<subtitle num="01" heading="Consumer Protection Division"> <chapter num="01" heading="Unit Pricing"> <regulation prefix="Regulation" num=".01" heading="General."> <text>These regulations are promulgated pursuant to Commercial Law Article, §14-105, Annotated Code of Maryland. They are intended to effectuate the provisions of the Unit Pricing Law, §14-101 et seq., Annotated Code of Maryland, and are not intended to extend, modify, or conflict with the Unit Pricing Law or its reasonable implications.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Findings."> <paragraph num="A."> <text>The Consumer Protection Division of the Office of the Attorney General and the Consumer Council find that some of those sales agencies required to unit price have not done so properly or in conformance with the Unit Pricing Law. The increasing costs of consumer commodities mandates the continued attention of the Division to enforce the Unit Pricing Law, as the disclosure of unit pricing information gives consumers a method of price comparisons for similar or identical consumer commodities. Thus, the availability of properly disclosed unit pricing information will provide an effective tool for informed and economical consumer purchasing.</text> </paragraph> <paragraph num="B."> <text>The Division and the Council further find that the General Assembly has authorized the Division to promulgate regulations to effectuate the purpose of the Unit Pricing Law, and has given the Council the role of advising the Division on these regulations. The proposed regulations explain the requirements of the Unit Pricing Law, clarify the method of disclosure, and require meaningful consumer information necessary to effectuate the Law's purpose. Provisions are proposed to set forth the responsibilities of those sales agencies required to unit price to notify the Division if an exemption from compliance is requested or if non-intentional technical errors are discovered.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Definitions."> <paragraph num="A."> <text>“Control” means the possession, direct or indirect, of the power to direct, or cause the direction of, the management and policies of a person, whether through ownership of voting securities, by contract, or otherwise.</text> </paragraph> <paragraph num="B."> <text>“Inventory facility” means a physical location, separate and apart from the physical location of the sales agency, where consumer commodities are stored and subject to inventory accounting, and which thereafter are distributed to the physical location of the sales agency.</text> </paragraph> <paragraph num="C."> <text>“Members of the immediate family” mean the spouse, son, daughter, parent, brother, and sister of the individual owner.</text> </paragraph> <paragraph num="D."> <text>“Multi-unit packages” means packages intended for retail sale containing two or more identically packaged or labeled units of an identical commodity in the same quantity.</text> </paragraph> <paragraph num="E."> <text>“Non-intentional technical errors” means inaccuracies in the unit pricing information reflected upon stamps, tags, labels, signs, or lists where these defects have resulted from a malfunction of a printing press, electronic data processing equipment, or other mechanical equipment used to produce these stamps, tags, labels, signs, or lists, or from the mistake of a computer programmer or machine operator, when this malfunction or mistake was not within the knowledge or control of the owner, operator, or management personnel of the store and when this owner, operator, or management personnel could not, with reasonable diligence, have detected and corrected these errors.</text> </paragraph> <paragraph num="F."> <text>“Preceding calendar year” means the immediately preceding period, January 1 through December 31.</text> </paragraph> <paragraph num="G."> <text>“Sales agency” means any proprietorship, partnership, corporation, or other legal or commercial entity which sells or offers for sale at retail, those consumer commodities defined in the Commercial Law Article, §14-101(b), Annotated Code of Maryland (hereinafter, the “Unit Pricing Law”).</text> </paragraph> <paragraph num="H."> <text>“Variety packages” means packages intended for retail sale containing two or more identical packages or units of similar but not identical commodities. Commodities which are generally the same, but which differ in weight, volume, appearance, or quality are considered similar but not identical. Not included within this definition are items under Regulation .07A.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Exemptions."> <paragraph num="A."> <text>To determine whether it is exempt from compliance with the Unit Pricing Law, a sales agency shall refer to the exemptions found in Commercial Law Article, §14-102(6)(i)—(iv), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>A sales agency shall be given a reasonable time after the close of its fiscal year to calculate gross annual sales to determine whether it is exempt from the provisions of the Unit Pricing Law pursuant to §14-102(6)(i). For purposes of these regulations, any time in excess of 3 months shall be presumed to be unreasonable. If compliance is mandated, the sales agency shall be given 2 months to implement its unit pricing system.</text> </paragraph> <paragraph num="C."> <text>If the sales agency is found to be required to unit price, it shall comply with the Unit Pricing Law and these regulations no later than June 1 following the close of its fiscal year, if determined on a calendar year basis. If the sales agency's fiscal year is determined by any other method, compliance shall be required by no later than 150 days after the close of this fiscal year.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Direct Delivery."> <text>For purposes of §14-102(a)(5), items shall be considered to have been directly delivered when the items have not passed through any warehouse or inventory facility which is owned or controlled directly or indirectly by the sales agency.</text> </regulation> <regulation prefix="Regulation" num=".06" heading="Consumer Commodities to be Unit Priced."> <paragraph num="A."> <text>Section 14-103(a)(2)(ii) of the Unit Pricing Law defines the categories of consumer commodities required to be unit priced. Any of these commodities which are priced for multi-unit or variety package purchase shall be unit priced on the basis of the total contents.</text> </paragraph> <paragraph num="B."> <text>The unit price of any consumer commodity sold with a deposit for the container's return, shall be based on the price of the item's contents without regard to the amount of the deposit. The fact that there is a deposit, however, shall be clearly and conspicuously displayed on the product or its package or near the product.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Consumer Commodities not Required to be Unit Priced."> <text>The seller is not required to unit price the following:</text> <paragraph num="A."> <text>Those items specifically exempted by §14-102(a)(1)—(5);</text> </paragraph> <paragraph num="B."> <text>Items displayed in a non-packaged manner such as loose produce, fresh seafood, meats, and cheeses cut to order;</text> </paragraph> <paragraph num="C."> <text>Durable items, including any item which wears or deteriorates from usage, for example, kitchen utensils, pots and pans, and any other type of cooking or kitchen aids and household goods, such as brooms, fabric cleaning towels, and other durable goods.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Repricing Policy and Discounts from Regular Price."> <paragraph num="A."> <text>When the sales agency has established and clearly disclosed a no- repricing policy, whereby items on display are not repriced to reflect a higher price, the applicable unit price stamps, tags, labels, signs, or lists shall display the unit price of the higher price.</text> </paragraph> <paragraph num="B."> <text>When the manufacturer of a consumer commodity has offered a discount or cents off the price of items offered for sale by a sales agency, the unit price stamps, tags, labels, signs, or lists shall display the higher price.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Uniformity."> <paragraph num="A."> <text>If different brands of the same consumer commodity are expressed in more than one measuring unit, the sales agency, if it is possible to do so, shall unit price the items consistently within the same product category. The more familiar measuring unit found in the product group is to be used if conversion and uniformity are possible.</text> </paragraph> <paragraph num="B."> <text>When metric units appear on the consumer commodity, in addition to the other units of measure, the sales agency may use both units of measure on any stamps, tags, labels, signs, or lists.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Unit Pricing Information to be Disclosed on Items Conspicuous to the Consumer."> <paragraph num="A."> <text>Section 14-104(1) of the Unit Pricing Law provides for the method of disclosing the required unit pricing information.</text> </paragraph> <paragraph num="B."> <text>The unit pricing tags, stamps, or labels shall contain in easily readable and understandable print the price of the item, the unit price, the unit of measure, the name and size of the item, and the brand name if there is one.</text> </paragraph> <paragraph num="C."> <text>The tags, stamps, or labels need not be any special size, but shall be conspicuously visible to the consumer.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Unit Pricing Information to be Disclosed on Items Inconspicuous to the Consumer."> <paragraph num="A."> <text>Section 14-104(2) of the Unit Pricing Law provides for the method of disclosing the required unit pricing information on items inconspicuous to the consumer.</text> </paragraph> <paragraph num="B."> <text>The signs or lists shall contain in easily readable and understandable print the price of the item, the unit price, the unit of measure, the name and size of the item, and the brand name if there is one.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".12" heading="Additional Methods of Disclosure."> <text>If the consumer commodities are refrigerated, and attachment of stamps, tags, or labels is not practical, the sales agency shall disclose the required unit pricing information by signs or lists. These signs or lists shall be clear, conspicuous, and near the consumer commodities, and the information readily available to the consumer without need for the consumer to inquire of, or otherwise contact store personnel.</text> </regulation> <regulation prefix="Regulation" num=".13" heading="Additional Pricing Requirements."> <paragraph num="A."> <text>The unit price may be shown in type which is at least the size of “elite” type. However, this price shall be identified as the “unit price” or “price per (unit of measure).”</text> </paragraph> <paragraph num="B."> <text>The designation of the unit price per measure of 1 dollar or more shall be expressed in terms of dollars and cents.</text> </paragraph> <paragraph num="C."> <text>If the unit price is under 1 dollar, it shall be listed:</text> <paragraph num="(1)"> <text>To the tenth of a cent (i.e., an item priced at 25.54 cents may read 25.5 cents or 25.5); or</text> </paragraph> <paragraph num="(2)"> <text>To the whole cent. The sales agency shall accurately and consistently use the same method of rounding up or down to compute the price to the whole cent.</text> </paragraph> </paragraph> <paragraph num="D."> <text>The sales agency shall have the option of using §C(1) or (2) but may not implement both methods.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".14" heading="Non-intentional Technical Errors."> <paragraph num="A."> <text>If any errors are alleged by the Division which would subject the sales agency to the enforcement provisions of the Unit Pricing Law, the sales agency shall submit data which shows by the preponderance of the evidence that the errors are non-intentional technical errors.</text> </paragraph> <paragraph num="B."> <text>The data submitted to the Division may contain the following information:</text> <paragraph num="(1)"> <text>Any specific malfunction of the printing press, electronic data processing equipment, or other mechanical equipment used to produce the stamps, tags, labels, signs, or lists;</text> </paragraph> <paragraph num="(2)"> <text>Any specific mistake made by the computer programmer or machine operator;</text> </paragraph> <paragraph num="(3)"> <text>Specific reasons why the malfunction or mistake was not within the knowledge or control of the owner, operator, or management personnel of the store;</text> </paragraph> <paragraph num="(4)"> <text>Specific reasons why the owner, operator, or management personnel could not, within reasonable diligence, have detected or corrected these errors;</text> </paragraph> <paragraph num="(5)"> <text>The name, address, and telephone number of the person or persons responsible for the alleged error;</text> </paragraph> <paragraph num="(6)"> <text>Whether the sales agency had prior similar problems with the printing press, electronic data processing equipment, or other mechanical equipment responsible for the alleged error, and what action was taken by the sales agency to correct the malfunction;</text> </paragraph> <paragraph num="(7)"> <text>Whether the sales agency had prior similar problems with the computer programmer or machine operator responsible for the alleged mistake and what action was taken by the sales agency to correct the mistake.</text> </paragraph> </paragraph> <paragraph num="C."> <text>The Division may not consider non-intentional technical errors to be violations of these regulations.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".15" heading="Exemptions from the Operation of the Unit Pricing Law."> <paragraph num="A."> <text>Under §14-105(a)(2), the Attorney General may exempt any sales agency which is using a program of unit pricing which is approximately as or more comprehensive than the program required by the Unit Pricing Law. The following procedures are to be followed by any sales agency requesting an exemption under Maryland law and these regulations:</text> <paragraph num="(1)"> <text>A request shall be made in writing;</text> </paragraph> <paragraph num="(2)"> <text>A request shall be supported by a detailed description of the plan being used;</text> </paragraph> <paragraph num="(3)"> <text>An exemption requested shall be conditioned upon the sales agency agreeing to continue the plan without change, unless prior approval of the Consumer Protection Division is obtained;</text> </paragraph> <paragraph num="(4)"> <text>A request shall be signed by the owner, partners, or corporate officers of the sales agency making the request.</text> </paragraph> </paragraph> <paragraph num="B."> <text>A sales agency which does business in more than one jurisdiction where unit pricing is required by statute, ordinance, rule, or regulation, may apply for exemption from Maryland law and these regulations if:</text> <paragraph num="(1)"> <text>The system of unit pricing will be approximately as comprehensive as the program required by Maryland law;</text> </paragraph> <paragraph num="(2)"> <text>The sales agency submits copies of the statute and the regulations of the other jurisdiction and agrees to conduct its unit pricing program in Maryland in the same manner that it conducts unit pricing in the other jurisdiction or jurisdictions;</text> </paragraph> <paragraph num="(3)"> <text>The plan of unit pricing will not be confusing to Maryland consumers; and</text> </paragraph> <paragraph num="(4)"> <text>The request for an exemption complies with conditions in §B(1)—(4) or A, of this regulation.</text> </paragraph> </paragraph> <paragraph num="C."> <text>No exemption provided for in §A or B, of this regulation, will be considered to have been granted until the Consumer Protection Division of the Office of the Attorney General has, in writing, advised the sales agency that it is exempt.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Compliance."> <paragraph num="A."> <text>The Unit Pricing Law requires 90 percent compliance, which may be based on either of the following, at the option of the sales agency:</text> <paragraph num="(1)"> <text>Dollar volume of items required to be unit priced;</text> </paragraph> <paragraph num="(2)"> <text>Number of items which the store carried which are required to be unit priced.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Every sales agency shall advise the Office of the Attorney General, Division of Consumer Protection, of the option as provided in §A, of this regulation, which it has elected to use. A sales agency may not then change its option until it has notified the Division of Consumer Protection of the change and this office has acknowledged receipt of the change.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §14-105, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: September 1, 1972</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective June 2, 1978 (5:11 Md. R. 880)</annotation> </annotations> </chapter> <chapter num="02" heading="Rules of Practice and Procedure—Cease and Desist Order Hearings"> <regulation prefix="Regulation" num=".01" heading="Scope."> <text>This chapter governs cease and desist order proceedings held under the authority of Commercial Law Article, §13-403, Annotated Code of Maryland.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>Agency.</text> <paragraph num="(a)"> <text>“Agency” means the Consumer Protection Division in its role as an administrative agency authorized to adjudicate contested cases under Commercial Law Article, §13-403, and State Government Article, §10-202(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(b)"> <text>“Agency” includes the Chief of the Consumer Protection Division, and any person to whom the Chief of the Consumer Protection Division has delegated the authority to issue the final administrative decision of the Agency in a contested case.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>“Authorized representative” means an attorney or, if permitted by applicable law, a person designated by a party to represent the party.</text> </paragraph> <paragraph num="(3)"> <text>“Chief” means:</text> <paragraph num="(a)"> <text>The Chief of the Consumer Protection Division; or</text> </paragraph> <paragraph num="(b)"> <text>A person designated by the Chief of the Consumer Protection Division not employed by the Office of Administrative Hearings.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>“Chief Administrative Law Judge” means the Chief Administrative Law Judge of the Office of Administrative Hearings.</text> </paragraph> <paragraph num="(5)"> <text>“Division” means the Consumer Protection Division of the Office of the Attorney General in its role as a party to a contested case.</text> </paragraph> <paragraph num="(6)"> <text>“Judge” means an administrative law judge:</text> <paragraph num="(a)"> <text>Appointed by the Chief Administrative Law Judge under State Government Article, §9-1604, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(b)"> <text>Designated by the Chief Administrative Law Judge under State Government Article, §9-1607, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(7)"> <text>“Office” means the Office of Administrative Hearings.</text> </paragraph> <paragraph num="(8)"> <text>“Party” means a person named or admitted to participate in a cease and desist order proceeding.</text> </paragraph> <paragraph num="(9)"> <text>“Person” means an individual, corporation, business trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Petition for Hearing."> <paragraph num="A."> <text>Filing a Petition.</text> <paragraph num="(1)"> <text>Any person may file a petition with the Agency.</text> </paragraph> <paragraph num="(2)"> <text>The petition shall:</text> <paragraph num="(a)"> <text>Be accompanied by a statement of charges; and</text> </paragraph> <paragraph num="(b)"> <text>Show cause why a hearing on the matters raised should be granted.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Review by the Agency. The Agency shall:</text> <paragraph num="(1)"> <text>Review each petition; and</text> </paragraph> <paragraph num="(2)"> <text>Determine whether to hold a hearing under Commercial Law Article, §13-403, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Unless notice issued under Regulation .06 of this chapter states otherwise, the Division is the party proponent.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Delegation of Authority."> <paragraph num="A."> <text>To Whom Delegated. The Chief of the Consumer Protection Division shall:</text> <paragraph num="(1)"> <text>Conduct the hearing; or</text> </paragraph> <paragraph num="(2)"> <text>Delegate the hearing authority to:</text> <paragraph num="(a)"> <text>The Office; or</text> </paragraph> <paragraph num="(b)"> <text>With the prior approval of the Chief Administrative Law Judge, a person not employed by the Office.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Scope of Authority Delegated. Unless the Agency notifies the parties of a different delegation, the authority delegated shall issue proposed findings of fact and proposed conclusions of law, but not recommend proposed relief.</text> </paragraph> <paragraph num="C."> <text>Delegation of Authority to Issue Final Administrative Decision. The Chief of the Consumer Protection Division may delegate the authority to issue the final administrative decision of the Agency.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Responsibility of Party Proponent."> <text>The party designated as the party proponent has the burden of proving the allegations by a preponderance of the evidence.</text> </regulation> <regulation prefix="Regulation" num=".06" heading="Notice."> <paragraph num="A."> <text>Type of Notice.</text> <paragraph num="(1)"> <text>The Agency shall issue notice in compliance with State Government Article, §§10-207 and 10-208, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>If a hearing date is required and has not been set, notice under State Government Article, §10-208(b)(1), Annotated Code of Maryland, shall be given once the hearing date has been set by the Agency or the Office, whichever is conducting the hearing.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The party proponent shall serve each party with all documents required by and in compliance with Commercial Law Article, §13-403(a)(2), Annotated Code of Maryland, and State Government Article, §§10-207, 10-208, and 10-209, Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Response."> <paragraph num="A."> <text>A respondent shall file a written response to the statement of charges.</text> </paragraph> <paragraph num="B."> <text>Time for Filing.</text> <paragraph num="(1)"> <text>Unless the Agency has issued a cease and desist order under Commercial Law Article, §13-403(d) or 14-12B-08(a), Annotated Code of Maryland, without first conducting a hearing, the respondent shall file the response:</text> <paragraph num="(a)"> <text>Within 20 days of service of the statement of charges; and</text> </paragraph> <paragraph num="(b)"> <text>Within 20 days of service of an amended statement of charges if a respondent wishes to contest new facts or allegations introduced in the amended statement of charges.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>If the Agency has issued a cease and desist order under Commercial Law Article, §13-403(d) or 14-12B-08(a), Annotated Code of Maryland, and if a hearing is requested, the respondent shall file the response with the request for hearing.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Content. The respondent shall state in the response all affirmative and negative defenses, and shall:</text> <paragraph num="(1)"> <text>Admit or deny each allegation in the statement of charges;</text> </paragraph> <paragraph num="(2)"> <text>Generally deny all allegations in the statement of charges except for those allegations that are specifically admitted; or</text> </paragraph> <paragraph num="(3)"> <text>State that the respondent is without knowledge or information sufficient to form a belief concerning the truth of any allegation, which statement has the effect of a denial.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Effect of Failure to Deny. Unless denied in a timely-filed response, allegations are admitted.</text> </paragraph> <paragraph num="E."> <text>Effect of Failure to File Response. Failure to timely file a response may be grounds for issuance of a default order under Regulation .17 of this chapter.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Filing of Pleadings and Papers."> <text>After service on a respondent of notice issued pursuant to Regulation .06 of this chapter, a party shall file pleadings and papers with:</text> <paragraph num="A."> <text>The Agency, if the hearing is before the Chief; or</text> </paragraph> <paragraph num="B."> <text>The Office, if the hearing authority is delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Service of Pleadings and Papers After Notice."> <paragraph num="A."> <text>A party shall serve pleadings and papers filed after notice issued pursuant to Regulation .06 of this chapter:</text> <paragraph num="(1)"> <text>Upon each party's attorney; or</text> </paragraph> <paragraph num="(2)"> <text>Upon the party if a party is not represented by counsel.</text> </paragraph> </paragraph> <paragraph num="B."> <text>A party shall make service by:</text> <paragraph num="(1)"> <text>Delivery of a copy;</text> </paragraph> <paragraph num="(2)"> <text>Mailing it to:</text> <paragraph num="(a)"> <text>The address most recently stated in a pleading or paper filed by the attorney or party; or</text> </paragraph> <paragraph num="(b)"> <text>To the last known address, if no address is stated on the most recent pleading or paper filed by the attorney or party; or</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Any other method agreed upon by the parties.</text> </paragraph> </paragraph> <paragraph num="C."> <text>A party shall include in its pleadings a certificate of service showing the date and manner of making service.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Notice to Public."> <paragraph num="A."> <text>The Division shall prepare and send to at least six newspapers of general circulation in Maryland notice of every cease and desist action filed.</text> </paragraph> <paragraph num="B."> <text>The Division shall include in the notice:</text> <paragraph num="(1)"> <text>A summary of the allegations;</text> </paragraph> <paragraph num="(2)"> <text>The date and time the case is scheduled for hearing, if a hearing has been scheduled; and</text> </paragraph> <paragraph num="(3)"> <text>A statement that hearings are open to the public.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Discovery."> <paragraph num="A."> <text>In hearings before the Chief, the parties are entitled to the following discovery:</text> <paragraph num="(1)"> <text>By written request filed not later than 30 days before the scheduled hearing, a party may require any other party to produce within 15 days, for inspection or copying, any file, memorandum, correspondence, document, object, or tangible thing:</text> <paragraph num="(a)"> <text>Relevant to the subject matter of the case; and</text> </paragraph> <paragraph num="(b)"> <text>Not privileged; and</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Unless provided by law or by agreement of the parties, no other discovery procedure may be required.</text> </paragraph> </paragraph> <paragraph num="B."> <text>In hearings delegated to the Office, the parties shall conduct any discovery pursuant to COMAR 28.02.01.13.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".12" heading="Hearing Subpoenas."> <paragraph num="A."> <text>Issuance of Hearing Subpoenas. On the request of a party in hearings before the Chief, or at the direction of the Chief, the Agency may issue subpoenas requiring the attendance and testimony of witnesses and the production at the hearing of any tangible items in the possession or under the control of the witness.</text> </paragraph> <paragraph num="B."> <text>Requests for Hearing Subpoenas.</text> <paragraph num="(1)"> <text>A party requesting a subpoena shall make the request, in writing, to the Agency.</text> </paragraph> <paragraph num="(2)"> <text>Unless cause is shown, a party shall file subpoena requests with the Agency at least 10 calendar days before the hearing.</text> </paragraph> <paragraph num="(3)"> <text>A request for a subpoena shall specify the:</text> <paragraph num="(a)"> <text>Name and full address of the person to be subpoenaed; and</text> </paragraph> <paragraph num="(b)"> <text>Name, full address, and telephone number of the party requesting the subpoena.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>A party requesting a subpoena for the production of tangible items, books, papers, or other documents shall describe those items with particularity.</text> </paragraph> <paragraph num="(5)"> <text>A party need not serve a subpoena request on all parties.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Service of Hearing Subpoenas. The party requesting the subpoena shall be responsible for serving the subpoena by:</text> <paragraph num="(1)"> <text>Personal delivery by an individual 18 years old or older who is not a party to the proceeding;</text> </paragraph> <paragraph num="(2)"> <text>Certified mail, return receipt requested, to the person at the address specified in the subpoena request;</text> </paragraph> <paragraph num="(3)"> <text>Regular mail, if the subpoena is to a party; or</text> </paragraph> <paragraph num="(4)"> <text>Any other method of service authorized by the Agency.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Affidavit of Service. The person requesting the subpoena shall file an Affidavit with the Agency showing the date and manner of making service.</text> </paragraph> <paragraph num="E."> <text>Objections to Hearing Subpoenas. A person may object to a subpoena by filing a motion to quash or for other relief.</text> </paragraph> <paragraph num="F."> <text>Failure to Comply with Hearing Subpoenas. Upon a timely request by a party to the proceeding, the Agency may:</text> <paragraph num="(1)"> <text>Seek an order from a circuit court to obtain compliance with the subpoena;</text> </paragraph> <paragraph num="(2)"> <text>Enter an order imposing sanctions, including default, upon a party who fails to comply with a subpoena; and</text> </paragraph> <paragraph num="(3)"> <text>Grant any other appropriate relief.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".13" heading="Prehearing Conferences."> <paragraph num="A."> <text>Hearings Before the Chief.</text> <paragraph num="(1)"> <text>In hearings before the Chief, any prehearing conferences shall be conducted as provided in §A(2)—(7) of this regulation.</text> </paragraph> <paragraph num="(2)"> <text>If appropriate, the Agency may hold a prehearing conference to resolve matters preliminary to the hearing.</text> </paragraph> <paragraph num="(3)"> <text>The Agency may require the parties to submit information before the prehearing conference.</text> </paragraph> <paragraph num="(4)"> <text>A prehearing conference may be convened to address the following matters:</text> <paragraph num="(a)"> <text>Issuance of subpoenas;</text> </paragraph> <paragraph num="(b)"> <text>Factual and legal issues;</text> </paragraph> <paragraph num="(c)"> <text>Stipulations;</text> </paragraph> <paragraph num="(d)"> <text>Requests for official notice;</text> </paragraph> <paragraph num="(e)"> <text>Identification and exchange of documentary evidence;</text> </paragraph> <paragraph num="(f)"> <text>Admissibility of evidence;</text> </paragraph> <paragraph num="(g)"> <text>Identification and qualification of witnesses;</text> </paragraph> <paragraph num="(h)"> <text>Motions;</text> </paragraph> <paragraph num="(i)"> <text>Discovery disputes;</text> </paragraph> <paragraph num="(j)"> <text>Order of presentation;</text> </paragraph> <paragraph num="(k)"> <text>Scheduling;</text> </paragraph> <paragraph num="(l)"> <text>Alternate dispute resolution; and</text> </paragraph> <paragraph num="(m)"> <text>Any other matters that will promote the orderly and prompt conduct of the hearing.</text> </paragraph> </paragraph> <paragraph num="(5)"> <text>Except as otherwise indicated in this chapter, at the discretion of the Agency, all or part of a prehearing conference may be recorded.</text> </paragraph> <paragraph num="(6)"> <text>Prehearing Orders.</text> <paragraph num="(a)"> <text>Unless otherwise stated in this chapter, when a prehearing conference has been held, the Agency shall issue a prehearing order.</text> </paragraph> <paragraph num="(b)"> <text>The Agency shall set forth in the prehearing order the actions taken or to be taken with regard to any matter addressed at the prehearing conference.</text> </paragraph> <paragraph num="(c)"> <text>If a prehearing conference is not held, the Agency may issue a prehearing order to regulate the conduct of the proceedings.</text> </paragraph> <paragraph num="(d)"> <text>The prehearing order shall be a part of the case record.</text> </paragraph> </paragraph> <paragraph num="(7)"> <text>If, after notice is given, a party fails to attend a prehearing conference, that party is bound by the Agency's prehearing order.</text> </paragraph> </paragraph> <paragraph num="B."> <text>In hearings delegated to the Office, COMAR 28.02.01.17 governs any prehearing conferences.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".14" heading="Conduct of Hearing."> <paragraph num="A."> <text>Hearings Before the Chief.</text> <paragraph num="(1)"> <text>In hearings before the Chief, the provisions of §A(2) and (3) of this regulation apply.</text> </paragraph> <paragraph num="(2)"> <text>Each party is entitled, on a genuine issue in a contested case, to:</text> <paragraph num="(a)"> <text>Call witnesses;</text> </paragraph> <paragraph num="(b)"> <text>Offer evidence; and</text> </paragraph> <paragraph num="(c)"> <text>Cross-examine any witness who testifies.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Exclusion of Witnesses.</text> <paragraph num="(a)"> <text>Upon request by a party, the Chief shall exclude witnesses other than parties from the hearing room, except when testifying.</text> </paragraph> <paragraph num="(b)"> <text>A party that is not an individual may designate an employee or officer as its representative to remain in the hearing room, even though the employee or officer may be a witness.</text> </paragraph> <paragraph num="(c)"> <text>An expert witness who is to render an opinion based on testimony given at the hearing may remain during that testimony.</text> </paragraph> <paragraph num="(d)"> <text>A party, representative, witness, or spectator may not disclose to a witness excluded under §A(3) of this regulation the nature, substance, or purpose of testimony, or other evidence introduced during that witness's absence.</text> </paragraph> <paragraph num="(e)"> <text>The Chief may:</text> <paragraph num="(i)"> <text>Exclude the testimony of a witness who receives information in violation of §A(3) of this regulation; or</text> </paragraph> <paragraph num="(ii)"> <text>Take other appropriate action.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>COMAR 28.02.01.20 governs hearings delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".15" heading="Powers and Duties of the Individual Conducting Hearing."> <paragraph num="A."> <text>Duties of the Chief. In hearings before the Chief, the Chief shall:</text> <paragraph num="(1)"> <text>Conduct a full, fair, and impartial hearing;</text> </paragraph> <paragraph num="(2)"> <text>Take action to avoid unnecessary delay in the disposition of the proceeding; and</text> </paragraph> <paragraph num="(3)"> <text>Maintain order.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Powers of the Chief. In hearings before the Chief, the Chief has the power to regulate the course of the hearing and the conduct of the parties and authorized representatives, including the power to:</text> <paragraph num="(1)"> <text>Administer oaths and affirmations;</text> </paragraph> <paragraph num="(2)"> <text>Issue subpoenas for witnesses and the production of evidence;</text> </paragraph> <paragraph num="(3)"> <text>Rule upon offers of proof and receive relevant and material evidence;</text> </paragraph> <paragraph num="(4)"> <text>Consider and rule upon motions;</text> </paragraph> <paragraph num="(5)"> <text>Admit affidavits and other hearsay as evidence, unless there are nonhearsay reasons why the evidence should be excluded;</text> </paragraph> <paragraph num="(6)"> <text>Examine and call witnesses as necessary to ensure a full and complete record;</text> </paragraph> <paragraph num="(7)"> <text>Limit unduly repetitious testimony and reasonably limit the time for presentations;</text> </paragraph> <paragraph num="(8)"> <text>Grant a continuance or postponement;</text> </paragraph> <paragraph num="(9)"> <text>Modify or waive, reasonably, any time periods established by this chapter;</text> </paragraph> <paragraph num="(10)"> <text>Request parties to submit legal memoranda and proposed findings of fact and conclusions of law;</text> </paragraph> <paragraph num="(11)"> <text>Make proposed or final decisions, as authorized, and take any other appropriate actions authorized by law;</text> </paragraph> <paragraph num="(12)"> <text>Issue orders necessary to secure procedural simplicity and administrative fairness, and to eliminate unjustifiable expense and delay;</text> </paragraph> <paragraph num="(13)"> <text>Conduct the hearing in a manner suited to ascertain the facts and safeguard the rights of the parties to the hearing; and</text> </paragraph> <paragraph num="(14)"> <text>Impose appropriate sanctions for failure to abide by these regulations or any lawful order of the individual conducting the hearing.</text> </paragraph> </paragraph> <paragraph num="C."> <text>COMAR 28.02.01.11 governs the powers and duties of the Judge in hearings delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Evidence."> <text>Evidence is admissible in accordance with State Government Article, §10-213, Annotated Code of Maryland, and other pertinent law.</text> </regulation> <regulation prefix="Regulation" num=".17" heading="Failure to Attend or Participate in a Hearing, Conference or Proceeding; Default."> <paragraph num="A."> <text>Hearings Before the Chief.</text> <paragraph num="(1)"> <text>In hearings before the Chief, the provisions of §A(2)—(4) of this regulation apply.</text> </paragraph> <paragraph num="(2)"> <text>After receiving proper notice, if a party fails to file a response or fails to attend or participate in a prehearing conference, hearing, or other stage of a proceeding, the Chief may proceed in that party's absence or may issue a default order against the defaulting party.</text> </paragraph> <paragraph num="(3)"> <text>On motion filed within 30 days after the date of a default order, the Chief may, for good cause, vacate or modify the final default order and set the case in for further proceedings as appropriate.</text> </paragraph> <paragraph num="(4)"> <text>If no motion is filed or a motion is denied, the default order is effective.</text> </paragraph> </paragraph> <paragraph num="B."> <text>COMAR 28.02.01.23 governs default in hearings delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".18" heading="Motions."> <paragraph num="A."> <text>Hearings Before the Chief.</text> <paragraph num="(1)"> <text>In hearings before the Chief, the provisions of §A(2—(7) of this regulation apply.</text> </paragraph> <paragraph num="(2)"> <text>A party may move for appropriate relief by submitting a motion either:</text> <paragraph num="(a)"> <text>In writing; or</text> </paragraph> <paragraph num="(b)"> <text>Orally at the hearing.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Content of Motions. In the motion, a party shall:</text> <paragraph num="(a)"> <text>Set forth the relief or order sought;</text> </paragraph> <paragraph num="(b)"> <text>State with particularity the grounds; and</text> </paragraph> <paragraph num="(c)"> <text>Attach as an exhibit to a written motion or, in an oral motion, refer to, any necessary supporting documents.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Prehearing Motions.</text> <paragraph num="(a)"> <text>Filing. A party shall file any prehearing motions:</text> <paragraph num="(i)"> <text>In writing; and</text> </paragraph> <paragraph num="(ii)"> <text>Not later than 15 days before the date of the hearing.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Response. A party shall file a written response to a prehearing motion:</text> <paragraph num="(i)"> <text>Within 15 days of filing of the motion; or</text> </paragraph> <paragraph num="(ii)"> <text>If the hearing is scheduled within 15 days of filing of the motion, not later than the date of the hearing.</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>Emergency Request for Postponement.</text> <paragraph num="(i)"> <text>For purposes of this section, “emergency” means a sudden, unforeseen occurrence requiring immediate attention that arises within 5 days of the hearing.</text> </paragraph> <paragraph num="(ii)"> <text>In an emergency, a party may request a postponement by telephone.</text> </paragraph> <paragraph num="(iii)"> <text>When practicable, a party shall contact all parties to a proceeding before a ruling on a postponement request is made.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(5)"> <text>Post-hearing Motions.</text> <paragraph num="(a)"> <text>Filing. Post-hearing motions shall be filed in writing.</text> </paragraph> <paragraph num="(b)"> <text>Response. A response to a post-hearing motion shall be filed:</text> <paragraph num="(i)"> <text>In writing; and</text> </paragraph> <paragraph num="(ii)"> <text>Within 15 days of filing of the motion.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(6)"> <text>Effect of Motion on Other Time Limits. The filing or pendency of a motion does not alter or extend any time limit otherwise established by this chapter.</text> </paragraph> <paragraph num="(7)"> <text>Review of Ruling. A ruling on a motion may only be reviewed by:</text> <paragraph num="(a)"> <text>Exception to the proposed decision; or</text> </paragraph> <paragraph num="(b)"> <text>Judicial review under State Government Article, §10-222, Annotated Code of Maryland.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>COMAR 28.02.01.12 governs motions in hearings delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".19" heading="Representation."> <paragraph num="A."> <text>In hearings before the Chief:</text> <paragraph num="(1)"> <text>An individual may represent himself or herself; or</text> </paragraph> <paragraph num="(2)"> <text>A party may be represented by an attorney authorized to practice law in Maryland or, if authorized by law, appear through a representative who is not an attorney.</text> </paragraph> </paragraph> <paragraph num="B."> <text>COMAR 28.02.01.08 governs representation matters in hearings delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".20" heading="Recording."> <paragraph num="A."> <text>Proceedings shall be recorded by:</text> <paragraph num="(1)"> <text>A stenographer;</text> </paragraph> <paragraph num="(2)"> <text>A court reporting service; or</text> </paragraph> <paragraph num="(3)"> <text>Electronic recording.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Transcription.</text> <paragraph num="(1)"> <text>Judicial Review of a Final Order. If a recorded proceeding has not been transcribed by a court reporting service before the filing of a petition for judicial review of a final order, and the parties are not filing a statement in lieu of record pursuant to Maryland Rule 7-206(b), the first party seeking judicial review shall:</text> <paragraph num="(a)"> <text>Order the transcript from a court reporting service; and</text> </paragraph> <paragraph num="(b)"> <text>Within 30 days of filing the petition for judicial review, have the court reporting service deliver a copy of the transcript to the Agency's administrative hearing clerk for transmittal to the clerk of the court.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Expense of Transcription.</text> <paragraph num="(a)"> <text>The first party seeking judicial review shall pay the expense of transcription.</text> </paragraph> <paragraph num="(b)"> <text>The expense of transcription is taxable as costs.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".21" heading="Exceptions and Responses."> <paragraph num="A."> <text>Filing Exceptions. A party shall file any exceptions to the proposed findings, conclusions, or orders of the Office or other designated person:</text> <paragraph num="(1)"> <text>In writing;</text> </paragraph> <paragraph num="(2)"> <text>With the Agency; and</text> </paragraph> <paragraph num="(3)"> <text>Within 30 days of the date the proposed findings, conclusions, or orders are submitted to the Agency.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Content of Exceptions. In its exceptions, a party shall:</text> <paragraph num="(1)"> <text>Identify the proposed finding, conclusion, or order to which exception is being taken;</text> </paragraph> <paragraph num="(2)"> <text>Specify the basis of the exception;</text> </paragraph> <paragraph num="(3)"> <text>Set forth the facts and law that support the exception; and</text> </paragraph> <paragraph num="(4)"> <text>State arguments in their entirety and not by reference to prior filings.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Length of Exceptions. Unless a request is filed with and granted by the Agency, a party may not file exceptions that exceed 50 pages.</text> </paragraph> <paragraph num="D."> <text>Response to Exceptions.</text> <paragraph num="(1)"> <text>Filing. A party shall file a response to exceptions:</text> <paragraph num="(a)"> <text>In writing;</text> </paragraph> <paragraph num="(b)"> <text>With the Agency; and</text> </paragraph> <paragraph num="(c)"> <text>Within 30 days of filing of the exceptions.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Length. Unless a request is filed with and granted by the Agency, a party may not file a response to exceptions that exceeds 50 pages.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Form of Exceptions and Responses. A party shall file exceptions and responses that conform to Maryland Rule 8-112.</text> </paragraph> <paragraph num="F."> <text>Oral Argument on Exceptions. Upon the request of a party, the Chief shall hear oral argument on exceptions.</text> </paragraph> <paragraph num="G."> <text>Additional Evidence.</text> <paragraph num="(1)"> <text>The Chief may take additional evidence that was not introduced at the time of the hearing, or order that the individual who conducted the hearing take the additional evidence, if a party:</text> <paragraph num="(a)"> <text>Applies for leave to offer the additional evidence at the time exceptions are filed; and</text> </paragraph> <paragraph num="(b)"> <text>Establishes that:</text> <paragraph num="(i)"> <text>The evidence is material; and</text> </paragraph> <paragraph num="(ii)"> <text>There was good cause for failure to offer the evidence in the hearing.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(2)"> <text>The Chief, on the Chief's own initiative, may take additional evidence at any time before a final decision is rendered.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".22" heading="Proposed and Final Orders."> <paragraph num="A."> <text>After proposed findings of fact and conclusions of law have been issued, any party may file a proposed order with the Agency.</text> </paragraph> <paragraph num="B."> <text>If the Agency finds that a respondent has violated the Consumer Protection Act, Commercial Law Article, Title 13, Annotated Code of Maryland, the Agency shall issue a final order under Commercial Law Article, §13-403, and State Government Article, §10-221, Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".23" heading="Modifications of Final Decisions."> <paragraph num="A."> <text>On motion of any party filed at any time, the Chief may modify a final decision to correct a mistake, irregularity or fraud in the same manner that the courts may exercise revisory power under Maryland Rule 2-535(b).</text> </paragraph> <paragraph num="B."> <text>On the initiative of the Chief, or on the motion of any party filed at any time, the Chief may modify a final decision to correct a clerical mistake in the same manner as the courts may exercise revisory power under Maryland Rule 2-535(d).</text> </paragraph> <paragraph num="C."> <text>In addition to the ability of the Chief to issue supplemental or amended orders in accordance with the terms of the final decision, on motion of any party filed within 14 days of the date of the final order, the Chief may modify a final decision.</text> </paragraph> <paragraph num="D."> <text>A request for modification pursuant to §§A—C of this regulation does not automatically stay the action or toll the time for filing a petition for judicial review.</text> </paragraph> <paragraph num="E."> <text>COMAR 28.02.01.27 governs modification of final decisions when final decision-making authority is delegated to the Office.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".24" heading="Notifications."> <paragraph num="A."> <text>A party shall notify the Agency and all parties in writing of any change of address or telephone number within 30 days of the change.</text> </paragraph> <paragraph num="B."> <text>If no change is provided, the Agency and all parties may rely on the last known address or telephone number.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">State Government Article, §10-206(b);Commercial Law Article, §§13-204(12), 13-205(a), and 13-403; Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: July 23, 1975 (2:16 Md. R. 1137)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.16 repealed and new Regulations .01—.24 adopted effective January 31, 2005 (32:2 Md. R. 145)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04C amended effective January 26, 2009 (36:2 Md. R. 99)</annotation> <annotation type="History" subtype="Administrative History">Annotation: COMAR 02.01.02.12 and 02.01.02.14 cited in Consumer Protection Division v. Consumer Publishing Co., 304 Md. 731 (1985)</annotation> </annotations> </chapter> <chapter num="03" heading="Petitions for Adoption of Regulations"> <regulation prefix="Regulation" num=".01" heading="General."> <text>These regulations are promulgated pursuant to State Government Article, §10-122, Annotated Code of Maryland, for the purpose of establishing procedures by which the public may petition the Division of Consumer Protection for substantive adoption of regulations.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Petition."> <text>Any person may request that the Consumer Protection Division, Office of the Attorney General, promulgate regulations related to any matter over which the Division has jurisdiction. The request shall be made by petition and shall state clearly and concisely the following:</text> <paragraph num="A."> <text>The substance or the nature of the regulation adoption which is requested;</text> </paragraph> <paragraph num="B."> <text>The reasons for the request and the person's interest in the request; and</text> </paragraph> <paragraph num="C."> <text>References to the authority of the Division to take the action which is requested.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Referral to Consumer Council."> <text>The petition shall be referred to the Consumer Protection Commission so the Division can receive the Council's advice.</text> </regulation> <regulation prefix="Regulation" num=".04" heading="Disposition of Petition."> <paragraph num="A."> <text>Within 60 days of receipt of the petition, the Division shall determine whether sufficient cause exists to warrant the holding of a regulation adoption proceeding.</text> </paragraph> <paragraph num="B."> <text>If the petition does not warrant the holding of a regulation adoption proceeding, the Division shall promptly give notice of this fact to the person who filed the petition, including a brief statement of its reason for the denial.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Procedure for Adoption of Regulations."> <text>If a determination is made that the petition is sufficient to warrant further regulation adoption proceedings, the Division shall comply with the procedures in Commercial Law Article, §13-205, Annotated Code of Maryland.</text> </regulation> <annotations> <annotation type="Authority">State Government Article, §10-122, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: September 29, 1976 (3:20 Md. R. 1143)</annotation> <annotation type="History" subtype="Administrative History">Regulation .02 amended effective February 27, 2006 (33:4 Md. R. 351)</annotation> <annotation type="History" subtype="Administrative History">Regulation .03 amended effective February 27, 2006 (33:4 Md. R. 351)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04 amended effective February 27, 2006 (33:4 Md. R. 351)</annotation> </annotations> </chapter> <chapter num="04" heading="New Home Builder Registration Fee" reason="Repealed"> <annotations> <annotation type="History" subtype="Administrative History">Effective date: February 19, 2001 (28:3 Md. R. 205)</annotation> <annotation type="History" subtype="Administrative History">Chapter repealed effective April 14, 2003 (30:7 Md. R. 486)</annotation> </annotations> </chapter> <chapter num="05" heading="Refund Policy of Retailers"> <regulation prefix="Regulation" num=".01" heading="General."> <text>These regulations are promulgated pursuant to the Commercial Law Article, §13-205, Annotated Code of Maryland. The provisions of the Commercial Law Article, §13-301(9), Annotated Code of Maryland, declare it to be an unfair or deceptive trade practice to knowingly conceal, suppress, or omit any material fact with the intent that a consumer rely on the same in connection with the promotion or sale of any consumer goods. The refund and exchange policies or a policy of no refunds or exchanges is material to consumers in making purchasing decisions, and consumers necessarily rely upon representations, past business practice, and the absence of a declared polity in making purchasing decisions.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Findings and Purpose."> <paragraph num="A."> <text>Findings. The Division of Consumer Protection of the Office of the Attorney General and the Consumer Council find that the refund and exchange policies of merchants, when left unstated, place the consumer at a disadvantage, particularly with merchants who vary refund and exchange policies with different consumers or who change policies without notice. Merchants' failure to communicate policies on refunds and exchanges, be it a policy of no refunds, cash refunds, or credit for returned merchandise, is a practice which is unfair and deceptive.</text> </paragraph> <paragraph num="B."> <text>Purpose. The purpose of these regulations is to require that a policy, a change in policy, or special sales promotion policies (such as final sale, fire sale, sale on “as is” merchandise, no returns, etc.), be clearly communicated to the consumer in all retail sales and to declare it to be an unfair and deceptive practice to fail to communicate the merchants' policies.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Definitions."> <paragraph num="A."> <text>The definitions of “consumer”, “consumer goods”, and “merchant” are, for the purposes of these regulations, the same definitions as are contained in Commercial Law Article, §13-101, Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>“Retail sale” means the sale of goods for the use or consumption of the consumer or for the benefit or satisfaction which the consumer may derive from the use or consumption of the goods by another. “Retail sale” does not include the sale of goods for resale by the purchaser.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Unfair and Deceptive Trade Practices."> <text>It shall be an unfair or deceptive trade practice prohibited by Commercial Law Article, §13-303, Annotated Code of Maryland, for a merchant in any retail sale to fail to disclose to all customers in writing, either on the sales form, by a clearly visible sign, or by conspicuous label on the consumer goods, the terms and conditions of the merchant's refund and exchange policies, or a policy of no refunds or exchanges. A merchant shall be deemed in compliance with the requirements of this regulation if the merchant discloses to the customer in writing any time limit on refunds or exchanges and, upon request by the customer or gift recipient, within a reasonable time of the purchase:</text> <paragraph num="A."> <text>Gives a cash refund for a cash purchase;</text> </paragraph> <paragraph num="B."> <text>Gives a cash refund or account credit for a credit purchase;</text> </paragraph> <paragraph num="C."> <text>Gives a cash refund, account credit, or merchandise exchange for a gift purchase; or</text> </paragraph> <paragraph num="D."> <text>Otherwise complies with the refund and exchange policies disclosed.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Exemptions."> <text>The provisions of Regulation .04 do not apply to the sale of:</text> <paragraph num="A."> <text>Food, perishable goods, goods which are custom made, or which are custom-altered at the request of the consumer; or</text> </paragraph> <paragraph num="B."> <text>Goods which cannot be resold by the merchant because of any valid law or regulation promulgated by a governmental body.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §13-205, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: September 1, 1976 (3:15 Md. R. 784)</annotation> </annotations> </chapter> <chapter num="06" heading="Arbitration Procedure"> <regulation prefix="Regulation" num=".01" heading="Scope of the Arbitration Program."> <paragraph num="A."> <text>General. Arbitration is a process by which disputes between parties are resolved outside of the court system by an impartial individual after hearing pertinent evidence and argument. Arbitration in Maryland is governed by the Maryland Uniform Arbitration Act, Courts and Judicial Proceedings Article, Title 3, Subtitle 2, Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Disputes Subject to Arbitration. Disputes arising out of transactions involving consumer goods, services, credit, or realty and which are covered by the Consumer Protection Act, Commercial Law Article, Title 13, Annotated Code of Maryland, may be arbitrated under these regulations when the consumer-complainant and the business agree to binding arbitration conducted under the arbitration program of the Consumer Protection Division. Unless the agreement to arbitrate stipulates otherwise, the arbitrator may award specific performance and damages, including consequential or incidental damages. Claims for punitive damages and attorney’s fees may not be arbitrated under any circumstances.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Cost."> <text>There will be no cost to either party for an arbitration conducted under these regulations except for transcripts ordered by a party.</text> </regulation> <regulation prefix="Regulation" num=".03" heading="Pool of Volunteer Arbitrators."> <paragraph num="A."> <text>Maintenance of Pool. The Arbitration Administrator may maintain a pool of volunteer arbitrators who will be selected to hear arbitrations that are not conducted by the Chief Arbitrator. A pool shall represent, to the extent feasible, a broad cross section of individuals from all parts of the State. The Arbitration Administrator will endeavor to obtain participation of a sufficient number of arbitrators from each region of the State to assure that arbitrations from that region will be heard and decided promptly.</text> </paragraph> <paragraph num="B."> <text>Qualifications of Arbitrators.</text> <paragraph num="(1)"> <text>Individuals selected for the pool will be persons at least 21 years old who:</text> <paragraph num="(a)"> <text>Have reputations for honesty, fairness, and diligence;</text> </paragraph> <paragraph num="(b)"> <text>Have the ability to analyze the facts and law, and resolve disputes in an impartial, just, and common sense manner;</text> </paragraph> <paragraph num="(c)"> <text>Are able to write clearly and demonstrate the reasoning followed in reaching the decision;</text> </paragraph> <paragraph num="(d)"> <text>Demonstrate maturity and judgment; and</text> </paragraph> <paragraph num="(e)"> <text>Are willing to commit the time that will be needed to assure that arbitrations assigned to them may be scheduled and decided promptly.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Volunteer arbitrators may be, but are not required to be, lawyers.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Training. Volunteer arbitrators will be required to participate in one or more training programs, including training in:</text> <paragraph num="(1)"> <text>How to conduct a hearing;</text> </paragraph> <paragraph num="(2)"> <text>Applicable laws; and</text> </paragraph> <paragraph num="(3)"> <text>Writing of an arbitration decision.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Participation in Arbitration Program."> <paragraph num="A."> <text>Precommitment Agreements. A person who conducts business in the State may agree, on a form prescribed by the Division, to submit to arbitration all, or any class of, disputes that may arise in the future between that merchant and a consumer so long as the dispute is one otherwise covered by these regulations. The agreement will provide that it will bind the business to submit to arbitration any complaint for which mediation efforts by the Division have not been fully successful, so long as the consumer also agrees to participate in the arbitration. An agreement under this section may be terminated with notice.</text> </paragraph> <paragraph num="B."> <text>Agreements to Arbitrate. Either party to a dispute covered by these regulations that is the subject of a complaint filed with the Consumer Protection Division may request arbitration, or arbitration may be suggested by the Consumer Protection Division, whether the business has agreed in advance to submit disputes to arbitration. When arbitration is requested by a party or suggested by the Consumer Protection Division, the Division will provide to each party an agreement to arbitrate on a form prescribed by the Division. The Division will note on the form the names of the parties, the issues on which arbitration is sought, the amount of the consumer's claim, and the remedy requested. Arbitration may be agreed to only by signing the arbitration agreement, which will provide that the arbitration will be governed by these regulations, that the decision will be binding except for limited appeals allowed by the Maryland Uniform Arbitration Act, and that the decision may be enforced by the Division. The Division will notify the parties whether arbitration has been agreed to or rejected.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Appointment of Arbitrator."> <paragraph num="A."> <text>Persons Eligible. The Chief Arbitrator may appoint himself/herself to preside over arbitration or may appoint an arbitrator from any pool maintained by the Arbitration Administrator. In making the appointment, the Chief Arbitrator will consider the:</text> <paragraph num="(1)"> <text>Location of the arbitration; and</text> </paragraph> <paragraph num="(2)"> <text>Ability of any potential arbitrator to hear and decide the particular matter fairly and promptly.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Disqualification.</text> <paragraph num="(1)"> <text>An arbitrator may not hear an arbitration if:</text> <paragraph num="(a)"> <text>He/she is related to one of the parties, has a personal interest in the subject of the arbitration, has a present or former personal or business relationship with one of the parties; or</text> </paragraph> <paragraph num="(b)"> <text>Other circumstances exist that might affect the arbitrator's ability to render a fair decision.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>If the Chief Arbitrator is disqualified from hearing a matter, the Arbitration Administrator shall appoint the arbitrator.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Notification. The Arbitration Administrator shall send written notice to the arbitrator of the appointment and the time, date, and location of the arbitration. The arbitrator shall promptly advise the Arbitration Administrator of any conflict or other interest in the matter that would preclude the arbitrator from serving, or of his/her unavailability to hear and decide the arbitration promptly. In this event, the Arbitration Administrator will make another appointment.</text> </paragraph> <paragraph num="D."> <text>Request for Disqualification. Any party may seek the disqualification of an arbitrator based upon the standards set forth in §B(1) of this regulation. The Chief Arbitrator may decide whether to grant the request or refer the request to the Chief of the Consumer Protection Division for decision. Any other arbitrator may refer the request to the Chief Arbitrator or, if the Chief Arbitrator has been disqualified previously, to the Chief of the Division. If an arbitrator, the Chief Arbitrator, or the Chief of the Division grants a request for disqualification, the Arbitration Administrator shall appoint another arbitrator to hear the matter.</text> </paragraph> <paragraph num="E."> <text>Substitution of Arbitrator. If an arbitrator is unable to conduct a prompt arbitration hearing or render a prompt decision in an arbitration already conducted due to illness, death, disability, or other reasons, the Arbitration Administrator may, after consultation with the parties, appoint another arbitrator.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Scheduling of Arbitration Hearing."> <paragraph num="A."> <text>Location and Time. Arbitrations shall be set by the Arbitration Administrator, to the extent feasible, at a time and location convenient to all parties. Arbitrations may be conducted at the complainant's home or the merchant's place of business, or any other location that will encourage a prompt and fair evaluation of the dispute. With the written agreement of the parties, the hearing may be conducted via electronic means. If either party desires a specific location for the hearing, that request shall be made in the agreement to arbitrate.</text> </paragraph> <paragraph num="B."> <text>Notice. After the parties agree to arbitrate the dispute, the Arbitration Administrator will schedule promptly a mutually convenient hearing date and mail notice of the date, time and place of the scheduled hearing at least 10 calendar days before the hearing to all parties by certified mail, return receipt requested, except that, with the written consent of the parties to the arbitration, the notice may be sent by email to an email address provided by the party to the Arbitration Administrator. The notice of the hearing will include the name of the arbitrator selected by the Chief Arbitrator to hear the dispute.</text> </paragraph> <paragraph num="C."> <text>Postponement. Any request for postponement may be granted by the arbitrator if all parties consent, or if good cause for a postponement is shown to the satisfaction of the Arbitration Administrator. Requests for postponement for cause should be made to the Arbitration Administrator at least 5 days before the hearing, unless the circumstances requiring the postponement do not allow 5 days' notice. Whenever a postponement is granted, the Arbitration Administrator will promptly reschedule the hearing and notify the arbitrator and the parties.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Conduct of the Arbitration Hearing."> <paragraph num="A."> <text>Representation. Parties to an arbitration may present their own cases or have someone represent them. Representation by an attorney is permitted but is not required.</text> </paragraph> <paragraph num="B."> <text>Presence at the Arbitration. Only the parties, witnesses, counsel, and other representatives may be present at an arbitration hearing unless the parties agree that other persons may attend. Witnesses, other than the parties and their representatives, may, at the discretion of the arbitrator, be excluded from the hearing during the testimony of any other witnesses.</text> </paragraph> <paragraph num="C."> <text>Failure to Appear. If a party, after proper notification, fails to appear at the hearing, the arbitrator shall hear the evidence presented and render a decision not earlier than 5 days following the hearing unless, within that time, the party who failed to appear establishes good cause for failing to appear, and failing to timely request a postponement. If good cause is established, the arbitrator shall reopen the hearing and take all additional evidence as is offered before rendering a decision.</text> </paragraph> <paragraph num="D."> <text>Allowable Evidence. The parties have the right to testify, present other witnesses, including experts, who have knowledge relevant to the dispute, and present relevant documents for the arbitrator's consideration. Each party may question the other party's witnesses. All witnesses will be placed under oath. Strict rules of evidence, such as apply in court proceedings, may not be applied, and the arbitrator will determine the weight to be given to any evidence that is presented.</text> </paragraph> <paragraph num="E."> <text>Inspections. The arbitrator has the discretion to make an inspection of the merchandise or goods which are the subject of the dispute, but are not available at the hearing, when requested by a party or whenever he/she determines that an inspection is necessary. If the arbitrator determines that an inspection of the goods or merchandise is necessary, then the arbitrator will promptly notify all parties to the dispute of the time and place of the inspection so that all parties to the dispute may be present if they wish.</text> </paragraph> <paragraph num="F."> <text>Expert Consultants. If the arbitrator determines that consultation with a neutral expert would assist him/her in reaching a fair decision, the arbitrator may request the Arbitration Administrator to obtain the services of an individual with the appropriate experience. The Arbitration Administrator may maintain a list of persons who have specialized skills covering a wide variety of consumer transactions, and who agree to provide expert assistance to the arbitration program when requested, so that requests for expert consultations may be honored with minimum delay. Consultation of an expert shall take place either in the presence of the parties and arbitrator or through the use of a conference call or electronic meeting arranged by the arbitrator. The arbitrator shall adjourn and reconvene the hearing if the adjournment is necessary for consultation of the expert.</text> </paragraph> <paragraph num="G."> <text>Adjournments and Reopenings. The arbitrator may adjourn an arbitration hearing from time to time as necessary. Notice of the adjournment shall be sent to the Arbitration Administrator who will schedule the adjourned hearing as appropriate. If the arbitrator determines after the close of the hearing, but before an award is made, that further hearing is needed to permit a just decision, the arbitrator may reopen the hearing by giving the parties reasonable notice of the reopening, including the matter or matters to be heard at the reopened hearing. The Arbitration Administrator shall schedule reopened hearings.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Ex Parte Communications."> <paragraph num="A."> <text>There shall be no direct communication between the parties to an arbitration and the arbitrator concerning the merits of the dispute other than at the arbitration hearing. Other communications, such as those concerning scheduling or other procedural matters, shall be made to the Arbitration Administrator, who will respond or refer the matter to the arbitrator as appropriate.</text> </paragraph> <paragraph num="B."> <text>If an ex parte communication occurs between a party and the arbitrator, the arbitrator shall notify the other party of the date, time, place, and content of the communication. If the communication occurs after the arbitration hearing and before rendering of the decision, the arbitrator shall reconvene the hearing, at the request of the party who did not engage in the ex parte communication, to permit submission of further evidence and rebuttal by both parties.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Transcript of Hearing."> <paragraph num="A."> <text>Record. Unless requested by a party, a verbatim record may not be made of the arbitration hearing, although the arbitrator will take notes of the testimony and place documentary evidence in an arbitration file.</text> </paragraph> <paragraph num="B."> <text>Transcription. A party may request in writing to the Arbitration Administrator that a verbatim record of all or part of the hearing be made and transcribed. This request shall be submitted with the agreement to arbitrate, and shall include an agreement to pay all costs of transcription. The Arbitration Administrator may require these costs to be advanced by the requesting party. Upon this request, the Arbitration Administrator will arrange for a reporter to be present or for the recording of the hearing. Once prepared, the transcript will be made available to all parties on request, and a copy will be preserved by the Arbitration Administrator.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="The Arbitration Award."> <paragraph num="A."> <text>Discretion of Arbitrator. The award in an arbitration rests solely in the discretion of the arbitrator and may not be changed by any person within the Office of the Attorney General except for a modification by the arbitrator when allowed by the Maryland Uniform Arbitration Act.</text> </paragraph> <paragraph num="B."> <text>Time. The award shall be made promptly. Arbitrators will endeavor to make an award within 30 days of the hearing unless unusual circumstances prevent an award being made within the 30-day period.</text> </paragraph> <paragraph num="C."> <text>Form of Award. The award shall be in writing. It shall include:</text> <paragraph num="(1)"> <text>The arbitrator's signature;</text> </paragraph> <paragraph num="(2)"> <text>The date of the award;</text> </paragraph> <paragraph num="(3)"> <text>The specific relief awarded to the complainant, or a statement that no relief is awarded; and</text> </paragraph> <paragraph num="(4)"> <text>A statement of reasons for the award.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Attorney’s Fees. An award may not include attorney’s fees.</text> </paragraph> <paragraph num="E."> <text>Notice. The arbitrator shall promptly submit the arbitration decision to the Arbitration Administrator. The Arbitration Administrator shall promptly deliver to the parties, by certified mail, return receipt requested, a copy of the award, along with an explanation of the parties' rights to appeal under the Maryland Uniform Arbitration Act.</text> </paragraph> <paragraph num="F."> <text>Settlement. If the parties settle the dispute before the award, the arbitrator shall set forth the terms of the settlement in an award, which shall have the same effect as any other award.</text> </paragraph> <paragraph num="G."> <text>Enforcement. If there has not been compliance with an award and no timely appeal has been taken, the Consumer Protection Division may seek confirmation of the decision in the appropriate court.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Interpretation of Regulations."> <text>These regulations are to be interpreted broadly to accomplish their purpose, and to promote the rendering of just, impartial, and timely arbitration decisions.