Texas Register, Volume 13, Number 50, Pages 3252-3304, June 28, 1988 Page: 3,292
3252-3304 p. ; 28 cm.View a full description of this periodical.
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removed. Sections 117.1 and 117.6 are
adopted without changes and will not be re-
published.
The amendments allow Texas to remain uni-
form with other states in regard to the criteria
which must be met for registered public offer-
ings of securities representing interests in
these programs.
The sections reflect the most recent amend-
ments to the North American Securities Ad-
ministrator's Association's real estate
guidelines and put issuers on notice as to
those requirements.
No comments were received regarding adop-
tion of the amendments.
The amendments are adopted under Texas
Civil Statutes, Article 581, 28-1, which pro-
vide that the board may make or adopt rules
of regulations governing registration state-
ments, applications, notices, and reports, and
in the adoption of rules and regulations, may
classify securities, persons, and matters
within its jurisdiction, and prescribe different
requirements for different classes.
1175. Conflicts of Interest and Investment
Restrictions.
(a) Sales, leases, and related pro-
gram transaction.
(1)-(2) (No change.)
(3) Dealing with related pro-
grams. A program shall not acquire prop-
erty from a program in which the sponsor
has an interest.
(b)-(d) (No change.)
(e) Services rendered to the pro-
gram by the sponsor.
(1) (No change.)
(2) Other services. Except as
provided in 117.4 of this title (relating to
Fees, Compensation, and Expenses), and
paragraph 1 this subsection no other ser-
vices may be performed by the sponsor for
the program except in extraordinary circum-
stances fully justified to the securities com-
missioner. As a minimum, self-dealing
arrangements must meet the following crite-
ria:
(A)-(D) (No change.)
(f)-(g) (No change.)
(h) Investments in other programs.
(1) Investments in limited part-
nership interests of another program shall
be prohibited; however, nothing herein shall
preclude the investment in general partner-
ships or joint ventures which own and oper-
ate a particular property provided the
program acquired a controlling interest in
such other joint ventures or general partner-
ships (except as permitted by paragraph (3)
of this subsection). In such event, duplicate
property management or other fees shall not
be permitted.
(2) Nothing in paragraph (1) of
this subsection shall preclude an investment
in limited partnerships which own and oper-
ate a particular property to be qualifiedpursuant to the Internal Revenue Code of
1986, 42(g), as amended. Such a two-
tiered partnership shall provide for its lim-
ited partners at both tiers all of the rights
and obligations required to be provided by
117.7 of this title (relating to Rights and
Obligations of Participants) of these guide-
lines. Duplicate fees shall not be permitted.
(3) (No change.)
(i) Lending practices.
(1) No loans may be made by
the program to the sponsor or an affiliate,
except as provided in 117.5(i)(2) of this
title (relating to Conflicts of Interest and
Investment Restrictions).
(2) Programs which make or in-
vest in mortgage loans may provide such
loans to programs formed by or affiliated
with the sponsor in those circumstances in
which such activities have been fully justi-
fled to the securities commissioner. These
affiliated transactions must at the minimum
meet the following conditions:
(A) the circumstances under
which the loans will be made and the actual
terms of the loans must be fully disclosed in
the prospectus:
(B) an independent and qual-
ified adviser must issue a letter of opinion
to the effect that any proposed loan to an
affiliate of the program is fair and at least
as favorable to the program as a loan to an
unaffiliated borrower in similar circum-
stances. In addition, the sponsors will be
required to obtain a letter of opinion from
the independent adviser in connection with
any disposition, renegotiation, or other sub-
sequent transaction involving loans made to
a sponsor or an affiliate of the sponsor. The
adviser's compensation must be paid by the
sponsor and not reimbursable by the pro-
gram; and
(C) loans made to third
parties, the proceeds of which are used to
purchase or refinance property in which the
sponsor or an affiliate has an equity or
security interest, must meet the require-
ments of subparagraph (A) or (B) of this
paragraph.
(3) On loans made available to
the program by the sponsor, the sponsor
may not receive interest or similar charges
or fees in excess of the amount which
would be charged by unrelated lending in-
stitutions on comparable loans for the same
purpose, in the same locality of the property
if the loan is made in connection with a
particular property. No prepayment charge
or penalty shall be required by the sponsor
on a loan to the program secured by either a
first or junior or all-inclusive trust deed,
mortgage, or encumbrance on the property,
except to the extent that such prepayment
charge or penalty is attributable to the un-
derlying encumbrance.(4) The sponsor shall be prohib-
ited from providing financing except:
(A) as permitted by para-
graph (2) of this subsection, in which case
there will be independent advisers for each
publicly registered party to the transaction;
or
(B) as permitted by para-
graph (5) of this subsection.
(5) An all-inclusive or wrap-
around note and deed of trust (the all-
inclusive note herein) may be used to fi-
nance the purchase of property by the pro-
gram only if the following conditions are
complied with:
(A) the sponsor under the
all-inclusive note shall not receive interest
on the amount of the underlying encum-
brance included in the all-inclusive note in
excess of that payable to the lender on that
underlying encumbrance;
(B) the program shall receive
credit on its obligation under the all-
inclusive note for payments made directly
on the underlying encumbrance; and
(C) a paying agent, ordi-
narily a bank, escrow company, or savings
and loan, shall collect payments (other than
any initial payment of prepaid interest or
loan points not to be applied to the underly-
ing encumbrance) on the all-inclusive note
and make disbursements therefrom to the
holder of the underlying encumbrance prior
to making any disbursement to the holder of
the all-inclusive note, subject to the require-
ments of subparagraph (A) of this para-
graph or, in the alternative, all payments on
the all-inclusive and underlying note shall
be made directly by the program.
(j)-(l) (No change.)
(m) Mortgage loan programs.
(1)-(2) (No change.)
(3) The program may not invest
in or make mortgage loans on unimproved
real property in an amount in excess of 25%
of the capital contributions to be raised by
the program.
(4) The program shall not invest
in real estate contracts of sale otherwise
known as land sale contracts unless such
contracts of sale are in recordable form and
are appropriately recorded in the chain of
title.
(5) The program shall not make
or invest in mortgage loans on any one
property if the aggregate amount of all
mortgage loans outstanding on the property,
including the loans of the program, would
exceed an amount equal to 85% of the
appraised value of the property as deter-
mined by an independent appraisal, unless13 TexReg 3292 June 28, 1988 Texas Register *
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Texas. Secretary of State. Texas Register, Volume 13, Number 50, Pages 3252-3304, June 28, 1988, periodical, June 28, 1988; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth220258/m1/40/: accessed August 15, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.