{"database": "openregs", "table": "cfr_sections", "is_view": false, "human_description_en": "where part_number = 275 sorted by section_id", "rows": [["17:17:5.0.1.1.22.0.36.1", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.0-2 General procedures for serving non-residents.", "SEC", "", "", "[65 FR 57448, Sept. 22, 2000]", "(a)  General procedures for serving process, pleadings, or other papers on non-resident investment advisers, general partners and managing agents.  Under Forms ADV and ADV-NR [17 CFR 279.1 and 279.4], a person may serve process, pleadings, or other papers on a non-resident investment adviser, or on a non-resident general partner or non-resident managing agent of an investment adviser by serving any or all of its appointed agents:\n\n(1) A person may serve a non-resident investment adviser, non-resident general partner, or non-resident managing agent by furnishing the Commission with one copy of the process, pleadings, or papers, for each named party, and one additional copy for the Commission's records.\n\n(2) If process, pleadings, or other papers are served on the Commission as described in this section, the Secretary of the Commission (Secretary) will promptly forward a copy to each named party by registered or certified mail at that party's last address filed with the Commission.\n\n(3) If the Secretary certifies that the Commission was served with process, pleadings, or other papers pursuant to paragraph (a)(1) of this section and forwarded these documents to a named party pursuant to paragraph (a)(2) of this section, this certification constitutes evidence of service upon that party.\n\n(b)  Definitions.  For purposes of this section:\n\n(1)  Managing agent  means any person, including a trustee, who directs or manages, or who participates in directing or managing, the affairs of any unincorporated organization or association other than a partnership.\n\n(2)  Non-resident  means:\n\n(i) An individual who resides in any place not subject to the jurisdiction of the United States;\n\n(ii) A corporation that is incorporated in or that has its principal office and place of business in any place not subject to the jurisdiction of the United States; and\n\n(iii) A partnership or other unincorporated organization or association that has its principal office and place of business in any place not subject to the jurisdiction of the United States.\n\n(3)  Principal office and place of business  has the same meaning as in \u00a7 275.203A-3(c) of this chapter."], ["17:17:5.0.1.1.22.0.36.10", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203-1 Application for investment adviser registration.", "SEC", "", "", "[65 FR 57448, Sept. 22, 2000; 65 FR 81737, Dec. 27, 2000 as amended at 84 FR 33630, July 12, 2019; 87 FR 38977, June 30, 2022]", "(a)  Form ADV.  (1) To apply for registration with the Commission as an investment adviser, you must complete Form ADV (17 CFR 279.1) by following the instructions in the form and you must file Part 1A of Form ADV, the firm brochure(s) required by Part 2A of Form ADV and Form CRS required by Part 3 of Form ADV electronically with the Investment Adviser Registration Depository (IARD) unless you have received a hardship exemption under \u00a7 275.203-3. You are not required to file with the Commission the brochure supplements required by Part 2B of Form ADV.\n\nInformation on how to file with the IARD is available on the Commission's website at  http://www.sec.gov/iard.  If you are not required to deliver a brochure or Form CRS to any clients, you are not required to prepare or file a brochure or Form CRS, as applicable, with the Commission. If you are not required to deliver a brochure supplement to any clients for any particular supervised person, you are not required to prepare a brochure supplement for that supervised person.\n\n(2)(i) On or after June 30, 2020, the Commission will not accept any initial application for registration as an investment adviser that does not include a Form CRS that satisfies the requirements of Part 3 of Form ADV.\n\n(ii) Beginning on May 1, 2020, any initial application for registration as an investment adviser filed prior to June 30, 2020, must include a Form CRS that satisfies the requirements of Part 3 of Form ADV by no later than June 30, 2020.\n\n(b)  When filed.  Each Form ADV is considered filed with the Commission upon acceptance by the IARD.\n\n(c)  Filing fees.  You must pay FINRA (the operator of the IARD) a filing fee. The Commission has approved the amount of the filing fee. No portion of the filing fee is refundable. Your completed application for registration will not be accepted by FINRA, and thus will not be considered filed with the Commission, until you have paid the filing fee.\n\n(d)  Form ADV-NR \u2014(1)  General Requirements.  Each non-resident, as defined in 17 CFR 275.0-2(b)(2) (Rule 0-2(b)(2)), general partner or a non-resident managing agent, as defined in 17 CFR 275.0-2(b)(2) (Rule 0-2(b)(1)), of any investment adviser registered, or applying for registration with, the Commission must submit Form ADV-NR (17 CFR 279.4). Form ADV-NR must be completed in connection with the adviser's initial registration with the Commission. If a person becomes a non-resident general partner or a non-resident managing agent after the date the adviser files its initial registration with the Commission, the person must file Form ADV-NR with the Commission within 30 days of becoming a non-resident general partner or a non-resident managing agent. If a person serves as a general partner or managing agent for multiple advisers, they must submit a separate Form ADV-NR for each adviser.\n\n(2)  When an amendment is required.  Each non-resident general partner or a non-resident managing agent of any investment adviser must amend its Form ADV-NR within 30 days whenever any information contained in the form becomes inaccurate by filing with the Commission a new Form ADV-NR.\n\n(3)  Electronic filing.  Form ADV-NR (and any amendments to Form ADV-NR) must be filed electronically through the Investment Adviser Registration Depository (IARD), unless a hardship exemption under 17 CFR 275.203-3 (Rule 203-3) has been granted.\n\n(4)  When filed.  Each Form ADV-NR is considered filed with the Commission upon acceptance by the IARD.\n\n(5)  Filing fees.  No fee shall be assessed for filing Form ADV-NR through IARD.\n\n(6)  Form ADV-NR is a report.  Each Form ADV-NR (and any amendment to Form ADV-NR) required to be filed under this rule is a \u201creport\u201d within the meaning of sections 204 and 207 of the Act."], ["17:17:5.0.1.1.22.0.36.11", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203-2 Withdrawal from investment adviser registration.", "SEC", "", "", "[65 FR 57449, Sept. 22, 2000]", "(a)  Form ADV-W.  You must file Form ADV-W (17 CFR 279.2) to withdraw from investment adviser registration with the Commission (or to withdraw a pending registration application).\n\n(b)  Electronic filing.  Once you have filed your Form ADV (17 CFR 279.1) (or any amendments to Form ADV) electronically with the Investment Adviser Registration Depository (IARD), any Form ADV-W you file must be filed with the IARD, unless you have received a hardship exemption under \u00a7 275.203-3.\n\n(c)  Effective date\u2014upon filing.  Each Form ADV-W filed under this section is effective upon acceptance by the IARD, provided however that your investment adviser registration will continue for a period of sixty days after acceptance solely for the purpose of commencing a proceeding under section 203(e) of the Act (15 U.S.C. 80b-3(e)).\n\n(d)  Filing fees.  You do not have to pay a fee to file Form ADV-W through the IARD.\n\n(e)  Form ADV-W is a report.  Each Form ADV-W required to be filed under this section is a \u201creport\u201d within the meaning of sections 204 and 207 of the Act (15 U.S.C. 80b-4 and 80b-7)."], ["17:17:5.0.1.1.22.0.36.12", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203-3 Hardship exemptions.", "SEC", "", "", "[65 FR 57449, Sept. 22, 2000; 65 FR 81738, Dec. 27, 2000, as amended at 68 FR 42248, July 17, 2003; 73 FR 4694, Jan. 28, 2008]", "This section provides two \u201chardship exemptions\u201d from the requirement to make Advisers Act filings electronically with the Investment Adviser Registration Depository (IARD).\n\n(a)  Temporary hardship exemption \u2014(1)  Eligibility for exemption.  If you are registered or are registering with the Commission as an investment adviser and submit electronic filings on the Investment Adviser Registration Depository (IARD) system, but have unanticipated technical difficulties that prevent you from submitting a filing to the IARD system, you may request a temporary hardship exemption from the requirements of this chapter to file electronically.\n\n(2)  Application procedures.  To request a temporary hardship exemption, you must:\n\n(i) File Form ADV-H (17 CFR 279.3) in paper format with no later than one business day after the filing that is the subject of the ADV-H was due; and\n\n(ii) Submit the filing that is the subject of the Form ADV-H in electronic format with the IARD no later than seven business days after the filing was due.\n\n(3)  Effective date\u2014upon filing.  The temporary hardship exemption will be granted when you file a completed Form ADV-H.\n\n(b)  Continuing hardship exemption \u2014(1)  Eligibility for exemption.  If you are a \u201csmall business\u201d (as described in paragraph (b)(5) of this section), you may apply for a continuing hardship exemption.\n\nThe period of the exemption may be no longer than one year after the date on which you apply for the exemption.\n\n(2)  Application procedures.  To apply for a continuing hardship exemption, you must file Form ADV-H at least ten business days before a filing is due. The Commission will grant or deny your application within ten business days after you file Form ADV-H.\n\n(3)  Effective date\u2014upon approval.  You are not exempt from the electronic filing requirements until and unless the Commission approves your application. If the Commission approves your application, you may submit your filings to FINRA in paper format for the period of time for which the exemption is granted.\n\n(4)  Criteria for exemption.  Your application will be granted only if you are able to demonstrate that the electronic filing requirements of this chapter are prohibitively burdensome or expensive.\n\n(5)  Small business.  You are a \u201csmall business\u201d for purposes of this section if you are required to answer Item 12 of Form ADV (17 CFR 279.1) and checked \u201cno\u201d to each question in Item 12 that you were required to answer.\n\nFINRA will charge you an additional fee covering its cost to convert to electronic format a filing made in reliance on a continuing hardship exemption."], ["17:17:5.0.1.1.22.0.36.13", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203(l)-1 Venture capital fund defined.", "SEC", "", "", "[76 FR 39702, July 6, 2011, as amended at 83 FR 1302, Jan. 11, 2018; 85 FR 13741, Mar. 10, 2020]", "(a)  Venture capital fund defined.  For purposes of section 203( l ) of the Act (15 U.S.C. 80b-3( l )), a venture capital fund is any entity described in subparagraph (A), (B), or (C) of section 203(b)(7) of the Act (15 U.S.C. 80b-3(b)(7)) (other than an entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-53)) or any entity described in subparagraph (A) or (B) of section 203(b)(8) of the Act (15 U.S.C. 80b-3(b)(8)) (other than an entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-53)) or any private fund that:\n\n(1) Represents to investors and potential investors that it pursues a venture capital strategy;\n\n(2) Immediately after the acquisition of any asset, other than qualifying investments or short-term holdings, holds no more than 20 percent of the amount of the fund's aggregate capital contributions and uncalled committed capital in assets (other than short-term holdings) that are not qualifying investments, valued at cost or fair value, consistently applied by the fund;\n\n(3) Does not borrow, issue debt obligations, provide guarantees or otherwise incur leverage, in excess of 15 percent of the private fund's aggregate capital contributions and uncalled committed capital, and any such borrowing, indebtedness, guarantee or leverage is for a non-renewable term of no longer than 120 calendar days, except that any guarantee by the private fund of a qualifying portfolio company's obligations up to the amount of the value of the private fund's investment in the qualifying portfolio company is not subject to the 120 calendar day limit;\n\n(4) Only issues securities the terms of which do not provide a holder with any right, except in extraordinary circumstances, to withdraw, redeem or require the repurchase of such securities but may entitle holders to receive distributions made to all holders pro rata; and\n\n(5) Is not registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), and has not elected to be treated as a business development company pursuant to section 54 of that Act (15 U.S.C. 80a-53).\n\n(b)  Certain pre-existing venture capital funds.  For purposes of section 203(l) of the Act (15 U.S.C. 80b-3(l)) and in addition to any venture capital fund as set forth in paragraph (a) of this section, a venture capital fund also includes any private fund that:\n\n(1) Has represented to investors and potential investors at the time of the offering of the private fund's securities that it pursues a venture capital strategy;\n\n(2) Prior to December 31, 2010, has sold securities to one or more investors that are not related persons, as defined in \u00a7 275.206(4)-2(d)(7), of any investment adviser of the private fund; and\n\n(3) Does not sell any securities to (including accepting any committed capital from) any person after July 21, 2011.\n\n(c)  Definitions.  For purposes of this section:\n\n(1)  Committed capital  means any commitment pursuant to which a person is obligated to:\n\n(i) Acquire an interest in the private fund; or\n\n(ii) Make capital contributions to the private fund.\n\n(2)  Equity security  has the same meaning as in section 3(a)(11) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(11)) and \u00a7 240.3a11-1 of this chapter.\n\n(3)  Qualifying investment  means:\n\n(i) An equity security issued by a qualifying portfolio company that has been acquired directly by the private fund from the qualifying portfolio company;\n\n(ii) Any equity security issued by a qualifying portfolio company in exchange for an equity security issued by the qualifying portfolio company described in paragraph (c)(3)(i) of this section; or\n\n(iii) Any equity security issued by a company of which a qualifying portfolio company is a majority-owned subsidiary, as defined in section 2(a)(24) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(24)), or a predecessor, and is acquired by the private fund in exchange for an  equity security  described in paragraph (c)(3)(i) or (c)(3)(ii) of this section.\n\n(4)  Qualifying portfolio company  means any company that:\n\n(i) At the time of any investment by the private fund, is not reporting or foreign traded and does not control, is not controlled by or under common control with another company, directly or indirectly, that is reporting or foreign traded;\n\n(ii) Does not borrow or issue debt obligations in connection with the private fund's investment in such company and distribute to the private fund the proceeds of such borrowing or issuance in exchange for the private fund's investment; and\n\n(iii) Is not an investment company, a private fund, an issuer that would be an investment company but for the exemption provided by \u00a7 270.3a-7 of this chapter, or a commodity pool.\n\n(5)  Reporting or foreign traded  means, with respect to a company, being subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), or having a security listed or traded on any exchange or organized market operating in a foreign jurisdiction.\n\n(6)  Short-term holdings  means cash and cash equivalents, as defined in \u00a7 270.2a51-1(b)(7)(i) of this chapter, U.S. Treasuries with a remaining maturity of 60 days or less, and shares of an open-end management investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8) that is regulated as a money market fund under \u00a7 270.2a-7 of this chapter.\n\nFor purposes of this section, an investment adviser may treat as a private fund any issuer formed under the laws of a jurisdiction other than the United States that has not offered or sold its securities in the United States or to U.S. persons in a manner inconsistent with being a private fund, provided that the adviser treats the issuer as a private fund under the Act (15 U.S.C. 80b) and the rules thereunder for all purposes."], ["17:17:5.0.1.1.22.0.36.14", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203(m)-1 Private fund adviser exemption.", "SEC", "", "", "[76 FR 39703, July 6, 2011, as amended at 83 FR 1302, Jan. 11, 2018; 85 FR 13741, Mar. 10, 2020]", "(a)  United States investment advisers.  For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business in the United States is exempt from the requirement to register under section 203 of the Act if the investment adviser:\n\n(1) Acts solely as an investment adviser to one or more qualifying private funds; and\n\n(2) Manages private fund assets of less than $150 million.\n\n(b)  Non-United States investment advisers.  For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business outside of the United States is exempt from the requirement to register under section 203 of the Act if:\n\n(1) The investment adviser has no client that is a United States person except for one or more qualifying private funds; and\n\n(2) All assets managed by the investment adviser at a place of business in the United States are solely attributable to private fund assets, the total value of which is less than $150 million.\n\n(c)  Frequency of Calculations.  For purposes of this section, calculate private fund assets annually, in accordance with General Instruction 15 to Form ADV (\u00a7 279.1 of this chapter).\n\n(d)  Definitions.  For purposes of this section:\n\n(1)  Assets under management  means the regulatory assets under management as determined under Item 5.F of Form ADV (\u00a7 279.1 of this chapter), except the following shall be excluded from the definition of assets under management for purposes of this section:\n\n(i) The regulatory assets under management attributable to a private fund that is an entity described in subparagraph (A), (B), or (C) of section 203(b)(7) of the Act (15 U.S.C. 80b- 3(b)(7)) (other than an entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-53)); and\n\n(ii) The regulatory assets under management attributable to a private fund that is an entity described in subparagraph (A) or (B) of section 203(b)(8) of the Act (15 U.S.C. 80b-3(b)(8)) (other than an entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-53).\n\n(2)  Place of business  has the same meaning as in \u00a7 275.222-1(a).\n\n(3)  Principal office and place of business  of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser.\n\n(4)  Private fund assets  means the investment adviser's assets under management attributable to a qualifying private fund.\n\n(5)  Qualifying private fund  means any private fund that is not registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8) and has not elected to be treated as a business development company pursuant to section 54 of that Act (15 U.S.C. 80a-53). For purposes of this section, an investment adviser may treat as a private fund an issuer that qualifies for an exclusion from the definition of an \u201cinvestment company,\u201d as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), in addition to those provided by section 3(c)(1) or 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or 15 U.S.C. 80a-3(c)(7)), provided that the investment adviser treats the issuer as a private fund under the Act (15 U.S.C. 80b) and the rules thereunder for all purposes.\n\n(6)  Related person  has the same meaning as in \u00a7 275.206(4)-2(d)(7).\n\n(7)  United States  has the same meaning as in \u00a7 230.902(l) of this chapter.\n\n(8)  United States person  means any person that is a U.S. person as defined in \u00a7 230.902(k) of this chapter, except that any discretionary account or similar account that is held for the benefit of a United States person by a dealer or other professional fiduciary is a United States person if the dealer or professional fiduciary is a related person of the investment adviser relying on this section and is not organized, incorporated, or (if an individual) resident in the United States.\n\nA client will not be considered a United States person if the client was not a United States person at the time of becoming a client."], ["17:17:5.0.1.1.22.0.36.15", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203A-1 Eligibility for SEC registration; Switching to or from SEC registration.", "SEC", "", "", "[76 FR 43011, July 19, 2011]", "(a)  Eligibility for SEC registration of mid-sized investment advisers.  If you are an investment adviser described in section 203A(a)(2)(B) of the Act (15 U.S.C. 80b-3a(a)(2)(B)):\n\n(1)  Threshold for SEC registration and registration buffer.  You may, but are not required to register with the Commission if you have assets under management of at least $100,000,000 but less than $110,000,000, and you need not withdraw your registration unless you have less than $90,000,000 of assets under management.\n\n(2)  Exceptions.  This paragraph (a) does not apply if:\n\n(i) You are an investment adviser to an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a) or to a company which has elected to be a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-54), and has not withdrawn the election; or\n\n(ii) You are eligible for an exemption described in \u00a7 275.203A-2 of this chapter.\n\n(b)  Switching to or from SEC registration \u2014(1)  State-registered advisers\u2014switching to SEC registration.  If you are registered with a state securities authority, you must apply for registration with the Commission within 90 days of filing an annual updating amendment to your Form ADV reporting that you are eligible for SEC registration and are not relying on an exemption from registration under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)).\n\n(2)  SEC-registered advisers\u2014switching to State registration.  If you are registered with the Commission and file an annual updating amendment to your Form ADV reporting that you are not eligible for SEC registration and are not relying on an exemption from registration under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)), you must file Form ADV-W (17 CFR 279.2) to withdraw your SEC registration within 180 days of your fiscal year end (unless you then are eligible for SEC registration). During this period while you are registered with both the Commission and one or more state securities authorities, the Act and applicable State law will apply to your advisory activities."], ["17:17:5.0.1.1.22.0.36.16", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203A-2 Exemptions from prohibition on Commission registration.", "SEC", "", "", "[62 FR 28133, May 22, 1997, as amended at 63 FR 39715, 39716, July 24, 1998; 65 FR 57450, Sept. 22, 2000; 67 FR 77625, Dec. 18, 2003; 76 FR 43012, July 19, 2011; 89 FR 24712, Apr. 9, 2024]", "The prohibition of section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) does not apply to:\n\n(a)  Pension consultants.  (1) An investment adviser that is a \u201cpension consultant,\u201d as defined in this section, with respect to assets of plans having an aggregate value of at least $200,000,000.\n\n(2) An investment adviser is a pension consultant, for purposes of paragraph (a) of this section, if the investment adviser provides investment advice to:\n\n(i) Any employee benefit plan described in section 3(3) of the Employee Retirement Income Security Act of 1974 (\u201cERISA\u201d) [29 U.S.C. 1002(3)];\n\n(ii) Any governmental plan described in section 3(32) of ERISA (29 U.S.C. 1002(32)); or\n\n(iii) Any church plan described in section 3(33) of ERISA (29 U.S.C. 1002(33)).