</text> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §§13-205 and 13-404;Courts and Judicial Proceedings Article, §3-201 et seq.; Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: June 25, 1977 (4:13 Md. R. 1027)</annotation> <annotation type="History" subtype="Administrative History">Regulation .07 amended effective April 21, 1978 (5:8 Md. R. 589)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.10 repealed effective July 15, 1985 (12:14 Md. R. 1429)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.11 adopted effective July 15, 1985 (12:14 Md. R. 1429)</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective February 27, 2006 (33:4 Md. R. 351)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01B amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> <annotation type="History" subtype="Administrative History">Regulation .05C, D amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06 amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> <annotation type="History" subtype="Administrative History">Regulation .07F amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> <annotation type="History" subtype="Administrative History">Regulation .08A amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> <annotation type="History" subtype="Administrative History">Regulation .09B amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10 amended effective April 27, 2026 (52:8 Md. R. 355)</annotation> </annotations> </chapter> <chapter num="07" heading="Invention Development Services"> <regulation prefix="Regulation" num=".01" heading="General."> <text>These regulations are promulgated pursuant to Commercial Law Article, §13-205, Annotated Code of Maryland, Subtitle, “Division of Consumer Protection; Consumer Council”. They shall apply to Chapter 362 of the Acts of 1977, which defines as an unfair or deceptive trade practice and thus prohibits under the provisions of Commercial Law Article, §13-303. Annotated Code of Maryland, “deception, fraud, false pretense, misrepresentation, or knowing concealment, suppression, or omission of any material fact with the intent that a consumer rely on the same in connection with a contract or other agreement for the evaluation, perfection, marketing, brokering, or promotion of an invention”.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Findings."> <paragraph num="A."> <text>The Consumer Protection Division of the office of the Attorney General and the Consumer Council find that Chapter 362 was enacted because of concern by the General Assembly regarding the practices of invention development services and, more particularly, because of concern as to whether those using these services were entitled to the benefits of the Consumer Protection Act.</text> </paragraph> <paragraph num="B."> <text>The Division and the Council further find that the General Assembly has delegated to them the responsibility to detail what practices of invention development services shall constitute violations of the Consumer Protection Act as unfair or deceptive trade practices, and to set certain requirements for the transaction of business by invention development services in Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Definitions."> <paragraph num="A."> <text>“Business day” means any calendar day except Sunday or the following business holidays: New Year's Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day, and Christmas Day, all as celebrated by the State of Maryland.</text> </paragraph> <paragraph num="B."> <text>“Contract” or “contract for invention development services”, for the purposes of these regulations, means a contract by which an invention developer undertakes invention development services for a customer for a stated payment or consideration, whether or not the payment or consideration has yet been made.</text> </paragraph> <paragraph num="C."> <text>“Customer” means a person, firm, partnership, corporation, or other entity that is solicited by or enters into a contract for invention development services with an invention developer.</text> </paragraph> <paragraph num="D."> <text>“Invention” means any discovery, process, machine, design, formulation, composition of matter, product, concept, or idea, or any combination of these.</text> </paragraph> <paragraph num="E."> <text>“Invention developer” means any person, firm, partnership, corporation, or other entity and any agent, employee, officer, partner, or independent contractor who or which sells or offers for sale in Maryland invention development services. “Invention developer” does not include:</text> <paragraph num="(1)"> <text>Any department or agency of federal, state or local government;</text> </paragraph> <paragraph num="(2)"> <text>Any charitable, scientific, educational, religious, or other organization qualified under Section 501(c)(3) or described in Section 170(b)(1)(a) of the Internal Revenue Code of 1954 as amended; and</text> </paragraph> <paragraph num="(3)"> <text>Bona fide manufacturers' representatives who sell, broker or otherwise market goods.</text> </paragraph> </paragraph> <paragraph num="F."> <text>“Invention development services” means the evaluation, perfection, marketing, brokering, or promotion of an invention by an invention developer, including a patent search or the procurement thereof, procuring the preparation or prosecution of a patent application, and any other acts done by an invention developer for consideration for the purpose of procuring or attempting to procure a patent for an invention or finding a licensee or buyer for an invention. “Invention development services” does not include solely technical or industrial research and development services or the services of an attorney and of a patent agent duly registered by the United States Patent and Trademark Office in the performance of those tasks which they are permitted to perform by reason of their registration.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Contracts to be in Writing, Provided in Advance, and Contain Provision for Cancellation."> <paragraph num="A."> <text>Every contract for invention development services shall be in writing, and a completed copy shall be given to the customer in accordance with the provisions of these regulations.</text> </paragraph> <paragraph num="B."> <text>No contract for invention development services may require payment or any portion thereof to be made by the customer until after 3 business days following the date on which the customer receives a completed copy of it.</text> </paragraph> <paragraph num="C."> <text>Every contract for invention development services shall provide for a 3 business day period during which the customer may cancel the contract in accordance with the provisions of these regulations.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Contract Cover Sheet."> <paragraph num="A."> <text>Every contract for invention development services shall have a conspicuous and legible cover sheet with the following notice and required disclosures imprinted on it in boldface type of a minimum size of 10 points:</text> </paragraph> <paragraph num="B."> <text>The invention developer shall complete the cover sheet with the proper information to be provided in the required disclosures. Numbers to be inserted in Required Disclosure #1 may be rounded to the nearest 100 and need not include those who have contracted within the 2 immediately preceding calendar months or parts thereof.</text> </paragraph> <paragraph num="C."> <text>The cover sheet shall contain the items required by the provisions of Regulation .05A and B, of this chapter, the name, home office address, and local office address of the invention developer, and nothing more.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Mandatory Contract Provisions."> <text>Every contract for invention development services shall set forth, in conspicuous and legible type, all of the following information:</text> <paragraph num="A."> <text>The terms and conditions of payment, which shall be consistent with the requirements of these regulations.</text> </paragraph> <paragraph num="B."> <text>A full, clear, and concise description of the specific acts or services which the invention developer contracts to perform for the customer for the stated consideration.</text> </paragraph> <paragraph num="C."> <text>A statement as to whether the invention developer contracts to construct, sell, or distribute one or more prototypes, models, or devices embodying the customer's invention.</text> </paragraph> <paragraph num="D."> <text>The full name and principal place of business, both in Maryland and at its home office if different, of the invention developer, and the name and principal place of business of any parent, subsidiary, or affiliated company which regularly performs for the invention developer the kinds of services for which the customer has contracted.</text> </paragraph> <paragraph num="E."> <text>A statement of the fee being charged for all services to be provided under the contract, together with any terms and conditions applicable to the payment of the fee.</text> </paragraph> <paragraph num="F."> <text>A statement as to whether or not any representation of estimated or projected earnings is or has been given by the invention developer, its employees, or agents to the customer. If so, then such estimate or projection shall be stated in the contract, together with a description of the data on which it is based.</text> </paragraph> <paragraph num="G."> <text>A statement as to whether or not the invention developer's officers or employees, or any of them, are licensed to practice law in any jurisdiction or are patent agents or patent attorneys duly registered with the United States Patent and Trademark Office and if so, a statement whether he or she will handle the customer's case.</text> </paragraph> <paragraph num="H."> <text>The name and address of the custodian of all records and correspondence pertaining to the services being contracted, together with a statement that the invention developer shall maintain all records and correspondence related to the contract and the services being contracted for that customer for at least 3 years after the expiration of the contract. Identification of the custodian as the invention developer by company name and address shall be sufficient. The statement shall also recite that these records and correspondence will be made available to the customer or the customer's representative for review and copying at the customer's reasonable expense on the invention developer's premises during normal business hours upon 7 days' written notice.</text> </paragraph> <paragraph num="I."> <text>A statement setting forth the approximate time schedule for the performance of the invention development services, including the estimated date by which performance of the services contracted for is expected to be completed.</text> </paragraph> <paragraph num="J."> <text>If the invention developer or any of its officers, directors, or managing agents has or have, or if an affiliated, parent, or subsidiary of the invention developer or any of its officers, directors, or managing agents has or have, during the 5 years immediately preceding the receipt by the customer of the completed copy of the contract, been a defendant or respondent in any proceeding in which a finding of deception, fraud, false pretense, false premise, misrepresentation, or knowing concealment, suppression, or omission of a material fact with the intent that a consumer rely on the same, unfair competition, unauthorized practice of law, or violation of consumer protection laws or regulations of the United States, any state or the Federal Trade Commission, was a part of the basis of a final judgment of liability, a guilty verdict, or an injunction or consent decree by final order of court or administrative agency, then the contract shall set forth a statement describing the invention developer's final adjudicated status in that proceeding. Any such proceeding which is presently pending and in which the moving party was an agency or instrumentality of federal, state, or local government shall be similarly disclosed. In the case of a pending proceeding, the disclosure may include a statement of the status of the proceeding and an opinion, clearly identified as opinion, of the invention developer's legal counsel as to the merits of the allegations.</text> </paragraph> <paragraph num="K."> <text>If, in conjunction with any contract with a customer, the invention developer normally uses one or more subsequent contracts, then the invention developer shall include in the contract a statement summarizing the subsequent contracts normally used. The statement shall include the amount of any fees or other consideration that may be required from the customer for the subsequent contracts and an approximate schedule of the expected times at or occasions on which the subsequent contracts and fees or other consideration will be proposed by the invention developer.</text> </paragraph> <paragraph num="L."> <text>A statement as to whether or not the invention developer contracts to pursue or arrange for protection of the customer's invention by United States Letters Patent or United States Design Patent or any foreign patent.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Reports Required."> <paragraph num="A."> <text>With respect to every contract for invention development services, the invention developer shall deliver written reports to the customer at the address specified in the contract, at quarterly intervals commencing not later than 3 months after the date of the contract and continuing throughout the term of the contract.</text> </paragraph> <paragraph num="B."> <text>These written reports shall identify the contract and shall include:</text> <paragraph num="(1)"> <text>A full, clear, and concise description of the services performed to the date of the report and of the services yet to be performed; and</text> </paragraph> <paragraph num="(2)"> <text>The name and address of the persons, firms, corporations or other entities to which the subject matter forming the basis of the contract has been disclosed, the reason for every disclosure and copies of all responses received as a result of these disclosures. Information previously furnished to the customer need not be repeated, provided the invention developer retains copies of these communications with the records of that customer's contract. As to disclosures made at trade shows or exhibitions, the requirements of this regulation shall be met so long as the trade show, its date and location are identified in the report.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Cancellation Notice."> <paragraph num="A."> <text>Attached to the contract as a part thereof, there shall be a Notice of Cancellation, provided in duplicate and in easily detachable form, in not less than 10-point boldface type, which reads as follows:</text> </paragraph> <paragraph num="B."> <text>The invention developer shall complete the notice of cancellation form with all proper information, leaving blank only the date on which the customer executes the cancellation notice and the customer's signature.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Remedies."> <paragraph num="A."> <text>The customer may cancel any contract for invention development services by mailing or delivering a signed and dated copy of the notice of cancellation, or any other notice to the same effect, to the invention developer at the address provided for the invention developer in the notice of cancellation or elsewhere in the contract, not later than midnight of the third business day following the date on which the customer receives the completed copy of the contract.</text> </paragraph> <paragraph num="B."> <text>Any contract for invention development services which does not substantially comply with the provisions of these regulations is voidable at the option of the customer.</text> </paragraph> <paragraph num="C."> <text>Any contract for invention development services entered into in reliance upon deception, fraud, false pretense, misrepresentation, or knowing concealment, suppression, or omission of a material fact is voidable at the option of the customer.</text> </paragraph> <paragraph num="D."> <text>If a customer makes a valid cancellation of the contract in accordance with these regulations, the invention developer shall, within 10 days following that act, return to the customer at the address furnished in the contract any payments made or other consideration given by the customer under that contract, as well as any property entrusted to the invention developer by the customer. In conjunction with this return, the invention developer may retain copies of the material for file records, which copies shall remain confidential.</text> </paragraph> <paragraph num="E."> <text>The provisions of these regulations may not restrict any right to bring an action to recover for injury or loss sustained as a result of the matters dealt with in these regulations.</text> </paragraph> <paragraph num="F."> <text>A customer may not waive nor may any contract contain a waiver of any of the provisions of these regulations.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Effective Date of Regulations."> <text>These regulations shall be effective 30 days after notice of final action is published in the Maryland Register.</text> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §13-205, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: March 10, 1978 (5:3 Md. R. 134)</annotation> </annotations> </chapter> <chapter num="08" heading="Disclosure Statements for Sale of Kosher Food"> <regulation prefix="Regulation" num=".01" heading="Purpose and Scope."> <paragraph num="A."> <text>The purpose of this chapter is to provide disclosure statements for persons who represent to the public that food that is sold or served is kosher, kosher for Passover, or under rabbinical or other kosher supervision.</text> </paragraph> <paragraph num="B."> <text>This chapter sets forth the disclosures that shall be made to a consumer regarding the preparation and handling of this food. The disclosures allow a consumer to make an informed choice as to whether the manner of food preparation and handling conforms to the consumer's standards.</text> </paragraph> <paragraph num="C."> <text>This chapter does not make a determination as to whether a food is kosher.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Division” means the Division of Consumer Protection of the Office of the Attorney General.</text> </paragraph> <paragraph num="(2)"> <text>Packaged Food.</text> <paragraph num="(a)"> <text>“Packaged food” means food packaged in advance of sale by a producer or packer of the product in units suitable for retail sale.</text> </paragraph> <paragraph num="(b)"> <text>“Packaged food” does not include food intended for consumption at its point of manufacture.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Disclosure Statements."> <paragraph num="A."> <text>This regulation does not apply to packaged food.</text> </paragraph> <paragraph num="B."> <text>A person who represents to the public that unpackaged food sold or served is kosher, kosher for Passover, or under rabbinical or other kosher supervision, shall complete at least one of the disclosure statements described in §§C—H of this regulation.</text> </paragraph> <paragraph num="C."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Both Kosher and Nonkosher Meat, Including Poultry, and Dairy and Pareve Food.</text> <paragraph num="(1)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Operates under rabbinical or other kosher supervision;</text> </paragraph> <paragraph num="(b)"> <text>Sells or serves meat, dairy, and pareve food described as kosher, as well as food not described as kosher;</text> </paragraph> <paragraph num="(c)"> <text>Describes meat as kosher only if it is slaughtered under rabbinical or other kosher supervision, is tagged as kosher at the conclusion of the slaughter, and after slaughter is not mixed with meat not described as kosher;</text> </paragraph> <paragraph num="(d)"> <text>Describes the kosher meat sold as “Glatt kosher” or “Glatt”;</text> </paragraph> <paragraph num="(e)"> <text>Sells or serves seafood only if it has or had fins and removable scales;</text> </paragraph> <paragraph num="(f)"> <text>Keeps separate meat described as kosher, dairy described as kosher, pareve food described as kosher, and food not described as kosher;</text> </paragraph> <paragraph num="(g)"> <text>Uses separate utensils for meat described as kosher, dairy described as kosher, pareve food described as kosher, and food not described as kosher; and</text> </paragraph> <paragraph num="(h)"> <text>Uses separate working areas for meat described as kosher, dairy described as kosher, pareve food described as kosher, and food not described as kosher.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall provide additional information concerning:</text> <paragraph num="(a)"> <text>The deveining, salting, and other practices about the meat described as kosher;</text> </paragraph> <paragraph num="(b)"> <text>The handling of food described as kosher and the handling of food not described as kosher; and</text> </paragraph> <paragraph num="(c)"> <text>What is meant by “Glatt kosher” or “Glatt”, if the person describes the kosher meat sold as “Glatt kosher” or “Glatt”.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Only Kosher Meat, Including Poultry, and Dairy and Pareve Food.</text> <paragraph num="(1)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Operates under rabbinical or other kosher supervision;</text> </paragraph> <paragraph num="(b)"> <text>Sells or serves only meat, dairy, and pareve food described as kosher;</text> </paragraph> <paragraph num="(c)"> <text>Describes meat as kosher only if it is slaughtered under rabbinical or other kosher supervision, is tagged as kosher at the conclusion of the slaughter, and after slaughter is not mixed with meat not described as kosher;</text> </paragraph> <paragraph num="(d)"> <text>Describes the kosher meat sold as “Glatt kosher” or “Glatt”;</text> </paragraph> <paragraph num="(e)"> <text>Sells or serves seafood only if it has or had fins and removable scales;</text> </paragraph> <paragraph num="(f)"> <text>Keeps separate meat, dairy, and pareve food;</text> </paragraph> <paragraph num="(g)"> <text>Uses separate utensils for meat, dairy, and pareve food; and</text> </paragraph> <paragraph num="(h)"> <text>Uses separate working areas for meat, dairy, and pareve food.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall provide additional information concerning:</text> <paragraph num="(a)"> <text>The deveining, salting, and other practices about the meat; and</text> </paragraph> <paragraph num="(b)"> <text>What is meant by “Glatt kosher” or “Glatt”, if the person describes the kosher meat sold as “Glatt kosher” or “Glatt”.</text> </paragraph> </paragraph> </paragraph> <paragraph num="E."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Only Kosher Meat, Including Poultry, and Pareve Food.</text> <paragraph num="(1)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Operates under rabbinical or other kosher supervision;</text> </paragraph> <paragraph num="(b)"> <text>Sells or serves only meat and pareve food described as kosher;</text> </paragraph> <paragraph num="(c)"> <text>Describes meat as kosher only if it is slaughtered under rabbinical or other kosher supervision, is tagged as kosher at the conclusion of the slaughter, and after slaughter is not mixed with meat not described as kosher;</text> </paragraph> <paragraph num="(d)"> <text>Describes the kosher meat sold as “Glatt kosher” or “Glatt”;</text> </paragraph> <paragraph num="(e)"> <text>Sells or serves seafood only if it has or had fins and removable scales;</text> </paragraph> <paragraph num="(f)"> <text>Keeps separate meat and pareve food;</text> </paragraph> <paragraph num="(g)"> <text>Uses separate utensils for meat and pareve food; and</text> </paragraph> <paragraph num="(h)"> <text>Uses separate working areas for meat and pareve food.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall provide additional information concerning:</text> <paragraph num="(a)"> <text>The deveining, salting, and other practices about the meat; and</text> </paragraph> <paragraph num="(b)"> <text>What is meant by “Glatt kosher” or “Glatt”, if the person describes the kosher meat sold as “Glatt kosher” or “Glatt”.</text> </paragraph> </paragraph> </paragraph> <paragraph num="F."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Only Kosher Dairy and Pareve Food. The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(1)"> <text>Operates under rabbinical or other kosher supervision;</text> </paragraph> <paragraph num="(2)"> <text>Sells or serves only dairy and pareve food described as kosher;</text> </paragraph> <paragraph num="(3)"> <text>Sells or serves seafood only if it has or had fins and removable scales;</text> </paragraph> <paragraph num="(4)"> <text>Keeps separate dairy and pareve food;</text> </paragraph> <paragraph num="(5)"> <text>Uses separate utensils for dairy and pareve food; and</text> </paragraph> <paragraph num="(6)"> <text>Uses separate working areas for dairy and pareve food.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Food as Kosher for Passover.</text> <paragraph num="(1)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Makes the Passover preparations under rabbinical or other kosher supervision;</text> </paragraph> <paragraph num="(b)"> <text>Keeps separate food described as kosher for Passover and food not described as kosher for Passover;</text> </paragraph> <paragraph num="(c)"> <text>Uses separate utensils for Passover items; and</text> </paragraph> <paragraph num="(d)"> <text>Uses separate working areas for Passover food.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall provide additional information about the content of the food that is described as kosher for Passover.</text> </paragraph> </paragraph> <paragraph num="H."> <text>Disclosure by Persons Who Represent They Sell or Serve Only Nonkosher Food, Except Kosher Hot Dogs—Alternative to Form in §C of This Regulation.</text> <paragraph num="(1)"> <text>The disclosure statement shall provide information about the reasons the hot dogs are described as kosher.</text> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall disclose whether separate utensils and working areas are used for the hot dogs described as kosher.</text> </paragraph> <paragraph num="(3)"> <text>The disclosure statement shall disclose whether the hot dogs described as kosher are kept free from contact with food not described as kosher.</text> </paragraph> </paragraph> <paragraph num="I."> <text>The disclosure statement shall state the name of the establishment and the date of the disclosure.</text> </paragraph> <paragraph num="J."> <text>More than one disclosure statement shall be completed if a person represents that unpackaged food that is sold or served is:</text> <paragraph num="(1)"> <text>Kosher; and</text> </paragraph> <paragraph num="(2)"> <text>Kosher for Passover.</text> </paragraph> </paragraph> <paragraph num="K."> <text>The completed disclosure statements shall be posted in the manner set forth in Regulation .05 of this chapter.</text> </paragraph> <paragraph num="L."> <text>The Division shall develop forms for the disclosure statements described in §§C—H of this regulation, and shall make them available upon request.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Rabbinical or Other Kosher Supervision Statements."> <paragraph num="A."> <text>A person who represents to the public that food for sale or a place of business is under rabbinical or other kosher supervision shall complete a statement about the rabbinical or other kosher supervision.</text> </paragraph> <paragraph num="B."> <text>The statement about rabbinical or other kosher supervision shall set forth:</text> <paragraph num="(1)"> <text>The name of the establishment;</text> </paragraph> <paragraph num="(2)"> <text>The date the statement was completed;</text> </paragraph> <paragraph num="(3)"> <text>The dates to which the supervision applies;</text> </paragraph> <paragraph num="(4)"> <text>The name of the rabbi or agency;</text> </paragraph> <paragraph num="(5)"> <text>The address of the rabbi or agency;</text> </paragraph> <paragraph num="(6)"> <text>The phone number of the rabbi or agency;</text> </paragraph> <paragraph num="(7)"> <text>The affiliation of the rabbi or agency;</text> </paragraph> <paragraph num="(8)"> <text>The frequency with which the rabbi or agency visits the establishment; and</text> </paragraph> <paragraph num="(9)"> <text>A general description about the rabbinical or other kosher supervision of the establishment.</text> </paragraph> </paragraph> <paragraph num="C."> <text>The statement about rabbinical or other kosher supervision shall be completed in addition to all disclosure statements required to be completed under Regulation .03 of this chapter.</text> </paragraph> <paragraph num="D."> <text>The completed statement about rabbinical or other kosher supervision shall be posted in the manner set forth in Regulation .05 of this chapter.</text> </paragraph> <paragraph num="E."> <text>The Division shall develop a form for the statement about rabbinical or other kosher supervision, and shall make it available at the request of a person.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Method of Posting."> <paragraph num="A."> <text>Disclosure Statements. The disclosure statements described in Regulation .03 of this chapter shall be posted in a clear and conspicuous manner, so that they can be seen easily by the consumer before the consumer buys or consumes the foods about which the disclosures are made.</text> </paragraph> <paragraph num="B."> <text>Statements about Rabbinical Supervision. The statement about rabbinical or other kosher supervision described in Regulation .04 of this chapter shall be posted adjacent to each disclosure statement.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §§14-902 and 14-903, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: January 15, 2002 (28:22 Md. R. 1933)</annotation> </annotations> </chapter> <chapter num="09" heading="Deposits on New Homes—Escrow Account, Surety Bond, and Letter of Credit Requirements"> <regulation prefix="Regulation" num=".01" heading="Purpose."> <text>The purpose of this chapter is to ensure compliance with State laws requiring that home builders secure deposits and other advance payments through the use of escrow accounts, surety bonds, and letters of credit, under Real Property Article, Title 10, Subtitle 3, Annotated Code of Maryland, and Real Property Article, Title 10, Subtitle 5, Annotated Code of Maryland (the Custom Home Protection Act).</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Scope."> <text>This chapter applies to all home builders and sellers of new homes, unless exempted by the terms of Real Property Article, §10-304, Annotated Code of Maryland.</text> </regulation> <regulation prefix="Regulation" num=".03" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Home builder” has the meaning stated in Business Regulation Article, §4.5-101(f), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“New home” has the meaning stated in Business Regulation Article, §4.5-101(k), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>“Seller” means a vendor subject to Real Property Article, Title 10, Subtitle 3, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(4)"> <text>“Unit” means the Home Builder Registration Unit of the Consumer Protection Division of the Office of the Attorney General.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Procedures and Requirements."> <paragraph num="A."> <text>Form of Bond or Letter of Credit. Home builders and sellers of new homes shall:</text> <paragraph num="(1)"> <text>Use the corporate surety bond or irrevocable letter of credit form provided by the Unit; or</text> </paragraph> <paragraph num="(2)"> <text>Submit other corporate surety bond or letter of credit forms to the Unit for its consideration and prior approval for use as required under Real Property Article, §§10-302 and 10-303, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Filing of Bonds and Letters of Credit. A home builder or seller shall file with the Unit at 200 St. Paul Place, 16th Floor, Baltimore, Maryland 21202, the corporate surety bonds and irrevocable letters of credit required by Real Property Article, §§10-302, 10-303, and 10-504, Annotated Code of Maryland.</text> </paragraph> <paragraph num="C."> <text>Certification of Compliance.</text> <paragraph num="(1)"> <text>A home builder or seller shall file with the Unit a statement in a form provided by the Unit, signed by its president or vice president if a corporation, or by a general partner of the home builder or seller or by the home builder or seller individually if not a corporation, that the bond, letter of credit, or escrow account is in the amount required by Real Property Article, §§10-302, 10-303, and 10-504, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>If the home builder or seller maintains escrow accounts instead of bonds or letters of credit, it shall file with the Unit a statement in a form provided by the Unit which shall be deemed to be a continuing representation until the Unit is notified in writing by the home builder or seller that the statement is to the contrary.</text> </paragraph> <paragraph num="(3)"> <text>The statements required by §C of this regulation shall be filed with the Unit:</text> <paragraph num="(a)"> <text>With the home builder's registration with the Unit;</text> </paragraph> <paragraph num="(b)"> <text>With each renewal of the home builder's registration with the Unit;</text> </paragraph> <paragraph num="(c)"> <text>For a seller that is not a home builder, that:</text> <paragraph num="(i)"> <text>Files a bond or letter of credit, upon filing the bond or letter of credit with the Unit;</text> </paragraph> <paragraph num="(ii)"> <text>Establishes an escrow account on, before, or within 20 days after the effective date of this chapter, within 30 days after the effective date of this chapter; or</text> </paragraph> <paragraph num="(iii)"> <text>Establishes an escrow account 21 or more days after the effective date of this chapter, within 10 days after establishing the escrow account; and</text> </paragraph> </paragraph> <paragraph num="(d)"> <text>Within 10 days of any change to the:</text> <paragraph num="(i)"> <text>Method by which the home builder or seller complies with Real Property Article, Title 10, Subtitles 3 and 5, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(ii)"> <text>Amount of the bond or letter of credit.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>The home builder or seller of new homes shall provide the Unit, upon request, any documents or information the Unit considers necessary to ensure compliance with Real Property Article, Title 10, Subtitles 3 and 5, Annotated Code of Maryland.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Real Property Article, §§10-302, 10-303.1, and 10-504, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: May 12, 2003 (30:9 Md. R. 614)</annotation> </annotations> </chapter> <chapter num="10" heading="Disclosure Statements for Sale of Halal Food"> <regulation prefix="Regulation" num=".01" heading="Purpose and Scope."> <paragraph num="A."> <text>The purpose of this chapter is to provide disclosure statements for persons who represent to the public that food that is sold or served is halal.</text> </paragraph> <paragraph num="B."> <text>This chapter sets forth the disclosures that shall be made to a consumer regarding the source of food and the preparation, handling, and sale of the food. The disclosures allow a consumer to make an informed choice as to whether the source of the food and manner of food preparation and handling conform to the consumer's standards.</text> </paragraph> <paragraph num="C."> <text>This chapter does not make a determination as to whether a food is halal.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Division” means the Division of Consumer Protection of the Office of the Attorney General.</text> </paragraph> <paragraph num="(2)"> <text>Packaged Food.</text> <paragraph num="(a)"> <text>“Packaged food” means food packaged in advance of sale by a producer or packer of the product in units suitable for retail sale.</text> </paragraph> <paragraph num="(b)"> <text>“Packaged food” does not include food intended for consumption at its point of manufacture.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>“Person” includes an individual, corporation, business trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Disclosure Statements."> <paragraph num="A."> <text>This regulation does not apply to packaged food.</text> </paragraph> <paragraph num="B."> <text>A person who represents to the public that unpackaged food sold or served is halal shall complete a disclosure statement described in §C of this regulation.</text> </paragraph> <paragraph num="C."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Unpackaged Halal Food.</text> <paragraph num="(1)"> <text>The disclosure statement shall state the name of the person selling or serving halal food and the date of the disclosure.</text> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Sells or serves only halal foods; or</text> </paragraph> <paragraph num="(b)"> <text>Sells or serves both halal and non-halal foods.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Sells or serves products that are certified by a halal certifying entity;</text> </paragraph> <paragraph num="(b)"> <text>Sells or serves products that are purchased from vendors who represent that their products are halal;</text> </paragraph> <paragraph num="(c)"> <text>Keeps halal and non-halal foods separate during preparation; and</text> </paragraph> <paragraph num="(d)"> <text>Prepares foods in accordance with Islamic religious requirements.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>The disclosure statement shall state:</text> <paragraph num="(a)"> <text>The names of vendors from whom the person purchased unpackaged halal food products; and</text> </paragraph> <paragraph num="(b)"> <text>That the address and phone number of the named vendors will be furnished on request.</text> </paragraph> </paragraph> <paragraph num="(5)"> <text>The disclosure statement shall, if applicable, state:</text> <paragraph num="(a)"> <text>The name of the person certifying the food as halal; and</text> </paragraph> <paragraph num="(b)"> <text>That the address and phone number of the named certifying persons will be furnished on request.</text> </paragraph> </paragraph> <paragraph num="(6)"> <text>The disclosure statement shall describe the halal food preparation and handling process.</text> </paragraph> <paragraph num="(7)"> <text>The disclosure statement shall be amended as necessary.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Disclosure Statement for Persons Who Represent That They Sell or Serve Both Halal and Non-Halal Foods.</text> <paragraph num="(1)"> <text>The disclosure statement shall include the requirements under §C of this regulation.</text> </paragraph> <paragraph num="(2)"> <text>The disclosure statement shall state in the affirmative or negative whether the person:</text> <paragraph num="(a)"> <text>Uses separate ovens, sinks, and preparation areas for halal and non-halal foods;</text> </paragraph> <paragraph num="(b)"> <text>Uses separate utensils and equipment for halal and non-halal foods;</text> </paragraph> <paragraph num="(c)"> <text>Uses separate refrigerators, freezers, and storage areas for halal and non-halal foods; and</text> </paragraph> <paragraph num="(d)"> <text>Mixes non-halal and halal foods.</text> </paragraph> </paragraph> </paragraph> <paragraph num="E."> <text>The completed disclosure statement shall be posted in the manner set forth in Regulation .04 of this chapter.</text> </paragraph> <paragraph num="F."> <text>The Division shall develop a form for the disclosure statement described in §§C and D of this regulation, and shall make forms available upon request.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Method of Posting."> <text>The disclosure statement described in Regulation .03 of this chapter shall be posted in a clear and conspicuous manner, so that the consumer can easily see it before the consumer buys or consumes the foods about which the disclosures are made.</text> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §§13-205, 14-3602, and 14-3604, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: March 23, 2009 (36:6 Md. R. 487)</annotation> </annotations> </chapter> </subtitle> <subtitle num="02" heading="Division of Securities"> <chapter num="01" heading="General Administrative Regulations"> <regulation prefix="Regulation" num=".01" heading="Definitions."> <paragraph num="A."> <text>As used in the Maryland Securities Act and in this subtitle, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Commissioner” means the Maryland Securities Commissioner or the designated agent of the Maryland Securities Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>“CRD” means the Central Registration Depository System.</text> </paragraph> <paragraph num="(3)"> <text>“Division” means the Division of Securities in the Office of the Attorney General.</text> </paragraph> <paragraph num="(4)"> <text>“Maryland Business Opportunities Sales Act” and “Business Opportunities Act” mean Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(5)"> <text>“Maryland Franchise Registration and Disclosure Law” and “Maryland Franchise Law” mean Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Maryland Securities Act” means Corporations and Associations Article, Title 11, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(7)"> <text>“NASAA” means the North American Securities Administrators Association, Inc.</text> </paragraph> <paragraph num="(8)"> <text>“NASD” means the National Association of Securities Dealers, Inc.</text> </paragraph> <paragraph num="(9)"> <text>“SEC” means the Securities and Exchange Commission.</text> </paragraph> <paragraph num="(10)"> <text>“Self-regulatory organization” or “SRO” means a national securities or commodities exchange, or an association or clearing agency that is registered with the Securities and Exchange Commission or the Commodity Futures Trading Commission.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Administrative Files."> <paragraph num="A."> <text>Public Inspection. Except for materials accorded confidential treatment under §B of this regulation, all registration statements, applications for registration, and reports filed with the Division are available for public inspection during regular business hours at the offices of the Division.</text> </paragraph> <paragraph num="B."> <text>Confidential Materials. The following materials contained in the registration files of the Division are not available for public inspection:</text> <paragraph num="(1)"> <text>Materials containing trade secrets or other confidential information if the:</text> <paragraph num="(a)"> <text>Provisions of State Government Article, Title 10, Subtitle 6, Annotated Code of Maryland, do not require disclosure of the trade secrets or confidential information, and</text> </paragraph> <paragraph num="(b)"> <text>Commissioner finds that disclosure of the trade secrets or confidential information is not necessary for the protection of investors;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Financial statements of broker-dealers that are required by COMAR 02.02.02 and that are accorded confidential treatment under 17 CFR §240.17a-5(d) (SEC Rule 17a-5(d), Annual Filing of Audited Financial Statements), which is incorporated by reference.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Requests for Confidential Treatment. A registrant who desires confidential treatment under §B(1) of this regulation shall submit a request for confidential treatment in a letter which shall:</text> <paragraph num="(1)"> <text>State the basis for the request; and</text> </paragraph> <paragraph num="(2)"> <text>Include a copy of the document for which confidential treatment is sought.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Petition for Adoption of Regulations."> <paragraph num="A."> <text>Petition. An interested person may petition the Commissioner to adopt, amend, or repeal a regulation within the Commissioner's authority under the:</text> <paragraph num="(1)"> <text>Maryland Securities Act;</text> </paragraph> <paragraph num="(2)"> <text>Maryland Franchise Registration and Disclosure Law; or</text> </paragraph> <paragraph num="(3)"> <text>Maryland Business Opportunities Sales Act.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Form of Petition. The petition shall be submitted in writing and may be in the form of a letter addressed to the Commissioner.</text> </paragraph> <paragraph num="C."> <text>Content of Petition. The petition shall state, clearly and concisely, the:</text> <paragraph num="(1)"> <text>Language of the proposed regulation;</text> </paragraph> <paragraph num="(2)"> <text>Reasons why the petitioner believes the Commissioner should adopt the proposed regulation;</text> </paragraph> <paragraph num="(3)"> <text>Nature of the petitioner's interest in the proposed regulation; and</text> </paragraph> <paragraph num="(4)"> <text>Authority of the Commissioner to take the action requested by the petitioner.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Disposition. The Commissioner shall consider the petition and shall notify the petitioner within 60 days of the Commissioner's disposition of the petition.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Fines and Civil Penalties."> <paragraph num="A."> <text>Scope. This regulation applies to fines and civil penalties imposed under the Maryland Securities Act, Corporations and Associations Article, §§11-417 and 11-701.1(b)(4), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Amount of Fine or Civil Penalty. For the purpose of determining the amount of a fine or civil penalty to be imposed for a violation of any provision of the Maryland Securities Act, or any regulation or order under the Maryland Securities Act, the Commissioner shall consider:</text> <paragraph num="(1)"> <text>The circumstances, nature, frequency, seriousness, magnitude, persistence, and willfulness of the conduct constituting the violation;</text> </paragraph> <paragraph num="(2)"> <text>The scope of the violation, including the number of persons in and out of Maryland affected by the conduct constituting the violation;</text> </paragraph> <paragraph num="(3)"> <text>The level of restitution or compensation the violator has made;</text> </paragraph> <paragraph num="(4)"> <text>Past and concurrent conduct of the violator that has given rise to any sanction or judgment imposed by, or plea of guilty or nolo contendere or settlement with, the Commissioner or a state securities administrator, a court of competent jurisdiction, the SEC, any other federal or state agency, or a self-regulatory organization; and</text> </paragraph> <paragraph num="(5)"> <text>Any other factor the Commissioner finds appropriate in the public interest or for the protection of investors and within the purposes fairly intended by the policy and provisions of the Maryland Securities Act.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Interpretive Opinions."> <paragraph num="A."> <text>Filing of Request. A request for an interpretive opinion or a no action position under the Maryland Securities Act, Corporations and Associations Article, §11-206(e), Annotated Code of Maryland, shall be filed with the Commissioner.</text> </paragraph> <paragraph num="B."> <text>Form of Request. A request for an interpretive opinion or a no action position shall include:</text> <paragraph num="(1)"> <text>An original and one copy of the letter requesting the interpretive opinion or no action position; and</text> </paragraph> <paragraph num="(2)"> <text>Two copies of any supporting documentation or materials.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Content of Request.</text> <paragraph num="(1)"> <text>A request shall state the names of any issuer, individual, or entity involved. Requests concerning unnamed issuers, individuals, or entities, or hypothetical situations, are not acceptable.</text> </paragraph> <paragraph num="(2)"> <text>A request shall indicate in a prominent manner the specific subsections of the statute or regulation to which the request pertains.</text> </paragraph> <paragraph num="(3)"> <text>A request shall be limited to a particular fact situation and shall contain a legal analysis indicating why the requesting party believes that it is appropriate, given the language, meaning, and intent of the pertinent statutes and regulations, and the interests of investor protection, that the Commissioner should take a particular position.</text> </paragraph> <paragraph num="(4)"> <text>A request shall contain the name of the individual to be contacted by the Division if additional information is required. The designated individual shall be fully versed in the facts and legal analysis underlying the request for the interpretive opinion or no action position.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Request for Confidential Treatment. If a person requesting an interpretive opinion or no action position seeks to keep all or part of the request confidential, the person shall submit, together with the request for an interpretive opinion or no action position, a separate letter that states why the person believes that confidential treatment is appropriate or necessary.</text> </paragraph> <paragraph num="E."> <text>Payment of Fee. A request for an interpretive opinion or a no action position shall be accompanied by the fee set forth in the Maryland Securities Act, Corporations and Associations Article, §11-206(e), Annotated Code of Maryland. The filing fee is nonrefundable.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Consent to Service of Process."> <text>A person required by the Maryland Securities Act, Corporations and Associations Article, §11-802, Annotated Code of Maryland, to appoint the Commissioner as agent for service of process shall file a Form U-2 (Uniform Consent to Service of Process) with the Commissioner.</text> </regulation> <regulation prefix="Regulation" num=".07" heading="Payment of Fees and Fines."> <paragraph num="A."> <text>Payee. Checks for fees required by the Maryland Securities Act, the Maryland Franchise Registration and Disclosure Law, or the Maryland Business Opportunities Sales Act, or for fines or civil penalties imposed by the Commissioner, shall be made payable to “Office of the Attorney General”.</text> </paragraph> <paragraph num="B."> <text>Overpayment of Fees.</text> <paragraph num="(1)"> <text>If the Division discovers an overpayment in an amount of $35 or greater in a fee paid directly to the Division, the Division shall notify the person submitting the fee that the person may be entitled to a refund.</text> </paragraph> <paragraph num="(2)"> <text>Refund Request.</text> <paragraph num="(a)"> <text>A person that wishes to obtain a refund of an overpayment shall:</text> <paragraph num="(i)"> <text>Advise the Division that the person wishes to receive a refund; and</text> </paragraph> <paragraph num="(ii)"> <text>Provide the Division with the person's federal tax identification number.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>A request for a refund of an overpayment shall be made within 90 days after the overpayment or the mailing of any notice given by the Division.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Processing Refund Request. The Division shall forward a request for a refund and the person's tax identification number to the Fiscal Division of the Office of the Attorney General for processing.</text> </paragraph> <paragraph num="(4)"> <text>Application of Overpayment to Fees for Subsequent Years. An overpayment of a fee may not be applied to fees due for subsequent years.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Place of Filing."> <text>A registration application, pleading, correspondence, or other document required to be filed with or served upon the Commissioner shall be addressed to the Securities Commissioner, Office of the Attorney General, 200 St. Paul Place, Baltimore, Maryland 21202-2020.</text> </regulation> <regulation prefix="Regulation" num=".09" heading="Senior or Retiree Designations and Credentials."> <paragraph num="A."> <text>It shall constitute a violation of the Maryland Securities Act, Corporations and Associations Article, §11-305, Annotated Code of Maryland, and a dishonest or unethical business practice under Corporations and Associations Article, §§11-302(a)(3) and 11-412(a)(7), Annotated Code of Maryland, to use, in a way that misleads or would mislead any person, a senior-specific certification or designation that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees.</text> </paragraph> <paragraph num="B."> <text>The prohibited use of a certification or professional designation includes, but is not limited to, the following:</text> <paragraph num="(1)"> <text>Use of a certification or professional designation by a person who has not actually earned or is ineligible to use the certification or designation;</text> </paragraph> <paragraph num="(2)"> <text>Use of a nonexistent or self-conferred certification or professional designation;</text> </paragraph> <paragraph num="(3)"> <text>Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the user does not have; and</text> </paragraph> <paragraph num="(4)"> <text>Use of a certification or professional designation that was obtained from a designating or certifying organization that:</text> <paragraph num="(a)"> <text>Is primarily engaged in the business of instruction in sales, marketing, or sales and marketing;</text> </paragraph> <paragraph num="(b)"> <text>Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;</text> </paragraph> <paragraph num="(c)"> <text>Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or</text> </paragraph> <paragraph num="(d)"> <text>Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certification.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of §B(4) of this regulation if:</text> <paragraph num="(1)"> <text>The organization has been accredited by:</text> <paragraph num="(a)"> <text>The American National Standards Institute; or</text> </paragraph> <paragraph num="(b)"> <text>The National Commission for Certifying Agencies; or</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The organization is on the United States Department of Education's list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the issued designation or credential does not primarily apply to sales, marketing, or sales and marketing.</text> </paragraph> </paragraph> <paragraph num="D."> <text>The following factors shall be considered when determining whether a combination of words, or an acronym standing for a combination of words, constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees:</text> <paragraph num="(1)"> <text>Use, in the name of the certification or professional designation, of one or more words such as “senior”, “retirement”, “elder”, or similar terms, combined with one or more words such as “certified”, “registered”, “chartered”, “adviser”, “specialist”, “consultant”, “planner”, or similar terms; and</text> </paragraph> <paragraph num="(2)"> <text>Manner in which the words described in §D(1) of this regulation are combined.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Exceptions.</text> <paragraph num="(1)"> <text>For purposes of this regulation, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:</text> <paragraph num="(a)"> <text>Indicates seniority or standing within the organization; or</text> </paragraph> <paragraph num="(b)"> <text>Specifies an individual's area of specialization within the organization.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>For purposes of this section, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Nothing in this regulation limits the Securities Commissioner's authority to enforce existing provisions of law.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §§11-203, 11-302, 11-305, and 11-412; Business Regulation Article, §§14-106 and 14-206; Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: June 1, 1962</annotation> <annotation type="History" subtype="Administrative History">Regulation .05 adopted as an emergency provision effective February 16, 1990 (17:5 Md. R. 633); adopted permanently effective June 11, 1990 (17:11 Md. R. 1340)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06 adopted effective May 13, 1991 (18:9 Md. R. 1007)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.06 repealed and new Regulations .01—.08 adopted effective January 17, 1994 (21:1 Md. R. 26)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01B amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .07 amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .09 adopted as an emergency provision effective October 5, 2009 (36:22 Md. R. 1721); adopted permanently effective February 8, 2010 (37:3 Md. R. 175)</annotation> </annotations> </chapter> <chapter num="02" heading="Broker-Dealer Regulations"> <regulation prefix="Regulation" num=".01" heading="Initial Registration as Broker-Dealer."> <paragraph num="A."> <text>Scope. This regulation governs applications for initial registration as a broker-dealer in Maryland.</text> </paragraph> <paragraph num="B."> <text>National Association of Securities Dealers (NASD) Members. An applicant that is already a member of, or has applied for membership in, the NASD shall:</text> <paragraph num="(1)"> <text>File with the Central Registration Depository System (CRD) the information required by Form BD (Uniform Application for Broker-Dealer Registration) and the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(2)"> <text>File with the Commissioner other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Non-NASD Members.</text> <paragraph num="(1)"> <text>An applicant that is not a member of, or has not applied for membership in, the NASD shall file with the Commissioner an application upon Form BD (Uniform Application for Broker-Dealer Registration).</text> </paragraph> <paragraph num="(2)"> <text>The application shall contain:</text> <paragraph num="(a)"> <text>A financial statement prepared in accordance with 17 CFR §240.17a-5(d) (SEC Rule 17a-5(d), Annual Filing of Audited Financial Statements), which is incorporated by reference, as of a date within 90 days of the date on which the statement is filed;</text> </paragraph> <paragraph num="(b)"> <text>If the applicant is a corporation, a resolution authorizing the filing of the application;</text> </paragraph> <paragraph num="(c)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(d)"> <text>A statement or certificate showing compliance with, or exemption from, the examination requirement of Regulation .06 of this chapter; and</text> </paragraph> <paragraph num="(e)"> <text>Other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Completion of Filing. An application for initial registration as a broker-dealer is not considered filed for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland, until:</text> <paragraph num="(1)"> <text>The applicant has complied with the examination requirement of Regulation .06 of this chapter;</text> </paragraph> <paragraph num="(2)"> <text>The required fee and all required submissions have been received by the Commissioner;</text> </paragraph> <paragraph num="(3)"> <text>If the applicant is seeking membership in the NASD, the applicant is approved as a member of the NASD; and</text> </paragraph> <paragraph num="(4)"> <text>The applicant has submitted any other information the Commissioner has requested.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Renewal Registration as Broker-Dealer."> <paragraph num="A."> <text>Scope. This regulation governs applications for renewal registration as a broker-dealer in Maryland.</text> </paragraph> <paragraph num="B."> <text>NASD Members. An applicant that is a member of the NASD shall:</text> <paragraph num="(1)"> <text>File with the CRD the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(2)"> <text>File with the Commissioner other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Non-NASD Members.</text> <paragraph num="(1)"> <text>An applicant that is not a member of the NASD shall file with the Commissioner an application upon Form 200 (Renewal of Registration of Non-NASD Broker-Dealer).</text> </paragraph> <paragraph num="(2)"> <text>The application shall contain:</text> <paragraph num="(a)"> <text>A financial statement prepared in accordance with 17 CFR §240.17a-5(d) (SEC Rule 17a-5(d), Annual Filing of Audited Financial Statements), which is incorporated by reference;</text> </paragraph> <paragraph num="(b)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(c)"> <text>Other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Completion of Filing. An application for renewal registration as a broker-dealer is not considered filed for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-406, Annotated Code of Maryland, until the required fee and all required submissions have been received by the Commissioner.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Mandatory Registration of an Agent."> <text>A broker-dealer registered with the Commissioner shall register at least one agent with the Commissioner.</text> </regulation> <regulation prefix="Regulation" num=".04" heading="Initial Registration as Agent."> <paragraph num="A."> <text>Scope. This regulation governs applications for initial registration as a broker-dealer agent in Maryland.</text> </paragraph> <paragraph num="B."> <text>Agents of NASD Members. An applicant for initial registration as an agent for a broker-dealer that is a member of the NASD shall:</text> <paragraph num="(1)"> <text>File with the CRD the information required by Form U-4 (Uniform Application for Securities Industry Registration or Transfer) and the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(2)"> <text>File with the Commissioner other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Agents of Non-NASD Members.</text> <paragraph num="(1)"> <text>An applicant for initial registration as an agent for a broker-dealer that is not an NASD member shall file an application with the Commissioner upon Form U-4 (Uniform Application for Securities Industry Registration or Transfer).</text> </paragraph> <paragraph num="(2)"> <text>The application shall contain:</text> <paragraph num="(a)"> <text>A statement or certificate showing compliance with or exemption from the examination requirement of Regulation .06 of this chapter;</text> </paragraph> <paragraph num="(b)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(c)"> <text>Other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Completion of Filing. An application for initial registration as an agent is not considered filed for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland, until:</text> <paragraph num="(1)"> <text>The applicant has complied with the examination requirement of Regulation .06 of this chapter;</text> </paragraph> <paragraph num="(2)"> <text>If the applicant has applied for registration with the NASD, the applicant is approved by the NASD as a representative; and</text> </paragraph> <paragraph num="(3)"> <text>The applicant has submitted any other information the Commissioner has requested.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Renewal Registration as Agent."> <paragraph num="A."> <text>Scope. This regulation governs applications for renewal registration as a broker-dealer agent in Maryland.</text> </paragraph> <paragraph num="B."> <text>Agents of NASD Members. An applicant for renewal registration as an agent for a broker-dealer that is a member of the NASD shall:</text> <paragraph num="(1)"> <text>File with the CRD the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(2)"> <text>File with the Commissioner other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Agents of Non-NASD Members.</text> <paragraph num="(1)"> <text>An applicant for renewal registration as an agent for a broker-dealer that is not a member of the NASD shall file an application for renewal registration with the Commissioner upon Form 200a (Application for Renewal of Agents of Non-NASD Member Broker-Dealers).</text> </paragraph> <paragraph num="(2)"> <text>The application shall contain:</text> <paragraph num="(a)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(b)"> <text>Other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Completion of Filing. An application for renewal registration as an agent is not considered filed for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-406, Annotated Code of Maryland, until the required fee and all required submissions have been received by the Commissioner.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Examination Requirement for Broker-Dealers and Agents."> <paragraph num="A."> <text>Examination Requirement. An applicant for registration as a broker-dealer or as a broker-dealer agent in Maryland shall:</text> <paragraph num="(1)"> <text>Pass, with a score of 70 percent or better, the appropriate examination designated in §B of this regulation within 2 years before the date of application; or</text> </paragraph> <paragraph num="(2)"> <text>Qualify for an exemption from the examination requirement under §C of this regulation.</text> </paragraph> </paragraph> <paragraph num="B."> <text>SRO Examinations. An applicant for initial registration as a broker-dealer or broker-dealer agent shall take the appropriate examination or examinations designated and administered by a self-regulatory organization.</text> </paragraph> <paragraph num="C."> <text>Exemption. An applicant for registration as a broker-dealer or broker-dealer agent is exempt from the examination requirement of this regulation if the applicant:</text> <paragraph num="(1)"> <text>Is a member firm or is a registered representative with the NASD; or</text> </paragraph> <paragraph num="(2)"> <text>Has been continuously engaged in the securities business for a period of at least 2 years immediately preceding the date of application.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Amendment of Documents Filed by Broker-Dealers and Agents."> <paragraph num="A."> <text>Time of Filing. An amendment to a broker-dealer or agent filing required by the Maryland Securities Act, Corporations and Associations Article, §11-411(d), Annotated Code of Maryland, shall be filed within 30 days of the event that gave rise to the need to amend the filing.</text> </paragraph> <paragraph num="B."> <text>Place of Filing.</text> <paragraph num="(1)"> <text>Broker-Dealers.</text> <paragraph num="(a)"> <text>NASD Members. A broker-dealer that is a member of the NASD shall file an amendment with the CRD.</text> </paragraph> <paragraph num="(b)"> <text>Non-NASD Members. A broker-dealer that is not a member of the NASD shall file an amendment with the Commissioner.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Broker-Dealer Agents.</text> <paragraph num="(a)"> <text>NASD Registered Representatives. A broker-dealer agent who is registered with the NASD shall file an amendment with the CRD.</text> </paragraph> <paragraph num="(b)"> <text>Others. A broker-dealer agent who is not registered with the NASD shall file an amendment with the Commissioner.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Financial Requirements for Broker-Dealers."> <paragraph num="A."> <text>Terms Defined. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-409, Annotated Code of Maryland, and this regulation, the terms “net capital” and “aggregate indebtedness” have the meanings stated in 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers and Dealers), which is incorporated by reference.</text> </paragraph> <paragraph num="B."> <text>Broker-Dealers Subject to §15 of the Securities Exchange Act of 1934. A broker-dealer that is registered in Maryland and that is subject to §15 of the Securities Exchange Act of 1934 shall maintain the net capital required by 17 CFR §240.15c3-1 (SEC Rule 15c3-1 Net Capital Requirements for Brokers and Dealers), which is incorporated by reference.</text> </paragraph> <paragraph num="C."> <text>Broker-Dealers Not Subject to §15 of the Securities Exchange Act of 1934.</text> <paragraph num="(1)"> <text>A broker-dealer that is registered in Maryland and that is not subject to §15 of the Securities Exchange Act of 1934 shall:</text> <paragraph num="(a)"> <text>Maintain a net capital of not less than $15,000; and</text> </paragraph> <paragraph num="(b)"> <text>Not permit its aggregate indebtedness to exceed 2000 percent of its net capital.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>A registered broker-dealer that deals exclusively in securities exempt under the Maryland Securities Act, Corporations and Associations Article, §11-601(1) or (2), Annotated Code of Maryland, is exempt from the requirement of §C(1)(b) of this regulation.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Exemption. The Commissioner by order may exempt a registered broker-dealer from the requirements of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Financial Reporting Requirements for Broker-Dealers."> <paragraph num="A."> <text>Financial Reports. A broker-dealer registered in Maryland shall file financial reports with the Commissioner as required by this regulation.</text> </paragraph> <paragraph num="B."> <text>NASD Members. Unless otherwise ordered by the Commissioner, a broker-dealer that is a member of the NASD may satisfy its obligations under this regulation and the Maryland Securities Act, Corporations and Associations Article, §11-411(c), Annotated Code of Maryland, by filing with the NASD an annual financial statement prepared in accordance with 17 CFR §240.17a-5(d) (SEC Rule 17a-5(d), Annual Filing of Audited Financial Statements), which is incorporated by reference.</text> </paragraph> <paragraph num="C."> <text>Non-NASD Members. A broker-dealer that is not a member of the NASD shall file with the Commissioner an annual financial statement prepared in accordance with 17 CFR §240.17a-5(d) (SEC Rule 17a-5(d), Annual Filing of Audited Financial Statements), which is incorporated by reference.</text> </paragraph> <paragraph num="D."> <text>Filing of Reports.</text> <paragraph num="(1)"> <text>Time for Filing. A broker-dealer required to file a financial statement under §C of this regulation shall file the financial statement within 45 days after the end of the broker-dealer's fiscal year.</text> </paragraph> <paragraph num="(2)"> <text>Extensions of Time.</text> <paragraph num="(a)"> <text>A broker-dealer may request an extension of time to file a financial statement. The request shall state the reason for the extension of time and shall contain an undertaking to file the statement on or before a specified date.</text> </paragraph> <paragraph num="(b)"> <text>A request for an extension of time shall be considered granted unless the Commissioner, within 10 days after the receipt of the request, denies the request and notifies the broker-dealer of the denial.</text> </paragraph> <paragraph num="(c)"> <text>If an extension of time for filing a financial statement is granted, the financial statement shall report the financial condition of the broker-dealer as of a date within 90 days of the date that the financial statement is filed.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Book and Record-Keeping Requirements for Broker-Dealers."> <paragraph num="A."> <text>A broker-dealer registered or required to be registered in Maryland shall make and keep books and records as set forth in 17 CFR §240.17a-3 (SEC Rule 17a-3, Records to be Made by Certain Exchange Members, Brokers and Dealers), which is incorporated by reference.</text> </paragraph> <paragraph num="B."> <text>A broker-dealer registered or required to be registered in Maryland shall preserve all records required to be made under this regulation as set forth in 17 CFR §240.17a-4 (SEC Rule 17a-4, Records to be Preserved by Certain Exchange Members, Brokers and Dealers), which is incorporated by reference.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §11-203, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: June 1, 19652</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.06 and new Regulations .01—.10 adopted effective January 17, 1994 (21:1 Md. R. 26)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01B, D amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04B, D amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .08B, C amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> </annotations> </chapter> <chapter num="03" heading="Registration Regulations"> <regulation prefix="Regulation" num=".01" heading="Prospectus."> <paragraph num="A."> <text>Scope of Regulation. This regulation prescribes the form and content of the prospectus required to be filed as part of a registration statement for registration of securities by qualification or notification, and to be used in connection with the offering of securities so registered.</text> </paragraph> <paragraph num="B."> <text>Registration by Qualification. A prospectus filed as part of a registration statement for registration of securities by qualification shall contain all the information required by Schedule A.</text> </paragraph> <paragraph num="C."> <text>Registration by Notification. A prospectus filed as part of a registration statement for registration of securities by notification shall contain the information required by Schedule A except that the information required by §§F(4), I(2), J, K, L, Q, S(1)(c), and S(2) may be omitted.</text> </paragraph> <paragraph num="D."> <text>Legibility of Prospectus. The prospectus may be printed, mimeographed, or typewritten, or prepared by any similar process which will result in clear, legible copies. If printed, it shall be set in clear Roman type at least as large as 10 point modern type, with financial data or other statistical or tabular matter at least as large as 8 point. All type shall be leaded at least 2 points.</text> </paragraph> <paragraph num="E."> <text>Presentation of Information in Prospectus.</text> <paragraph num="(1)"> <text>The prospectus shall contain the information called for by all items of Schedule A required to be answered, except that no reference need be made to inapplicable items, and negative answers to any item may be omitted. None of the other information or documents filed as a part of the registration statement need be included in the prospectus.</text> </paragraph> <paragraph num="(2)"> <text>Unless clearly indicated otherwise, information set forth in any part of the prospectus need not be duplicated elsewhere in the prospectus. When it is deemed necessary or desirable to call attention to the information in more than one part of the prospectus, this may be accomplished by appropriate cross-references. Instead of restating information in the form of notes to the financial statements, references may be made to other parts of the prospectus where the information is set forth.</text> </paragraph> <paragraph num="(3)"> <text>The information required in the prospectus need not follow the order of the items in Schedule A. All information contained in the prospectus shall be set forth under appropriate captions or headings reasonably indicative of the principal subject matter set forth under it.</text> </paragraph> <paragraph num="(4)"> <text>Every prospectus shall include in its forepart a reasonably detailed table of contents showing the subject matter of the various sections or subdivisions and the page number on which each section or subdivision begins.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Date of Prospectus.</text> <paragraph num="(1)"> <text>Each prospectus used after the effective date of the registration statement shall be dated approximately as of the effective date, provided, however, that a revised or amended prospectus used after it need only bear the approximate date of its issuance.</text> </paragraph> <paragraph num="(2)"> <text>Each supplement to a prospectus shall be separately dated with the approximate date of its issuance.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Exchange Offers. If any of the securities being registered are to be offered in exchange for securities of any other issuer, the prospectus shall also include the information which would be required by §§F—O of Schedule A if the securities of an issuer were being registered.</text> </paragraph> <paragraph num="H."> <text>Preliminary Prospectus. A prospectus filed as part of a registration statement is a preliminary prospectus until the registration statement has become effective. Every preliminary prospectus shall bear on the outside front cover page the following caption underscored or in red ink, “Preliminary Prospectus”, and the following statement, in type as large as that generally in the body of the prospectus:</text> </paragraph> <paragraph num="I."> <text>Required Legend. Every prospectus shall bear the following legend in capital letters on the outside front cover page:</text> </paragraph> <paragraph num="J."> <text>Use of Prospectus.