Current through Reg. 49, No. 12; March 22, 2024
(a) Introduction.
(1) Certain open-end investment companies
commonly known as money market funds have investment characteristics and sales
patterns materially different from other types of mutual funds and other
securities. These funds, defined in subsection (b) of this section, are
designed to attract a large volume of comparatively short-term investments by
purchasers. As early redemptions are contemplated by both purchaser and seller,
and because these funds continuously offer to repurchase their own securities
and issue new securities to new and repeat investors, an excessive amount of
fees may be paid under the Texas Securities Act, §35.B(2), for the
securities issued. Therefore, pursuant to the Act, §5.T, the State
Securities Board conditionally exempts from the fee provisions of the Texas
Securities Act certain investment company securities defined herein provided
all the requirements of this section are satisfied.
(2) Nothing in this section shall be
construed to relieve any open-end investment company from any condition or
requirement of registration under the Texas Securities Act except as
specifically stated herein or in Chapter 114 of this title (relating to Federal
Covered Securities).
(b)
Definition. In this section, a "money market fund" or "fund": is an open-end
investment company which must meet all of the following conditions.
(1) The fund must engage in a continuous
offering of its securities.
(2) The
fund must hold itself out to be a money market fund or an equivalent to a money
market fund and must be in compliance with the Investment Company Act of 1940,
Rule 2a-7, as revised in Securities and Exchange Commission Release Number
IC-31166 .
(3) The fund must not
pay or charge sales commissions or redemption fees except nominal exchange fees
which may not be used for sales expenses or in lieu of initial sales charges or
redemption fees.
(4) The fund's
total charges against net assets for sales distribution activities and/or the
servicing of shareholder accounts must not be in excess of .25% of average net
assets per annum.
(5) With the
exception of mergers, consolidations, or acquisitions of assets, or as noted in
paragraph (6) of this subsection, the fund's investments in other investment
companies must be limited to:
(A) 10% of the
fund's total assets;
(B) other
investment companies with substantially similar investment objectives;
and
(C) other investment companies
with charges and fees substantially similar to those set forth in paragraphs
(3) and (4) of this subsection.
(6) In the case of a master/feeder fund
structure:
(A) feeder fund(s) must meet, or
invest in a master fund which meets, paragraphs (1)-(4) of this
subsection;
(B) when viewed
together, the master/feeder fund(s) must meet paragraphs (3) and (4) of this
subsection; and
(C) all feeder
funds must have investment objectives substantially similar to those of the
master fund.
(7) A
currently authorized fund which has been granted money market status is not
required to comply with this subsection until the fund files its Year End
Report of Sales of Federal Covered Securities by a Money Market Fund on Form
133.27, but it is required to comply with the subsection as it was in effect at
the time that the fund was designated a money market fund for purposes of this
section.
(c) Request for
determination.
(1) At the time an applicant
submits documents or fees in connection with an authorization to sell federal
covered securities, or at any time thereafter, the applicant may request the
Securities Commissioner determine that the issuer is a money market fund as
defined in this section. The request shall be made in writing on Form 133.26 of
this title (relating to Request for Determination of Money Market Fund Status
for Federal Covered Securities). The Securities Commissioner shall review the
request and any other information the Securities Commissioner deems relevant to
the determination of whether the issuer is a money market fund for purposes of
this section.
(2) If the request is
made after the issuance of the fund's original authorization, an amendment fee
as prescribed by the Texas Securities Act, §35.A(1) will be required.
Additional sales information will be required since only the federal covered
securities authorized and sold after the date the Securities Commissioner
determines that the issuer is a money market fund will be subject to the
reduced fees under subsection (d) of this section.
(d) Conditional exemption. Subject to the
other provisions of this section, federal covered securities issued by money
market funds are exempt from the fee imposed by the Texas Securities Act,
§35.B(2), provided all of the following requirements are satisfied at the
time of sale of the federal covered securities.
(1) An applicant has requested that the
Securities Commissioner determine that the issuer is a money market fund as
defined in this section.