\n\n(3) In determining the aggregate value of assets of plans, include only that portion of a plan's assets for which the investment adviser provided investment advice (including any advice with respect to the selection of an investment adviser to manage such assets). Determine the aggregate value of assets by cumulating the value of assets of plans with respect to which the investment adviser was last employed or retained by contract to provide investment advice during a 12-month period ended within 90 days of filing an annual updating amendment to Form ADV (17 CFR 279.1).\n\n(b)  Investment advisers controlling, controlled by, or under common control with an investment adviser registered with the Commission.  An investment adviser that controls, is controlled by, or is under common control with, an investment adviser eligible to register, and registered with, the Commission (\u201cregistered adviser\u201d), provided that the principal office and place of business of the investment adviser is the same as that of the registered adviser. For purposes of this paragraph, control means the power to direct or cause the direction of the management or policies of an investment adviser, whether through ownership of securities, by contract, or otherwise. Any person that directly or indirectly has the right to vote 25 percent or more of the voting securities, or is entitled to 25 percent or more of the profits, of an investment adviser is presumed to control that investment adviser.\n\n(c)  Investment advisers expecting to be eligible for Commission registration within 120 Days.  An investment adviser that:\n\n(1) Immediately before it registers with the Commission, is not registered or required to be registered with the Commission or a state securities authority of any State and has a reasonable expectation that it would be eligible to register with the Commission within 120 days after the date the investment adviser's registration with the Commission becomes effective;\n\n(2) Indicates on Schedule D of its Form ADV (17 CFR 279.1) that it will withdraw from registration with the Commission if, on the 120th day after the date the investment adviser's registration with the Commission becomes effective, the investment adviser would be prohibited by section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) from registering with the Commission; and\n\n(3) Notwithstanding \u00a7 275.203A-1(b)(2) of this chapter, files a completed Form ADV-W (17 CFR 279.2) withdrawing from registration with the Commission within 120 days after the date the investment adviser's registration with the Commission becomes effective.\n\n(d)  Multi-state investment advisers.  An investment adviser that:\n\n(1) Upon submission of its application for registration with the Commission, is required by the laws of 15 or more States to register as an investment adviser with the state securities authority in the respective States, and thereafter would, but for this section, be required by the laws of at least 15 States to register as an investment adviser with the state securities authority in the respective States;\n\n(2) Elects to rely on paragraph (d) of this section by:\n\n(i) Indicating on Schedule D of its Form ADV that the investment adviser has reviewed the applicable State and federal laws and has concluded that, in the case of an application for registration with the Commission, it is required by the laws of 15 or more States to register as an investment adviser with the state securities authorities in the respective States or, in the case of an amendment to Form ADV, it would be required by the laws of at least 15 States to register as an investment adviser with the state securities authorities in the respective States, within 90 days prior to the date of filing Form ADV; and\n\n(ii) Undertaking on Schedule D of its Form ADV to withdraw from registration with the Commission if the adviser indicates on an annual updating amendment to Form ADV that the investment adviser would be required by the laws of fewer than 15 States to register as an investment adviser with the state securities authority in the respective States, and that the investment adviser would be prohibited by section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) from registering with the Commission, by filing a completed Form ADV-W within 180 days of the adviser's fiscal year end (unless the adviser then is eligible for SEC registration); and\n\n(3) Maintains in an easily accessible place a record of the States in which the investment adviser has determined it would, but for the exemption, be required to register for a period of not less than five years from the filing of a Form ADV that includes a representation that is based on such record.\n\n(e)  Internet investment advisers.  (1) An investment adviser that:\n\n(i) Provides investment advice to all of its clients exclusively through an operational interactive website at all times during which the investment adviser relies on this paragraph (e);\n\n(ii) Maintains, in an easily accessible place, for a period of not less than five years from the filing of a Form ADV that includes a representation that the adviser is eligible to register with the Commission under this paragraph (e), a record demonstrating that it provides investment advice to its clients exclusively through an operational interactive website in accordance with the limits in paragraph (e)(1)(i) of this section; and\n\n(iii) Does not control, is not controlled by, and is not under common control with, another investment adviser that registers with the Commission under paragraph (b) of this section solely in reliance on the adviser registered under this paragraph (e) as its registered adviser.\n\n(2) For purposes of this paragraph (e), \u201coperational interactive website\u201d means a website, mobile application, or similar digital platform through which the investment adviser provides digital investment advisory services on an ongoing basis to more than one client (except during temporary technological outages of a  de minimis  duration). For purposes of this rule, \u201cdigital investment advisory service\u201d is investment advice to clients that is generated by the operational interactive website's software-based models, algorithms, or applications based on personal information each client supplies through the operational interactive website.\n\n(3) An investment adviser may rely on the definition of  client  in \u00a7 275.202(a)(30)-1 in determining whether it is eligible to rely on this paragraph (e)."], ["17:17:5.0.1.1.22.0.36.17", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.203A-3 Definitions.", "SEC", "", "", "[62 FR 28134, May 22, 1997, as amended at 63 FR 39715, July 24, 1998; 69 FR 72088, Dec. 10, 2004; 76 FR 43012, July 19, 2011]", "For purposes of section 203A of the Act (15 U.S.C. 80b-3a) and the rules thereunder:\n\n(a)(1)  Investment adviser representative.  \u201cInvestment adviser representative\u201d of an investment adviser means a supervised person of the investment adviser:\n\n(i) Who has more than five clients who are natural persons (other than excepted persons described in paragraph (a)(3)(i) of this section); and\n\n(ii) More than ten percent of whose clients are natural persons (other than excepted persons described in paragraph (a)(3)(i) of this section).\n\n(2) Notwithstanding paragraph (a)(1) of this section, a supervised person is not an investment adviser representative if the supervised person:\n\n(i) Does not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment adviser; or\n\n(ii) Provides only impersonal investment advice.\n\n(3) For purposes of this section:\n\n(i) \u201cExcepted person\u201d means a natural person who is a qualified client as described in \u00a7 275.205-3(d)(1).\n\n(ii) \u201cImpersonal investment advice\u201d means investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts.\n\n(4) Supervised persons may rely on the definition of \u201cclient\u201d in \u00a7 275.202(a)(30)-1 to identify clients for purposes of paragraph (a)(1) of this section, except that supervised persons need not count clients that are not residents of the United States.\n\n(b)  Place of business.  \u201cPlace of business\u201d of an investment adviser representative means:\n\n(1) An office at which the investment adviser representative regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients; and\n\n(2) Any other location that is held out to the general public as a location at which the investment adviser representative provides investment advisory services, solicits, meets with, or otherwise communicates with clients.\n\n(c)  Principal office and place of business.  \u201cPrincipal office and place of business\u201d of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser.\n\n(d)  Assets under management.  Determine \u201cassets under management\u201d by calculating the securities portfolios with respect to which an investment adviser provides continuous and regular supervisory or management services as reported on the investment adviser's Form ADV (17 CFR 279.1).\n\n(e)  State securities authority.  \u201cState securities authority\u201d means the securities commissioner or commission (or any agency, office or officer performing like functions) of any State."], ["17:17:5.0.1.1.22.0.36.18", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7\u00a7 275.203A-4--275.203A-6 [Reserved]", "SEC", "", "", "", ""], ["17:17:5.0.1.1.22.0.36.19", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204-1 Amendments to Form ADV.", "SEC", "", "", "[65 FR 57450, Sept. 22, 2000; 65 FR 81738, Dec. 27, 2000, as amended at 68 FR 42248, July 17, 2003; 73 FR 4694, Jan. 28, 2008; 75 FR 49267, Aug. 12, 2010; 76 FR 43013, July 19, 2011; 81 FR 60458, Sept. 1, 2016; 84 FR 33630, July 12, 2019]", "(a)  When amendment is required.  You must amend your Form ADV (17 CFR 279.1):\n\n(1) Parts 1 and 2:\n\n(i) At least annually, within 90 days of the end of your fiscal year; and\n\n(ii) More frequently, if required by the instructions to Form ADV.\n\n(2) Part 3 at the frequency required by the instructions to Form ADV.\n\n(b)  Electronic filing of amendments.  (1) Subject to paragraph (c) of this section, you must file all amendments to Part 1A, Part 2A, and Part 3 of Form ADV electronically with the IARD, unless you have received a continuing hardship exemption under \u00a7 275.203-3. You are not required to file with the Commission amendments to brochure supplements required by Part 2B of Form ADV.\n\n(2) If you have received a continuing hardship exemption under \u00a7 275.203-3, you must, when you are required to amend your Form ADV, file a completed Part 1A, Part 2A and Part 3 of Form ADV on paper with the SEC by mailing it to FINRA.\n\n(c)  Filing fees.  You must pay FINRA (the operator of the IARD) an initial filing fee when you first electronically file Part 1A of Form ADV. After you pay the initial filing fee, you must pay an annual filing fee each time you file your annual updating amendment. No portion of either fee is refundable. The Commission has approved the filing fees. Your amended Form ADV will not be accepted by FINRA, and thus will not be considered filed with the Commission, until you have paid the filing fee.\n\n(d)  Amendments to Form ADV are reports.  Each amendment required to be filed under this section is a \u201creport\u201d within the meaning of sections 204 and 207 of the Act (15 U.S.C. 80b-4 and 80b-7).\n\n(e)  Transition to Filing Form CRS.  If you are registered with the Commission or have an application for registration pending with the Commission prior to June 30, 2020, you must amend your Form ADV by electronically filing with IARD your initial Form CRS that satisfies the requirements of Part 3 of Form ADV (as amended effective September 30, 2019) beginning on May 1, 2020 and by no later than June 30, 2020.\n\nThis note applies to paragraphs (a), (b), and (e) of this section. Information on how to file with the IARD is available on our website at  http://www.sec.gov/iard.  For the annual updating amendment: Summaries of material changes that are not included in the adviser's brochure must be filed with the Commission as an exhibit to Part 2A in the same electronic file; and if you are not required to prepare a brochure, a summary of material changes, an annual updating amendment to your brochure, or Form CRS you are not required to file them with the Commission. See the instructions for Part 2A and Part 3 of Form ADV."], ["17:17:5.0.1.1.22.0.36.2", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.0-3 References to rules and regulations.", "SEC", "", "", "[30 FR 4129, Mar. 30, 1965]", "The term  rules and regulations  refers to all rules and regulations adopted by the Commission pursuant to the Act, including the forms for registration and reports and the accompanying instructions thereto."], ["17:17:5.0.1.1.22.0.36.20", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204-2 Books and records to be maintained by investment advisers.", "SEC", "", "", "[26 FR 5002, June 6, 1961]", "(a) Every investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3) shall make and keep true, accurate and current the following books and records relating to its investment advisory business;\n\n(1) 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.\n\n(2) General and auxiliary ledgers (or other comparable records) reflecting asset, liability, reserve, capital, income and expense accounts.\n\n(3) A memorandum of each order given by the investment adviser for the purchase or sale of any security, of any instruction received by the investment adviser concerning the purchase, sale, receipt or delivery of a particular security, and of any modification or cancellation of any such order or instruction. Such 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 such order; and shall show the account for which entered, the date of entry, and the bank, broker or dealer by or through whom executed where appropriate. Orders entered pursuant to the exercise of discretionary power shall be so designated.\n\n(4) All check books, bank statements, cancelled checks and cash reconciliations of the investment adviser.\n\n(5) All bills or statements (or copies thereof), paid or unpaid, relating to the business of the investment adviser as such.\n\n(6) All trial balances, financial statements, and internal audit working papers relating to the business of such investment adviser.\n\n(7) Originals of all written communications received and copies of all written communications sent by such investment adviser relating to:\n\n(i) Any recommendation made or proposed to be made and any advice given or proposed to be given;\n\n(ii) Any receipt, disbursement or delivery of funds or securities;\n\n(iii) The placing or execution of any order to purchase or sell any security; and, for any transaction that is subject to the requirements of \u00a7 240.15c6-2(a) of this chapter, each confirmation received, and any allocation and each affirmation sent or received, with a date and time stamp for each allocation and affirmation that indicates when the allocation and affirmation was sent or received;\n\n(iv) Predecessor performance (as defined in \u00a7 275.206(4)-1(e)(12) of this chapter) and the performance or rate of return of any or all managed accounts, portfolios (as defined in \u00a7 275.206(4)-1(e)(11) of this chapter), or securities recommendations; Provided, however:\n\n(A) That the investment adviser shall not be required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser; and\n\n(B) That if the investment adviser sends any notice, circular, or other advertisement (as defined in \u00a7 275.206(4)-1(e)(1) of this chapter) offering any report, analysis, publication or other investment advisory service to more than ten persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent; except that if such notice, circular, or advertisement is distributed to persons named on any list, the investment adviser shall retain with the copy of such notice, circular, or advertisement a memorandum describing the list and the source thereof.\n\n(8) A list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of any client.\n\n(9) All powers of attorney and other evidences of the granting of any discretionary authority by any client to the investment adviser, or copies thereof.\n\n(10) All written agreements (or copies thereof) entered into by the investment adviser with any client or otherwise relating to the business of such investment adviser as such.\n\n(11)(i) A copy of each\n\n(A) Advertisement (as defined in \u00a7 275.206(4)-1(e)(1) of this chapter) that the investment adviser disseminates, directly or indirectly, except:\n\n( 1 ) For oral advertisements, the adviser may instead retain a copy of any written or recorded materials used by the adviser in connection with the oral advertisement; and\n\n( 2 ) For compensated oral testimonials and endorsements (as defined in \u00a7 275.206(4)-1(e)(17) and (5) of this chapter), the adviser may instead make and keep a record of the disclosures provided to clients or investors pursuant to \u00a7 275.206(4)-1(b)(1) of this chapter; and\n\n(B) Notice, circular, newspaper article, investment letter, bulletin, or other communication that the investment adviser disseminates, directly or indirectly, to ten or more persons (other than persons associated with such investment adviser); and\n\n(C) If such notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication recommends the purchase or sale of a specific security and does not state the reasons for such recommendation, a memorandum of the investment adviser indicating the reasons therefor; and\n\n(ii) A copy of any questionnaire or survey used in the preparation of a third-party rating included or appearing in any advertisement in the event the adviser obtains a copy of the questionnaire or survey.\n\n(12)(i) A copy of the investment adviser's code of ethics adopted and implemented pursuant to \u00a7 275.204A-1 that is in effect, or at any time within the past five years was in effect;\n\n(ii) A record of any violation of the code of ethics, and of any action taken as a result of the violation; and\n\n(iii) A record of all written acknowledgments as required by \u00a7 275.204A-1(a)(5) for each person who is currently, or within the past five years was, a supervised person of the investment adviser.\n\n(13)(i) A record of each report made by an access person as required by \u00a7 275.204A-1(b), including any information provided under paragraph (b)(3)(iii) of that section in lieu of such reports;\n\n(ii) A record of the names of persons who are currently, or within the past five years were, access persons of the investment adviser; and\n\n(iii) A record of any decision, and the reasons supporting the decision, to approve the acquisition of securities by access persons under \u00a7 275.204A-1(c), for at least five years after the end of the fiscal year in which the approval is granted.\n\n(14)(i) A copy of each brochure, brochure supplement and Form CRS, and each amendment or revision to the brochure, brochure supplement and Form CRS, that satisfies the requirements of Part 2 or Part 3 of Form ADV, as applicable [17 CFR 279.1]; any summary of material changes that satisfies the requirements of Part 2 of Form ADV but is not contained in the brochure; and a record of the dates that each brochure, brochure supplement and Form CRS, each amendment or revision thereto, and each summary of material changes not contained in a brochure given to any client or to any prospective client who subsequently becomes a client.\n\n(ii) Documentation describing the method used to compute managed assets for purposes of Item 4.E of Part 2A of Form ADV, if the method differs from the method used to compute regulatory assets under management in Item 5.F of Part 1A of Form ADV.\n\n(iii) A memorandum describing any legal or disciplinary event listed in Item 9 of Part 2A or Item 3 of Part 2B (Disciplinary Information) and presumed to be material, if the event involved the investment adviser or any of its supervised persons and is not disclosed in the brochure or brochure supplement described in paragraph (a)(14)(i) of this section. The memorandum must explain the investment adviser's determination that the presumption of materiality is overcome, and must discuss the factors described in Item 9 of Part 2A of Form ADV or Item 3 of Part 2B of Form ADV.\n\n(15)(i) If not included in the advertisement, a record of the disclosures provided to clients or investors pursuant to \u00a7 275.206(4)-1(b)(1)(ii) and (iii) of this chapter;\n\n(ii) Documentation substantiating the adviser's reasonable basis for believing that a testimonial or endorsement (as defined in \u00a7 275.206(4)-1(e)(17) and (5) of this chapter) complies with \u00a7 275.206(4)-1 and that the third-party rating (as defined in \u00a7 275.206(4)-1(e)(18) of this chapter) complies with \u00a7 275.206(4)-1(c)(1) of this chapter; and\n\n(iii) A record of the names of all persons who are an investment adviser's partners, officers, directors, or employees, or a person that controls, is controlled by, or is under common control with the investment adviser, or is a partner, officer, director or employee of such a person pursuant to \u00a7 275.206(4)-1(b)(4)(ii) of this chapter.\n\n(16) All accounts, books, internal working papers, and any other records or documents that are necessary to form the basis for or demonstrate the calculation of any performance or rate of return of any or all managed accounts, portfolios (as defined in \u00a7 275.206(4)-1(e)(11) of this chapter), or securities recommendations presented in any notice, circular, advertisement (as defined in \u00a7 275.206(4)-1(e)(1) of this chapter), newspaper article, investment letter, bulletin, or other communication that the investment adviser disseminates, directly or indirectly, to any person (other than persons associated with such investment adviser), including copies of all information provided or offered pursuant to \u00a7 275.206(4)-1(d)(6) of this chapter; provided, however, that, 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 or investor'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 deemed to satisfy the requirements of this paragraph.\n\n(17)(i) A copy of the investment adviser's policies and procedures formulated pursuant to \u00a7 275.206(4)-7(a) of this chapter that are in effect, or at any time within the past five years were in effect;\n\n(ii) Any records documenting the investment adviser's annual review of those policies and procedures conducted pursuant to \u00a7 275.206(4)-7(b) of this chapter;\n\n(iii) A copy of any internal control report obtained or received pursuant to \u00a7 275.206(4)-2(a)(6)(ii).\n\n(18)(i) Books and records that pertain to \u00a7 275.206(4)-5 containing a list or other record of:\n\n(A) The names, titles and business and residence addresses of all covered associates of the investment adviser;\n\n(B) All government entities to which the investment adviser provides or has provided investment advisory services, or which are or were investors in any covered investment pool to which the investment adviser provides or has provided investment advisory services, as applicable, in the past five years, but not prior to September 13, 2010;\n\n(C) All direct or indirect contributions made by the investment adviser or any of its covered associates to an official of a government entity, or direct or indirect payments to a political party of a State or political subdivision thereof, or to a political action committee; and\n\n(D) The name and business address of each regulated person to whom the investment adviser provides or agrees to provide, directly or indirectly, payment to solicit a government entity for investment advisory services on its behalf, in accordance with \u00a7 275.206(4)-5(a)(2).