</text> <paragraph num="(1)"> <text>It is a condition of registration of securities by qualification or notification that a prospectus satisfying the requirements of this regulation shall be sent or given to each person to whom an offer is made as required by §11-502(c) or 11-504(d) of the Maryland Securities Act.</text> </paragraph> <paragraph num="(2)"> <text>When a prospectus is used more than 9 months after the effective date of the registration statement, the information contained in it shall be as of a date not more than 16 months before the use, so far as the information is known to the user of the prospectus or can be furnished by the user without unreasonable effort or expense.</text> </paragraph> <paragraph num="(3)"> <text>In addition to the requirements of §J(2), if a prospectus becomes misleading or inaccurate in any material respect, its use shall be discontinued, and it shall be revised or supplemented in such a way that it may not be misleading or inaccurate in any material respect. Three copies of a revised or supplemented prospectus shall be promptly filed with the Commissioner. Nothing in this paragraph shall be taken to relieve any person from the requirements of §11-502(c) or 11-504(d) of the Maryland Securities Act.</text> </paragraph> </paragraph> <paragraph num="K."> <text>Definitions. As used in this chapter, the following terms shall have the meanings indicated:</text> <paragraph num="(1)"> <text>“Affiliate” of, or person “affiliated” with, a specified person, is a person who directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.</text> </paragraph> <paragraph num="(2)"> <text>“Control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.</text> </paragraph> <paragraph num="(3)"> <text>“Director” means any director of a corporation or any person performing similar functions with respect to any organization whether incorporated or unincorporated.</text> </paragraph> <paragraph num="(4)"> <text>“Equity security” means any:</text> <paragraph num="(a)"> <text>Stock or similar security;</text> </paragraph> <paragraph num="(b)"> <text>Security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or</text> </paragraph> <paragraph num="(c)"> <text>Such warrant or right.</text> </paragraph> </paragraph> <paragraph num="(5)"> <text>“Material”, when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters as to which an average prudent investor reasonably ought to be informed before purchasing the security registered.</text> </paragraph> <paragraph num="(6)"> <text>“Officer” means a president, vice-president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer, and any other person performing similar functions with respect to any organization, whether incorporated or unincorporated.</text> </paragraph> <paragraph num="(7)"> <text>“Predecessor” means a person, the major portion of the business and assets of which another person acquired in a single succession, or in a series of related successions, in each of which the acquiring person acquired the major portion of the business and assets of the acquired person.</text> </paragraph> <paragraph num="(8)"> <text>“Promoter” includes any person who:</text> <paragraph num="(a)"> <text>Acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of an issuer;</text> </paragraph> <paragraph num="(b)"> <text>In connection with the founding and organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services or property, or both services and property, 10 percent or more of any class of securities of the issuer or 10 percent or more of the proceeds from the sale of any class of securities. However, a person who receives the securities or proceeds either solely as underwriting commissions or solely in consideration of property may not be deemed a promoter within the meaning of this subsection if the person does not otherwise take part in founding and organizing the enterprise.</text> </paragraph> </paragraph> <paragraph num="(9)"> <text>“Significant subsidiary” means a subsidiary meeting any one of the following conditions:</text> <paragraph num="(a)"> <text>The assets of the subsidiary, or the investments in and advances to the subsidiary by its parent and the parent's other subsidiaries, if any, exceed 15 percent of the assets of the parent and its subsidiaries on a consolidated basis;</text> </paragraph> <paragraph num="(b)"> <text>The sales and operating revenues of the subsidiary exceed 15 percent of the sales and operating revenues of its parent and the parent's subsidiaries on a consolidated basis;</text> </paragraph> <paragraph num="(c)"> <text>The subsidiary is a parent of one or more subsidiaries and, together with the subsidiaries would, if considered in the aggregate, constitute a significant subsidiary.</text> </paragraph> </paragraph> <paragraph num="(10)"> <text>“Subsidiary” of a specified person is an affiliate controlled by that person directly, or indirectly through one or more intermediaries.</text> </paragraph> <paragraph num="(11)"> <text>“Succession” means the direct acquisition of the assets comprising a going business, whether by merger, consolidation, purchase, or other direct transfer. The term does not include the acquisition of control of a business, unless followed by the direct acquisition of its assets. The terms “succeed” and “successor” have meanings correlative to the foregoing.</text> </paragraph> </paragraph> <paragraph num="L."> <text>Additional Information. In addition to the information expressly required to be included in a prospectus or a registration statement by this regulation, or both, there shall be added such further information, if any, as may be necessary in order to make the statements made in a prospectus or a registration statement, or both, in the light of the circumstances under which they are made, not misleading.</text> </paragraph> <paragraph num="M."> <text>Guidelines. Registrants should consult releases issued by the Division of Securities from time to time respecting guidelines as to compliance with the procedural, form and contents requirements for a registration statement and a prospectus set forth in this regulation.</text> </paragraph> <included-document> <text>Schedule A</text> <text>Information Required in Prospectus</text> </included-document> </regulation> <regulation prefix="Regulation" num=".02" heading="Acceptability of Uniform Forms in Registration by Coordination."> <text>The Commissioner will permit the use of the Uniform Application Form adopted by the North American Securities Administrators Association and the Uniform Application to Register Securities (Form U-1) adopted by the Midwest Securities Commissioners Association in connection with the registration of securities by coordination, provided, however, that no instruction, undertaking, or other matter appearing in the forms shall be deemed to modify, or in any way affect, the application of the requirements of the Maryland Securities Act and of the rules and regulations under it to the registration.</text> </regulation> <regulation prefix="Regulation" num=".03" heading="Repealed." /> <regulation prefix="Regulation" num=".04" heading="Quarterly Reports on Registered Securities."> <paragraph num="A."> <text>Except as provided in §B of this regulation, so long as a registration statement covering securities registered by notification or qualification is effective, the person who filed the registration statement shall file quarterly reports which shall keep reasonably current the information contained in the registration statement and disclose the progress of the offering, (see form SRQ-1, which is annexed hereto), and in addition, the reports shall contain a list of persons who have purchased securities within that given monthly period. This shareholder list shall include the name, the address and the telephone number of the purchaser and the number of units, shares, or beneficial interests purchased and the date of the purchase.</text> </paragraph> <paragraph num="B."> <text>When an offering of securities registered by notification or qualification has been completed, the person who filed the registration statement may be relieved of the necessity of filing further reports pursuant to §A of this regulation by notifying the Commissioner in writing of the fact that the offering has been completed, and by submitting a final shareholder list and status of the offering report.</text> </paragraph> <paragraph num="C."> <text>The quarterly reports required by §A of this regulation shall be filed with the Division of Securities within 7 days from the end of each quarterly period.</text> </paragraph> <paragraph num="D."> <text>The Securities Commissioner may, by rule or order, further modify, condition, withdraw, or waive the conditions of this regulation when he deems it in the public interest.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Financial Statements Filed As Part of Registration Statements for Registration of Securities by Qualification Notification."> <paragraph num="A."> <text>All financial statements required to be filed as part of registration statements for registration of securities by qualification or notification shall be certified by independent public accountants.</text> </paragraph> <paragraph num="B."> <text>The Commissioner will not recognize any certified public accountant or public accountant as independent who is not in fact independent. For example, an accountant will be considered not independent with respect to any person or any of its parents or subsidiaries:</text> <paragraph num="(1)"> <text>In whom he has, or had during the period of report, any direct, financial interest or any material indirect financial interest; or</text> </paragraph> <paragraph num="(2)"> <text>with whom he is, or was during the period, connected as a promoter, underwriter, voting trustee, director, officer, or employee.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Escrow Requirements."> <paragraph num="A."> <text>The Commissioner, in his discretion, shall have the right to require an escrow fund to be established and may, by regulation or order, require as a condition of registration by qualification that the proceeds from the sale of the registered securities be impounded until the issuer receives a special amount. The Commissioner may, by regulation or order, determine the conditions of any escrow or impounding required hereunder, but he may not reject a depository solely because of location in another state.</text> </paragraph> <paragraph num="B."> <text>Accordingly, in any instance where he determines impounding of the proceeds of the sale of securities to be in the public interest and necessary for the protection of investors, the Commissioner will require, as a condition of registration, that the registrant deposit a specific percentage of the proceeds from the sale of the registrant's securities in an acceptable depository, pursuant to a written agreement between the registrant issuer and the depository, to be retained in it until a specific sum has been accumulated and the terms and conditions of the agreement have been performed.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Registration by Coordination of Shelf Registrations Pursuant to SEC Rule 415."> <paragraph num="A."> <text>Initial Registration. Securities which are qualified to be registered on SEC Form S-3 and which are to be offered in series or offered and sold on a continuous or delayed basis pursuant to SEC Rule 415, may be registered by coordination as follows:</text> <paragraph num="(1)"> <text>Initial Filing. On filing a Shelf Registration Statement with the SEC pursuant to Rule 415, the registrant shall file a Form U- 1 annexing the Shelf Registration Statement containing all of the information required for coordinated registrations pursuant to §11-503 of the Maryland Securities Act with the Maryland Division of Securities (the Division), along with the requisite filing fee based on the maximum amount to be sold.</text> </paragraph> <paragraph num="(2)"> <text>Pre-effective Amendments. If an amendment to the Shelf Registration Statement is required prior to SEC effectiveness, this amendment shall be filed with the Division.</text> </paragraph> <paragraph num="(3)"> <text>Effectiveness of Registration. The Shelf Registration Statement automatically becomes effective in Maryland at the moment the federal registration statement becomes effective if all the following conditions are satisfied:</text> <paragraph num="(a)"> <text>A stop order is not in effect and a proceeding is not pending under §§11-511—11-513 of the Maryland Securities Act;</text> </paragraph> <paragraph num="(b)"> <text>The registration statement has been on file with the Commissioner for at least 10 days prior to the determination of effectiveness by the SEC; and</text> </paragraph> <paragraph num="(c)"> <text>A statement of the maximum and minimum proposed offering prices and the maximum underwriting discounts and commissions applicable to the shelf registration has been on file for 2 full business days or any shorter period which the Commissioner permits by rule or otherwise, and the offering is made within those limitations.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Subsequent Takedowns. Thereafter, the securities registered under §A may be offered and sold in Maryland without, except as indicated below, any prior notification to or approval by the Division so long as these offerings are effected with no material changes from the terms provided in the Shelf Registration Statement:</text> <paragraph num="(1)"> <text>Further Filings. The registrant shall furnish copies of prospectus supplements or post-effective amendments, or both, relating to particular offerings of securities registered by the Shelf Registration Statement to the Division at the same time these filings are made with the SEC.</text> </paragraph> <paragraph num="(2)"> <text>Pricing-Telegrams. The furnishing of pricing-telegrams with respect to particular offerings of securities registered by the Shelf Registration Statement is not required.</text> </paragraph> <paragraph num="(3)"> <text>Conclusion of Offering. The registrant shall notify the Division in writing when the offering is concluded.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Filing of Sales and Advertising Literature."> <paragraph num="A."> <text>Definitions.</text> <paragraph num="(1)"> <text>“Act” means the Maryland Securities Act.</text> </paragraph> <paragraph num="(2)"> <text>“Commissioner” means the Securities Commissioner of the State.</text> </paragraph> <paragraph num="(3)"> <text>“Division” means the Division of Securities of the Office of the Attorney General.</text> </paragraph> <paragraph num="(4)"> <text>“Regulation” means this regulation.</text> </paragraph> <paragraph num="(5)"> <text>“Sales and advertising literature” includes any pamphlet, circular, form letter, advertisement or printed advertising communication, films, film strips, television and radio presentations, tape and cassette recordings, and any other public lecture addressed or intended for distribution to and/or delivered to prospective investors including clients or prospective clients of an agent or broker/dealer; provided, however, that “sales and advertising literature” may not include:</text> <paragraph num="(a)"> <text>Any prospectus used in conjunction with an offer or sale, or both, of securities;</text> </paragraph> <paragraph num="(b)"> <text>Any individual letter sent to a prospective investor where the issuer has filed a registration statement with the Division relating to the offer or sale, or both, of securities to which the letter relates, provided, however, that the letter shall direct the prospective investor to the prospectus or be accompanied by a copy of the prospectus;</text> </paragraph> <paragraph num="(c)"> <text>Tombstone advertisements;</text> </paragraph> <paragraph num="(d)"> <text>Dividend notices, proxy statements and reports to shareholders, the content of which does not pertain to a current offering or sale, or both, of securities of the issuer;</text> </paragraph> <paragraph num="(e)"> <text>Literature disseminated in connection with the distribution of securities of an investment company registered under §8 of the Investment Company Act of 1940;</text> </paragraph> <paragraph num="(f)"> <text>Literature relating to any securities, offer or sale, or both of securities, to which is applicable one or more of the exemptions from registration contained within §§11-601—11-604 of the Act;</text> </paragraph> <paragraph num="(g)"> <text>Written or printed material relating to an offer or sale, or both, of securities pursuant to a:</text> <paragraph num="(i)"> <text>Qualified employee stock, or stock-option plan, or</text> </paragraph> <paragraph num="(ii)"> <text>Merger, consolidation, exchange offer, reclassification of securities or sale of corporate assets in consideration of the issuance of securities of another issuer;</text> </paragraph> </paragraph> <paragraph num="(h)"> <text>Written or printed material which is otherwise required to be filed under the registration provisions of the Act.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>All sales and advertising literature relating to an offering of securities for which a registration statement has been filed with the Division pursuant to §11-502, 11-503, or 11-504 of the Act also shall be filed with the Division and have prominently displayed by legend or printed sticker on the front cover of the sales and advertising literature, in bold-face type, substantially the following statement:</text> </paragraph> <paragraph num="C."> <text>The Commissioner shall review the sales and advertising literature required to be filed under §B of this regulation and, if 7 days after the filing of the material, he has not issued a stop-order or other order with respect to it, the material may be used in connection with the offering of securities to which it relates. If a stop-order or other order is issued, then the sales and advertising literature, and the use of it, shall comply in all respects with the order.</text> </paragraph> <paragraph num="D."> <text>The Commissioner may, by regulation or order, further modify, condition, withdraw, or waive the conditions of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Procedure for Renewal of Registration Statement."> <paragraph num="A."> <text>Definitions. As used in this regulation:</text> <paragraph num="(1)"> <text>“Effective date” means the date that a registration statement is declared effective by the Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>“Expiration/renewal date” means the date that is 1 year from the effective date.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Scope of Regulation. This regulation applies to registration statements filed pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1, Annotated Code of Maryland. Regulations concerning registration of securities of investment companies may be found in Regulation .10, below.</text> </paragraph> <paragraph num="C."> <text>Filing Requirements. Subject to the provisions of the Maryland Securities Act, Corporations and Associations Article, §§11-511, 11-512, and 11-513, Annotated Code of Maryland, an effective registration statement that is registered pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-502, 11-503, or 11-504, may be renewed for a successive 1-year period by submitting to the Division, within the 30 days before its expiration/renewal date, the following:</text> <paragraph num="(1)"> <text>A manually signed U-1 application;</text> </paragraph> <paragraph num="(2)"> <text>The appropriate registration fee in the amount and made payable in the manner specified in the Maryland Securities Act, Corporations and Associations Article, §11-506(a), Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(3)"> <text>All registration or offering documents that have been amended during the registration period that have not been previously filed with the Division.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Retroactive Effectiveness. An application for renewal may not be given effectiveness retroactive to its expiration/renewal date for any reason, including, but not limited to, the late or deficient filing of any of the documents or materials specified in §C, above.</text> </paragraph> <paragraph num="E."> <text>Termination. The registrant shall provide the Commissioner with written notification of the termination of the offering in this State.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Registration of Securities of Investment Companies."> <paragraph num="A."> <text>Filing Fee.</text> <paragraph num="(1)"> <text>Subject to the registration provisions of the Maryland Securities Act, Corporations and Associations Article, §§11-502, 11-503, and 11-504, Annotated Code of Maryland, a registrant that files pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1, Annotated Code of Maryland, shall pay a $100 filing fee with the initial application for registration.</text> </paragraph> <paragraph num="(2)"> <text>A registrant that renews its registration statement pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1(b), shall pay a $100 filing fee in addition to any fee that is required to be paid pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1(b)(1) or (2).</text> </paragraph> </paragraph> <paragraph num="B."> <text>A registrant that files a registration statement for an indefinite amount of securities pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1, shall promptly notify the Commissioner of the registrant's fiscal year and of any subsequent changes to its fiscal year.</text> </paragraph> <paragraph num="C."> <text>A registrant that pays a fee pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1(b)(2), shall file a report of sales on Form USR-1, as approved by the North American Securities Administrators Association.</text> </paragraph> <paragraph num="D."> <text>A registration statement filed pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1, shall cover only one class of securities. Multiple classes of securities offered by the same issuer shall be registered separately.</text> </paragraph> <paragraph num="E."> <text>Renewal. A registrant that renews its registration statement pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1(b), shall file with the Commissioner a current prospectus and statement of additional information or other offering document, as applicable.</text> </paragraph> <paragraph num="F."> <text>Termination. The registrant shall provide the Commissioner with written notification of the termination of the offering in this State. Upon termination, the registrant shall pay a final sales fee pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-510.1(b)(1) or (2), and comply with §C of this regulation, if applicable.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Initial and Renewal Registration as Issuer Agent."> <paragraph num="A."> <text>Definitions.</text> <paragraph num="(1)"> <text>For purposes of this regulation, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="(2)"> <text>Terms Defined.</text> <paragraph num="(a)"> <text>“Agent” has the same meaning as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(b)"> <text>“Issuer agent” means an agent, other than a broker-dealer agent, who represents an issuer in effecting or attempting to effect the purchase or sale of securities.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Initial Registration. An applicant for initial registration as an issuer agent shall file with the Commissioner:</text> <paragraph num="(1)"> <text>An application upon Form U-4 (Uniform Application for Securities Industry Registration or Transfer);</text> </paragraph> <paragraph num="(2)"> <text>A statement or certificate demonstrating that the applicant has satisfied the examination requirement of §C of this regulation; and</text> </paragraph> <paragraph num="(3)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407(a)(2), Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Examination Requirement. An applicant for initial registration as an issuer agent shall have passed, with a score of 70 percent or better, the Series 63 examination administered by the NASD unless:</text> <paragraph num="(1)"> <text>The applicant effects transactions exclusively in securities exempt under the Maryland Securities Act, Corporations and Associations Article, §11-601; or</text> </paragraph> <paragraph num="(2)"> <text>Based upon the applicant's education, experience, or duties, the Commissioner waives the examination requirement.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Renewal Registration. An applicant for renewal registration as an issuer agent shall file with the Commissioner:</text> <paragraph num="(1)"> <text>An application on the form entitled Maryland Application for Renewal of Registration as an Issuer Agent; and</text> </paragraph> <paragraph num="(2)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407(a)(2).</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".12" heading="Small Corporate Offering Registration."> <paragraph num="A."> <text>Registration by Qualification. An issuer may register securities by qualification under the Maryland Securities Act, Corporations and Associations Article, §11-504, Annotated Code of Maryland, by using Form U-7 (Small Corporate Offering Registration Form) if the conditions set forth in this regulation and in the instructions to Form U-7 are satisfied.</text> </paragraph> <paragraph num="B."> <text>Small Corporate Offering Registration Form.</text> <paragraph num="(1)"> <text>An application to register securities under this regulation shall be prepared in accordance with the instructions set forth in Form U-7 (Small Corporate Offering Registration Form) adopted by the North American Securities Administrators Association, Inc., on April 29, 1989, which is incorporated by reference.</text> </paragraph> <paragraph num="(2)"> <text>A completed Form U-7 that has been declared effective by the Commissioner shall serve as the prospectus for an offering registered under this regulation.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Eligibility of Issuer. To be eligible to register securities under this regulation, the issuer shall satisfy the following conditions:</text> <paragraph num="(1)"> <text>The issuer is a corporation organized under the laws of one of the states or possessions of the United States;</text> </paragraph> <paragraph num="(2)"> <text>The issuer engages in, or proposes to engage in, a business other than petroleum exploration or mining or other extractive industries;</text> </paragraph> <paragraph num="(3)"> <text>The issuer is not an investment company subject to the Investment Company Act of 1940, 15 U.S.C. §§80a-1—80a-52;</text> </paragraph> <paragraph num="(4)"> <text>The issuer is not subject to the reporting requirements of §13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§78m, 78o(d)).</text> </paragraph> </paragraph> <paragraph num="D."> <text>Eligibility of Offering. To be eligible for registration under this regulation, an offering shall satisfy the following conditions:</text> <paragraph num="(1)"> <text>The aggregate offering price does not exceed $1,000,000 in any 12-month period, less the aggregate offering price for all securities sold within 12 months before the start of and during the offering of the securities under 17 CFR §230.504 (SEC Rule 504, Exemptions for Limited Offerings and Sales of Securities Not Exceeding $500,000) in reliance on any exemption under §3(b) or in violation of §5(a) of the Securities Act of 1933 (15 U.S.C. §§77c(b), 77e(a));</text> </paragraph> <paragraph num="(2)"> <text>The offering is not a “blind pool” offering or other offering for which the specific business or properties cannot be described at the time of the offering;</text> </paragraph> <paragraph num="(3)"> <text>The securities are to be offered and sold only on behalf of the issuer and not on behalf of any selling security holder;</text> </paragraph> <paragraph num="(4)"> <text>If the securities are common stock, the offering price equals or exceeds $5 per share;</text> </paragraph> <paragraph num="(5)"> <text>If the securities are options, warrants, or rights for common stock, the exercise price equals or exceeds $5 per share;</text> </paragraph> <paragraph num="(6)"> <text>If the securities are convertible into common stock, the conversion price equals or exceeds $5 per share; and</text> </paragraph> <paragraph num="(7)"> <text>The offering is exempt from registration with the SEC under 17 CFR §§230.501—230.508 (SEC Regulation D, Rules Governing the Limited Offer and Sale of Securities Without Registration under the Securities Act of 1933).</text> </paragraph> </paragraph> <paragraph num="E."> <text>Disqualifications.</text> <paragraph num="(1)"> <text>Bases of Disqualification. An issuer may not register an offering under this regulation if the issuer, any of its officers, directors, beneficial owners of 10 percent or more of any class of its equity securities, any promoters currently connected with it in any capacity, any selling agents of the securities to be offered, or any officer, director, or partner of the selling agent:</text> <paragraph num="(a)"> <text>Within 5 years before the filing of the application for registration under this regulation, has filed a registration statement which is currently the subject of a stop order under any state's securities law;</text> </paragraph> <paragraph num="(b)"> <text>Within 5 years before the filing of the application for registration under this regulation, has been convicted of any felony or misdemeanor in connection with the offer, purchase, or sale of any security or any felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, or conspiracy to defraud;</text> </paragraph> <paragraph num="(c)"> <text>Is currently subject to any state administrative enforcement order or judgment:</text> <paragraph num="(i)"> <text>That was entered within 5 years before the filing of the application for registration under this regulation, and</text> </paragraph> <paragraph num="(ii)"> <text>In which fraud or deceit, including untrue statements of material facts or omissions of material facts, was found;</text> </paragraph> </paragraph> <paragraph num="(d)"> <text>Is subject to any state administrative enforcement order or judgment that prohibits, denies, or revokes the use of any exemption from registration in connection with the current offer, purchase, or sale of securities; or</text> </paragraph> <paragraph num="(e)"> <text>Is currently subject to any order, judgment, or decree of any court of competent jurisdiction, entered within 5 years before the filing of the application for registration under this regulation, temporarily, preliminarily, or permanently restraining or enjoining the party from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with a state.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Limitation of Disqualification. The disqualifications set forth in §E(1)(a)—(c) and (e) of this regulation do not apply if the:</text> <paragraph num="(a)"> <text>Person subject to the disqualification is licensed or registered to conduct securities-related business in the state in which the disqualifying administrative order or judgment was entered or the broker-dealer employing the person is registered in Maryland; and</text> </paragraph> <paragraph num="(b)"> <text>Form BD or Form U-4 filed with the Commissioner discloses the disqualifying event.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Waiver of Disqualification. The Commissioner, by order, may waive a disqualification set forth in §E of this regulation if the Commissioner finds that the waiver is consistent with the public interest and within the purposes fairly intended by the policy and provisions of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Undertaking Not to Split Stock.</text> <paragraph num="(1)"> <text>By execution and filing of a Form U-7, the issuer undertakes not to split its common stock, or declare a stock dividend, for 2 years after the effectiveness of the registration.</text> </paragraph> <paragraph num="(2)"> <text>Notwithstanding §F(1) of this regulation, an issuer may apply to the Commissioner for approval to split its common stock or declare a stock dividend in connection with a subsequent registered public offering.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Filing Requirements.</text> <paragraph num="(1)"> <text>An application for registration under this regulation shall be filed with the Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>An application for registration under this regulation shall contain:</text> <paragraph num="(a)"> <text>All forms and exhibits required by the instructions in Form U-7;</text> </paragraph> <paragraph num="(b)"> <text>If the issuer does not make the offering through a registered broker-dealer, an application for issuer agent registration prepared in accordance with Regulation .11 of this chapter;</text> </paragraph> <paragraph num="(c)"> <text>The filing fee set forth in the Maryland Securities Act, Corporations and Associations Article, §11-506(a).</text> </paragraph> </paragraph> </paragraph> <paragraph num="H."> <text>Reports Filed with the Commissioner. The issuer shall file quarterly reports that shall:</text> <paragraph num="(1)"> <text>Contain the information required by Regulation .04 of this chapter; and</text> </paragraph> <paragraph num="(2)"> <text>Certify that no changes or amendments were made to Form U-7 or any sales or advertising materials other than changes or amendments filed with and declared effective by the Commissioner.</text> </paragraph> </paragraph> <paragraph num="I."> <text>Reports to Investors. The issuer shall deliver to each investor any:</text> <paragraph num="(1)"> <text>Reports required by Form U-7; and</text> </paragraph> <paragraph num="(2)"> <text>Other reports that the Commissioner may require.</text> </paragraph> </paragraph> <paragraph num="J."> <text>Sales and Advertising Literature. The issuer shall file sales and advertising literature with the Commissioner as required by Regulation .08 of this chapter.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §11-203, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date:</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.05 effective June 1, 1962</annotation> <annotation type="History" subtype="Administrative History">Regulation .03 repealed effective April 15, 1991 (18:7 Md. R. 770)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06 effective December 1, 1968</annotation> <annotation type="History" subtype="Administrative History">Regulation .07 effective December 1, 1972; repealed effective July 1,</annotation> <annotation type="History" subtype="Administrative History">1983 (10:6 Md. R. 551)</annotation> <annotation type="History" subtype="Administrative History">Regulation .07 adopted effective May 7, 1984 (11:9 Md. R. 795)</annotation> <annotation type="History" subtype="Administrative History">Regulation .08 effective December 1, 1974</annotation> <annotation type="History" subtype="Administrative History">Regulation .09 adopted effective August 6, 1990 (17:15 Md. R. 1853)</annotation> <annotation type="History" subtype="Administrative History">Regulation .09E adopted effective April 1, 1991 (18:6 Md. R. 684)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10 adopted effective August 6, 1990 (17:15 Md. R. 1853)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10D—F amended effective April 1, 1991 (18:6 Md. R. 684)</annotation> <annotation type="History" subtype="Administrative History">Regulation .11 adopted effective May 9, 1994 (21:9 Md. R. 749)</annotation> <annotation type="History" subtype="Administrative History">Regulation .12 adopted effective May 9, 1994 (21:9 Md. R. 749)</annotation> <annotation type="History" subtype="Administrative History">Regulation .21 adopted effective October 20, 1978 (5:21 Md. R. 1585)</annotation> <annotation type="History" subtype="Administrative History">Regulation .21 repealed effective August 6, 1990 (17:15 Md. R. 1853)</annotation> </annotations> </chapter> <chapter num="04" heading="Exemption from Registration Regulations"> <regulation prefix="Regulation" num=".01" heading="Requirements for Compliance with Not-for-Profit Exemption."> <paragraph num="A."> <text>Securities offered pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-601(9)(i), Annotated Code of Maryland, shall be deemed exempt securities if the nationwide aggregate offering price does not exceed $150,000.</text> </paragraph> <paragraph num="B."> <text>Securities offered pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-601(9)(ii), Annotated Code of Maryland, shall be deemed exempt securities if the following conditions are satisfied:</text> <paragraph num="(1)"> <text>Exempt Securities—General Conditions.</text> <paragraph num="(a)"> <text>The issuer shall notify the Commissioner in writing at least 10 days before the first sale of the securities in this State.</text> </paragraph> <paragraph num="(b)"> <text>The notification shall contain the following information:</text> <paragraph num="(i)"> <text>Name, address, and telephone number of the issuer;</text> </paragraph> <paragraph num="(ii)"> <text>Name, address, telephone number, and CRD number, if applicable, of the broker-dealer or issuer's agent registered in this State who will offer the securities.</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>An affirmation that a commission or remuneration for soliciting any prospective buyer may not be paid except to a broker-dealer or issuer's agent registered in this State.</text> </paragraph> <paragraph num="(d)"> <text>An affirmation that all prospective buyers will receive, before any sale, a disclosure document containing the information required by Form MLOE-2 of Regulation .12 of this chapter. The financial information required by Item 19, Part I of Form MLOE-2, need not be provided.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The issuer shall pay the filing fee pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>The exemption for an offering made pursuant to this exemption shall be effective for 1 year from the date that the notification filing is accepted by the Commissioner. The exemption may be extended for successive 1-year periods by complying with the provisions of §B of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Employee Benefit Plans."> <paragraph num="A."> <text>Securities offered pursuant to a nonqualified benefit plan as described in the Maryland Securities Act, Corporations and Associations Article, §11-601(11), Annotated Code of Maryland, shall be deemed exempt securities if the following conditions are satisfied:</text> <paragraph num="(1)"> <text>The issuer shall notify the Commissioner in writing at least 30 days before any offer or sale in this State. The notification shall include the following information:</text> <paragraph num="(a)"> <text>Name, address, and telephone number of the issuer;</text> </paragraph> <paragraph num="(b)"> <text>Name, address, and telephone number of the administrator of the plan; and</text> </paragraph> <paragraph num="(c)"> <text>A copy of the plan.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The issuer shall pay the filing fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>The Commissioner may waive the 30-day prior notice requirement of §A(1) of this regulation, if the Commissioner finds that the waiver is appropriate in the public interest.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The exemption for an offering made pursuant to this exemption shall be effective from the date that the notification filing is accepted by the Commissioner. If there is a material change or amendment to the plan during the offering period, the issuer shall notify the Commissioner by complying with the provisions of §A of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Existing Security Holder Exemption."> <paragraph num="A."> <text>Transactions involving existing security holders pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-602(11)(ii), Annotated Code of Maryland, shall be deemed exempt transactions if the following conditions are satisfied:</text> <paragraph num="(1)"> <text>The issuer shall notify the Commissioner in writing at least 5 business days before the offer or sale in this State. The notification shall include the following information:</text> <paragraph num="(a)"> <text>Name, address, and telephone number of the issuer;</text> </paragraph> <paragraph num="(b)"> <text>Name, address, telephone number, and CRD number, if applicable, of any entity or individual receiving any commission or remuneration in connection with the offer or sale of the securities; and</text> </paragraph> <paragraph num="(c)"> <text>A description of the terms of the offering.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The issuer shall pay the filing fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The exemption for an offering made pursuant to this exemption shall be effective for 1 year from the date that the notification filing is accepted by the Commissioner. The exemption may be extended for successive 1-year periods by complying with the provisions of §A of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Designated Institutional Investor."> <paragraph num="A."> <text>Definitions.</text> <paragraph num="(1)"> <text>“Accredited investor” has the same meaning as set forth in Regulation D, 17 CFR §230.501(a)(1)—(3), (7), and (8), which is incorporated by reference.</text> </paragraph> <paragraph num="(2)"> <text>“Qualified institutional buyer” has the same meaning as set forth in Rule 144A, 55 FR 17933 (1990), which is incorporated by reference.</text> </paragraph> </paragraph> <paragraph num="B."> <text>For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-602(8), Annotated Code of Maryland, an institutional investor includes the following:</text> <paragraph num="(1)"> <text>An accredited investor; or</text> </paragraph> <paragraph num="(2)"> <text>A qualified institutional buyer.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Recognized Securities Manuals."> <paragraph num="A."> <text>The following publications are designated recognized securities manuals for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-602(2), Annotated Code of Maryland:</text> <paragraph num="(1)"> <text>Mergent's Industrial Manual;</text> </paragraph> <paragraph num="(2)"> <text>Mergent's Transportation Manual;</text> </paragraph> <paragraph num="(3)"> <text>Mergent's Public Utility Manual;</text> </paragraph> <paragraph num="(4)"> <text>Mergent's Bank and Finance Manual; and</text> </paragraph> <paragraph num="(5)"> <text>Standard and Poor's Standard Corporation Descriptions.</text> </paragraph> </paragraph> <paragraph num="B."> <text>This designation may be revoked if the Commissioner finds that the information provided in the manual has been so changed or insufficiently applied that the protection of investors contemplated by the exemption is no longer afforded.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Designated Exchange Exemption."> <paragraph num="A."> <text>Definitions.</text> <paragraph num="(1)"> <text>“CBOE” means The Chicago Board Options Exchange.</text> </paragraph> <paragraph num="(2)"> <text>“NASDAQ/NMS” means the National Association of Securities Dealers Automated Quotations/National Market System.</text> </paragraph> <paragraph num="(3)"> <text>“Release” means Securities Act Release 33-6810 published at 53 FR 52550 (1988), which is incorporated by reference.</text> </paragraph> <paragraph num="(4)"> <text>“SEC” means the Securities and Exchange Commission.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Exempt Securities. The following securities shall be exempted from the provisions of the Maryland Securities Act, Corporations and Associations Article, §§11-205 and 11-501, Annotated Code of Maryland:</text> <paragraph num="(1)"> <text>Any security listed or approved for listing upon notice of issuance on NASDAQ/NMS, provided that this designation may be revoked if the Commissioner finds that the listing standards have been so changed or insufficiently applied that the protection of investors contemplated by the standards for listing in the Release is no longer afforded;</text> </paragraph> <paragraph num="(2)"> <text>Any security listed or approved for listing upon notice of issuance on the CBOE, provided that this designation may be revoked if the Commissioner finds that the:</text> <paragraph num="(a)"> <text>Listing standards have been so changed or insufficiently applied that the protection of investors contemplated by the standards for listing in the Release is no longer afforded; or</text> </paragraph> <paragraph num="(b)"> <text>CBOE has failed to promptly notify the Commissioner in writing that it has:</text> <paragraph num="(i)"> <text>Made a rule filing with the SEC proposing to list a type of security not provided for in the listing standards contained in the Release and has failed to provide the Commissioner with a copy of the rule filing, or</text> </paragraph> <paragraph num="(ii)"> <text>Proposed to list a security under its listing standards for “other securities” that raises significant new regulatory issues requiring a rule filing with the SEC and has failed to provide the Commissioner with a copy of the rule filing;</text> </paragraph> </paragraph> </paragraph> <paragraph num="(3)"> <text>Any other security of the same issuer that is of senior or substantially equal rank;</text> </paragraph> <paragraph num="(4)"> <text>Any security called for by subscription rights or warrants that are exempted under §B(1) or (2) of this regulation; and</text> </paragraph> <paragraph num="(5)"> <text>Any warrant or right to purchase or subscribe to any security that is exempted under §B(1) or (2) of this regulation.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Designated Clearing Agency Exemption."> <paragraph num="A."> <text>The Options Clearing Corporation (OCC) shall be designated as a “clearing agency” for purposes of the Maryland Securities Act, Corporations and Associations Article, §11-601(13), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>This designation may be revoked if the Commissioner finds that this action is advisable for the protection of investors or in the public interest.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Bank Securities."> <paragraph num="A."> <text>Federal Savings Banks. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-601(3), Annotated Code of Maryland, the term “bank” includes a savings bank organized under the laws of the United States.</text> </paragraph> <paragraph num="B."> <text>Exclusions. For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-601(3), Annotated Code of Maryland, the terms “bank”, “savings institution”, and “trust company” do not include a bank, savings institution, or trust company that:</text> <paragraph num="(1)"> <text>Has not received its permanent charter or final approval to operate from the governmental agency to which application is made or that regulates the entity;</text> </paragraph> <paragraph num="(2)"> <text>Has received a conditional approval to operate for the purpose of raising capital or meeting other regulatory requirements;</text> </paragraph> <paragraph num="(3)"> <text>Has its charter revoked; or</text> </paragraph> <paragraph num="(4)"> <text>Is on any form of conditional status.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Maryland Limited Offering Exemption (MLOE): Scope and Definitions."> <paragraph num="A."> <text>Scope.</text> <paragraph num="(1)"> <text>The Maryland Limited Offering Exemption (MLOE) creates under the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, two exemptions from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>Regulation .10 sets forth conditions that apply to both a local issuer exemption under Regulation .11 and a general transactional exemption under Regulation .12.</text> </paragraph> <paragraph num="(3)"> <text>Regulation .11 sets forth additional conditions that apply to the local issuer exemption.</text> </paragraph> <paragraph num="(4)"> <text>Regulation .12 sets forth additional conditions that apply to the general transactional exemption.</text> </paragraph> <paragraph num="(5)"> <text>Regulation .13 provides that the MLOE exemption will remain available in the event of certain insignificant deviations from the conditions set forth in Regulations .10—.12.</text> </paragraph> <paragraph num="(6)"> <text>The MLOE and the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, do not provide an exemption from the antifraud provisions of the Maryland Securities Act, Corporations and Associations Article, Subtitles 3 and 7, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(7)"> <text>The MLOE and the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, do not exempt from registration the offer or sale of securities:</text> <paragraph num="(a)"> <text>For which a registration statement or Regulation A notification has been filed with the SEC under the Securities Act of 1933; or</text> </paragraph> <paragraph num="(b)"> <text>Exempt from registration with the SEC under 17 CFR §230.505 (SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) or 17 CFR §230.506 (SEC Rule 506, Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering).</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Definitions. For purposes of MLOE and the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, the following terms have the meanings indicated:</text> <paragraph num="(1)"> <text>Accredited Investor.</text> <paragraph num="(a)"> <text>“Accredited investor” has the meaning stated in 17 CFR §230.501(a) (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D), which is incorporated by reference.</text> </paragraph> <paragraph num="(b)"> <text>“Accredited investor” includes a relative, spouse, or relative of the spouse of an individual described in 17 CFR §230.501(a)(4) (SEC Rule 501, Definitions and Terms Used in Regulation D), who has the same principal residence as the individual.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>“Affiliate” has the meaning stated in 17 CFR §230.501 (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D), which is incorporated by reference.</text> </paragraph> <paragraph num="(3)"> <text>“Aggregate offering price” has the meaning stated in 17 CFR §230.501 (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D).</text> </paragraph> <paragraph num="(4)"> <text>“Beneficial owner” has the meaning stated in 17 CFR §240.13d-3 (1994) (SEC Rule 13d-3, Determination of Beneficial Owner), which is incorporated by reference, except that all references to §13(d) or 13(g) of the Securities Exchange Act of 1934 shall refer, instead, to this regulation, and further, that Rule 13d-3(d)(ii) is not incorporated by reference.</text> </paragraph> <paragraph num="(5)"> <text>“Executive officer” has the meaning stated in 17 CFR §230.501 (SEC Rule 501, Definitions and Terms Used in Regulation D).</text> </paragraph> <paragraph num="(6)"> <text>“MLOE” means the Maryland Limited Offering Exemption created by Regulations .09—.13 of this chapter.</text> </paragraph> <paragraph num="(7)"> <text>Promoter.</text> <paragraph num="(a)"> <text>“Promoter” means a person that:</text> <paragraph num="(i)"> <text>Acting alone or together with one or more persons, directly or indirectly founds or organizes the business or enterprise of an issuer; or</text> </paragraph> <paragraph num="(ii)"> <text>In connection with founding or organizing the business or enterprise of an issuer, directly or indirectly receives in consideration of services, property, or both services and property, 10 percent or more of a class of securities of the issuer, or 10 percent or more of the proceeds from the sale of a class of securities of the issuer.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>“Promoter” does not include a person that receives 10 percent or more of a class of securities of the issuer or 10 percent or more of the proceeds from the sale of a class of securities of the issuer, either solely as brokerage commissions or solely in consideration of property, if the person does not directly or indirectly found or organize the business or enterprise of the issuer.</text> </paragraph> </paragraph> <paragraph num="(8)"> <text>“Purchaser representative” has the meaning stated in 17 CFR §230.501 (SEC Rule 501, Definitions and Terms Used in Regulation D).</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="MLOE: Generally Applicable Conditions."> <paragraph num="A."> <text>General Requirements.</text> <paragraph num="(1)"> <text>Transactions by an issuer involving the offer or sale of securities of the issuer that are part of an offering that satisfies the terms of MLOE are exempt under the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>The burden of proving an exemption under MLOE is on the person claiming the exemption.</text> </paragraph> <paragraph num="(3)"> <text>Notwithstanding the failure of a transaction to satisfy one or more of the terms of MLOE, upon application, the Commissioner may order that the transaction is exempt under the Maryland Securities Act, Corporations and Associations Article, §11-602(9), Annotated Code of Maryland, if the Commissioner finds that the:</text> <paragraph num="(a)"> <text>Transaction demonstrates substantial compliance in good faith with the conditions of MLOE; and</text> </paragraph> <paragraph num="(b)"> <text>Order would be consistent with the public interest.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Integration.</text> <paragraph num="(1)"> <text>Offers and sales of securities that are part of the same offering of securities under MLOE shall satisfy all of the applicable terms of MLOE.</text> </paragraph> <paragraph num="(2)"> <text>Offers and sales of securities that are made more than 6 months before the commencement or more than 6 months after the completion of an offering of securities under MLOE are not considered part of the offering of securities under MLOE if during those 6 month periods there are no offers or sales of securities by or for the issuer that are of the same or similar class as those offered or sold under MLOE, other than offers or sales of securities under an employee benefit plan of the type referred to in the Maryland Securities Act, Corporations and Associations Article, §11-601(11), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>If securities of the same or similar class as those offered or sold under MLOE are offered or sold within 6 months before the commencement or 6 months after the completion of an offering of securities under MLOE, those offers to sell and sales, depending on the particular facts and circumstances, may be considered to be integrated with the offering, under §B(1) of this regulation.</text> </paragraph> <paragraph num="(4)"> <text>In determining whether offers and sales should be integrated for purposes of this regulation, the Commissioner may consider whether the offers or sales:</text> <paragraph num="(a)"> <text>Are part of a single plan of financing;</text> </paragraph> <paragraph num="(b)"> <text>Involve issuance of the same class of securities;</text> </paragraph> <paragraph num="(c)"> <text>Have been made at or about the same time;</text> </paragraph> <paragraph num="(d)"> <text>Involve the same type of consideration; and</text> </paragraph> <paragraph num="(e)"> <text>Are made for the same general purpose.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Manner of Offering.</text> <paragraph num="(1)"> <text>The issuer or a person acting on the issuer's behalf may not offer or sell securities under MLOE by any form of general solicitation or advertising in Maryland.</text> </paragraph> <paragraph num="(2)"> <text>The issuer or a person acting on the issuer's behalf may not offer or sell securities under MLOE by any form of general solicitation or advertising outside Maryland, if the:</text> <paragraph num="(a)"> <text>Issuer or person acting on the issuer's behalf reasonably believes that the general solicitation or advertising would be disseminated into Maryland;</text> </paragraph> <paragraph num="(b)"> <text>General solicitation or advertising is disseminated into Maryland.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>For purposes of this section, “general solicitation” and “advertising” include, but are not limited to:</text> <paragraph num="(a)"> <text>An advertisement, article, notice, or other communication published in a newspaper, magazine, or similar media, or broadcast over, transmitted through, or otherwise disseminated by television, radio, information databases, or similar media; and</text> </paragraph> <paragraph num="(b)"> <text>A seminar or meeting whose attendees have been invited by an advertisement, article, notice, or other communication published in a newspaper, magazine, or similar media or broadcast over, transmitted through, or otherwise disseminated by television, radio, information databases, or similar media.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Remuneration for Solicitation or for Sales.</text> <paragraph num="(1)"> <text>Except as provided in §D(2) of this regulation, a commission or similar remuneration may not be paid or given, directly or indirectly, for the solicitation of a prospective purchaser or in connection with sales of securities under MLOE.</text> </paragraph> <paragraph num="(2)"> <text>A commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under MLOE may be paid or given to:</text> <paragraph num="(a)"> <text>A broker-dealer that the issuer reasonably believes is registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(b)"> <text>An individual who the issuer reasonably believes has not received a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities on behalf of more than one other issuer within a 12-month period immediately before the first sale by the individual in the offering of securities under MLOE.</text> </paragraph> </paragraph> </paragraph> <paragraph num="E."> <text>Resales.</text> <paragraph num="(1)"> <text>Securities acquired in a transaction under MLOE may not be resold unless they are registered under the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, or qualify for an exemption from registration under the Maryland Securities Act, Corporations and Associations Article, §11-602, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>The issuer or a person acting on the issuer's behalf shall exercise reasonable care to assure that each purchaser of the securities in an offering under MLOE purchases for investment and not with a view to distribution of the securities.</text> </paragraph> <paragraph num="(3)"> <text>For purposes of §E(2) of this regulation, reasonable care may be demonstrated if the issuer or the person acting on the issuer's behalf:</text> <paragraph num="(a)"> <text>Made a reasonable inquiry to determine whether the purchaser is acquiring the securities for other persons;</text> </paragraph> <paragraph num="(b)"> <text>Delivered written disclosure to each purchaser before a sale that the securities have not been registered under the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, and, therefore, may not be resold unless the securities are registered under that section or qualify for an exemption from registration under the Maryland Securities Act, Corporations and Associations Article, §11-602, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(c)"> <text>Obtained from the purchaser a signed agreement that the securities will not be resold unless they are registered or qualify for an exemption from registration under the Maryland Securities Act, Corporations and Associations Article, §11-602, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(d)"> <text>Placed a restrictive legend on the certificate or other document evidencing the securities, which legend may be in the following form:</text> </paragraph> <paragraph num="(e)"> <text>Acted in another manner that demonstrated reasonable care.</text> </paragraph> </paragraph> </paragraph> <paragraph num="F."> <text>Calculation of the Number of Purchasers.</text> <paragraph num="(1)"> <text>For the purpose of calculating the number of purchasers under MLOE, the following conditions apply:</text> <paragraph num="(a)"> <text>The following purchasers are excluded:</text> <paragraph num="(i)"> <text>A relative, spouse, or relative of the spouse of a purchaser, who has the same principal residence as the purchaser,</text> </paragraph> <paragraph num="(ii)"> <text>A trust or estate in which a purchaser and any of the persons related to the purchaser as specified in §F(1)(a)(i) or (iii) of this regulation collectively are beneficial owners of more than 50 percent of the interests, excluding contingent interests,</text> </paragraph> <paragraph num="(iii)"> <text>A corporation, limited liability company, partnership, or other entity of which a purchaser and any of the persons related to the purchaser as specified in §F(1)(a)(i) or (ii) of this regulation collectively are beneficial owners of more than 50 percent of the equity interests (excluding directors' qualifying shares), and</text> </paragraph> <paragraph num="(iv)"> <text>Accredited investors;</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>A corporation, limited liability company, partnership, or other entity is considered one purchaser, unless the corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer;</text> </paragraph> <paragraph num="(c)"> <text>If a purchaser that is a corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer and is not an accredited investor under 17 CFR §230.501(a)(8) (SEC Rule 501, Definitions and Terms Used in Regulation D), then each beneficial owner of an equity interest in the corporation, limited liability company, partnership, or other entity is considered a separate purchaser, except to the extent provided in §F(2) of this regulation;</text> </paragraph> <paragraph num="(d)"> <text>A noncontributory employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 is considered one purchaser, if the plan's trustee makes all investment decisions for the plan;</text> </paragraph> <paragraph num="(e)"> <text>Regardless of the amount of discretion given to the investment adviser or broker-dealer to act on behalf of a client or customer, a client of an investment adviser or a customer of a broker-dealer is considered a “purchaser” under MLOE.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The provisions of MLOE apply to each purchaser whether or not the purchaser is included in calculating the number of purchasers under §F(1) of this regulation.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Disqualification.</text> <paragraph num="(1)"> <text>An exemption under MLOE is not available if the issuer, any of its directors, officers, general partners, trustees, beneficial owners of 10 percent or more of a class of its equity interests, or promoters currently connected with it in any capacity, or any person, other than a broker-dealer currently registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland, that has been or will be paid or given, directly or indirectly, a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under MLOE:</text> <paragraph num="(a)"> <text>Within 5 years before the first sale of securities in an offering under MLOE, has filed a registration statement or application for exemption from registration that is currently subject to a stop order under a state's securities laws;</text> </paragraph> <paragraph num="(b)"> <text>Within 5 years before the first sale of securities in an offering under MLOE, has been convicted of or has pleaded nolo contendere to a felony or misdemeanor in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or with a state securities administrator, or a felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, conspiracy to defraud, or theft;</text> </paragraph> <paragraph num="(c)"> <text>Is subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment, or decree of a court of competent jurisdiction entered within 5 years before the first sale of securities in an offering under MLOE and permanently restraining or enjoining, that person from engaging in or continuing any conduct or practice in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or a state securities administrator;</text> </paragraph> <paragraph num="(d)"> <text>Is subject to a United States Postal Service false representation or cease and desist order entered under 39 U.S.C. §3005 within 5 years before the first sale of securities in an offering under MLOE or is subject to a temporary restraining order or preliminary injunction entered under 39 U.S.C. §3007 or 18 U.S.C. §1345 with respect to conduct alleged to have violated 39 U.S.C. §3005; or</text> </paragraph> <paragraph num="(e)"> <text>Is subject to a state administrative order entered by a state securities administrator in which fraud or deceit was found, if the final order was entered within 5 years before the first sale of securities in an offering under MLOE.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>An exemption under MLOE is not available if the issuer or any of its predecessors or affiliates is subject to an order issued by the Commissioner or is subject to an order, judgment, or decree of a court of competent jurisdiction temporarily, preliminarily, or permanently restraining or enjoining the person for failure to comply with §D of Regulation .12 of this chapter.</text> </paragraph> <paragraph num="(3)"> <text>Waiver of Disqualification.</text> <paragraph num="(a)"> <text>The Commissioner may waive by order a disqualification under §G(1) or (2) of this regulation, if the Commissioner determines that the order would be consistent with the public interest.</text> </paragraph> <paragraph num="(b)"> <text>A waiver by the Commissioner of a disqualification under §G(1) or (2) of this regulation is without prejudice to the Commissioner in other proceedings or matters with respect to the issuer or any other person.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="MLOE: Local Issuer Exemption."> <paragraph num="A."> <text>Nature of Issuer.</text> <paragraph num="(1)"> <text>Exemption under MLOE and this regulation is available only to local issuers.</text> </paragraph> <paragraph num="(2)"> <text>The Commissioner may extend by order the exemption under this regulation to a limited liability company, partnership, or other entity that satisfies all of the elements of the definition of local issuer except that it is not a corporation, if the Commissioner determines that the order would be consistent with the public interest.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Definition.</text> <paragraph num="(1)"> <text>“Local issuer” means a corporation that:</text> <paragraph num="(a)"> <text>Is organized under the laws of Maryland or is organized under the laws of another jurisdiction and is qualified to do business in Maryland under Corporations and Associations Article, §7-203, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(b)"> <text>Has its principal place of business in Maryland; and</text> </paragraph> <paragraph num="(c)"> <text>In the reasonable belief of the issuer, has 50 or fewer beneficial owners of its securities, both immediately before and immediately after the sale of securities under MLOE.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>For the purpose of calculating the number of beneficial owners under §B(1)(c) of this regulation:</text> <paragraph num="(a)"> <text>A corporation, limited liability company, partnership, or other entity is considered one beneficial owner, unless the corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer;</text> </paragraph> <paragraph num="(b)"> <text>If an owner that is a corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer, then each beneficial owner of an equity interest in the corporation, limited liability company, partnership, or other entity is considered a separate owner of the issuer;</text> </paragraph> <paragraph num="(c)"> <text>A relative, spouse, or relative of the spouse of a beneficial owner, who has the same principal residence as the beneficial owner, is considered together with the beneficial owner to be one beneficial owner of the issuer;</text> </paragraph> <paragraph num="(d)"> <text>A holder of a purchase money mortgage is excluded; and</text> </paragraph> <paragraph num="(e)"> <text>A person enumerated in 17 CFR §230.501(a)(1) (SEC Rule 501, Definitions and Terms Used in Regulation D) (1994), which is incorporated by reference, is excluded.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Number of Purchasers. In an offering under this regulation:</text> <paragraph num="(1)"> <text>There may be not more than, or the issuer shall have a reasonable belief that there are not more than, ten purchasers, wherever located, of securities from the issuer during any 12-month period; and</text> </paragraph> <paragraph num="(2)"> <text>The number of purchasers shall be calculated in accordance with Regulation .10F of this chapter.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Aggregate Offering Price. In an offering under this regulation, the aggregate offering price during any 12-month period may not exceed $150,000.</text> </paragraph> <paragraph num="E."> <text>Disclosure. Availability of the exemption under this regulation does not depend upon the issuer's delivery to a purchaser of a specific disclosure document.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".12" heading="MLOE: General Transactional Exemption."> <paragraph num="A."> <text>Nature of Security.</text> <paragraph num="(1)"> <text>Exemption under MLOE and this regulation is available for the following securities issued by a corporation, limited liability company, partnership, or real estate investment trust:</text> <paragraph num="(a)"> <text>A note, stock, bond, debenture, evidence of indebtedness, voting trust certificate, partnership interest, limited liability company interest, share of beneficial interest of a real estate investment trust, or American Depositary Receipt;</text> </paragraph> <paragraph num="(b)"> <text>A warrant or right to purchase or subscribe for a security listed in §A(1)(a) of this regulation; or</text> </paragraph> <paragraph num="(c)"> <text>A security convertible into a security listed in §A(1)(a) or (b) of this regulation.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The Commissioner may extend by order the exemption under this regulation to other types of securities or issuers, if the Commissioner determines that the order would be consistent with the public interest.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Number of Purchasers. In an offering under this regulation:</text> <paragraph num="(1)"> <text>There may be not more than, or the issuer shall have a reasonable belief that there are not more than, 35 purchasers in Maryland of securities from the issuer; and</text> </paragraph> <paragraph num="(2)"> <text>The number of purchasers shall be calculated in accordance with Regulation .10F of this chapter.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Disclosure.</text> <paragraph num="(1)"> <text>In an offering under this regulation, the issuer shall:</text> <paragraph num="(a)"> <text>Deliver a Form MLOE-2, or a disclosure document containing the information required by Form MLOE-2, to each prospective purchaser before a sale to the purchaser;</text> </paragraph> <paragraph num="(b)"> <text>Sell securities only to accredited investors;</text> </paragraph> <paragraph num="(c)"> <text>Sell securities only to purchasers that, immediately before the sale, possess the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment, or that the issuer believes after reasonable inquiry possess that knowledge and experience;</text> </paragraph> <paragraph num="(d)"> <text>Sell securities only to purchasers that, immediately before the sale, are able to bear, or that the issuer believes after reasonable inquiry are able to bear, the economic risk of the investment and that, together with a purchaser representative, possess the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment, or that the issuer believes after reasonable inquiry possess that knowledge and experience; or</text> </paragraph> <paragraph num="(e)"> <text>Sell securities only to a combination of purchasers that are described in §C(1)(b), (c), or (d) of this regulation.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Notwithstanding the applicability of §C(1)(b)—(e) of this regulation, an issuer shall deliver Part II of Form MLOE-2, or a disclosure document containing the information required by Part II of Form MLOE-2, to all purchasers, if:</text> <paragraph num="(a)"> <text>Within 18 months before the first sale of securities under this regulation, the issuer issued or committed to be issued securities of the same or similar class for consideration of a per share value 25 percent or more below the offering price of securities to be sold under this regulation, if the securities so issued or committed to be issued constitute 10 percent or more of the securities of the same or similar class outstanding at the commencement of the offering under this regulation, or if the securities were issued or committed to be issued to an officer, director, general partner, or any other person that performs similar functions, or promoter of the issuer; or</text> </paragraph> <paragraph num="(b)"> <text>Any part of the proceeds of an offering under this regulation are not to be escrowed in a bank or other depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation, or with another person approved as escrow agent by order of the Commissioner, until completion of the offering.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Notice Filing.</text> <paragraph num="(1)"> <text>If the anticipated aggregate offering price of an offering exempt from registration under MLOE and this regulation exceeds $150,000, the issuer shall file with the Commissioner not later than 15 days after the first sale of securities under MLOE and this regulation:</text> <paragraph num="(a)"> <text>A Form MLOE-1, or a document containing the information required by Form MLOE-1; and</text> </paragraph> <paragraph num="(b)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Exclusions.</text> <paragraph num="(a)"> <text>The requirements of §D(1) of this regulation do not apply to an offer of securities made by an issuer to one person that, after completion of the offering, is the sole beneficial owner of the issuer.</text> </paragraph> <paragraph num="(b)"> <text>The requirements of §D(1) of this regulation do not apply to an offer of securities made in connection with the initial organization of an issuer to five or fewer individuals who will be principals of the issuer and will be substantially involved in the operations of the issuer.</text> </paragraph> <paragraph num="(c)"> <text>If a corporation, limited liability company, partnership, or other entity was organized for the purpose of acquiring the securities of the issuer, and equity interests in the corporation, limited liability company, partnership, or other entity are beneficially owned by more than one person, then the corporation, limited liability company, partnership, or other entity is considered to be more than one person for purposes of §D(2)(a) of this regulation.</text> </paragraph> <paragraph num="(d)"> <text>For purposes of calculating the number of beneficial owners in §D(2)(c) of this regulation, a relative, spouse, or relative of the spouse of a beneficial owner, who has the same principal residence as the beneficial owner, is considered together with the beneficial owner to be one person.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".13" heading="MLOE: Insignificant Deviations."> <paragraph num="A."> <text>Conditions. A failure to comply with a term of MLOE does not result in the loss of an exemption from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, for an offer or sale to a particular individual or entity, if the issuer or other person relying on the exemption demonstrates that the:</text> <paragraph num="(1)"> <text>Failure to comply did not pertain to a term directly intended to protect that particular individual or entity or class of individuals or entities;</text> </paragraph> <paragraph num="(2)"> <text>Failure to comply did not pertain to Regulation .10C or G, Regulation .11B or C, or Regulation .12B of this chapter;</text> </paragraph> <paragraph num="(3)"> <text>Failure to comply was insignificant with respect to the offering as a whole; and</text> </paragraph> <paragraph num="(4)"> <text>Issuer made a good faith and reasonable attempt to comply with all applicable terms of MLOE.