Section 123.3 - Conditional Exemption for Money Market Funds(a) Introduction. (1) Certain open-end investment companies commonly known as money market funds have investment characteristics and sales patterns materially different from other types of mutual funds and other securities. These funds, defined in subsection (b) of this section, are designed to attract a large volume of comparatively short-term investments by purchasers. As early redemptions are contemplated by both purchaser and seller, and because these funds continuously offer to repurchase their own securities and issue new securities to new and repeat investors, an excessive amount of fees may be paid under the Texas Securities Act, §4006.055, for the securities issued. Therefore, pursuant to the Act, §4005.024, the State Securities Board conditionally exempts from the fee provisions of the Texas Securities Act certain investment company securities defined herein provided all the requirements of this section are satisfied.(2) Nothing in this section shall be construed to relieve any open-end investment company from any condition or requirement of registration under the Texas Securities Act except as specifically stated herein or in Chapter 114 of this title (relating to Federal Covered Securities).(b) Definition. In this section, a "money market fund" or "fund" is an open-end investment company which must meet all of the following conditions. (1) The fund must engage in a continuous offering of its securities.(2) The fund must hold itself out to be a money market fund or an equivalent to a money market fund and must be in compliance with the Investment Company Act of 1940, Rule 2a-7 (17 CFR § 270.2a-7, as amended).(3) The fund must not pay or charge sales commissions or redemption fees except nominal exchange fees which may not be used for sales expenses or in lieu of initial sales charges or redemption fees.(4) The fund's total charges against net assets for sales distribution activities and/or the servicing of shareholder accounts must not be in excess of .25% of average net assets per annum.(5) With the exception of mergers, consolidations, or acquisitions of assets, or as noted in paragraph (6) of this subsection, the fund's investments in other investment companies must be limited to: (A) 10% of the fund's total assets;(B) other investment companies with substantially similar investment objectives; and(C) other investment companies with charges and fees substantially similar to those set forth in paragraphs (3) and (4) of this subsection.(6) In the case of a master/feeder fund structure: (A) feeder fund(s) must meet, or invest in a master fund which meets, paragraphs (1)-(4) of this subsection;(B) when viewed together, the master/feeder fund(s) must meet paragraphs (3) and (4) of this subsection; and(C) all feeder funds must have investment objectives substantially similar to those of the master fund.(7) A currently authorized fund which has been granted money market status is not required to comply with this subsection until the fund files its Year-End Report of Sales of Federal Covered Securities by a Money Market Fund on Form 133.27, but it is required to comply with the subsection as it was in effect at the time that the fund was designated a money market fund for purposes of this section.(c) Request for determination. (1) At the time an applicant submits documents or fees in connection with an authorization to sell federal covered securities, or at any time thereafter, the applicant may request the Securities Commissioner determine that the issuer is a money market fund as defined in this section. The request shall be made in writing on Form 133.26 of this title (relating to Request for Determination of Money Market Fund Status for Federal Covered Securities). The Securities Commissioner shall review the request and any other information the Securities Commissioner deems relevant to the determination of whether the issuer is a money market fund for purposes of this section.(2) If the request is made after the issuance of the fund's original authorization, an amendment fee as prescribed by the Texas Securities Act, §4006.001(1) will be required. Additional sales information will be required since only the federal covered securities authorized and sold after the date the Securities Commissioner determines that the issuer is a money market fund will be subject to the reduced fees under subsection (d) of this section.(d) Conditional exemption. Subject to the other provisions of this section, federal covered securities issued by money market funds are exempt from the fee imposed by the Texas Securities Act, §4006.055, provided all of the following requirements are satisfied at the time of sale of the federal covered securities. (1) An applicant has requested that the Securities Commissioner determine that the issuer is a money market fund as defined in this section.(2) The Securities Commissioner has determined that the issuer is a money market fund as defined in this section.(3) For each filing of an original, renewal, or amended authorization under the conditional exemption provided by this section, the applicant has paid the filing fee required by the Act, §4006.001(1), in addition to the reduced fee imposed by paragraph (5) of this subsection.