\n\n(ii) Records relating to the contributions and payments referred to in paragraph (a)(18)(i)(C) of this section must be listed in chronological order and indicate:\n\n(A) The name and title of each contributor;\n\n(B) The name and title (including any city/county/State or other political subdivision) of each recipient of a contribution or payment;\n\n(C) The amount and date of each contribution or payment; and\n\n(D) Whether any such contribution was the subject of the exception for certain returned contributions pursuant to \u00a7 275.206(4)-5(b)(2).\n\n(iii) An investment adviser is only required to make and keep current the records referred to in paragraphs (a)(18)(i)(A) and (C) of this section if it provides investment advisory services to a government entity or a government entity is an investor in any covered investment pool to which the investment adviser provides investment advisory services.\n\n(iv) For purposes of this section, the terms \u201ccontribution,\u201d \u201ccovered associate,\u201d \u201ccovered investment pool,\u201d \u201cgovernment entity,\u201d \u201cofficial,\u201d \u201cpayment,\u201d \u201cregulated person,\u201d and \u201csolicit\u201d have the same meanings as set forth in \u00a7 275.206(4)-5.\n\n(19) A record of who the \u201cintended audience\u201d is pursuant to \u00a7 275.206(4)-1(d)(6) and(e)(10)(ii)(B) of this chapter.\n\n(20) - (24) [Reserved]\n\n(25)(i) The written policies and procedures required to be adopted and implemented pursuant to \u00a7 248.30(a)(1);\n\n(ii) The written documentation of any detected unauthorized access to or use of customer information, as well as any response to, and recovery from such unauthorized access to or use of customer information required by \u00a7 248.30(a)(3) of this chapter;\n\n(iii) The written documentation of any investigation and determination made regarding whether notification is required pursuant to \u00a7 248.30(a)(4) of this chapter, including the basis for any determination made, any written documentation from the United States Attorney General related to a delay in notice, as well as a copy of any notice transmitted following such determination;\n\n(iv) The written policies and procedures required to be adopted and implemented pursuant to \u00a7 248.30(a)(5)(i) of this chapter;\n\n(v) The written documentation of any contract or agreement entered into pursuant to \u00a7 248.30(a)(5) of this chapter; and\n\n(vi) The written policies and procedures required to be adopted and implemented pursuant to \u00a7 248.30(b)(2) of this chapter.\n\n(b) If an investment adviser subject to paragraph (a) of this section has custody or possession of securities or funds of any client, the records required to be made and kept under paragraph (a) of this section shall include:\n\n(1) A journal or other record showing all purchases, sales, receipts and deliveries of securities (including certificate numbers) for such accounts and all other debits and credits to such accounts.\n\n(2) A separate ledger account for each such client showing all purchases, sales, receipts and deliveries of securities, the date and price of each purchase and sale, and all debits and credits.\n\n(3) Copies of confirmations of all transactions effected by or for the account of any such client.\n\n(4) A record for each security in which any such client has a position, which record shall show the name of each such client having any interest in such security, the amount or interest of each such client, and the location of each such security.\n\n(5) A memorandum describing the basis upon which you have determined that the presumption that any related person is not operationally independent under \u00a7 275.206(4)-2(d)(5) has been overcome.\n\n(c)(1) Every investment adviser subject to paragraph (a) of this section who renders any investment supervisory or management service to any client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, make and keep true, accurate and current:\n\n(i) Records showing separately for each such client the securities purchased and sold, and the date, amount and price of each such purchase and sale.\n\n(ii) For each security in which any such client has a current position, information from which the investment adviser can promptly furnish the name of each such client, and the current amount or interest of such client.\n\n(2) Every investment adviser subject to paragraph (a) of this section that exercises voting authority with respect to client securities shall, with respect to those clients, make and retain the following:\n\n(i) Copies of all policies and procedures required by \u00a7 275.206(4)-6.\n\n(ii) A copy of each proxy statement that the investment adviser receives regarding client securities. An investment adviser may satisfy this requirement by relying on a third party to make and retain, on the investment adviser's behalf, a copy of a proxy statement (provided that the adviser has obtained an undertaking from the third party to provide a copy of the proxy statement promptly upon request) or may rely on obtaining a copy of a proxy statement from the Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.\n\n(iii) A record of each vote cast by the investment adviser on behalf of a client. An investment adviser may satisfy this requirement by relying on a third party to make and retain, on the investment adviser's behalf, a record of the vote cast (provided that the adviser has obtained an undertaking from the third party to provide a copy of the record promptly upon request).\n\n(iv) A copy of any document created by the adviser that was material to making a decision how to vote proxies on behalf of a client or that memorializes the basis for that decision.\n\n(v) A copy of each written client request for information on how the adviser voted proxies on behalf of the client, and a copy of any written response by the investment adviser to any (written or oral) client request for information on how the adviser voted proxies on behalf of the requesting client.\n\n(d) Any books or records required by this section may be maintained by the investment adviser in such manner that the identity of any client to whom such investment adviser renders investment supervisory services is indicated by numerical or alphabetical code or some similar designation.\n\n(e)(1) All books and records required to be made under the provisions of paragraphs (a) to (c)(1)(i), inclusive, and (c)(2) of this section (except for books and records required to be made under the provisions of paragraphs (a)(11), (a)(12)(i), (a)(12)(iii), (a)(13)(ii), (a)(13)(iii), (a)(16), and (a)(17)(i) of this section), shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the investment adviser.\n\n(2) Partnership articles and any amendments thereto, 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 three years after termination of the enterprise.\n\n(3)(i) Books and records required to be made under the provisions of paragraphs (a)(11) and (a)(16) of this rule shall be maintained and preserved in an easily accessible place for a period of not less than five years, the first two 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.\n\n(ii)  Transition rule.  If you are an investment adviser that was, prior to July 21, 2011, exempt from registration under section 203(b)(3) of the Act (15 U.S.C. 80b-3(b)(3)), as in effect on July 20, 2011, paragraph (e)(3)(i) of this section does not require you to maintain or preserve books and records that would otherwise be required to be maintained or preserved under the provisions of paragraph (a)(16) of this section to the extent those books and records pertain to the performance or rate of return of such private fund (as defined in section 202(a)(29) of the Act (15 U.S.C. 80b-2(a)(29)), or other account you advise for any period ended prior to your registration, provided that you continue to preserve any books and records in your possession that pertain to the performance or rate of return of such private fund or other account for such period.\n\n(f) An investment adviser subject to paragraph (a) of this section, before ceasing to conduct or discontinuing business as an investment adviser shall arrange for and be responsible for the preservation of the books and records required to be maintained and preserved under this section for the remainder of the period specified in this section, and shall notify the Commission in writing, at its principal office, Washington, D.C. 20549, of the exact address where such books and records will be maintained during such period.\n\n(g)  Micrographic and electronic storage permitted \u2014(1)  General.  The records required to be maintained and preserved pursuant to this part may be maintained and preserved for the required time by an investment adviser on:\n\n(i) Micrographic media, including microfilm, microfiche, or any similar medium; or\n\n(ii) Electronic storage media, including any digital storage medium or system that meets the terms of this section.\n\n(2)  General requirements.  The investment adviser must:\n\n(i) Arrange and index the records in a way that permits easy location, access, and retrieval of any particular record;\n\n(ii) Provide promptly any of the following that the Commission (by its examiners or other representatives) may request:\n\n(A) A legible, true, and complete copy of the record in the medium and format in which it is stored;\n\n(B) A legible, true, and complete printout of the record; and\n\n(C) Means to access, view, and print the records; and\n\n(iii) Separately store, for the time required for preservation of the original record, a duplicate copy of the record on any medium allowed by this section.\n\n(3)  Special requirements for electronic storage media.  In the case of records on electronic storage media, the investment adviser must establish and maintain procedures:\n\n(i) To maintain and preserve the records, so as to reasonably safeguard them from loss, alteration, or destruction;\n\n(ii) To limit access to the records to properly authorized personnel and the Commission (including its examiners and other representatives); and\n\n(iii) To reasonably ensure that any reproduction of a non-electronic original record on electronic storage media is complete, true, and legible when retrieved.\n\n(h)(1) Any book or other record made, kept, maintained and preserved in compliance with \u00a7\u00a7 240.17a-3 and 240.17a-4 of this chapter under the Securities Exchange Act of 1934, or with rules adopted by the Municipal Securities Rulemaking Board, which is substantially the same as the book or other record required to be made, kept, maintained and preserved under this section, shall be deemed to be made, kept, maintained and preserved in compliance with this section.\n\n(2) A record made and kept pursuant to any provision of paragraph (a) of this section, which contains all the information required under any other provision of paragraph (a) of this section, need not be maintained in duplicate in order to meet the requirements of the other provision of paragraph (a) of this section.\n\n(i) As used in this section the term \u201cdiscretionary power\u201d shall not include discretion as to the price at which or the time when a transaction is or is to be effected, if, before the order is given by the investment adviser, the client has directed or approved the purchase or sale of a definite amount of the particular security.\n\n(j)(1) Except as provided in paragraph (j)(3) of this section, each non-resident investment adviser registered or applying for registration pursuant to section 203 of the Act shall keep, maintain and preserve, at a place within the United States designated in a notice from him as provided in paragraph (j)(2) of this section true, correct, complete and current copies of books and records which he is required to make, keep current, maintain or preserve pursuant to any provisions of any rule or regulation of the Commission adopted under the Act.\n\n(2) Except as provided in paragraph (j)(3) of this section, each nonresident investment adviser subject to this paragraph (j) shall furnish to the Commission a written notice specifying the address of the place within the United States where the copies of the books and records required to be kept and preserved by him pursuant to paragraph (j)(1) of this section are located. Each non-resident investment adviser registered or applying for registration when this paragraph becomes effective shall file such notice within 30 days after such rule becomes effective. Each non-resident investment adviser who files an application for registration after this paragraph becomes effective shall file such notice with such application for registration.\n\n(3) Notwithstanding the provisions of paragraphs (j)(1) and (2) of this section, a non-resident investment adviser need not keep or preserve within the United States copies of the books and records referred to in said paragraphs (j)(1) and (2), if:\n\n(i) Such non-resident investment adviser files with the Commission, at the time or within the period provided by paragraph (j)(2) of this section, a written undertaking, in form acceptable to the Commission and signed by a duly authorized person, to furnish to the Commission, upon demand, at its principal office in Washington, DC, or at any Regional Office of the Commission designated in such demand, true, correct, complete and current copies of any or all of the books and records which he is required to make, keep current, maintain or preserve pursuant to any provision of any rule or regulation of the Commission adopted under the Act, or any part of such books and records which may be specified in such demand. Such undertaking shall be in substantially the following form:\n\nThe undersigned hereby undertakes to furnish at its own expense to the Securities and Exchange Commission at its principal office in Washington, DC or at any Regional Office of said Commission specified in a demand for copies of books and records made by or on behalf of said Commission, true, correct, complete and current copies of any or all, or any part, of the books and records which the undersigned is required to make, keep current or preserve pursuant to any provision of any rule or regulation of the Securities and Exchange Commission under the Investment Advisers Act of 1940. This undertaking shall be suspended during any period when the undersigned is making, keeping current, and preserving copies of all of said books and records at a place within the United States in compliance with Rule 204-2(j) under the Investment Advisers Act of 1940. This undertaking shall be binding upon the undersigned and the heirs, successors and assigns of the undersigned, and the written irrevocable consents and powers of attorney of the undersigned, its general partners and managing agents filed with the Securities and Exchange Commission shall extend to and cover any action to enforce same.\n\nThe undersigned hereby undertakes to furnish at its own expense to the Securities and Exchange Commission at its principal office in Washington, DC or at any Regional Office of said Commission specified in a demand for copies of books and records made by or on behalf of said Commission, true, correct, complete and current copies of any or all, or any part, of the books and records which the undersigned is required to make, keep current or preserve pursuant to any provision of any rule or regulation of the Securities and Exchange Commission under the Investment Advisers Act of 1940. This undertaking shall be suspended during any period when the undersigned is making, keeping current, and preserving copies of all of said books and records at a place within the United States in compliance with Rule 204-2(j) under the Investment Advisers Act of 1940. This undertaking shall be binding upon the undersigned and the heirs, successors and assigns of the undersigned, and the written irrevocable consents and powers of attorney of the undersigned, its general partners and managing agents filed with the Securities and Exchange Commission shall extend to and cover any action to enforce same.\n\nand\n\n(ii) Such non-resident investment adviser furnishes to the Commission, at his own expense 14 days after written demand therefor forwarded to him by registered mail at his last address of record filed with the Commission and signed by the Secretary of the Commission or such person as the Commission may authorize to act in its behalf, true, correct, complete and current copies of any or all books and records which such investment adviser is required to make, keep current or preserve pursuant to any provision of any rule or regulation of the Commission adopted under the Act, or any part of such books and records which may be specified in said written demand. Such copies shall be furnished to the Commission at its principal office in Washington, DC, or at any Regional Office of the Commission which may be specified in said written demand.\n\n(4) For purposes of this paragraph (j) the term  non-resident investment adviser  shall have the same meaning set out in \u00a7 275.0-2(b)(2).\n\n(k) Every investment adviser that registers under section 203 of the Act (15 U.S.C. 80b-3) after July 8, 1997 shall be required to preserve in accordance with this section the books and records the investment adviser had been required to maintain by the State in which the investment adviser had its principal office and place of business prior to registering with the Commission."], ["17:17:5.0.1.1.22.0.36.21", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204-3 Delivery of brochures and brochure supplements.", "SEC", "", "", "[75 FR 49268, Aug. 12, 2010, as amended at 81 FR 60458, Oct. 31, 2016; 84 FR 33630, July 12, 2019; 87 FR 22447, Apr. 15, 2022]", "(a)  General requirements.  If you are registered under the Act as an investment adviser, you must deliver a brochure and one or more brochure supplements to each client or prospective client that contains all information required by Part 2 of Form ADV [17 CFR 279.1].\n\n(b)  Delivery requirements.  You (or a supervised person acting on your behalf) must:\n\n(1) Deliver to a client or prospective client your current brochure before or at the time you enter into an investment advisory contract with that client.\n\n(2) Deliver to each client, annually within 120 days after the end of your fiscal year and without charge, if there are material changes in your brochure since your last annual updating amendment:\n\n(i) A current brochure, or\n\n(ii) The summary of material changes to the brochure as required by Item 2 of Form ADV, Part 2A that offers to provide your current brochure without charge, accompanied by the Web site address (if available) and an e-mail address (if available) and telephone number by which a client may obtain the current brochure from you, and the Web site address for obtaining information about you through the Investment Adviser Public Disclosure (IAPD) system.\n\n(3) Deliver to each client or prospective client a current brochure supplement for a supervised person before or at the time that supervised person begins to provide advisory services to the client; provided, however, that if investment advice for a client is provided by a team comprised of more than five supervised persons, a current brochure supplement need only be delivered to that client for the five supervised persons with the most significant responsibility for the day-to-day advice provided to that client. For purposes of this section, a supervised person will provide advisory services to a client if that supervised person will:\n\n(i) Formulate investment advice for the client and have direct client contact; or\n\n(ii) Make discretionary investment decisions for the client, even if the supervised person will have no direct client contact.\n\n(4) Deliver the following to each client promptly after you create an amended brochure or brochure supplement, as applicable, if the amendment adds disclosure of an event, or materially revises information already disclosed about an event, in response to Item 9 of Part 2A of Form ADV or Item 3 of Part 2B of Form ADV (Disciplinary Information), respectively, (i) the amended brochure or brochure supplement, as applicable, along with a statement describing the material facts relating to the change in disciplinary information, or (ii) a statement describing the material facts relating to the change in disciplinary information.\n\n(c)  Exceptions to delivery requirement.  (1) You are not required to deliver a brochure to a client:\n\n(i) That is an investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a-1 to 80a-64] or a business development company as defined in that Act, provided that the advisory contract with that client meets the requirements of section 15(c) of that Act [15 U.S.C. 80a-15(c)]; or\n\n(ii) Who receives only impersonal investment advice for which you charge less than $500 per year.\n\n(2) You are not required to deliver a brochure supplement to a client:\n\n(i) To whom you are not required to deliver a brochure under subparagraph (c)(1) of this section;\n\n(ii) Who receives only impersonal investment advice; or\n\n(iii) Who is an officer, employee, or other person related to the adviser that would be a \u201cqualified client\u201d of your firm under \u00a7 275.205-3(d)(1)(iii).\n\n(d)  Wrap fee program brochures.  (1) If you are a sponsor of a wrap fee program, then the brochure that paragraph (b) of this section requires you to deliver to a client or prospective client of the wrap fee program must be a wrap fee program brochure containing all the information required by Part 2A, Appendix 1 of Form ADV. Any additional information in a wrap fee program brochure must be limited to information applicable to wrap fee programs that you sponsor.\n\n(2) You do not have to deliver a wrap fee program brochure if another sponsor of the wrap fee program delivers, to the client or prospective client of the wrap fee program, a wrap fee program brochure containing all the information required by Part 2A, Appendix 1 of Form ADV.\n\nA wrap fee program brochure does not take the place of any brochure supplements that you are required to deliver under paragraph (b) of this section.\n\n(e)  Multiple brochures.  If you provide substantially different advisory services to different clients, you may provide them with different brochures, so long as each client receives all information about the services and fees that are applicable to that client. The brochure you deliver to a client may omit any information required by Part 2A of Form ADV if the information does not apply to the advisory services or fees that you will provide or charge, or that you propose to provide or charge, to that client.\n\n(f)  Other disclosure obligations.  Delivering a brochure or brochure supplement in compliance with this section does not relieve you of any other disclosure obligations you have to your advisory clients or prospective clients under any federal or state laws or regulations.\n\n(g)  Definitions.  For purposes of this section:\n\n(1)  Impersonal investment advice  means investment advisory services that do not purport to meet the objectives or needs of specific individuals or accounts.\n\n(2)  Current brochure  and  current brochure supplement  mean the most recent revision of the brochure or brochure supplement, including all amendments to date.\n\n(3)  Sponsor  of a wrap fee program means an investment adviser that is compensated under a wrap fee program for sponsoring, organizing, or administering the program, or for selecting, or providing advice to clients regarding the selection of, other investment advisers in the program.\n\n(4)  Supervised person  means any of your officers, partners or directors (or other persons occupying a similar status or performing similar functions) or employees, or any other person who provides investment advice on your behalf.