July 16, 1991
TO: SEC RULES MEMBERS NO. 38-91
INVESTMENT ADVISER MEMBERS NO. 30-91
RE: NEW JERSEY CASINO CONTROL ACT AMENDED
__________________________________________________________
The Institute is pleased to inform you that Senate Bill
3279 has been passed by the New Jersey Legislature and was signed
by the Governor on June 29, 1991. Among other provisions, this
bill amends Section 85(f) of the New Jersey Casino Control Act to
permit investment by an institutional investor of up to ten
percent of the equity securities of a casino licensee or twenty
percent of the outstanding debt of a casino licensee provided
that such securities are of a publicly traded corporation and the
institutional investor purchased such securities for investment
purposes only. The definition of "institutional investor" in
Section 11 of the Casino Control Act has also been amended to
specifically include an investment company registered under the
Investment Company Act of 1940.
As you may be aware, in August 1989 the New Jersey Casino
Commission ruled that institutional investors that hold five
percent or more of a New Jersey related casino stock must file
for qualification under the Casino Control Act. (The process of
qualifying under the Casino Control Act is extremely lengthy,
complicated and expensive. During the process of qualifying, the
stock must be placed in trust and no profits can be taken.)
Previously, the Casino Commission and the Division of Gaming
Enforcement recognized that the presumption of control set forth
in the statute could be rebutted by an institutional investor
upon a showing that the securities were being held for investment
purposes on behalf of unrelated clients and not for the purpose
of affecting or influencing control of the issuer. Consequently,
waivers from the qualification process were routinely available
to most institutional investors.
Last summer, the Casino Commission held a series of public
hearings to determine whether amendments to the Casino Control
Act were necessary in order to encourage investment in casino
holding company securities. The Institute submitted a detailed
comment letter to the Casino Commission recommending that given
the detailed and stringent reporting requirements that
institutional investors are subject to pursuant to the provisions
of the Securities Exchange Act of 1934, the Casino Control Act
could be amended to allow investment by passive institutional
investors of up to ten percent of a class of equity securities
and twenty percent of a class of debt securities of publicly-held
casino companies without sacrificing the integrity of the casino
licensing process.
* * *
Senate Bill 3279 is effective as of June 29, 1991. A copy
of the bill is attached.
Patricia Louie
Assistant General Counsel
Attachment