1. (a) Selling expenses of programs are subject to Section 260.140.20 of these rules and should not exceed 15% of the initial subscriptions. Management fees or payments for so-called management services are considered as additional promotional compensation and ordinarily will not be permitted.
2. (b) Commissions payable on the sale of program units shall be paid in cash based solely on the amount of initial subscriptions. Payment of commissions in the form of overriding royalties, net profit interests or other interests in production ordinarily will not be approved, except that no objection will be raised to the payment of commissions in the form of working interests in property of the program, provided the amount does not exceed that purchasable by applying the aggregate cash commission allowable to the unit offering price.
3. (c) All items of compensation to underwriters or dealers, including but not limited to, selling commissions, expenses, rights of first refusal, consulting fees, finders' fees and all other items of compensation of any kind or description paid by the program, directly or indirectly, shall be taken into consideration in computing the amount of allowable selling commissions.
4. (d) As an alternative to the provisions of Subsection (a) above, a sponsor may elect to receive twelve and one-half percent (12 1/2%) of the initial subscriptions to a program (excluding assessments) provided (i) that all selling expenses are paid by the sponsor, and (ii) that the receipt by the sponsor of said twelve and one-half percent (12 1/2%) and the payment of all selling expenses by the sponsor shall be fully set forth in the prospectus. Selling expenses as used in this Subsection means the total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys) paid in connection with the offering and all other expenses actually incurred in connection with the offer and sale of the units, including expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees, escrow holders, depositaries, and engineers and other experts, expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants' and attorneys' fees.

Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.

History

1. Editorial correction adding Note filed 11-8-82 (Register 82, No. 46).