\n\n(5)  Wrap fee program  means an advisory program under which a specified fee or fees not based directly upon transactions in a client's account is charged for investment advisory services (which may include portfolio management or advice concerning the selection of other investment advisers) and the execution of client transactions."], ["17:17:5.0.1.1.22.0.36.22", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204-4 Reporting by exempt reporting advisers.", "SEC", "", "", "[76 FR 43013, July 19, 2011]", "(a)  Exempt reporting advisers.  If you are an investment adviser relying on the exemption from registering with the Commission under section 203(l) or (m) of the Act (15 U.S.C. 80b-3(l) or 80b-3(m)), you must complete and file reports on Form ADV (17 CFR 279.1) by following the instructions in the Form, which specify the information that an exempt reporting adviser must provide.\n\n(b)  Electronic filing.  You must file Form ADV electronically with the Investment Adviser Registration Depository (IARD) unless you have received a hardship exemption under paragraph (e) of this section.\n\nInformation on how to file with the IARD is available on the Commission's Web site at  http://www.sec.gov/iard.\n\n(c)  When filed.  Each Form ADV is considered filed with the Commission upon acceptance by the IARD.\n\n(d)  Filing fees.  You must pay FINRA (the operator of the IARD) a filing fee. The Commission has approved the amount of the filing fee. No portion of the filing fee is refundable. Your completed Form ADV will not be accepted by FINRA, and thus will not be considered filed with the Commission, until you have paid the filing fee.\n\n(e)  Temporary hardship exemption \u2014(1)  Eligibility for exemption.  If you have unanticipated technical difficulties that prevent submission of a filing to the IARD, you may request a temporary hardship exemption from the requirements of this chapter to file electronically.\n\n(2)  Application procedures.  To request a temporary hardship exemption, you must:\n\n(i) File Form ADV-H (17 CFR 279.3) in paper format no later than one business day after the filing that is the subject of the ADV-H was due; and\n\n(ii) Submit the filing that is the subject of the Form ADV-H in electronic format with the IARD no later than seven business days after the filing was due.\n\n(3)  Effective date\u2014upon filing.  The temporary hardship exemption will be granted when you file a completed Form ADV-H.\n\n(f)  Final report.  You must file a final report in accordance with instructions in Form ADV when:\n\n(1) You cease operation as an investment adviser;\n\n(2) You no longer meet the definition of exempt reporting adviser under paragraph (a); or\n\n(3) You apply for registration with the Commission.\n\nYou do not have to pay a filing fee to file a final report on Form ADV through the IARD."], ["17:17:5.0.1.1.22.0.36.23", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204-5 Delivery of Form CRS.", "SEC", "", "", "[84 FR 33631, July 12, 2019, as amended at 87 FR 22447, Apr. 15, 2022]", "(a)  General requirements.  If you are registered under the Act as an investment adviser, you must deliver Form CRS, required by Part 3 of Form ADV [17 CFR 279.1], to each retail investor.\n\n(b)  Delivery requirements.  You (or a supervised person acting on your behalf) must:\n\n(1) Deliver to each retail investor your current Form CRS before or at the time you enter into an investment advisory contract with that retail investor.\n\n(2) Deliver to each retail investor who is an existing client your current Form CRS before or at the time you:\n\n(i) Open a new account that is different from the retail investor's existing account(s);\n\n(ii) Recommend that the retail investor roll over assets from a retirement account into a new or existing account or investment; or\n\n(iii) Recommend or provide a new investment advisory service or investment that does not necessarily involve the opening of a new account and would not be held in an existing account.\n\n(3) Post the current Form CRS prominently on your website, if you have one, in a location and format that is easily accessible for retail investors.\n\n(4) Communicate any changes made to Form CRS to each retail investor who is an existing client within 60 days after the amendments are required to be made and without charge. The communication can be made by delivering the amended Form CRS or by communicating the information through another disclosure that is delivered to the retail investor.\n\n(5) Deliver a current Form CRS to each retail investor within 30 days upon request.\n\n(c)  Other disclosure obligations.  Delivering Form CRS in compliance with this section does not relieve you of any other disclosure obligations you have to your retail investors under any Federal or State laws or regulations.\n\n(d)  Definitions.  For purposes of this section:\n\n(1)  Current Form CRS  means the most recent version of the Form CRS.\n\n(2)  Retail investor  means a natural person, or the legal representative of such natural person, who seeks to receive or receives services primarily for personal, family or household purposes.\n\n(3)  Supervised person  means any of your officers, partners or directors (or other persons occupying a similar status or performing similar functions) or employees, or any other person who provides investment advice on your behalf.\n\n(e)  Transition rule.  (1) Within 30 days after the date by which you are first required by \u00a7 275.204-1(b) to electronically file your Form CRS with the Commission, you must deliver to each of your existing clients who is a retail investor your current Form CRS as required by Part 3 of Form ADV.\n\n(2) As of the date by which you are first required to electronically file your Form CRS with the Commission, you must begin using your Form CRS as required by Part 3 of Form ADV to comply with the requirements of paragraph (b) of this section."], ["17:17:5.0.1.1.22.0.36.24", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204(b)-1 Reporting by investment advisers to private funds.", "SEC", "", "", "[76 FR 71174, Nov. 16, 2011, as amended at 88 FR 38202, June 12, 2023; 89 FR 18060, Mar. 12, 2024]", "(a)  Reporting by investment advisers to private funds on Form PF.  If you are an investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), you act as an investment adviser to one or more private funds and, as of the end of your most recently completed fiscal year, you managed private fund assets of at least $150 million, you must complete and file a report on Form PF (17 CFR 279.9) by following the instructions in the Form, which specify the information that an investment adviser must provide. Your initial report on Form PF is due no later than the last day on which your next update would be timely in accordance with paragraph (e) if you had previously filed the Form; provided that you are not required to file Form PF with respect to any fiscal quarter or fiscal year ending prior to the date on which your registration becomes effective.\n\n(b)  Electronic filing.  You must file Form PF electronically with the Form PF filing system on the Investment Adviser Registration Depository (IARD).\n\nInformation on how to file Form PF is available on the Commission's Web site at  http://www.sec.gov/iard.\n\n(c)  When filed.  Each Form PF is considered filed with the Commission upon acceptance by the Form PF filing system.\n\n(d)  Filing fees.  You must pay the operator of the Form PF filing system a filing fee as required by the instructions to Form PF. The Commission has approved the amount of the filing fee. No portion of the filing fee is refundable. Your completed Form PF will not be accepted by the operator of the Form PF filing system, and thus will not be considered filed with the Commission, until you have paid the filing fee.\n\n(e)  Updates to Form PF.  You must file an updated Form PF:\n\n(1) At least annually, no later than the date specified in the instructions to Form PF; and\n\n(2) More frequently, if required by the instructions to Form PF. You must file all updated reports electronically with the Form PF filing system.\n\n(f)  Temporary hardship exemption.  (1) If you have unanticipated technical difficulties that prevent you from submitting Form PF on a timely basis through the Form PF filing system, you may request a temporary hardship exemption from the requirements of this section to file electronically.\n\n(2) To request a temporary hardship exemption, you must:\n\n(i) Complete and file in accordance with the instructions to Form PF no later than one business day after the electronic Form PF filing was due; and\n\n(ii) Submit the filing that is the subject of the Form PF paper filing in electronic format with the Form PF filing system no later than seven business days after the filing was due.\n\n(3) The temporary hardship exemption will be granted when you file Item A of Section 1a and Section 7 of Form PF, checking the box in Section 1a indicating that you are requesting a temporary hardship exemption.\n\n(4) A request for a temporary hardship exemption is considered filed upon the earlier of the date the request is postmarked or the date it is received by the Commission.\n\n(5) The hardship exemptions available under \u00a7 275.203-3 do not apply to Form PF.\n\n(g)  Definitions.  For purposes of this section:\n\n(1)  Assets under management  means the regulatory assets under management as determined under Item 5.F of Form ADV (\u00a7 279.1 of this chapter).\n\n(2)  Private fund assets  means the investment adviser's assets under management attributable to private funds."], ["17:17:5.0.1.1.22.0.36.25", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.204A-1 Investment adviser codes of ethics.", "SEC", "", "", "[69 FR 41708, July 9, 2004, as amended at 76 FR 81806, Dec. 29, 2011; 81 FR 83554, Nov. 21, 2016]", "(a)  Adoption of code of ethics.  If you are an investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), you must establish, maintain and enforce a written code of ethics that, at a minimum, includes:\n\n(1) A standard (or standards) of business conduct that you require of your supervised persons, which standard must reflect your fiduciary obligations and those of your supervised persons;\n\n(2) Provisions requiring your supervised persons to comply with applicable Federal securities laws;\n\n(3) Provisions that require all of your access persons to report, and you to review, their personal securities transactions and holdings periodically as provided below;\n\n(4) Provisions requiring supervised persons to report any violations of your code of ethics promptly to your chief compliance officer or, provided your chief compliance officer also receives reports of all violations, to other persons you designate in your code of ethics; and\n\n(5) Provisions requiring you to provide each of your supervised persons with a copy of your code of ethics and any amendments, and requiring your supervised persons to provide you with a written acknowledgment of their receipt of the code and any amendments.\n\n(b)  Reporting requirements \u2014(1)  Holdings reports.  The code of ethics must require your access persons to submit to your chief compliance officer or other persons you designate in your code of ethics a report of the access person's current securities holdings that meets the following requirements:\n\n(i)  Content of holdings reports.  Each holdings report must contain, at a minimum:\n\n(A) The title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security in which the access person has any direct or indirect beneficial ownership;\n\n(B) The name of any broker, dealer or bank with which the access person maintains an account in which any securities are held for the access person's direct or indirect benefit; and\n\n(C) The date the access person submits the report.\n\n(ii)  Timing of holdings reports.  Your access persons must each submit a holdings report:\n\n(A) No later than 10 days after the person becomes an access person, and the information must be current as of a date no more than 45 days prior to the date the person becomes an access person.\n\n(B) At least once each 12-month period thereafter on a date you select, and the information must be current as of a date no more than 45 days prior to the date the report was submitted.\n\n(2)  Transaction reports.  The code of ethics must require access persons to submit to your chief compliance officer or other persons you designate in your code of ethics quarterly securities transactions reports that meet the following requirements:\n\n(i)  Content of transaction reports.  Each transaction report must contain, at a minimum, the following information about each transaction involving a reportable security in which the access person had, or as a result of the transaction acquired, any direct or indirect beneficial ownership:\n\n(A) The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved;\n\n(B) The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);\n\n(C) The price of the security at which the transaction was effected;\n\n(D) The name of the broker, dealer or bank with or through which the transaction was effected; and\n\n(E) The date the access person submits the report.\n\n(ii)  Timing of transaction reports.  Each access person must submit a transaction report no later than 30 days after the end of each calendar quarter, which report must cover, at a minimum, all transactions during the quarter.\n\n(3)  Exceptions from reporting requirements.  Your code of ethics need not require an access person to submit:\n\n(i) Any report with respect to securities held in accounts over which the access person had no direct or indirect influence or control;\n\n(ii) A transaction report with respect to transactions effected pursuant to an automatic investment plan;\n\n(iii) A transaction report if the report would duplicate information contained in broker trade confirmations or account statements that you hold in your records so long as you receive the confirmations or statements no later than 30 days after the end of the applicable calendar quarter.\n\n(c)  Pre-approval of certain investments.  Your code of ethics must require your access persons to obtain your approval before they directly or indirectly acquire beneficial ownership in any security in an initial public offering or in a limited offering.\n\n(d)  Small advisers.  If you have only one access person (i.e., yourself), you are not required to submit reports to yourself or to obtain your own approval for investments in any security in an initial public offering or in a limited offering, if you maintain records of all of your holdings and transactions that this section would otherwise require you to report.\n\n(e)  Definitions.  For the purpose of this section:\n\n(1)  Access person  means:\n\n(i) Any of your supervised persons:\n\n(A) Who has access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any reportable fund, or\n\n(B) Who is involved in making securities recommendations to clients, or who has access to such recommendations that are nonpublic.\n\n(ii) If providing investment advice is your primary business, all of your directors, officers and partners are presumed to be access persons.\n\n(2)  Automatic investment plan  means a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan.\n\n(3)  Beneficial ownership  is interpreted in the same manner as it would be under \u00a7 240.16a-1(a)(2) of this chapter in determining whether a person has beneficial ownership of a security for purposes of section 16 of the Securities Exchange Act of 1934 (15 U.S.C. 78p) and the rules and regulations thereunder. Any report required by paragraph (b) of this section may contain a statement that the report will not be construed as an admission that the person making the report has any direct or indirect beneficial ownership in the security to which the report relates.\n\n(4)  Federal securities laws  means the Securities Act of 1933 (15 U.S.C. 77a-aa), the Securities Exchange Act of 1934 (15 U.S.C. 78a-mm), the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 (2002)), the Investment Company Act of 1940 (15 U.S.C. 80a), the Investment Advisers Act of 1940 (15 U.S.C. 80b), title V of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 Stat. 1338 (1999), any rules adopted by the Commission under any of these statutes, the Bank Secrecy Act (31 U.S.C. 5311-5314; 5316-5332) as it applies to funds and investment advisers, and any rules adopted thereunder by the Commission or the Department of the Treasury.\n\n(5)  Fund  means an investment company registered under the Investment Company Act.\n\n(6)  Initial public offering  means an offering of securities registered under the Securities Act of 1933 (15 U.S.C. 77a), the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)).\n\n(7)  Limited offering  means an offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(a)(2) or section 4(a)(5) (15 U.S.C. 77d(a)(2) or 77d(a)(5)) or pursuant to \u00a7\u00a7 230.504 or 230.506 of this chapter.\n\n(8)  Purchase or sale of a security  includes, among other things, the writing of an option to purchase or sell a security.\n\n(9)  Reportable fund  means:\n\n(i) Any fund for which you serve as an investment adviser as defined in section 2(a)(20) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(20)) (i.e., in most cases you must be approved by the fund's board of directors before you can serve); or\n\n(ii) Any fund whose investment adviser or principal underwriter controls you, is controlled by you, or is under common control with you. For purposes of this section,  control  has the same meaning as it does in section 2(a)(9) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(9)).\n\n(10)  Reportable security  means a security as defined in section 202(a)(18) of the Act (15 U.S.C. 80b-2(a)(18)), except that it does not include:\n\n(i) Direct obligations of the Government of the United States;\n\n(ii) Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements;\n\n(iii) Shares issued by money market funds;\n\n(iv) Shares issued by open-end funds other than reportable funds; and\n\n(v) Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are reportable funds."], ["17:17:5.0.1.1.22.0.36.26", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.205-1 Definition of \u201cinvestment performance\u201d of an investment company and \u201cinvestment record\u201d of an appropriate index of securities prices.", "SEC", "", "", "[37 FR 17468, Aug. 29, 1972]", "(a)  Investment performance  of an investment company for any period shall mean the sum of:\n\n(1) The change in its net asset value per share during such period;\n\n(2) The value of its cash distributions per share accumulated to the end of such period; and\n\n(3) The value of capital gains taxes per share paid or payable on undistributed realized long-term capital gains accumulated to the end of such period; expressed as a percentage of its net asset value per share at the beginning of such period. For this purpose, the value of distributions per share of realized capital gains, of dividends per share paid from investment income and of capital gains taxes per share paid or payable on undistributed realized long-term capital gains shall be treated as reinvested in shares of the investment company at the net asset value per share in effect at the close of business on the record date for the payment of such distributions and dividends and the date on which provision is made for such taxes, after giving effect to such distributions, dividends and taxes.\n\n(b)  Investment record  of an appropriate index of securities prices for any period shall mean the sum of:\n\n(1) The change in the level of the index during such period; and\n\n(2) The value, computed consistently with the index, of cash distributions made by companies whose securities comprise the index accumulated to the end of such period; expressed as a percentage of the index level at the beginning of such period. For this purpose cash distributions on the securities which comprise the index shall be treated as reinvested in the index at least as frequently as the end of each calendar quarter following the payment of the dividend.\n\nExhibit I\n\n[ Method of computing the investment record of the standard  &  poor's  500  stock composite index for calendar  1971]\n\n1  Source: Standard & Poor's Trade and Securities Statistics, Jan. 1972, p. 33.\n\n2   Id.  See Standard & Poor's Trade and Securities Statistics Security and Price Index Record\u20141970 Edition, p. 133 for explanation of quarterly dividend yield.\n\n3  Quarterly percentages have been founded to two decimal places.\n\nChange in index value for 1971: 102.09 \u2212 92.15 = 9.94. \n \n Accumulated value of dividends for 1971:\n\n \n \n  \n Aggregate value of dividends paid, assuming quarterly reinvestment and computed consistently with the index: \n \n (Percent yield as computed above) \u00d7 (ending index value) = Aggregate value of dividends paid \n \n For 1971: \n \n .0314 \u00d7 102.09 = 3.21\n \n Investment record of Standard & Poor's 500 stock composite index assuming quarterly reinvestment dividends: \n \n \n  \n The same method can be extended to cases where an investment company's fiscal quarters do not coincide with the fiscal quarters of the S & P dividend record or to instances where a \u201crolling period\u201d is used for performance comparisons as indicated by the following example of the calculation of the investment record of the Standard & Poor's 500 Stock Composite Index for the 12 months ended November 1971: \n \n Index value Nov. 30, 1971 93.99\n Index value Nov. 30, 1970 87.20\n    Change in index value 6.79 \n Quarter ending\u2014\n Dividend yield\n Rate for each month of quarter (\n 1/12  of annual)>\n Annual rate\n \n 1/4  of annual\n Dec. 1970 3.41 0.85 0.28\n Mar. 1971 3.10 .78 .26\n June 1971 3.11 .78 .26\n Sept. 1971 3.14 .79 .26\n Dec. 1971 3.01 .75 .25 \n Accumulated value of dividends reinvested:\n \n December = 1.0028\n \n January-March = 1.0078\n \n April-June = 1.0078\n \n July-September = 1.0079 \n \n October-November = 1.0053 \n 4 \n  \n \n \n \n 4  The rate for October and November would be two-thirds of the yield for the quarter ended Sept. 30 (i.e. .667 \u00d7 .79 = 5269) since the yield for the quarter ended Dec. 31 would not be available as of Nov. 30. \n Dividend yield: \n \n (1.0028 \u00d7 1.0078 \u00d7 1.0078 \u00d7 1.0079 \u00d7 1.0053) \u2212 1.00 = .0320\n \n Aggregate value of dividends paid computed consistently with the index: \n \n .0320 \u00d7 93.99 = 3.01\n \n Investment record of the Standard & Poor's 500 Stock Composite Index for the 12 months ended November 30, 1971: \n \n \n  \n Exhibit II\n [ Method of Computing the Investment Record of the New York Stock Exchange Composite Index for Calendar  1971]\n (1)\u2014Quarter ending\n (2)\u2014Index value \n 1 \n (3)\u2014Aggregate market value of shares listed on the NYSE as of end of quarter (billions of dollars) \n 2 \n (4)\u2014Quarterly value of estimated cash payments of shares listed on the NYSE (millions of dollars) \n 3 \n (5)\u2014Estimated yield \n 4  (quarterly percent)>\n Dec. 1970 50.23\n    Mar. 1971 55.44 $709 $5,106 0.72 \n June 1971 55.09 710 4,961 .70 \n Sept. 1971 54.33 709 5,006 .71 \n Dec. 1971 56.43 742 5,183 .70\n \n 1  Source: New York Stock Exchange Composite Index as reported daily by the New York Stock Exchange.\n \n 2  Source: Monthly Review, New York Stock Exchange.\n \n 3  Source: The Exchange, New York Stock Exchange magazine, May, Aug., Nov. 1971 and Feb. 1972 editions. Upon request the Statistics Division of the Research Department of the NYSE will make this figure available within 10 days of the end of each quarter.\n \n 4  The ratio of column 4 to column 3. \n Change in NYSE Composite Index value for 1971: 56.43 \u2212 50.23 = 6.20.