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Rights of Commissioner. The Commissioner retains the right to take action under the Maryland Securities Act against an issuer or other person that fails to comply with a term of MLOE, including Regulation .12D of this chapter, and establishes an exemption under MLOE only through reliance upon §A of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".14" heading="Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-601(16), Annotated Code of Maryland, for Certain Securities."> <text>The following securities are exempt from registration filings under the Maryland Securities Act, Corporations and Associations Article, §§11-205 and 11-501, Annotated Code of Maryland, provided that the exemption may be revoked with respect to a specific security pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-603: Mortgage-related securities, as defined under §3(A)(41) of the federal Securities Exchange Act of 1934, and the rules, regulations, and interpretive releases promulgated under it.</text> </regulation> <regulation prefix="Regulation" num=".15" heading="Coordination with SEC Rule 505 or 506."> <paragraph num="A."> <text>Scope.</text> <paragraph num="(1)"> <text>This regulation exempts under the Maryland Securities Act, Corporations and Associations Article, §11-602(15), Annotated Code of Maryland, certain transactions from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>This regulation and the Maryland Securities Act, Corporations and Associations Article, §11-602(15), Annotated Code of Maryland, do not provide an exemption from the antifraud provisions of the Maryland Securities Act, Corporations and Associations Article, Subtitles 3 and 7, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Conditions.</text> <paragraph num="(1)"> <text>An offering under this regulation shall satisfy the terms of 17 CFR §230.505 (1994) (SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) or 17 CFR §230.506 (1994) (SEC Rule 506, Exemption for Limited Offers Without Regard to Dollar Amount of Offering), which are incorporated by reference.</text> </paragraph> <paragraph num="(2)"> <text>The burden of proving an exemption under this regulation is on the person claiming the exemption.</text> </paragraph> <paragraph num="(3)"> <text>Remuneration for Solicitation or for Sales.</text> <paragraph num="(a)"> <text>Except as provided in §B(3)(b) of this regulation, a commission or similar remuneration may not be paid or given, directly or indirectly, for the solicitation of a prospective purchaser or in connection with sales of securities under this regulation.</text> </paragraph> <paragraph num="(b)"> <text>A commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under this regulation may be paid or given to:</text> <paragraph num="(i)"> <text>A broker-dealer that the issuer reasonably believes is registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(ii)"> <text>An individual who the issuer reasonably believes has not received a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities on behalf of more than one other issuer within a 12-month period immediately before the first sale by the individual in the offering of securities under this regulation.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Disqualification.</text> <paragraph num="(1)"> <text>An exemption under this regulation is not available if the issuer, any of the issuer's directors, officers, general partners, trustees, or any other person that performs similar functions, beneficial owners of 10 percent or more of a class of its equity interests, or promoters currently connected with it in any capacity, or any person, other than a broker-dealer currently registered under the Maryland Securities Act, Corporations and Associations Article, §11-405, Annotated Code of Maryland, that has been or will be paid or given, directly or indirectly, a commission or similar remuneration for the solicitation of a prospective purchaser or in connection with sales of securities under this regulation:</text> <paragraph num="(a)"> <text>Within 5 years before the first sale of securities in an offering under this regulation, has filed a registration statement or application for exemption from registration that is currently subject to a stop order under a state's securities laws;</text> </paragraph> <paragraph num="(b)"> <text>Within 5 years before the first sale of securities in an offering under this regulation, has been convicted of or has pleaded nolo contendere to a felony or misdemeanor in connection with the purchase or sale of a security or in connection with the making of a false filing with the SEC or with a state securities administrator, or a felony involving fraud or deceit, including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny, conspiracy to defraud, or theft;</text> </paragraph> <paragraph num="(c)"> <text>Is subject to an order, judgment, or decree of a court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to an order, judgment, or decree of a court of competent jurisdiction entered within 5 years before the first sale of securities in an offering under this regulation and permanently restraining or enjoining, that person from engaging in or continuing any conduct or practice in connection with the offer, purchase, or sale of a security or in connection with the making of a false filing with the SEC or a state securities administrator;</text> </paragraph> <paragraph num="(d)"> <text>Is subject to a United States Postal Service false representation or cease and desist order entered under 39 U.S.C. §3005 within 5 years before the first sale of securities in an offering under this regulation or is subject to a temporary restraining order or preliminary injunction entered under 39 U.S.C. §3007 or 18 U.S.C. §1345 with respect to conduct alleged to have violated 39 U.S.C. §3005; or</text> </paragraph> <paragraph num="(e)"> <text>Is subject to a state administrative order entered by a state securities administrator in which fraud or deceit was found, if the final order was entered within 5 years before the first sale of securities in an offering under this regulation.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>An exemption under this regulation is not available if the issuer or any of its predecessors or affiliates is subject to an order issued by the Commissioner or an order, judgment, or decree of a court of competent jurisdiction temporarily, preliminarily, or permanently restraining or enjoining the person for failure to comply with §D of this regulation.</text> </paragraph> <paragraph num="(3)"> <text>Waiver of Disqualification.</text> <paragraph num="(a)"> <text>The Commissioner may waive by order a disqualification under §C(1) or (2) of this regulation, if the Commissioner determines that the order would be consistent with the public interest.</text> </paragraph> <paragraph num="(b)"> <text>A waiver by the Commissioner of a disqualification under §C(1) or (2) of this regulation is without prejudice to the Commissioner in other proceedings or matters with respect to the issuer or any other person.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Notice Filing. Not later than 15 days after the first sale of securities under this regulation, the issuer shall file with the Commissioner:</text> <paragraph num="(1)"> <text>A manually signed notice on a completed SEC Form D (Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption), as filed with the SEC and as that form may be amended from time to time, which filing or filings shall:</text> <paragraph num="(a)"> <text>Constitute the issuer's representation and affirmation to the Commissioner that it has complied with 17 CFR §230.505 (SEC Rule 505, Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000) or 17 CFR §230.506 (SEC Rule 506, Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering), and</text> </paragraph> <paragraph num="(b)"> <text>Include in the Appendix, the information requested in the fifth column with respect to Maryland;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>A statement by the issuer or issuer's counsel of the first date of a sale of securities in Maryland made under this regulation; and</text> </paragraph> <paragraph num="(3)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Insignificant Deviations.</text> <paragraph num="(1)"> <text>A failure to comply with a term of §B or D of this regulation, including a failure to comply with a term of SEC Rule 505 or Rule 506, does not result in the loss of an exemption from the registration requirements of the Maryland Securities Act, Corporations and Associations Article, §11-501, Annotated Code of Maryland, for an offer or sale to a particular individual or entity, if the issuer or other person relying on the exemption demonstrates that:</text> <paragraph num="(a)"> <text>The failure to comply did not pertain to a term directly intended to protect that particular individual or entity or class of individuals or entities;</text> </paragraph> <paragraph num="(b)"> <text>The failure to comply did not pertain to 17 CFR §230.502(c) (SEC Rule 502, General Conditions to Be Met), 17 CFR §230.505(b)(2)(i), (ii), or (iii) (SEC Rule 505, Exemption For Limited Offers and Sales of Securities Not Exceeding $5,000,000), 17 CFR §230.506(b)(2)(i) (SEC Rule 506, Exemption For Limited Offers and Sales Without Regard to Dollar Amount of Offering);</text> </paragraph> <paragraph num="(c)"> <text>The failure to comply was insignificant with respect to the offering as a whole; and</text> </paragraph> <paragraph num="(d)"> <text>The issuer made a good faith and reasonable attempt to comply with all applicable terms of this regulation.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The Commissioner retains the right to take action under the Maryland Securities Act against an issuer or other person that fails to comply with a term of this regulation, and establishes an exemption only through reliance upon §E(1) of this regulation.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Vacant" /> <regulation prefix="Regulation" num=".17" heading="Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-602(17), Annotated Code of Maryland, for Certain Transactions."> <text>The following transactions are exempt from registration filings under the Maryland Securities Act, Corporations and Associations Article, §§11-205 and 11-501, Annotated Code of Maryland, provided that the exemption may be revoked with respect to a specific transaction pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-603: A transaction involving the offer or sale of one or more promissory notes directly secured by a first lien on a single parcel of real estate upon which is located a dwelling or other residential or commercial structure, and participation interest in the notes, that are exempt under §4(5) of the federal Securities Act of 1933, and the rules, regulations, and interpretive releases promulgated under it.</text> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §§11-203, 11-405, 11-501, 11-506, 11-601(3), 11-601(12), and 11-602, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: April 1, 1983 (10:6 Md. R. 551)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.05 adopted effective April 15, 1991 (18:7 Md. R. 770)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06 repealed and new Regulations .06 and .07 adopted effective November 11, 1991 (18:22 Md. R. 2393)</annotation> <annotation type="History" subtype="Administrative History">Regulations .10 and .11 adopted as an emergency provision effective October 1, 1992 (19:17 Md. R. 1602); adopted permanently effective November 23, 1992 (19:23 Md. R. 2039)</annotation> <annotation type="History" subtype="Administrative History">Regulation .12 adopted effective June 3, 1985 (12:11 Md. R. 1046)</annotation> <annotation type="History" subtype="Administrative History">Regulation .12 amended and recodified to Regulation .06 effective April 15, 1991 (18:7 Md. R. 770)</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective September 1, 1995 (22:17 Md. R. 1314)</annotation> </annotations> </chapter> <chapter num="05" heading="Investment Adviser Regulations"> <regulation prefix="Regulation" num=".01" heading="Definitions."> <paragraph num="A."> <text>As used in the Maryland Securities Act, Corporations and Associations Article, §11-101(h), Annotated Code of Maryland, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Compensation” means a form of payment or consideration, whether direct or indirect or in the form of cash or other benefits, that is paid or conveyed to or for the benefit of the investment adviser in connection with the rendering of the investment advisory services described in the Maryland Securities Act, Corporations and Associations Article, §11-101(i), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities” has the same meaning as the identical phrase found in §202(a)(11) of the Investment Advisers Act of 1940 and the rules, regulations, and interpretive releases promulgated under it.</text> </paragraph> <paragraph num="(3)"> <text>“Engineer” means a person who is registered and in good standing with the State Board for Professional Engineers, as provided in Business Occupations and Professions Article, Title 14, Annotated Code of Maryland, or its equivalent licensing and regulatory agency in a state.</text> </paragraph> <paragraph num="(4)"> <text>“Insurance producer” means an insurance producer licensed by and in good standing with the Maryland Insurance Administration, as set forth in the Insurance Article, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(5)"> <text>“Investment Advisers Act of 1940” means the federal act of that name, as amended, set forth in 15 U.S.C. §§80b-1—80b-21.</text> </paragraph> <paragraph num="(6)"> <text>“Investment Company Act of 1940” means the federal act of that name, as amended, set forth in 15 U.S.C. §§80a-1—80a-52.</text> </paragraph> <paragraph num="(7)"> <text>“Lawyer” means a person who is admitted to practice before the bar of any state and is in good standing with it.</text> </paragraph> <paragraph num="(8)"> <text>“Securities Exchange Act of 1934” means the federal act of that name, as amended, set forth in 15 U.S.C. §§78a—78jj.</text> </paragraph> <paragraph num="(9)"> <text>“Solely incidental to the practice of his profession” has the same meaning as the identical phrase found in §202(a)(11) of the Investment Advisers Act of 1940 and the rules, regulations, and interpretive releases promulgated under it.</text> </paragraph> <paragraph num="(10)"> <text>“Teacher” means a person who possesses a valid license or certificate of qualification to teach in an educational institution in a state, or a person who is employed in a teaching or research capacity by a college, university, or other accredited educational institution.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Notwithanding the Maryland Securities Act, Corporations and Associations Article, §11-101(i), Annotated Code of Maryland, the term “investment adviser representative”, as it applies to an individual who is employed by or associated with a federal covered adviser, only includes an individual who has a “place of business” in this State, as that term is defined in rules or regulations promulgated under §203A of the Investment Advisers Act of 1940, and who is either:</text> <paragraph num="(1)"> <text>An “investment adviser representative” as that term is defined in rules or regulations promulgated under §203A of the Investment Advisers Act of 1940; or</text> </paragraph> <paragraph num="(2)"> <text>Not a “supervised person” as that term is defined in rules or regulations promulgated under the Investment Advisers Act of 1940, and solicits, offers, or negotiates for the sale of or sells investment advisory services on behalf of a federal covered adviser.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Indirect Consideration."> <paragraph num="A."> <text>The antifraud provisions of the Maryland Securities Act, Corporations and Associations Article, §11-302(a), Annotated Code of Maryland, apply to a person who receives consideration indirectly from another person for:</text> <paragraph num="(1)"> <text>Advising the person as to the value of securities or their purchase or sale; or</text> </paragraph> <paragraph num="(2)"> <text>Acting as an investment adviser or investment adviser representative.</text> </paragraph> </paragraph> <paragraph num="B."> <text>For purposes of this regulation and the Maryland Securities Act, Corporations and Associations Article, §11-302(a), Annotated Code of Maryland, a person receiving indirect consideration may include a person, including officers, directors, and investment adviser representatives of an investment adviser, who receives compensation from an individual or entity that renders investment advice to a client even though the person does not receive compensation directly from the client.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Dishonest or Unethical Practices."> <paragraph num="A."> <text>Definitions. As used in this regulation, the following terms have the meanings indicated:</text> <paragraph num="(1)"> <text>“Affiliate” has the meaning stated in §2(a)(3) of the Investment Company Act of 1940.</text> </paragraph> <paragraph num="(2)"> <text>“Found” means determined or ascertained by adjudication or consent in a final court action, administrative proceeding, or SRO proceeding.</text> </paragraph> <paragraph num="(3)"> <text>“Investment-related or financially related” means pertaining to investment advisory or financial planning services, counseling or consulting activities, securities, commodities, banking, insurance, real estate, or accountancy, including, but not limited to, acting as or being associated with a broker-dealer, investment company, investment adviser, government securities broker or dealer, municipal securities dealer, insurance company or agent or broker, bank, savings institution, trust company, credit union, or savings and loan association, or fiduciary, or an entity or person required to be registered under the Commodity Exchange Act.</text> </paragraph> <paragraph num="(4)"> <text>“Involved” means acting or aiding, abetting, causing, counseling, commanding, inducing, conspiring with, or failing reasonably to supervise another in doing an act.</text> </paragraph> <paragraph num="(5)"> <text>“Management person” means a person with power to:</text> <paragraph num="(a)"> <text>Exercise, directly or indirectly, a controlling influence over the management or policies of an investment adviser; or</text> </paragraph> <paragraph num="(b)"> <text>Determine the general investment advice given to clients.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Prohibited Practices. An investment adviser is a fiduciary and has a duty to act primarily for the benefit of its clients. While the extent and nature of this duty varies according to the nature of the relationship between an investment adviser and its clients and the circumstances of each case, an investment adviser may not engage in unethical business practices, including the following:</text> <paragraph num="(1)"> <text>Recommending to a client to whom investment supervisory, management, or consulting services are provided the purchase, sale, or exchange of a security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client's investment objectives, financial situation and needs, and any other information known or acquired by the investment adviser after reasonable examination of the client's financial records.</text> </paragraph> <paragraph num="(2)"> <text>Placing an order to purchase or sell a security for the account of a client without having obtained, in advance, the authority to do so.</text> </paragraph> <paragraph num="(3)"> <text>Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client.</text> </paragraph> <paragraph num="(4)"> <text>Exercising discretionary power in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client within 10 business days after the date of the first transaction placed under oral discretionary authority, unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specified security shall be executed, or both.</text> </paragraph> <paragraph num="(5)"> <text>Inducing trading in a client's account that is excessive in size or frequency in view of the financial resources, objectives, and character of the account.</text> </paragraph> <paragraph num="(6)"> <text>Borrowing money or securities from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds or securities.</text> </paragraph> <paragraph num="(7)"> <text>Loaning money to a client unless the investment adviser is a financial institution engaged in the business of loaning funds or a broker-dealer engaged in the management of margin accounts, or unless the client is an affiliate of the investment adviser.</text> </paragraph> <paragraph num="(8)"> <text>Misrepresenting to an advisory client or prospective advisory client the qualifications of the investment adviser, or an investment adviser representative employed by or associated with the investment adviser or an employee of the investment adviser, or misrepresenting the nature of the advisory services being offered or fees to be charged for that service, or omitting to state a material fact necessary to make the statements made regarding qualifications, services, or fees, in light of the circumstances under which they are made, not misleading.</text> </paragraph> <paragraph num="(9)"> <text>Providing a report or recommendation to an advisory client prepared by a person other than the investment adviser without disclosing that fact, except that this prohibition does not apply to a situation in which the investment adviser uses published research reports or statistical analyses to render advice or a situation in which an adviser orders these reports in the normal course of providing services.</text> </paragraph> <paragraph num="(10)"> <text>Charging a client an unreasonable advisory fee in light of the fees charged by other investment advisers providing essentially the same services.</text> </paragraph> <paragraph num="(11)"> <text>Failing to disclose to clients in writing before advice is rendered a material conflict of interest relating to the investment adviser or any of its affiliates or employees that could reasonably be expected to impair the rendering of unbiased and objective advice, including conflicts that may arise from:</text> <paragraph num="(a)"> <text>Compensation arrangements connected with advisory services to clients that are in addition to compensation from the clients for these services; and</text> </paragraph> <paragraph num="(b)"> <text>Charging a client an advisory fee for rendering advice when a commission for executing securities transactions pursuant to the advice will be received by:</text> <paragraph num="(i)"> <text>The investment adviser;</text> </paragraph> <paragraph num="(ii)"> <text>Any affiliate of the investment adviser;</text> </paragraph> <paragraph num="(iii)"> <text>Any investment adviser representative employed by or associated with the investment adviser; or</text> </paragraph> <paragraph num="(iv)"> <text>Any employee of the investment adviser.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(12)"> <text>Guaranteeing a client that a certain or specific result will be achieved, for example, gain or no loss, as a result of the advice that will be rendered.</text> </paragraph> <paragraph num="(13)"> <text>Publishing, circulating, or distributing an advertisement that does not comply with 17 CFR §275.206(4)-1 (SEC Rule 206(4)-1, Advertisements by Investment Advisers).</text> </paragraph> <paragraph num="(14)"> <text>Disclosing the identity, affairs, or investments of a client to a third party without the consent of the client, unless required by law to do so.</text> </paragraph> <paragraph num="(15)"> <text>Taking an action, directly or indirectly, with respect to those securities, instruments, or funds in which a client has a beneficial interest, when the investment adviser has custody or possession of the securities or funds when the investment adviser's action is subject to and does not comply with the safekeeping requirements of 17 CFR §275.206(4)-2 (SEC Rule 206(4)-2, Custody or Possession of Funds or Securities of Clients).</text> </paragraph> <paragraph num="(16)"> <text>Entering into, extending, or renewing an investment advisory contract unless the contract is in writing and discloses, in substance:</text> <paragraph num="(a)"> <text>The services to be provided;</text> </paragraph> <paragraph num="(b)"> <text>The term of the contract;</text> </paragraph> <paragraph num="(c)"> <text>The advisory fee or the formula for computing the fee;</text> </paragraph> <paragraph num="(d)"> <text>The amount of prepaid fee to be returned in the event of contract termination or nonperformance;</text> </paragraph> <paragraph num="(e)"> <text>Whether the contract grants discretionary power to the investment adviser; and</text> </paragraph> <paragraph num="(f)"> <text>That an assignment of the contract may not be made by the investment adviser without the consent of the other party to the contract.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Failure to Disclose.</text> <paragraph num="(1)"> <text>It shall constitute a dishonest and unethical business practice within the meaning of the Maryland Securities Act, Corporations and Associations Article, §11-302(a)(3), Annotated Code of Maryland, for an investment adviser to fail to disclose to a client or prospective client all material facts with respect to:</text> <paragraph num="(a)"> <text>A financial condition of the adviser that is reasonably likely to impair the ability of the investment adviser to meet contractual commitments to the client, if the investment adviser has discretionary authority, whether express or implied, or custody over the client's funds, instruments, or securities, or requires prepayment of advisory fees of more than $500 from the client at a time more than 6 months in advance of performance; or</text> </paragraph> <paragraph num="(b)"> <text>A legal or disciplinary event that is material to an evaluation of the investment adviser's integrity or ability to meet contractual commitments to clients.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Investment advisers may disclose the information required by this section in their “brochure”, the Form ADV-Part II written disclosure statement that is required to be made to clients under the Maryland Securities Act, Corporations and Associations Article, §§11-302(d) and 11-411(b), Annotated Code of Maryland, and Regulation .05 of this chapter, if the delivery of the brochure satisfies the timing of disclosure requirements described in §D of this regulation.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Timing of Disclosure. The information required to be disclosed by §C of this regulation shall be disclosed to clients promptly, and to prospective clients not less than 48 hours before entering into a written or oral investment advisory contract, or not later than the time of entering into a contract if the client has the right to terminate the contract without penalty within 5 business days after entering into the contract.</text> </paragraph> <paragraph num="E."> <text>Material Events. There shall be a rebuttable presumption that the following legal or disciplinary events involving the investment adviser or a management person of the adviser (any of these being referred to after this as “person”) that were not resolved in the person's favor or subsequently reversed, suspended, or vacated, are material within the meaning of §C(1)(b) of this regulation for a period of 10 years from the time of the event:</text> <paragraph num="(1)"> <text>A criminal or civil action in a court of competent jurisdiction in which the person was:</text> <paragraph num="(a)"> <text>Convicted of, or pleaded guilty or nolo contendere to, a felony or misdemeanor, or is the named subject of a pending criminal proceeding or indictment (any of these referred to after this as “action”), and the action involved an investment-related or financially related business, fraud, false statements or omissions, wrongful taking of property, bribery, forgery, counterfeiting, or extortion;</text> </paragraph> <paragraph num="(b)"> <text>Found to have been involved in a violation of an investment-related or financially related statute or regulation; or</text> </paragraph> <paragraph num="(c)"> <text>The subject of an order, judgment, or decree permanently or temporarily enjoining or otherwise limiting the person from engaging in an investment-related or financially related activity.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Administrative proceedings before the Commissioner, the SEC, other federal regulatory agency, or other state (“agency”) in which the person was found to have:</text> <paragraph num="(a)"> <text>Caused an investment-related or financially related business or entity to lose its license or authorization to do business; or</text> </paragraph> <paragraph num="(b)"> <text>Been involved in a violation of an investment-related or financially related statute or regulation and was the subject of an order by the agency denying, suspending, or revoking the license or authorization of the person to act in, or barring or suspending the person's association with, an investment-related or financially related business, entity, or individual, or otherwise limiting significantly the person's investment-related or financially related activities.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Self-regulatory organization proceedings in which the person was found to have:</text> <paragraph num="(a)"> <text>Caused an investment-related or financially related business or entity to lose its license or authorization to do business; or</text> </paragraph> <paragraph num="(b)"> <text>Been involved in a violation of the SRO's rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person from membership, fining the person more than $2,500, or otherwise significantly limiting the person's investment-related or financially related activities.</text> </paragraph> </paragraph> </paragraph> <paragraph num="F."> <text>Calculating Time Period. For purposes of calculating the 10-year period during which events are presumed to be material under §E of this regulation, the date of a reportable event shall be the date on which the final order, judgment, or decree was entered, or the latest date on which a right of appeal from a preliminary order, judgment, or decree lapsed.</text> </paragraph> <paragraph num="G."> <text>Other Conduct and Obligations. The conduct set forth in §§B—F of this regulation is not inclusive. Engaging in other conduct such as nondisclosure, incomplete disclosure, or deceptive practices shall be considered an unethical business practice. Compliance with this regulation does not relieve an investment adviser from any obligations under any other disclosure requirement of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, or a regulation or order promulgated under it, or any other state or federal law, rule, or regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Custody of Client Funds or Securities."> <paragraph num="A."> <text>Conditions of Custody. As provided in the Maryland Securities Act, Corporations and Associations Article, §11-302(f), Annotated Code of Maryland, it is unlawful for an investment adviser to take or have custody of securities or funds of a client unless:</text> <paragraph num="(1)"> <text>The investment adviser notifies the Commissioner in writing that the investment adviser has or may have custody, which notification may be given on Form ADV;</text> </paragraph> <paragraph num="(2)"> <text>The securities of each client are segregated, marked to identify the particular client having the beneficial interest in those securities, and held in safekeeping in a place reasonably free from risk of destruction or other loss;</text> </paragraph> <paragraph num="(3)"> <text>All client funds are deposited as follows:</text> <paragraph num="(a)"> <text>In one or more bank accounts containing only clients' funds,</text> </paragraph> <paragraph num="(b)"> <text>The account or accounts are maintained in the name of the investment adviser as agent or trustee for the clients, and</text> </paragraph> <paragraph num="(c)"> <text>The investment adviser maintains a separate record for each account showing the name and address of the bank where the account is maintained, the dates and amounts of deposits in and withdrawals from the account, and the exact amount of each client's beneficial interest in the account;</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Immediately after accepting custody or possession of funds or securities from a client, the investment adviser notifies the client in writing of the place and manner in which the funds and securities will be maintained and subsequently, if or when there is a change in the place or manner in which the funds or securities are maintained, the investment adviser gives written notice to the client;</text> </paragraph> <paragraph num="(5)"> <text>At least once every 3 months, the investment adviser sends to each client an itemized statement showing the client's funds and securities in the investment adviser's custody at the end of the period, and all debits, credits, and transactions in the client's account during that period; and</text> </paragraph> <paragraph num="(6)"> <text>At least once each calendar year, an independent certified public accountant or public accountant (“accountant”) verifies all client funds and securities by an actual examination, which shall be made at a time chosen by the accountant without prior notice to the investment adviser. A report stating that the accountant has made an examination of the client funds and securities in the custody of the investment adviser, and describing the nature and extent of the examination, shall be filed with the Commissioner within 30 days after each examination.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Exception for Certain Broker-Dealers. This regulation does not apply to an investment adviser that is also registered as a broker-dealer under §15 of the Securities Exchange Act of 1934 if the broker-dealer:</text> <paragraph num="(1)"> <text>Is subject to and in compliance with 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers or Dealers); or</text> </paragraph> <paragraph num="(2)"> <text>Is a member of an exchange whose members are exempt from 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers or Dealers) under the provisions of paragraph (b)(2) of that rule, and the broker-dealer is in compliance with all rules and settled practices of the exchange that impose requirements with respect to financial responsibility and the segregation of funds or securities carried for the accounts of customers.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Information to be Furnished to Clients (“Brochure Rule”)."> <paragraph num="A."> <text>Unless otherwise provided in this regulation, an investment adviser may fulfill the disclosure requirements of the Maryland Securities Act, Corporations and Associations Article, §§11-302(d) and 11-411(b), Annotated Code of Maryland, by complying with the provisions of §204 of the Investment Advisers Act of 1940 and the rules, regulations, and interpretive releases promulgated under it with respect to Form ADV. Taken together, these requirements may be known as the “brochure rule”.</text> </paragraph> <paragraph num="B."> <text>As provided in the Maryland Securities Act, Corporations and Associations Article, §§11-302(d) and 11-411(b), Annotated Code of Maryland, the Commissioner may impose on an investment adviser, or a class or group of investment advisers, requirements relating to the disclosure of information to clients that are in addition to those set forth in §A of this regulation. These additional requirements may be imposed as appropriate in the public interest or for the protection of investors and clients.</text> </paragraph> <paragraph num="C."> <text>Nothing in this regulation shall relieve an investment adviser from any obligations under any other provision of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, or a regulation or order promulgated under it, or any other state or federal law, rule, or regulation that requires the disclosure of information to clients or prospective clients not specifically required by this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Agency Cross Transactions."> <paragraph num="A."> <text>Definition. For purposes of this regulation, “agency cross transaction for an advisory client” means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, or a person controlling, controlled by, or under common control with the investment adviser, including an investment adviser representative, acts as a broker-dealer for both the client and another person on the other side of the transaction. When acting in this capacity, the person is required to be registered as a broker-dealer in this State unless excluded from the definition.</text> </paragraph> <paragraph num="B."> <text>Conditions of Compliance. An investment adviser effecting an agency cross transaction for an advisory client shall be in compliance with the Maryland Securities Act, Corporations and Associations Article, §11-302(a)(4), Annotated Code of Maryland, if the following conditions are met:</text> <paragraph num="(1)"> <text>The advisory client executes a written consent prospectively authorizing the investment adviser to effect agency cross transactions for the client;</text> </paragraph> <paragraph num="(2)"> <text>Before obtaining written consent from the client, the investment adviser makes full written disclosure to the client that, with respect to agency cross transactions, the investment adviser will act as broker-dealer for, receive commissions from, and have a potentially conflicting division of loyalties and responsibilities regarding both parties to the transactions;</text> </paragraph> <paragraph num="(3)"> <text>At or before the completion of each agency cross transaction, the investment adviser or other person relying on this regulation sends to the client a written confirmation including:</text> <paragraph num="(a)"> <text>A statement of the nature of the transaction;</text> </paragraph> <paragraph num="(b)"> <text>The date the transaction took place;</text> </paragraph> <paragraph num="(c)"> <text>An offer to furnish, upon request, the time when the transaction took place; and</text> </paragraph> <paragraph num="(d)"> <text>The source and amount of any other remuneration the investment adviser received or will receive in connection with the transaction;</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>In the case of a purchase, if the investment adviser was not participating in a distribution, or, in the case of a sale, if the investment adviser was not participating in a tender offer, the written confirmation may state whether the investment adviser has been receiving or will receive other remuneration and that the investment adviser will furnish the source and amount of the remuneration to the client upon the client's written request;</text> </paragraph> <paragraph num="(5)"> <text>At least annually, and with or as a part of a written statement or summary of the client's account provided by the investment adviser, the investment adviser or another person relying on this regulation sends the client a written disclosure statement identifying:</text> <paragraph num="(a)"> <text>The total number of agency cross transactions during the period for the client since the date of the last statement or summary; and</text> </paragraph> <paragraph num="(b)"> <text>The total amount of all commissions or other remuneration the investment adviser received or will receive in connection with agency cross transactions for the client during the period;</text> </paragraph> </paragraph> <paragraph num="(6)"> <text>Each written disclosure and confirmation required by this regulation shall include a conspicuous statement that the client may revoke the written consent required under §B(1) of this regulation at any time by providing written notice of the revocation to the investment adviser; and</text> </paragraph> <paragraph num="(7)"> <text>An agency cross transaction may not be effected in which the same investment adviser recommended the transaction to both a seller and a purchaser.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Duties to Clients. Nothing in this regulation shall be construed to relieve an investment adviser or investment adviser representative from acting in the best interests of the client, including fulfilling the duty with respect to the best price and execution for the particular transaction for the client, nor shall it relieve an investment adviser or investment adviser representative of any obligations under any other disclosure requirement of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, or a regulation or order promulgated under it, or any other state or federal law, rule or regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-302(a)(4), for Certain Broker-Dealers."> <paragraph num="A."> <text>Definitions. As used in this regulation:</text> <paragraph num="(1)"> <text>“Publicly distributed written materials” means written materials that are distributed to 35 or more persons who pay for those materials;</text> </paragraph> <paragraph num="(2)"> <text>“Publicly made oral statements” means oral statements made simultaneously to 35 or more persons who pay for access to those statements.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Exemption from §11-302(a)(4). An investment adviser registered as a broker-dealer under §15 of the Securities Exchange Act of 1934 shall be exempt from the Maryland Securities Act, Corporations and Associations Article, §11-302(a)(4), Annotated Code of Maryland, in connection with a transaction in relation to which the broker-dealer acts as an investment adviser:</text> <paragraph num="(1)"> <text>Solely by means of publicly distributed written materials or publicly made oral statements;</text> </paragraph> <paragraph num="(2)"> <text>Solely by means of written materials or oral statements not purporting to meet the objectives or needs of specific individuals or accounts;</text> </paragraph> <paragraph num="(3)"> <text>Solely through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or</text> </paragraph> <paragraph num="(4)"> <text>Through a combination of the items or services enumerated in §B(1)—(3) of this regulation.</text> </paragraph> </paragraph> <paragraph num="C."> <text>The exemption in §B of this regulation shall apply only if the materials and oral statements disclose that, if the purchaser of the advisory communication uses the investment adviser's services in connection with the sale or purchase of a security that is a subject of the communication, the investment adviser may act as principal for its own account or as agent for another person.</text> </paragraph> <paragraph num="D."> <text>Compliance by the investment adviser with the disclosure in §C of this regulation does not relieve it of any obligations under any other disclosure requirement of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, or a regulation or order promulgated under it, or any other state or federal law, rule, or regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-302(e)(1)(i) for Performance-Based Compensation."> <paragraph num="A."> <text>Definitions. As used in this regulation:</text> <paragraph num="(1)"> <text>“Affiliate” has the meaning stated in §2(a)(3) of the Investment Company Act of 1940.</text> </paragraph> <paragraph num="(2)"> <text>“Client's independent agent” means a person who agrees to act as an investment advisory client's agent in connection with the contract, but does not include:</text> <paragraph num="(a)"> <text>The investment adviser relying on this regulation;</text> </paragraph> <paragraph num="(b)"> <text>An affiliate of the investment adviser or an affiliate of an affiliate of the investment adviser, including an investment adviser representative;</text> </paragraph> <paragraph num="(c)"> <text>An interested person of the investment adviser;</text> </paragraph> <paragraph num="(d)"> <text>A person who receives, directly or indirectly, compensation in connection with the contract from the investment adviser, an affiliate of the investment adviser, an affiliate of the affiliate of the investment adviser, or an interested person of the investment adviser; or</text> </paragraph> <paragraph num="(e)"> <text>A person having the benefit of a material relationship between or among himself (or an affiliate of that person) and the investment adviser (or an affiliate of the investment adviser) that exists, or has existed at any time during the past 2 years.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Company.</text> <paragraph num="(a)"> <text>Except for the companies listed in §A(3)(b) of this regulation, “company” means a corporation, partnership, association, joint stock company, trust, or any organized group of persons, whether incorporated or not, or a receiver, trustee in a case under Title 11 of the United States Code, or similar official or a liquidating agent for any of the above, in his capacity as such.</text> </paragraph> <paragraph num="(b)"> <text>Unless each of the equity owners of the companies listed below, other than the investment adviser entering into the contract, is a natural person as described in §B(1) of this regulation or is a company as defined in §A(3)(a) of this regulation, “company” does not include:</text> <paragraph num="(i)"> <text>A company required to be registered under the Investment Company Act of 1940 but that is not so registered;</text> </paragraph> <paragraph num="(ii)"> <text>A private investment company that, for purposes of this paragraph, means a company that would be defined as an investment company under §3(a) of the Investment Company Act of 1940 but for the exception from that definition provided by §3(c)(1) of that act;</text> </paragraph> <paragraph num="(iii)"> <text>An investment company registered under the Investment Company Act of 1940; or</text> </paragraph> <paragraph num="(iv)"> <text>A business development company, as defined in §202(a)(22) of the Investment Advisers Act of 1940.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(4)"> <text>“Interested person” means:</text> <paragraph num="(a)"> <text>A member of the immediate family of a natural person who is an affiliate of the investment adviser;</text> </paragraph> <paragraph num="(b)"> <text>A person who knowingly has a direct or indirect beneficial interest in, or who is designated as trustee, executor, or guardian of a legal interest in, a security issued by the investment adviser or by a controlling person of the investment adviser if that beneficial or legal interest exceeds:</text> <paragraph num="(i)"> <text>One-tenth of 1 percent of any class of outstanding securities of the investment adviser or a controlling person of the investment adviser; or</text> </paragraph> <paragraph num="(ii)"> <text>Five percent of the total assets of the person seeking to act as the client's independent agent; or</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>A person or partner or employee of a person who, at any time during the past 2 years, has acted as legal counsel for the investment adviser.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-302(e)(1)(i). Notwithstanding the prohibitions of the Maryland Securities Act, Corporation and Associations Article, §11-302(e)(1)(i), Annotated Code of Maryland, an investment adviser may enter into, extend, or renew an investment advisory contract that provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds or a portion of the funds of the client if the following conditions are met:</text> <paragraph num="(1)"> <text>The client entering into the contract is a:</text> <paragraph num="(a)"> <text>Natural person or a company that, immediately after entering into the contract, has at least $500,000 under the management of the investment adviser; or</text> </paragraph> <paragraph num="(b)"> <text>Person who the investment adviser and its investment adviser representatives reasonably believe, immediately before entering into the contract, is a natural person or a company whose net worth, at the time the contract is entered into, exceeds $1,000,000. The net worth of a natural person may include assets held jointly with that person's spouse.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The compensation paid to the investment adviser with respect to the performance of securities over a given period shall be based on a formula with the following characteristics:</text> <paragraph num="(a)"> <text>In the case of securities for which market quotations are readily available within the meaning of 17 CFR §270.2a-4(a)(1) (SEC Rule 2a-4(a)(1), Periodic Calculation of Net Asset Value of Redeemable Security), the formula shall include the realized capital losses and unrealized capital depreciation of the securities over the period;</text> </paragraph> <paragraph num="(b)"> <text>In the case of securities for which market quotations are not readily available within the meaning of 17 CFR §270.2a-4(a)(1) (SEC Rule 2a-4(a)(1), Periodic Calculation of Net Asset Value of Redeemable Security), the formula shall include:</text> <paragraph num="(i)"> <text>The realized capital losses of securities over the period; and</text> </paragraph> <paragraph num="(ii)"> <text>If the unrealized capital appreciation of the securities over the period is included, the unrealized capital depreciation of the securities over the period; and</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>The formula shall provide that compensation paid to the investment adviser under this regulation is based on the gains less the losses (computed in accordance with §B(2)(a) and (b) of this regulation) in the client's account for a period of not less than 1 year.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Before entering into the advisory contract and in addition to the requirements of Form ADV, the investment adviser shall disclose in writing to the client or the client's independent agent all material information concerning the proposed advisory arrangement, including the following:</text> <paragraph num="(a)"> <text>That the fee arrangement may create an incentive for the investment adviser to make investments that involve more risk and are more speculative than would be the case in the absence of a performance-based fee;</text> </paragraph> <paragraph num="(b)"> <text>When relevant, that the investment adviser may receive increased compensation with regard to unrealized appreciation as well as realized gains in the client's account;</text> </paragraph> <paragraph num="(c)"> <text>The time periods that will be used to measure investment performance throughout the contract and their potential significance in the computation of the fee;</text> </paragraph> <paragraph num="(d)"> <text>The nature of an index that will be used as a comparative measure of investment performance, the potential significance of the index, and the reasons the investment adviser believes that the index is appropriate; and</text> </paragraph> <paragraph num="(e)"> <text>When the investment adviser's compensation is based in part on the unrealized appreciation of securities for which market quotations are not readily available within the meaning of 17 CFR §270.2a-4(a)(1) (SEC Rule 2a-4(a)(1), Periodic Calculation of Net Asset Value of Redeemable Security), the method by which the securities will be valued and the extent to which the valuation will be independently determined.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>The investment adviser, and any investment adviser representative who enters into the contract, shall reasonably believe, immediately before entering into the contract, that the contract represents an arm's-length arrangement between the parties and that the client (or in the case of a client that is a company as defined in §A(3) of this regulation, the person representing the company), alone or together with the client's independent agent, understands the proposed method of compensation and its risks. The representative of a company may be a partner, director, officer, or an employee of the company or the trustee when the company is a trust, or other person designated by the company or trustee, but shall satisfy the definition of client's independent agent set forth in §A(2) of this regulation.</text> </paragraph> </paragraph> <paragraph num="C."> <text>A person entering into or performing an investment advisory contract under this regulation is not relieved of any obligations under the Maryland Securities Act, Corporations and Associations Article, §11-302(a), Annotated Code of Maryland, or any other applicable provision of the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, or a regulation or order promulgated under it, or any other state or federal law, rule, or regulation.</text> </paragraph> <paragraph num="D."> <text>Nothing in this regulation shall relieve a client's independent agent from any obligation to the client under applicable law.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Transactions Considered Not to be Assignments."> <text>For purposes of the Maryland Securities Act, Corporations and Associations Article, §11-302(e)(1)(ii), Annotated Code of Maryland, a transaction that does not result in a change of actual control or management of an investment adviser is not an assignment.</text> </regulation> <regulation prefix="Regulation" num=".10" heading="Electronic Filing with Designated Entity."> <paragraph num="A."> <text>Designation. Pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-405(a), Annotated Code of Maryland, the Commissioner designates the web-based Investment Adviser Registration Depository (IARD) operated by the Financial Industry Regulatory Authority to receive and store filings and collect related fees from investment advisers and investment adviser representatives on behalf of the Commissioner.</text> </paragraph> <paragraph num="B."> <text>Use of the IARD. Unless otherwise provided, all investment adviser and investment adviser representative applications, amendments, reports, notices, related filings, and fees required to be filed with the Commissioner pursuant to the regulations promulgated under the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, shall be filed electronically with and transmitted to the IARD.</text> </paragraph> <paragraph num="C."> <text>Electronic Filing Conditions.</text> <paragraph num="(1)"> <text>Electronic Signature. When a signature or signatures are required by the particular instructions of any filing to be made through the IARD, a duly authorized officer of the investment adviser or the investment adviser, as required, shall affix the individual's electronic signature to the filing by typing the individual's name in the appropriate fields and submitting the filing to the IARD. Submission of a filing in this manner shall constitute irrefutable evidence of legal signature by any individual whose name is typed on the filing.</text> </paragraph> <paragraph num="(2)"> <text>Completion of Filing. Applications for initial and renewal registration as an investment adviser may not be considered filed until the required fee and all required submissions have been received by the Commissioner.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Electronic Filing—When Not Required. Notwithstanding §B of this regulation, the electronic filing of any particular document and the collection of related processing fees may not be required until the IARD provides for receipt of such filings and fees and 30 days notice is provided by the Commissioner. Any documents required to be filed with the Commissioner that are not permitted to be filed with or cannot be accepted by the IARD shall be filed in paper directly with the Commissioner.</text> </paragraph> <paragraph num="E."> <text>Hardship Exemptions.</text> <paragraph num="(1)"> <text>Temporary Hardship Exemption.</text> <paragraph num="(a)"> <text>An investment adviser registered or required to be registered in this State who experiences unanticipated technical difficulties that prevent submission of an electronic filing to the IARD may request a temporary hardship exemption from the requirements to file electronically.</text> </paragraph> <paragraph num="(b)"> <text>To request a temporary hardship exemption, an investment adviser shall:</text> <paragraph num="(i)"> <text>File Form ADV-H-State, Application for a Temporary or Continuing Hardship Exemption, in paper format with the Commissioner where the investment adviser's principal place of business is located, not later than 1 business day after the filing that is the subject of the Form ADV-H-State is due; and</text> </paragraph> <paragraph num="(ii)"> <text>Submit the filing that is the subject of the Form ADV-H-State in electronic format to the IARD not later than 7 business days after the filing is due.</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>Effective Date Upon Filing. The temporary hardship exemption will be considered effective upon receipt by the Commissioner of the complete Form ADV-H-State. Multiple temporary hardship exemption requests within the same calendar year may be disallowed by the Commissioner.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Continuing Hardship Exemption.</text> <paragraph num="(a)"> <text>Criteria for Exemption. A continuing hardship exemption may be granted only if the investment adviser is able to demonstrate that the electronic filing requirements of this regulation are prohibitively burdensome.</text> </paragraph> <paragraph num="(b)"> <text>To apply for a continuing hardship exemption, an investment adviser shall:</text> <paragraph num="(i)"> <text>File Form ADV-H-State, Application for a Temporary or Continuing Hardship Exemption, in paper format with the Commissioner at least 20 business days before a filing is due; and</text> </paragraph> <paragraph num="(ii)"> <text>If a filing is due to more than one Commissioner, file Form ADV-H-State with the Commissioner where the investment adviser's principal place of business is located.</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>Decision and Effective Date. The Commissioner who receives the application shall grant or deny the application within 10 business days after the filing of Form ADV-H-State. An exemption is effective upon approval by the Commissioner. The time period of the exemption may not be longer than 1 year after the date on which the Form ADV-H-State is filed. If the Commissioner approves the application, the investment adviser shall, not later than 5 business days after the exemption approval date, submit filings to the IARD in paper format along with the appropriate processing fees for the period of time for which the exemption is granted.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Applications for Investment Advisers and Notice Filings for Federal Covered Advisers."> <paragraph num="A."> <text>Application Form for Investment Adviser Registration.</text> <paragraph num="(1)"> <text>Initial Application. An application for initial registration as an investment adviser shall be made by completing Form ADV (Uniform Application for Investment Adviser Registration) in accordance with the form instructions and by filing the form with the IARD. The application for initial registration shall also include the following:</text> <paragraph num="(a)"> <text>Evidence of compliance by the applicant with or exemption from the examination requirements of Regulation .14 of this chapter;</text> </paragraph> <paragraph num="(b)"> <text>For those applicants subject to Regulation .15 of this chapter, a balance sheet prepared in accordance with the instructions to the Form ADV, and, if such balance sheet is as of a date more than 45 days from the date of filing of the application, an unaudited balance sheet prepared in accordance with the instructions to the Form ADV;</text> </paragraph> <paragraph num="(c)"> <text>A sample copy of each investment advisory contract used by the applicant;</text> </paragraph> <paragraph num="(d)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(e)"> <text>Any other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Renewal Application. An application for renewal registration as an investment adviser shall be made by filing with the IARD the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>Updates and Amendments.</text> <paragraph num="(a)"> <text>An investment adviser shall file with the IARD, in accordance with the instructions in the Form ADV, any amendments to the investment adviser's Form ADV;</text> </paragraph> <paragraph num="(b)"> <text>An amendment shall be considered to be filed promptly if the amendment is filed within 30 days of the event that requires the filing of the amendment; and</text> </paragraph> <paragraph num="(c)"> <text>Within 90 days of the end of the investment adviser's fiscal year, an investment adviser shall file with the IARD an updated Form ADV.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Investment Adviser Representative Registration. Each investment adviser registered or required to be registered in this State shall register at least one investment adviser representative with the Commissioner.</text> </paragraph> <paragraph num="(5)"> <text>Completion of Filing. An application for initial or renewal registration as an investment adviser will not be considered filed until the required fee and all required submissions have been received by the Commissioner.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Notice Filing Requirements for Federal Covered Advisers.</text> <paragraph num="(1)"> <text>Initial Notice Filing. An initial notice filing for a federal covered adviser shall be made by filing with the IARD a completed Form ADV (Uniform Application for Investment Adviser Registration) and the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland. An initial notice filing shall be considered filed when the fee required by Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland, and the Form ADV are filed with and accepted by the IARD on behalf of this State.</text> </paragraph> <paragraph num="(2)"> <text>Renewal Notice Filing. A renewal notice for a federal covered adviser shall be made by filing with the IARD the fee required by Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland. The renewal notice filing shall be considered filed when the fee required by Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland, is filed with and accepted by the IARD on behalf of this State.</text> </paragraph> <paragraph num="(3)"> <text>Updates and Amendments. A federal covered adviser shall file with the IARD, in accordance with the instructions in the Form ADV, any amendments to the federal covered adviser's Form ADV.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".12" heading="Initial and Renewal Registration as Investment Adviser Representative."> <paragraph num="A."> <text>Method of Filing. Until the IARD is capable of accepting applications to register investment adviser representatives, an application for initial or renewal registration as an investment adviser representative shall be submitted in accordance with §C of this regulation. When the IARD is capable of accepting applications to register investment adviser representatives, an application for initial and renewal registration as an investment adviser representative shall be submitted in accordance with §B of this regulation.</text> </paragraph> <paragraph num="B."> <text>Electronic Filings.</text> <paragraph num="(1)"> <text>Initial Application. An application for initial registration as an investment adviser representative shall be made by completing the Uniform Application for Securities Industry Registration or Transfer (Form U-4), in accordance with the form instructions and by filing the Form U-4 with the IARD. The application for initial registration also shall include:</text> <paragraph num="(a)"> <text>Evidence of compliance by the applicant with or exemption from the examination requirements of Regulation .14 of this chapter; and</text> </paragraph> <paragraph num="(b)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Annual Renewal. An application for renewal registration for an investment adviser representative registered in this State shall be made by filing with the IARD the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>Updates and Amendments.</text> <paragraph num="(a)"> <text>The investment adviser representative is under a continuing obligation to update information required by Form U-4 as changes occur.</text> </paragraph> <paragraph num="(b)"> <text>An investment adviser representative and the investment adviser shall file promptly with the IARD any amendments to the representative's Form U-4.</text> </paragraph> <paragraph num="(c)"> <text>An amendment shall be considered to be filed promptly if the amendment is filed within 30 days of the event that requires the filing of the amendment.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Paper Filings.</text> <paragraph num="(1)"> <text>Except for an individual specified in §A(2) of this regulation, an application for initial registration as an investment adviser representative shall be filed with the Commissioner upon Form U-4 (Uniform Application for Securities Industry Registration or Transfer). The Form U-4 shall be manually executed by both the individual applicant and the investment adviser. The application also shall contain the following:</text> <paragraph num="(a)"> <text>Evidence of compliance by the applicant with or exemption from the examination requirements of Regulation .14 of this chapter; and</text> </paragraph> <paragraph num="(b)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>An individual registered as an agent in this State for a registered broker-dealer that is also a registered investment adviser in this State or is the affiliate of the registered investment adviser shall file an application for initial registration as an investment adviser representative with the Commissioner. The application shall contain the following:</text> <paragraph num="(a)"> <text>The name and CRD number of the applicant;</text> </paragraph> <paragraph num="(b)"> <text>Evidence of compliance by the applicant with or exemption from the examination requirements of Regulation .14 of this chapter; and</text> </paragraph> <paragraph num="(c)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>An application for renewal registration for an investment adviser representative registered in this State shall be filed by the investment adviser with the Commissioner. A renewal application will be accepted not earlier than 60 days before the December 31 expiration date and shall contain:</text> <paragraph num="(a)"> <text>A list of the names and, when applicable, CRD numbers of the investment adviser representatives;</text> </paragraph> <paragraph num="(b)"> <text>Amendments of documents previously filed with the Commissioner that were not amended as required by the Maryland Securities Act, Corporations and Associations Article, §11-411(d), Annotated Code of Maryland;</text> </paragraph> <paragraph num="(c)"> <text>A certification that, to the best knowledge, information, and belief of the investment adviser, there has been no change in the information contained in the investment adviser representatives' applications for registration currently in effect; and</text> </paragraph> <paragraph num="(d)"> <text>The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Applications for initial and renewal registration as an investment adviser representative will not be considered filed until the required fee and all required submissions have been received by the Commissioner.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".13" heading="Investment Adviser Supervision."> <paragraph num="A."> <text>An investment adviser registered or required to be registered in this State shall establish, maintain, and enforce written supervisory guidelines that are reasonably designed to:</text> <paragraph num="(1)"> <text>Supervise the activities of an investment adviser representative and associated person to achieve compliance with the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, and the regulations promulgated under it; and</text> </paragraph> <paragraph num="(2)"> <text>Achieve compliance by the investment adviser with the Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland, and the regulations promulgated under it.</text> </paragraph> </paragraph> <paragraph num="B."> <text>An investment adviser registered or required to be registered in this State shall designate on the Form ADV one principal responsible for compliance with §A of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".14" heading="Examination Requirements for Investment Advisers and Investment Adviser Representatives."> <paragraph num="A."> <text>Definitions. As used in this regulation, the following terms have the meanings indicated:</text> <paragraph num="(1)"> <text>“Approved IAR continuing education credit” means the materials, written, oral, or otherwise, that have been approved by NASAA or its designee and that make up the educational program provided to an investment adviser representative (IAR) under this regulation.</text> </paragraph> <paragraph num="(2)"> <text>“Authorized provider” means a person that NASAA or its designee has authorized to provide continuing education content required by this regulation.</text> </paragraph> <paragraph num="(3)"> <text>“Credit” means a unit that has been designated by NASAA or its designee as at least 50 minutes of educational instruction.</text> </paragraph> <paragraph num="(4)"> <text>“Home state” means the state in which the investment adviser representative has its principal office and place of business.</text> </paragraph> <paragraph num="(5)"> <text>“IAR ethics and professional responsibility content” means approved IAR continuing education content that addresses an investment adviser representative's ethical and regulatory obligations.</text> </paragraph> <paragraph num="(6)"> <text>“IAR products and practice content” means approved IAR continuing education content that addresses an investment adviser representative's continuing skills and knowledge regarding financial products, investment features, and practices in the investment advisory industry.</text> </paragraph> <paragraph num="(7)"> <text>“NASAA” means the North American Securities Administrators Association or a committee designated by its Board of Directors.</text> </paragraph> <paragraph num="(8)"> <text>“Reporting period” means one 12-month period as determined by NASAA. An investment adviser representative's initial reporting period with this State commences the first day of the first full reporting period after the individual is registered or required to be registered with this State.</text> </paragraph> </paragraph> <paragraph num="B."> <text>General Examination Requirements.</text> <paragraph num="(1)"> <text>An investment adviser or investment adviser representative registered or required to be registered in this State shall:</text> <paragraph num="(a)"> <text>Successfully pass the examination or examinations designated by the Commissioner;</text> </paragraph> <paragraph num="(b)"> <text>Qualify for an exemption from the examination requirement under §D or E of this regulation; or</text> </paragraph> <paragraph num="(c)"> <text>Receive a waiver of the examination requirement under §G of this regulation.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The person who is designated a principal under Regulation .13B of this chapter shall fulfill the investment adviser's examination requirement.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Designated principals and applicants for initial registration as investment adviser representative shall pass the following examinations administered by the FINRA:</text> <paragraph num="(1)"> <text>Series 65 examination as adopted by the Commissioner on January 1, 2000; or</text> </paragraph> <paragraph num="(2)"> <text>Series 7 examination and the Series 66 examination as adopted by the Commissioner on January 1, 2000.</text> </paragraph> </paragraph> <paragraph num="D."> <text>The provisions of §C of this regulation do not apply to a designated principal or an applicant for initial registration as an investment adviser representative, if the individual has earned a credential designated by the Commissioner including, but not limited to, the following, and at the time of application is in good standing with the organization that issued the credential:</text> <paragraph num="(1)"> <text>Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards, Inc.;</text> </paragraph> <paragraph num="(2)"> <text>Chartered Financial Consultant (ChFC) awarded by the American College, Bryn Mawr, Pennsylvania;</text> </paragraph> <paragraph num="(3)"> <text>Personal Financial Specialist (PFS) awarded by the American Institute of Certified Public Accountants;</text> </paragraph> <paragraph num="(4)"> <text>Chartered Financial Analyst (CFA) awarded by the Institute of Chartered Financial Analysts; or</text> </paragraph> <paragraph num="(5)"> <text>Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Grandfathering Provisions.</text> <paragraph num="(1)"> <text>The provisions of §C of this regulation do not apply to a designated principal or an applicant for initial registration as an investment adviser representative, if the:</text> <paragraph num="(a)"> <text>Individual was approved by the Commissioner as the designated principal for a registered investment adviser as of January 1, 2000; or</text> </paragraph> <paragraph num="(b)"> <text>Individual was registered in any jurisdiction in the United States as an investment adviser representative or investment adviser as of January 1, 2000.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Notwithstanding §E(1) of this regulation, the Commissioner may require additional examinations for an individual found to have violated any state or federal law.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Two-Year Requirement.</text> <paragraph num="(1)"> <text>An individual who has not been registered in any jurisdiction for a period of 2 years shall be required to comply with the provisions of §C of this regulation.</text> </paragraph> <paragraph num="(2)"> <text>Notwithstanding §F(1) of this regulation, the Commissioner, by order or otherwise, may modify the 2-year requirement of this subsection.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Based on a demonstration by an individual of relevant factors including, but not limited to, education and experience, the Commissioner shall consider an individual's request for a waiver of the examination requirements in accordance with the Maryland Securities Act, Corporations and Associations Article, §11-412(c)(6), Annotated Code of Maryland.</text> </paragraph> <paragraph num="H."> <text>Continuing Education Requirements.</text> <paragraph num="(1)"> <text>An investment adviser representative registered in this State shall complete the following continuing education requirements each reporting period:</text> <paragraph num="(a)"> <text>6 credits of IAR ethics and professional responsibility content approved by NASAA and offered by an authorized provider, with at least 3 credits covering the topic of ethics; and</text> </paragraph> <paragraph num="(b)"> <text>6 credits of IAR products and practice content approved by NASAA and offered by an authorized provider.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>An investment adviser representative who is registered as an agent of a FINRA member broker-dealer and is in compliance with FINRA's continuing education requirements is considered to be in compliance with the provisions of §H(1)(b) of this regulation for each applicable reporting period if, as determined by NASAA:</text> <paragraph num="(a)"> <text>FINRA's continuing education content focuses on compliance, regulatory, ethical, and sales practices standards;</text> </paragraph> <paragraph num="(b)"> <text>FINRA's continuing education content is derived from state and federal investment advisory statutes, rules and regulations, securities industry rules and regulations, and accepted standards and practices in the financial services industry; and</text> </paragraph> <paragraph num="(c)"> <text>FINRA's continuing education content requires that its participants demonstrate proficiency in the subject matter of the educational materials.