(4) During the current calendar year, the fund has an aggregate authorized amount of $10 million of federal covered securities for sale in Texas.(5) The fund has paid the reduced authorization fee imposed by this paragraph for the aggregate amount of federal covered securities proposed to be sold during the current calendar year under this conditional exemption. The reduced authorization fee imposed by this paragraph for authorization of federal covered securities in excess of the first $10 million aggregate amount of securities sold is: (A) for the next $10 million of federal covered securities authorized, 1/20 of 1.0% of the aggregate amount to be sold;(B) for the next $30 million of federal covered securities authorized, 1/50 of 1.0% of the aggregate amount to be sold;(C) for the next $50 million of federal covered securities to be authorized, 1/100 of 1.0% of the aggregate amount to be sold; and(D) 1/200 of 1.0% of the aggregate amount on the remainder of the federal covered securities authorized to be sold.(e) Oversales. The reduced authorization fee schedule imposed by subsection (d)(5) of this section shall not apply to any federal covered securities authorized under the Act, §4006.151. All fees paid for authorization of federal covered securities of money market funds pursuant to §4006.151 shall be computed as set forth in the Act, §§4006.001(1), 4006.055, and 4006.151.(f) Unsold balance at end of calendar year. In any calendar year, the fees required to be paid by a fund for sales that year will be calculated under subsection (d)(4) and (5) of this section without regard to the amount of fees paid or federal covered securities sold in any other year. If, at the end of any calendar year a money market fund has a remaining unsold balance of federal covered securities authorized to be sold, the dollar amount of fees paid under subsection (d) of this section for authorization of the unsold balance may be reapplied to fees required in the next calendar year, but no unsold balance of authorized but unsold federal covered securities will be carried forward to the subsequent calendar year.(g) Year end reports. To qualify for the reduced fees accorded to a fund granted money market fund status pursuant to this section, the fund must file a year end report of sales on Form 133.27 of this title (relating to Year-End Report of Sales of Federal Covered Securities by a Money Market Fund) in January of each year which reflects the amount of federal covered securities sold in the previous year, the balance of fees paid for authorization of any unsold balance in the previous year and the recalculated balance of authorized federal covered securities at the beginning of the current year. In calculating fees applied to sales during the previous year, fees will first be applied at the higher rates specified in the reduced fee schedule in subsection (d)(5) of this section, and then at more reduced rates as sales volume increases, and not vice versa. Funds should consult Form 133.27 in determining how to compute fees.(h) Effect of noncompliance. If at any time the business or plan of business of any fund has been altered so that it is no longer a money market fund within subsection (b) of this section, such an issuer shall not be entitled to any reduction of fees as provided in subsection (d)(5) of this section. Such fund shall not be entitled to any reduction in fees as provided in subsection (d)(5) of this section for any sales of its securities from the time at which it ceases to comply with subsection (b) of this section until the Securities Commissioner redetermines in a subsequent calendar year that the issuer is again a money market fund as defined in subsection (b) of this section, and instead fees shall be calculated for such issuer as provided in the Act, Chapter 4006, Subchapters A, B, and D.(i) Appeals. If any person should take exception to an action of the Securities Commissioner in making, failing to make, or revoking a determination whether that person is a money market fund, the aggrieved person may appeal the decision of the Securities Commissioner as provided in the Act, §4007.107.(j) Effect of a prior determination. A fund offering federal covered securities, that was determined to be a money market fund prior to October 11, 1996, will continue to be considered a money market fund for purposes of this section without the necessity of submitting a new request for determination, so long as the fund continues to meet the definition of a "money market fund" in subsection (b) of this section.7 Tex. Admin. Code § 123.3
The provisions of this §123.3 adopted to be effective September 1, 1979, 4 TexReg 2901; amended to be effective February 2, 1983, 8 TexReg 281; amended to be effective December 20, 1993, 18 TexReg 9093; amended to be effective June 8, 1994, 19 TexReg 4196; amended to be effective April 8, 1997, 22 TexReg 3227; amended to be effective February 24, 2004, 29 TexReg 1644; Amended by Texas Register, Volume 41, Number 24, June 10, 2016, TexReg 4251, eff. 6/14/2016; Amended by Texas Register, Volume 49, Number 13, March 29, 2024, TexReg 2065, eff. 4/7/2024