\n \n Accumulated Value of Dividends of NYSE Composite Index for 1971: \n\n \n \n  \n Aggregate value of dividends paid on NYSE Composite Index assuming quarterly reinvestment: \n \n For 1971:\n \n .0286 \u00d7 56.43 = 1.61\n \n Investment record of the New York Stock Exchange Composite Index assuming quarterly reinvestment of dividends: \n \n \n  \n The same method can be extended to cases where an investment company's fiscal quarters do not coincide with the fiscal quarters of the NYSE dividend record or to instances where a \u201crolling period\u201d is used for performance comparisons as indicated by the following example of the calculation of the investment record of the NYSE Composite Index for the 12 months ended November 1971:\n \n Index value Nov. 30, 1971 51.84\n Index value Nov. 30, 1970 47.41\n    Change in index value 4.43 \n Quarter ending\n Dividend yield quarterly percent\n Rate for each month of quarter (\n 1/12  of annual)>\n Dec. 1970 0.79 0.26\n Mar. 1971 .72 .24\n June 1971 .70 .23\n Sept. 1971 .71 .24\n Dec. 1971 .70 .23 \n Accumulated value of dividends reinvested: \n \n December = 1.0026 \n \n January-March = 1.0072 \n \n April-June = 1.0070 \n \n July-September = 1.0071 \n \n October-November = 1.0047 \n 4 \n  \n \n \n \n 4  The rate for October and November would be two thirds of the yield for the quarter ended September 30 (i.e. .667 \u00d7 .71 = 4736), since the yield for the quarter ended December 31 would not be available as of November 30. \n Dividend yield:\n \n (1.0026 \u00d7 1.0072 \u00d7 1.0070 \u00d7 1.0071 \u00d7 1.0047) \u2212 1.00 = .0289\n \n Aggregate value of dividends paid computed consistently with the index:\n\nChange in index value for 1971: 102.09 \u2212 92.15 = 9.94.\n\nAccumulated value of dividends for 1971:\n\nAggregate value of dividends paid, assuming quarterly reinvestment and computed consistently with the index:\n\n(Percent yield as computed above) \u00d7 (ending index value) = Aggregate value of dividends paid\n\nFor 1971:\n\n.0314 \u00d7 102.09 = 3.21\n\nInvestment record of Standard & Poor's 500 stock composite index assuming quarterly reinvestment dividends:\n\nThe same method can be extended to cases where an investment company's fiscal quarters do not coincide with the fiscal quarters of the S & P dividend record or to instances where a \u201crolling period\u201d is used for performance comparisons as indicated by the following example of the calculation of the investment record of the Standard & Poor's 500 Stock Composite Index for the 12 months ended November 1971:\n\nAccumulated value of dividends reinvested:\n\nDecember = 1.0028\n\nJanuary-March = 1.0078\n\nApril-June = 1.0078\n\nJuly-September = 1.0079\n\nOctober-November = 1.0053 \n 4\n\n4  The rate for October and November would be two-thirds of the yield for the quarter ended Sept. 30 (i.e. .667 \u00d7 .79 = 5269) since the yield for the quarter ended Dec. 31 would not be available as of Nov. 30.\n\nDividend yield:\n\nAggregate value of dividends paid computed consistently with the index:\n\n.0320 \u00d7 93.99 = 3.01\n\nInvestment record of the Standard & Poor's 500 Stock Composite Index for the 12 months ended November 30, 1971:\n\nExhibit II\n\n[ Method of Computing the Investment Record of the New York Stock Exchange Composite Index for Calendar  1971]\n\n1  Source: New York Stock Exchange Composite Index as reported daily by the New York Stock Exchange.\n\n2  Source: Monthly Review, New York Stock Exchange.\n\n3  Source: The Exchange, New York Stock Exchange magazine, May, Aug., Nov. 1971 and Feb. 1972 editions. Upon request the Statistics Division of the Research Department of the NYSE will make this figure available within 10 days of the end of each quarter.\n\n4  The ratio of column 4 to column 3.\n\nChange in NYSE Composite Index value for 1971: 56.43 \u2212 50.23 = 6.20.\n\nAccumulated Value of Dividends of NYSE Composite Index for 1971:\n\nAggregate value of dividends paid on NYSE Composite Index assuming quarterly reinvestment:\n\nFor 1971:\n\n.0286 \u00d7 56.43 = 1.61\n\nInvestment record of the New York Stock Exchange Composite Index assuming quarterly reinvestment of dividends:\n\nThe same method can be extended to cases where an investment company's fiscal quarters do not coincide with the fiscal quarters of the NYSE dividend record or to instances where a \u201crolling period\u201d is used for performance comparisons as indicated by the following example of the calculation of the investment record of the NYSE Composite Index for the 12 months ended November 1971:\n\nAccumulated value of dividends reinvested:\n\nDecember = 1.0026\n\nJanuary-March = 1.0072\n\nApril-June = 1.0070\n\nJuly-September = 1.0071\n\nOctober-November = 1.0047 \n 4\n\n4  The rate for October and November would be two thirds of the yield for the quarter ended September 30 (i.e. .667 \u00d7 .71 = 4736), since the yield for the quarter ended December 31 would not be available as of November 30.\n\nDividend yield:\n\nAggregate value of dividends paid computed consistently with the index:\n\n.0289 \u00d7 51.84 = 1.50\n\nInvestment record of the NYSE Composite Index for the 12 months ended November 30, 1971:\n\nInvestment record of the NYSE Composite Index for the 12 months ended November 30, 1971:"], ["17:17:5.0.1.1.22.0.36.27", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.205-2 Definition of \u201cspecified period\u201d over which the asset value of the company or fund under management is averaged.", "SEC", "", "", "[37 FR 24896, Nov. 22, 1972]", "(a) For purposes of this rule:\n\n(1)  Fulcrum fee  shall mean the fee which is paid or earned when the investment company's performance is equivalent to that of the index or other measure of performance.\n\n(2)  Rolling period  shall mean a period consisting of a specified number of subperiods of definite length in which the most recent subperiod is substituted for the earliest subperiod as time passes.\n\n(b) The specified period over which the asset value of the company or fund under management is averaged shall mean the period over which the investment performance of the company or fund and the investment record of an appropriate index of securities prices or such other measure of investment performance are computed.\n\n(c) Notwithstanding paragraph (b) of this section, the specified period over which the asset value of the company or fund is averaged for the purpose of computing the fulcrum fee may differ from the period over which the asset value is averaged for computing the performance related portion of the fee, only if:\n\n(1) The performance related portion of the fee is computed over a rolling period and the total fee is payable at the end of each subperiod of the rolling period; and\n\n(2) The fulcrum fee is computed on the basis of the asset value averaged over the most recent subperiod or subperiods of the rolling period."], ["17:17:5.0.1.1.22.0.36.28", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.205-3 Exemption from the compensation prohibition of section 205(a)(1) for investment advisers.", "SEC", "", "", "[63 FR 39027, July 21, 1998, as amended at 69 FR 72088, Dec. 10, 2004; 77 FR 10368, Feb. 22, 2012; 86 FR 62475, Nov. 10, 2021", "(a)  General.  The provisions of section 205(a)(1) of the Act (15 U.S.C. 80b-5(a)(1)) will not be deemed to prohibit an investment adviser from entering into, performing, renewing or extending an investment advisory contract that provides for compensation to the investment adviser on the basis of a share of the capital gains upon, or the capital appreciation of, the funds, or any portion of the funds, of a client,  Provided,  That the client entering into the contract subject to this section is a qualified client, as defined in paragraph (d)(1) of this section.\n\n(b)  Identification of the client.  In the case of a private investment company, as defined in paragraph (d)(3) of this section, an investment company registered under the Investment Company Act of 1940, or a business development company, as defined in section 202(a)(22) of the Act (15 U.S.C. 80b-2(a)(22)), each equity owner of any such company (except for the investment adviser entering into the contract and any other equity owners not charged a fee on the basis of a share of capital gains or capital appreciation) will be considered a client for purposes of paragraph (a) of this section.\n\n(c)  Transition rules \u2014(1)  Registered investment advisers.  If a registered investment adviser entered into a contract and satisfied the conditions of this section that were in effect when the contract was entered into, the adviser will be considered to satisfy the conditions of this section;  Provided,  however, that if a natural person or company who was not a party to the contract becomes a party (including an equity owner of a private investment company advised by the adviser), the conditions of this section in effect at that time will apply with regard to that person or company.\n\n(2)  Registered investment advisers that were previously not registered.  If an investment adviser was not required to register with the Commission pursuant to section 203 of the Act (15 U.S.C. 80b-3) and was not registered, section 205(a)(1) of the Act will not apply to an advisory contract entered into when the adviser was not required to register and was not registered, or to an account of an equity owner of a private investment company advised by the adviser if the account was established when the adviser was not required to register and was not registered;  Provided,  however, that section 205(a)(1) of the Act will apply with regard to a natural person or company who was not a party to the contract and becomes a party (including an equity owner of a private investment company advised by the adviser) when the adviser is required to register.\n\n(3)  Certain transfers of interests.  Solely for purposes of paragraphs (c)(1) and (c)(2) of this section, a transfer of an equity ownership interest in a private investment company by gift or bequest, or pursuant to an agreement related to a legal separation or divorce, will not cause the transferee to \u201cbecome a party\u201d to the contract and will not cause section 205(a)(1) of the Act to apply to such transferee.\n\n(d)  Definitions.  For the purposes of this section:\n\n(1) The term  qualified client  means:\n\n(i) A natural person who, or a company that, immediately after entering into the contract has, under the management of the investment adviser, at least the applicable dollar amount specified in the most recent order;\n\n(ii) A natural person who, or a company that, the investment adviser entering into the contract (and any person acting on his behalf) reasonably believes, immediately prior to entering into the contract, either:\n\n(A) Has a net worth (together, in the case of a natural person, with assets held jointly with a spouse) of more than the applicable dollar amount specified in the most recent order. For purposes of calculating a natural person's net worth:\n\n( 1 ) The person's primary residence must not be included as an asset;\n\n( 2 ) Indebtedness secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time the investment advisory contract is entered into may not be included as a liability (except that if the amount of such indebtedness outstanding at the time of calculation exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess must be included as a liability); and\n\n( 3 ) Indebtedness that is secured by the person's primary residence in excess of the estimated fair market value of the residence must be included as a liability; or\n\n(B) Is a qualified purchaser as defined in section 2(a)(51)(A) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(51)(A)) at the time the contract is entered into; or\n\n(iii) A natural person who immediately prior to entering into the contract is:\n\n(A) An executive officer, director, trustee, general partner, or person serving in a similar capacity, of the investment adviser; or\n\n(B) An employee of the investment adviser (other than an employee performing solely clerical, secretarial or administrative functions with regard to the investment adviser) who, in connection with his or her regular functions or duties, participates in the investment activities of such investment adviser, provided that such employee has been performing such functions and duties for or on behalf of the investment adviser, or substantially similar functions or duties for or on behalf of another company for at least 12 months.\n\n(2) The term  company  has the same meaning as in section 202(a)(5) of the Act (15 U.S.C. 80b-2(a)(5)), but does not include a company that is required to be registered under the Investment Company Act of 1940 but is not registered.\n\n(3) The term  private investment company  means a company that would be defined as an investment company under section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)) but for the exception provided from that definition by section 3(c)(1) of such Act (15 U.S.C. 80a-3(c)(1)).\n\n(4) The term  executive officer  means the president, any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions, for the investment adviser.\n\n(5) The term  most recent order  means the most recently issued Commission order in accordance with paragraph (e) of this section and as published in the  Federal Register .\n\n(e)  Inflation adjustments.  Pursuant to section 205(e) of the Act, the dollar amounts referenced in paragraphs (d)(1)(i) and (d)(1)(ii)(A) of this section shall be adjusted, by order of the Commission, issued on or about May 1, 2026, and approximately every five years thereafter. The adjusted dollar amounts established in such orders shall be computed by:\n\n(1) Dividing the year-end value of the Personal Consumption Expenditures Chain-Type Price Index (or any successor index thereto), as published by the United States Department of Commerce, for the calendar year preceding the calendar year in which the order is being issued, by the year-end value of such index (or successor) for the calendar year 1997;\n\n(2) For the dollar amount in paragraph (d)(1)(i) of this section, multiplying $750,000 times the quotient obtained in paragraph (e)(1) of this section and rounding the product to the nearest multiple of $100,000; and\n\n(3) For the dollar amount in paragraph (d)(1)(ii)(A) of this section, multiplying $1,500,000 times the quotient obtained in paragraph (e)(1) of this section and rounding the product to the nearest multiple of $100,000."], ["17:17:5.0.1.1.22.0.36.29", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(3)-1 Exemption of investment advisers registered as broker-dealers in connection with the provision of certain investment advisory services.", "SEC", "", "", "[40 FR 38159, Aug. 27, 1975]", "(a) An investment adviser which is a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934 shall be exempt from section 206(3) in connection with any transaction in relation to which such broker or dealer is acting as an investment adviser solely (1) by means of publicly distributed written materials or publicly made oral statements; (2) by means of written materials or oral statements which do not purport to meet the objectives or needs of specific individuals or accounts; (3) through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or (4) any combination of the foregoing services:  Provided, however,  That such materials and oral statements include a statement that if the purchaser of the advisory communication uses the services of the adviser in connection with a sale or purchase of a security which is a subject of such communication, the adviser may act as principal for its own account or as agent for another person.\n\n(b) For the purpose of this Rule, publicly distributed written materials are those which are distributed to 35 or more persons who pay for such materials, and publicly made oral statements are those made simultaneously to 35 or more persons who pay for access to such statements.\n\nThe requirement that the investment adviser disclose that it may act as principal or agent for another person in the sale or purchase of a security that is the subject of investment advice does not relieve the investment adviser of any disclosure obligation which, depending upon the nature of the relationship between the investment adviser and the client, may be imposed by subparagraphs (1) or (2) of section 206 or the other provisions of the federal securities laws."], ["17:17:5.0.1.1.22.0.36.3", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.0-4 General requirements of papers and applications.", "SEC", "", "", "[41 FR 39019, Sept. 14, 1976, as amended at 44 FR 4666, Jan. 23, 1979; 47 FR 58239, Dec. 30, 1982; 68 FR 42248, July 17, 2003; 76 FR 71877, Nov. 21, 2011; 87 FR 38976, June 30, 2022]", "(a)  Filings.  (1) All papers required to be filed with the Commission shall, unless otherwise provided by the rules and regulations, be delivered through the mails or otherwise to the Secretary of the Securities and Exchange Commission, Washington, DC 20549. Except as otherwise provided by the rules and regulations, such papers shall be deemed to have been filed with the Commission on the date when they are actually received by it.\n\n(2) All filings required to be made electronically with the Investment Adviser Registration Depository (\u201cIARD\u201d) shall, unless otherwise provided by the rules and regulations in this part, be deemed to have been filed with the Commission upon acceptance by the IARD. Filings required to be made through the IARD on a day that the IARD is closed shall be considered timely filed with the Commission if filed with the IARD no later than the following business day.\n\n(3) Filings required to be made through the IARD during the period in December of each year that the IARD is not available for submission of filings shall be considered timely filed with the Commission if filed with the IARD no later than the following January 7.\n\nEach year the IARD shuts down to filers for several days during the end of December to process renewals of state notice filings and registrations. During this period, advisers are not able to submit filings through the IARD. Check the Commission's Web site at  http://www.sec.gov/iard  for the dates of the annual IARD shutdown.\n\n(b)  Formal specifications respecting applications.  Every application for an order under any provision of the Act, for which a form with instructions is not specifically prescribed, and every amendment to such application, shall be filed electronically pursuant to 17 CFR part 232 (Regulation S-T). Any filings made in paper, including filings made pursuant to a hardship exemption under Regulation S-T, shall be filed in quintuplicate. One copy shall be signed by the applicant, but the other four copies may have facsimile or typed signatures. Such applications shall be on paper no larger than 8\n 1/2  x 11 inches in size. To the extent that the reduction of larger documents would render them illegible, those documents may be filed on paper larger than 8\n 1/2  x 11 inches in size. The left margin should be at least 1\n 1/2  inches wide and, if the application is bound, it should be bound on the left side. All typewritten or printed matter (including deficits in financial statements) should be set forth in black so as to permit photocopying.\n\n(c)  Authorization respecting applications.  (1) Every application for an order under any provision of the Act, for which a form with instructions is not specifically prescribed and which is executed by a corporation, partnership, or other company and filed with the Commission, shall contain a concise statement of the applicable provisions of the articles of incorporation, bylaws, or similar documents, relating to the right of the person signing and filing such application to take such action on behalf of the applicant, and a statement that all such requirements have been complied with and that the person signing and filing the same is fully authorized to do so. If such authorization is dependent on resolutions of stockholders, directors, or other bodies, such resolutions shall be attached as an exhibit to, or the pertinent provisions thereof shall be quoted in, the application.\n\n(2) If an amendment to any such application shall be filed, such amendment shall contain a similar statement or, in lieu thereof, shall state that the authorization described in the original application is applicable to the individual who signs such amendment and that such authorization still remains in effect.\n\n(3) When any such application or amendment is signed by an agent or attorney, the power of attorney evidencing his authority to sign shall contain similar statements and shall be filed with the Commission.\n\n(d)  Verification of applications and statements of fact.  Every application for an order under any provision of the Act, for which a form with instructions is not specifically prescribed, and every amendment to such application, and every statement of fact formally filed in support of, or in opposition to, any application or declaration shall be verified by the person executing the same. An instrument executed on behalf of a corporation shall be verified in substantially the following form, but suitable changes may be made in such form for other kinds of companies and for individuals:\n\nThe undersigned states that he or she has duly executed the attached dated , 20__, for and on behalf of (Name of company); that he or she is the (Title of officer) of such company; and that all action by stockholders, directors, and other bodies necessary to authorize the undersigned to execute and file such instrument has been taken. The undersigned further states that he or she is familiar with such instrument, and the contents thereof, and that the facts therein set forth are true to the best of his or her knowledge, information and belief.\n\n(Signature)\n\n(e)  Statement of grounds for application.  Each application should contain a brief statement of the reasons why the applicant is deemed to be entitled to the action requested with a reference to the provisions of the Act and of the rules and regulations under which application is made.\n\n(f)  Name and address.  Every application shall contain the name and address of each applicant and the name and address of any person to whom any applicant wishes any question regarding the application to be directed.\n\n(g) [Reserved]\n\n(h)  Definition of application.  For purposes of this rule, an \u201capplication\u201d means any application for an order of the Commission under the Act other than an application for registration as an investment adviser.