Title 02 — Subtitle 02. Division of Securities

“Commissioner” means the Maryland Securities Commissioner or the designated agent of the Maryland Securities Commissioner.

“CRD” means the Central Registration Depository System.

“Division” means the Division of Securities in the Office of the Attorney General.

“Maryland Business Opportunities Sales Act” and “Business Opportunities Act” mean Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland.

“Maryland Franchise Registration and Disclosure Law” and “Maryland Franchise Law” mean Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland.

“Maryland Securities Act” means Corporations and Associations Article, Title 11, Annotated Code of Maryland.

“NASAA” means the North American Securities Administrators Association, Inc.

“NASD” means the National Association of Securities Dealers, Inc.

“SEC” means the Securities and Exchange Commission.

“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.

Materials containing trade secrets or other confidential information if the:

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.

State the basis for the request; and

Include a copy of the document for which confidential treatment is sought.

Maryland Securities Act;

Maryland Franchise Registration and Disclosure Law; or

Maryland Business Opportunities Sales Act.

Language of the proposed regulation;

Reasons why the petitioner believes the Commissioner should adopt the proposed regulation;

Nature of the petitioner's interest in the proposed regulation; and

Authority of the Commissioner to take the action requested by the petitioner.

The circumstances, nature, frequency, seriousness, magnitude, persistence, and willfulness of the conduct constituting the violation;

The scope of the violation, including the number of persons in and out of Maryland affected by the conduct constituting the violation;

The level of restitution or compensation the violator has made;

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

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.

An original and one copy of the letter requesting the interpretive opinion or no action position; and

Two copies of any supporting documentation or materials.

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.

A request shall indicate in a prominent manner the specific subsections of the statute or regulation to which the request pertains.

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.

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.

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.

Refund Request.

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.

Application of Overpayment to Fees for Subsequent Years. An overpayment of a fee may not be applied to fees due for subsequent years.

Use of a certification or professional designation by a person who has not actually earned or is ineligible to use the certification or designation;

Use of a nonexistent or self-conferred certification or professional designation;

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

Use of a certification or professional designation that was obtained from a designating or certifying organization that:

The organization has been accredited by:

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.

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

Manner in which the words described in §D(1) of this regulation are combined.

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:

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.

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

File with the Commissioner other information the Commissioner may reasonably require.

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).

The application shall contain:

The applicant has complied with the examination requirement of Regulation .06 of this chapter;

The required fee and all required submissions have been received by the Commissioner;

If the applicant is seeking membership in the NASD, the applicant is approved as a member of the NASD; and

The applicant has submitted any other information the Commissioner has requested.

File with the CRD the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and

File with the Commissioner other information the Commissioner may reasonably require.

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).

The application shall contain:

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

File with the Commissioner other information the Commissioner may reasonably require.

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).

The application shall contain:

The applicant has complied with the examination requirement of Regulation .06 of this chapter;

If the applicant has applied for registration with the NASD, the applicant is approved by the NASD as a representative; and

The applicant has submitted any other information the Commissioner has requested.

File with the CRD the fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407, Annotated Code of Maryland; and

File with the Commissioner other information the Commissioner may reasonably require.

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).

The application shall contain:

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

Qualify for an exemption from the examination requirement under §C of this regulation.

Is a member firm or is a registered representative with the NASD; or

Has been continuously engaged in the securities business for a period of at least 2 years immediately preceding the date of application.

Broker-Dealers.

Broker-Dealer Agents.

A broker-dealer that is registered in Maryland and that is not subject to §15 of the Securities Exchange Act of 1934 shall:

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.

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.

Extensions of Time.

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.

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.

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.

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.

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.

Each supplement to a prospectus shall be separately dated with the approximate date of its issuance.

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.

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.

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.

“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.

“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.

“Director” means any director of a corporation or any person performing similar functions with respect to any organization whether incorporated or unincorporated.

“Equity security” means any:

“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.

“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.

“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.

“Promoter” includes any person who:

“Significant subsidiary” means a subsidiary meeting any one of the following conditions:

“Subsidiary” of a specified person is an affiliate controlled by that person directly, or indirectly through one or more intermediaries.

“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.