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Credentialing Organization Continuing Education Compliance. Credits of continuing education completed by an investment adviser representative who was awarded and currently holds a credential that qualifies for an examination waiver under §D of this regulation shall satisfy the requirements of §H(1) of this regulation provided:</text> <paragraph num="(a)"> <text>The investment adviser representative completes the credits of continuing education as a condition of maintaining the credential for the relevant reporting period;</text> </paragraph> <paragraph num="(b)"> <text>The credits of continuing education completed during the relevant reporting period by the investment adviser representative are mandatory to maintain the credential; and</text> </paragraph> <paragraph num="(c)"> <text>The continuing education content provided by the credentialing organization during the relevant reporting period is approved IAR continuing education content.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Continuing Education Reporting. An investment adviser representative registered in this State shall be responsible for ensuring that the authorized provider reports the investment adviser representative's completion of the applicable IAR continuing education requirements.</text> </paragraph> <paragraph num="(5)"> <text>No Carry-Forward. An investment adviser representative who completes credits of continuing education in excess of the amount required for a reporting period may not carry forward excess credits to a subsequent reporting period.</text> </paragraph> <paragraph num="(6)"> <text>Failure to Complete or Report Continuing Education.</text> <paragraph num="(a)"> <text>An investment adviser representative who fails to comply with §H(1) or (4) of this regulation by the end of a reporting period shall be considered “CE inactive”.</text> </paragraph> <paragraph num="(b)"> <text>The registration of an investment adviser representative who is “CE inactive”, but otherwise qualifies for renewal, shall be renewed in this State at the end of the calendar year in which the investment adviser representative becomes “CE inactive”.</text> </paragraph> <paragraph num="(c)"> <text>An investment adviser representative shall remain “CE inactive” until the investment adviser representative completes and reports all required IAR continuing education credits for all reporting periods as required by this regulation.</text> </paragraph> <paragraph num="(d)"> <text>An investment adviser representative who is “CE inactive” at the close of the next calendar year is not eligible for investment adviser representative registration or renewal of an investment adviser representative registration.</text> </paragraph> </paragraph> <paragraph num="(7)"> <text>The Commissioner may, in the Commissioner's discretion, waive any requirements of this regulation.</text> </paragraph> <paragraph num="(8)"> <text>Home State. An investment adviser representative registered or required to be registered in this State who is registered as an investment adviser representative in the individual's home state is considered to be in compliance with §H of this regulation provided:</text> <paragraph num="(a)"> <text>The investment adviser representative's home state has continuing education requirements that are at least as stringent as §H of this regulation; and</text> </paragraph> <paragraph num="(b)"> <text>The investment adviser representative is in compliance with the home state's investment adviser representative continuing education requirements.</text> </paragraph> </paragraph> <paragraph num="(9)"> <text>Unregistered Periods. An individual applying for investment adviser representative registration who was previously registered as an investment adviser representative in this State must complete IAR continuing education for all reporting periods that occurred during the period the individual was not registered in this State as an investment adviser representative unless the individual takes and passes the examination required under §C of this regulation or receives an examination waiver under §G of this regulation.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".15" heading="Financial Requirements for Certain Investment Advisers."> <paragraph num="A."> <text>For purposes of this regulation, the following terms have the meanings indicated:</text> <paragraph num="(1)"> <text>“Net assets” means the excess of assets over liabilities, as determined by generally accepted accounting principles.</text> </paragraph> <paragraph num="(2)"> <text>“Net capital” has the meaning stated in 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers and Dealers).</text> </paragraph> <paragraph num="(3)"> <text>“Tangible net assets” means the net assets of an investment adviser registered or required to be registered reduced by the following:</text> <paragraph num="(a)"> <text>Prepaid expenses, except as to items properly classified as current assets under generally accepted accounting principles;</text> </paragraph> <paragraph num="(b)"> <text>Deferred charges;</text> </paragraph> <paragraph num="(c)"> <text>Goodwill, franchise rights, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense, and all other assets of intangible nature; and</text> </paragraph> <paragraph num="(d)"> <text>Homes, furnishings, and automobiles and personal items not readily marketable, in the case of an individual, or advances or loans to stockholders and officers, in the case of a corporation, or advances or loans to partners, in the case of a partnership.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>An investment adviser registered or required to be registered in this State that has custody of client funds, assets, or securities, or requires payment of advisory fees more than 6 months in advance and in excess of $500 per client, shall:</text> <paragraph num="(1)"> <text>Maintain at all times a minimum net capital of $20,000, or minimum tangible net assets of $35,000; or</text> </paragraph> <paragraph num="(2)"> <text>Be bonded in the amount of $10,000 by a bonding company qualified to do business in this State, or deposit cash or any other equivalent form of security as the Commissioner may permit in the amount of $10,000.</text> </paragraph> </paragraph> <paragraph num="C."> <text>An investment adviser registered or required to be registered in this State shall notify the Commissioner by the close of business on the next business day if the investment adviser's total net capital or tangible net assets falls below the minimum required net capital or minimum required tangible net assets as required by §B(1) of this regulation. After transmitting the notice, the investment adviser shall, by the close of business on the following business day, file with the Commissioner a report of its financial condition, including the following:</text> <paragraph num="(1)"> <text>A trial balance of all ledger accounts;</text> </paragraph> <paragraph num="(2)"> <text>A computation of net capital or tangible net assets as defined in §A of this regulation;</text> </paragraph> <paragraph num="(3)"> <text>A statement of all client funds, securities, or assets that are not segregated;</text> </paragraph> <paragraph num="(4)"> <text>A computation of the aggregate amount of client ledger debit balances; and</text> </paragraph> <paragraph num="(5)"> <text>A statement of the number of client accounts.</text> </paragraph> </paragraph> <paragraph num="D."> <text>For an investment adviser registered or required to be registered in this State that maintains a minimum tangible net assets requirement as required by §B(1) of this regulation, rather than the minimum net capital requirement, submission to the Commissioner of a current appraisal may be required in order to establish the worth of an asset being calculated under the tangible net asset formulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Record-Keeping Requirements for Investment Advisers."> <paragraph num="A."> <text>An investment adviser registered or required to be registered in this State shall maintain and preserve the following books, ledgers, and records:</text> <paragraph num="(1)"> <text>A journal or journals, including cash receipts and disbursements records, and any other records of original entry forming the basis of entries in any ledger.</text> </paragraph> <paragraph num="(2)"> <text>General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income, and expense accounts.</text> </paragraph> <paragraph num="(3)"> <text>A memorandum of each order given by the investment adviser for the purchase or sale of a security or asset, of an instruction received by the investment adviser from the client concerning the purchase, sale, receipt, or delivery of a particular security or asset, and of a modification or cancellation of an order or instruction. These memoranda shall show the terms and conditions of the order, instruction, modification, or cancellation, shall identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed the order, and shall show the account for which entered, the date of entry, whether the order was entered pursuant to the exercise of discretionary power and, when appropriate, the bank, broker-dealer, or other entity or person by or through which the transaction was effected.</text> </paragraph> <paragraph num="(4)"> <text>All check books, bank statements, cancelled checks, and cash reconciliations of the investment adviser.</text> </paragraph> <paragraph num="(5)"> <text>All bills or statements, or copies thereof, paid or unpaid, relating to the business of the investment adviser.</text> </paragraph> <paragraph num="(6)"> <text>All trial balances, financial statements, and internal audit working papers relating to the business of the investment adviser.</text> </paragraph> <paragraph num="(7)"> <text>Originals of all written communications received, and copies of all written communications sent, by the investment adviser relating to a recommendation made or proposed to be made and advice given or proposed to be given, a receipt, disbursement, or delivery of funds, securities, or assets, or the placing or execution of an order to purchase or sell a security or asset, except that:</text> <paragraph num="(a)"> <text>The investment adviser is not required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser; and</text> </paragraph> <paragraph num="(b)"> <text>If the investment adviser sends a notice, circular, or other advertisement offering a report, analysis, publication, or other investment advisory service to more than 10 persons, the investment adviser is not required to keep a record of the names and addresses of the persons to whom it was sent, except that if the notice, circular, or advertisement is distributed to persons named on a list, the investment adviser shall retain with a copy of the notice, circular, or advertisement a memorandum describing the list and its source.</text> </paragraph> </paragraph> <paragraph num="(8)"> <text>A list or other record of all accounts in which the investment adviser is vested with discretionary power with respect to the funds, securities, assets, or transactions of a client.</text> </paragraph> <paragraph num="(9)"> <text>Copies of originals of all powers of attorney and other evidences of the granting of discretionary authority by a client to the investment adviser.</text> </paragraph> <paragraph num="(10)"> <text>All written agreements, or copies, entered into by the investment adviser with a client or otherwise relating to the business of the investment adviser.</text> </paragraph> <paragraph num="(11)"> <text>A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication that the investment adviser circulates or distributes, directly or indirectly, to 10 or more persons, other than persons connected with the investment adviser, and, if the notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication recommends the purchase or sale of a specific security or asset, and does not state the reasons for this recommendation, a memorandum of the investment adviser indicating the reasons.</text> </paragraph> <paragraph num="(12)"> <text>Records of Securities or Asset Transactions.</text> <paragraph num="(a)"> <text>A record of every transaction involving either an asset about which advice is given or a security, in which the investment adviser or any of those persons described in §A(12)(b) and (c) of this regulation has, or by reason of the transaction acquires, any direct or indirect beneficial ownership, except transactions effected over which neither the investment adviser nor any of those persons described in §A(12)(b) and (c) of this regulation has any direct or indirect influence or control, and transactions in securities that are direct obligations of the United States.</text> </paragraph> <paragraph num="(b)"> <text>Records of transactions shall include the transactions of:</text> <paragraph num="(i)"> <text>A partner, officer, or director of the investment adviser;</text> </paragraph> <paragraph num="(ii)"> <text>An employee who makes any recommendation, who participates in the determination of which recommendation shall be made, or whose functions or duties relate to the determination of which recommendation shall be made;</text> </paragraph> <paragraph num="(iii)"> <text>An employee who, in connection with the employee's duties, obtains information concerning which securities are being recommended before the effective dissemination of the recommendations or of the information concerning the recommendations; and</text> </paragraph> <paragraph num="(iv)"> <text>Any of the following persons who obtain information concerning securities recommendations being made by the investment adviser before the effective dissemination of the recommendations or of the information concerning the recommendations: a person in a control relationship to the investment adviser, an affiliated person of the controlling person, and an affiliated person of the affiliated person.</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>“Control” has the same meaning as set forth in §2(a)(9) of the Investment Company Act of 1940, as amended.</text> </paragraph> <paragraph num="(d)"> <text>The record shall state the title and amount of the security or asset involved, the date and nature of the transaction (that is, purchase, sale, or other acquisition or disposition), the price at which it was effected, and the name of the broker-dealer, bank, or other entity or person with or through which the transaction was effected.</text> </paragraph> <paragraph num="(e)"> <text>A transaction shall be recorded not later than 10 days after the end of the calendar quarter in which the transaction was effected.</text> </paragraph> <paragraph num="(f)"> <text>The record also may contain a statement declaring that the reporting or recording of the transaction will not be construed as an admission that the investment adviser or investment adviser representative has any direct or indirect beneficial ownership in the security or asset.</text> </paragraph> <paragraph num="(g)"> <text>An investment adviser will not be considered to have violated the provisions of this subsection by the investment adviser's failure to record securities or asset transactions of any of those persons described in §A(12)(b) and (c) of this regulation if the investment adviser establishes that it instituted adequate procedures and used reasonable diligence to obtain promptly reports of all transactions required to be recorded.</text> </paragraph> </paragraph> <paragraph num="(13)"> <text>Records of Transactions in Securities or Assets Involving Direct or Indirect Beneficial Ownership.</text> <paragraph num="(a)"> <text>Notwithstanding the provisions of §A(12) of this regulation, when the investment adviser is primarily engaged in a business other than advising registered investment companies or other advisory clients, a record shall be maintained of every transaction involving either an asset about which advice is given or a security, in which the investment adviser or any of those persons described in §A(13)(b) and (c) of this regulation has, or by reason of the transaction acquires, any direct or indirect beneficial ownership, except transactions effected in any account over which neither the investment adviser nor any of those persons described in §A(13)(b) and (c) of this regulation has any direct or indirect influence or control, and transactions in securities that are direct obligations of the United States.</text> </paragraph> <paragraph num="(b)"> <text>Records of transactions shall include the transactions of:</text> <paragraph num="(i)"> <text>A partner, officer, director, or employee of the investment adviser who makes a recommendation, who participates in the determination of which recommendation shall be made, or whose functions or duties relate to the determination of which recommendation shall be made, or who, in connection with his duties, obtains information concerning which securities are being recommended before the effective dissemination of the recommendations or of the information concerning the recommendations; and</text> </paragraph> <paragraph num="(ii)"> <text>Any of the following persons who obtain information concerning securities recommendations being made by the investment adviser before the effective dissemination of the recommendations or of the information concerning the recommendations: a person in a control relationship to the investment adviser, an affiliated person of the controlling person, and an affiliated person of the affiliated person.</text> </paragraph> </paragraph> <paragraph num="(c)"> <text>“Control” has the same meaning as set forth in §2(a)(9) of the Investment Company Act of 1940, as amended.</text> </paragraph> <paragraph num="(d)"> <text>The record shall state the title and amount of the security or asset involved, the date and nature of the transaction (that is, purchase, sale, or other acquisition or disposition), the price at which it was effected, and the name of the broker-dealer, bank, or other entity or person with or through which the transaction was effected.</text> </paragraph> <paragraph num="(e)"> <text>A transaction shall be recorded not later than 10 days after the end of the calendar quarter in which the transaction was effected.</text> </paragraph> <paragraph num="(f)"> <text>The record may also contain a statement declaring that the reporting or recording of the transaction will not be construed as an admission that the investment adviser or investment adviser representative has any direct or indirect beneficial ownership in the security or asset.</text> </paragraph> <paragraph num="(g)"> <text>An investment adviser is “primarily engaged in a business or businesses other than advising registered investment companies or other advisory clients” if, for each of its three most recent fiscal years or for the period of time since organization, whichever is less, the investment adviser derived from the other business or businesses, on an unconsolidated basis, more than 50 percent of both its total sales and revenues and its income (or loss) before income taxes and extraordinary items.</text> </paragraph> <paragraph num="(h)"> <text>An investment adviser will not be considered to have violated the provisions of this subsection by its failure to record securities or asset transactions of any of those persons described in §A(13)(b) and (c) of this regulation if the investment adviser establishes that it instituted adequate procedures and used reasonable diligence to obtain promptly reports of all transactions required to be recorded.</text> </paragraph> </paragraph> <paragraph num="(14)"> <text>A copy of each written statement, and each amendment or revision of each written statement, given or sent to a client or prospective client of the investment adviser in accordance with the provisions of Regulation .05 of this chapter, and a record of the dates that each written statement, and each amendment or revision of each written statement, was given, or offered to be given, to a client or prospective client who subsequently became a client.</text> </paragraph> <paragraph num="(15)"> <text>All accounts, books, internal working papers, and other records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return of all managed accounts or securities or assets recommendations in any notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication that the investment adviser circulates or distributes, directly or indirectly, to 10 or more persons, other than persons connected with the investment adviser. With respect to the performance of managed accounts, the retention of all account statements, if they reflect all debits, credits, and other transactions in a client's account for the period of the statement, and all worksheets necessary to demonstrate the calculation of the performance or rate of return of all managed accounts, shall be considered to satisfy the requirements of this subsection.</text> </paragraph> </paragraph> <paragraph num="B."> <text>If an investment adviser subject to §A of this regulation has custody or possession of securities, assets, or funds of a client, the records required to be made and kept under §A of this regulation shall include:</text> <paragraph num="(1)"> <text>A journal or other record showing all purchases, sales, receipts, and deliveries of securities (including certificate numbers) and other assets (including identifying or descriptive materials as appropriate) for these accounts, as well as all other debits and credits to the accounts;</text> </paragraph> <paragraph num="(2)"> <text>A separate ledger account for each client showing all purchases, sales, receipts, and deliveries of securities or assets, the date and price of each purchase and sale, and all debits and credits;</text> </paragraph> <paragraph num="(3)"> <text>Copies of confirmations of all transactions effected by or for the account of each client; and</text> </paragraph> <paragraph num="(4)"> <text>A record for each security or asset in which each client has a position or ownership interest, which record shall show the name of the client having the position or interest, the amount of the position or interest, and the location of each security or asset.</text> </paragraph> </paragraph> <paragraph num="C."> <text>An investment adviser subject to §A of this regulation that renders an investment supervisory or management service to a client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, make and keep the following:</text> <paragraph num="(1)"> <text>True, accurate, and current records showing separately for each client the securities or assets purchased and sold, and the date, amount, and price of each purchase and sale; and</text> </paragraph> <paragraph num="(2)"> <text>For each security or asset in which a client has a current position, true, accurate, and current information from which the investment adviser can promptly furnish the name of each client, and the current amount or interest of the client.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Books or records required by this regulation may be maintained by the investment adviser in a manner such that the identity of a client to whom the investment adviser renders investment advisory services is indicated by numerical or alphabetical code or some similar designation.</text> </paragraph> <paragraph num="E."> <text>Time Period.</text> <paragraph num="(1)"> <text>Books and records required to be made under the provisions of §§A—C(1), inclusive, of this regulation, except for books and records required to be made under the provisions of §A(11) and (15) of this regulation, shall be maintained and preserved in an easily accessible place for a period of not less than 5 years from the end of the fiscal year during which the last entry was made on the record, and for the first 2 years shall be maintained in an appropriate office of the investment adviser.</text> </paragraph> <paragraph num="(2)"> <text>Partnership articles and amendments to the partnership articles, articles of incorporation, charters, minute books, and stock certificate books of the investment adviser and of any predecessor, shall be maintained in the principal office of the investment adviser and preserved until at least 3 years after termination of the enterprise.</text> </paragraph> <paragraph num="(3)"> <text>Books and records required to be made under the provisions of §A(11) and (15) of this regulation shall be maintained and preserved in an easily accessible place for a period of not less than 5 years, the first 2 years in an appropriate office of the investment adviser, from the end of the fiscal year during which the investment adviser last published or otherwise disseminated, directly or indirectly, the notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Before ceasing to conduct or discontinuing business as an investment adviser, an investment adviser subject to §A of this regulation shall arrange for and be responsible for the preservation of the books and records required to be maintained and preserved under this regulation for the remainder of the period specified herein, and shall notify the Commissioner in writing of the exact address at which the books and records will be maintained during this period.</text> </paragraph> <paragraph num="G."> <text>Preservation and Maintenance.</text> <paragraph num="(1)"> <text>The records required to be maintained and preserved under this regulation may be immediately produced or reproduced by photograph on film or, as provided in §G(2) of this regulation, on magnetic disk, tape, or other computer storage medium, and be maintained and preserved for the required time in that form. If records are produced or reproduced by photographic film or computer storage medium, the investment advisor shall:</text> <paragraph num="(a)"> <text>Arrange the records and index the films or computer storage medium so as to permit the immediate location of a particular record;</text> </paragraph> <paragraph num="(b)"> <text>Be ready at all times to provide, and promptly provide, any facsimile enlargement of film or computer printout or copy of the computer storage medium that the Commissioner may request;</text> </paragraph> <paragraph num="(c)"> <text>Store separately from the original one other copy of the film or computer storage medium for the time required;</text> </paragraph> <paragraph num="(d)"> <text>With respect to records stored on computer storage medium, maintain procedures for maintenance and preservation of, and access to, records to reasonably safeguard records from loss, alteration, or destruction; and</text> </paragraph> <paragraph num="(e)"> <text>With respect to records stored on photographic film, at all times have available for examination of its records under the Maryland Securities Act, Corporations and Associations Article, §11-411, Annotated Code of Maryland, facilities for immediate, easily readable projection of the film and for producing easily readable facsimile enlargements.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Under §G(1) of this regulation, an adviser may maintain and preserve on computer tape or disk or other computer storage medium records that, in the ordinary course of the adviser's business, are created by the adviser on electronic media or are received by the adviser solely on electronic media or by electronic data transmission.</text> </paragraph> </paragraph> <paragraph num="H."> <text>A book or other record made, kept, maintained, and preserved in compliance with 17 CFR §240.17a-3 (SEC Rule 17a-3, Records to be Made by Certain Exchange Members, Brokers and Dealers), that is substantially the same as the book or other record required to be made, kept, maintained, and preserved under this regulation shall be considered to be made, kept, maintained, and preserved in compliance with this regulation.</text> </paragraph> <paragraph num="I."> <text>A record made and kept under any provision of §A of this regulation, that contains all the information required under any other provision of §A of this regulation, need not be maintained in duplicate in order to meet the requirements of the other provision of §A of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".17" heading="Financial Reporting Requirements for Certain Investment Advisers."> <paragraph num="A."> <text>A registered investment adviser that has custody of client funds or securities, or requires payment of advisory fees 6 months or more in advance and in excess of $500 per client, shall file with the Commissioner an audited balance sheet as of the end of the investment adviser's fiscal year. Each balance sheet filed under this regulation shall be:</text> <paragraph num="(1)"> <text>Audited by an independent certified public accountant;</text> </paragraph> <paragraph num="(2)"> <text>Prepared in conformity with generally accepted accounting principles; and</text> </paragraph> <paragraph num="(3)"> <text>Accompanied by a note stating the principles used to prepare it, the basis of included securities or assets, and any other explanations required for clarity.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The financial statements required by this regulation shall be filed with the Commissioner within 90 days following the end of the investment adviser's fiscal year.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".18" heading="Correction of Documents Filed by Investment Advisers and Investment Adviser Representatives."> <paragraph num="A."> <text>Scope. This regulation governs amendment filings for investment advisers and investment adviser representatives that have not yet transitioned onto the IARD. Investment advisers and investment adviser representatives that have transitioned onto the IARD shall comply with Regulations .11A(3) and .12A(3) of this chapter.</text> </paragraph> <paragraph num="B."> <text>An amendment to an investment adviser's filings required by the Maryland Securities Act, Corporations and Associations Article, §11-411(d), Annotated Code of Maryland, shall be filed with the Commissioner.</text> </paragraph> <paragraph num="C."> <text>An amendment to an investment adviser representative's filings required by the Maryland Securities Act, Corporations and Associations Article, §11-411(d), Annotated Code of Maryland, shall be filed with the Commissioner upon Form U-4.</text> </paragraph> <paragraph num="D."> <text>An amendment required by the Maryland Securities Act, Corporations and Associations Article, §11-411(d), Annotated Code of Maryland, shall be:</text> <paragraph num="(1)"> <text>Filed within 30 days of the event giving rise to the amendment; and</text> </paragraph> <paragraph num="(2)"> <text>Marked to indicate clearly the changes on the filing that is being amended.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".19" heading="Withdrawal of Investment Adviser and Investment Adviser Representative Registrations."> <paragraph num="A."> <text>Investment Adviser. An application for withdrawal of registration or of an application to register as an investment adviser shall be made by completing Form ADV-W (Notice of Withdrawal from Registration as Investment Adviser) in accordance with the form instructions and by filing the form with the IARD.</text> </paragraph> <paragraph num="B."> <text>Investment Adviser Representative. An application for withdrawal of registration or of an application to register as an investment adviser representative shall be made by completing Form U-5 (Uniform Notice of Withdrawal of Securities Industry Registration) in accordance with the form instructions and by filing the form with the IARD.</text> </paragraph> <paragraph num="C."> <text>Filings required by §A or B of this regulation shall be filed within 30 days of the event giving rise to the filing.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".20" heading="Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-101(i)(2), Annotated Code of Maryland, for Certain Individuals."> <text>Under the Maryland Securities Act, Corporations and Associations Article, §11-101(i)(2), Annotated Code of Maryland, an investment adviser representative does not include:</text> <paragraph num="A."> <text>An individual broker-dealer agent who:</text> <paragraph num="(1)"> <text>In conjunction with the agent's employment or affiliation with a broker-dealer, holds out to the public, as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1)(ii)3, Annotated Code of Maryland, by use of the title “financial consultant”, “financial adviser”, or similar title or designation;</text> </paragraph> <paragraph num="(2)"> <text>Does not in any other manner hold out as an investment adviser or representative;</text> </paragraph> <paragraph num="(3)"> <text>Does not in any other manner act or perform as an investment adviser or representative as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland;</text> </paragraph> <paragraph num="(4)"> <text>Is registered and in good standing in this State as the agent of a broker-dealer that is registered and in good standing in this State; and</text> </paragraph> <paragraph num="(5)"> <text>Has passed, with a score of 70 percent or better, the Series 7 examination administered by the FINRA, or a combination of examinations that the Commissioner determines is the substantial equivalent of the Series 7 examination;</text> </paragraph> </paragraph> <paragraph num="B."> <text>An individual insurance producer who:</text> <paragraph num="(1)"> <text>Falls within the definition of “investment adviser” under the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland, solely by incident of holding out to the public, as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1)(ii)3, Annotated Code of Maryland, by use of the registered trademark “ChFC”, “Chartered Financial Consultant”, “NAIFA”, “National Association of Insurance and Financial Advisers”, or any state or local affiliate of NAIFA whether by name or acronym, in the context of representing, acting as an agent or employee of, or otherwise indicating an affiliation with, an insurance company, producer, or agency;</text> </paragraph> <paragraph num="(2)"> <text>Does not in any other manner hold out as an investment adviser or representative;</text> </paragraph> <paragraph num="(3)"> <text>Does not in any other manner act or perform as an investment adviser or representative as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland;</text> </paragraph> <paragraph num="(4)"> <text>Holds a valid license as an insurance producer with the Maryland Insurance Administration, as provided in the Insurance Article, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(5)"> <text>Does not, in any other manner, act or perform as a broker-dealer agent as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(b), Annotated Code of Maryland;</text> </paragraph> </paragraph> <paragraph num="C."> <text>An individual officer, director, or other administrative employee of an insurance company, producer, agency, or trade association who:</text> <paragraph num="(1)"> <text>Falls within the definition of “investment adviser” under the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland, solely by incident of holding out to the public, as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1)(ii)(3), Annotated Code of Maryland, by use of the registered trademark “ChFC”, “Chartered Financial Consultant”, “NAIFA”, “National Association of Insurance and Financial Advisers”, or any state or local affiliate of NAIFA whether by name or acronym;</text> </paragraph> <paragraph num="(2)"> <text>Does not in any other manner hold out as an investment adviser or representative;</text> </paragraph> <paragraph num="(3)"> <text>Does not in any other manner act or perform as an investment adviser or representative as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland;</text> </paragraph> <paragraph num="(4)"> <text>Is regulated by the Maryland Insurance Administration, as provided in the Insurance Article, Annotated Code of Maryland, with respect to business or professional conduct;</text> </paragraph> <paragraph num="(5)"> <text>Uses the registered trademark “ChFC”, “Chartered Financial Consultant”, “NAIFA”, “National Association of Insurance and Financial Advisers”, or any state or local affiliate of NAIFA whether by name or acronym, only in the context of acting as an officer, director, or other administrative employee of an insurance company, producer, agency, or trade association; and</text> </paragraph> <paragraph num="(6)"> <text>Does not, in any other manner, act or perform as a broker-dealer agent as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(b), Annotated Code of Maryland;</text> </paragraph> </paragraph> <paragraph num="D."> <text>An individual who falls within the definition of “investment adviser” under the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland, solely by incident of holding out to the public, as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1)(ii)3, Annotated Code of Maryland, but who:</text> <paragraph num="(1)"> <text>Uses the registered trademark “ChFC”, “Chartered Financial Consultant”, “CFP”, or “Certified Financial Planner” solely in the context of:</text> <paragraph num="(a)"> <text>Acting as a teacher or researcher at an accredited college or university,</text> </paragraph> <paragraph num="(b)"> <text>Employment in the employee benefits, pension, personnel, or similar unit of a business entity that is not an investment adviser, or</text> </paragraph> <paragraph num="(c)"> <text>Employment by an agency of municipal, state, or local government;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Does not in any other manner hold out as an investment adviser or representative; and</text> </paragraph> <paragraph num="(3)"> <text>Does not in any other manner act or perform as an investment adviser or representative as set forth in the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(1), Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".21" heading="Exemption from the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(2)(iii)3, Annotated Code of Maryland, for Certain Individuals."> <text>For the purposes of the Maryland Securities Act, Corporations and Associations Article, §11-101(h)(2)(iii)3, Annotated Code of Maryland, a certified public accountant or certified public accounting firm (CPA) is not considered to “hold out” as an investment adviser if the CPA limits his or her holding out as an investment adviser to the following and does not in any other manner hold out as an investment adviser:</text> <paragraph num="A."> <text>Enumerating financial or investment planning, counseling, consulting, or similar types of advising or consulting as a service of the practice of the CPA in brochures or similar materials used for internal client purposes only;</text> </paragraph> <paragraph num="B."> <text>Enumerating financial or investment planning, counseling, consulting, or similar types of advising or consulting as a service of the practice of the CPA under the heading or caption “Certified Public Accountants” in a classified telephone book advertisement or listing, or in a directory of professional services, provided that the services are enumerated among the other services that are offered by the CPA.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".22" heading="Cancellation of Investment Adviser and Investment Adviser Representative Applications."> <paragraph num="A."> <text>Abandonment of Application. For purposes of this regulation and the Maryland Securities Act, Corporations and Associations Article, §11-414, Annotated Code of Maryland, an application is considered abandoned if the applicant has failed to pursue the application for initial registration in a diligent manner.</text> </paragraph> <paragraph num="B."> <text>Notice of Proposed Cancellation. Before the Commissioner cancels an application for initial registration because the applicant has abandoned the application, the Commissioner shall send the applicant notice of the proposed cancellation at least 15 days before issuing an order of cancellation. The notice shall be sent by certified mail, return receipt requested, to the last known address of the applicant as specified in the application or correspondence with the Division.</text> </paragraph> <paragraph num="C."> <text>Request for Time to Complete Application.</text> <paragraph num="(1)"> <text>An applicant that receives a notice of proposed cancellation under §B of this regulation may request, before the date of the proposed cancellation, that the application remain pending so that the applicant may complete the application.</text> </paragraph> <paragraph num="(2)"> <text>An applicant that has requested that an application remain pending shall complete the application within 30 days of the date of the request.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Final Action.</text> <paragraph num="(1)"> <text>If an applicant does not make a timely request for additional time to complete an application after the Commissioner has issued a notice of proposed cancellation under §B of this regulation, the Commissioner may cancel the application as abandoned.</text> </paragraph> <paragraph num="(2)"> <text>If an applicant that has requested additional time under §C of this regulation fails to complete the application within 30 days, the Commissioner may cancel the application as abandoned.</text> </paragraph> </paragraph> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §§11-101, 11-203, and 11-302, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date:</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.09 adopted as an emergency provision effective July 25, 1989 (16:16 Md. R. 1733); emergency status expired December 22, 1989</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.09 adopted as an emergency provision effective December 23, 1989 (17:1 Md. R. 63); adopted permanently effective April 16, 1990 (17:7 Md. R. 845)</annotation> <annotation type="History" subtype="Administrative History">Regulation .05 amended and Regulations .10—.18 adopted as an emergency provision effective August 1, 1990 (17:15 Md. R. 1845)</annotation> <annotation type="History" subtype="Administrative History">Regulation .05 amended and new Regulations .10—.18 adopted as an emergency provision effective December 1, 1990 (17:26 Md. R. 2972)</annotation> <annotation type="History" subtype="Administrative History">Regulations .05A, B amended effective March 18, 1991 (18:5 Md. R. 592)</annotation> <annotation type="History" subtype="Administrative History">Regulations .10—.18 adopted effective March 18, 1991 (18:5 Md. R. 592)</annotation> <annotation type="History" subtype="Administrative History">Regulations .10B, .11C, and .13D amended as an emergency provision effective September 23, 1991 (18:20 Md. R. 2197); emergency status extended at 18:26 Md. R. 2826; adopted permanently effective February 3, 1992 (19:2 Md. R. 152)</annotation> <annotation type="History" subtype="Administrative History">Regulations .19 and .20 adopted as an emergency provision effective October 1, 1992 (19:17 Md. R. 1602); emergency status extended at 19:24 Md. R. 2123; adopted permanently effective December 7, 1992 (19:24 Md. R. 2125)</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective May 9, 1994 (21:9 Md. R. 749)</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective February 4, 2002 (29:2 Md. R. 94)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01B amended effective December 27, 2021 (48:26 Md. R. 1109)</annotation> <annotation type="History" subtype="Administrative History">Regulation .11A amended effective December 27, 2021 (48:26 Md. R. 1109)</annotation> <annotation type="History" subtype="Administrative History">Regulation .14 amended effective December 27, 2021 (48:26 Md. R. 1109)</annotation> </annotations> </chapter> <chapter num="06" heading="Procedures for Administrative Hearings"> <regulation prefix="Regulation" num=".01" heading="Scope."> <paragraph num="A."> <text>This chapter contains procedures for administrative hearings before the Maryland Securities Commissioner which are conducted under the:</text> <paragraph num="(1)"> <text>Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland (“the Maryland Securities Act”);</text> </paragraph> <paragraph num="(2)"> <text>Maryland Business Opportunities Sales Act, Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland (“the Business Opportunities Act”); or</text> </paragraph> <paragraph num="(3)"> <text>Maryland Franchise Registration and Disclosure Law, Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland (“the Maryland Franchise Law”).</text> </paragraph> </paragraph> <paragraph num="B."> <text>Exceptions.</text> <paragraph num="(1)"> <text>This chapter does not apply to investigations instituted by the Commissioner under the Maryland Securities Act, the Business Opportunities Act, or the Maryland Franchise Law. COMAR 02.02.07 contains regulations governing investigations.</text> </paragraph> <paragraph num="(2)"> <text>Regulations .08—.22 of this chapter do not apply to contested cases that are delegated under State Government Article, §10-205, Annotated Code of Maryland, to the Office of Administrative Hearings to conduct a hearing.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Administrative law judge” means a person authorized to conduct hearings in contested cases under State Government Article, Title 9, Subtitle 16, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Commissioner” means the Maryland Securities Commissioner or the designated agent of the Maryland Securities Commissioner.</text> </paragraph> <paragraph num="(3)"> <text>“Contested case” has the meaning stated in State Government Article, §10-202(d), Annotated Code of Maryland, and in this chapter refers to a proceeding before the Commissioner under the Maryland Securities Act, Business Opportunities Act, or the Maryland Franchise Law.</text> </paragraph> <paragraph num="(4)"> <text>“Division” means the Division of Securities in the Office of the Attorney General.</text> </paragraph> <paragraph num="(5)"> <text>“Maryland Business Opportunities Sales Act” and “Business Opportunities Act” mean Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Maryland Franchise Registration and Disclosure Law” and “Maryland Franchise Law” mean Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(7)"> <text>“Maryland Securities Act” means Corporations and Associations Article, Title 11, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(8)"> <text>“Party” means a respondent in the proceeding and the Division.</text> </paragraph> <paragraph num="(9)"> <text>“Person” has the meaning stated in Business Regulation Article, §1-101(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(10)"> <text>“Respondent” means a person against whom a show cause order or summary order has been issued under the Maryland Securities Act, the Business Opportunities Act, or the Maryland Franchise Law.</text> </paragraph> <paragraph num="(11)"> <text>Show Cause Order.</text> <paragraph num="(a)"> <text>“Show cause order” means an order issued by the Commissioner that alleges facts that constitute a violation of, or a failure to comply with, the law by the respondent and that directs the respondent to explain why the Commissioner should not issue a final order against the respondent based upon the alleged facts.</text> </paragraph> <paragraph num="(b)"> <text>“Show cause order” includes orders to show cause concerning:</text> <paragraph num="(i)"> <text>A cease and desist order under the Business Opportunities Act, Business Regulation Article, §14-110, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(ii)"> <text>A cease and desist order under the Maryland Franchise Law, Business Regulation Article, §14-210, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(iii)"> <text>A denial, suspension, or revocation of investment adviser or investment adviser representative registration under the Maryland Securities Act, Corporations and Associations Article, §11-412, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(iv)"> <text>A denial, suspension, or revocation of broker-dealer or broker-dealer agent registration under the Maryland Securities Act, Corporations and Associations Article, §11-412, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(v)"> <text>A denial, suspension, or revocation of effectiveness of a securities registration statement under the Maryland Securities Act, Corporations and Associations Article, §11-511, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(vi)"> <text>A denial or revocation of a securities registration exemption under the Maryland Securities Act, Corporations and Associations Article, §11-603, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(vii)"> <text>An order to cease and desist violations of the Maryland Securities Act, Corporations and Associations Article, §11-301—11-304, 11-401, 11-402, or 11-501, Annotated Code of Maryland.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(12)"> <text>Summary Order.</text> <paragraph num="(a)"> <text>“Summary order” means an order issued by the Commissioner that alleges facts that constitute a violation of, or failure to comply with, the law by the respondent and that directs the respondent immediately to take certain actions or to refrain from certain actions.</text> </paragraph> <paragraph num="(b)"> <text>“Summary order” includes:</text> <paragraph num="(i)"> <text>A summary cease and desist order issued under the Business Opportunities Act, Business Regulation Article, §14-110, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(ii)"> <text>A summary cease and desist order issued under the Maryland Franchise Law, Business Regulation Article, §14-210, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(iii)"> <text>A stop order issued under the Maryland Franchise Law, Business Regulation Article, §14-221, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(iv)"> <text>A summary postponement or suspension of investment adviser or investment adviser representative registration under the Maryland Securities Act, Corporations and Associations Article, §11-413, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(v)"> <text>A summary postponement or suspension of broker-dealer or broker-dealer agent registration under the Maryland Securities Act, Corporations and Associations Article, §11-413, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(vi)"> <text>A summary postponement or suspension of the effectiveness of a securities registration statement under the Maryland Securities Act, Corporations and Associations Article, §11-512, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(vii)"> <text>A summary denial or revocation of a securities registration exemption under the Maryland Securities Act, Corporations and Associations Article, §11-603, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(viii)"> <text>A summary cease and desist order for violation of the Maryland Securities Act, Corporations and Associations Article, §11-701.1, Annotated Code of Maryland.</text> </paragraph> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Time and Place of Filing."> <paragraph num="A."> <text>Place of Filing. Papers required or permitted to be filed under this chapter, or any provision of applicable law, shall be filed with the Office of the Attorney General, Division of Securities, 200 St. Paul Place, 20th Floor, Baltimore, MD 21202-2020, or such other places as the Commissioner may designate.</text> </paragraph> <paragraph num="B."> <text>Date of Filing. A paper is filed when it is received by the Commissioner.</text> </paragraph> <paragraph num="C."> <text>Computation of Time. Unless otherwise specifically provided by law or these regulations, computation of any time period prescribed by these regulations or by an order of the Commissioner begins with the first day following the act or event that initiates the time period. The last day of the time period so computed is included unless it is a Saturday, Sunday, State holiday, or any other day on which the Division is closed, in which event the period runs until the end of the next business day.</text> </paragraph> <paragraph num="D."> <text>Additional Time After Service by Mail. If a notice or other filing is served by mail and the party served is entitled or required to take some action within a prescribed time period after service:</text> <paragraph num="(1)"> <text>The date of mailing is the date of service; and</text> </paragraph> <paragraph num="(2)"> <text>3 days are added to the prescribed time period.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Form of Papers."> <paragraph num="A."> <text>Caption. A pleading or other paper filed by a party with the Commissioner shall contain a caption that sets forth:</text> <paragraph num="(1)"> <text>The name of the first listed respondent;</text> </paragraph> <paragraph num="(2)"> <text>The file number assigned to the case by the Division; and</text> </paragraph> <paragraph num="(3)"> <text>A brief descriptive title of the pleading.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Signature. A pleading or other paper filed with the Commissioner shall:</text> <paragraph num="(1)"> <text>Be signed by the party or the party's representative or attorney; and</text> </paragraph> <paragraph num="(2)"> <text>Contain the business address and telephone number of the person by whom it is signed.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Certificate of Service. The original of any pleading or other paper shall be filed with the Commissioner, and a copy shall be served upon each party or party's attorney of record. A certificate of service attesting to the date and manner of service shall be filed with the pleading.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Initiation of Contested Case."> <paragraph num="A."> <text>Service of Summary Order or Show Cause Order. The Division shall promptly serve a copy of a summary order or a show cause order upon each respondent named in the order. Service may be made by personal service or by registered or certified mail. If appropriate, service may be made upon the Commissioner as the respondent's attorney for service of process in accordance with the Maryland Securities Act, Corporations and Associations Article, §11-802, or in accordance with an appointment made pursuant to the Maryland Franchise Law, Business Regulation Article, §14-216(c)(26), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Notice of Right to Hearing. In addition to any contents required by statute, a summary order or show cause order shall advise the respondent of the:</text> <paragraph num="(1)"> <text>Respondent's right to a hearing;</text> </paragraph> <paragraph num="(2)"> <text>Time period within which the respondent must request a hearing;</text> </paragraph> <paragraph num="(3)"> <text>Respondent's obligation to file an answer; and</text> </paragraph> <paragraph num="(4)"> <text>Effect of a failure to file an answer and to request a hearing.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Answer."> <paragraph num="A."> <text>Time for Filing. A respondent shall file with the Commissioner a written answer to a show cause or summary order within 15 days of service of the order and within 7 days of service of any amended order. The parties may agree to extend the time for filing the answer up to 30 days. Any additional extension of time may only be granted by order of the Commissioner.</text> </paragraph> <paragraph num="B."> <text>Response to Factual Allegations. The answer shall admit or deny each factual allegation in the show cause or summary order and shall set forth affirmative defenses, if any. A respondent without knowledge or information sufficient to form a belief as to the truth of an allegation shall so state.</text> </paragraph> <paragraph num="C."> <text>Request for Hearing. The answer shall indicate whether the respondent requests a hearing concerning the show cause or summary order.</text> </paragraph> <paragraph num="D."> <text>Failure to File Answer. If a respondent fails to file a timely answer, the Commissioner may issue a proposed or final decision adverse to that respondent.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Delegation of Hearing Authority."> <paragraph num="A."> <text>Delegation. The Commissioner may delegate authority to conduct a hearing to the Office of Administrative Hearings or to another person designated in accordance with State Government Article, §10-205(a), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Scope of Delegation. The Commissioner shall indicate in a written notice of delegation whether the Office of Administrative Hearings or other designated hearing officer is to issue proposed or final findings of fact, proposed or final conclusions of law, and a proposed or final decision. The Commissioner shall serve the notice of delegation on all parties and on the Office of Administrative Hearings or other designated hearing officer.</text> </paragraph> <paragraph num="C."> <text>Revocation of Delegation. The Commissioner may revoke all or part of a delegation of a contested case to the Office of Administrative Hearings or other designated hearing officer if the case:</text> <paragraph num="(1)"> <text>Involves novel or unanticipated factual or legal issues;</text> </paragraph> <paragraph num="(2)"> <text>Has significant social or fiscal consequences;</text> </paragraph> <paragraph num="(3)"> <text>Involves policy issues of general applicability; or</text> </paragraph> <paragraph num="(4)"> <text>Is likely to have precedential value.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Procedures for Revocation.</text> <paragraph num="(1)"> <text>The Commissioner may revoke a delegation of a contested case at any time before a ruling on a substantive issue by the hearing officer or administrative law judge, or the taking of oral testimony from the first witness, whichever is earlier.</text> </paragraph> <paragraph num="(2)"> <text>The Commissioner shall issue a written notice of revocation that states briefly the reason for the revocation and specifies whether all or part of the delegation has been revoked. If only part of the delegation has been revoked, the Commissioner shall specify in the notice of revocation the portions of the contested case for which the delegation has been revoked.</text> </paragraph> <paragraph num="(3)"> <text>The Commissioner shall serve the notice of revocation on all parties and the Office of Administrative Hearings or other designated hearing officer.</text> </paragraph> <paragraph num="(4)"> <text>A decision issued by the Commissioner shall reflect the revocation of delegation, and a copy of the revocation notice shall be included as part of the record.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Withdrawal of Delegation with Consent of Parties. The Commissioner may withdraw all or part of a delegation of a contested case as to a respondent at any time with the consent of that respondent and the Division.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Notice of Hearing."> <paragraph num="A."> <text>Advance Written Notice. If a respondent requests a hearing, or if the Commissioner otherwise determines that a hearing concerning a summary order or a show cause order is appropriate, the Commissioner shall give the parties reasonable advance written notice of the hearing.</text> </paragraph> <paragraph num="B."> <text>Content of Notice. The notice of the hearing shall include:</text> <paragraph num="(1)"> <text>The date, time, place, and nature of the hearing;</text> </paragraph> <paragraph num="(2)"> <text>The legal basis for the hearing;</text> </paragraph> <paragraph num="(3)"> <text>A brief statement of the issues;</text> </paragraph> <paragraph num="(4)"> <text>A summary of the rights and restrictions concerning representation set forth in Regulation .09 of this chapter;</text> </paragraph> <paragraph num="(5)"> <text>A statement that each respondent may present evidence and may cross-examine witnesses;</text> </paragraph> <paragraph num="(6)"> <text>A statement that each respondent may request the issuance of subpoenas in accordance with Regulation .13 of this chapter;</text> </paragraph> <paragraph num="(7)"> <text>A copy of the hearing procedures set forth in this chapter;</text> </paragraph> <paragraph num="(8)"> <text>A statement that failure by a respondent to appear at the hearing may result in adverse action against that respondent;</text> </paragraph> <paragraph num="(9)"> <text>A statement that the parties may agree to the evidence and that a respondent may waive the right to appear at the hearing.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Hearings under the Maryland Franchise Law. If a respondent named in a cease and desist order issued under the Maryland Franchise Law, Business Regulation Article, §14-210, Annotated Code of Maryland, or in a stop order issued under the Maryland Franchise Law, Business Regulation Article, §14-221, Annotated Code of Maryland, submits a written request for a hearing, the Commissioner shall schedule the hearing to begin within 15 business days after the Commissioner receives the request, unless the respondent consents to a later date.</text> </paragraph> <paragraph num="D."> <text>Certain Hearings under the Maryland Securities Act. If a respondent named in a summary order issued pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-413, 11-512, or 11-603, Annotated Code of Maryland, submits a written request for a hearing, the Commissioner shall, within 15 days after receipt of the request, set a date for a hearing.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Representation."> <paragraph num="A."> <text>An individual may appear on the individual's own behalf.</text> </paragraph> <paragraph num="B."> <text>A party may be represented by an attorney authorized to practice law in Maryland or, when authorized by law, appear through a representative who is not an attorney. An attorney who is not a member of the Maryland Bar, but is a member in good standing of the Bar of another state, may represent a party if the attorney is specially admitted in accordance with Rule 14 of the Rules Governing Admission to the Bar of Maryland.</text> </paragraph> <paragraph num="C."> <text>An attorney who appears in a representative capacity shall enter an appearance by filing a pleading or written notice of appearance setting forth the:</text> <paragraph num="(1)"> <text>Name, business address, and telephone number of the attorney; and</text> </paragraph> <paragraph num="(2)"> <text>Name and address of the party represented.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Each party and any representative of a party shall promptly notify the Commissioner in writing of any change of address or telephone number.</text> </paragraph> <paragraph num="E."> <text>A party's representative of record shall be copied on all notices, pleadings, or other correspondence relating to the contested case.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Addition, Deletion, and Substitution of Parties."> <text>The Commissioner may, upon motion of a party, order the addition, deletion, or substitution of parties.</text> </regulation> <regulation prefix="Regulation" num=".11" heading="Consolidation of Cases."> <text>If separate proceedings involve a common question of law or fact, the Commissioner may consolidate the proceedings in whole or in part.</text> </regulation> <regulation prefix="Regulation" num=".12" heading="Discovery."> <paragraph num="A."> <text>Document Requests. A party may serve a written document request on any other party requiring that party to produce, within 15 days, for inspection and copying, any documents or tangible items:</text> <paragraph num="(1)"> <text>Relevant to the subject matter of the case; and</text> </paragraph> <paragraph num="(2)"> <text>Not privileged.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Filing and Service. The party making the document request shall:</text> <paragraph num="(1)"> <text>File the written request with the Commissioner not later than 20 days before the date set for the hearing; and</text> </paragraph> <paragraph num="(2)"> <text>Serve a copy of the request on all other parties.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Copies of Documents.</text> <paragraph num="(1)"> <text>Copies of requested documents shall be made at the expense of the party making the request.</text> </paragraph> <paragraph num="(2)"> <text>The charge for copying documents may be waived by the Division in accordance with State Government Article, §10-621, Annotated Code of Maryland, or other applicable law.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".13" heading="Subpoenas."> <paragraph num="A."> <text>Issuance of Subpoenas. Upon the request of any party, the Commissioner may issue subpoenas requiring the attendance and testimony of witnesses and the production of documents and tangible items in the possession or under the control of the witness.</text> </paragraph> <paragraph num="B."> <text>Applications for Subpoenas. An application for issuance of a subpoena shall be made in writing to the Commissioner and shall state:</text> <paragraph num="(1)"> <text>The name and address of the person to be subpoenaed;</text> </paragraph> <paragraph num="(2)"> <text>If production of documents or tangible items is sought, a particular description of the documents or tangible items sought; and</text> </paragraph> <paragraph num="(3)"> <text>The name, address, and telephone number of the party requesting the subpoena.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Service of Subpoenas. A subpoena may be served by personal service or by registered or certified mail. The party requesting the subpoena shall be responsible for, and bear the cost of, service.</text> </paragraph> <paragraph num="D."> <text>Return of Service. A party shall promptly file a return of service with the Commissioner including an affidavit by the person making service and, if the subpoena was served by mail, the return receipt.</text> </paragraph> <paragraph num="E."> <text>Objections to Subpoenas. A person who has been served with a subpoena may object to the subpoena by filing a motion to quash with the Commissioner within 10 days of service of the subpoena or by the date of the hearing, whichever is earlier.</text> </paragraph> <paragraph num="F."> <text>Enforcement of Subpoenas.</text> <paragraph num="(1)"> <text>If a person under subpoena fails to appear as required by the subpoena, or fails to produce the documents or tangible items set forth in the subpoena, a party may apply to the Commissioner for enforcement of the subpoena.</text> </paragraph> <paragraph num="(2)"> <text>An application to the Commissioner for enforcement of a subpoena shall be made immediately upon the failure to comply with the subpoena or within such other time period as the Commissioner may set.</text> </paragraph> <paragraph num="(3)"> <text>Upon a timely request by a party for enforcement of a subpoena, the Commissioner may apply to the circuit court in the county in which the person under subpoena resides to enforce the subpoena.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".14" heading="Prehearing Conferences."> <paragraph num="A."> <text>Scheduling of Conference. The Commissioner, upon request of a party or when the Commissioner otherwise believes it appropriate, may require the parties to appear at a specified date, time, and place for a prehearing conference before the date set for hearing.</text> </paragraph> <paragraph num="B."> <text>Agenda. A prehearing conference may be held to address the following matters:</text> <paragraph num="(1)"> <text>Simplification of issues;</text> </paragraph> <paragraph num="(2)"> <text>Admissions or stipulations of fact;</text> </paragraph> <paragraph num="(3)"> <text>Requests for official notice;</text> </paragraph> <paragraph num="(4)"> <text>Discovery disputes;</text> </paragraph> <paragraph num="(5)"> <text>Preliminary motions;</text> </paragraph> <paragraph num="(6)"> <text>Admissibility of evidence;</text> </paragraph> <paragraph num="(7)"> <text>Order of presentation;</text> </paragraph> <paragraph num="(8)"> <text>Limitation of the number of witnesses;</text> </paragraph> <paragraph num="(9)"> <text>Exchange of prepared testimony and exhibits between the parties;</text> </paragraph> <paragraph num="(10)"> <text>Scheduling; and</text> </paragraph> <paragraph num="(11)"> <text>Other matters that will promote the orderly and prompt conduct of the hearing.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Conduct of Prehearing Conference. The Commissioner may conduct the prehearing conference by telephone. Upon notice to the participants, all or part of the prehearing conference may be recorded.</text> </paragraph> <paragraph num="D."> <text>Record of Prehearing Conference. The Commissioner shall make any action taken at a prehearing conference part of the record.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".15" heading="Failure to Appear."> <paragraph num="A."> <text>Conduct of Hearing in Party's Absence. If a party, after receiving notice of a prehearing conference or hearing, fails to appear at the conference or hearing, the Commissioner may proceed to hold the conference or hearing in that party's absence.</text> </paragraph> <paragraph num="B."> <text>Default. The Commissioner may also hold the absent party in default and may issue a proposed or final decision and order against the defaulted party.</text> </paragraph> <paragraph num="C."> <text>Request for Reconsideration.</text> <paragraph num="(1)"> <text>A party defaulted as a result of a failure to appear at a prehearing conference or hearing may file a written motion requesting reconsideration by the Commissioner and stating the grounds for the request.</text> </paragraph> <paragraph num="(2)"> <text>A motion for reconsideration shall be filed within 15 days after service of a default order, or such lesser time as the Commissioner may direct.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Motions—Generally."> <paragraph num="A."> <text>Form and Content. Unless otherwise permitted by these regulations or by the Commissioner, motions shall:</text> <paragraph num="(1)"> <text>Be made in writing, unless otherwise permitted by the Commissioner during the course of a hearing; and</text> </paragraph> <paragraph num="(2)"> <text>State concisely the question to be determined and be accompanied by any necessary supporting documentation.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Filing and Service. A party shall file a motion not later than 15 days before the date of the hearing and shall serve a copy of the motion on each party.</text> </paragraph> <paragraph num="C."> <text>Response to Motion. A response to a written motion shall be filed on the earlier of:</text> <paragraph num="(1)"> <text>10 days after receipt of the motion; or</text> </paragraph> <paragraph num="(2)"> <text>The date of the hearing.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Oral Argument. The Commissioner may allow oral argument if it appears necessary to a fuller understanding of the issues presented.</text> </paragraph> <paragraph num="E."> <text>Effect of Filing of Motion. The filing or pendency of a motion does not alter or extend any time limit.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".17" heading="Motions for Summary Decision."> <paragraph num="A."> <text>Time for Filing. A party may move at any time for summary decision as to any substantive issue in the case.</text> </paragraph> <paragraph num="B."> <text>Standard. The Commissioner may issue a summary decision if the Commissioner finds that there is no genuine issue as to any material fact, and that the moving party is entitled to prevail as a matter of law.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".18" heading="Conduct of Hearings."> <paragraph num="A."> <text>Presiding Officer. The Commissioner shall preside at all hearings unless the Commissioner has delegated authority to conduct a hearing to the Office of Administrative Hearings or other hearing officer designated in accordance with State Government Article, §10-205(a), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Order of Proceedings.</text> <paragraph num="(1)"> <text>The Commissioner shall call the hearing to order.</text> </paragraph> <paragraph num="(2)"> <text>The Commissioner shall explain briefly the purpose and nature of the hearing.</text> </paragraph> <paragraph num="(3)"> <text>The Commissioner may allow the parties to present preliminary matters.</text> </paragraph> <paragraph num="(4)"> <text>The parties may make opening statements.</text> </paragraph> <paragraph num="(5)"> <text>The Commissioner shall state the order of presentation of evidence.</text> </paragraph> <paragraph num="(6)"> <text>Witnesses shall be sworn or put under affirmation to tell the truth.</text> </paragraph> <paragraph num="(7)"> <text>The parties may present closing summations and argument.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Function of Presiding Officer. During the hearing, the Commissioner:</text> <paragraph num="(1)"> <text>Shall administer the oath or affirmation to each witness;</text> </paragraph> <paragraph num="(2)"> <text>Shall rule on the admissibility of evidence;</text> </paragraph> <paragraph num="(3)"> <text>Shall maintain order and take such action as necessary to avoid delay in the conduct of the hearing; and</text> </paragraph> <paragraph num="(4)"> <text>May question any witness as to any matter that the Commissioner considers relevant and material to the proceeding.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Presentation by Parties. On a genuine issue relevant to the determination of a contested case, each party may:</text> <paragraph num="(1)"> <text>Call witnesses;</text> </paragraph> <paragraph num="(2)"> <text>Offer evidence;</text> </paragraph> <paragraph num="(3)"> <text>Cross-examine any witness called by another party; and</text> </paragraph> <paragraph num="(4)"> <text>Make opening and closing statements.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Telephone Hearings.</text> <paragraph num="(1)"> <text>Consent of Parties. If each party consents and has an opportunity to participate in the entire proceeding, the Commissioner may conduct all or part of the hearing by telephone, video, or other electronic means.</text> </paragraph> <paragraph num="(2)"> <text>Documentary Evidence. A party shall mail copies of all documentary evidence to be offered during a telephone hearing to all parties and the Commissioner at least 5 days before the hearing.</text> </paragraph> <paragraph num="(3)"> <text>Default. The following conditions may be considered a failure to appear and grounds for default, if the conditions exist for more than 10 minutes after the scheduled time for a telephone hearing:</text> <paragraph num="(a)"> <text>Failure of a party to answer the telephone;</text> </paragraph> <paragraph num="(b)"> <text>Failure of a party to free the telephone for a hearing; or</text> </paragraph> <paragraph num="(c)"> <text>Failure of a party to be ready to proceed with the hearing as scheduled.</text> </paragraph> </paragraph> </paragraph> <paragraph num="F."> <text>Waiver of Right to Appear at Hearing.</text> <paragraph num="(1)"> <text>A party may waive the right to appear personally at the hearing.</text> </paragraph> <paragraph num="(2)"> <text>A waiver shall be in writing and filed with the Commissioner.</text> </paragraph> <paragraph num="(3)"> <text>A waiver may be withdrawn by a party by written notice filed with the Commissioner not later than 7 days before the scheduled hearing.</text> </paragraph> <paragraph num="(4)"> <text>A party who has filed a timely written waiver may not be held in default for failing to appear at the hearing.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Public Hearings. All hearings are public unless all respondents request that the hearing be conducted privately and the Commissioner, for good cause shown, grants the request.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".19" heading="Submission of Case on Documentary Record."> <text>The Commissioner may elect not to hold a hearing if all parties agree to submit the case on the documentary record and waive their right to appear.</text> </regulation> <regulation prefix="Regulation" num=".20" heading="Evidence."> <paragraph num="A."> <text>Standards of Admissibility. Evidence shall be admitted in accordance with State Government Article, §10-213, Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Relevance. The Commissioner may admit evidence that reasonable and prudent individuals commonly accept in the conduct of their affairs, and give probative effect to that evidence.</text> </paragraph> <paragraph num="C."> <text>Exclusion of Evidence. The Commissioner may exclude evidence that is incompetent, irrelevant, immaterial, or unduly repetitious.</text> </paragraph> <paragraph num="D."> <text>Hearsay. Evidence may not be excluded solely on the ground that it is hearsay.</text> </paragraph> <paragraph num="E."> <text>Stipulations. Parties may, by stipulation, agree on any facts relevant to the proceedings. The facts stipulated shall be considered proven for purposes of the proceedings.