\n\n(i) The manually signed original (or in the case of duplicate originals, one duplicate original) of all registrations, applications, statements, reports, or other documents filed under the Investment Advisers Act of 1940, as amended, shall be numbered sequentially (in addition to any internal numbering which otherwise may be present) by handwritten, typed, printed, or other legible form of notation from the facing page of the document through the last page of that document and any exhibits or attachments thereto. Further, the total number of pages contained in a numbered original shall be set forth on the first page of the document."], ["17:17:5.0.1.1.22.0.36.30", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(3)-2 Agency cross transactions for advisory clients.", "SEC", "", "", "[42 FR 29301 June 8, 1977, as amended at 48 FR 41379, Sept. 15, 1983; 62 FR 28135, May 22, 1997]", "(a) An investment adviser, or a person registered as a broker-dealer under section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) and controlling, controlled by, or under common control with an investment adviser, shall be deemed in compliance with the provisions of sections 206(3) of the Act (15 U.S.C. 80b-6(3)) in effecting an agency cross transaction for an advisory client, if:\n\n(1) The advisory client has executed a written consent prospectively authorizing the investment adviser, or any other person relying on this rule, to effect agency cross transactions for such advisory client, provided that such written consent is obtained after full written disclosure that with respect to agency cross transactions the investment adviser or such other person will act as broker for, receive commissions from, and have a potentially conflicting division of loyalties and responsibilities regarding, both parties to such transactions;\n\n(2) The investment adviser, or any other person relying on this rule, sends to each such client a written confirmation at or before the completion of each such transaction, which confirmation includes (i) a statement of the nature of such transaction, (ii) the date such transaction took place, (iii) an offer to furnish upon request, the time when such transaction took place, and (iv) the source and amount of any other remuneration received or to be received by the investment adviser and any other person relying on this rule in connection with the transaction,  Provided, however,  That if, in the case of a purchase, neither the investment adviser nor any other person relying on this rule was participating in a distribution, or in the case of a sale, neither the investment adviser nor any other person relying on this rule was participating in a tender offer, the written confirmation may state whether any other remuneration has been or will be received and that the source and amount of such other remuneration will be furnished upon written request of such customer;\n\n(3) The investment adviser, or any other person relying in this rule, sends to each such client, at least annually, and with or as part of any written statement or summary of such account from the investment adviser or such other person, a written disclosure statement identifying the total number of such transactions during the period since the date of the last such statement or summary, and the total amount of all commissions or other remuneration received or to be received by the investment adviser or any other person relying on this rule in connection with such transactions during such period;\n\n(4) Each written disclosure statement and confirmation required by this rule includes a conspicuous statement that the written consent referred to in paragraph (a)(1) of this section may be revoked at any time by written notice to the investment adviser, or to any other person relying on this rule, from the advisory client; and\n\n(5) No such transaction is effected in which the same investment adviser or an investment adviser and any person controlling, controlled by or under common control with such investment adviser recommended the transaction to both any seller and any purchaser.\n\n(b) For purposes of this rule the term  agency cross transaction for an advisory client  shall mean a transaction in which a person acts as an investment adviser in relation to a transaction in which such investment adviser, or any person controlling, controlled by, or under common control with such investment adviser, acts as broker for both such advisory client and for another person on the other side of the transaction.\n\n(c) This rule shall not be construed as relieving in any way the investment adviser or another person relying on this rule from acting in the best interests of the advisory client, including fulfilling the duty with respect to the best price and execution for the particular transaction for the advisory client; nor shall it relieve such person or persons from any disclosure obligation which may be imposed by subparagraphs (1) or (2) of section 206 of the Act or by other applicable provisions of the federal securities laws."], ["17:17:5.0.1.1.22.0.36.31", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(4)-1 Investment adviser marketing.", "SEC", "", "", "[86 FR 13024, Mar. 5, 2021, as amended at 87 FR 22447, Apr. 15, 2022]", "As a means reasonably designed to prevent fraudulent, deceptive, or manipulative acts, practices, or courses of business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-6(4)), it is unlawful for any investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), directly or indirectly, to disseminate any advertisement that violates any of paragraphs (a) through (d) of this section.\n\n(a)  General prohibitions.  An advertisement may not:\n\n(1) Include any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statement made, in the light of the circumstances under which it was made, not misleading;\n\n(2) Include a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate upon demand by the Commission;\n\n(3) Include information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the investment adviser;\n\n(4) Discuss any potential benefits to clients or investors connected with or resulting from the investment adviser's services or methods of operation without providing fair and balanced treatment of any material risks or material limitations associated with the potential benefits;\n\n(5) Include a reference to specific investment advice provided by the investment adviser where such investment advice is not presented in a manner that is fair and balanced;\n\n(6) Include or exclude performance results, or present performance time periods, in a manner that is not fair and balanced; or\n\n(7) Otherwise be materially misleading.\n\n(b)  Testimonials and endorsements.  An advertisement may not include any testimonial or endorsement, and an adviser may not provide compensation, directly or indirectly, for a testimonial or endorsement, unless the investment adviser complies with the conditions in paragraphs (b)(1) through (3) of this section, subject to the exemptions in paragraph (b)(4) of this section.\n\n(1)  Required disclosures.  The investment adviser discloses, or reasonably believes that the person giving the testimonial or endorsement discloses, the following at the time the testimonial or endorsement is disseminated:\n\n(i) Clearly and prominently:\n\n(A) That the testimonial was given by a current client or investor, and the  endorsement  was given by a person other than a current client or investor, as applicable;\n\n(B) That cash or non-cash compensation was provided for the  testimonial  or  endorsement,  if applicable; and\n\n(C) A brief statement of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the investment adviser's relationship with such person;\n\n(ii) The material terms of any compensation arrangement, including a description of the compensation provided or to be provided, directly or indirectly, to the person for the  testimonial  or  endorsement;  and\n\n(iii) A description of any material conflicts of interest on the part of the person giving the  testimonial  or  endorsement  resulting from the investment adviser's relationship with such person and/or any compensation arrangement.\n\n(2)  Adviser oversight and compliance.  The investment adviser must have:\n\n(i) A reasonable basis for believing that the testimonial or endorsement complies with the requirements of this section; and\n\n(ii) A written agreement with any person giving a testimonial or endorsement that describes the scope of the agreed-upon activities and the terms of compensation for those activities.\n\n(3)  Disqualification.  An investment adviser may not compensate a person, directly or indirectly, for a testimonial or endorsement if the adviser knows, or in the exercise of reasonable care should know, that the person giving the testimonial or endorsement is an ineligible person at the time the testimonial or endorsement is disseminated. This paragraph shall not disqualify any person for any matter(s) that occurred prior to May 4, 2021, if such matter(s) would not have disqualified such person under \u00a7 275.206(4)-3(a)(1)(ii) of this chapter, as in effect prior to May 4, 2021.\n\n(4)  Exemptions.  (i) A testimonial or endorsement disseminated for no compensation or  de minimis compensation  is not required to comply with paragraphs (b)(2)(ii) and (3) of this section;\n\n(ii) A testimonial or endorsement by the investment adviser's partners, officers, directors, or employees, or a person that controls, is controlled by, or is under common control with the investment adviser, or is a partner, officer, director or employee of such a person is not required to comply with paragraphs (b)(1) and (2)(ii) of this section, provided that the affiliation between the investment adviser and such person is readily apparent to or is disclosed to the client or investor at the time the testimonial or endorsement is disseminated and the investment adviser documents such person's status at the time the testimonial or endorsement is disseminated;\n\n(iii) A testimonial or endorsement by a broker or dealer registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(a)) is not required to comply with:\n\n(A) Paragraph (b)(1) of this section if the testimonial or endorsement is a recommendation subject to \u00a7 240.15l-1 of this chapter (Regulation Best Interest) under that Act;\n\n(B) Paragraphs (b)(1)(ii) and (iii) of this section if the testimonial or endorsement is provided to a person that is not a retail customer (as that term is defined in \u00a7 240.15l-1 of this chapter (Regulation Best Interest) under the Securities Exchange Act of 1934 (15 U.S.C. 78o(a)); and\n\n(C) Paragraph (b)(3) of this section if the broker or dealer is not subject to statutory disqualification, as defined under section 3(a)(39) of that Act; and\n\n(iv) A testimonial or endorsement by a person that is covered by rule 506(d) of Regulation D under the Securities Act of 1933 (\u00a7 230.506(d) of this chapter) with respect to a rule 506 securities offering under the Securities Act of 1933 (\u00a7 230.506 of this chapter) and whose involvement would not disqualify the offering under that rule is not required to comply with paragraph (b)(3) of this section.\n\n(c)  Third-party ratings.  An advertisement may not include any third-party rating, unless the investment adviser:\n\n(1) Has a reasonable basis for believing that any questionnaire or survey used in the preparation of the third-party rating is structured to make it equally easy for a participant to provide favorable and unfavorable responses, and is not designed or prepared to produce any predetermined result; and\n\n(2) Clearly and prominently discloses, or the investment adviser reasonably believes that the third-party rating clearly and prominently discloses:\n\n(i) The date on which the rating was given and the period of time upon which the rating was based;\n\n(ii) The identity of the third party that created and tabulated the rating; and\n\n(iii) If applicable, that compensation has been provided directly or indirectly by the adviser in connection with obtaining or using the third-party rating.\n\n(d)  Performance.  An investment adviser may not include in any advertisement:\n\n(1) Any presentation of gross performance, unless the advertisement also presents net performance:\n\n(i) With at least equal prominence to, and in a format designed to facilitate comparison with, the gross performance; and\n\n(ii) Calculated over the same time period, and using the same type of return and methodology, as the gross performance.\n\n(2) Any performance results, of any portfolio or any composite aggregation of related portfolios, in each case other than any private fund, unless the advertisement includes performance results of the same portfolio or composite aggregation for one-, five-, and ten-year periods, each presented with equal prominence and ending on a date that is no less recent than the most recent calendar year-end; except that if the relevant portfolio did not exist for a particular prescribed period, then the life of the portfolio must be substituted for that period.\n\n(3) Any statement, express or implied, that the calculation or presentation of performance results in the advertisement has been approved or reviewed by the Commission.\n\n(4) Any related performance, unless it includes all related portfolios; provided that related performance may exclude any related portfolios if:\n\n(i) The advertised performance results are not materially higher than if all related portfolios had been included; and\n\n(ii) The exclusion of any related portfolio does not alter the presentation of any applicable time periods prescribed by paragraph (d)(2) of this section.\n\n(5) Any extracted performance, unless the advertisement provides, or offers to provide promptly, the performance results of the total portfolio from which the performance was extracted.\n\n(6) Any hypothetical performance unless the investment adviser:\n\n(i) Adopts and implements policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement;\n\n(ii) Provides sufficient information to enable the intended audience to understand the criteria used and assumptions made in calculating such hypothetical performance; and\n\n(iii) Provides (or, if the intended audience is an investor in a private fund, provides, or offers to provide promptly) sufficient information to enable the intended audience to understand the risks and limitations of using such hypothetical performance in making investment decisions; Provided that the investment adviser need not comply with the other conditions on performance in paragraphs (d)(2), (4), and (5) of this section.\n\n(7) Any predecessor performance unless:\n\n(i) The person or persons who were primarily responsible for achieving the prior performance results manage accounts at the advertising adviser;\n\n(ii) The accounts managed at the predecessor investment adviser are sufficiently similar to the accounts managed at the advertising investment adviser that the performance results would provide relevant information to clients or investors;\n\n(iii) All accounts that were managed in a substantially similar manner are advertised unless the exclusion of any such account would not result in materially higher performance and the exclusion of any account does not alter the presentation of any applicable time periods prescribed in paragraph (d)(2) of this section; and\n\n(iv) The advertisement clearly and prominently includes all relevant disclosures, including that the performance results were from accounts managed at another entity.\n\n(e)  Definitions.  For purposes of this section:\n\n(1)  Advertisement  means:\n\n(i) Any direct or indirect communication an investment adviser makes to more than one person, or to one or more persons if the communication includes hypothetical performance, that offers the investment adviser's investment advisory services with regard to securities to prospective clients or investors in a private fund advised by the investment adviser or offers new investment advisory services with regard to securities to current clients or investors in a private fund advised by the investment adviser, but does not include:\n\n(A) Extemporaneous, live, oral communications;\n\n(B) Information contained in a statutory or regulatory notice, filing, or other required communication, provided that such information is reasonably designed to satisfy the requirements of such notice, filing, or other required communication; or\n\n(C) A communication that includes hypothetical performance that is provided:\n\n( 1 ) In response to an unsolicited request for such information from a prospective or current client or investor in a private fund advised by the investment adviser; or\n\n( 2 ) To a prospective or current investor in a private fund advised by the investment adviser in a one-on-one communication; and\n\n(ii) Any endorsement or testimonial for which an investment adviser provides compensation, directly or indirectly, but does not include any information contained in a statutory or regulatory notice, filing, or other required communication, provided that such information is reasonably designed to satisfy the requirements of such notice, filing, or other required communication.\n\n(2)  De minimis compensation  means compensation paid to a person for providing a  testimonial  or  endorsement  of a total of $1,000 or less (or the equivalent value in non-cash compensation) during the preceding 12 months.\n\n(3) A  disqualifying Commission action  means a Commission opinion or order barring, suspending, or prohibiting the person from acting in any capacity under the Federal securities laws.\n\n(4) A  disqualifying event  is any of the following events that occurred within ten years prior to the person disseminating an endorsement or testimonial:\n\n(i) A conviction by a court of competent jurisdiction within the United States of any felony or misdemeanor involving conduct described in paragraph (2)(A) through (D) of section 203(e) of the Act;\n\n(ii) A conviction by a court of competent jurisdiction within the United States of engaging in, any of the conduct specified in paragraphs (1), (5), or (6) of section 203(e) of the Act;\n\n(iii) The entry of any final order by any entity described in paragraph (9) of section 203(e) of the Act, or by the U.S. Commodity Futures Trading Commission or a self-regulatory organization (as defined in the Form ADV Glossary of Terms)), of the type described in paragraph (9) of section 203(e) of the Act;\n\n(iv) The entry of an order, judgment or decree described in paragraph (4) of section 203(e) of the Act, and still in effect, by any court of competent jurisdiction within the United States; and\n\n(v) A Commission order that a person cease and desist from committing or causing a violation or future violation of:\n\n(A) Any scienter-based anti-fraud provision of the Federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and \u00a7 240.10b-5 of this chapter, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)), and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or\n\n(B) Section 5 of the Securities Act of 1933 (15 U.S.C. 77e);\n\n(vi) A disqualifying event does not include an event described in paragraphs (e)(4)(i) through (v) of this section with respect to a person that is also subject to:\n\n(A) An order pursuant to section 9(c) of the Investment Company Act of 1940 (15 U.S.C. 80a-9) with respect to such event; or\n\n(B) A Commission opinion or order with respect to such event that is not a disqualifying Commission action; provided that for each applicable type of order or opinion described in paragraphs (e)(4)(vi)(A) and (B) of this section:\n\n( 1 ) The person is in compliance with the terms of the order or opinion, including, but not limited to, the payment of disgorgement, prejudgment interest, civil or administrative penalties, and fines; and\n\n( 2 ) For a period of ten years following the date of each order or opinion, the advertisement containing the testimonial or endorsement must include a statement that the person providing the testimonial or endorsement is subject to a Commission order or opinion regarding one or more disciplinary action(s), and include the order or opinion or a link to the order or opinion on the Commission's website.\n\n(5)  Endorsement  means any statement by a person other than a current client or investor in a private fund advised by the investment adviser that:\n\n(i) Indicates approval, support, or recommendation of the investment adviser or its supervised persons or describes that person's experience with the investment adviser or its supervised persons;\n\n(ii) Directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser; or\n\n(iii) Refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.\n\n(6)  Extracted performance  means the performance results of a subset of investments extracted from a portfolio.\n\n(7)  Gross performance  means the performance results of a portfolio (or portions of a  portfolio  that are included in extracted performance, if applicable) before the deduction of all fees and expenses that a client or investor has paid or would have paid in connection with the investment adviser's investment advisory services to the relevant portfolio.\n\n(8)  Hypothetical performance  means performance results that were not actually achieved by any portfolio of the investment adviser.\n\n(i) Hypothetical performance includes, but is not limited to;\n\n(A) Performance derived from model portfolios;\n\n(B) Performance that is backtested by the application of a strategy to data from prior time periods when the strategy was not actually used during those time periods; and\n\n(C) Targeted or projected performance returns with respect to any portfolio or to the investment advisory services with regard to securities offered in the advertisement, however:\n\n(ii) Hypothetical performance does not include:\n\n(A) An interactive analysis tool where a client or investor, or prospective client, or investor, uses the tool to produce simulations and statistical analyses that present the likelihood of various investment outcomes if certain investments are made or certain investment strategies or styles are undertaken, thereby serving as an additional resource to investors in the evaluation of the potential risks and returns of investment choices; provided that the investment adviser:\n\n( 1 ) Provides a description of the criteria and methodology used, including the investment analysis tool's limitations and key assumptions;\n\n( 2 ) Explains that the results may vary with each use and over time;\n\n( 3 ) If applicable, describes the universe of investments considered in the analysis, explains how the tool determines which investments to select, discloses if the tool favors certain investments and, if so, explains the reason for the selectivity, and states that other investments not considered may have characteristics similar or superior to those being analyzed; and\n\n( 4 ) Discloses that the tool generates outcomes that are hypothetical in nature; or\n\n(B) Predecessor performance that is displayed in compliance with paragraph (d)(7) of this section.\n\n(9)  Ineligible person  means a person who is subject to a disqualifying Commission action or is subject to any disqualifying event, and the following persons with respect to the ineligible person:\n\n(i) Any employee, officer, or director of the ineligible person and any other individuals with similar status or functions within the scope of association with the ineligible person;\n\n(ii) If the ineligible person is a partnership, all general partners; and\n\n(iii) If the ineligible person is a limited liability company managed by elected managers, all elected managers.\n\n(10)  Net performance  means the performance results of a portfolio (or portions of a portfolio that are included in extracted performance, if applicable) after the deduction of all fees and expenses that a client or investor has paid or would have paid in connection with the investment adviser's investment advisory services to the relevant portfolio, including, if applicable, advisory fees, advisory fees paid to underlying investment vehicles, and payments by the investment adviser for which the client or investor reimburses the investment adviser. For purposes of this rule, net performance:\n\n(i) May reflect the exclusion of custodian fees paid to a bank or other third-party organization for safekeeping funds and securities; and/or\n\n(ii) If using a model fee, must reflect one of the following:\n\n(A) The deduction of a model fee when doing so would result in performance figures that are no higher than if the actual fee had been deducted; or\n\n(B) The deduction of a model fee that is equal to the highest fee charged to the intended audience to whom the advertisement is disseminated.\n\n(11)  Portfolio  means a group of investments managed by the investment adviser. A portfolio may be an account or a private fund and includes, but is not limited to, a portfolio for the account of the investment adviser or its advisory affiliate (as defined in the Form ADV Glossary of Terms).\n\n(12)  Predecessor performance  means investment performance achieved by a group of investments consisting of an account or a private fund that was not advised at all times during the period shown by the investment adviser advertising the performance.\n\n(13)  Private fund  has the same meaning as in section 202(a)(29) of the Act.\n\n(14)  Related performance  means the performance results of one or more related portfolios, either on a portfolio-by-portfolio basis or as a composite aggregation of all portfolios falling within stated criteria.\n\n(15)  Related portfolio  means a portfolio with substantially similar investment policies, objectives, and strategies as those of the services being offered in the advertisement.\n\n(16)  Supervised person  has the same meaning as in section 202(a)(25) of the Act.