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Question 1 of 10
1. Question
Regarding Organization and Offering Expenses, which of the following statement(s) is/are untrue when issuer expenses that are reimbursed or paid for with offering proceeds?
Correct
2310. Direct Participation Programs
Organization and Offering Expenses
The organization and offering expenses subject to the limitations in paragraph (b)(4)(B)(i) above include the following: issuer expenses that are reimbursed or paid for with offering proceeds, including overhead expenses, which issuer expenses include, but are not limited to, expenses for:
a. assembling, printing and mailing offering materials, processing subscription agreements, generating advertising and sales materials;
b. legal and accounting services provided to the sponsor or issuer;
c. salaries and non-transaction-based compensation paid to employees or agents of the sponsor or issuer for performing services for the issuer;
d. transfer agents, escrow holders depositories, engineers and other experts; and
e. registration and qualification of securities under federal and state law, including taxes and fees and FINRA fees;Incorrect
2310. Direct Participation Programs
Organization and Offering Expenses
The organization and offering expenses subject to the limitations in paragraph (b)(4)(B)(i) above include the following: issuer expenses that are reimbursed or paid for with offering proceeds, including overhead expenses, which issuer expenses include, but are not limited to, expenses for:
a. assembling, printing and mailing offering materials, processing subscription agreements, generating advertising and sales materials;
b. legal and accounting services provided to the sponsor or issuer;
c. salaries and non-transaction-based compensation paid to employees or agents of the sponsor or issuer for performing services for the issuer;
d. transfer agents, escrow holders depositories, engineers and other experts; and
e. registration and qualification of securities under federal and state law, including taxes and fees and FINRA fees; -
Question 2 of 10
2. Question
Regarding Organization and Offering Expenses, which of the following statement(s) is/are untrue when underwriting compensation, which includes but is not limited to items of compensation listed in Rule 5110(c)(3) including payments?
Correct
2310. Direct Participation Programs
Organization and Offering Expenses
The organization and offering expenses subject to the limitations in paragraph (b)(4)(B)(i) above include the following: underwriting compensation, which includes but is not limited to items of compensation listed in Rule 5110(c)(3) including payments:
a. to any wholesaling or retailing firm that is engaged in the solicitation, marketing, distribution or sales of the program or REIT securities;
b. to any registered representative of a member who receives transaction-based compensation in connection with the offering, except to the extent that such compensation has been included in a. above;
c. to any registered representative who is engaged in the solicitation, marketing, distribution or sales of the program or REIT securities,Incorrect
2310. Direct Participation Programs
Organization and Offering Expenses
The organization and offering expenses subject to the limitations in paragraph (b)(4)(B)(i) above include the following: underwriting compensation, which includes but is not limited to items of compensation listed in Rule 5110(c)(3) including payments:
a. to any wholesaling or retailing firm that is engaged in the solicitation, marketing, distribution or sales of the program or REIT securities;
b. to any registered representative of a member who receives transaction-based compensation in connection with the offering, except to the extent that such compensation has been included in a. above;
c. to any registered representative who is engaged in the solicitation, marketing, distribution or sales of the program or REIT securities, -
Question 3 of 10
3. Question
Regarding Organization and Offering Expenses, which of the following statement(s) is/are true when ?
Correct
2310. Direct Participation Programs
Organization and Offering Expenses
All items of compensation paid by the program or REIT directly or indirectly from whatever source to underwriters, broker-dealers, or affiliates thereof, including, but not limited to, sales commissions, wholesaling fees, due diligence expenses, other underwriter’s expenses, underwriter’s counsel’s fees, securities or rights to acquire securities, rights of first refusal, consulting fees, finder’s fees, investor relations fees, and any other items of compensation for services of any kind or description, which are deemed to be in connection with or related to the public offering, shall be taken into consideration in computing the amount of compensation for purposes of determining compliance with the provisions of subparagraphs (A) and (B).Incorrect
2310. Direct Participation Programs
Organization and Offering Expenses
All items of compensation paid by the program or REIT directly or indirectly from whatever source to underwriters, broker-dealers, or affiliates thereof, including, but not limited to, sales commissions, wholesaling fees, due diligence expenses, other underwriter’s expenses, underwriter’s counsel’s fees, securities or rights to acquire securities, rights of first refusal, consulting fees, finder’s fees, investor relations fees, and any other items of compensation for services of any kind or description, which are deemed to be in connection with or related to the public offering, shall be taken into consideration in computing the amount of compensation for purposes of determining compliance with the provisions of subparagraphs (A) and (B). -
Question 4 of 10
4. Question
Regarding Organization and Offering Expenses, which of the following statement(s) is/are true when an affiliate of a member which acts or proposes to act as a general partner, associate general partner, or other sponsor of a program or REIT shall be presumed to be bearing investment risk?
Correct
2310. Direct Participation Programs
Organization and Offering Expenses
The determination of whether compensation paid to underwriters, broker-dealers, or affiliates thereof is in connection with or related to a public offering, for purposes of this subparagraph (4), shall be made on the basis of such factors as the timing of the transaction, the consideration rendered, the investment risk, and the role of the member or affiliate in the organization, management and direction of the enterprise in which the sponsor is involved.