</text> </paragraph> <paragraph num="F."> <text>Official Notice.</text> <paragraph num="(1)"> <text>The Commissioner may take official notice of a fact that is judicially noticeable or that is within the specialized knowledge of the Division.</text> </paragraph> <paragraph num="(2)"> <text>Before taking official notice of a fact, the Commissioner shall:</text> <paragraph num="(a)"> <text>Notify each party before or during the hearing; and</text> </paragraph> <paragraph num="(b)"> <text>Give each party an opportunity to contest the fact.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".21" heading="Examination of Witnesses."> <paragraph num="A."> <text>Oath. Witnesses shall testify under oath or affirmation.</text> </paragraph> <paragraph num="B."> <text>Rules of Evidence. A party may conduct direct examination or cross-examination without strict adherence to formal rules of evidence in order to obtain a full and fair disclosure of facts relevant to matters in issue.</text> </paragraph> <paragraph num="C."> <text>Hostile Witnesses. If the Commissioner determines that a witness is hostile or unresponsive, the Commissioner may authorize the party calling the witness to proceed as if the witness were under cross-examination.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".22" heading="Sequestration of Witnesses."> <paragraph num="A."> <text>Request for Sequestration. Upon request by any party, the Commissioner may exclude witnesses other than parties from the hearing room when those witnesses are not testifying.</text> </paragraph> <paragraph num="B."> <text>Representative of Party. A party that is not a natural person may designate an individual as its representative to remain in the hearing room, even though the individual may also be a witness.</text> </paragraph> <paragraph num="C."> <text>Experts. An expert witness who is to render an opinion based upon the testimony given at the hearing may remain in the hearing room during the testimony.</text> </paragraph> <paragraph num="D."> <text>Prohibition of Disclosure. The Commissioner may order the witnesses, parties, their counsel, and any person under their direction not to disclose to any sequestered witness the substance of the testimony, exhibits, or other evidence introduced during the witness' absence.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".23" heading="Ex Parte Communications."> <paragraph num="A."> <text>General Prohibition. Except as provided in §B of this regulation, while a contested case is pending, the Commissioner may not communicate ex parte regarding the merits of any issue in the case with:</text> <paragraph num="(1)"> <text>A respondent;</text> </paragraph> <paragraph num="(2)"> <text>A representative or attorney for a respondent;</text> </paragraph> <paragraph num="(3)"> <text>Division staff or counsel involved in the investigation or presentation of the case; or</text> </paragraph> <paragraph num="(4)"> <text>An administrative law judge or other hearing officer who presided at an earlier stage of the case.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Other Division Staff. The Commissioner may communicate regarding the merits of any issue in the case with the Division's staff or counsel who have not otherwise participated in the investigation or presentation of the case.</text> </paragraph> <paragraph num="C."> <text>Disclosure. Ex parte communications received before a hearing in a contested case that would otherwise violate §A of this regulation shall be disclosed in accordance with State Government Article, §10-219, Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".24" heading="Proposed Decisions and Final Decisions."> <paragraph num="A."> <text>Cases Heard by the Commissioner. The Commissioner shall prepare written findings of fact and conclusions of law, and shall promptly issue a final decision after the conclusion of any hearing held before the Commissioner. The final decision shall include rulings on any proposed findings of fact and conclusions of law submitted by the parties.</text> </paragraph> <paragraph num="B."> <text>Cases Heard by an Administrative Law Judge.</text> <paragraph num="(1)"> <text>When the Commissioner has delegated authority to hear a case to the Office of Administrative Hearings but has reserved final decision-making authority, the administrative law judge shall send a proposed decision, including proposed findings of fact and conclusions of law, to the parties and the Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>Within 15 days of receipt of the proposed decision, each party shall file with the Commissioner any exceptions to the proposed decision, any supporting memorandum, and any request to present argument to the Commissioner.</text> </paragraph> <paragraph num="(3)"> <text>Within 10 days of receipt of exceptions filed by an adverse party, a party may file a memorandum in opposition to those exceptions.</text> </paragraph> <paragraph num="(4)"> <text>The Commissioner shall review the hearing record, the proposed decision of the administrative law judge, and any exceptions and memoranda filed by the parties, and shall permit the parties to present arguments, if they request an opportunity to do so. Before issuing a final decision, the Commissioner may require the submission of additional information or documentation.</text> </paragraph> <paragraph num="(5)"> <text>The Commissioner shall issue a final decision that may adopt, modify, or reject the proposed findings of fact, proposed conclusions of law, or the proposed decision of the administrative law judge. The final decision shall include rulings on any exceptions filed by the parties.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Notice of Appeal Rights. A final decision of the Commissioner shall advise each respondent that any appeal to the circuit court shall be filed within 30 days from the date the order is mailed by the Division.</text> </paragraph> <paragraph num="D."> <text>Final Decision by Default. The Commissioner may enter a final decision as to any respondent who fails to:</text> <paragraph num="(1)"> <text>File a timely responsive answer; or</text> </paragraph> <paragraph num="(2)"> <text>Appear for a hearing at the scheduled time and date.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Service of Final Decision. A final decision of the Commissioner shall be in writing. A copy of the final decision shall be hand delivered or mailed, by certified or registered mail, to each party or its representative or attorney.</text> </paragraph> <paragraph num="F."> <text>Correction of Final Decision. In the event of fraud, mistake, or irregularity, the Commissioner may correct a final decision at any time.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".25" heading="Record of Proceedings."> <paragraph num="A."> <text>Recording of Oral Proceedings. The Division shall cause all oral proceedings, including testimony, to be recorded by a stenographer or by tape recorder or other device. The recording of the proceedings, which need not be transcribed, shall be maintained in the custody of the Division. In the event of an appeal from a decision of the Commissioner, the appellant shall pay the cost of transcription of the record. Other verbatim reports or recordings may not be made by any other person without the consent of the Commissioner.</text> </paragraph> <paragraph num="B."> <text>The record of a contested case shall include:</text> <paragraph num="(1)"> <text>All pleadings, motions, orders, and related papers filed with the Commissioner or the Office of Administrative Hearings;</text> </paragraph> <paragraph num="(2)"> <text>All documentary and tangible evidence;</text> </paragraph> <paragraph num="(3)"> <text>A statement of matters officially noticed;</text> </paragraph> <paragraph num="(4)"> <text>Recordings and any transcripts of oral proceedings;</text> </paragraph> <paragraph num="(5)"> <text>The findings of fact and conclusions of law proposed by each party;</text> </paragraph> <paragraph num="(6)"> <text>Any exceptions filed by the parties and the Commissioner's rulings on those exceptions;</text> </paragraph> <paragraph num="(7)"> <text>The findings of fact, conclusions of law, and decision of the Commissioner;</text> </paragraph> <paragraph num="(8)"> <text>If a case has been delegated to the Office of Administrative Hearings for a proposed decision:</text> <paragraph num="(a)"> <text>The notice of delegation;</text> </paragraph> <paragraph num="(b)"> <text>Any notice of revocation;</text> </paragraph> <paragraph num="(c)"> <text>The proposed decision, including proposed findings of fact and proposed conclusions of law, of the administrative law judge;</text> </paragraph> <paragraph num="(d)"> <text>Any exceptions filed by the parties;</text> </paragraph> <paragraph num="(e)"> <text>The Commissioner's rulings on any exceptions and proposed findings of fact or conclusions of law; and</text> </paragraph> <paragraph num="(f)"> <text>Any additional information or documentation submitted to the Commissioner by the parties;</text> </paragraph> </paragraph> <paragraph num="(9)"> <text>The final order, if any, of the Commissioner; and</text> </paragraph> <paragraph num="(10)"> <text>Other documents or material placed in the record as required by law or at the discretion of the Commissioner.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Index of Record. The Division shall prepare an index of the record of proceedings.</text> </paragraph> <paragraph num="D."> <text>Public Inspection. Upon compilation, the record shall be available for public inspection at the Division during normal business hours unless the contents are otherwise protected by law.</text> </paragraph> <paragraph num="E."> <text>Copy of Record. The Division, upon request of a party, shall arrange for a copy of the record to be made, if the requesting party pays in advance to the Office of the Attorney General the Division's estimate of the reasonable cost of making the copy. The copy shall be certified by the Commissioner.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".26" heading="Stay of Enforcement."> <paragraph num="A."> <text>Motion for Stay. After the Commissioner has issued a final decision that results in the entry of a final order against a party, the party may move for a stay of the Commissioner's order if the party has filed an appeal of the final decision.</text> </paragraph> <paragraph num="B."> <text>Form of Motion. A request for a stay shall be in writing and shall include a copy of the order for appeal filed in the circuit court.</text> </paragraph> <paragraph num="C."> <text>Criteria for Stay. The Commissioner may grant a stay of a final order for such period of time as the Commissioner considers appropriate, after considering:</text> <paragraph num="(1)"> <text>The potential hardship caused by the order to the party requesting the stay;</text> </paragraph> <paragraph num="(2)"> <text>The likelihood that the party will prevail on appeal;</text> </paragraph> <paragraph num="(3)"> <text>Other reasons for a stay proffered by that party;</text> </paragraph> <paragraph num="(4)"> <text>The interest of investor protection; and</text> </paragraph> <paragraph num="(5)"> <text>The public interest.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".27" heading="Disposition by Agreement."> <text>At any time after initiation of a contested case, with the approval of the Commissioner, the parties may resolve a contested case without a final decision by stipulation, settlement, or consent order.</text> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §11-203;Business Regulation Article, §§14-106 and 14-206;State Government Article, §10-206; Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: May 23, 1994 (21:10 Md. R. 840)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01B amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .02B amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .03D adopted effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04A amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06A amended and D adopted effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .07 amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .09B, C amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .16C amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .23B amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> <annotation type="History" subtype="Administrative History">Regulation .24B amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> </annotations> </chapter> <chapter num="07" heading="Investigations"> <regulation prefix="Regulation" num=".01" heading="Scope."> <paragraph num="A."> <text>This chapter applies to investigations instituted by the Securities Commissioner under the:</text> <paragraph num="(1)"> <text>Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland (the Maryland Securities Act);</text> </paragraph> <paragraph num="(2)"> <text>Maryland Business Opportunities Sales Act, Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland (the Business Opportunities Act); or</text> </paragraph> <paragraph num="(3)"> <text>Maryland Franchise Registration and Disclosure Law, Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland (the Maryland Franchise Law).</text> </paragraph> </paragraph> <paragraph num="B."> <text>This chapter does not apply to examinations of registrants conducted by the Securities Division under the Maryland Securities Act, Corporations and Associations Article, §11-411(e), Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Document” means the original of a paper or other tangible item or material on which information is written or recorded and includes, by example, correspondence, memoranda, reports, circulars, announcements, financial statements or projections, books, ledgers, records, tabulations, maps, charts, photographs, mechanical transcriptions, electronic and computer media, and any other tangible recording.</text> </paragraph> <paragraph num="(2)"> <text>“Person” means an individual, partnership, corporation, limited liability company, limited liability partnership, business trust, estate, trust, fiduciary, representative of any kind, association, unincorporated organization, government, political subdivision, and any other legal or commercial entity, and includes all individuals and entities set forth in Business Regulation Article, §1-101(g), and Corporations and Associations Article, §§1-101(p) and 11-101(n), Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Subpoenas."> <paragraph num="A."> <text>Type of Subpoena. As part of an investigation, the Commissioner may issue a subpoena to any person to:</text> <paragraph num="(1)"> <text>Testify under oath;</text> </paragraph> <paragraph num="(2)"> <text>Answer written interrogatories under oath;</text> </paragraph> <paragraph num="(3)"> <text>Produce documents and tangible things; and</text> </paragraph> <paragraph num="(4)"> <text>Permit inspection and copying of documents.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Content of Subpoena. A subpoena shall:</text> <paragraph num="(1)"> <text>Describe generally the nature of the investigation;</text> </paragraph> <paragraph num="(2)"> <text>If the subpoena requires testimony under oath, specify the date, time, and place for the taking of testimony;</text> </paragraph> <paragraph num="(3)"> <text>If the subpoena requires answers to written interrogatories, contain a copy of the written interrogatories;</text> </paragraph> <paragraph num="(4)"> <text>If the subpoena requires the production of tangible things or documents:</text> <paragraph num="(a)"> <text>Describe the things and documents to be produced with reasonable specificity, and</text> </paragraph> <paragraph num="(b)"> <text>Specify a date, time, and place at which the things and documents are to be produced;</text> </paragraph> </paragraph> <paragraph num="(5)"> <text>Notify the person to whom the subpoena is directed of the obligation to supplement responses under Regulation .05 of this chapter;</text> </paragraph> <paragraph num="(6)"> <text>Advise the person to whom the subpoena is directed that the person may be represented by counsel; and</text> </paragraph> <paragraph num="(7)"> <text>Identify a member of the Securities Division who may be contacted in reference to the subpoena.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Subpoenas to Corporations and Other Entities.</text> <paragraph num="(1)"> <text>A subpoena directed to a corporation, partnership, or other entity that requires testimony under oath shall describe with reasonable particularity the subject matter of the testimony.</text> </paragraph> <paragraph num="(2)"> <text>An entity that receives a subpoena to answer written interrogatories or to testify under oath shall designate one or more of its officers, agents, employees, or other authorized persons familiar with the subject matter specified in the subpoena to respond to the subpoena on its behalf.</text> </paragraph> <paragraph num="(3)"> <text>The persons designated by an entity to respond to a subpoena on its behalf shall answer the interrogatories or testify as to all matters known or reasonably available to the entity.</text> </paragraph> <paragraph num="(4)"> <text>A subpoena directed to an entity that requires testimony under oath or answers to written interrogatories shall advise the entity of its obligations under this regulation.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Service of Subpoena.</text> <paragraph num="(1)"> <text>A subpoena may be served by personal service or by mail.</text> </paragraph> <paragraph num="(2)"> <text>The person who serves a subpoena shall complete a certificate of service attesting to the method and date of service.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Effect of Other Proceedings. The pendency or beginning of administrative or judicial proceedings against a person by the Commissioner does not relieve the person of its obligation to respond to a subpoena issued under this regulation.</text> </paragraph> <paragraph num="F."> <text>Petition to Modify or Quash Subpoena.</text> <paragraph num="(1)"> <text>A person served with a subpoena under this regulation may request that the subpoena be modified or quashed.</text> </paragraph> <paragraph num="(2)"> <text>A petition to modify or quash a subpoena issued under this regulation shall be filed with the Commissioner within 10 days of service of the subpoena or by the date specified for compliance with the subpoena, whichever is earlier. The petition shall set forth good cause why the subpoena should be modified or quashed.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Enforcement of Subpoena. If a person served with a subpoena under this regulation fails to appear as required by the subpoena, or fails to provide testimony, answers to written interrogatories, or documents and tangible things as required by the subpoena, the Commissioner may apply to the appropriate circuit court for enforcement of the subpoena.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Testimony Under Oath."> <paragraph num="A."> <text>Presiding Officer. Testimony under oath shall be taken before the Commissioner or an officer designated by the Commissioner.</text> </paragraph> <paragraph num="B."> <text>Attendance at Testimony. A witness who testifies under oath in compliance with a subpoena may be accompanied and represented by counsel. Members of the Division involved in the investigation may be present during the taking of testimony. Other persons may not attend unless permitted in the discretion of the Commissioner.</text> </paragraph> <paragraph num="C."> <text>Examination of Witness. The following individuals may ask questions of</text> <paragraph num="(1)"> <text>Attorneys representing the Division;</text> </paragraph> <paragraph num="(2)"> <text>The Commissioner; and</text> </paragraph> <paragraph num="(3)"> <text>Counsel representing the witness.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Record of Testimony. Testimony shall be recorded by a stenographer or by tape recorder or other device. Any other recording is not permitted. The recording of the testimony shall be maintained in the custody of the Division.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Production of Things and Documents."> <paragraph num="A."> <text>Assertion of Privilege. If a person responding to a subpoena for production of things or documents withholds a record or document on the basis of a privilege, the person shall state, with respect to each document:</text> <paragraph num="(1)"> <text>The name and title of the author of the document;</text> </paragraph> <paragraph num="(2)"> <text>The names and titles of all persons to whom the document was addressed;</text> </paragraph> <paragraph num="(3)"> <text>The names and titles of all persons to whom copies of the document were sent;</text> </paragraph> <paragraph num="(4)"> <text>The date on which the document was written or otherwise produced and the date on which it was mailed, sent, or delivered to its addressee;</text> </paragraph> <paragraph num="(5)"> <text>The number of pages in the document;</text> </paragraph> <paragraph num="(6)"> <text>A brief description of the nature or subject matter of the document;</text> </paragraph> <paragraph num="(7)"> <text>The basis on which the document is being withheld; and</text> </paragraph> <paragraph num="(8)"> <text>The paragraph number of the subpoena to which the document is responsive.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Obligation to Supplement Responses. If a person has responded to a subpoena under this regulation and later discovers or obtains additional documents or things responsive to the subpoena, the person shall supplement the response as soon as reasonably possible.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Use and Confidential Treatment of Subpoenaed Materials."> <paragraph num="A."> <text>Use of Subpoenaed Materials. The Division may use information, documents, and things obtained by subpoena in furtherance of an investigation conducted by the Division and of joint investigations conducted by the Division in cooperation with other state and federal agencies.</text> </paragraph> <paragraph num="B."> <text>Confidential Treatment. Information, documents, and things obtained by subpoena may be held confidential and are not subject to disclosure to the extent provided by the Public Information Act, State Government Article, §§10-611—10-628, Annotated Code of Maryland.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §§11-203 and 11-701;Business Regulation Article, §§14-106, 14-111, 14-206, and 14-212; Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: December 5, 1994 (21:24 Md. R. 1986)</annotation> <annotation type="History" subtype="Administrative History">Regulation .02B amended effective June 15, 1998 (25:12 Md. R. 944)</annotation> </annotations> </chapter> <chapter num="08" heading="Franchise Registration and Disclosure"> <regulation prefix="Regulation" num=".01" heading="Definitions."> <paragraph num="A."> <text>For purposes of this chapter and of the Maryland Franchise Registration and Disclosure Law, Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>Except as used in the Uniform Franchise Offering Circular, “affiliate” means a person that, directly or indirectly, controls, is controlled by, or is under common control with, another person.</text> </paragraph> <paragraph num="(2)"> <text>“Commissioner” means the Securities Commissioner in the Office of the Attorney General or the designated agent of the Commissioner.</text> </paragraph> <paragraph num="(3)"> <text>“Division” means the Division of Securities in the Office of the Attorney General.</text> </paragraph> <paragraph num="(4)"> <text>Earnings Claim.</text> <paragraph num="(a)"> <text>“Earnings claim” means information given to a prospective franchisee by, on behalf of, or at the direction of the franchisor or its agent, from which a specific level or range of actual or potential sales, cost, income, or profit from franchised or nonfranchised units may be ascertained.</text> </paragraph> <paragraph num="(b)"> <text>“Earnings claim” includes, but is not necessarily limited to, a chart, table, or mathematical calculation presented to demonstrate possible results based on a combination of variables such as multiples of prices and quantity to reflect gross sales.</text> </paragraph> <paragraph num="(c)"> <text>“Earnings claim” includes a representation of a franchise offering that is described in terms of the amount or value of revenue, sales, income, contracts, or business intended to be provided to a franchisee within a specified period of time.</text> </paragraph> </paragraph> <paragraph num="(5)"> <text>“Franchise” has the meaning stated in the Maryland Franchise Law, Business Regulation Article, §14-201(e), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Franchise fee” has the meaning stated in the Maryland Franchise Law, Business Regulation Article, §14-201(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(7)"> <text>“Maryland Franchise Offering Circular (MFOC)” means a document prepared in accordance with Regulation .04 of this chapter.</text> </paragraph> <paragraph num="(8)"> <text>“Maryland Franchise Registration and Disclosure Law” and the “Maryland Franchise Law” mean Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(9)"> <text>“Material change”, for purposes of the Maryland Franchise Law, Business Regulation Article, §14-220, Annotated Code of Maryland, and Regulation .06 of this chapter, includes, but is not limited to:</text> <paragraph num="(a)"> <text>The termination, in any manner, of more than 10 percent of the franchises of the franchisor that are located in the State during any 3-month period;</text> </paragraph> <paragraph num="(b)"> <text>The termination, in any manner, of more than 5 percent of all franchises of the franchisor regardless of location during any 3-month period;</text> </paragraph> <paragraph num="(c)"> <text>A reorganization of the franchisor;</text> </paragraph> <paragraph num="(d)"> <text>A change in control, corporate name, or state of incorporation of the franchisor;</text> </paragraph> <paragraph num="(e)"> <text>The commencement of any new product, service, or model line requiring, directly or indirectly, additional investment by any franchisee; and</text> </paragraph> <paragraph num="(f)"> <text>The discontinuation or modification of the marketing plan or system of any product or service of the franchisor which accounts for at least 20 percent of the annual gross sales of the franchisor.</text> </paragraph> </paragraph> <paragraph num="(10)"> <text>“Person” has the meaning stated in Business Regulation Article, §1-101(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(11)"> <text>For purposes of the Maryland Franchise Law, Business Regulation Article, §14-203, Annotated Code of Maryland, the Maryland edition of a “publication” is considered a separate “publication” if the Maryland edition does not carry the same advertising as other editions of the publication.</text> </paragraph> <paragraph num="(12)"> <text>“Uniform Franchise Offering Circular (UFOC)” means the Uniform Franchise Offering Circular Guidelines adopted by the North American Securities Administrators Association, Inc., on April 25, 1993, which is incorporated by reference in Regulation .04A of this chapter.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Franchise."> <paragraph num="A."> <text>Scope. The Commissioner shall consider the factors set forth in this regulation in any determination as to whether a business relationship is a franchise as defined in the Maryland Franchise Law, Business Regulation Article, §14-201(e), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Marketing Plan. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(e)(1), Annotated Code of Maryland, “marketing plan” means a plan or system concerning a material aspect of conducting business. Indicia of a marketing plan include:</text> <paragraph num="(1)"> <text>Price specification, special pricing systems, or discount plans;</text> </paragraph> <paragraph num="(2)"> <text>Sales or display equipment or merchandising devices;</text> </paragraph> <paragraph num="(3)"> <text>Sales techniques;</text> </paragraph> <paragraph num="(4)"> <text>Promotional or advertising materials or cooperative advertising;</text> </paragraph> <paragraph num="(5)"> <text>Training regarding the promotion, operation, or management of the business; and</text> </paragraph> <paragraph num="(6)"> <text>Operational, managerial, technical, or financial guidelines or assistance.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Prescription by Franchisor. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(e)(1)(i), Annotated Code of Maryland, whether a marketing plan or system is “prescribed in substantial part by the franchisor” depends upon consideration of a number of factors including, but not limited to:</text> <paragraph num="(1)"> <text>Whether the representations made by the franchisor in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer to sell or sale of a franchise requires, that the franchisee operate a business that purchases a substantial portion of its goods solely from sources designated or approved by the franchisor;</text> </paragraph> <paragraph num="(2)"> <text>Whether the representations made by the franchisor in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer to sell or sale of a franchise requires, that the franchisee follow an operating plan, standard procedure, or training manual, or its substantial equivalent, promulgated by the franchisor in the operation of the licensed business, violations of which may, under the terms of the agreement, permit the franchisor to terminate the agreement;</text> </paragraph> <paragraph num="(3)"> <text>Whether the representations made by the franchisor in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer to sell or sale of a franchise requires, that the franchisee is limited as to the:</text> <paragraph num="(a)"> <text>Type, quantity, or quality of any product or service the franchisee may sell; or</text> </paragraph> <paragraph num="(b)"> <text>Persons or accounts to which the franchisee may sell the franchisor's product or service;</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Whether the provisions of the agreement permitting the franchisor to terminate the agreement, to buy back the franchisee or license rights assigned by the agreement, or to refuse to renew the grant of the franchisee or license rights are such as to operate or be exercisable substantially at the will of the franchisor; and</text> </paragraph> <paragraph num="(5)"> <text>Whether the representations made by the franchisor or seller in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer or sale of a franchise requires, that the franchisor aid or assist the franchisee in:</text> <paragraph num="(a)"> <text>Training,</text> </paragraph> <paragraph num="(b)"> <text>Obtaining locations or facilities for operation of the franchisee's business, or</text> </paragraph> <paragraph num="(c)"> <text>Marketing the franchisor's product or service.</text> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Association with Franchisor's Business. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(e)(1)(ii), Annotated Code of Maryland, whether a marketing plan or system is “associated substantially with the trademark, service mark, trade name, logotype, advertising, or other commercial symbol that designates the franchisor or its affiliate” depends upon consideration of a number of factors, including but not limited to:</text> <paragraph num="(1)"> <text>Whether the identification of the franchisor's business or use of its trademark, service mark, trade name, logotype, advertising, or other commercial symbol is used either by the franchisor or the franchisee to enhance the chances of the franchisee's success in the business of dealing in, selling, or promoting the franchisor's product or service; and</text> </paragraph> <paragraph num="(2)"> <text>Whether the agreement provides for the franchisee to contribute a portion of its operating revenue to the franchisor for advertising expenses, or representations made by the franchisor or the franchisor's agents or employees otherwise suggest, require, or compel payment by the franchisee for advertising conducted, managed, or prescribed by the franchisor.</text> </paragraph> </paragraph> <paragraph num="E."> <text>The Commissioner may consider, in determining whether a business relationship is a franchise as defined in Maryland Franchise Law, Business Regulation Article, §14-201, Annotated Code of Maryland, whether the relationship is described as or entitled a “franchise”.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Franchise Fee."> <paragraph num="A."> <text>Scope. The Commissioner shall consider the factors set forth in this regulation in any determination as to whether a franchisee is required to pay a franchise fee, as defined in the Maryland Franchise Law, Business Regulation Article, §14-201(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Form and Timing of Payment. A franchise fee includes, but is not limited to, a payment that is made before, upon, or after execution of an agreement to purchase, process, resell, or otherwise distribute a manufacturer's or franchisor's goods, services, equipment, inventory, or real estate, and that is made in the form of a lump sum, installments, periodic royalties, profits, or cash flow, or is or may be reflected in the price of goods, services, equipment, inventory, or real estate sold by the franchisor to the franchisee.</text> </paragraph> <paragraph num="C."> <text>Purchases at Wholesale Price. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(g)(3)(i), Annotated Code of Maryland, whether a transaction involves “the purchase of or agreement to purchase goods at a wholesale price” depends upon consideration of a number of factors, including but not limited to whether in connection with an agreement to process, resell, or otherwise distribute a manufacturer's or franchisor's product or service:</text> <paragraph num="(1)"> <text>Consideration paid by the buyer in purchase transactions is solely for the payment of goods, services, equipment, inventory, or real estate, and does not reflect the buyer's payment for the right to continue the purchase transactions or the business;</text> </paragraph> <paragraph num="(2)"> <text>The buyer's purchase of goods, services, equipment, inventory, or real estate is required by or in connection with the agreement; and</text> </paragraph> <paragraph num="(3)"> <text>The cost to the seller of goods, services, equipment, inventory, or real estate is reasonably related to the price paid by the buyer.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Application for Registration."> <paragraph num="A."> <text>Form of Application. An application to register a franchise shall be prepared in accordance with the Uniform Franchise Offering Circular Guidelines adopted by the North American Securities Administrators Association, Inc., on April 25, 1993 (UFOC), which is incorporated by reference, with the modifications set forth in §B of this regulation. A copy of the UFOC may be obtained from the Division for a nominal fee and may also be found in Business Franchise Guide (CCH) §5200—5200.17.</text> </paragraph> <paragraph num="B."> <text>Modifications to UFOC.</text> <paragraph num="(1)"> <text>An application shall include two copies of the proposed offering circular which complies with the instructions for the UFOC with the additions and modifications set forth in §B(2)—(4) of this regulation.</text> </paragraph> <paragraph num="(2)"> <text>Item 11—Franchisor Obligations. In addition to the information required by the UFOC, the offering circular shall disclose in Item 11 how fees related to advertising are to be raised and spent, and how a franchisee may obtain an accounting of advertising expenditures.</text> </paragraph> <paragraph num="(3)"> <text>Item 17—Renewal, Termination, Transfer, and Dispute Resolution. If the agreement provides for termination of the franchise upon bankruptcy of the franchisee, the offering circular shall disclose in Item 17, in addition to the information required by the UFOC, that this provision may not be enforceable under federal bankruptcy law.</text> </paragraph> <paragraph num="(4)"> <text>Item 21—Financial Statements. In addition to the information required by the UFOC, the offering circular shall contain financial statements required under Regulation .13 of this chapter.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Initial Registration."> <paragraph num="A."> <text>Registration File Number.</text> <paragraph num="(1)"> <text>Upon receipt of an application for initial registration, the Division shall assign a file number to the application.</text> </paragraph> <paragraph num="(2)"> <text>Correspondents shall refer to the assigned file number in all subsequent related filings and correspondence with the Division.</text> </paragraph> <paragraph num="(3)"> <text>An application for registration may include a stamped self-addressed envelope and a duplicate cover letter which the Division may stamp and return to the applicant as confirmation of receipt of the filing and notification of the registration file number.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Undertaking. During an examination of an application for initial registration under the Maryland Franchise Law, the Commissioner may require that the applicant provide an undertaking that it has not offered or sold franchises in the State without being registered.</text> </paragraph> <paragraph num="C."> <text>Completion of Filing.</text> <paragraph num="(1)"> <text>During an examination of an application for initial registration under the Maryland Franchise Law, the Commissioner may require the applicant to modify the application or to submit additional information to remedy deficiencies in the application. The Commissioner may require the applicant to make such other disclosures as the Commissioner determines are necessary in the public interest and for the protection of prospective franchisees.</text> </paragraph> <paragraph num="(2)"> <text>A request by the Commissioner for modifications, additional information, or other disclosures may be communicated in any form to the applicant, or to the person filing the application on behalf of the applicant, within 30 business days after receipt of the initial application.</text> </paragraph> <paragraph num="(3)"> <text>An application for initial registration is considered filed for purposes of the Maryland Franchise Law, Business Regulation Article, §14-218(b), Annotated Code of Maryland, only when the application fee required by the Maryland Franchise Law, Business Regulation Article, §14-215, Annotated Code of Maryland, and all modifications, information, and disclosures reasonably required by the Commissioner have been received by the Division.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Abandonment of Application. If an applicant fails to provide information requested by the Commissioner or otherwise neglects to pursue an application for initial registration in a diligent manner, the Commissioner shall consider the application abandoned 6 months after the date of the last written communication from the applicant or any person on behalf of the applicant. An applicant who wishes to revive an abandoned application shall submit a new application, together with a new application fee.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Amendment of Registration."> <paragraph num="A."> <text>When to File.</text> <paragraph num="(1)"> <text>An application for amendment of a registration statement shall be promptly filed if there is a material change in the information that a registrant previously filed with the Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>An amendment is not required if a particular franchise agreement is changed as a result of negotiations between the franchisee and the franchisor and the franchisor agrees to the change or a similar change only on an individual or isolated basis.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Form of Amendment.</text> <paragraph num="(1)"> <text>An application for amendment of a registration statement, whether filed before or after the effective date of registration, shall be in the form set forth in Regulation .04 of this chapter and shall contain:</text> <paragraph num="(a)"> <text>One complete clean copy of the amended MFOC; and</text> </paragraph> <paragraph num="(b)"> <text>One redlined copy of the MFOC that highlights all additions, deletions, and other changes by underlining, boldface or italic type, or such other symbols as to indicate clearly any alterations to the applicant's prior submission.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Each amendment shall be accompanied by a facing page which indicates that the filing is an amendment and which states the number of the amendment and the items of the offering circular which are affected by the amendment.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Payment of Fee. An application to amend an effective registration statement shall be accompanied by payment for the fee set forth in the Maryland Franchise Law, Business Regulation Article, §14-220, Annotated Code of Maryland.</text> </paragraph> <paragraph num="D."> <text>Status of Current Registration. During the pendency of an application to amend a registration statement, the current registration statement filed with the Commissioner remains in effect.</text> </paragraph> <paragraph num="E."> <text>Completion of Filing. During examination of an application to amend an effective registration statement, the Commissioner may require the applicant to modify the application or to submit additional information to remedy deficiencies in the application. The Commissioner may require the applicant to make such other disclosures as the Commissioner considers necessary or appropriate in the public interest or for the protection of prospective franchisees.</text> </paragraph> <paragraph num="F."> <text>Effective Date of Amendment.</text> <paragraph num="(1)"> <text>If the Commissioner does not require additional information from the applicant and does not issue a stop order or other order blocking effectiveness of the amendment, an amendment to an effective registration statement becomes effective 15 business days after receipt by the Commissioner of the application to amend, or at such earlier time as the Commissioner may determine.</text> </paragraph> <paragraph num="(2)"> <text>If the Commissioner requires that the applicant provide additional information, the amendment to the registration statement becomes effective 15 business days after receipt by the Commissioner of the information requested, unless the Commissioner issues a stop order or other order blocking the effectiveness of the amendment.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Abandonment of Amendment. If an applicant fails to provide information requested by the Commissioner or otherwise neglects to pursue an application to amend an effective registration statement in a diligent manner, the Commissioner shall consider the application to amend the registration statement abandoned 6 months after the date of the last written communication from the applicant or any person on behalf of the applicant. An applicant who wishes to revive an abandoned application to amend an effective registration statement shall submit a new application to amend the registration statement, together with a new filing fee.</text> </paragraph> <paragraph num="H."> <text>Annual Effective Date. Notwithstanding the amendment of an effective registration statement, the effective date of the initial or renewal registration statement remains the date from which annual effectiveness is measured.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Renewal of Registration."> <paragraph num="A."> <text>Time for Submitting Renewal Application.</text> <paragraph num="(1)"> <text>An application to renew a registration shall be submitted to the Division not less than 15 business days before the end of 1 year from the effective date of the registration.</text> </paragraph> <paragraph num="(2)"> <text>If a registrant submits an application to renew a registration less than 15 days before the expiration of the prior year's registration, but before the expiration of the prior year's registration, the Commissioner may consider the application as an application for renewal registration.</text> </paragraph> <paragraph num="(3)"> <text>If a registrant submits an application to renew a registration after the expiration of the prior year's registration, the Commissioner shall treat the application as an application for initial registration.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Form of Renewal Application. An application to renew a registration shall be in the form set forth in Regulation .04 of this chapter and shall be accompanied by:</text> <paragraph num="(1)"> <text>Two copies of the registrant's most recent MFOC which meets the requirements of Regulation .04 of this chapter;</text> </paragraph> <paragraph num="(2)"> <text>Financial statements that satisfy the requirements of Regulation .13 of this chapter; and</text> </paragraph> <paragraph num="(3)"> <text>Payment for the renewal fee required by the Maryland Franchise Law, Business Regulation Article, §14-219, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Completion of Filing.</text> <paragraph num="(1)"> <text>During an examination of an application to renew a registration, the Commissioner may require the applicant to modify the application or to submit additional information to remedy deficiencies in the application. The Commissioner may require the applicant to make such other disclosures as the Commissioner considers necessary or appropriate in the public interest or for the protection of prospective franchisees.</text> </paragraph> <paragraph num="(2)"> <text>A request by the Commissioner for modifications, additional information, or other disclosures may be communicated in any form to the applicant, or to the person submitting the application on behalf of the applicant, within 15 business days after receipt of the application.</text> </paragraph> <paragraph num="(3)"> <text>An application for renewal registration is considered filed for purposes of the Maryland Franchise Law, Business Regulation Article, §14-219(b)(1), Annotated Code of Maryland, only when the application fee required by the Maryland Franchise Law, Business Regulation Article, §14-219(b)(1)(iii), Annotated Code of Maryland, and all modifications, information, and disclosures reasonably required by the Commissioner have been received by the Division.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Date of Effectiveness.</text> <paragraph num="(1)"> <text>If no stop order or other order blocking effectiveness of the renewal is in effect, a renewal registration that was timely filed becomes effective at 12 noon of the day on which the prior registration expires, or at such earlier time as the Commissioner may determine.</text> </paragraph> <paragraph num="(2)"> <text>If a renewal registration application is submitted less than 15 days before the expiration of the prior registration, and the Commissioner elects to treat it as a renewal registration application under §A(2) of this regulation, the Commissioner shall notify the applicant of the date upon which the renewal registration becomes effective.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Extension of Current Registration. If a previous registration is about to expire and a renewal registration application is not yet considered filed, the Commissioner may extend the effective period of a registration subject to such conditions as the Commissioner may prescribe for the protection of prospective franchisees.</text> </paragraph> <paragraph num="F."> <text>Abandonment of Renewal Application. If an applicant fails to provide information requested by the Commissioner or otherwise neglects to pursue an application for renewal registration in a diligent manner, the Commissioner shall consider the application abandoned 6 months after the date of the last written communication from the applicant or any person on behalf of the applicant. An applicant who wishes to revive an abandoned application for renewal registration shall submit an initial application for registration, together with the application fee required by the Maryland Franchise Law, Business Regulation Article, §14-215, Annotated Code of Maryland, for an initial registration.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Escrow Condition."> <paragraph num="A."> <text>Imposition of Escrow Condition. At any time after the submission of a registration statement and upon a finding that it is necessary and appropriate for the protection of prospective franchisees or subfranchisors, the Commissioner may require a franchisor to escrow franchise fees and other funds paid by a franchisee or subfranchisor until the franchisor's obligations under the offering have been satisfied.</text> </paragraph> <paragraph num="B."> <text>Depositary. Funds subject to an escrow condition shall be placed in a separate trust account with a national bank located in Maryland or a Maryland bank or trust company.</text> </paragraph> <paragraph num="C."> <text>Compliance with Escrow Condition. After the Commissioner imposes an escrow condition, the franchisor shall file with the Commissioner the following:</text> <paragraph num="(1)"> <text>An original fully executed copy of the escrow agreement;</text> </paragraph> <paragraph num="(2)"> <text>A written consent from the depositary agreeing to operate the escrow account under this regulation;</text> </paragraph> <paragraph num="(3)"> <text>The name and address of the depositary and the account number of the escrow account;</text> </paragraph> <paragraph num="(4)"> <text>The name, address, and telephone number of an individual or individuals at the depositary who may be contacted by the Commissioner regarding the escrow account; and</text> </paragraph> <paragraph num="(5)"> <text>An amended franchise registration application reflecting, in both the franchise agreement and Item 5 of the offering circular, that the Commissioner has imposed the escrow conditions and the material terms of that escrow condition, including the name of the depositary.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Operation of Escrow Condition. After the Commissioner imposes an escrow condition:</text> <paragraph num="(1)"> <text>Franchisee and subfranchisor checks for franchise fees or other payments to the franchisor shall be made payable to the depositary;</text> </paragraph> <paragraph num="(2)"> <text>Franchise fees and all other funds to be paid to the franchisor by its franchisees or subfranchisors for any purpose shall be placed, within 48 hours of the receipt of those funds, with the depositary; and</text> </paragraph> <paragraph num="(3)"> <text>Funds placed in the depositary shall remain escrowed until the Commissioner authorizes the release of the funds under §E of this regulation.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Release of Escrowed Funds.</text> <paragraph num="(1)"> <text>A franchisor may apply to the Commissioner for the release of escrowed funds.</text> </paragraph> <paragraph num="(2)"> <text>A franchisor's application to the Commissioner to authorize the release of escrowed funds to the franchisor shall be in writing, verified by an authorized officer of the franchisor and shall contain:</text> <paragraph num="(a)"> <text>A statement by the franchisor that all proceeds from the sale of franchises have been placed with the depositary in accordance with the terms and conditions of the escrow condition;</text> </paragraph> <paragraph num="(b)"> <text>A statement of the depositary, signed by an appropriate officer, setting forth the aggregate amount of escrowed funds deposited with the depositary and the franchisor's account number with the depositary;</text> </paragraph> <paragraph num="(c)"> <text>A list of the franchisees and subfranchisors and the amount held in the escrow account for the account of each franchisee and subfranchisor;</text> </paragraph> <paragraph num="(d)"> <text>With respect to each franchisee for which the release of funds is sought, the amount of funds sought to be released and a written certification from the franchisee stating the amount of funds to be released and acknowledging that the franchisor has completely performed its obligations under the franchise agreement to provide real estate, improvements, equipment, inventory, training, or other items; and</text> </paragraph> <paragraph num="(e)"> <text>Other information the Commissioner may reasonably require.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>If the Commissioner finds that the franchisor has fulfilled its obligations under the franchise agreement to a specified franchisee or subfranchisor, the Commissioner shall authorize the depositary to release to the franchisor those amounts of the escrowed funds applicable to the franchisee or subfranchisor.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Surety Bond in Place of Escrow.</text> <paragraph num="(1)"> <text>Instead of the imposition of an escrow condition, a franchisor may post a surety bond in an amount required by the Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>The bond shall be:</text> <paragraph num="(a)"> <text>In an amount not less than the initial franchise fee multiplied by the number of franchises the franchisor estimates it will sell in the State in the next year;</text> </paragraph> <paragraph num="(b)"> <text>Issued by a corporate surety authorized to transact business in Maryland; and</text> </paragraph> <paragraph num="(c)"> <text>Conditioned upon the completion by the franchisor of its obligations under the franchise agreement to provide real estate, improvements, equipment, inventory, training, or other items.</text> </paragraph> </paragraph> </paragraph> <paragraph num="G."> <text>Deferral of Fees in Place of Escrow.</text> <paragraph num="(1)"> <text>Instead of the imposition of an escrow condition, the Commissioner may, in appropriate circumstances, accept a franchisor's agreement to defer franchise fees and other initial payments owed by franchisees and subfranchisors until the franchisor has completed its initial obligations under the franchise agreement.</text> </paragraph> <paragraph num="(2)"> <text>The franchisor's agreement to defer franchise fees shall be reflected in the offering circular and the franchise agreement.</text> </paragraph> </paragraph> <paragraph num="H."> <text>Removal of Escrow Condition. At any time after the imposition of an escrow condition, the Commissioner may remove the escrow condition if:</text> <paragraph num="(1)"> <text>The franchisor posts a surety bond in accordance with §F of this regulation;</text> </paragraph> <paragraph num="(2)"> <text>The franchisor agrees to defer franchise fees and other initial payments in accordance with §G of this regulation; or</text> </paragraph> <paragraph num="(3)"> <text>Based upon new information, the Commissioner finds that the escrow condition is no longer necessary and appropriate for the protection of prospective franchisees.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Advertising."> <paragraph num="A."> <text>Standards For Advertising.</text> <paragraph num="(1)"> <text>An advertisement for a franchise offering may not refer to:</text> <paragraph num="(a)"> <text>The purchase or sale of a franchise as a safe investment, as free from risk of loss or default, or as a guarantee or assurance of earnings or profits;</text> </paragraph> <paragraph num="(b)"> <text>An earnings claim, unless otherwise permitted by the Commissioner; or</text> </paragraph> <paragraph num="(c)"> <text>An opinion of counsel without stating the name and address of the counsel.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Advertising shall state the name and address of the person sponsoring the advertisement or making the offer.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Review of Advertising. A copy of each advertisement to be used by or on behalf of a franchisor in the offer or sale of any franchise subject to registration shall be submitted to the Division of Securities for review at least 5 days before the date of its anticipated initial use.</text> </paragraph> <paragraph num="C."> <text>Videotape and Audiotape Advertising. Advertising submitted under this regulation that is in the form of videotapes or audiotapes shall be accompanied by a written transcript and description of the contents.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Exemptions."> <paragraph num="A."> <text>Basis of Exemption. Under the Maryland Franchise Law, Business Regulation Article, §14-214(b)(3), Annotated Code of Maryland, the Commissioner has determined that the offers or sales described in §§B—G of this regulation are exempt from the registration provisions of the Maryland Franchise Law because the transactions are not within the purpose of the Maryland Franchise Law and registration of the transactions is not necessary or appropriate for the protection of investors.</text> </paragraph> <paragraph num="B."> <text>Out-of-State Sales.</text> <paragraph num="(1)"> <text>The registration provisions of the Maryland Franchise Law do not apply to an offer or sale of a franchise to a resident of a foreign state, territory, or country who is not a resident of Maryland to the knowledge of the seller.</text> </paragraph> <paragraph num="(2)"> <text>The exemption set forth in §B(1) of this regulation may be claimed only if:</text> <paragraph num="(a)"> <text>The franchised business is not to be operated wholly or partially in Maryland;</text> </paragraph> <paragraph num="(b)"> <text>The sale of the franchise does not violate any law of the foreign state, territory, or country of which the offeree or buyer is a resident; and</text> </paragraph> <paragraph num="(c)"> <text>The sale of the franchise does not violate the antifraud provisions of the Maryland Franchise Law.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Nominal Franchise Fee. The registration provisions of the Maryland Franchise Law do not apply to an offer or sale of a franchise when the franchise fee does not exceed $100 on an annual basis.</text> </paragraph> <paragraph num="D."> <text>Seasoned Franchisor.</text> <paragraph num="(1)"> <text>The registration provisions of the Maryland Franchise Law do not apply to any offer or sale of a franchise when the franchisor has:</text> <paragraph num="(a)"> <text>A net equity, according to its most recently audited financial statements, of not less than:</text> <paragraph num="(i)"> <text>$10,000,000 on a consolidated basis, or</text> </paragraph> <paragraph num="(ii)"> <text>$1,000,000 and is at least 80 percent owned by a corporation or entity that has a net equity, on a consolidated basis, according to its most recently audited financial statements, of not less than $10,000,000, which 80 percent owner guarantees the performance of the franchisor's obligations; and</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Had at least 25 franchisees conducting the same franchised business at all times during the 5-year period immediately preceding the offer or sale.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The exemption set forth in §D(1) of this regulation may be claimed only if the franchisor:</text> <paragraph num="(a)"> <text>Files a Form F-1 Notice of Exemption:</text> <paragraph num="(i)"> <text>Not later than 10 business days before the offer or sale of any franchise, which Notice of Exemption shall expire after a period of 1 year, and</text> </paragraph> <paragraph num="(ii)"> <text>If the franchisor intends to offer or sell for an additional period annually after that, at least 10 business days before the expiration of the previously filed Notice of Exemption;</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Files a Consent to Service of Process naming the Commissioner as the franchisor's agent to receive process in Maryland;</text> </paragraph> <paragraph num="(c)"> <text>Files an undertaking by which it agrees to supply any additional information the Commissioner may reasonably request;</text> </paragraph> <paragraph num="(d)"> <text>Pays the filing fee required by the Maryland Franchise Law, Business Regulation Article, §14-214(d), Annotated Code of Maryland;</text> </paragraph> <paragraph num="(e)"> <text>Submits financial statements demonstrating compliance with the conditions set forth in §D(1)(a) of this regulation;</text> </paragraph> <paragraph num="(f)"> <text>Submits a representation that the franchisor complies with the condition set forth in §D(1)(b) of this regulation; and</text> </paragraph> <paragraph num="(g)"> <text>Files one copy of its current offering circular.</text> </paragraph> </paragraph> </paragraph> <paragraph num="E."> <text>Sophisticated Franchisee.</text> <paragraph num="(1)"> <text>The registration provisions of the Maryland Franchise Law do not apply to any offer or sale of a franchise for which the franchisor requires an initial investment by the franchisee of more than $750,000.</text> </paragraph> <paragraph num="(2)"> <text>The exemption set forth in §E(1) of this regulation may be claimed only if the franchisor:</text> <paragraph num="(a)"> <text>Files a Form F-1 Notice of Exemption:</text> <paragraph num="(i)"> <text>Not later than 10 business days before the offer or sale of any franchise, which Notice of Exemption shall expire after a period of 1 year, and</text> </paragraph> <paragraph num="(ii)"> <text>If the franchisor intends to offer or sell for an additional period annually after that, at least 10 business days before the expiration of the previously filed Notice of Exemption;</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Files a Consent to Service of Process naming the Commissioner as the franchisor's agent to receive process in Maryland;</text> </paragraph> <paragraph num="(c)"> <text>Files an undertaking by which it agrees to supply any additional information the Commissioner may reasonably request;</text> </paragraph> <paragraph num="(d)"> <text>Pays the filing fee required by the Maryland Franchise Law, Business Regulation Article, §14-214(d), Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(e)"> <text>Files one copy of its current offering circular.</text> </paragraph> </paragraph> </paragraph> <paragraph num="F."> <text>Institutional Franchisee.</text> <paragraph num="(1)"> <text>The registration provisions of the Maryland Franchise Law do not apply to an offer or sale of a franchise to a bank, savings bank, savings and loan association, trust company, insurance company, investment company, or other financial institution, or to a broker-dealer when the:</text> <paragraph num="(a)"> <text>Purchaser is acting for itself or in a fiduciary capacity; and</text> </paragraph> <paragraph num="(b)"> <text>Franchise is not being purchased for the purpose of resale.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The exemption set forth in §F(1) of this regulation may be claimed only if the franchisor:</text> <paragraph num="(a)"> <text>Files a Form F-1 Notice of Exemption at least 10 business days before each offer or sale of each franchise;</text> </paragraph> <paragraph num="(b)"> <text>Files a Consent to Service of Process naming the Commissioner as the franchisor's agent to receive process in Maryland;</text> </paragraph> <paragraph num="(c)"> <text>Files an undertaking by which it agrees to supply any additional information as the Commissioner may reasonably request; and</text> </paragraph> <paragraph num="(d)"> <text>Pays the filing fee required by the Maryland Franchise Law, Business Regulation Article, §14-214(d), Annotated Code of Maryland.</text> </paragraph> </paragraph> </paragraph> <paragraph num="G."> <text>Exemption by Order.</text> <paragraph num="(1)"> <text>The registration provisions of the Maryland Franchise Law do not apply to an offer or sale of a franchise or class of franchises not otherwise described in §§B—F of this regulation if the Commissioner, by order, determines that:</text> <paragraph num="(a)"> <text>The transaction or class of franchises is not one within the purpose of the Maryland Franchise Law; and</text> </paragraph> <paragraph num="(b)"> <text>Registration of the transaction or class of franchises is not necessary or appropriate in the public interest or for the protection of franchisees.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>A request for an order exempting the offer and sale of a franchise or class of franchises under this section shall:</text> <paragraph num="(a)"> <text>Be filed with the Commissioner;</text> </paragraph> <paragraph num="(b)"> <text>Contain a description of the transaction or class of franchises for which an exemption is sought and the reasons why an order of exemption is appropriate under the criteria described in §G(1) of this regulation; and</text> </paragraph> <paragraph num="(c)"> <text>Include a representation that the person making the request shall provide any additional information the Commissioner requires.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>A request for an order under this section may be made either by a franchisor or a franchisee.</text> </paragraph> <paragraph num="(4)"> <text>The Commissioner's order exempting the offer and sale of a franchise or class of franchises shall include findings of fact and reasons why granting the exemption is appropriate under the criteria described in §G(1) of this regulation.</text> </paragraph> <paragraph num="(5)"> <text>Unless the Commissioner orders otherwise, if the Commissioner finds that a franchise or class of franchises satisfies the criteria described in §G(1) of this regulation, an exemption may be claimed only if the franchisor:</text> <paragraph num="(a)"> <text>Files a Form F-1 Notice of Exemption, as set forth in Regulation .11 of this chapter, not later than 10 business days before the offer or sale of any franchise, which Notice of Exemption shall expire after a period of 1 year, and if the franchisor intends to offer or sell for an additional period annually after that, at least 10 business days before the expiration of the previously filed Notice of Exemption;</text> </paragraph> <paragraph num="(b)"> <text>Files a Consent to Service of Process naming the Commissioner as the franchisor's agent to receive process in Maryland;</text> </paragraph> <paragraph num="(c)"> <text>Files an undertaking by which it agrees to supply any additional information the Commissioner may reasonably require;</text> </paragraph> <paragraph num="(d)"> <text>Pays the filing fee required by the Maryland Franchise Law, Business Regulation Article, §14-214(d), Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(e)"> <text>Files one copy of its current offering circular.</text> </paragraph> </paragraph> </paragraph> <paragraph num="H."> <text>Disclosure Requirements.</text> <paragraph num="(1)"> <text>Unless the Commissioner orders otherwise, if a franchisor relies upon any of the exemptions set forth in §D, E, F, or G of this regulation, the franchisor shall provide an offering circular, together with all proposed agreements relating to the sale of the franchise, to a prospective franchisee at the earlier of:</text> <paragraph num="(a)"> <text>The prospective franchisee's first personal meeting with the franchisor; or</text> </paragraph> <paragraph num="(b)"> <text>10 business days before the signing of the agreement or the payment of any consideration.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Instead of providing an offering circular prepared in accordance with the Maryland Franchise Law, Business Regulation Article, §14-216, Annotated Code of Maryland, and Regulation .04 of this chapter, a franchisor may provide an offering circular that complies with the requirements of the:</text> <paragraph num="(a)"> <text>Federal Trade Commission's trade regulation entitled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures”, 16 CFR 436;</text> </paragraph> <paragraph num="(b)"> <text>Franchise disclosure law of another state; or</text> </paragraph> <paragraph num="(c)"> <text>UFOC.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Franchisors filing a claim of exemption under §D, E, F, or G of this regulation shall include a self-addressed stamped envelope by which the Division may return to the franchisor confirmation of receipt of the filing and the exemption file number assigned. Correspondents shall refer to the assigned file number in all subsequent related filings and correspondence with the Division.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Exemptions—Form F-1."> <text>The following form shall be filed by franchisors claiming exemptions under Regulation .10D, E, F, or G of this chapter:</text> <included-document> <text>FORM F-1</text> <text>NOTICE OF EXEMPTION UNDER THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW</text> <text>Pursuant to COMAR 02.02.08.10</text> <text>This Notice of Exemption shall be accompanied by a filing fee of $250.00 payable by check to: Office of the Attorney General. This Notice shall be considered filed with the Division for purposes of COMAR 02.02.08.10 as of the date on which the Notice is received by the Division or, if received by the Division after the date on which it is due, as of the date prior to the due date on which it was mailed by means of United States registered or certified mail to the Maryland Division of Securities, Office of the Attorney General, 200 St. Paul Place, 20th Floor, Baltimore, Maryland 21202-2020.</text> <text>This form is being filed to claim the following exemption from the registration requirements of the Maryland Franchise Registration and Disclosure Law. (CHECK ONE)</text> <text>_______02.02.08.10D—SEASONED FRANCHISOR</text> <text>(If relying on this exemption, include with this filing the financial statements required by this regulation.)</text> <text>_______02.02.08.10E—SOPHISTICATED FRANCHISEE</text> <text>_______02.02.08.10F—INSTITUTIONAL FRANCHISEE</text> <text>_______02.02.08.10G—EXEMPTION BY ORDER</text> <text>(If relying on this exemption, include with this filing a copy of the Commissioner's order.)</text> </included-document> </regulation> <regulation prefix="Regulation" num=".12" heading="Denial, Suspension, or Revocation of Registration or Exemption."> <text>The Commissioner, with or without prior notice or hearing, may issue a cease and desist order and may deny, suspend, or revoke any registration, amendment, or claim of exemption set forth in Regulation .10 of this chapter, if the Commissioner finds that:</text> <paragraph num="A."> <text>The franchisor, or any of its officers, directors, agents, employees, or any other person related to the franchisor has violated or failed to comply with any provision of the Maryland Franchise Law, or any regulation or order of the Commissioner;</text> </paragraph> <paragraph num="B."> <text>The franchisor, or any of its officers, directors, agents, or employees, or any other person related to the franchisor, is engaging or is about to engage in false, fraudulent, or deceptive practices in connection with the offer and sale of a franchise;</text> </paragraph> <paragraph num="C."> <text>A person identified in an application for registration, a claim of exemption, or any MFOC or other franchise offering circular has been convicted of an offense described in the Maryland Franchise Law, Business Regulation Article, §14-216(c)(8), Annotated Code of Maryland, or is subject to an order or civil judgment as described in the Maryland Franchise Law, Business Regulation Article, §14-216(c)(9), Annotated Code of Maryland, and the involvement of the person in the business of the applicant or franchisor creates a substantial risk to franchisees or prospective franchisees.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".13" heading="Financial Statements."> <paragraph num="A."> <text>Scope. The following financial statements shall be prepared in accordance with this regulation:</text> <paragraph num="(1)"> <text>A financial statement required by the Maryland Franchise Law;</text> </paragraph> <paragraph num="(2)"> <text>A financial statement required by any regulation adopted under the Maryland Franchise Law, including the MFOC; and</text> </paragraph> <paragraph num="(3)"> <text>A financial statement used by or on behalf of a franchisor in connection with an offer, sale, or purchase of a franchise in Maryland.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Standards.</text> <paragraph num="(1)"> <text>A financial statement specified in §A of this regulation shall be prepared in accordance with generally accepted accounting principles.</text> </paragraph> <paragraph num="(2)"> <text>Financial statements of a franchise offering, for which registration is required under the Maryland Franchise Law, shall be audited and certified by an independent certified public accountant, except that this requirement:</text> <paragraph num="(a)"> <text>Does not apply to interim financial statements unless otherwise required by the Commissioner in a particular case; and</text> </paragraph> <paragraph num="(b)"> <text>May be waived by the Commissioner for good cause shown when a waiver would not be inconsistent with the purposes of the Maryland Franchise Law or contrary to the public interest or the protection of prospective franchisees.</text> </paragraph> </paragraph> </paragraph> <paragraph num="C."> <text>Content of Financial Statements.</text> <paragraph num="(1)"> <text>The financial statements that accompany an application for initial or renewal registration shall include comparative:</text> <paragraph num="(a)"> <text>Balance sheets as of the end of the franchisor's last 2 fiscal years before the application date; and</text> </paragraph> <paragraph num="(b)"> <text>Statements of operations, or owners' equity, and of cash flows for the last 3 fiscal years before the application date.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>If the date of the most recent audited financial statements precedes the date of the application by more than 90 days, the franchisor shall also include:</text> <paragraph num="(a)"> <text>An interim balance sheet as of a date within 90 days of the date of the application; and</text> </paragraph> <paragraph num="(b)"> <text>Statements of operations for the period from the date of the most recent audited statement to the date of the interim balance sheet.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>If a franchisor owns, directly or indirectly, a controlling interest in any other corporation or entity, the financial statements filed by the franchisor shall reflect, on a consolidated basis, the financial condition of the franchisor and each of the entities controlled by it.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Disclosure. A presentation of unaudited financial statements shall be accompanied by the following written disclosure, immediately adjacent to the financial statements:</text> </paragraph> <paragraph num="E."> <text>Failure to Submit Financial Statements. If a franchisor fails to submit audited financial statements which comply with the requirements of this regulation as part of an application for registration or renewal of registration, the Commissioner may deny the application.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".14" heading="Reports by Registrants."> <paragraph num="A."> <text>Time for Filing.</text> <paragraph num="(1)"> <text>A franchisor registered under the Maryland Franchise Law shall file a quarterly report with the Commissioner.</text> </paragraph> <paragraph num="(2)"> <text>The first report filed under this section shall be filed not later than 90 days after the effective date of the franchisor's registration statement.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Content. The reports required by §A of this regulation shall include:</text> <paragraph num="(1)"> <text>The number of franchises sold in Maryland under the registration statement;</text> </paragraph> <paragraph num="(2)"> <text>The selling price of each franchise sold in Maryland;</text> </paragraph> <paragraph num="(3)"> <text>Graphic representations of exclusive areas, if any, sold to Maryland franchisees; and</text> </paragraph> <paragraph num="(4)"> <text>If the Commissioner directs with respect to a particular franchisor, current financial statements of the franchisor.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".15" heading="Franchisor Records."> <paragraph num="A."