\n\n(17)  Testimonial  means any statement by a current client or investor in a private fund advised by the investment adviser:\n\n(i) About the client or investor's experience with the investment adviser or its supervised persons;\n\n(ii) That directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser; or\n\n(iii) That refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.\n\n(18)  Third-party rating  means a rating or ranking of an investment adviser provided by a person who is not a related person (as defined in the Form ADV Glossary of Terms), and such person provides such ratings or rankings in the ordinary course of its business."], ["17:17:5.0.1.1.22.0.36.32", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(4)-2 Custody of funds or securities of clients by investment advisers.", "SEC", "", "", "[75 FR 1484, Jan. 11, 2010]", "(a)  Safekeeping required.  If you are an investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), it is a fraudulent, deceptive, or manipulative act, practice or course of business within the meaning of section 206(4) of the  Act (15 U.S.C. 80b-6(4))  for you to have custody of client funds or securities unless:\n\n(1)  Qualified custodian.  A qualified custodian maintains those funds and securities:\n\n(i) In a separate account for each client under that client's name; or\n\n(ii) In accounts that contain only your clients' funds and securities, under your name as agent or trustee for the clients.\n\n(2)  Notice to clients.  If you open an account with a qualified custodian on your client's behalf, either under the client's name or under your name as agent, you notify the client in writing of the qualified custodian's name, address, and the manner in which the funds or securities are maintained, promptly when the account is opened and following any changes to this information. If you send account statements to a client to which you are required to provide this notice, include in the notification provided to that client and in any subsequent account statement you send that client a statement urging the client to compare the account statements from the custodian with those from the adviser.\n\n(3)  Account statements to clients.  You have a reasonable basis, after due inquiry, for believing that the qualified custodian sends an account statement, at least quarterly, to each of your clients for which it maintains funds or securities, identifying the amount of funds and of each security in the account at the end of the period and setting forth all transactions in the account during that period.\n\n(4)  Independent verification.  The client funds and securities of which you have custody are verified by actual examination at least once during each calendar year, except as provided below, by an independent public accountant, pursuant to a written agreement between you and the accountant, at a time that is chosen by the accountant without prior notice or announcement to you and that is irregular from year to year. The written agreement must provide for the first examination to occur within six months of becoming subject to this paragraph, except that, if you maintain client funds or securities pursuant to this section as a qualified custodian, the agreement must provide for the first examination to occur no later than six months after obtaining the internal control report. The written agreement must require the accountant to:\n\n(i) File a certificate on Form ADV-E (17 CFR 279.8) with the Commission within 120 days of the time chosen by the accountant in paragraph (a)(4) of this section, stating that it has examined the funds and securities and describing the nature and extent of the examination;\n\n(ii) Upon finding any material discrepancies during the course of the examination, notify the Commission within one business day of the finding, by means of a facsimile transmission or electronic mail, followed by first class mail, directed to the attention of the Director of the Office of Compliance Inspections and Examinations; and\n\n(iii) Upon resignation or dismissal from, or other termination of, the engagement, or upon removing itself or being removed from consideration for being reappointed, file within four business days Form ADV-E accompanied by a statement that includes:\n\n(A) The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the accountant; and\n\n(B) An explanation of any problems relating to examination scope or procedure that contributed to such resignation, dismissal, removal, or other termination.\n\n(5)  Special rule for limited partnerships and limited liability companies.  If you or a related person is a general partner of a limited partnership (or managing member of a limited liability company, or hold a comparable position for another type of pooled investment vehicle), the account statements required under paragraph (a)(3) of this section must be sent to each limited partner (or member or other beneficial owner).\n\n(6)  Investment advisers acting as qualified custodians.  If you maintain, or if you have custody because a related person maintains, client funds or securities pursuant to this section as a qualified custodian in connection with advisory services you provide to clients:\n\n(i) The independent public accountant you retain to perform the independent verification required by paragraph (a)(4) of this section must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules; and\n\n(ii) You must obtain, or receive from your related person, within six months of becoming subject to this paragraph and thereafter no less frequently than once each calendar year a written internal control report prepared by an independent public accountant:\n\n(A) The internal control report must include an opinion of an independent public accountant as to whether controls have been placed in operation as of a specific date, and are suitably designed and are operating effectively to meet control objectives relating to custodial services, including the safeguarding of funds and securities held by either you or a related person on behalf of your advisory clients, during the year;\n\n(B) The independent public accountant must verify that the funds and securities are reconciled to a custodian other than you or your related person; and\n\n(C) The independent public accountant must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules.\n\n(7)  Independent representatives.  A client may designate an independent representative to receive, on his behalf, notices and account statements as required under paragraphs (a)(2) and (a)(3) of this section.\n\n(b)  Exceptions.  (1)  Shares of mutual funds.  With respect to shares of an open-end company as defined in section 5(a)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-5(a)(1)) (\u201cmutual fund\u201d), you may use the mutual fund's transfer agent in lieu of a qualified custodian for purposes of complying with paragraph (a) of this section.\n\n(2)  Certain privately offered securities.  (i) You are not required to comply with paragraph (a)(1) of this section with respect to securities that are:\n\n(A) Acquired from the issuer in a transaction or chain of transactions not involving any public offering;\n\n(B) Uncertificated, and ownership thereof is recorded only on the books of the issuer or its transfer agent in the name of the client; and\n\n(C) Transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer.\n\n(ii) Notwithstanding paragraph (b)(2)(i) of this section, the provisions of this paragraph (b)(2) are available with respect to securities held for the account of a limited partnership (or a limited liability company, or other type of pooled investment vehicle) only if the limited partnership is audited, and the audited financial statements are distributed, as described in paragraph (b)(4) of this section.\n\n(3)  Fee deduction.  Notwithstanding paragraph (a)(4) of this section, you are not required to obtain an independent verification of client funds and securities maintained by a qualified custodian if:\n\n(i) you have custody of the funds and securities solely as a consequence of your authority to make withdrawals from client accounts to pay your advisory fee; and\n\n(ii) if the qualified custodian is a related person, you can rely on paragraph (b)(6) of this section.\n\n(4)  Limited partnerships subject to annual audit.  You are not required to comply with paragraphs (a)(2) and (a)(3) of this section and you shall be deemed to have complied with paragraph (a)(4) of this section with respect to the account of a limited partnership (or limited liability company, or another type of pooled investment vehicle) that is subject to audit (as defined in rule 1-02(d) of Regulation S-X (17 CFR 210.1-02(d))):\n\n(i) At least annually and distributes its audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners (or members or other beneficial owners) within 120 days of the end of its fiscal year;\n\n(ii) By an independent public accountant that is registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules; and\n\n(iii) Upon liquidation and distributes its audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners (or members or other beneficial owners) promptly after the completion of such audit.\n\n(5)  Registered investment companies.  You are not required to comply with this section (17 CFR 275.206(4)-2) with respect to the account of an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 to 80a-64).\n\n(6)  Certain Related Persons.  Notwithstanding paragraph (a)(4) of this section, you are not required to obtain an independent verification of client funds and securities if:\n\n(i) you have custody under this rule solely because a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients; and\n\n(ii) your related person is operationally independent of you.\n\n(c)  Delivery to Related Person.  Sending an account statement under paragraph (a)(5) of this section or distributing audited financial statements under paragraph (b)(4) of this section shall not satisfy the requirements of this section if such account statements or financial statements are sent solely to limited partners (or members or other beneficial owners) that themselves are limited partnerships (or limited liability companies, or another type of pooled investment vehicle) and are your related persons.\n\n(d)  Definitions.  For the purposes of this section:\n\n(1)  Control  means the power, directly or indirectly, to direct the management or policies of a person, whether through ownership of securities, by contract, or otherwise. Control includes:\n\n(i) Each of your firm's officers, partners, or directors exercising executive responsibility (or persons having similar status or functions) is presumed to control your firm;\n\n(ii) A person is presumed to control a corporation if the person:\n\n(A) Directly or indirectly has the right to vote 25 percent or more of a class of the corporation's voting securities; or\n\n(B) Has the power to sell or direct the sale of 25 percent or more of a class of the corporation's voting securities;\n\n(iii) A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the partnership;\n\n(iv) A person is presumed to control a limited liability company if the person:\n\n(A) Directly or indirectly has the right to vote 25 percent or more of a class of the interests of the limited liability company;\n\n(B) Has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the limited liability company; or\n\n(C) Is an elected manager of the limited liability company; or\n\n(v) A person is presumed to control a trust if the person is a trustee or managing agent of the trust.\n\n(2)  Custody  means holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. You have custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients. Custody includes:\n\n(i) Possession of client funds or securities (but not of checks drawn by clients and made payable to third parties) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;\n\n(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and\n\n(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.\n\n(3)  Independent public accountant  means a public accountant that meets the standards of independence described in rule 2-01(b) and (c) of Regulation S-X (17 CFR 210.2-01(b) and (c)).\n\n(4)  Independent representative  means a person that:\n\n(i) Acts as agent for an advisory client, including in the case of a pooled investment vehicle, for limited partners of a limited partnership (or members of a limited liability company, or other beneficial owners of another type of pooled investment vehicle) and by law or contract is obliged to act in the best interest of the advisory client or the limited partners (or members, or other beneficial owners);\n\n(ii) Does not control, is not controlled by, and is not under common control with you; and\n\n(iii) Does not have, and has not had within the past two years, a material business relationship with you.\n\n(5)  Operationally independent:  for purposes of paragraph (b)(6) of this section, a related person is presumed not to be operationally independent unless each of the following conditions is met and no other circumstances can reasonably be expected to compromise the operational independence of the related person: (i) Client assets in the custody of the related person are not subject to claims of the adviser's creditors; (ii) advisory personnel do not have custody or possession of, or direct or indirect access to client assets of which the related person has custody, or the power to control the disposition of such client assets to third parties for the benefit of the adviser or its related persons, or otherwise have the opportunity to misappropriate such client assets; (iii) advisory personnel and personnel of the related person who have access to advisory client assets are not under common supervision; and (iv) advisory personnel do not hold any position with the related person or share premises with the related person.\n\n(6)  Qualified custodian  means:\n\n(i) A bank as defined in section 202(a)(2) of the Advisers Act (15 U.S.C. 80b-2(a)(2)) or a savings association as defined in section 3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)) that has deposits insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act (12 U.S.C. 1811);\n\n(ii) A broker-dealer registered under section 15(b)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(1)), holding the client assets in customer accounts;\n\n(iii) A futures commission merchant registered under section 4f(a) of the Commodity Exchange Act (7 U.S.C. 6f(a)), holding the client assets in customer accounts, but only with respect to clients' funds and security futures, or other securities incidental to transactions in contracts for the purchase or sale of a commodity for future delivery and options thereon; and\n\n(iv) A foreign financial institution that customarily holds financial assets for its customers, provided that the foreign financial institution keeps the advisory clients' assets in customer accounts segregated from its proprietary assets.\n\n(7)  Related person  means any person, directly or indirectly, controlling or controlled by you, and any person that is under common control with you."], ["17:17:5.0.1.1.22.0.36.33", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7\u00a7 275.206(4)-(3)--275.206(4)-4 [Reserved]", "SEC", "", "", "", ""], ["17:17:5.0.1.1.22.0.36.34", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(4)-5 Political contributions by certain investment advisers.", "SEC", "", "", "[75 FR 41069, July 14, 2010, as amended at 76 FR 43013, July 19, 2011; 77 FR 28477, May 15, 2012]", "(a)  Prohibitions.  As a means reasonably designed to prevent fraudulent, deceptive or manipulative acts, practices, or courses of business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-6(4)), it shall be unlawful:\n\n(1) For any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under section 203(b)(3) of the Advisers Act (15 U.S.C. 80b-3(b)(3)), or that is an exempt reporting adviser, as defined in section 275.204-4(a), to provide investment advisory services for compensation to a government entity within two years after a contribution to an official of the government entity is made by the investment adviser or any covered associate of the investment adviser (including a person who becomes a covered associate within two years after the contribution is made); and\n\n(2) For any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under section 203(b)(3) of the Advisers Act (15 U.S.C. 80b-3(b)(3)), or that is an exempt reporting adviser, or any of the investment adviser's covered associates:\n\n(i) To provide or agree to provide, directly or indirectly, payment to any person to solicit a government entity for investment advisory services on behalf of such investment adviser unless such person is:\n\n(A) A regulated person; or\n\n(B) An executive officer, general partner, managing member (or, in each case, a person with a similar status or function), or employee of the investment adviser; and\n\n(ii) To coordinate, or to solicit any person or political action committee to make, any:\n\n(A) Contribution to an official of a government entity to which the investment adviser is providing or seeking to provide investment advisory services; or\n\n(B) Payment to a political party of a State or locality where the investment adviser is providing or seeking to provide investment advisory services to a government entity.\n\n(b)  Exceptions \u2014(1)  De minimis exception.  Paragraph (a)(1) of this section does not apply to contributions made by a covered associate, if a natural person, to officials for whom the covered associate  was  entitled to vote at the time of the contributions and which in the aggregate do not exceed $350 to any one official, per election, or to officials for whom the covered associate was not entitled to vote at the time of the contributions and which in the aggregate do not exceed $150 to any one official, per election.\n\n(2)  Exception for certain new covered associates.  The prohibitions of paragraph (a)(1) of this section shall not apply to an investment adviser as a result of a contribution made by a natural person more than six months prior to becoming a covered associate of the investment adviser unless such person, after becoming a covered associate, solicits clients on behalf of the investment adviser.\n\n(3)  Exception for certain returned contributions.  (i) An investment adviser that is prohibited from providing investment advisory services for compensation pursuant to paragraph (a)(1) of this section as a result of a contribution made by a covered associate of the investment adviser is excepted from such prohibition, subject to paragraphs (b)(3)(ii) and (b)(3)(iii) of this section, upon satisfaction of the following requirements:\n\n(A) The investment adviser must have discovered the contribution which resulted in the prohibition within four months of the date of such contribution;\n\n(B) Such contribution must not have exceeded $350; and\n\n(C) The contributor must obtain a return of the contribution within 60 calendar days of the date of discovery of such contribution by the investment adviser.\n\n(ii) In any calendar year, an investment adviser that has reported on its annual updating amendment to Form ADV (17 CFR 279.1) that it has more than 50 employees is entitled to no more than three exceptions pursuant to paragraph (b)(3)(i) of this section, and an investment adviser that has reported on its annual updating amendment to Form ADV that it has 50 or fewer employees is entitled to no more than two exceptions pursuant to paragraph (b)(3)(i) of this section.\n\n(iii) An investment adviser may not rely on the exception provided in paragraph (b)(3)(i) of this section more than once with respect to contributions by the same covered associate of the investment adviser regardless of the time period.\n\n(c)  Prohibitions as applied to covered investment pools.  For purposes of this section, an investment adviser to a covered investment pool in which a government entity invests or is solicited to invest shall be treated as though that investment adviser were providing or seeking to provide investment advisory services directly to the government entity.\n\n(d)  Further prohibition.  As a means reasonably designed to prevent fraudulent, deceptive or manipulative acts, practices, or courses of business within the meaning of section 206(4) of Advisers Act (15 U.S.C. 80b-6(4)), it shall be unlawful for any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under section 203(b)(3) of the Advisers Act (15 U.S.C. 80b-3(b)(3)), or that is an exempt reporting adviser, or any of the investment adviser's covered associates to do anything indirectly which, if done directly, would result in a violation of this section.\n\n(e)  Exemptions.  The Commission, upon application, may conditionally or unconditionally exempt an investment adviser from the prohibition under paragraph (a)(1) of this section. In determining whether to grant an exemption, the Commission will consider, among other factors:\n\n(1) Whether the exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Advisers Act (15 U.S.C. 80b);\n\n(2) Whether the investment adviser:\n\n(i) Before the contribution resulting in the prohibition was made, adopted and implemented policies and procedures reasonably designed to prevent violations of this section; and\n\n(ii) Prior to or at the time the contribution which resulted in such prohibition was made, had no actual knowledge of the contribution; and\n\n(iii) After learning of the contribution:\n\n(A) Has taken all available steps to cause the contributor involved in making the contribution which resulted in such prohibition to obtain a return of the contribution; and\n\n(B) Has taken such other remedial or preventive measures as may be appropriate under the circumstances;\n\n(3) Whether, at the time of the contribution, the contributor was a covered associate or otherwise an employee of the investment adviser, or was seeking such employment;\n\n(4) The timing and amount of the contribution which resulted in the prohibition;\n\n(5) The nature of the election ( e.g,  Federal, State or local); and\n\n(6) The contributor's apparent intent or motive in making the contribution which resulted in the prohibition, as evidenced by the facts and circumstances surrounding such contribution.\n\n(f)  Definitions.  For purposes of this section:\n\n(1)  Contribution  means any gift, subscription, loan, advance, or deposit of money or anything of value made for:\n\n(i) The purpose of influencing any election for Federal, State or local office;\n\n(ii) Payment of debt incurred in connection with any such election; or\n\n(iii) Transition or inaugural expenses of the successful candidate for State or local office.\n\n(2)  Covered associate  of an investment adviser means:\n\n(i) Any general partner, managing member or executive officer, or other individual with a similar status or function;\n\n(ii) Any employee who solicits a government entity for the investment adviser and any person who supervises, directly or indirectly, such employee; and\n\n(iii) Any political action committee controlled by the investment adviser or by any person described in paragraphs (f)(2)(i) and (f)(2)(ii) of this section.\n\n(3)  Covered investment pool  means:\n\n(i) An investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a) that is an investment option of a plan or program of a government entity; or\n\n(ii) Any company that would be an investment company under section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)), but for the exclusion provided from that definition by either section 3(c)(1), section 3(c)(7) or section 3(c)(11) of that Act (15 U.S.C. 80a-3(c)(1), (c)(7) or (c)(11)).\n\n(4)  Executive officer  of an investment adviser means:\n\n(i) The president;\n\n(ii) Any vice president in charge of a principal business unit, division or function (such as sales, administration or finance);\n\n(iii) Any other officer of the investment adviser who performs a policy-making function; or\n\n(iv) Any other person who performs similar policy-making functions for the investment adviser.