In whom he has, or had during the period of report, any direct, financial interest or any material indirect financial interest; or

with whom he is, or was during the period, connected as a promoter, underwriter, voting trustee, director, officer, or employee.

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.

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.

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:

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.

Pricing-Telegrams. The furnishing of pricing-telegrams with respect to particular offerings of securities registered by the Shelf Registration Statement is not required.

Conclusion of Offering. The registrant shall notify the Division in writing when the offering is concluded.

“Act” means the Maryland Securities Act.

“Commissioner” means the Securities Commissioner of the State.

“Division” means the Division of Securities of the Office of the Attorney General.

“Regulation” means this regulation.

“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:

“Effective date” means the date that a registration statement is declared effective by the Commissioner.

“Expiration/renewal date” means the date that is 1 year from the effective date.

A manually signed U-1 application;

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

All registration or offering documents that have been amended during the registration period that have not been previously filed with the Division.

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.

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).

For purposes of this regulation, the following terms have the meanings indicated.

Terms Defined.

An application upon Form U-4 (Uniform Application for Securities Industry Registration or Transfer);

A statement or certificate demonstrating that the applicant has satisfied the examination requirement of §C of this regulation; and

The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407(a)(2), Annotated Code of Maryland.

The applicant effects transactions exclusively in securities exempt under the Maryland Securities Act, Corporations and Associations Article, §11-601; or

Based upon the applicant's education, experience, or duties, the Commissioner waives the examination requirement.

An application on the form entitled Maryland Application for Renewal of Registration as an Issuer Agent; and

The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-407(a)(2).

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.

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.

The issuer is a corporation organized under the laws of one of the states or possessions of the United States;

The issuer engages in, or proposes to engage in, a business other than petroleum exploration or mining or other extractive industries;

The issuer is not an investment company subject to the Investment Company Act of 1940, 15 U.S.C. §§80a-1—80a-52;

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)).

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));

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;

The securities are to be offered and sold only on behalf of the issuer and not on behalf of any selling security holder;

If the securities are common stock, the offering price equals or exceeds $5 per share;

If the securities are options, warrants, or rights for common stock, the exercise price equals or exceeds $5 per share;

If the securities are convertible into common stock, the conversion price equals or exceeds $5 per share; and

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).

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:

Limitation of Disqualification. The disqualifications set forth in §E(1)(a)—(c) and (e) of this regulation do not apply if the:

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.

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.

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.

An application for registration under this regulation shall be filed with the Commissioner.

An application for registration under this regulation shall contain:

Contain the information required by Regulation .04 of this chapter; and

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.

Reports required by Form U-7; and

Other reports that the Commissioner may require.

Exempt Securities—General Conditions.

The issuer shall pay the filing fee pursuant to the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.

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:

The issuer shall pay the filing fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.

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.

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:

The issuer shall pay the filing fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506(b), Annotated Code of Maryland.

“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.

“Qualified institutional buyer” has the same meaning as set forth in Rule 144A, 55 FR 17933 (1990), which is incorporated by reference.

An accredited investor; or

A qualified institutional buyer.

Mergent's Industrial Manual;

Mergent's Transportation Manual;

Mergent's Public Utility Manual;

Mergent's Bank and Finance Manual; and

Standard and Poor's Standard Corporation Descriptions.

“CBOE” means The Chicago Board Options Exchange.

“NASDAQ/NMS” means the National Association of Securities Dealers Automated Quotations/National Market System.

“Release” means Securities Act Release 33-6810 published at 53 FR 52550 (1988), which is incorporated by reference.

“SEC” means the Securities and Exchange Commission.

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;

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:

Any other security of the same issuer that is of senior or substantially equal rank;

Any security called for by subscription rights or warrants that are exempted under §B(1) or (2) of this regulation; and

Any warrant or right to purchase or subscribe to any security that is exempted under §B(1) or (2) of this regulation.

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;

Has received a conditional approval to operate for the purpose of raising capital or meeting other regulatory requirements;

Has its charter revoked; or

Is on any form of conditional status.

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.

Regulation .10 sets forth conditions that apply to both a local issuer exemption under Regulation .11 and a general transactional exemption under Regulation .12.

