Commissioner's Release: 104-C: NOTICE FILING AND FEE PAYMENT REQUIREMENTS FOR INVESTMENT COMPANIES

Pete Wilson, Governor
Date: December 18, 1996

Keith Paul Bishop, Commissioner


In 1996, the California Legislature enacted SB 1729 (Chapter 268, Statutes 1996), effective January 1, 1997, which establishes an exemption from qualification under the Corporate Securities Law of 1968 (the "Law") for any security issued by an investment company registered as an open-end management company or unit investment trust under the Investment Company Act of 1940. This exemption is found at Section 25100(t) of the Corporations Code, and requires the filing of a notice and other documents, along with the payment of a fee, by an investment company claiming the exemption. Attached to this release is the form of the notice required to be filed by an investment company on and after January 1, 1997, seeking to offer or sell its securities in this state. This notice, the documents required by the notice, and payment of the fee may be filed in any office of the Department of Corporations.

The Department of Corporations is aware that the National Securities Markets Improvement Act of 1996 (the "NSMIA") was signed into law by the President on October 11, 1996. Title I of that act became effective immediately upon enactment. One of the provisions of Title I preempts state qualification or registration of the offer and sale of securities issued by an investment company registered, or that has filed an application for registration under, the federal Investment Company Act of 1940. The effect of the NSMIA on the qualification of securities under the Law was discussed by the Commissioner of Corporations in Commissioner's Release No. 101-C, dated November 18, 1996. Notwithstanding the issuance of Commissioner's Release No. 101-C, and the issuance of this release, the Commissioner reserves the right under the NSMIA to require future notice and document filings, as well as fee payments, under that law.

Section 3.5 of Article 3 of the California Constitution provides that a state administrative agency has no power to declare a state statute unenforceable on the basis that federal law prohibits the enforcement of the statute, unless an appellate court has made a determination that the enforcement of the statute is prohibited by federal law or regulations.

As a consequence of the federal preemption language in the NSMIA and the obligation of the Commissioner under Section 3.5 of Article 3 of the California Constitution, the Department has drafted the notice required to be filed by new Corporations Code Section 25100(t) in a manner which it believes to be consistent with the requirements of Section 25100(t) and Section 18(c)(2)(A) and (B) of the Securities Act of 1933 (the "Securities Act").

In filing the notice and other documents, as well as the payment of the filing fee, the investment company is directed to Section 18(c)(2)(C) of the Securities Act, which provides that a state may require the registration or qualification of the securities issued by any issuer who refuses to pay the fee authorized under Section 18(c)(2)(B), and that a delay in the payment of the fee, or underpayment of the fee, if promptly remedied will not constitute a refusal to pay the fee.

WILLIAM KENEFICK
Assistant Commissioner
Office of Policy