(i) An affiliate of a member which acts or proposes to act as a general partner, associate general partner, or other sponsor of a program or REIT shall be presumed to be bearing investment risk for purposes of this paragraph (b) if the affiliate:
a. is subject to potential liability as a general partner to the same extent as any other general partner;
b. is not indemnified against potential liability as a general partner to any greater or different extent than any other general partner for its actions or those of any other general partner;
c. has a net worth equal to at least five percent of the net proceeds of the public offering or $1.0 million, whichever is less; provided, however, that the computation of the net worth shall not include an interest in the program offered but may include net worth applied to satisfy the requirements of this paragraph (b) with respect to other programs or REITs; and
d. agrees to maintain net worth as required by subparagraph c. above under its control until the earlier of the removal or withdrawal of the affiliate as a general partner, associate general partner, or other sponsor, or the dissolution of the program or REIT.Incorrect
2310. Direct Participation Programs
Organization and Offering Expenses
The determination of whether compensation paid to underwriters, broker-dealers, or affiliates thereof is in connection with or related to a public offering, for purposes of this subparagraph (4), shall be made on the basis of such factors as the timing of the transaction, the consideration rendered, the investment risk, and the role of the member or affiliate in the organization, management and direction of the enterprise in which the sponsor is involved.
(i) An affiliate of a member which acts or proposes to act as a general partner, associate general partner, or other sponsor of a program or REIT shall be presumed to be bearing investment risk for purposes of this paragraph (b) if the affiliate:
a. is subject to potential liability as a general partner to the same extent as any other general partner;
b. is not indemnified against potential liability as a general partner to any greater or different extent than any other general partner for its actions or those of any other general partner;
c. has a net worth equal to at least five percent of the net proceeds of the public offering or $1.0 million, whichever is less; provided, however, that the computation of the net worth shall not include an interest in the program offered but may include net worth applied to satisfy the requirements of this paragraph (b) with respect to other programs or REITs; and
d. agrees to maintain net worth as required by subparagraph c. above under its control until the earlier of the removal or withdrawal of the affiliate as a general partner, associate general partner, or other sponsor, or the dissolution of the program or REIT. -
Question 5 of 10
5. Question
Regarding Organization and Offering Expenses, which of the following statement(s) is/are true when subject to the limitations on direct and indirect non-cash compensation provided under subparagraph (C), no member shall accept any cash compensation unless all of the following conditions are satisfied?
Correct
2310. Direct Participation Programs
Organization and Offering Expenses
Subject to the limitations on direct and indirect non-cash compensation provided under subparagraph (C), no member shall accept any cash compensation unless all of the following conditions are satisfied:
(i) all compensation is paid directly to the member in cash and the distribution, if any, of all compensation to the member’s associated persons is controlled solely by the member;
(ii) the value of all compensation to be paid in connection with an offering is included as compensation to be received in connection with the offering for purposes of subparagraph (B);
(iii) arrangements relating to the proposed payment of all compensation are disclosed in the prospectus or similar offering document;
(iv) the value of all compensation paid in connection with an offering is reflected on the books and records of the recipient member as compensation received in connection with the offering;Incorrect
2310. Direct Participation Programs
Organization and Offering Expenses
Subject to the limitations on direct and indirect non-cash compensation provided under subparagraph (C), no member shall accept any cash compensation unless all of the following conditions are satisfied:
(i) all compensation is paid directly to the member in cash and the distribution, if any, of all compensation to the member’s associated persons is controlled solely by the member;
(ii) the value of all compensation to be paid in connection with an offering is included as compensation to be received in connection with the offering for purposes of subparagraph (B);
(iii) arrangements relating to the proposed payment of all compensation are disclosed in the prospectus or similar offering document;
(iv) the value of all compensation paid in connection with an offering is reflected on the books and records of the recipient member as compensation received in connection with the offering; -
Question 6 of 10
6. Question
Regarding Organization and Offering Expenses: Valuation for Customer Account Statements, which of the following statement(s) is/are true?
Correct
2310. Direct Participation Programs
Organization and Offering Expenses
Valuation for Customer Account Statements
A member shall not participate in a public offering of the securities of a direct participation program (DPP) that is not subject to the requirements of the Investment Company Act of 1940 or of a REIT unless the issuer of the DPP or REIT has agreed to disclose:
(A) a per share estimated value of the DPP or REIT security, developed in a manner reasonably designed to ensure it is reliable, in the DPP or REIT periodic reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act;
(B) an explanation of the method by which the per share estimated value was developed;
(C) the date of the valuation; and
(D) in a periodic or current report filed pursuant to Section 13(a) or 15(d) of the Exchange Act within 150 days following the second anniversary of breaking escrow and in each annual report thereafter, a per share estimated valueIncorrect
2310. Direct Participation Programs
Organization and Offering Expenses
Valuation for Customer Account Statements
A member shall not participate in a public offering of the securities of a direct participation program (DPP) that is not subject to the requirements of the Investment Company Act of 1940 or of a REIT unless the issuer of the DPP or REIT has agreed to disclose:
(A) a per share estimated value of the DPP or REIT security, developed in a manner reasonably designed to ensure it is reliable, in the DPP or REIT periodic reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act;
(B) an explanation of the method by which the per share estimated value was developed;
(C) the date of the valuation; and
(D) in a periodic or current report filed pursuant to Section 13(a) or 15(d) of the Exchange Act within 150 days following the second anniversary of breaking escrow and in each annual report thereafter, a per share estimated value -
Question 7 of 10
7. Question
Regarding Valuation for Customer Account Statements, which of the following statement(s) is/are true?