Regulation .11 sets forth additional conditions that apply to the local issuer exemption.

Regulation .12 sets forth additional conditions that apply to the general transactional exemption.

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.

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.

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:

Accredited Investor.

“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.

“Aggregate offering price” has the meaning stated in 17 CFR §230.501 (1994) (SEC Rule 501, Definitions and Terms Used in Regulation D).

“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.

“Executive officer” has the meaning stated in 17 CFR §230.501 (SEC Rule 501, Definitions and Terms Used in Regulation D).

“MLOE” means the Maryland Limited Offering Exemption created by Regulations .09—.13 of this chapter.

Promoter.

“Purchaser representative” has the meaning stated in 17 CFR §230.501 (SEC Rule 501, Definitions and Terms Used in Regulation D).

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.

The burden of proving an exemption under MLOE is on the person claiming the exemption.

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:

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.

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.

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.

In determining whether offers and sales should be integrated for purposes of this regulation, the Commissioner may consider whether the offers or sales:

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.

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:

For purposes of this section, “general solicitation” and “advertising” include, but are not limited to:

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.

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:

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.

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.

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:

For the purpose of calculating the number of purchasers under MLOE, the following conditions apply:

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.

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:

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.

Waiver of Disqualification.

Exemption under MLOE and this regulation is available only to local issuers.

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.

“Local issuer” means a corporation that:

For the purpose of calculating the number of beneficial owners under §B(1)(c) of this regulation:

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

The number of purchasers shall be calculated in accordance with Regulation .10F of this chapter.

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:

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.

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

The number of purchasers shall be calculated in accordance with Regulation .10F of this chapter.

In an offering under this regulation, the issuer shall:

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:

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:

Exclusions.

Failure to comply did not pertain to a term directly intended to protect that particular individual or entity or class of individuals or entities;

Failure to comply did not pertain to Regulation .10C or G, Regulation .11B or C, or Regulation .12B of this chapter;

Failure to comply was insignificant with respect to the offering as a whole; and

Issuer made a good faith and reasonable attempt to comply with all applicable terms of MLOE.

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.

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.

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.

The burden of proving an exemption under this regulation is on the person claiming the exemption.

Remuneration for Solicitation or for Sales.

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:

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.

Waiver of Disqualification.

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:

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

The fee required by the Maryland Securities Act, Corporations and Associations Article, §11-506, Annotated Code of Maryland.

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:

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.

“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.

“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.

“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.

“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.

“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.

“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.

“Lawyer” means a person who is admitted to practice before the bar of any state and is in good standing with it.

“Securities Exchange Act of 1934” means the federal act of that name, as amended, set forth in 15 U.S.C. §§78a—78jj.

“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.

“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.

An “investment adviser representative” as that term is defined in rules or regulations promulgated under §203A of the Investment Advisers Act of 1940; or

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.

Advising the person as to the value of securities or their purchase or sale; or

Acting as an investment adviser or investment adviser representative.

“Affiliate” has the meaning stated in §2(a)(3) of the Investment Company Act of 1940.

“Found” means determined or ascertained by adjudication or consent in a final court action, administrative proceeding, or SRO proceeding.

“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.

“Involved” means acting or aiding, abetting, causing, counseling, commanding, inducing, conspiring with, or failing reasonably to supervise another in doing an act.

“Management person” means a person with power to:

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.

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.

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.

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.

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.

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.

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.

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.

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.

Charging a client an unreasonable advisory fee in light of the fees charged by other investment advisers providing essentially the same services.

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:

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.

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).

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.

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).

Entering into, extending, or renewing an investment advisory contract unless the contract is in writing and discloses, in substance:

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:

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.

A criminal or civil action in a court of competent jurisdiction in which the person was:

Administrative proceedings before the Commissioner, the SEC, other federal regulatory agency, or other state (“agency”) in which the person was found to have:

Self-regulatory organization proceedings in which the person was found to have:

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;

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;

All client funds are deposited as follows:

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;

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

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.

Is subject to and in compliance with 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers or Dealers); or

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.