(2) The
Securities Commissioner has determined that the issuer is a money market fund
as defined in this section.
(3) For
each filing of an original, renewal, or amended authorization under the
conditional exemption provided by this section, the applicant has paid the
filing fee required by the Act, §35.A(1), in addition to the reduced fee
imposed by paragraph (5) of this subsection.
(4) During the current calendar year, the
fund has an aggregate authorized amount of $10 million of federal covered
securities for sale in Texas.
(5)
The fund has paid the reduced authorization fee imposed by this paragraph for
the aggregate amount of federal covered securities proposed to be sold during
the current calendar year under this conditional exemption. The reduced
authorization fee imposed by this paragraph for authorization of federal
covered securities in excess of the first $10 million aggregate amount of
securities sold is:
(A) for the next $10
million of federal covered securities authorized, 1/20 of 1.0% of the aggregate
amount to be sold;
(B) for the next
$30 million of federal covered securities authorized, 1/50 of 1.0% of the
aggregate amount to be sold;
(C)
for the next $50 million of federal covered securities to be authorized, 1/100
of 1.0% of the aggregate amount to be sold; and
(D) 1/200 of 1.0% of the aggregate amount on
the remainder of the federal covered securities authorized to be
sold.
(e)
Oversales. The reduced authorization fee schedule imposed by subsection (d)(5)
of this section shall not apply to any federal covered securities authorized
under the Act, §35-1. All fees paid for authorization of federal covered
securities of money market funds pursuant to §35-1 shall be computed as
set forth in the Act, §§35.A(1), 35.B(2), and 35-1.
(f) Unsold balance at end of calendar year.
In any calendar year, the fees required to be paid by a fund for sales that
year will be calculated under subsection (d)(4) and (5) of this section without
regard to the amount of fees paid or federal covered securities sold in any
other year. If, at the end of any calendar year a money market fund has a
remaining unsold balance of federal covered securities authorized to be sold,
the dollar amount of fees paid under subsection (d) of this section for
authorization of the unsold balance may be reapplied to fees required in the
next calendar year, but no unsold balance of authorized but unsold federal
covered securities will be carried forward to the subsequent calendar
year.
(g) Year end reports. To
qualify for the reduced fees accorded to a fund granted money market fund
status pursuant to this section, the fund must file a year end report of sales
on Form 133.27 of this title (relating to Year End Report of Sales of Federal
Covered Securities by a Money Market Fund) in January of each year which
reflects the amount of federal covered securities sold in the previous year,
the balance of fees paid for authorization of any unsold balance in the
previous year and the recalculated balance of authorized federal covered
securities at the beginning of the current year. In calculating fees applied to
sales during the previous year, fees will first be applied at the higher rates
specified in the reduced fee schedule in subsection (d)(5) of this section, and
then at more reduced rates as sales volume increases, and not vice versa. Funds
should consult Form 133.27 in determining how to compute fees.
(h) Effect of noncompliance. If at any time
the business or plan of business of any fund has been altered so that it is no
longer a money market fund within subsection (b) of this section, such an
issuer shall not be entitled to any reduction of fees as provided in subsection
(d)(5) of this section. Such fund shall not be entitled to any reduction in
fees as provided in subsection (d)(5) of this section for any sales of its
securities from the time at which it ceases to comply with subsection (b) of
this section until the Securities Commissioner redetermines in a subsequent
calendar year that the issuer is again a money market fund as defined in
subsection (b) of this section, and instead fees shall be calculated for such
issuer as provided in the Act, §35 and §35-1.
(i) Appeals. If any person should take
exception to an action of the Securities Commissioner in making, failing to
make, or revoking a determination whether that person is a money market fund,
the aggrieved person may appeal the decision of the Securities Commissioner as
provided in the Act, §24.
(j)
Effect of a prior determination. A fund offering federal covered securities,
that was determined to be a money market fund prior to October 11, 1996, will
continue to be considered a money market fund for purposes of this section
without the necessity of submitting a new request for determination, so long as
the fund continues to meet the definition of a "money market fund" in
subsection (b) of this section.