Correct
2310. Direct Participation Programs
Valuation for Customer Account Statements
in a periodic or current report filed pursuant to Section 13(a) or 15(d) of the Exchange Act within 150 days following the second anniversary of breaking escrow and in each annual report thereafter, a per share estimated value:
(i) based on valuations of the assets and liabilities of the DPP or REIT performed at least annually, by, or with the material assistance or confirmation of, a third-party valuation expert or service;
(ii) derived from a methodology that conforms to standard industry practice; and
(iii) accompanied by a written opinion or report by the issuer, delivered at least annually, that explains the scope of the review, the methodology used to develop the valuation or valuations, and the basis for the value or values reported.Incorrect
2310. Direct Participation Programs
Valuation for Customer Account Statements
in a periodic or current report filed pursuant to Section 13(a) or 15(d) of the Exchange Act within 150 days following the second anniversary of breaking escrow and in each annual report thereafter, a per share estimated value:
(i) based on valuations of the assets and liabilities of the DPP or REIT performed at least annually, by, or with the material assistance or confirmation of, a third-party valuation expert or service;
(ii) derived from a methodology that conforms to standard industry practice; and
(iii) accompanied by a written opinion or report by the issuer, delivered at least annually, that explains the scope of the review, the methodology used to develop the valuation or valuations, and the basis for the value or values reported. -
Question 8 of 10
8. Question
Regarding Participation in Rollups, which of the following statement(s) is/are true?
Correct
2310. Direct Participation Programs
Participation in Rollups
(A) No member or person associated with a member shall participate in the solicitation of votes or tenders from limited partners in connection with a limited partnership rollup transaction, irrespective of the form of the resulting entity (i.e., a partnership, real estate investment trust or corporation), unless any compensation received by the member:
(i) is payable and equal in amount regardless of whether the limited partner votes affirmatively or negatively in the proposed limited partnership rollup transaction;
(ii) in the aggregate, does not exceed 2% of the exchange value of the newly created securities; and
(iii) is paid regardless of whether the limited partners reject the proposed limited partnership rollup transaction.Incorrect
2310. Direct Participation Programs
Participation in Rollups
(A) No member or person associated with a member shall participate in the solicitation of votes or tenders from limited partners in connection with a limited partnership rollup transaction, irrespective of the form of the resulting entity (i.e., a partnership, real estate investment trust or corporation), unless any compensation received by the member:
(i) is payable and equal in amount regardless of whether the limited partner votes affirmatively or negatively in the proposed limited partnership rollup transaction;
(ii) in the aggregate, does not exceed 2% of the exchange value of the newly created securities; and
(iii) is paid regardless of whether the limited partners reject the proposed limited partnership rollup transaction. -
Question 9 of 10
9. Question
Regarding Participation in Rollups, which of the following statement(s) is/are true when no member or person associated with a member shall participate in any capacity in a limited partnership rollup transaction if the transaction is unfair or unreasonable?
Correct
2310. Direct Participation Programs
Participation in Rollups
No member or person associated with a member shall participate in any capacity in a limited partnership rollup transaction if the transaction is unfair or unreasonable.
(i) A limited partnership rollup transaction will be presumed not to be unfair or unreasonable if the limited partnership rollup transaction provides for the right of dissenting limited partners:Incorrect
2310. Direct Participation Programs
Participation in Rollups
No member or person associated with a member shall participate in any capacity in a limited partnership rollup transaction if the transaction is unfair or unreasonable.
(i) A limited partnership rollup transaction will be presumed not to be unfair or unreasonable if the limited partnership rollup transaction provides for the right of dissenting limited partners: -
Question 10 of 10
10. Question
Regarding Participation in Rollups, what is the rate of interest provided when limited partnership rollup transactions which utilize debt instruments as compensation must provide for a trustee and an indenture to protect the rights of the debt holders
Correct
2310. Direct Participation Programs
Participation in Rollups
limited partnership rollup transactions which utilize debt instruments as compensation must provide for a trustee and an indenture to protect the rights of the debt holders and provide a rate of interest equal to at least 120% of the applicable federal rate as determined in accordance with Section 1274 of the Internal Revenue Code of 1986;Incorrect
2310. Direct Participation Programs
Participation in Rollups
limited partnership rollup transactions which utilize debt instruments as compensation must provide for a trustee and an indenture to protect the rights of the debt holders and provide a rate of interest equal to at least 120% of the applicable federal rate as determined in accordance with Section 1274 of the Internal Revenue Code of 1986;