The advisory client executes a written consent prospectively authorizing the investment adviser to effect agency cross transactions for the client;

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;

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:

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;

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:

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

An agency cross transaction may not be effected in which the same investment adviser recommended the transaction to both a seller and a purchaser.

“Publicly distributed written materials” means written materials that are distributed to 35 or more persons who pay for those materials;

“Publicly made oral statements” means oral statements made simultaneously to 35 or more persons who pay for access to those statements.

Solely by means of publicly distributed written materials or publicly made oral statements;

Solely by means of written materials or oral statements not purporting to meet the objectives or needs of specific individuals or accounts;

Solely through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or

Through a combination of the items or services enumerated in §B(1)—(3) of this regulation.

“Affiliate” has the meaning stated in §2(a)(3) of the Investment Company Act of 1940.

“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:

Company.

“Interested person” means:

The client entering into the contract is a:

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:

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:

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.

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.

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.

Temporary Hardship Exemption.

Continuing Hardship Exemption.

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:

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.

Updates and Amendments.

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.

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.

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.

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.

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.

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:

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.

Updates and Amendments.

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:

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:

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:

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.

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

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.

“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.

“Authorized provider” means a person that NASAA or its designee has authorized to provide continuing education content required by this regulation.

“Credit” means a unit that has been designated by NASAA or its designee as at least 50 minutes of educational instruction.

“Home state” means the state in which the investment adviser representative has its principal office and place of business.

“IAR ethics and professional responsibility content” means approved IAR continuing education content that addresses an investment adviser representative's ethical and regulatory obligations.

“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.

“NASAA” means the North American Securities Administrators Association or a committee designated by its Board of Directors.

“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.

An investment adviser or investment adviser representative registered or required to be registered in this State shall:

The person who is designated a principal under Regulation .13B of this chapter shall fulfill the investment adviser's examination requirement.

Series 65 examination as adopted by the Commissioner on January 1, 2000; or

Series 7 examination and the Series 66 examination as adopted by the Commissioner on January 1, 2000.

Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards, Inc.;

Chartered Financial Consultant (ChFC) awarded by the American College, Bryn Mawr, Pennsylvania;

Personal Financial Specialist (PFS) awarded by the American Institute of Certified Public Accountants;

Chartered Financial Analyst (CFA) awarded by the Institute of Chartered Financial Analysts; or

Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc.

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:

Notwithstanding §E(1) of this regulation, the Commissioner may require additional examinations for an individual found to have violated any state or federal law.

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.

Notwithstanding §F(1) of this regulation, the Commissioner, by order or otherwise, may modify the 2-year requirement of this subsection.

An investment adviser representative registered in this State shall complete the following continuing education requirements each reporting period:

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:

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:

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.

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.

Failure to Complete or Report Continuing Education.

The Commissioner may, in the Commissioner's discretion, waive any requirements of this regulation.

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:

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.

“Net assets” means the excess of assets over liabilities, as determined by generally accepted accounting principles.

“Net capital” has the meaning stated in 17 CFR §240.15c3-1 (SEC Rule 15c3-1, Net Capital Requirements for Brokers and Dealers).

“Tangible net assets” means the net assets of an investment adviser registered or required to be registered reduced by the following:

Maintain at all times a minimum net capital of $20,000, or minimum tangible net assets of $35,000; or

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.

A trial balance of all ledger accounts;

A computation of net capital or tangible net assets as defined in §A of this regulation;

A statement of all client funds, securities, or assets that are not segregated;

A computation of the aggregate amount of client ledger debit balances; and

A statement of the number of client accounts.

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.

General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income, and expense accounts.

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.

All check books, bank statements, cancelled checks, and cash reconciliations of the investment adviser.

All bills or statements, or copies thereof, paid or unpaid, relating to the business of the investment adviser.

All trial balances, financial statements, and internal audit working papers relating to the business of the investment adviser.

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:

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.

Copies of originals of all powers of attorney and other evidences of the granting of discretionary authority by a client to the investment adviser.

All written agreements, or copies, entered into by the investment adviser with a client or otherwise relating to the business of the investment adviser.

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.

Records of Securities or Asset Transactions.

Records of Transactions in Securities or Assets Involving Direct or Indirect Beneficial Ownership.

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.

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.

