On January 12, 2016, the Securities and Exchange Commission's Division of Corporation Finance (the "Division") granted no-action relief to the College Savings Plan Network ("CSPN"), an affiliate of the National Association of State Treasurers that represents eleven International Revenue Code §529-qualified prepaid tuition programs (the "§529 Programs"), in connection with its request for the §529 Programs to qualify as "qualified institutional buyers" ("QIBs") pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and "accredited investors" pursuant to Rule 501(a)(3) of Regulation D under the Securities Act.
In its letter to the Division, CSPN argued that the §529 Programs should qualify as both QIBs and accredited investors because the §529 Programs: (1) are business trusts or corporations that engage in business activities typically associated with QIBs and accredited investors; (2) should be treated as favorably as §529 prepaid tuition plans created especially for private universities; (3) are maintained by unique entities; and (4) do not need the protection of registration under the Securities Act.
In concluding that the §529 Programs are eligible for both QIB and accredited investor status, the Division emphasized the fact that the §529 Programs parallel the structure of trusts and corporations and do not need the protections associated with Securities Act registration.
A copy of the no-action letter is available at https://www.sec.gov/divisions/corpfin/cf-noaction/2016/cspn-011216-501a.htm.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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