> <text>Records to Be Maintained. A franchisor offering or selling a franchise in the State shall maintain complete and accurate records of offers and sales of franchises, including but not limited to:</text> <paragraph num="(1)"> <text>Offering circulars;</text> </paragraph> <paragraph num="(2)"> <text>Advertising;</text> </paragraph> <paragraph num="(3)"> <text>Correspondence with franchisees and prospective franchisees;</text> </paragraph> <paragraph num="(4)"> <text>Past and present operations manuals;</text> </paragraph> <paragraph num="(5)"> <text>Training records;</text> </paragraph> <paragraph num="(6)"> <text>Training manuals; and</text> </paragraph> <paragraph num="(7)"> <text>Copies of executed agreements.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Form of Records. The records may be maintained on photographic or electronic media, but shall be printed if the Commissioner so orders.</text> </paragraph> <paragraph num="C."> <text>Retention Schedule. The records described in §A of this regulation shall be maintained at an office readily accessible to the franchisor for 5 years.</text> </paragraph> <paragraph num="D."> <text>Inspection of Records. The Commissioner or the Commissioner's designated representatives shall have access to the records described in §A of this regulation at any time, upon reasonable request during business hours, in order to conduct such examinations as the Commissioner considers necessary or appropriate in the public interest or for the protection of prospective franchisees.</text> </paragraph> <paragraph num="E."> <text>Other Investigative Powers. Nothing in this regulation is intended to limit the investigative powers of the Commissioner.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Fraudulent and Prohibited Practices."> <paragraph num="A."> <text>Scope of Antifraud Provisions. Unless otherwise indicated, the antifraud provisions of the Maryland Franchise Law, Business Regulation Article, §14-229, Annotated Code of Maryland, and this regulation apply to any offer to sell or sale of a franchise in the State regardless of whether the franchise offering is exempt from registration under the Maryland Franchise Law.</text> </paragraph> <paragraph num="B."> <text>Fraudulent Representations and Deceptive Statements. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise commits a “misrepresentation to, deceit of, or fraud on the buyer” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-221(2), Annotated Code of Maryland, and engages in an “act, practice, or course of business which operates or would operate as a fraud or deceit on another person” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-229(a)(3), Annotated Code of Maryland, if that person makes, or causes to be made, oral or written statements that do not comply with §§C—H of this regulation.</text> </paragraph> <paragraph num="C."> <text>Representations Concerning Nature of Franchise. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise may not make, or cause to be made, oral or written statements concerning the:</text> <paragraph num="(1)"> <text>Exclusivity of the franchise rights granted to the franchisee without disclosing the exact nature of the exclusivity;</text> </paragraph> <paragraph num="(2)"> <text>Nature and number of locations or sites appropriate for the franchisee's enterprise, whether or not to be obtained by the franchisor, without disclosing:</text> <paragraph num="(a)"> <text>By whom each site is to be secured;</text> </paragraph> <paragraph num="(b)"> <text>The manner in which the procurement of any site is to be financed;</text> </paragraph> <paragraph num="(c)"> <text>The source and terms for financing;</text> </paragraph> <paragraph num="(d)"> <text>The relationship, if any, between site procurement and the execution of a franchise agreement;</text> </paragraph> <paragraph num="(e)"> <text>The identity of anyone with whom the franchisor has a binding obligation for the procurement of any site;</text> </paragraph> <paragraph num="(f)"> <text>Whether use of a site by a franchisee will entitle the franchisee to become affiliated with any existing enterprise; and</text> </paragraph> <paragraph num="(g)"> <text>Whether the use of a site by a franchisee will create an obligation on the part of the franchisor or franchisee to any third party;</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Interest or readiness of other persons to enter into a franchise agreement substantially similar to that being offered or sold without disclosing the source of this information and the identities, including names and addresses, of those persons;</text> </paragraph> <paragraph num="(4)"> <text>Total number of franchises substantially similar to the franchise being offered or sold that have been established or are planned to be established in a geographical area without disclosing:</text> <paragraph num="(a)"> <text>Graphically, the area represented; and</text> </paragraph> <paragraph num="(b)"> <text>Whether the subject franchises are operating or have conducted business within the meaning of Item 20 of the MFOC; or</text> </paragraph> </paragraph> <paragraph num="(5)"> <text>Endorsement or approval of the franchise or its business by any person or entity without disclosing the nature of the endorsement or approval and any compensation by the franchisor or the franchisees to the person or entity.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Representations Concerning Income, Earnings, and Net Worth. A person authorizing, aiding in, or causing to be made, an offer or sale of a franchise may not make, or cause to be made, oral or written statements concerning:</text> <paragraph num="(1)"> <text>Industry-wide total income or the income applicable to the prospective franchisee, whether actual or projected, for a product or service marketed by the franchisor, without disclosing the relationship, if any, of these representations to the franchisor's and its franchisees' actual income experience;</text> </paragraph> <paragraph num="(2)"> <text>The actual income experience of the franchisor unless the person discloses the availability of certified audited financial statements and how they may be obtained;</text> </paragraph> <paragraph num="(3)"> <text>Potential earnings from operation of the franchise if these earnings claims have not been included in the MFOC or other offering circular required to be filed with the Commissioner;</text> </paragraph> <paragraph num="(4)"> <text>The net worth of the franchisor and its affiliates unless the person discloses whether financial statements of the franchisor are available and how they may be obtained; or</text> </paragraph> <paragraph num="(5)"> <text>The amount or value of revenue, sales, income, contracts, or business intended to be provided to a franchisee within a specified period of time, without disclosing the actual revenue, sales, income, contract, or business experience of existing franchisees purchasing similarly described franchises, and the period of time in which those franchisees achieved and maintained that revenue, sales, income, contracts, or business.</text> </paragraph> </paragraph> <paragraph num="E."> <text>Representations Concerning the Operation of the Franchise. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise may not make, or cause to be made, oral or written statements concerning the:</text> <paragraph num="(1)"> <text>Date by which a prospective franchisee's enterprise will be totally operational without disclosing the:</text> <paragraph num="(a)"> <text>Factual basis upon which that date has been determined or estimated; and</text> </paragraph> <paragraph num="(b)"> <text>Average elapsed time between the signing of a franchise contract and the beginning of conduct of business of the franchisor's other franchisees throughout the continental United States and Canada;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Sources from which a franchisee is required to purchase its goods, services, equipment, inventory, or real estate pursuant to the franchise agreement without disclosing:</text> <paragraph num="(a)"> <text>An affiliation between these sources and the franchisor; and</text> </paragraph> <paragraph num="(b)"> <text>The relationship between the price at which a franchisee will make the purchases and the prevailing market price, if any, for these goods, services, supplies, equipment, inventory, or real estate;</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Franchisor's affiliation with any person or business entity from whom the franchisee shall be required to purchase goods or services or with whom the franchisee shall otherwise be required to do business without disclosing the legal nature of the affiliation; or</text> </paragraph> <paragraph num="(4)"> <text>Qualifications or experience that the franchisor or any affiliate requires or recommends be possessed by a potential franchisee without disclosing whether additional personnel will be required for operation of the franchisee's business if the potential franchisee does not possess the requisite qualifications or experience.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Representations Concerning the Franchise Agreement. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise may not make, or cause to be made, oral or written statements concerning:</text> <paragraph num="(1)"> <text>The application for a franchise agreement without disclosing that an application is a preliminary document and not the agreement by which a franchise will be sold or the creation of a contractual relationship;</text> </paragraph> <paragraph num="(2)"> <text>A payment or consideration without disclosing its significance in the franchise sale transaction;</text> </paragraph> <paragraph num="(3)"> <text>The execution of any contract, release, or any negotiable or other written instrument in connection with the franchise agreement without disclosing the complete contents of the document and the significance of the execution of the document in the franchise sale transaction; or</text> </paragraph> <paragraph num="(4)"> <text>Recovery of a portion or all of the franchise fee or other investment without disclosing:</text> <paragraph num="(a)"> <text>Whether the franchise fee or other investment is secured or guaranteed and, if so, in what manner; or</text> </paragraph> <paragraph num="(b)"> <text>If the franchise fee or other investment is not secured or guaranteed, over what period of time, based on the actual experience of other franchises of the franchisor, the franchisee might expect to recover the franchise fee or other investment.</text> </paragraph> </paragraph> </paragraph> <paragraph num="G."> <text>Representations Concerning Franchisor Support. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise may not make, or cause to be made, oral or written statements concerning the:</text> <paragraph num="(1)"> <text>Advertising support to be provided by the franchisee and by the franchisor without disclosing the manner by which:</text> <paragraph num="(a)"> <text>The funds are to be raised and spent; and</text> </paragraph> <paragraph num="(b)"> <text>A franchisee may obtain an accounting of expenditures;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Extent of any training, supervision, and technical assistance to be provided by the franchisor under the franchise agreement without disclosing the:</text> <paragraph num="(a)"> <text>Frequency with which the training, supervision, and technical assistance will be provided;</text> </paragraph> <paragraph num="(b)"> <text>Cost of the training, supervision, and technical assistance to the franchisee; and</text> </paragraph> <paragraph num="(c)"> <text>Effect of any failure of the franchisee to participate in the same; or</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Aid or assistance that the franchisor will provide to the franchisee in training, obtaining locations for conducting business, or in marketing the product or service of the franchisor without disclosing, before the execution of the franchise agreement, whether the franchise agreement imposes these obligations on the franchisor.</text> </paragraph> </paragraph> <paragraph num="H."> <text>Representations Concerning Public Agencies. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise may not make, or cause to be made, any oral or written statement concerning:</text> <paragraph num="(1)"> <text>Approval or endorsement of a franchise or a franchisor by the Division of Securities, any other State agency, or any other public agency or the employees of any public agency;</text> </paragraph> <paragraph num="(2)"> <text>A finding by any agency of any state, or of any public agency, or by its agents or employees that any contents of advertising are true and not misleading; or</text> </paragraph> <paragraph num="(3)"> <text>The name of the state or any state agency or the name of any public agency or any agency agents or employees in connection with promoting, advertising, offering, or selling a franchise other than to:</text> <paragraph num="(a)"> <text>State that compliance with applicable laws has been accomplished; and</text> </paragraph> <paragraph num="(b)"> <text>Demonstrate compliance by a showing of copies of correspondence or official records.</text> </paragraph> </paragraph> </paragraph> <paragraph num="I."> <text>Misrepresentations. A person authorizing, aiding in, or causing to be made, an offer or sale of a franchise commits a “misrepresentation to, deceit of, or fraud on the buyer” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-221(2), Annotated Code of Maryland, and engages in an “act, practice, or course of business which operates or would operate as a fraud or deceit on another person” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-229(a)(3), Annotated Code of Maryland, if that person misrepresents:</text> <paragraph num="(1)"> <text>That execution of any document in connection with the offer or sale of a franchise constitutes only an application for a franchise if execution of the document creates a contractual relationship;</text> </paragraph> <paragraph num="(2)"> <text>The number of franchises of the franchisor that are similar in type and which are conducting or have conducted business within the meaning of Item 20 of the MFOC, within a given area at any time;</text> </paragraph> <paragraph num="(3)"> <text>That the franchise agreement and all of its obligations are embodied in one or several documents presented to, made available to, or executed by a prospective franchisee when, in fact:</text> <paragraph num="(a)"> <text>The execution of additional documents, or the giving by the franchisee of additional consideration, is required for the creation of a contractual relationship; or</text> </paragraph> <paragraph num="(b)"> <text>The execution of one or more of these documents is not related to or necessary for the sale of the franchise;</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Any element of a franchise agreement or of the business of the franchisor that is required to be disclosed by the Maryland Franchise Law, Business Regulation Article, §14-216, Annotated Code of Maryland, or by this regulation.</text> </paragraph> </paragraph> <paragraph num="J."> <text>False, Fraudulent, and Deceptive Omissions. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise commits a “misrepresentation to, deceit of, or fraud on the buyer” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-221(2), Annotated Code of Maryland, and engages in an “act, practice, or course of business which operates or would operate as a fraud or deceit on another person” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-229(a)(3), Annotated Code of Maryland, if that persons fails to make the following disclosures:</text> <paragraph num="(1)"> <text>When a relationship exists between the franchisor and any other person or entity that has offered, is offering, or will offer a franchise program substantially similar to that being offered or sold, to disclose the:</text> <paragraph num="(a)"> <text>Nature of the relationship; and</text> </paragraph> <paragraph num="(b)"> <text>Similarity, if any, between the trademark or commercial symbol or the production and marketing plan of the other person or entity to that of the franchise being offered or sold;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>If a franchisee is required to purchase goods, services, equipment, inventory, real estate, or other items from designated sources, including the franchisor, to disclose:</text> <paragraph num="(a)"> <text>In the case of sources other than the franchisor, any affiliation of the franchisor with these sources;</text> </paragraph> <paragraph num="(b)"> <text>If the source is affiliated with the franchisor, the cost to the seller of these goods, services, equipment, inventory, real estate, or other items;</text> </paragraph> <paragraph num="(c)"> <text>The prevailing market price, if any, for the goods, services, equipment, inventory, real estate, or other items, and if none, an explanation as to the inability of the seller to determine and disclose same; or</text> </paragraph> <paragraph num="(d)"> <text>The manner, if any, in which the availability of the goods, services, equipment, inventory, real estate, or other items will be insured by the franchisor or its affiliates under the terms of the franchise agreement; or</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Any representation required to be made by the Maryland Franchise Law, Business Regulation Article, §14-216, Annotated Code of Maryland, which is an element of the franchise being offered or sold.</text> </paragraph> </paragraph> <paragraph num="K."> <text>Misapplication of Proceeds. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise commits a “misrepresentation to, deceit of, or fraud on the buyer” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-221(2), Annotated Code of Maryland, and engages in an “act, practice, or course of business which operates or would operate as a fraud or deceit on another person” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-229(a)(3), Annotated Code of Maryland, if that person applies, authorizes, or causes any material part of the proceeds from the sale of franchises to be applied:</text> <paragraph num="(1)"> <text>In any material way contrary to the purpose specified in the offering circular, advertising, or oral representations used in connection with the offer or sale of the franchise; or</text> </paragraph> <paragraph num="(2)"> <text>For a purpose not reasonably related to the business of the franchisor as described in the offering circular, advertising, oral representations, or any contract related to the offer or sale of the franchise.</text> </paragraph> </paragraph> <paragraph num="L."> <text>Prohibited Releases from Liability and Waivers. A person authorizing, aiding in, or causing to be made, an offer or sale of a franchise commits a “misrepresentation to, deceit of, or fraud on the buyer” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-221(2), Annotated Code of Maryland, Annotated Code of Maryland, and engages in an “act, practice, or course of business which operates or would operate as a fraud or deceit on another person” within the meaning of the Maryland Franchise Law, Business Regulation Article, §14-229(a)(3), Annotated Code of Maryland, if that person requires a franchisee to:</text> <paragraph num="(1)"> <text>Provide a release from liability under the provisions of the Maryland Franchise Law as part of a franchise agreement or as a condition of the sale, renewal, or assignment of a franchise;</text> </paragraph> <paragraph num="(2)"> <text>Assent to a period of limitations for causes of action under the Maryland Franchise Law, Business Regulation Article, §14-226, Annotated Code of Maryland, other than the period of limitations set forth in that statute; or</text> </paragraph> <paragraph num="(3)"> <text>Waive the franchisee's right to file a lawsuit alleging a cause of action arising under the Maryland Franchise Law in any court of competent jurisdiction in this State.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".17" heading="Interpretive Opinions."> <paragraph num="A."> <text>Filing of Request. A request for an interpretive opinion or a no action position under the Maryland Franchise Law, Business Regulation Article, §14-209, Annotated Code of Maryland, shall be filed with the Commissioner.</text> </paragraph> <paragraph num="B."> <text>Form of Request. A request for an interpretive opinion or a no action position shall include:</text> <paragraph num="(1)"> <text>An original and one copy of the letter requesting the interpretive opinion or no action position; and</text> </paragraph> <paragraph num="(2)"> <text>Two copies of any supporting documentation or materials.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Content of Request.</text> <paragraph num="(1)"> <text>A request shall state the names of any franchisor, individual, or entity involved. Requests concerning unnamed franchisors, individuals, or entities, or hypothetical situations are not acceptable.</text> </paragraph> <paragraph num="(2)"> <text>A request shall indicate in a prominent manner the specific parts of the statute or regulation to which the request pertains.</text> </paragraph> <paragraph num="(3)"> <text>A request shall be limited to a particular fact situation and shall contain a legal analysis indicating why the requesting party believes that it is appropriate, given the language, meaning, and intent of the pertinent statutes and regulations, and the interests of investor protection, that the Commissioner should take a particular position.</text> </paragraph> <paragraph num="(4)"> <text>A request shall contain the name of the individual to be contacted by the Division if additional information is required. The designated individual shall be fully versed in the facts and legal analysis underlying the request for the interpretive opinion or no action position.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Request for Confidential Treatment. If a person requesting an interpretive opinion or no action position seeks to keep all or part of the request confidential, the person shall submit, together with the request for an interpretive opinion or no action position, a separate letter that states why the person believes that confidential treatment is appropriate or necessary.</text> </paragraph> <paragraph num="E."> <text>Payment of Fee. A request for an interpretive opinion or a no action position shall be accompanied by the fee set forth in the Maryland Franchise Law, Business Regulation Article, §14-209(b)(2), Annotated Code of Maryland. The filing fee is nonrefundable.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".18" heading="Internet Offers."> <paragraph num="A."> <text>Any communication made through the Internet, the World Wide Web, or any other similar proprietary or common carrier electronic delivery system, of an offer to sell a franchise (Internet Offer) is exempt from the registration provisions of the Maryland Franchise Law if:</text> <paragraph num="(1)"> <text>The Internet Offer indicates, directly or indirectly, that the franchise is not being offered to residents of Maryland;</text> </paragraph> <paragraph num="(2)"> <text>The Internet Offer is not otherwise directed to any person in Maryland by or on behalf of the franchisor or anyone acting with the franchisor's knowledge; and</text> </paragraph> <paragraph num="(3)"> <text>No franchises are sold in Maryland by or on behalf of the franchisor until the offering has been registered and declared effective and the MFOC has been delivered to the offeree before the sale and in compliance with the Maryland Franchise Law.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Reliance on an exemption from registration under this regulation does not preclude a franchisor from relying on any other exemption provided under the Maryland Franchise Law or these regulations.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Business Regulation Article, §14-206, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date:</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.08 adopted as an emergency provision effective December 2, 1977 (4:26 Md. R. 2005); emergency status extended at 5:8 Md. R. 587</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.08 adopted effective May 5, 1978 (5:9 Md. R. 683) (Recodified from COMAR 02.02.04 to 02.02.10)</annotation> <annotation type="History" subtype="Administrative History">Regulations .02—.08 recodified to Regulations .02—.12 and amended effective May 19, 1986 (13:10 Md. R. 1154)</annotation> <annotation type="History" subtype="Administrative History">Regulation .02C amended effective October 29, 1990 (17:21 Md. R. 2525)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04 amended effective October 29, 1990 (17:21 Md. R. 2525)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10A amended and .10B adopted effective October 29, 1990 (17:21 Md. R. 2525)</annotation> <annotation type="History" subtype="Administrative History">Regulation .12B amended effective October 29, 1990 (17:21 Md. R. 2525)</annotation> <annotation type="History" subtype="Administrative History">Regulation .13 adopted effective April 15, 1991 (18:7 Md. R. 770)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.13 under COMAR 02.02.10 repealed effective January 17, 1994 (21:1 Md. R. 27)</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.17 adopted effective January 17, 1994 (21:1 Md. R. 27)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01B amended effective May 23, 1994 (21:10 Md. R. 840)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04A amended and C adopted effective May 23, 1994 (21:10 Md. R. 840)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10G amended effective May 23, 1994 (21:10 Md. R. 840)</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective December 18, 1995 (22:25 Md. R. 1960)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04B amended effective June 29, 1998 (25:13 Md. R. 992)</annotation> <annotation type="History" subtype="Administrative History">Regulation .08F amended effective June 29, 1998 (25:13 Md. R. 992)</annotation> <annotation type="History" subtype="Administrative History">Regulation .09B amended effective June 29, 1998 (25:13 Md. R. 992)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10B, D, H amended effective June 29, 1998 (25:13 Md. R. 992)</annotation> <annotation type="History" subtype="Administrative History">Regulation .11 amended effective June 29, 1998 (25:13 Md. R. 992)</annotation> <annotation type="History" subtype="Administrative History">Regulation .18 adopted effective June 29, 1998 (25:13 Md. R. 992)</annotation> </annotations> </chapter> <chapter num="09" heading="Federal Covered Securities"> <regulation prefix="Regulation" num=".01" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Federal covered security” has the meaning stated in Corporations and Associations Article, §11-101(f), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Investment company” has the meaning stated in §3 of the Investment Company Act of 1940, 15 U.S.C. §80a-3.</text> </paragraph> <paragraph num="(3)"> <text>“Registration statement” has the meaning stated in §2(a)(8) of the Securities Act of 1933, 15 U.S.C. §77b(a)(8).</text> </paragraph> <paragraph num="(4)"> <text>“Unit investment trust” has the meaning stated in §4(2) of the Investment Company Act of 1940, 15 U.S.C. §80a-4(2).</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Incorporation by Reference."> <paragraph num="A."> <text>In this chapter, the following documents are incorporated by reference.</text> </paragraph> <paragraph num="B."> <text>Documents Incorporated.</text> <paragraph num="(1)"> <text>15 U.S.C. §80a-3.</text> </paragraph> <paragraph num="(2)"> <text>15 U.S.C. §80a-4(2).</text> </paragraph> <paragraph num="(3)"> <text>15 U.S.C. §77b(a)(8).</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Use of Uniform Forms."> <paragraph num="A."> <text>Required Uniform Forms. To comply with the notice filing requirements of this chapter and Corporations and Associations Article, §11-503.1, Annotated Code of Maryland, an issuer may use the following forms:</text> <paragraph num="(1)"> <text>Form NF (Uniform Investment Company Notice Filing);</text> </paragraph> <paragraph num="(2)"> <text>Form U-2 (Uniform Consent to Service of Process);</text> </paragraph> <paragraph num="(3)"> <text>SEC Form D (Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption).</text> </paragraph> </paragraph> <paragraph num="B."> <text>Effect on Maryland Law. An instruction, undertaking, or other matter appearing in the forms listed in §A of this regulation does not limit the application of Corporations and Associations Article, Title 11, Annotated Code of Maryland, or this chapter.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Notice Filing—Investment Companies."> <paragraph num="A."> <text>Notice Filing. An issuer registered with the SEC under the Investment Company Act of 1940 that intends to offer or sell securities that are federal covered securities under §18(b)(2) of the Securities Act of 1933 shall, before an offer or sale in Maryland, submit a notice filing for those securities.</text> </paragraph> <paragraph num="B."> <text>Separate Classes or Series of Securities. An issuer that offers multiple classes or series of securities shall file a separate notice filing with the Commissioner and pay a separate fee for each class or series of securities.</text> </paragraph> <paragraph num="C."> <text>Initial Notice Filing. An initial notice filing shall consist of:</text> <paragraph num="(1)"> <text>Form NF (Uniform Investment Company Notice Filing) or a copy of the investment company's registration statement filed with the SEC;</text> </paragraph> <paragraph num="(2)"> <text>Form U-2 (Uniform Consent to Service of Process) or, if this document has been previously filed with the Commissioner, a cross-reference to the Maryland file number of an effective notice filing with which the Form U-2 was filed;</text> </paragraph> <paragraph num="(3)"> <text>The name and CRD number, if any, of at least one broker-dealer or issuer agent that will effect transactions in the securities in Maryland;</text> </paragraph> <paragraph num="(4)"> <text>The fee required by Corporations and Associations Article, §11-510.1, Annotated Code of Maryland; and</text> </paragraph> <paragraph num="(5)"> <text>Any documents filed with the SEC that the Commissioner may request.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Response to Notice Filing.</text> <paragraph num="(1)"> <text>Notice to Issuer. Following receipt of a notice filing, the Division shall notify an issuer that its notice filing is:</text> <paragraph num="(a)"> <text>Effective;</text> </paragraph> <paragraph num="(b)"> <text>Effective pending SEC effectiveness; or</text> </paragraph> <paragraph num="(c)"> <text>Incomplete.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Effectiveness. The Division shall notify an issuer that its notice filing is effective upon receipt in Maryland if:</text> <paragraph num="(a)"> <text>The notice filing is complete;</text> </paragraph> <paragraph num="(b)"> <text>The issuer's registration statement has been declared effective by the SEC; and</text> </paragraph> <paragraph num="(c)"> <text>No stop order is in effect and no proceeding is pending under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Notice Filing Effective Pending SEC Effectiveness.</text> <paragraph num="(a)"> <text>The Division shall notify an issuer that its notice filing is effective pending SEC effectiveness if:</text> <paragraph num="(i)"> <text>The notice filing is complete;</text> </paragraph> <paragraph num="(ii)"> <text>The issuer's registration statement has not been declared effective by the SEC; and</text> </paragraph> <paragraph num="(iii)"> <text>No stop order is in effect and no proceeding is pending under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>An issuer shall notify the Commissioner when its registration statement is declared effective by the SEC.</text> </paragraph> <paragraph num="(c)"> <text>The notice filing in Maryland is effective in Maryland immediately upon SEC effectiveness.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Incomplete Notice Filing.</text> <paragraph num="(a)"> <text>Notice of Deficiency.</text> <paragraph num="(i)"> <text>If a notice is incomplete, the Commissioner, before issuing a stop order under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland, shall notify an issuer of the deficiencies in the notice filing that must be corrected in order to complete the notice filing.</text> </paragraph> <paragraph num="(ii)"> <text>If an issuer cures the deficiencies in its notice filing, the Commissioner shall notify the issuer that its notice filing is effective or effective pending SEC effectiveness.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Stop Order.</text> <paragraph num="(i)"> <text>If an issuer fails to cure the deficiencies in its notice filing within 15 calendar days of notification of the deficiencies, the Commissioner may issue a stop order suspending the offer or sale of the securities in Maryland under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(ii)"> <text>If, after the Commissioner issues a stop order, the issuer completes the notice filing, the Commissioner may vacate or otherwise modify the stop order and declare the filing effective.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="E."> <text>Duration of Notice Filing.</text> <paragraph num="(1)"> <text>Investment Companies Other Than Unit Investment Trusts. An initial or renewal notice filing submitted for an issuer is effective until the last day of the issuer's fiscal year end, when it must be renewed under Regulation .06 or terminated under Regulation .07 of this chapter.</text> </paragraph> <paragraph num="(2)"> <text>Unit Investment Trusts.</text> <paragraph num="(a)"> <text>An initial or renewal notice filing submitted for an issuer is effective for a 1-year period from the date of effectiveness, and must be renewed under Regulation .06 or terminated under Regulation .07 of this chapter.</text> </paragraph> <paragraph num="(b)"> <text>The Division will run the effective period of the issuer's notice filing concurrently with the SEC effective period for the notice filing if:</text> <paragraph num="(i)"> <text>The issuer's SEC filing is already effective at the time the notice filing is made with the Division; and</text> </paragraph> <paragraph num="(ii)"> <text>The issuer requests that the Division set the Maryland effective period to run concurrently.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(3)"> <text>SEC Termination. If, after an issuer's notice filing is declared effective in Maryland, the issuer's registration with the SEC terminates, the issuer shall terminate its notice filing under Regulation .07 of this chapter.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Amendment of Notice Filing.</text> <paragraph num="(1)"> <text>Filing Requirement. An issuer shall file with the Commissioner an amendment to the notice filing for any material changes in the information contained in the filing.</text> </paragraph> <paragraph num="(2)"> <text>Material Changes. Events requiring an issuer to amend its notice filing include, but are not limited to, changes in the:</text> <paragraph num="(a)"> <text>Fiscal year-end date;</text> </paragraph> <paragraph num="(b)"> <text>Name of the issuer or of a portfolio, series, or class of securities of the issuer; or</text> </paragraph> <paragraph num="(c)"> <text>Business form of the issuer.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Change in Fiscal Year End—Investment Companies Other Than Unit Investment Trusts. If an issuer changes its fiscal year-end date, the issuer shall:</text> <paragraph num="(a)"> <text>Submit a renewal notice filing at the end of its new fiscal year-end date in accordance with Regulation .06 of this chapter; and</text> </paragraph> <paragraph num="(b)"> <text>Pay a fee in accordance with Regulation .05 of this chapter.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>Filing Deadline. An issuer shall file amendments required by this section within 15 days of the event giving rise to the need to amend the filing.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Registration Requirement—Nonpayment of Fees. Until October 10, 1999, if a notice filing is incomplete for nonpayment or underpayment of any fees required under Regulation .05 of this chapter and the deficiency is not remedied within 15 calendar days after notification is sent to an issuer, the Commissioner may require the registration of the securities under Corporations and Associations Article, §11-503, Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Notice Filing Fee—Investment Companies."> <paragraph num="A."> <text>Notice Filing Fee.</text> <paragraph num="(1)"> <text>An issuer submitting a notice filing under Regulation .04 or .06 of this chapter shall pay an initial part of its fee at the time of the notice filing and the remaining part of its fee by the due date under §B of this regulation, or upon termination under Regulation .07 of this chapter.</text> </paragraph> <paragraph num="(2)"> <text>Initial Part of Fee. As part of its notice filing, an issuer shall pay $500 as required by Corporations and Associations Article, §11-510.1, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>Remaining Part of Fee. An issuer may pay the remaining part of its fee by either:</text> <paragraph num="(a)"> <text>Paying a flat fee of $1,300; or</text> </paragraph> <paragraph num="(b)"> <text>Filing with the Commissioner a year-end sales report on Form NF and paying a calculated fee computed as follows:</text> <paragraph num="(i)"> <text>If gross sales in Maryland are $500,000 or less, no additional fee is due,</text> </paragraph> <paragraph num="(ii)"> <text>If gross sales in Maryland are equal to or greater than $1,500,000, the remaining part of the fee is $1,000, or</text> </paragraph> <paragraph num="(iii)"> <text>If gross sales in Maryland are greater than $500,000 but less than $1,500,000, the remaining part of the fee is equal to 0.1 percent of gross sales in Maryland, minus $500.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Due Date for Remaining Part of Fee.</text> <paragraph num="(1)"> <text>Investment Companies Other Than Unit Investment Trusts. An issuer shall submit the remaining part of its fee within 60 days after its fiscal year-end date.</text> </paragraph> <paragraph num="(2)"> <text>Unit Investment Trusts. An issuer shall submit the remaining part of its fee within 60 days after expiration of effectiveness under Regulation .04E(2) of this chapter.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Change in Fiscal Year End—Prorated Fee.</text> <paragraph num="(1)"> <text>Renewing Issuer. If, as a result of a change in fiscal year-end date, the effective period for an issuer's existing notice filing extends beyond 12 months, an issuer renewing its notice filing under Regulation .06 shall submit a prorated fee in accordance with §C(3) of this regulation.</text> </paragraph> <paragraph num="(2)"> <text>Terminating Issuer. If, as a result of a change in fiscal year-end date, the effective period for an issuer's existing notice filing extends beyond 12 months, an issuer terminating its notice filing under Regulation .07 of this chapter shall submit a prorated fee in accordance with §C(3) of this regulation, minus $500.</text> </paragraph> <paragraph num="(3)"> <text>Prorated Fee—Tables.</text> <paragraph num="(a)"> <text>Flat Fee Table.</text> </paragraph> <paragraph num="(b)"> <text>Calculated Fee Table.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Renewal Notice Filing—Investment Companies."> <paragraph num="A."> <text>Renewal Notice Filing. An issuer shall renew its notice filing for a successive 1-year period by paying $500 as the initial part of its renewal fee and submitting to the Commissioner, within the due date under §B of this regulation, the remaining part of its fee required by Regulation .05 of this chapter.</text> </paragraph> <paragraph num="B."> <text>Due Date for Renewal Notice Filing.</text> <paragraph num="(1)"> <text>Investment Companies Other Than Unit Investment Trusts.</text> <paragraph num="(a)"> <text>An issuer shall submit its renewal notice filing within 60 days after its fiscal year-end date.</text> </paragraph> <paragraph num="(b)"> <text>If an issuer changes its fiscal year-end date, its existing notice filing may not remain effective for more than 24 months.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Unit Investment Trusts. An issuer shall submit its renewal notice filing within 60 days after expiration of effectiveness under Regulation .04E(2) of this chapter.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Termination of Offering—Investment Companies."> <text>If an issuer terminates an offering in Maryland, it shall:</text> <paragraph num="A."> <text>Notify the Commissioner of the termination of the offering; and</text> </paragraph> <paragraph num="B."> <text>Pay the fee and file any year-end sales report required by Regulation .05 of this chapter.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Combinations and Reorganizations—Investment Companies."> <paragraph num="A."> <text>Surviving Issuer. Within 15 days after the combination or reorganization of two or more issuers:</text> <paragraph num="(1)"> <text>A surviving issuer with an effective notice filing in Maryland shall amend its notice filing in accordance with Regulation .04F of this chapter;</text> </paragraph> <paragraph num="(2)"> <text>A surviving issuer without an effective notice filing in Maryland shall submit a notice filing in accordance with Regulation .04 of this chapter.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Terminating Issuers. Within 15 days after the combination or reorganization of two or more issuers, issuers terminating their offerings in Maryland shall make the filings required by Regulation .07 of this chapter.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Notice Filing and Fee—SEC Rule 506 Offerings."> <paragraph num="A."> <text>General. An issuer that intends to offer or sell federal covered securities under §18(b)(4)(D) of the Securities Act of 1933 shall, not later than 15 days after the first sale of securities in Maryland, submit a notice filing unless the securities or transactions would qualify for a self-executing exemption under Corporations and Associations Article, §11-601 or 11-602, Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>Notice Filing. A notice filing shall consist of:</text> <paragraph num="(1)"> <text>A completed copy of SEC Form D (Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption), as filed with the SEC, including Part E, manually signed, and the Maryland portion of the appendix to the form;</text> </paragraph> <paragraph num="(2)"> <text>Form U-2 (Uniform Consent to Service of Process);</text> </paragraph> <paragraph num="(3)"> <text>The date of the first sale of the securities in Maryland under this offering;</text> </paragraph> <paragraph num="(4)"> <text>The name and CRD number, if any, of at least one broker-dealer or issuer agent that will effect transactions in the securities in Maryland; and</text> </paragraph> <paragraph num="(5)"> <text>The fee required by Corporations and Associations Article, §11-506, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Response to Notice Filing.</text> <paragraph num="(1)"> <text>Notice to Issuer. Following receipt of a notice filing, the Division shall notify an issuer that its notice filing is:</text> <paragraph num="(a)"> <text>Effective; or</text> </paragraph> <paragraph num="(b)"> <text>Incomplete.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Effectiveness. A notice filing is effective in Maryland if:</text> <paragraph num="(a)"> <text>The notice filing is complete; and</text> </paragraph> <paragraph num="(b)"> <text>No stop order is in effect and no proceeding is pending under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Incomplete Notice Filing.</text> <paragraph num="(a)"> <text>Notice of Deficiency.</text> <paragraph num="(i)"> <text>If a notice filing is incomplete, the Commissioner, before issuing a stop order under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland, shall notify an issuer of the deficiencies in the notice filing that must be corrected in order to complete the notice filing.</text> </paragraph> <paragraph num="(ii)"> <text>If an issuer cures the deficiencies in its notice filing, the Commissioner shall notify the issuer that the notice filing is effective.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Stop Order.</text> <paragraph num="(i)"> <text>If an issuer fails to cure the deficiencies in its notice filing within 15 calendar days of notification of the deficiencies, the Commissioner may issue a stop order suspending the offer or sale of the securities in Maryland under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(ii)"> <text>If, after the Commissioner issues a stop order, the issuer completes the notice filing, the Commissioner may vacate or otherwise modify the stop order and declare the filing effective.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Registration Requirement—Nonpayment of Fees. Until October 10, 1999, if a notice filing is incomplete for nonpayment or underpayment of any fees required under §B of this regulation and the deficiency is not remedied within 15 calendar days after notification is sent to an issuer:</text> <paragraph num="(1)"> <text>The Commissioner may require the issuer to register the securities under Corporations and Associations Article, §11-503, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(2)"> <text>The issuer may establish an exemption for the securities under Corporations and Associations Article, §11-601 or 11-602, Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Notice Filing and Fee—Federal Covered Securities under §18(b)(3) and (b)(4)(A)—(C) of the Securities Act of 1933."> <paragraph num="A."> <text>General.</text> <paragraph num="(1)"> <text>An issuer that intends to offer or sell federal covered securities under §18(b)(3) or (b)(4)(A)—(C) of the Securities Act of 1933 shall submit a notice filing unless the securities or transactions would qualify for a self-executing exemption under Corporations and Associations Article, §11-601 or 11-602, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>A notice filing shall be filed with the Commissioner:</text> <paragraph num="(a)"> <text>At the same time an issuer submits its filing for securities with the SEC; or</text> </paragraph> <paragraph num="(b)"> <text>If no SEC filing is required, not later than 15 days after the first sale in Maryland.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Notice Filing. A notice filing shall consist of:</text> <paragraph num="(1)"> <text>A copy of each document filed, if any, with the SEC under the Securities Act of 1933 with respect to the offer or sale of federal covered securities under this regulation; (2) Form U-2 (Uniform Consent to Service of Process);</text> </paragraph> <paragraph num="(2)"> <text>Form U-2 (uniform Consent to Service of Process);</text> </paragraph> <paragraph num="(3)"> <text>The date of the first sale of the securities in Maryland;</text> </paragraph> <paragraph num="(4)"> <text>The name and CRD number, if any, of at least one broker-dealer or issuer agent that will effect transactions in the securities in Maryland; and</text> </paragraph> <paragraph num="(5)"> <text>The fee required by Corporations and Associations Article, §11-506, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>Response to Notice Filing.</text> <paragraph num="(1)"> <text>Notice to Issuer. Following receipt of a notice filing, the Division shall notify an issuer that its notice filing is:</text> <paragraph num="(a)"> <text>Effective; or</text> </paragraph> <paragraph num="(b)"> <text>Incomplete.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>Effectiveness. A notice filing is effective in Maryland if:</text> <paragraph num="(a)"> <text>The notice filing is complete; and</text> </paragraph> <paragraph num="(b)"> <text>No stop order is in effect and no proceeding is pending under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Incomplete Notice Filing.</text> <paragraph num="(a)"> <text>Notice of Deficiency.</text> <paragraph num="(i)"> <text>If a notice filing is incomplete, the Commissioner, before issuing a stop order under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland, shall notify an issuer of the deficiencies in the notice filing that must be corrected in order to complete the notice filing.</text> </paragraph> <paragraph num="(ii)"> <text>If an issuer cures the deficiencies in its notice filing, the Commissioner shall notify the issuer that the notice filing is effective.</text> </paragraph> </paragraph> <paragraph num="(b)"> <text>Stop Order.</text> <paragraph num="(i)"> <text>If an issuer fails to cure the deficiencies in its notice filing within 15 calendar days of notification of the deficiencies, the Commissioner may issue a stop order suspending the offer or sale of the securities in Maryland under Corporations and Associations Article, §§11-503.1 and 11-513, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(ii)"> <text>If, after the Commissioner issues a stop order, the issuer completes the notice filing, the Commissioner may vacate or otherwise modify the stop order and declare the filing effective.</text> </paragraph> </paragraph> </paragraph> </paragraph> <paragraph num="D."> <text>Registration Requirement—Nonpayment of Fees. Until October 10, 1999, if a notice filing is incomplete for nonpayment or underpayment of any fees required under §B of this regulation and the deficiency is not remedied within 15 calendar days after notification is sent to an issuer:</text> <paragraph num="(1)"> <text>The Commissioner may require the issuer to register the securities under Corporations and Associations Article, §11-503, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(2)"> <text>The issuer may establish an exemption for the securities under Corporations and Associations Article, §11-601 or 11-602, Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Registration of Agents."> <text>A person engaged in sales activity relating to the offer or sale of federal covered securities under this chapter shall:</text> <paragraph num="A."> <text>Register as a broker-dealer agent under Corporations and Associations Article, §11-401, Annotated Code of Maryland, and COMAR 02.02.02.04;</text> </paragraph> <paragraph num="B."> <text>Register as an issuer agent under Corporations and Associations Article, §11-401, Annotated Code of Maryland, and COMAR 02.02.03.11; or</text> </paragraph> <paragraph num="C."> <text>Qualify for an exclusion under Corporations and Associations Article, §11-101, Annotated Code of Maryland, or an exemption under another provision.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Corporations and Associations Article, §§11-203, 11-501, 11-503.1, 11-506, 11-510.1, 11-513, and 11-802, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: August 24, 1998 (25:17 Md. R. 1358)</annotation> <annotation type="History" subtype="Administrative History">Regulations .09, .10 adopted effective December 28, 1998 (25:26 Md. R. 1918)</annotation> </annotations> </chapter> </subtitle> <subtitle num="03" heading="Civil Division"> <chapter num="01" heading="Procedure for Hearings Conducted to Determine Whether Country Clubs Receiving Preferential Tax Treatment Practice Discrimination"> <regulation prefix="Regulation" num=".01" heading="Notice."> <paragraph num="A."> <text>Any country club to be afforded a hearing on charges of discrimination prohibited by Tax-Property Article, §8-214, Annotated Code of Maryland, shall be given written notice of the date, time, and place of the hearing not less than 30 days before the hearing. Notice will be given by ordinary mail to the address of the club as indicated on the records of the office of the Supervisor of Assessments of the county in which the club is located.</text> </paragraph> <paragraph num="B."> <text>The notice shall state the specifications of the charge or charges of discrimination and shall describe any records and other documentary evidence required to be produced by the club at the hearing.</text> </paragraph> <paragraph num="C."> <text>The purpose, date, time, and place of the hearing shall be published in the Maryland Register. Any interested person may appear and be heard.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Answer."> <paragraph num="A."> <text>Upon receipt of charges and notice of hearing, a country club shall, within 15 days of the date of the notice, respond in writing to the charge or charges of discrimination. The answer shall indicate additionally whether or not the country club desires a hearing.</text> </paragraph> <paragraph num="B."> <text>The answer of any country club to charges of discrimination shall be signed by the president or other authorized representative of the club and returned to the Department of Law, State of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Postponements."> <paragraph num="A."> <text>If, for good cause shown, a country club requests in writing a postponement of the hearing date within the time provided for its response under Regulation .02 of this chapter postponement may be granted. The postponement may not be for more than 30 days unless specified otherwise by the Attorney General.</text> </paragraph> <paragraph num="B."> <text>The hearing date may be postponed, in the sole discretion of the Attorney General, notwithstanding noncompliance with this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Conduct of Hearings."> <paragraph num="A."> <text>Hearings shall be conducted before a hearing officer appointed by the Attorney General. The hearings shall be recorded and shall be open to the public.</text> </paragraph> <paragraph num="B."> <text>Hearings may be conducted in an informal manner and the parties may not be bound by the technical rules of evidence, except that evidence shall be relevant to the issues in the case. A country club shall have the right to offer testimony and exhibits and cross-examine witnesses.</text> </paragraph> <paragraph num="C."> <text>At the hearing, an officer, manager, or other qualified representative of the club shall be present to testify concerning past and present racial, ethnic, religious, and sexual composition of the club membership, club procedures, and practices with respect to membership applications, guest policies and practices in the past and present, and the charters, bylaws, and other official club documents relating to membership and use of club facilities. The club may be represented by counsel.</text> </paragraph> <paragraph num="D."> <text>The Attorney General may designate one or more Assistant Attorneys General to represent the Department of Assessment and Taxation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Orders."> <paragraph num="A."> <text>After the hearing has been completed, the hearing officer shall submit findings of fact, conclusions of law, and a proposed order to the Attorney General for review. The Attorney General shall issue findings of fact, conclusions of law, and a final order.</text> </paragraph> <paragraph num="B."> <text>The final order and opinion shall be served by mail on the country club or its attorney.</text> </paragraph> <paragraph num="C."> <text>After any order finding that a country club practices discrimination, the Attorney General shall propose a consent agreement whereby the club agrees to cease the discriminatory practices.</text> </paragraph> <paragraph num="D."> <text>If the country club breaches or violates or refuses to enter into an appropriate consent agreement, the Attorney General shall issue an order to that club to cease all discriminatory practices.</text> </paragraph> <paragraph num="E."> <text>If the country club breaches the order to cease all discriminatory practices, the Attorney General, in accordance with Article 81, §19(e) and (f), Annotated Code of Maryland, shall direct the Supervisor of Assessments to terminate the tax exemption, credit, or beneficial assessment of that club.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Further Appeals."> <paragraph num="A."> <text>Any country club which has its tax exemption, credit, or beneficial assessment withdrawn as described in Regulation .05E of this chapter may appeal pursuant to State Government Article, §§10-215 and 10-216, Annotated Code of Maryland. The appeal shall be taken by filing within 30 days of notice of the withdrawal of the tax exemption, credit, or beneficial assessment, an order for appeal with the court having jurisdiction in the case and by serving a copy of the order on the Office of the Attorney General.</text> </paragraph> <paragraph num="B."> <text>Any notice of appeal shall include a request for a transcript of the record of the proceedings. The record shall be transcribed at the expense of the appealing party, and the cost of transcription shall be paid before the transmittal of the record to the court.</text> </paragraph> <paragraph num="C."> <text>Appeals shall be taken in compliance with subtitle B of the Maryland Rules of Procedure.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Computation of Time."> <paragraph num="A."> <text>In computing any period of time prescribed by these regulations, the day of the act or event after which the designated period of time begins to run is not to be included.</text> </paragraph> <paragraph num="B."> <text>The last day of the time period is to be included unless it is a Saturday, Sunday, or a legal holiday, in which event the period runs until the end of the next day which is not a Saturday, Sunday, or a legal holiday.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Tax Property Article, §§8-212—8-218, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: December 24, 1975 (2:29 Md. R. 1735)</annotation> </annotations> </chapter> </subtitle> <subtitle num="04" heading="Antitrust Division"> <chapter num="01" heading="Maryland Foreign Discriminatory Boycotts Act Regulations"> <annotations> <annotation type="Authority">Commercial Law Article, §§11-101—11-115, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: January 19, 1977 (4:2 Md. R. 81)</annotation> </annotations> </chapter> <chapter num="02" heading="Business Review Procedure"> <regulation prefix="Regulation" num=".01" heading="General."> <text>The Attorney General of Maryland is not authorized to give advisory opinions to private parties. The Attorney General will in certain circumstances and under the conditions set forth in this chapter, respond to inquiries from private parties with respect to proposed business conduct, and may state the Attorney General's enforcement intentions under the Maryland Antitrust Act, Commercial Law Article, §§11-201—11-213, Annotated Code of Maryland.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Request."> <text>A request for a business review letter shall be submitted in writing to the Assistant Attorney General and Chief, Antitrust Division, Office of the Attorney General, 200 St. Paul Place, Baltimore, Maryland 21202.</text> </regulation> <regulation prefix="Regulation" num=".03" heading="Proposed Business Conduct."> <text>The Attorney General shall consider only requests with respect to proposed business conduct. Hypothetical problems may not be considered for review.</text> </regulation> <regulation prefix="Regulation" num=".04" heading="Applicability."> <text>A business review letter issued under this chapter does not have application to any party which does not join in the request for the business review letter.</text> </regulation> <regulation prefix="Regulation" num=".05" heading="Content of Request."> <text>A request shall be accompanied by:</text> <paragraph num="A."> <text>All relevant data, including background information;</text> </paragraph> <paragraph num="B."> <text>Complete copies of all operative documents; and</text> </paragraph> <paragraph num="C."> <text>Detailed statements of all collateral understandings, if any.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Obligation of Requesting Party."> <text>The requesting party is under an obligation to make a full disclosure with respect to the business conduct for which review is requested. A party requesting the review letter shall provide the Attorney General with whatever additional information or documents the Attorney General may request in order to review the matter. The additional information, if furnished orally, shall be promptly confirmed in writing. In connection with any request for review, the Attorney General may also conduct whatever independent investigation the Attorney General believes is appropriate.</text> </regulation> <regulation prefix="Regulation" num=".07" heading="Oral Clearance Not Binding."> <text>The Attorney General does not give or authorize an oral clearance, release, or other statement purporting to bind the enforcement discretion of the Attorney General. The requesting party may rely only upon a written business review letter signed by the Attorney General, or Assistant Attorney General and Chief of the Antitrust Division.</text> </regulation> <regulation prefix="Regulation" num=".08" heading="Response by Attorney General."> <text>After review of a request, the Attorney General may:</text> <paragraph num="A."> <text>State the Attorney General's present enforcement intention with respect to the proposed business conduct;</text> </paragraph> <paragraph num="B."> <text>Decline to respond to the request; or</text> </paragraph> <paragraph num="C."> <text>Take such other position as the Attorney General considers appropriate.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Effect of Business Review Letter."> <paragraph num="A."> <text>A business review letter shall recite the facts upon which it is issued, and shall state only the enforcement intention of the Attorney General with respect to the facts as recited. The Attorney General remains completely free to bring whatever action or proceeding the Attorney General subsequently comes to believe is required by the public interest.</text> </paragraph> <paragraph num="B."> <text>A business review letter issued shall state only the Attorney General's present enforcement intentions under the antitrust laws, and may not in any way be taken to indicate the Attorney General's views on legal or factual issues that may be raised when the proposed business conduct is subject to approval, review, or regulation by a State or federal agency, commission, department, or board. The issuance of a business review letter is not to be represented to mean that the Attorney General believes that there are no anticompetitive consequences warranting a regulatory entity's consideration.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Request May Be Withdrawn At Any Time."> <text>A requesting party may withdraw a request for review at any time. The Attorney General remains free, however, to submit comments to the requesting party as the Attorney General considers appropriate. Failure to take action after receipt of documents or information, whether submitted pursuant to this procedure or otherwise, does not in any way limit or stop the Attorney General from taking action at any time after that as the Attorney General considers appropriate.</text> </regulation> <regulation prefix="Regulation" num=".11" heading="Documents Retained."> <text>The Attorney General reserves the right to retain documents submitted to the Attorney General under this procedure or otherwise and to use them for purposes of enforcement of the Maryland Antitrust Act, Commercial Law Article, §11-201—11-213, Annotated Code of Maryland.</text> </regulation> <annotations> <annotation type="Authority">Commercial Law Article, §§11-201—11-213, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: October 12, 1992 (19:20 Md. R. 1813)</annotation> </annotations> </chapter> </subtitle> <subtitle num="05" heading="Acquisition and Conversion of Nonprofit Hospitals"> <chapter num="01" heading="Applications for and Hearings on the Acquisition and Conversion of Nonprofit Hospitals"> <regulation prefix="Regulation" num=".01" heading="Scope."> <text>This chapter applies to the conversion and acquisition of a nonprofit hospital and is intended to effectuate the provisions of State Government Article, Title 6.5, Annotated Code of Maryland, and is not intended to modify or conflict with the provisions of that title.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Acquisition” has the meaning stated in State Government Article, §6.5-101(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Application” means any documents or other materials filed with the Attorney General in accordance with State Government Article, §6.5-201, Annotated Code of Maryland, and Regulation .03 of this chapter.</text> </paragraph> <paragraph num="(3)"> <text>“Attorney General” means the Attorney General or a designee of the Attorney General.</text> </paragraph> <paragraph num="(4)"> <text>“Board” means the board of directors, board of trustees, or other managing board of a corporation or institution.</text> </paragraph> <paragraph num="(5)"> <text>“Certificate of need” has the meaning stated in Health-General Article, §19-114, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Consideration” means any cash, stocks, or things of value promised by the transferee to the transferor for completion of the acquisition.</text> </paragraph> <paragraph num="(7)"> <text>“Department” means the Secretary of Health or a designee of the Secretary of Health.</text> </paragraph> <paragraph num="(8)"> <text>“Fair value” means the value of the transferor considering all relevant factors, including those set forth in State Government Article, §6.5-301(d), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(9)"> <text>“Hospital” has the meaning stated in Health-General Article, §19-301(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(10)"> <text>“Material” means an original or any copy of any information or document, including a card, computerized record, correspondence, disc or diskette, drawing, electronic record, film or microfilm, form, map, photograph, photostat, recording, or tape.</text> </paragraph> <paragraph num="(11)"> <text>“Modification” means a temporary or permanent condition that shall be satisfied or executed by the transferee or transferor, or both.</text> </paragraph> <paragraph num="(12)"> <text>“Transferee” means the person in an acquisition that received the ownership or control of the nonprofit health entity that is the subject of the acquisition.</text> </paragraph> <paragraph num="(13)"> <text>Transferor.</text> <paragraph num="(a)"> <text>“Transferor” has the meaning stated in State Government Article, §6.5-101(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(b)"> <text>“Transferor” includes, for purposes of information sought during the application process, predecessor or merged entities.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Application."> <paragraph num="A."> <text>A person that seeks to engage in an acquisition of a nonprofit health entity shall mail or deliver 30 complete copies of an application to the Office of the Attorney General, 200 St. Paul Place, Baltimore, Maryland 21202.</text> </paragraph> <paragraph num="B."> <text>The application shall include:</text> <paragraph num="(1)"> <text>The name, address, and designated representative of:</text> <paragraph num="(a)"> <text>The transferor;</text> </paragraph> <paragraph num="(b)"> <text>The transferee; and</text> </paragraph> <paragraph num="(c)"> <text>Any other parties to the acquisition;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>All of the terms of the proposed acquisition, including consideration to be paid by the transferee;</text> </paragraph> <paragraph num="(3)"> <text>A copy of the acquisition agreement or agreements, including any exhibits or attachments;</text> </paragraph> <paragraph num="(4)"> <text>A financial and community impact analysis report from an independent expert or consultant that addresses the criteria in State Government Article, §6.5-301, Annotated Code of Maryland;</text> </paragraph> <paragraph num="(5)"> <text>Minutes of all board meetings of the transferor and the transferee for the 60 months preceding the filing;</text> </paragraph> <paragraph num="(6)"> <text>All reports, analyses, memoranda, correspondence, or other documents submitted to or considered by the board of the transferor in approving the proposed acquisition;</text> </paragraph> <paragraph num="(7)"> <text>All requests by the transferor for purchase bids made to any entity during the 60 months preceding the filing;</text> </paragraph> <paragraph num="(8)"> <text>All documents comprising, analyzing, or responding to offers of purchase of the transferor from entities other than the transferee for the 60 months preceding the filing;</text> </paragraph> <paragraph num="(9)"> <text>All documents describing, proposing, or summarizing compensation to be paid by the transferee or transferor to officers, directors, or employees of the transferor as a result of the proposed acquisition, including any contracts or other documents reflecting continued employment of such officers, directors, or employees after completion of the acquisition;</text> </paragraph> <paragraph num="(10)"> <text>All transaction documents that are necessary to be executed in order to effect the proposed acquisition;</text> </paragraph> <paragraph num="(11)"> <text>All articles of incorporation and bylaws of the transferor, and any wholly owned subsidiaries of the transferor, adopted since the creation of the transferor;</text> </paragraph> <paragraph num="(12)"> <text>All documents describing restrictions on the use of gifts of $5,000 or more that were made to the transferor or its wholly owned subsidiaries;</text> </paragraph> <paragraph num="(13)"> <text>All annual reports and audited financial statements of the transferor for the 60 months preceding the application and any audited or unaudited current financial statements of the transferor;</text> </paragraph> <paragraph num="(14)"> <text>All documents relating to any certificate of need and any license to operate held by the transferor for the 60 months preceding the application;</text> </paragraph> <paragraph num="(15)"> <text>All documents relating to any proposed maintenance of effort after acquisition or any proposed change after acquisition in the provision of health care services in the community in which the transferor-hospital is located; and</text> </paragraph> <paragraph num="(16)"> <text>All other documents related to the acquisition.</text> </paragraph> </paragraph> <paragraph num="C."> <text>An application is complete only if all documents and information required to be provided by §B of this regulation and all expert reports, including those the Attorney General requests as authorized in State Government Article, §6.5-203(e), Annotated Code of Maryland and Regulation .04 of this chapter, are filed. The Attorney General may ask questions of the transferor, transferee, or both, to determine if an application is complete.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Financial and Community Impact Report and Other Expert Assistance."> <paragraph num="A."> <text>The transferee shall file a financial and community impact report prepared by an independent expert that analyzes whether:</text> <paragraph num="(1)"> <text>The purchase price represents the fair value of the transferor;</text> </paragraph> <paragraph num="(2)"> <text>The fair value of the transferor will be paid in accordance with State Government Article, §6.5-301(b)(2), Annotated Code of Maryland;</text> </paragraph> <paragraph num="(3)"> <text>Any part of the public or charitable assets that are subject to the acquisition will inure directly or indirectly to an officer, director, or trustee of the transferor;</text> </paragraph> <paragraph num="(4)"> <text>Any conflicts of interest exist for any officer, director, or trustee of the transferor; and</text> </paragraph> <paragraph num="(5)"> <text>The transaction is in the public interest, analyzing each factor set forth in State Government Article, §6.5-301(e), Annotated Code of Maryland, including if and to what extent the cost of health care in the community will be affected, and reaching a conclusion on each factor.</text> </paragraph> </paragraph> <paragraph num="B."> <text>After consultation with the Department, the Attorney General may hire an independent expert, at the expense of the transferee, to prepare a financial and community impact report analyzing one or more of the factors in §A of this regulation or in State Government Article, §6.5-301, Annotated Code of Maryland.</text> </paragraph> <paragraph num="C."> <text>After consultation with the Department, the Attorney General may hire experts, at the expense of the transferee, to assist in executing the responsibilities set forth in State Government Article, Title 6.5, Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Public Access to Documents."> <paragraph num="A."> <text>Any person may request to inspect or copy all or part of an application or documents generated upon review of an application.</text> </paragraph> <paragraph num="B."> <text>Unless it conflicts with this chapter or State Government Article, Title 6.5, Annotated Code of Maryland, the Maryland Public Information Act, State Government Article, Title 10, Subtitle 6, Annotated Code of Maryland applies to public access to the application or documents generated upon review of an application, including provisions concerning judicial review of a denial of access.</text> </paragraph> <paragraph num="C."> <text>General Rule of Confidentiality and Nondisclosure. Except as provided in §D or E of this regulation or otherwise by law, all information and documents gathered by or filed with the Attorney General pursuant to an application, investigation, or examination under this chapter are:</text> <paragraph num="(1)"> <text>Confidential;</text> </paragraph> <paragraph num="(2)"> <text>Not subject to subpoena; and</text> </paragraph> <paragraph num="(3)"> <text>Not to be made public by the Attorney General or any other party.</text> </paragraph> </paragraph> <paragraph num="D."> <text>Waiver by Written Consent of Person to Which the Material Relates. If the person to whom the material relates gives prior written consent by delivery in a form considered acceptable by the Attorney General, the material may be made public.</text> </paragraph> <paragraph num="E."> <text>Attorney General's Discretion to Disclose. After giving the applicant notice and an opportunity to be heard, if the Attorney General determines that disclosure is in the interest of the stockholders of the transferor or the public, the Attorney General may disclose all or part of material otherwise confidential under §C of this regulation.</text> </paragraph> <paragraph num="F."> <text>Process for Requesting Access.</text> <paragraph num="(1)"> <text>A request to inspect or copy materials shall be in writing.</text> </paragraph> <paragraph num="(2)"> <text>The request shall be directed to the Attorney General.</text> </paragraph> <paragraph num="(3)"> <text>The request shall:</text> <paragraph num="(a)"> <text>Contain the requestor's name and address;</text> </paragraph> <paragraph num="(b)"> <text>Be signed by the requestor; and</text> </paragraph> <paragraph num="(c)"> <text>Contain a brief description of the information sought.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>If the Attorney General grants a request for inspection or copying, the materials shall be produced within a reasonable period not to exceed 30 days from the date of the receipt of the request.</text> </paragraph> <paragraph num="(5)"> <text>If the Attorney General denies the request in whole or in part, the denial shall:</text> <paragraph num="(a)"> <text>Be mailed within 30 days from the date of the receipt of the request; and</text> </paragraph> <paragraph num="(b)"> <text>State the reasons for the denial.</text> </paragraph> </paragraph> <paragraph num="(6)"> <text>With the consent of the requestor, any time limit imposed in this process may be extended for an additional period.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Fee for Copying Materials. The Attorney General may:</text> <paragraph num="(1)"> <text>Charge a reasonable fee per page of material copied comparable to fees currently charged by other agencies for copies provided under the State Government Article, §10-621, Annotated Code of Maryland; or</text> </paragraph> <paragraph num="(2)"> <text>Waive the fee if the Attorney General decides that waiver of the fee is in the public interest.</text> </paragraph> </paragraph> <paragraph num="H."