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;

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;

Copies of confirmations of all transactions effected by or for the account of each client; and

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.

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

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.

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.

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.

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.

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:

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.

Audited by an independent certified public accountant;

Prepared in conformity with generally accepted accounting principles; and

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.

Filed within 30 days of the event giving rise to the amendment; and

Marked to indicate clearly the changes on the filing that is being amended.

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;

Does not in any other manner hold out as an investment adviser or representative;

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;

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

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;

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;

Does not in any other manner hold out as an investment adviser or representative;

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;

Holds a valid license as an insurance producer with the Maryland Insurance Administration, as provided in the Insurance Article, Annotated Code of Maryland; and

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;

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;

Does not in any other manner hold out as an investment adviser or representative;

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;

Is regulated by the Maryland Insurance Administration, as provided in the Insurance Article, Annotated Code of Maryland, with respect to business or professional conduct;

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

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;

Uses the registered trademark “ChFC”, “Chartered Financial Consultant”, “CFP”, or “Certified Financial Planner” solely in the context of:

Does not in any other manner hold out as an investment adviser or representative; and

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.

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.

An applicant that has requested that an application remain pending shall complete the application within 30 days of the date of the request.

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.

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.

Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland (“the Maryland Securities Act”);

Maryland Business Opportunities Sales Act, Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland (“the Business Opportunities Act”); or

Maryland Franchise Registration and Disclosure Law, Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland (“the Maryland Franchise Law”).

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.

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.

“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.

“Commissioner” means the Maryland Securities Commissioner or the designated agent of the Maryland Securities Commissioner.

“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.

“Division” means the Division of Securities in the Office of the Attorney General.

“Maryland Business Opportunities Sales Act” and “Business Opportunities Act” mean Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland.

“Maryland Franchise Registration and Disclosure Law” and “Maryland Franchise Law” mean Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland.

“Maryland Securities Act” means Corporations and Associations Article, Title 11, Annotated Code of Maryland.

“Party” means a respondent in the proceeding and the Division.

“Person” has the meaning stated in Business Regulation Article, §1-101(g), Annotated Code of Maryland.

“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.

Show Cause Order.

Summary Order.

The date of mailing is the date of service; and

3 days are added to the prescribed time period.

The name of the first listed respondent;

The file number assigned to the case by the Division; and

A brief descriptive title of the pleading.

Be signed by the party or the party's representative or attorney; and

Contain the business address and telephone number of the person by whom it is signed.

Respondent's right to a hearing;

Time period within which the respondent must request a hearing;

Respondent's obligation to file an answer; and

Effect of a failure to file an answer and to request a hearing.

Involves novel or unanticipated factual or legal issues;

Has significant social or fiscal consequences;

Involves policy issues of general applicability; or

Is likely to have precedential value.

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.

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.

The Commissioner shall serve the notice of revocation on all parties and the Office of Administrative Hearings or other designated hearing officer.

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.

The date, time, place, and nature of the hearing;

The legal basis for the hearing;

A brief statement of the issues;

A summary of the rights and restrictions concerning representation set forth in Regulation .09 of this chapter;

A statement that each respondent may present evidence and may cross-examine witnesses;

A statement that each respondent may request the issuance of subpoenas in accordance with Regulation .13 of this chapter;

A copy of the hearing procedures set forth in this chapter;

A statement that failure by a respondent to appear at the hearing may result in adverse action against that respondent;

A statement that the parties may agree to the evidence and that a respondent may waive the right to appear at the hearing.

Name, business address, and telephone number of the attorney; and

Name and address of the party represented.

Relevant to the subject matter of the case; and

Not privileged.

File the written request with the Commissioner not later than 20 days before the date set for the hearing; and

Serve a copy of the request on all other parties.

Copies of requested documents shall be made at the expense of the party making the request.

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.

The name and address of the person to be subpoenaed;

If production of documents or tangible items is sought, a particular description of the documents or tangible items sought; and

The name, address, and telephone number of the party requesting the subpoena.

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.

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.

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.

Simplification of issues;

Admissions or stipulations of fact;

Requests for official notice;

Discovery disputes;

Preliminary motions;

Admissibility of evidence;

Order of presentation;

Limitation of the number of witnesses;

Exchange of prepared testimony and exhibits between the parties;

Scheduling; and

Other matters that will promote the orderly and prompt conduct of the hearing.

