable portions of the amended proposed
regulations is attached. Please contact me with any comments
that you would like incorporated in the Institute’s comment
letter by February 1, 1991. Individual comments should be sent
to Michael J. Vargon, General Counsel, New Securities Division,
725 St. Michaels Drive, Santa Fe, New Mexico 87501.
* * *
We will keep you further advised.
Patricia Louie
Assistant General Counsel
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