> <text>Judicial Review. The requestor may seek judicial review of a decision by the Attorney General to deny access to materials, but, unless otherwise ordered by a court, the appeal may not delay action upon the application for conversion.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Public Hearing."> <paragraph num="A."> <text>Within 90 days of receiving a complete application, including all expert reports required or requested by the Attorney General, the Attorney General shall hold a public hearing in the jurisdiction in which the hospital to be acquired by the transferee is located. If the acquisition involves hospitals in more than one jurisdiction, the Attorney General shall hold at least one public hearing in each jurisdiction in which a hospital to be acquired by the transferee is located.</text> </paragraph> <paragraph num="B."> <text>The hearing shall be quasi-legislative and not a contested case hearing.</text> </paragraph> <paragraph num="C."> <text>Notice of all hearings shall be published in accordance with State Government Article, §6.5-202, Annotated Code of Maryland.</text> </paragraph> <paragraph num="D."> <text>The transferee is responsible for all reasonable costs related to the public hearings.</text> </paragraph> <paragraph num="E."> <text>The Attorney General shall determine the conduct of the hearing, including:</text> <paragraph num="(1)"> <text>The order of presentation; and</text> </paragraph> <paragraph num="(2)"> <text>Time limits for questions and testimony.</text> </paragraph> </paragraph> <paragraph num="F."> <text>The Attorney General may:</text> <paragraph num="(1)"> <text>Request the attendance of persons to testify or the production of documents;</text> </paragraph> <paragraph num="(2)"> <text>Issue a subpoena requiring the:</text> <paragraph num="(a)"> <text>Attendance of persons to testify; or</text> </paragraph> <paragraph num="(b)"> <text>Production of documents;</text> </paragraph> </paragraph> <paragraph num="(3)"> <text>Employ related discovery procedures;</text> </paragraph> <paragraph num="(4)"> <text>Request that the Department join the Attorney General in presiding at the hearing;</text> </paragraph> <paragraph num="(5)"> <text>Require testimony to be given under oath;</text> </paragraph> <paragraph num="(6)"> <text>Ask questions of anyone present at the hearing;</text> </paragraph> <paragraph num="(7)"> <text>Take questions from the audience and redirect the questions to others present at the hearing; and</text> </paragraph> <paragraph num="(8)"> <text>Record the hearing by audiotape or stenographic means.</text> </paragraph> </paragraph> <paragraph num="G."> <text>Recorded Hearings.</text> <paragraph num="(1)"> <text>If the hearing is recorded, the Office of the Attorney General or the Attorney General's designee shall maintain the original audiotape or stenographic record.</text> </paragraph> <paragraph num="(2)"> <text>The transferee shall be responsible for the cost of transcribing the record and providing a copy of the record to the:</text> <paragraph num="(a)"> <text>Transferee;</text> </paragraph> <paragraph num="(b)"> <text>Transferor; and</text> </paragraph> <paragraph num="(c)"> <text>Attorney General.</text> </paragraph> </paragraph> </paragraph> <paragraph num="H."> <text>The rules of evidence do not apply to a hearing held under this chapter.</text> </paragraph> <paragraph num="I."> <text>The Attorney General shall receive and mark all exhibits offered at the hearing if they are relevant to the hearing.</text> </paragraph> <paragraph num="J."> <text>The Attorney General shall control and maintain custody of the hearing record, which shall consist of:</text> <paragraph num="(1)"> <text>The complete application;</text> </paragraph> <paragraph num="(2)"> <text>Notice of all hearings;</text> </paragraph> <paragraph num="(3)"> <text>Exhibits and other documents entered into the record as approved by the Attorney General;</text> </paragraph> <paragraph num="(4)"> <text>The register of all persons who participated in the hearing;</text> </paragraph> <paragraph num="(5)"> <text>Any audiotape of the hearing;</text> </paragraph> <paragraph num="(6)"> <text>Any transcript of the hearing; and</text> </paragraph> <paragraph num="(7)"> <text>The final decision of the Attorney General.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Decision."> <paragraph num="A."> <text>Within 60 days after the record is closed, including the conclusion of any public hearings, submission of any expert reports, and consultation with the Department, the Attorney General shall issue a decision:</text> <paragraph num="(1)"> <text>Approving the application without modification;</text> </paragraph> <paragraph num="(2)"> <text>Approving the application with modification; or</text> </paragraph> <paragraph num="(3)"> <text>Disapproving the application.</text> </paragraph> </paragraph> <paragraph num="B."> <text>For good cause, the Attorney General may extend the time for a decision for a 60-day period. Only two time extensions may be granted.</text> </paragraph> <paragraph num="C."> <text>The decision of the Attorney General becomes effective 90 days after the date the decision is issued.</text> </paragraph> <paragraph num="D."> <text>Unless otherwise required by law, a person aggrieved by a final decision of the Attorney General may file a petition for review in the circuit court for the county in which the hospital to be acquired by the transferee is located. If the acquisition involves hospitals in more than one county, the appeal may be filed in the circuit court for any of the jurisdictions in which a hospital to be acquired by the transferee is located. A petition for review shall be filed not later than 30 days after the date the Attorney General's final decision becomes effective.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">State Government Article, §6.5-103, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: December 12, 2002 (29:24 Md. R. 1918)</annotation> </annotations> </chapter> </subtitle> <subtitle num="06" heading="General Regulations"> <chapter num="01" heading="Public Information Act Requests"> <regulation prefix="Regulation" num=".01" heading="Scope."> <text>This chapter sets out procedures under the Public Information Act for filing and processing requests to the Office of the Attorney General for the inspection and copying of public records of the Office.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Policy."> <text>It is the policy of the Office of the Attorney General to facilitate access to the public records of the Office, if access is allowed by law, by minimizing costs and time delays to applicants.</text> </regulation> <regulation prefix="Regulation" num=".03" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Act” means the Public Information Act, General Provisions Article, §§4-101—4-601, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Applicant” has the meaning stated in General Provisions Article, §4-101(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>“Board” has the meaning stated in General Provisions Article, §4-101(c), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(4)"> <text>“Copy” means any form of reproduction using a photocopying machine or other reproduction technology, including a paper copy, an electronic copy, a printout, or an image.</text> </paragraph> <paragraph num="(5)"> <text>“Custodian” has the meaning stated in General Provisions Article, §4-101(d), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Indigent” has the meaning stated in General Provisions Article, §4-206(a)(2), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(7)"> <text>“Metadata” has the meaning stated in General Provisions Article, §4-205(a), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(8)"> <text>“Office” means the Office of the Attorney General.</text> </paragraph> <paragraph num="(9)"> <text>“Official custodian” has the meaning stated in General Provisions Article, §4-101(f), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(10)"> <text>“Public Access Ombudsman” means the official appointed under General Provisions Article, Title 4, Subtitle 1B, Annotated Code of Maryland, to resolve disputes under the Act.</text> </paragraph> <paragraph num="(11)"> <text>“Public record” has the meaning stated in General Provisions Article, §4-101(k), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(12)"> <text>“Reasonable Fee” has the meaning stated in General Provisions Article, §4-206(a)(3), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(13)"> <text>“Working day” means a day other than a Saturday, Sunday, State holiday, or other day on which the Office is not open for official business.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Attorney General as Official Custodian."> <text>Unless otherwise provided by law, the Attorney General is the official custodian of the public records of the Office.</text> </regulation> <regulation prefix="Regulation" num=".05" heading="Who May Request Public Records."> <text>Any person may request to inspect or copy public records of the Office.</text> </regulation> <regulation prefix="Regulation" num=".06" heading="Necessity for Written Request."> <paragraph num="A."> <text>Inspection.</text> <paragraph num="(1)"> <text>Except as otherwise provided in this chapter, the custodian shall make public records of the Office available for inspection by an applicant without demanding a written request.</text> </paragraph> <paragraph num="(2)"> <text>The custodian shall require a written request if the custodian reasonably believes that:</text> <paragraph num="(a)"> <text>The Act or any other law may prohibit the disclosure of one or more public records to the applicant; or</text> </paragraph> <paragraph num="(b)"> <text>A written request will materially assist the Office in responding.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Copies. If the applicant requests a copy of any public record of the Office, the custodian may require a written request.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Contents of Written Request."> <text>A written request shall:</text> <paragraph num="A."> <text>Contain the applicant’s contact information; and</text> </paragraph> <paragraph num="B."> <text>Reasonably identify, by brief description, the public record sought.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Addressee."> <text>A request to inspect or copy a public record shall be addressed to the custodian of the record or to the Office’s representative for public records requests as designated under General Provisions Article, §4-503, Annotated Code of Maryland. If the custodian is unknown, the request may alternatively be addressed to the Attorney General.</text> </regulation> <regulation prefix="Regulation" num=".09" heading="Response to Request."> <paragraph num="A."> <text>If the custodian decides to grant a request for inspection, the custodian shall produce the public record for inspection:</text> <paragraph num="(1)"> <text>Immediately; or</text> </paragraph> <paragraph num="(2)"> <text>If additional time is needed to retrieve the public record and conduct any necessary review, within a reasonable time period, not to exceed 30 days after the date of the request.</text> </paragraph> </paragraph> <paragraph num="B."> <text>If the custodian reasonably believes that it will take more than 10 working days to produce the public record, the custodian shall indicate in writing or by electronic mail within 10 working days after receipt of the request:</text> <paragraph num="(1)"> <text>The amount of time that the custodian anticipates it will take to produce the public record;</text> </paragraph> <paragraph num="(2)"> <text>An estimate of the range of fees that may be charged to comply with the request for public records; and</text> </paragraph> <paragraph num="(3)"> <text>The reason why it will take more than 10 working days to produce the records.</text> </paragraph> </paragraph> <paragraph num="C."> <text>If the custodian decides to deny a request for inspection, the custodian shall:</text> <paragraph num="(1)"> <text>Deny the request promptly and not more than 30 days after the request, except as otherwise provided by law; and</text> </paragraph> <paragraph num="(2)"> <text>Immediately notify the applicant of the denial.</text> </paragraph> </paragraph> <paragraph num="D."> <text>If a request is denied, the custodian shall provide the applicant, at the time of the denial or within 10 working days, a written statement that gives:</text> <paragraph num="(1)"> <text>The reason or reasons for the denial, including, for records denied under General Provisions Article, §4-343, Annotated Code of Maryland, a brief explanation of:</text> <paragraph num="(a)"> <text>Why the denial is necessary, that is, why disclosure of the public record would be contrary to the public interest; and</text> </paragraph> <paragraph num="(b)"> <text>Why redacting information would not address the reasons for the denial;</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The legal authority for the denial;</text> </paragraph> <paragraph num="(3)"> <text>Without disclosing the protected information, a brief description of the undisclosed record or records that will enable the applicant to assess the applicability of the legal authority for the denial; and</text> </paragraph> <paragraph num="(4)"> <text>Notice of the remedies available for review of the denial.</text> </paragraph> </paragraph> <paragraph num="E."> <text>If a requested public record is not in the custody or control of the person to whom application is made, that person shall, within 10 working days after receipt of the request, notify the applicant:</text> <paragraph num="(1)"> <text>That the person does not have custody or control of the requested public record; and</text> </paragraph> <paragraph num="(2)"> <text>If the person knows:</text> <paragraph num="(a)"> <text>The name of the custodian of the public record; and</text> </paragraph> <paragraph num="(b)"> <text>The location or possible location of the public record.</text> </paragraph> </paragraph> </paragraph> <paragraph num="F."> <text>Any time limit imposed by §§A—C of this regulation may be extended:</text> <paragraph num="(1)"> <text>With the consent of the applicant, for an additional period of up to 30 days; and</text> </paragraph> <paragraph num="(2)"> <text>For the period of time during which a dispute is pending before the Public Access Ombudsman, as permitted by General Provisions Article, §4-203(d)(2), Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Notice to Person Possibly Affected by Disclosure."> <paragraph num="A."> <text>Unless prohibited by law, the custodian may provide notice of a request for inspection or copying of any public record of the Office to any person who, in the judgment of the custodian, could be adversely affected by disclosure of the public record.</text> </paragraph> <paragraph num="B."> <text>The custodian may consider the views of the possibly affected person before deciding whether to disclose the public record to an applicant.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".11" heading="Electronic Records."> <paragraph num="A."> <text>Except as provided in §§C and D of this regulation, the custodian shall provide an applicant with a copy of the public record in a searchable and analyzable electronic format if:</text> <paragraph num="(1)"> <text>The public record is in a searchable and analyzable electronic format;</text> </paragraph> <paragraph num="(2)"> <text>The applicant requests a copy of the public record in a searchable and analyzable electronic format; and</text> </paragraph> <paragraph num="(3)"> <text>The custodian is able to provide a copy of the public record, in whole or in part, in a searchable and analyzable electronic format that does not disclose information that is exempt from disclosure under the Act.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The custodian shall provide a portion of the public record in a searchable and analyzable electronic format if:</text> <paragraph num="(1)"> <text>Requested by the applicant; and</text> </paragraph> <paragraph num="(2)"> <text>The custodian is able to do so by using the existing functions of the database or software program that contains the searchable and analyzable data.</text> </paragraph> </paragraph> <paragraph num="C."> <text>The custodian is not required to:</text> <paragraph num="(1)"> <text>Create or reconstruct a public record in an electronic format if the public record is not available in an electronic format;</text> </paragraph> <paragraph num="(2)"> <text>Release an electronic record in a format that would jeopardize or compromise the security or integrity of the original record or of any proprietary software in which the record is maintained; or</text> </paragraph> <paragraph num="(3)"> <text>Create, compile, or program a new public record.</text> </paragraph> </paragraph> <paragraph num="D."> <text>The custodian may remove metadata from an electronic document before providing the electronic record to an applicant by:</text> <paragraph num="(1)"> <text>Using a software program or function; or</text> </paragraph> <paragraph num="(2)"> <text>Converting the electronic record into a different searchable and analyzable format.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".12" heading="Public Record Destroyed or Lost."> <text>If the person to whom application is made knows that a requested public record of the Office has been destroyed or lost, the person shall promptly:</text> <paragraph num="A."> <text>Notify the applicant that the public record is not available; and</text> </paragraph> <paragraph num="B."> <text>Explain the reasons why the public record cannot be produced.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".13" heading="Availability of Judicial and Administrative Review."> <text>If the custodian denies a request to inspect or copy a public record of the Office, the applicant may file an action for judicial enforcement under General Provisions Article, §4-362(a)(1), Annotated Code of Maryland, without pursuing the remedies set forth in General Provisions Article, Title 4, Subtitles 1A and 1B, Annotated Code of Maryland.</text> </regulation> <regulation prefix="Regulation" num=".14" heading="Disclosure Against Public Interest."> <paragraph num="A."> <text>Denial Pending Court Order.</text> <paragraph num="(1)"> <text>If, in the opinion of the Attorney General, disclosure of a public record of the Office otherwise subject to disclosure under the Act would do substantial injury to the public interest, the Attorney General may temporarily deny the request and seek a court order allowing continued nondisclosure.</text> </paragraph> <paragraph num="(2)"> <text>A temporary denial shall be in writing.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Circuit Court Review.</text> <paragraph num="(1)"> <text>Within 10 working days after the denial, the Attorney General shall apply to the appropriate circuit court for an order permitting continued denial or restriction of access.</text> </paragraph> <paragraph num="(2)"> <text>Notice of the Attorney General's complaint shall be served on the applicant in the manner provided for service of process by the Maryland Rules.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".15" heading="Fees."> <paragraph num="A."> <text>Except as provided in §§B and C of this regulation, the fee schedule for copying and certifying copies of public records of the Office is as follows:</text> <paragraph num="(1)"> <text>For each copy made by a standard printer or photocopying machine within the Office, 25 cents per page;</text> </paragraph> <paragraph num="(2)"> <text>For each copy made other than by a standard printer or photocopying machine within the Office, the actual cost of reproduction; and</text> </paragraph> <paragraph num="(3)"> <text>For certification as a true copy of a copy of a public record, an additional fee of $1 per page, or if appropriate, per item.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Minimum Fee. A charge may not be made if the total fee is $1 or less.</text> </paragraph> <paragraph num="C."> <text>If the fee for copies or certified copies of any public record of the Office is specifically set by a law other than the Act or this regulation, the custodian shall charge the prescribed fee.</text> </paragraph> <paragraph num="D."> <text>If the custodian cannot copy a public record within the Office, the custodian shall make arrangements for the prompt reproduction of the record at public or private facilities outside the Office. The custodian shall:</text> <paragraph num="(1)"> <text>Collect from the applicant a fee to cover the actual cost of reproduction; or</text> </paragraph> <paragraph num="(2)"> <text>Direct the applicant to pay the cost of reproduction directly to the facility making the copy.</text> </paragraph> </paragraph> <paragraph num="E."> <text>If the custodian intends to charge a fee, before copying a public record of the Office or otherwise disclosing public records to the applicant, the custodian shall estimate both the cost of reproduction and the search and preparation fee under §F of this regulation and may either:</text> <paragraph num="(1)"> <text>Obtain the agreement of the applicant to pay the cost; or</text> </paragraph> <paragraph num="(2)"> <text>Require prepayment of all or a portion of the cost.</text> </paragraph> </paragraph> <paragraph num="F."> <text>Search and Preparation Fee.</text> <paragraph num="(1)"> <text>Except as provided in §G of this regulation, the custodian may charge a reasonable fee for time that an official or employee of the Office spends to:</text> <paragraph num="(a)"> <text>Search for requested public records;</text> </paragraph> <paragraph num="(b)"> <text>Review requested public records for potential disclosure; and</text> </paragraph> <paragraph num="(c)"> <text>Prepare public records for inspection and copying.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>The custodian shall determine the fee under §F(1) of this regulation by multiplying the employee’s salary, prorated to an hourly basis, by the actual time attributable to the search for, review of, and preparation of public records for inspection and copying.</text> </paragraph> </paragraph> <paragraph num="G."> <text>The custodian may not charge a fee under §F of this regulation for the first 2 hours needed to search for and prepare a public record for inspection.</text> </paragraph> <paragraph num="H."> <text>Waiver or Reduction of Fee.</text> <paragraph num="(1)"> <text>The custodian may waive or reduce any fee under this regulation if:</text> <paragraph num="(a)"> <text>The applicant requests a waiver; and</text> </paragraph> <paragraph num="(b)"> <text>The custodian determines that:</text> <paragraph num="(i)"> <text>The waiver or reduction is in the public interest; or</text> </paragraph> <paragraph num="(ii)"> <text>The applicant is indigent and files an affidavit verifying the facts that support a claim of indigency.</text> </paragraph> </paragraph> </paragraph> <paragraph num="(2)"> <text>In determining whether a fee waiver is in the public interest, the custodian shall consider, among other relevant factors, the ability of the applicant to pay the fee.</text> </paragraph> </paragraph> <paragraph num="I."> <text>If the applicant requests that copies of a public record be mailed or delivered to the applicant or to a third party, the custodian may charge the applicant for the cost of postage or delivery.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".16" heading="Time and Place of Inspection."> <paragraph num="A."> <text>An applicant may inspect any public record of the Office that the applicant is entitled to inspect during the normal working hours of the Office, subject to the ability of the custodian, if a record is not immediately available for inspection, to schedule a mutually agreeable date within a reasonable amount of time that comports with any applicable deadlines under the Act.</text> </paragraph> <paragraph num="B."> <text>The inspection shall occur where the public record is located, unless the custodian, after taking into account the applicant's expressed wish, determines that another place is more suitable and convenient.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".17" heading="Sociological Information."> <paragraph num="A."> <text>For purposes of this regulation, “sociological information” means:</text> <paragraph num="(1)"> <text>Social Security number;</text> </paragraph> <paragraph num="(2)"> <text>Personal street address;</text> </paragraph> <paragraph num="(3)"> <text>Personal phone number;</text> </paragraph> <paragraph num="(4)"> <text>Date of birth; and</text> </paragraph> <paragraph num="(5)"> <text>Driver’s license number.</text> </paragraph> </paragraph> <paragraph num="B."> <text>Except for use in carrying out the custodian’s governmental functions or except as further provided in §C of this regulation, a custodian may not disclose under the Act, and shall deny a request for inspection or copying of, any part of a public record that contains sociological information relating to an individual.</text> </paragraph> <paragraph num="C."> <text>A custodian may disclose sociological information:</text> <paragraph num="(1)"> <text>To other public officials and employees in the performance of their public duties;</text> </paragraph> <paragraph num="(2)"> <text>To the person in interest or the agent or representative of the person in interest;</text> </paragraph> <paragraph num="(3)"> <text>With the consent of the person in interest;</text> </paragraph> <paragraph num="(4)"> <text>Pursuant to a duly issued subpoena;</text> </paragraph> <paragraph num="(5)"> <text>Pursuant to a court order;</text> </paragraph> <paragraph num="(6)"> <text>If disclosure is otherwise required by law, including if required to be disclosed under General Provisions Article, §4-333, Annotated Code of Maryland, as part of a licensing record; or</text> </paragraph> <paragraph num="(7)"> <text>If disclosure is otherwise permitted by law and the Attorney General or the Attorney General’s designee determines that disclosure would be in the public’s best interests.</text> </paragraph> </paragraph> </regulation> <annotations> <annotation type="Authority">General Provisions Article, §§4-101—4-601, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: August 18, 2003 (30:16 Md. R. 1073)</annotation> <annotation type="History" subtype="Administrative History">Chapter revised effective May 30, 2022 (49:11 Md. R. 609)</annotation> </annotations> </chapter> <chapter num="02" heading="Correction or Amendment of Public Records"> <regulation prefix="Regulation" num=".01" heading="Scope."> <text>This chapter sets out procedures under which a person in interest may request the correction or amendment of public records of the Office of the Attorney General.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Act” means the Public Information Act, General Provisions Article, §§4-101—4-601, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Custodian” has the meaning stated in General Provisions Article, §4-101(d), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>“Office” means the Office of the Attorney General.</text> </paragraph> <paragraph num="(4)"> <text>“Person in interest” has the meaning stated in General Provisions Article, §4-101(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(5)"> <text>“Public record” has the meaning stated in General Provisions Article, §4-101(k), Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Who May Request."> <text>A person in interest may request that the Office correct or amend any public record that:</text> <paragraph num="A."> <text>The Office keeps; and</text> </paragraph> <paragraph num="B."> <text>The person in interest is authorized to inspect.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Contents of Request."> <paragraph num="A."> <text>A person in interest shall make a request to correct or amend a public record in writing.</text> </paragraph> <paragraph num="B."> <text>The request shall:</text> <paragraph num="(1)"> <text>Identify the public record to be corrected or amended;</text> </paragraph> <paragraph num="(2)"> <text>State the precise correction or amendment requested;</text> </paragraph> <paragraph num="(3)"> <text>State the reason for the correction or amendment; and</text> </paragraph> <paragraph num="(4)"> <text>Include a statement that, to the best of the requester's belief, the public record is inaccurate or incomplete.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Addressee."> <text>A request to correct or amend a public record shall be addressed to the custodian of the record. If the custodian is unknown, the request may be addressed to the Attorney General.</text> </regulation> <regulation prefix="Regulation" num=".06" heading="Return of Nonconforming Request."> <paragraph num="A."> <text>The Office shall accept a request to correct or amend a public record when it is received if it reasonably complies with Regulations .04 and .05 of this chapter.</text> </paragraph> <paragraph num="B."> <text>If the request does not reasonably comply with Regulations .04 and .05 of this chapter, the Office shall return the request to the requester with:</text> <paragraph num="(1)"> <text>An explanation of the reason for the return; and</text> </paragraph> <paragraph num="(2)"> <text>A statement that, on receipt of a request that reasonably complies with Regulations .04 and .05 of this chapter, the request will be accepted.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Response to Request."> <text>Within 30 days after the Office receives a request for correction or amendment that reasonably complies with Regulations .04 and .05 of this chapter, the custodian shall:</text> <paragraph num="A."> <text>Make the requested correction or amendment, and inform the requester in writing of the action; or</text> </paragraph> <paragraph num="B."> <text>Inform the requester in writing that the Office will not:</text> <paragraph num="(1)"> <text>Make the requested correction or amendment, and the reason for the refusal; or</text> </paragraph> <paragraph num="(2)"> <text>Act on the request because:</text> <paragraph num="(a)"> <text>The requester is not a person in interest;</text> </paragraph> <paragraph num="(b)"> <text>The requester is not authorized to inspect the record; or</text> </paragraph> <paragraph num="(c)"> <text>Of any other reason authorized by law.</text> </paragraph> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Response to Refusal of Request—Statement of Disagreement."> <text>If the Office refuses to make a requested correction or amendment, a person in interest may file with the Office a concise statement of the reasons for:</text> <paragraph num="A."> <text>The requested correction or amendment; and</text> </paragraph> <paragraph num="B."> <text>The person's disagreement with the refusal of the Office to make the correction or amendment.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Requirements for Statement of Disagreement."> <text>The statement submitted under Regulation .08 of this chapter shall:</text> <paragraph num="A."> <text>Be on pages not larger than 8-1/2 × 11 inches;</text> </paragraph> <paragraph num="B."> <text>Use only one side of each page; and</text> </paragraph> <paragraph num="C."> <text>Consist of not more than five pages.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Disclosure of Statement of Disagreement."> <text>If a person in interest files a statement of disagreement concerning a public record under Regulations .08 and .09 of this chapter, the Office shall provide a copy of the statement whenever the Office discloses the public record to a third party.</text> </regulation> <regulation prefix="Regulation" num=".11" heading="Administrative Review."> <paragraph num="A."> <text>A person may request administrative review under this regulation if the Office:</text> <paragraph num="(1)"> <text>Has refused the person's request to correct or amend a public record under Regulation .07 of this chapter;</text> </paragraph> <paragraph num="(2)"> <text>Has rejected the person's statement of disagreement under Regulation .08 of this chapter; or</text> </paragraph> <paragraph num="(3)"> <text>Has not provided a statement of disagreement to a third party under Regulation .10 of this chapter.</text> </paragraph> </paragraph> <paragraph num="B."> <text>A request for review shall be filed with the Attorney General within 30 days after the requester is advised of the Office’s action.</text> </paragraph> <paragraph num="C."> <text>The review proceedings shall be conducted in accordance with State Government Article, Title 10, Subtitle 2, Annotated Code of Maryland.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">General Provisions Article, §4-502, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: August 18, 2003 (30:16 Md. R. 1073)</annotation> <annotation type="History" subtype="Administrative History">Regulation .2B amended effective May 30, 2022 (49:11 Md. R. 609)</annotation> <annotation type="History" subtype="Administrative History">Regulation .11B amended effective May 30, 2022 (49:11 Md. R. 609)</annotation> </annotations> </chapter> <chapter num="03" heading="“Instructions on Current Life-Sustaining Treatment Options” Form"> <regulation prefix="Regulation" num=".01" heading="Scope."> <text>This chapter sets out the “Instructions on Current Life-Sustaining Treatment Options” form developed by the Office of the Attorney General and certain related procedures and requirements.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Advance directive” has the meaning stated in Health-General Article, §5-601(d), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Agent” has the meaning stated in Health-General Article, §5-601(c), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>“Facility” has the meaning stated in Health-General Article, §19-343(a), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(4)"> <text>“Form” means the “Instructions on Current Life-Sustaining Treatment Options” form required to be developed pursuant to Health-General Article, §6-608.1, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(5)"> <text>“Health care provider” has the meaning stated in Health-General Article, §5-601(k), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Medical record” has the meaning stated in Health-General Article, §4-301(g), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(7)"> <text>“Patient” has the meaning stated in Health-General Article, §4-301(j), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(8)"> <text>“Prepare” means to:</text> <paragraph num="(a)"> <text>Assist a patient or proxy in making entries on a form; and</text> </paragraph> <paragraph num="(b)"> <text>Obtain the signatures required on the form.</text> </paragraph> </paragraph> <paragraph num="(9)"> <text>“Proxy” means the agent or surrogate decision maker who is making health care decisions on behalf of a patient in accordance with the Health Care Decisions Act, Health-General Article, §§5-601—5-618, Annotated Code of Maryland.</text> </paragraph> <paragraph num="(10)"> <text>“Resident” means a patient who has been admitted to a facility.</text> </paragraph> <paragraph num="(11)"> <text>“Surrogate decision maker” means an individual who makes health care decisions for a patient pursuant to Health-General Article, §5-605, Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Nature and Contents of the Form."> <paragraph num="A."> <text>The form shall consist of two sides of a single sheet of paper.</text> </paragraph> <paragraph num="B."> <text>The format and contents of the form are as follows:</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Voluntary Use of the Form."> <paragraph num="A."> <text>Use of the form by a patient or proxy is voluntary.</text> </paragraph> <paragraph num="B."> <text>A patient or proxy may make an entry on some parts of the form and decline to do so on other parts.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Offering of Form by Health Care Providers and Facilities."> <paragraph num="A."> <text>Any health care provider may offer the form to:</text> <paragraph num="(1)"> <text>A patient who has the capacity to use the form; or</text> </paragraph> <paragraph num="(2)"> <text>A proxy on behalf of a patient who lacks the capacity to use the form.</text> </paragraph> </paragraph> <paragraph num="B."> <text>A facility shall, with reasonable promptness after a resident's admission, offer the form to:</text> <paragraph num="(1)"> <text>A resident who has the capacity to use the form; or</text> </paragraph> <paragraph num="(2)"> <text>A proxy on behalf of a resident who lacks the capacity to use the form.</text> </paragraph> </paragraph> <paragraph num="C."> <text>If a resident or proxy who has been offered the form by a facility declines to use it, the facility shall document:</text> <paragraph num="(1)"> <text>The date of the offer;</text> </paragraph> <paragraph num="(2)"> <text>The identity of the individual who offered the form; and</text> </paragraph> <paragraph num="(3)"> <text>The identity of the individual who declined the use of the form.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Preparation of the Form."> <paragraph num="A."> <text>A patient or proxy who is considering use of the Form shall be offered assistance by:</text> <paragraph num="(1)"> <text>The patient's attending physician; or</text> </paragraph> <paragraph num="(2)"> <text>Another health care provider who:</text> <paragraph num="(a)"> <text>Has been determined by the attending physician to have the knowledge and skills to properly conduct a discussion about the form; and</text> </paragraph> <paragraph num="(b)"> <text>Acts under the general direction of the attending physician.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>If the form is used by a proxy on behalf of a patient who has an advance directive in the patient's medical records, the health care provider preparing the form shall take reasonable steps to ensure that entries made by the proxy are consistent with the advance directive.</text> </paragraph> <paragraph num="C."> <text>A patient or proxy that completes any part of the form shall initial that part.</text> </paragraph> <paragraph num="D."> <text>The form shall be signed by:</text> <paragraph num="(1)"> <text>The patient or proxy;</text> </paragraph> <paragraph num="(2)"> <text>The patient's attending physician; and</text> </paragraph> <paragraph num="(3)"> <text>If another health care provider prepared the form, that health care provider.</text> </paragraph> </paragraph> <paragraph num="E."> <text>A health care provider may initial a part of a form or sign a form on behalf of a patient or proxy if:</text> <paragraph num="(1)"> <text>The patient or proxy is unable to initial or sign personally;</text> </paragraph> <paragraph num="(2)"> <text>The patient or proxy expressly directs the health care provider to initial or sign on behalf of the patient or proxy; and</text> </paragraph> <paragraph num="(3)"> <text>The health care provider documents the circumstances in the patient's medical record.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".07" heading="Maintenance of the Form."> <paragraph num="A."> <text>A form prepared in accordance with Regulation .06 of this chapter is a medical record of the patient.</text> </paragraph> <paragraph num="B."> <text>In a facility, the form shall be maintained visibly at the front of the patient's active chart.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".08" heading="Transmission and Review of the Form upon Transfer of Patient."> <paragraph num="A."> <text>A health care provider that has prepared the form for a patient or proxy shall include a complete and unaltered copy of the form in the records that physically accompany the patient upon transfer to the care of another health care provider.</text> </paragraph> <paragraph num="B."> <text>If a health care provider, for good cause, is unable to include the form in the records that physically accompany a patient upon transfer, the facility shall promptly transmit by facsimile or make available by electronic means a complete and unaltered image of the form to the other health care provider.</text> </paragraph> <paragraph num="C."> <text>A health care provider that receives the form shall make it available to the patient's attending physician for review before the issuance of medical orders on matters addressed by entries on the form.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".09" heading="Reproduction and Alteration of the Form."> <paragraph num="A."> <text>A health care provider may freely copy, store electronically and subsequently print, or otherwise reproduce the form.</text> </paragraph> <paragraph num="B."> <text>A health care provider may:</text> <paragraph num="(1)"> <text>Include on the form additional identifying information about a patient; or</text> </paragraph> <paragraph num="(2)"> <text>Alter the spacing or position of identifying information about a patient.</text> </paragraph> </paragraph> <paragraph num="C."> <text>A health care provider may not alter the contents or format of the form other than as provided in §B of this regulation.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".10" heading="Immunity."> <paragraph num="A."> <text>A health care provider who, in good faith, issues medical orders based on the form prepared in accordance with Regulation .06 of this chapter is entitled to the immunity provided under Health-General Article, §5-609, Annotated Code of Maryland.</text> </paragraph> <paragraph num="B."> <text>If medical orders are issued based on the form prepared in accordance with Regulation .06 of this chapter, a health care provider that, in good faith, provides, withholds, or withdraws treatment in furtherance of those orders is entitled to the immunity provided under Health-General Article, §5-609, Annotated Code of Maryland.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Health-General Article, §5-608.1, Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: October 1, 2005 (32:15 Md. R. 1316)</annotation> <annotation type="History" subtype="Administrative History">Regulation .01 amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .02B amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .03 repealed and new Regulation .03 adopted effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .05 amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06C amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .06E adopted effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .07A amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .08B amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> <annotation type="History" subtype="Administrative History">Regulation .10 amended effective April 1, 2008 (35:3 Md. R. 288)</annotation> </annotations> </chapter> <chapter num="04" heading="Cooperation with the Maryland Commission on Civil Rights"> <regulation prefix="Regulation" num=".01" heading="General."> <text>These regulations are promulgated pursuant to State Government Article, §20-1048(a), Annotated Code of Maryland, to promote cooperation between the Attorney General and the Maryland Commission on Civil Rights in areas in which the agencies have overlapping jurisdiction.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Attorney General” means the Attorney General of Maryland as established by Article V of the Constitution of the State of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Maryland Commission on Civil Rights” or “MCCR” means the State agency established by State Government Article, §20-201, Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Jurisdiction of MCCR and the Attorney General Not Disturbed."> <paragraph num="A."> <text>The Commission and the Attorney General retain all authorities granted to them by law. Nothing in these regulations limits either MCCR or the Attorney General from taking an enforcement action within its authority.</text> </paragraph> <paragraph num="B."> <text>MCCR shall retain jurisdiction to:</text> <paragraph num="(1)"> <text>Investigate individual complaints filed with MCCR;</text> </paragraph> <paragraph num="(2)"> <text>Require a respondent to answer charges of a certified complaint at a public hearing before an administrative law judge, pursuant to State Government Article §§20-1008 and 20-1027; Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>Assert claims of an unlawful discriminatory practice in employment, housing, public accommodations, commercial leasing, State contracts, health services, and health facilities pursuant to State Government Article Title 20; Annotated Code of Maryland</text> </paragraph> <paragraph num="(4)"> <text>Assert claims of an unlawful employment practice arising from a certified complaint in a civil action pursuant to §20-1012; Annotated Code of Maryland.</text> </paragraph> <paragraph num="(5)"> <text>Assert claims of an unlawful housing practice arising from a certified complaint in a civil action pursuant to State Government Article, §20-1032;</text> </paragraph> <paragraph num="(6)"> <text>Investigate discriminatory acts by a unit, officer, or employee of the State, a county, or a municipality; and</text> </paragraph> <paragraph num="(7)"> <text>Initiate a Commission complaint of discrimination pursuant to State Government Article, §§20-1004(d) and 20-1036, Annotated Code of Maryland.</text> </paragraph> </paragraph> <paragraph num="C."> <text>The Attorney General shall retain jurisdiction to investigate, prosecute, and remediate acts of discrimination prohibited under the U.S. Constitution, the Maryland Constitution, state law or federal law.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Information Sharing."> <paragraph num="A."> <text>To the extent necessary and appropriate to facilitate the shared mission of enforcing civil rights laws, MCCR and the Attorney General shall share information regarding potential civil rights violations.</text> </paragraph> <paragraph num="B."> <text>MCCR and the Attorney General shall maintain an agreement delineating the requirements of information sharing.</text> </paragraph> <paragraph num="C."> <text>MCCR and the Attorney General shall maintain the confidentiality of joint investigations pursuant to State Government Article, §20-1101, Annotated Code of Maryland.</text> </paragraph> <paragraph num="D."> <text>MCCR will not disclose information to the Attorney General regarding claims against entities represented by the Attorney General other than through its ordinary case processing procedures or pursuant to legal process.</text> </paragraph> <paragraph num="E."> <text>MCCR and the Attorney General shall meet no less than three times each year to share information concerning observed patterns of civil rights violations and enforcement actions.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Referral of Cases Between MCCR and the Attorney General."> <paragraph num="A."> <text>If MCCR determines that complaints of civil rights violations may fall within the jurisdiction of the Attorney General, MCCR may refer the complaints to the Attorney General. The Attorney General may investigate, prosecute, and remediate civil rights violations referred by MCCR, but is not required to do so.</text> </paragraph> <paragraph num="B."> <text>Pursuant to State Government Article, §20-1041(b)(1), Annotated Code of Maryland, the Attorney General does not have the authority to investigate, prosecute, and remediate civil rights violations on behalf of an individual. The Attorney General may refer these matters to MCCR.</text> </paragraph> <paragraph num="C."> <text>The Attorney General may advise the claimant that it is declining the matter and provide information regarding the process for filing a complaint with MCCR.</text> </paragraph> <paragraph num="D."> <text>The Attorney General may provide the information received from the claimant directly to MCCR.</text> </paragraph> <paragraph num="E."> <text>MCCR will address all referrals in accordance with its ordinary complaint processing procedures.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Coordination in Areas of Overlapping Jurisdiction."> <paragraph num="A."> <text>MCCR and the Attorney General may jointly investigate, prosecute, and remediate conduct that constitutes a civil rights violation when it serves the public interest.</text> </paragraph> <paragraph num="B."> <text>Parallel investigations are permitted in appropriate circumstances after conferral between the Attorney General and MCCR.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">State Government Article §20-1048(a), Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: August 4, 2025 (52:15 Md. R. 811)</annotation> </annotations> </chapter> </subtitle> <subtitle num="07" heading="Tobacco Product Regulations"> <chapter num="01" heading="Nonparticipating Manufacturer Quarterly Escrow and Certification Obligations"> <regulation prefix="Regulation" num=".01" heading="Purpose."> <text>This chapter is intended to promote nonparticipating manufacturer compliance with the Escrow Act and Business Regulation Article, §16-503, Annotated Code of Maryland.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Brand family” has the meaning stated in Business Regulation Article, §16-501(b), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Cigarette” has the meaning stated in Business Regulation Article, §16-501(c), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(3)"> <text>“Escrow Act” means Ch. 169, Acts of 1999, as amended by Ch. 141, Acts of 2001.</text> </paragraph> <paragraph num="(4)"> <text>“Nonparticipating manufacturer” has the meaning stated in Business Regulation Article, §16-501(h), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(5)"> <text>“Qualified escrow fund” has the meaning stated in Business Regulation Article, §16-501(j), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(6)"> <text>“Units sold” has the meaning stated in Business Regulation Article, §16-501(l), Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Quarterly Escrow Payments."> <paragraph num="A."> <text>A nonparticipating manufacturer shall make the escrow payments required by the Escrow Act in quarterly installments during the year in which the sales covered by the payments are made, if the nonparticipating manufacturer has:</text> <paragraph num="(1)"> <text>Not previously established and funded a qualified escrow fund in Maryland;</text> </paragraph> <paragraph num="(2)"> <text>Not made any escrow payments for more than 1 year;</text> </paragraph> <paragraph num="(3)"> <text>Failed to make a timely or complete escrow payment for a prior calendar year;</text> </paragraph> <paragraph num="(4)"> <text>Failed to pay a judgment or civil penalty in connection with its Maryland sales; or</text> </paragraph> <paragraph num="(5)"> <text>Sold more than 1,600,000 cigarettes in Maryland during a calendar quarter.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The Attorney General may require a nonparticipating manufacturer to make quarterly escrow payments if the Attorney General finds reasonable cause to believe the nonparticipating manufacturer will not make its fully required escrow deposit by April 15 of the year following the year in which the cigarettes are sold.</text> </paragraph> <paragraph num="C."> <text>If a quarterly payment obligation is required under §A or B of this regulation, the Attorney General may require the nonparticipating manufacturer to make immediate escrow payments for amounts that would have been due had a quarterly escrow requirement been in effect as of January 1 of the same year.</text> </paragraph> <paragraph num="D."> <text>A nonparticipating manufacturer may request from the Attorney General a waiver from a quarterly payment obligation imposed under §A(3) of this regulation. The Attorney General may waive application of the quarterly payment obligation if the Attorney General finds that:</text> <paragraph num="(1)"> <text>The nonparticipating manufacturer has paid in full its escrow obligations; and</text> </paragraph> <paragraph num="(2)"> <text>There is reasonable cause to believe that the nonparticipating manufacturer will pay in full its required escrow deposit by April 15 of the year following the year in which the cigarettes are sold.</text> </paragraph> </paragraph> <paragraph num="E."> <text>The quarterly payments shall reflect an inflation rate of 3 percent. Nonparticipating manufacturers subject to a quarterly payment obligation shall make a final reconciliation payment on or before April 15 of the year following the year in which the cigarettes are sold in order to account for the annual adjustment for inflation under the Escrow Act.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Quarterly Certifications."> <paragraph num="A."> <text>A nonparticipating manufacturer that is required to make quarterly escrow payments under Regulation .03 of this chapter shall file a quarterly certification of compliance with the Attorney General. The nonparticipating manufacturer's certification shall be in the form and manner posted on the Attorney General's website and shall provide:</text> <paragraph num="(1)"> <text>The identity of the nonparticipating manufacturer reporting and the quarter being reported;</text> </paragraph> <paragraph num="(2)"> <text>The number of units sold by brand family for the quarter being reported;</text> </paragraph> <paragraph num="(3)"> <text>The applicable escrow rate and payment;</text> </paragraph> <paragraph num="(4)"> <text>The name of the financial institution in which the qualified escrow fund is held;</text> </paragraph> <paragraph num="(5)"> <text>The amount of the escrow deposit and proof of deposit, such as a counter receipt or statement;</text> </paragraph> <paragraph num="(6)"> <text>Any other information necessary to ensure compliance with this regulation.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The quarterly certification required under this regulation does not affect a nonparticipating manufacturer's obligation to file annual certifications under Business Regulation Article, §16-503, Annotated Code of Maryland.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Quarterly Periods; Deadlines."> <paragraph num="A."> <text>For purposes of this chapter, the calendar year is divided into the following quarters:</text> <paragraph num="(1)"> <text>January 1 through March 31;</text> </paragraph> <paragraph num="(2)"> <text>April 1 through June 30;</text> </paragraph> <paragraph num="(3)"> <text>July 1 through September 1; and</text> </paragraph> <paragraph num="(4)"> <text>October 1 through December 31.</text> </paragraph> </paragraph> <paragraph num="B."> <text>The nonparticipating manufacturer shall make its quarterly payments under Regulation .03 of this chapter not later than 30 days after the end of the calendar quarter for which the quarterly escrow payment is required.</text> </paragraph> <paragraph num="C."> <text>The nonparticipating manufacturer shall submit its quarterly certification under Regulation .04 of this chapter not later than 40 days after the end of the calendar quarter for which the quarterly escrow payment is required.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".06" heading="Noncompliance."> <paragraph num="A."> <text>If a nonparticipating manufacturer fails to make its required quarterly escrow payment or to provide a complete quarterly certification, the Attorney General may remove the nonparticipating manufacturer and its brand families from the directory of certified manufacturers.</text> </paragraph> <paragraph num="B."> <text>A nonparticipating manufacturer may seek review of the Attorney General's decision to remove a nonparticipating manufacturer or its brand families from the directory of certified manufacturers in accordance with State Government Article, Title 10, Subtitle 2, Annotated Code of Maryland.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Business Regulation Article, §16-506(e), Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date:</annotation> <annotation type="History" subtype="Administrative History">Regulations .01—.06 adopted as an emergency provision effective November 23, 2004 (31:25 Md. R. 1788); adopted permanently effective February 14, 2005 (32:3 Md. R. 288)</annotation> </annotations> </chapter> </subtitle> <subtitle num="08" heading="Sexual Assault Evidence Kits"> <chapter num="01" heading="Sexual Assault Victims’ Rights — Disposal of Rape Kit Evidence and Notification"> <regulation prefix="Regulation" num=".01" heading="Purpose."> <text>This chapter is intended to promote uniform statewide implementation of the disposal of rape kit evidence and sexual assault victim notification requirements set forth in Criminal Procedure Article, §11-926, Annotated Code of Maryland.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Child advocacy center” has the meaning stated in Criminal Procedure Article, §11-296(a), Annotated Code of Maryland.</text> </paragraph> <paragraph num="(2)"> <text>“Hospital” has the meaning stated in Criminal Procedure Article, §11-296(a), Annotated Code of Maryland.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Information Provided to Victims."> <paragraph num="A."> <text>A health care provider that performs a sexual assault evidence collection kit exam on a victim of sexual assault shall provide the victim with:</text> <paragraph num="(1)"> <text>If known, contact information for the investigating law enforcement agency that the victim may contact about the status and results of the kit analysis;</text> </paragraph> <paragraph num="(2)"> <text>Written information describing the laws and policies governing the testing, preservation, and disposal of a sexual assault evidence collection kit; and</text> </paragraph> <paragraph num="(3)"> <text>Notice of the right to request an independent review of a law enforcement agency’s decision not to test a sexual assault evidence collection kit.</text> </paragraph> </paragraph> <paragraph num="B."> <text>An investigating law enforcement agency that receives a sexual assault evidence collection kit, within 30 days after a request by the victim from whom the evidence was collected, shall provide the victim with:</text> <paragraph num="(1)"> <text>The law enforcement agency’s decision regarding whether to send the sexual assault evidence collection kit to a forensic laboratory for analysis;</text> </paragraph> <paragraph num="(2)"> <text>The law enforcement agency’s decision regarding whether to send the sexual assault evidence collection kit to a forensic laboratory for analysis;</text> </paragraph> <paragraph num="(3)"> <text>All available results of the kit analysis except results that would impede or compromise an ongoing investigation.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Transfer and Destruction of Kits."> <paragraph num="A."> <text>Kit Transfers.</text> <paragraph num="(1)"> <text>A sexual assault evidence collection kit shall be transferred to a law enforcement agency:</text> <paragraph num="(a)"> <text>By a hospital or a child advocacy center within 30 days after the exam is performed; or</text> </paragraph> <paragraph num="(b)"> <text>By a government agency in possession of a kit, unless the agency is otherwise required to retain the kit by law or court rule.</text> </paragraph> </paragraph> <paragraph num="(2)"> <text>A hospital or child advocacy center shall cause a sexual assault evidence collection kit to be transferred by notifying the appropriate law enforcement agency as set forth in §A(4) and (5) of this regulation.</text> </paragraph> <paragraph num="(3)"> <text>Upon notification, the law enforcement agency shall promptly send a representative to retrieve the kit.</text> </paragraph> <paragraph num="(4)"> <text>Sexual assault evidence collection kits transferred pursuant to §A(1) of this regulation shall be given to the law enforcement agency responsible for investigating the crime associated with the kit, if known.</text> </paragraph> <paragraph num="(5)"> <text>If the law enforcement agency responsible for investigating the crime associated with the kit is unknown, the kit shall be given to a law enforcement agency in the county:</text> <paragraph num="(a)"> <text>Where the hospital, child advocacy center, or government agency is located; or</text> </paragraph> <paragraph num="(b)"> <text>Where the alleged sexual assault occurred.</text> </paragraph> </paragraph> </paragraph> <paragraph num="B."> <text>Except as provided in §C of this regulation, within 20 years after the evidence is collected, a law enforcement agency may not destroy or dispose of:</text> <paragraph num="(1)"> <text>A sexual assault evidence collection kit; or</text> </paragraph> <paragraph num="(2)"> <text>Other crime scene evidence relating to a sexual assault that has been identified by the State’s Attorney as relevant to prosecution.</text> </paragraph> </paragraph> <paragraph num="C."> <text>A law enforcement agency is not required to comply with the requirements in §B of this regulation if:</text> <paragraph num="(1)"> <text>The case for which the evidence was collected resulted in a conviction and the sentence has been completed; or</text> </paragraph> <paragraph num="(2)"> <text>All suspects identified by testing a sexual assault evidence collection kit are deceased.</text> </paragraph> </paragraph> <paragraph num="D."> <text>On written request by the victim from whom the evidence was collected, a law enforcement agency with custody of a sexual assault evidence collection kit or other crime scene evidence relating to a sexual assault shall:</text> <paragraph num="(1)"> <text>Notify the victim no later than 60 days before the date of the intended destruction or disposal of the evidence; or</text> </paragraph> <paragraph num="(2)"> <text>Retain the evidence for 12 months longer than the period specified in §B of this regulation or for a time period agreed to by the victim and the law enforcement agency.</text> </paragraph> </paragraph> </regulation> <annotations> <annotation type="Authority">Criminal Procedure Article, §11-926(e), Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: October 8, 2018 (45:20 Md. R. 917)</annotation> <annotation type="History" subtype="Administrative History">Regulation .03 amended effective May 4, 2020 (47:9 Md. R. 476)</annotation> <annotation type="History" subtype="Administrative History">Regulation .04A amended effective May 4, 2020 (47:9 Md. R. 476)</annotation> <annotation type="History" subtype="Administrative History">Regulation .05 repealed effective May 4, 2020 (47:9 Md. R. 476)</annotation> </annotations> </chapter> <chapter num="02" heading="Sexual Assault Evidence Collection Kits — Analysis"> <regulation prefix="Regulation" num=".01" heading="Criteria for Analysis."> <text>A sexual assault evidence collection kit shall be submitted to a forensic laboratory for analysis unless:</text> <paragraph num="A."> <text>There is clear evidence disproving the allegation of sexual assault;</text> </paragraph> <paragraph num="B."> <text>The facts alleged, if true, could not be interpreted to violate a provision of Criminal Law Article, Title 3, Subtitle 2, 3, or 6, or Title 11, Subtitle 3, Annotated Code of Maryland;</text> </paragraph> <paragraph num="C."> <text>The victim from whom the evidence was collected declines to give consent for analysis; or</text> </paragraph> <paragraph num="D."> <text>The suspect’s profile has been collected for entry as a convicted offender for a qualifying offense in the Combined DNA Index System (CODIS) maintained by the Federal Bureau of Investigation and the suspect has pleaded guilty to the offense that led to the sexual assault evidence collection kit.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Anonymous Kits."> <paragraph num="A."> <text>If a victim of sexual assault wishes to remain anonymous and not file a criminal complaint, the victim shall be informed that the victim may file a criminal complaint at a future time.</text> </paragraph> <paragraph num="B."> <text>If a provision of Regulation .01 of this chapter is determined to be satisfied after the submission of the victim’s sexual assault evidence collection kit for analysis, testing may be terminated or not initiated.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Submission to Forensic Laboratories."> <paragraph num="A."> <text>Except as provided in Regulation .01 of this chapter, an investigating law enforcement agency that receives a sexual assault evidence collection kit shall submit the kit and all requested associated reference standards to a forensic laboratory for analysis within 30 days of receipt of the kit and all requested associated reference standards.</text> </paragraph> <paragraph num="B."> <text>Testing by Forensic Laboratories.</text> <paragraph num="(1)"> <text>A forensic laboratory that receives a sexual assault evidence collection kit and all requested associated reference standards for analysis shall determine suitability and complete screening, testing, and analysis in a timely manner.</text> </paragraph> <paragraph num="(2)"> <text>Failure to complete the screening, testing, and analysis in a timely manner as required in §B(1) of this regulation may not constitute the basis for excluding the analysis or results as evidence in a criminal proceeding.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Use of Victim Services Organizations."> <text>A law enforcement agency that receives a sexual assault evidence collection kit shall make use of certified sexual assault crisis programs or other qualified community-based sexual assault victim service organizations that can provide services and support to survivors of sexual assault.</text> </regulation> <regulation prefix="Regulation" num=".05" heading="CODIS."> <paragraph num="A."> <text>The eligible results of an analysis of a sexual assault evidence collection kit shall be entered into CODIS.</text> </paragraph> <paragraph num="B."> <text>The DNA collected from a victim under this chapter may not be used for any purpose except as authorized by this subtitle.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Criminal Procedure Article, §11-926(e), Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: May 4, 2020 (47:9 Md. R. 476)</annotation> </annotations> </chapter> <chapter num="03" heading="Review of Law Enforcement Decisions Not to Test a Kit"> <regulation prefix="Regulation" num=".01" heading="Scope."> <text>This chapter sets out the procedures under which a person may request the review of a law enforcement agency’s decision not to test a sexual assault evidence collection kit.</text> </regulation> <regulation prefix="Regulation" num=".02" heading="Definitions."> <paragraph num="A."> <text>In this chapter, the following terms have the meanings indicated.</text> </paragraph> <paragraph num="B."> <text>Terms Defined.</text> <paragraph num="(1)"> <text>“Committee” means the Maryland Sexual Assault Evidence Kit Policy and Funding Committee.</text> </paragraph> <paragraph num="(2)"> <text>“Kit” means a sexual assault evidence collection kit.</text> </paragraph> <paragraph num="(3)"> <text>“SART” means a sexual assault response team which includes at least one representative from each of the following professions and organizations:</text> <paragraph num="(a)"> <text>Forensic nurse examiner providing services at a local sexual assault forensic examination program or other qualified health care provider from a local hospital;</text> </paragraph> <paragraph num="(b)"> <text>Local law enforcement agency;</text> </paragraph> <paragraph num="(c)"> <text>Local State’s attorney’s office;</text> </paragraph> <paragraph num="(d)"> <text>Local certified rape crisis center;</text> </paragraph> <paragraph num="(e)"> <text>Maryland Coalition Against Sexual Assault;</text> </paragraph> <paragraph num="(f)"> <text>Crime lab, if available; and</text> </paragraph> <paragraph num="(g)"> <text>Crime victim rights attorney, if available.</text> </paragraph> </paragraph> <paragraph num="(4)"> <text>“Untested kit review” means the independent review by a SART or the Committee of a law enforcement agency’s decision not to test a kit.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".03" heading="Untested Kit Review by SARTs."> <paragraph num="A."> <text>When a law enforcement agency decides not to test a kit, the victim, the victim’s representative, a Committee member, or a member of the SART where the alleged assault occurred may request an untested kit review.</text> </paragraph> <paragraph num="B."> <text>The request for an untested kit review shall first be submitted to the SART where the alleged assault occurred if one exists.</text> </paragraph> <paragraph num="C."> <text>All SART members representing the professions and organizations listed in Regulation .02B(3) of this chapter shall participate in the untested kit review.</text> </paragraph> <paragraph num="D."> <text>A person involved in the investigation of a sexual assault case may not participate in the untested kit review for a kit related to that case.</text> </paragraph> <paragraph num="E."> <text>The SART may request and consider case files and any other evidence it deems appropriate when conducting an untested kit review.</text> </paragraph> <paragraph num="F."> <text>The SART shall issue a written determination pursuant to an untested kit review in a timely manner.</text> </paragraph> <paragraph num="G."> <text>The SART’s determination will serve as a recommendation only and is not a contested case under the Administrative Procedure Act, State Government Article, §10-222, Annotated Code of Maryland.</text> </paragraph> <paragraph num="H."> <text>In jurisdictions where there is not a functioning SART as defined in Regulation .02B(3) of this chapter, the victim, the victim’s representative, a Committee member, or a member of the SART where the alleged assault occurred shall submit a request for an untested kit review directly to the Committee.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".04" heading="Untested Kit Review by the Committee."> <paragraph num="A."> <text>After the SART issues its recommendation, the victim, victim’s representative, or member of the SART where the alleged assault occurred may request an untested kit review by the Committee.</text> </paragraph> <paragraph num="B."> <text>Subcommittee Membership.</text> <paragraph num="(1)"> <text>The Committee shall designate a subcommittee with one Committee representative from each of the professions or organizations listed in Regulation .02B(3) of this chapter to review the law enforcement agency’s decision not to test a kit.</text> </paragraph> <paragraph num="(2)"> <text>The subcommittee shall include a representative from the Office of the Attorney General.</text> </paragraph> <paragraph num="(3)"> <text>A subcommittee member that participated in an untested kit review by a SART may not participate in an untested kit review of the same kit by the Committee.</text> </paragraph> </paragraph> <paragraph num="C."> <text>A person involved in the investigation of a sexual assault case may not participate in the untested kit review for a kit related to that case.</text> </paragraph> <paragraph num="D."> <text>The Committee may request and consider case files and any other evidence it deems appropriate when conducting an untested kit review.</text> </paragraph> <paragraph num="E."> <text>The Committee shall issue a written determination pursuant to an untested kit review in a timely manner.</text> </paragraph> <paragraph num="F."> <text>The Committee’s determination will serve as a recommendation only and is not a contested case under the Administrative Procedure Act.</text> </paragraph> <paragraph num="G."> <text>Upon request by the victim, the victim’s representative, a Committee member, or a member of the SART where the alleged assault occurred, and in those cases where there was no untested kit review by the SART, the full Committee may conduct an untested kit review.</text> </paragraph> </regulation> <regulation prefix="Regulation" num=".05" heading="Confidential Proceedings."> <paragraph num="A."> <text>SART and Committee meetings held for the purpose of conducting untested kit reviews are not open to the public.</text> </paragraph> <paragraph num="B."> <text>Information provided to, or gathered by, a SART or the Committee for purposes of conducting an untested kit review are confidential.</text> </paragraph> <paragraph num="C."> <text>Written determinations issued by a SART or Committee are not confidential.</text> </paragraph> <paragraph num="D."> <text>Personally identifying information shall be redacted from a written determination prior to its release.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Criminal Procedure Article, §§11-926(e) and 11-927(f), Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: May 4, 2020 (47:9 Md. R. 476)</annotation> </annotations> </chapter> <chapter num="04" heading="Reporting"> <regulation prefix="Regulation" num=".01" heading="Reporting by Law Enforcement Agencies."> <paragraph num="A."> <text>A law enforcement agency shall submit a copy of its written policies demonstrating compliance with this subtitle to the Office of the Attorney General within 90 days of the date this regulation goes into effect.</text> </paragraph> <paragraph num="B."> <text>On or before September 1, 2021, and every year thereafter, a law enforcement agency shall submit the following information to the Office of the Attorney General:</text> <paragraph num="(1)"> <text>The number of sexual assault evidence collection kits in its possession as of June 30 of that calendar year;</text> </paragraph> <paragraph num="(2)"> <text>The number of untested sexual assault evidence collection kits in its possession as of June 30 of that calendar year;</text> </paragraph> <paragraph num="(3)"> <text>The date each sexual assault evidence collection kit in its possession was received;</text> </paragraph> <paragraph num="(4)"> <text>The number of sexual assault evidence collection kits tested during the prior year as of June 30 of that calendar year;</text> </paragraph> <paragraph num="(5)"> <text>The number of sexual assault evidence collection kits not tested during the prior year as of June 30 of that calendar year pursuant to COMAR 02.08.02.01A, B, C, or D;</text> </paragraph> <paragraph num="(6)"> <text>The number of any other kits not tested and an explanation of why the kit was not tested;</text> </paragraph> <paragraph num="(7)"> <text>For untested kit reviews:</text> <paragraph num="(a)"> <text>The number of untested kit reviews requested during the prior year as of June 30 of that calendar year;</text> </paragraph> <paragraph num="(b)"> <text>The written recommendation resulting from each of the untested kit reviews conducted during the prior year as of June 30 of that calendar year; and</text> </paragraph> <paragraph num="(c)"> <text>The number sexual assault evidence collections kits tested at the recommendation of an untested kit review;</text> </paragraph> </paragraph> <paragraph num="(8)"> <text>For sexual assault evidence collection kits destroyed during the prior year as of June 30 of that calendar year:</text> <paragraph num="(a)"> <text>The number of sexual assault evidence collection kits destroyed;</text> </paragraph> <paragraph num="(b)"> <text>The date each sexual assault evidence collection kit was collected;</text> </paragraph> <paragraph num="(c)"> <text>The date each sexual assault evidence collection kit was destroyed; and</text> </paragraph> <paragraph num="(d)"> <text>The reason for the destruction; and</text> </paragraph> </paragraph> <paragraph num="(9)"> <text>The number of written requests received pursuant to COMAR 02.08.01.04D during the prior year as of June 30 of that calendar year.</text> </paragraph> </paragraph> </regulation> <regulation prefix="Regulation" num=".02" heading="Reporting by Forensic Laboratories."> <text>On or before September 1, 2021, and every year thereafter, a forensic laboratory shall submit the following information to the Office of the Attorney General:</text> <paragraph num="A."> <text>The number of sexual assault evidence collection kits tested within the prior completed fiscal year;</text> </paragraph> <paragraph num="B."> <text>The date each sexual assault evidence collection kit tested was received from a law enforcement agency; and</text> </paragraph> <paragraph num="C."> <text>The date on which a report summarizing the results of the test was prepared for each sexual assault evidence collection kit.</text> </paragraph> </regulation> <annotations> <annotation type="Authority">Criminal Procedure Article, §§11-926(e) and 11-927(f), Annotated Code of Maryland</annotation> <annotation type="History" subtype="Administrative History">Effective date: May 4, 2020 (47:9 Md. R. 476)</annotation> </annotations> </chapter> </subtitle>