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.

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.

Be made in writing, unless otherwise permitted by the Commissioner during the course of a hearing; and

State concisely the question to be determined and be accompanied by any necessary supporting documentation.

10 days after receipt of the motion; or

The date of the hearing.

The Commissioner shall call the hearing to order.

The Commissioner shall explain briefly the purpose and nature of the hearing.

The Commissioner may allow the parties to present preliminary matters.

The parties may make opening statements.

The Commissioner shall state the order of presentation of evidence.

Witnesses shall be sworn or put under affirmation to tell the truth.

The parties may present closing summations and argument.

Shall administer the oath or affirmation to each witness;

Shall rule on the admissibility of evidence;

Shall maintain order and take such action as necessary to avoid delay in the conduct of the hearing; and

May question any witness as to any matter that the Commissioner considers relevant and material to the proceeding.

Call witnesses;

Offer evidence;

Cross-examine any witness called by another party; and

Make opening and closing statements.

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.

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.

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:

A party may waive the right to appear personally at the hearing.

A waiver shall be in writing and filed with the Commissioner.

A waiver may be withdrawn by a party by written notice filed with the Commissioner not later than 7 days before the scheduled hearing.

A party who has filed a timely written waiver may not be held in default for failing to appear at the hearing.

The Commissioner may take official notice of a fact that is judicially noticeable or that is within the specialized knowledge of the Division.

Before taking official notice of a fact, the Commissioner shall:

A respondent;

A representative or attorney for a respondent;

Division staff or counsel involved in the investigation or presentation of the case; or

An administrative law judge or other hearing officer who presided at an earlier stage of the case.

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.

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.

Within 10 days of receipt of exceptions filed by an adverse party, a party may file a memorandum in opposition to those exceptions.

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.

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.

File a timely responsive answer; or

Appear for a hearing at the scheduled time and date.

All pleadings, motions, orders, and related papers filed with the Commissioner or the Office of Administrative Hearings;

All documentary and tangible evidence;

A statement of matters officially noticed;

Recordings and any transcripts of oral proceedings;

The findings of fact and conclusions of law proposed by each party;

Any exceptions filed by the parties and the Commissioner's rulings on those exceptions;

The findings of fact, conclusions of law, and decision of the Commissioner;

If a case has been delegated to the Office of Administrative Hearings for a proposed decision:

The final order, if any, of the Commissioner; and

Other documents or material placed in the record as required by law or at the discretion of the Commissioner.

The potential hardship caused by the order to the party requesting the stay;

The likelihood that the party will prevail on appeal;

Other reasons for a stay proffered by that party;

The interest of investor protection; and

The public interest.

Maryland Securities Act, Corporations and Associations Article, Title 11, Annotated Code of Maryland (the Maryland Securities Act);

Maryland Business Opportunities Sales Act, Business Regulation Article, Title 14, Subtitle 1, Annotated Code of Maryland (the Business Opportunities Act); or

Maryland Franchise Registration and Disclosure Law, Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland (the Maryland Franchise Law).

“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.

“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.

Testify under oath;

Answer written interrogatories under oath;

Produce documents and tangible things; and

Permit inspection and copying of documents.

Describe generally the nature of the investigation;

If the subpoena requires testimony under oath, specify the date, time, and place for the taking of testimony;

If the subpoena requires answers to written interrogatories, contain a copy of the written interrogatories;

If the subpoena requires the production of tangible things or documents:

Notify the person to whom the subpoena is directed of the obligation to supplement responses under Regulation .05 of this chapter;

Advise the person to whom the subpoena is directed that the person may be represented by counsel; and

Identify a member of the Securities Division who may be contacted in reference to the subpoena.

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.

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.

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.

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.

A subpoena may be served by personal service or by mail.

The person who serves a subpoena shall complete a certificate of service attesting to the method and date of service.

A person served with a subpoena under this regulation may request that the subpoena be modified or quashed.

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.

Attorneys representing the Division;

The Commissioner; and

Counsel representing the witness.

The name and title of the author of the document;

The names and titles of all persons to whom the document was addressed;

The names and titles of all persons to whom copies of the document were sent;

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;

The number of pages in the document;

A brief description of the nature or subject matter of the document;

The basis on which the document is being withheld; and

The paragraph number of the subpoena to which the document is responsive.

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.

“Commissioner” means the Securities Commissioner in the Office of the Attorney General or the designated agent of the Commissioner.

“Division” means the Division of Securities in the Office of the Attorney General.

Earnings Claim.

“Franchise” has the meaning stated in the Maryland Franchise Law, Business Regulation Article, §14-201(e), Annotated Code of Maryland.

“Franchise fee” has the meaning stated in the Maryland Franchise Law, Business Regulation Article, §14-201(g), Annotated Code of Maryland.

“Maryland Franchise Offering Circular (MFOC)” means a document prepared in accordance with Regulation .04 of this chapter.

“Maryland Franchise Registration and Disclosure Law” and the “Maryland Franchise Law” mean Business Regulation Article, Title 14, Subtitle 2, Annotated Code of Maryland.

“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:

“Person” has the meaning stated in Business Regulation Article, §1-101(g), Annotated Code of Maryland.

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.

“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.

Price specification, special pricing systems, or discount plans;

Sales or display equipment or merchandising devices;

Sales techniques;

Promotional or advertising materials or cooperative advertising;

Training regarding the promotion, operation, or management of the business; and

Operational, managerial, technical, or financial guidelines or assistance.

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;

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;

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:

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

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:

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

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.

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;

The buyer's purchase of goods, services, equipment, inventory, or real estate is required by or in connection with the agreement; and

The cost to the seller of goods, services, equipment, inventory, or real estate is reasonably related to the price paid by the buyer.

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.

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.

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.

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.

Upon receipt of an application for initial registration, the Division shall assign a file number to the application.

Correspondents shall refer to the assigned file number in all subsequent related filings and correspondence with the Division.

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.

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.

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.

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.

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.

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.

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:

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.

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.

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.

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.

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.

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.

Two copies of the registrant's most recent MFOC which meets the requirements of Regulation .04 of this chapter;

Financial statements that satisfy the requirements of Regulation .13 of this chapter; and

Payment for the renewal fee required by the Maryland Franchise Law, Business Regulation Article, §14-219, Annotated Code of Maryland.

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.

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.

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.

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.

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.

An original fully executed copy of the escrow agreement;

A written consent from the depositary agreeing to operate the escrow account under this regulation;

The name and address of the depositary and the account number of the escrow account;

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

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.

Franchisee and subfranchisor checks for franchise fees or other payments to the franchisor shall be made payable to the depositary;

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

Funds placed in the depositary shall remain escrowed until the Commissioner authorizes the release of the funds under §E of this regulation.

A franchisor may apply to the Commissioner for the release of escrowed funds.

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:

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.

Instead of the imposition of an escrow condition, a franchisor may post a surety bond in an amount required by the Commissioner.

The bond shall be:

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.

The franchisor's agreement to defer franchise fees shall be reflected in the offering circular and the franchise agreement.

The franchisor posts a surety bond in accordance with §F of this regulation;

The franchisor agrees to defer franchise fees and other initial payments in accordance with §G of this regulation; or

Based upon new information, the Commissioner finds that the escrow condition is no longer necessary and appropriate for the protection of prospective franchisees.

An advertisement for a franchise offering may not refer to:

Advertising shall state the name and address of the person sponsoring the advertisement or making the offer.

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.

The exemption set forth in §B(1) of this regulation may be claimed only if:

The registration provisions of the Maryland Franchise Law do not apply to any offer or sale of a franchise when the franchisor has:

The exemption set forth in §D(1) of this regulation may be claimed only if the franchisor:

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.

The exemption set forth in §E(1) of this regulation may be claimed only if the franchisor:

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:

The exemption set forth in §F(1) of this regulation may be claimed only if the franchisor:

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:

A request for an order exempting the offer and sale of a franchise or class of franchises under this section shall:

A request for an order under this section may be made either by a franchisor or a franchisee.

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.

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:

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:

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:

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.

A financial statement required by the Maryland Franchise Law;

A financial statement required by any regulation adopted under the Maryland Franchise Law, including the MFOC; and

A financial statement used by or on behalf of a franchisor in connection with an offer, sale, or purchase of a franchise in Maryland.

A financial statement specified in §A of this regulation shall be prepared in accordance with generally accepted accounting principles.

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:

The financial statements that accompany an application for initial or renewal registration shall include comparative:

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:

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.

A franchisor registered under the Maryland Franchise Law shall file a quarterly report with the Commissioner.

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.

The number of franchises sold in Maryland under the registration statement;

The selling price of each franchise sold in Maryland;

Graphic representations of exclusive areas, if any, sold to Maryland franchisees; and

If the Commissioner directs with respect to a particular franchisor, current financial statements of the franchisor.

Offering circulars;

Advertising;

Correspondence with franchisees and prospective franchisees;

Past and present operations manuals;

Training records;

Training manuals; and

Copies of executed agreements.

Exclusivity of the franchise rights granted to the franchisee without disclosing the exact nature of the exclusivity;

Nature and number of locations or sites appropriate for the franchisee's enterprise, whether or not to be obtained by the franchisor, without disclosing:

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;

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:

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.

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;

The actual income experience of the franchisor unless the person discloses the availability of certified audited financial statements and how they may be obtained;

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;

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

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.

Date by which a prospective franchisee's enterprise will be totally operational without disclosing the:

Sources from which a franchisee is required to purchase its goods, services, equipment, inventory, or real estate pursuant to the franchise agreement without disclosing:

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

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.

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;

A payment or consideration without disclosing its significance in the franchise sale transaction;

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

Recovery of a portion or all of the franchise fee or other investment without disclosing:

Advertising support to be provided by the franchisee and by the franchisor without disclosing the manner by which:

Extent of any training, supervision, and technical assistance to be provided by the franchisor under the franchise agreement without disclosing the:

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.

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;

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

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:

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;

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;

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:

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.

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:

If a franchisee is required to purchase goods, services, equipment, inventory, real estate, or other items from designated sources, including the franchisor, to disclose:

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.

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

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.

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;

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

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.

An original and one copy of the letter requesting the interpretive opinion or no action position; and

Two copies of any supporting documentation or materials.

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.

A request shall indicate in a prominent manner the specific parts of the statute or regulation to which the request pertains.

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.

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.

The Internet Offer indicates, directly or indirectly, that the franchise is not being offered to residents of Maryland;

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

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.

“Federal covered security” has the meaning stated in Corporations and Associations Article, §11-101(f), Annotated Code of Maryland.

“Investment company” has the meaning stated in §3 of the Investment Company Act of 1940, 15 U.S.C. §80a-3.

“Registration statement” has the meaning stated in §2(a)(8) of the Securities Act of 1933, 15 U.S.C. §77b(a)(8).

“Unit investment trust” has the meaning stated in §4(2) of the Investment Company Act of 1940, 15 U.S.C. §80a-4(2).

15 U.S.C. §80a-3.

15 U.S.C. §80a-4(2).

15 U.S.C. §77b(a)(8).

Form NF (Uniform Investment Company Notice Filing);

Form U-2 (Uniform Consent to Service of Process);

SEC Form D (Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption).

Form NF (Uniform Investment Company Notice Filing) or a copy of the investment company's registration statement filed with the SEC;

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;

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;

The fee required by Corporations and Associations Article, §11-510.1, Annotated Code of Maryland; and

Any documents filed with the SEC that the Commissioner may request.

Notice to Issuer. Following receipt of a notice filing, the Division shall notify an issuer that its notice filing is:

Effectiveness. The Division shall notify an issuer that its notice filing is effective upon receipt in Maryland if:

Notice Filing Effective Pending SEC Effectiveness.

Incomplete Notice Filing.

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.

Unit Investment Trusts.

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.

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.

Material Changes. Events requiring an issuer to amend its notice filing include, but are not limited to, changes in the:

Change in Fiscal Year End—Investment Companies Other Than Unit Investment Trusts. If an issuer changes its fiscal year-end date, the issuer shall:

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.

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.