\n\n(5)  Government entity  means any State or political subdivision of a State, including:\n\n(i) Any agency, authority, or instrumentality of the State or political subdivision;\n\n(ii) A pool of assets sponsored or established by the State or political subdivision or any agency, authority or instrumentality thereof, including, but not limited to a \u201cdefined benefit plan\u201d as defined in section 414(j) of the Internal Revenue Code (26 U.S.C. 414(j)), or a State general fund;\n\n(iii) A plan or program of a government entity; and\n\n(iv) Officers, agents, or employees of the State or political subdivision or any agency, authority or instrumentality thereof, acting in their official capacity.\n\n(6)  Official  means any person (including any election committee for the person) who was, at the time of the contribution, an incumbent, candidate or successful candidate for elective office of a government entity, if the office:\n\n(i) Is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a government entity; or\n\n(ii) Has authority to appoint any person who is directly or indirectly responsible for, or can influence the outcome of, the hiring of an investment adviser by a government entity.\n\n(7)  Payment  means any gift, subscription, loan, advance, or deposit of money or anything of value.\n\n(8)  Plan or program of a government entity  means any participant-directed investment program or plan sponsored or established by a State or political subdivision or any agency, authority or instrumentality thereof, including, but not limited to, a \u201cqualified tuition plan\u201d authorized by section 529 of the Internal Revenue Code (26 U.S.C. 529), a retirement plan authorized by section 403(b) or 457 of the Internal Revenue Code (26 U.S.C. 403(b) or 457), or any similar program or plan.\n\n(9)  Regulated person  means:\n\n(i) An investment adviser registered with the Commission that has not, and whose covered associates have not, within two years of soliciting a government entity:\n\n(A) Made a contribution to an official of that government entity, other than as described in paragraph (b)(1) of this section; and\n\n(B) Coordinated or solicited any person or political action committee to make any contribution or payment described in paragraphs (a)(2)(ii)(A) and (B) of this section;\n\n(ii) A \u201cbroker,\u201d as defined in section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)) or a \u201cdealer,\u201d as defined in section 3(a)(5) of that Act (15 U.S.C. 78c(a)(5)), that is registered with the Commission, and is a member of a national securities association registered under 15A of that Act (15 U.S.C. 78o-3), provided that:\n\n(A) The rules of the association prohibit members from engaging in distribution or solicitation activities if certain political contributions have been made; and\n\n(B) The Commission, by order, finds that such rules impose substantially equivalent or more stringent restrictions on broker-dealers than this section imposes on investment advisers and that such rules are consistent with the objectives of this section; and\n\n(iii) A \u201cmunicipal advisor\u201d registered with the Commission under section 15B of the Exchange Act and subject to rules of the Municipal Securities Rulemaking Board, provided that:\n\n(A) Such rules prohibit municipal advisors from engaging in distribution or solicitation activities if certain political contributions have been made; and\n\n(B) The Commission, by order, finds that such rules impose substantially equivalent or more stringent restrictions on municipal advisors than this section imposes on investment advisers and that such rules are consistent with the objectives of this section.\n\n(10)  Solicit  means:\n\n(i) With respect to investment advisory services, to communicate, directly or indirectly, for the purpose of obtaining or retaining a client for, or referring a client to, an investment adviser; and\n\n(ii) With respect to a contribution or payment, to communicate, directly or indirectly, for the purpose of obtaining or arranging a contribution or payment."], ["17:17:5.0.1.1.22.0.36.35", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(4)-6 Proxy voting.", "SEC", "", "", "[68 FR 6593, Feb. 7, 2003]", "If you are an investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), it is a fraudulent, deceptive, or manipulative act, practice or course of business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-6(4)), for you to exercise voting authority with respect to client securities, unless you:\n\n(a) Adopt and implement written policies and procedures that are reasonably designed to ensure that you vote client securities in the best interest of clients, which procedures must include how you address material conflicts that may arise between your interests and those of your clients;\n\n(b) Disclose to clients how they may obtain information from you about how you voted with respect to their securities; and\n\n(c) Describe to clients your proxy voting policies and procedures and, upon request, furnish a copy of the policies and procedures to the requesting client."], ["17:17:5.0.1.1.22.0.36.36", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(4)-7 Compliance procedures and practices.", "SEC", "", "", "[68 FR 74730, Dec. 24, 2003, as amended at 88 FR 63386, Sept. 14, 2023; 89 FR 91253, Nov. 19, 2024]", "If you are an investment adviser registered or required to be registered under section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3), it shall be unlawful within the meaning of section 206 of the Act (15 U.S.C. 80b-6) for you to provide investment advice to clients unless you:\n\n(a)  Policies and procedures.  Adopt and implement written policies and procedures reasonably designed to prevent violation, by you and your supervised persons, of the Act and the rules that the Commission has adopted under the Act;\n\n(b)  Annual review.  Review, no less frequently than annually, the adequacy of the policies and procedures established pursuant to this section and the effectiveness of their implementation; and\n\n(c)  Chief compliance officer.  Designate an individual (who is a supervised person) responsible for administering the policies and procedures that you adopt under paragraph (a) of this section."], ["17:17:5.0.1.1.22.0.36.37", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.206(4)-8 Pooled investment vehicles.", "SEC", "", "", "[72 FR 44761, Aug. 9, 2007]", "(a)  Prohibition.  It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) of the Act (15 U.S.C. 80b-6(4)) for any investment adviser to a pooled investment vehicle to:\n\n(1) Make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading, to any investor or prospective investor in the pooled investment vehicle; or\n\n(2) Otherwise engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle.\n\n(b)  Definition.  For purposes of this section \u201cpooled investment vehicle\u201d means any investment company as defined in section 3(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(a)) or any company that would be an investment company under section 3(a) of that Act but for the exclusion provided from that definition by either section 3(c)(1) or section 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or (7))."], ["17:17:5.0.1.1.22.0.36.38", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.222-1 Definitions.", "SEC", "", "", "[62 FR 28135, May 22, 1997, as amended at 76 FR 43014, July 19, 2011]", "For purposes of section 222 (15 U.S.C. 80b-18a) of the Act:\n\n(a)  Place of business.  \u201cPlace of business\u201d of an investment adviser means:\n\n(1) An office at which the investment adviser regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients; and\n\n(2) Any other location that is held out to the general public as a location at which the investment adviser provides investment advisory services, solicits, meets with, or otherwise communicates with clients.\n\n(b)  Principal office and place of business.  \u201cPrincipal office and place of business\u201d of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser."], ["17:17:5.0.1.1.22.0.36.39", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.222-2 Definition of \u201cclient\u201d for purposes of the national de minimis standard.", "SEC", "", "", "[76 FR 43014, July 19, 2011]", "For purposes of section 222(d)(2) of the Act (15 U.S.C. 80b-18a(d)(2)), an investment adviser may rely upon the definition of \u201cclient\u201d provided by \u00a7 275.202(a)(30)-1, without giving regard to paragraph (b)(4) of that section."], ["17:17:5.0.1.1.22.0.36.4", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.0-5 Procedure with respect to applications and other matters.", "SEC", "", "", "[41 FR 39020, Sept. 14, 1976, as amended at 61 FR 49962, Sept. 24, 1996]", "The procedure hereinbelow set forth will be followed with respect to any proceeding initiated by the filing of an application, or upon the Commission's own motion, pursuant to any section of the Act or any rule or regulation thereunder, unless in the particular case a different procedure is provided:\n\n(a) Notice of the initiation of the proceeding will be published in the  Federal Register  and will indicate the earliest date upon which an order disposing of the matter may be entered. The notice will also provide that any interested person may, within the period of time specified therein, submit to the Commission in writing any facts bearing upon the desirability of a hearing on the matter and may request that a hearing be held, stating his reasons therefor and the nature of his interest in the matter.\n\n(b) An order disposing of the matter will be issued as of course following the expiration of the period of time referred to in paragraph (a) of this section, unless the Commission thereafter orders a hearing on the matter.\n\n(c) The Commission will order a hearing on the matter, if it appears that a hearing is necessary or appropriate in the public interest or for the protection of investors, (1) upon the request of any interested person or (2) upon its own motion.\n\n(d)  Definition of application.  For purposes of this rule, an \u201capplication\u201d means any application for an order of the Commission under the Act other than an application for registration as an investment adviser."], ["17:17:5.0.1.1.22.0.36.5", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.0-6 Incorporation by reference in applications.", "SEC", "", "", "[84 FR 12738, Apr. 2, 2019]", "(a)  Exhibits.  Any document or part thereof, including any financial statement or part thereof, filed with the Commission pursuant to any Act administered by the Commission may be incorporated by reference as an exhibit to any application filed with the Commission by the same or any other person. If any modification has occurred in the text of any document incorporated by reference since the filing thereof, the registrant must file with the reference a statement containing the text of any such modification and the date thereof.\n\n(b)  General.  Include an express statement clearly describing the specific location of the information you are incorporating by reference. The statement must identify the document where the information was originally filed or submitted and the location of the information within that document. The statement must be made at the particular place where the information is required, if applicable. Information must not be incorporated by reference in any case where such incorporation would render the disclosure incomplete, unclear, or confusing. For example, unless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document.\n\n(c)  Definition of Application.  For purposes of this rule, an \u201capplication\u201d means any application for an order of the Commission under the Act other than an application for registration as an investment adviser."], ["17:17:5.0.1.1.22.0.36.6", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.0-7 Small entities under the Investment Advisers Act for purposes of the Regulatory Flexibility Act.", "SEC", "", "", "[63 FR 35515, June 30, 1998, as amended at 65 FR 57448, Sept. 22, 2000; 76 FR 43011, July 19, 2011]", "(a) For purposes of Commission rulemaking in accordance with the provisions of Chapter Six of the Administrative Procedure Act (5 U.S.C. 601  et seq. ) and unless otherwise defined for purposes of a particular rulemaking proceeding, the term  small business  or  small organization  for purposes of the Investment Advisers Act of 1940 shall mean an investment adviser that:\n\n(1) Has assets under management, as defined under Section 203A(a)(3) of the Act (15 U.S.C. 80b-3a(a)(2)) and reported on its annual updating amendment to Form ADV (17 CFR 279.1), of less than $25 million, or such higher amount as the Commission may by rule deem appropriate under Section 203A(a)(1)(A) of the Act (15 U.S.C. 80b-3a(a)(1)(A));\n\n(2) Did not have total assets of $5 million or more on the last day of the most recent fiscal year; and\n\n(3) Does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more (or such higher amount as the Commission may deem appropriate), or any person (other than a natural person) that had total assets of $5 million or more on the last day of the most recent fiscal year.\n\n(b) For purposes of this section:\n\n(1)  Control  means the power, directly or indirectly, to direct the management or policies of a person, whether through ownership of securities, by contract, or otherwise.\n\n(i) A person is presumed to control a corporation if the person:\n\n(A) Directly or indirectly has the right to vote 25 percent or more of a class of the corporation's voting securities; or\n\n(B) Has the power to sell or direct the sale of 25 percent or more of a class of the corporation's voting securities.\n\n(ii) A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the partnership.\n\n(iii) A person is presumed to control a limited liability company (LLC) if the person:\n\n(A) Directly or indirectly has the right to vote 25 percent or more of a class of the interests of the LLC;\n\n(B) Has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the LLC; or\n\n(C) Is an elected manager of the LLC.\n\n(iv) A person is presumed to control a trust if the person is a trustee or managing agent of the trust.\n\n(2)  Total assets  means the total assets as shown on the balance sheet of the investment adviser or other person described above under paragraph (a)(3) of this section, or the balance sheet of the investment adviser or such other person with its subsidiaries consolidated, whichever is larger."], ["17:17:5.0.1.1.22.0.36.7", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.202(a)(1)-1 Certain transactions not deemed assignments.", "SEC", "", "", "[51 FR 32907, Sept. 17, 1986; 64 FR 2567, Jan. 15, 1999]", "A transaction which does not result in a change of actual control or management of an investment adviser is not an assignment for purposes of section 205(a)(2) of the Act."], ["17:17:5.0.1.1.22.0.36.8", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.202(a)(11)(G)-1 Family offices.", "SEC", "", "", "[76 FR 37994, June 29, 2011, as amended at 81 FR 60457, Sept. 1, 2016]", "(a)  Exclusion.  A family office, as defined in this section, shall not be considered to be an investment adviser for purpose of the Act.\n\n(b)  Family office.  A family office is a company (including its directors, partners, members, managers, trustees, and employees acting within the scope of their position or employment) that:\n\n(1) Has no clients other than family clients; provided that if a person that is not a family client becomes a client of the family office as a result of the death of a family member or key employee or other involuntary transfer from a family member or key employee, that person shall be deemed to be a family client for purposes of this section for one year following the completion of the transfer of legal title to the assets resulting from the involuntary event;\n\n(2) Is wholly owned by family clients and is exclusively controlled (directly or indirectly) by one or more family members and/or family entities; and\n\n(3) Does not hold itself out to the public as an investment adviser.\n\n(c)  Grandfathering.  A family office as defined in paragraph (a) of this section shall not exclude any person, who was not registered or required to be registered under the Act on January 1, 2010, solely because such person provides investment advice to, and was engaged before January 1, 2010 in providing investment advice to:\n\n(1) Natural persons who, at the time of their applicable investment, are officers, directors, or employees of the family office who have invested with the family office before January 1, 2010 and are accredited investors, as defined in Regulation D under the Securities Act of 1933;\n\n(2) Any company owned exclusively and controlled by one or more family members; or\n\n(3) Any investment adviser registered under the Act that provides investment advice to the family office and who identifies investment opportunities to the family office, and invests in such transactions on substantially the same terms as the family office invests, but does not invest in other funds advised by the family office, and whose assets as to which the family office directly or indirectly provides investment advice represents, in the aggregate, not more than 5 percent of the value of the total assets as to which the family office provides investment advice; provided that a family office that would not be a family office but for this paragraph (c) shall be deemed to be an investment adviser for purposes of paragraphs (1), (2) and (4) of section 206 of the Act.\n\n(d)  Definitions.  For purposes of this section:\n\n(1)  Affiliated family office  means a family office wholly owned by family clients of another family office and that is controlled (directly or indirectly) by one or more family members of such other family office and/or family entities affiliated with such other family office and has no clients other than family clients of such other family office.\n\n(2)  Control  means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of being an officer of such company.\n\n(3)  Executive officer  means the president, any vice president in charge of a principal business unit, division or function (such as administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions, for the family office.\n\n(4)  Family client  means:\n\n(i) Any family member;\n\n(ii) Any former family member;\n\n(iii) Any key employee;\n\n(iv) Any former key employee, provided that upon the end of such individual's employment by the family office, the former key employee shall not receive investment advice from the family office (or invest additional assets with a family office-advised trust, foundation or entity) other than with respect to assets advised (directly or indirectly) by the family office immediately prior to the end of such individual's employment, except that a former key employee shall be permitted to receive investment advice from the family office with respect to additional investments that the former key employee was contractually obligated to make, and that relate to a family-office advised investment existing, in each case prior to the time the person became a former key employee.\n\n(v) Any non-profit organization, charitable foundation, charitable trust (including charitable lead trusts and charitable remainder trusts whose only current beneficiaries are other family clients and charitable or non-profit organizations), or other charitable organization, in each case for which all the funding such foundation, trust or organization holds came exclusively from one or more other family clients;\n\n(vi) Any estate of a family member, former family member, key employee, or, subject to the condition contained in paragraph (d)(4)(iv) of this section, former key employee;\n\n(vii) Any irrevocable trust in which one or more other family clients are the only current beneficiaries;\n\n(viii) Any irrevocable trust funded exclusively by one or more other family clients in which other family clients and non-profit organizations, charitable foundations, charitable trusts, or other charitable organizations are the only current beneficiaries;\n\n(ix) Any revocable trust of which one or more other family clients are the sole grantor;\n\n(x) Any trust of which: Each trustee or other person authorized to make decisions with respect to the trust is a key employee; and each settlor or other person who has contributed assets to the trust is a key employee or the key employee's current and/or former spouse or spousal equivalent who, at the time of contribution, holds a joint, community property, or other similar shared ownership interest with the key employee; or\n\n(xi) Any company wholly owned (directly or indirectly) exclusively by, and operated for the sole benefit of, one or more other family clients; provided that if any such entity is a pooled investment vehicle, it is excepted from the definition of \u201cinvestment company\u201d under the Investment Company Act of 1940.\n\n(5)  Family entity  means any of the trusts, estates, companies or other entities set forth in paragraphs (d)(4)(v), (vi), (vii), (viii), (ix), or (xi) of this section, but excluding key employees and their trusts from the definition of family client solely for purposes of this definition.\n\n(6)  Family member  means all lineal descendants (including by adoption, stepchildren, foster children, and individuals that were a minor when another family member became a legal guardian of that individual) of a common ancestor (who may be living or deceased), and such lineal descendants' spouses or spousal equivalents; provided that the common ancestor is no more than 10 generations removed from the youngest generation of family members.\n\n(7)  Former family member  means a spouse, spousal equivalent, or stepchild that was a family member but is no longer a family member due to a divorce or other similar event.\n\n(8)  Key employee  means any natural person (including any key employee's spouse or spouse equivalent who holds a joint, community property, or other similar shared ownership interest with that key employee) who is an executive officer, director, trustee, general partner, or person serving in a similar capacity of the family office or its affiliated family office or any employee of the family office or its affiliated family office (other than an employee performing solely clerical, secretarial, or administrative functions with regard to the family office) who, in connection with his or her regular functions or duties, participates in the investment activities of the family office or affiliated family office, provided that such employee has been performing such functions and duties for or on behalf of the family office or affiliated family office, or substantially similar functions or duties for or on behalf of another company, for at least 12 months.\n\n(9)  Spousal equivalent  means a cohabitant occupying a relationship generally equivalent to that of a spouse."], ["17:17:5.0.1.1.22.0.36.9", 17, "Commodity and Securities Exchanges", "II", "", "275", "PART 275\u2014RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940", "", "", "", "\u00a7 275.202(a)(30)-1 Foreign private advisers.", "SEC", "", "", "[76 FR 39701, July 6, 2011]", "(a)  Client.  You may deem the following to be a single client for purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)):\n\n(1) A natural person, and:\n\n(i) Any minor child of the natural person;\n\n(ii) Any relative, spouse, spousal equivalent, or relative of the spouse or of the spousal equivalent of the natural person who has the same principal residence;\n\n(iii) All accounts of which the natural person and/or the persons referred to in this paragraph (a)(1) are the only primary beneficiaries; and\n\n(iv) All trusts of which the natural person and/or the persons referred to in this paragraph (a)(1) are the only primary beneficiaries;\n\n(2)(i) A corporation, general partnership, limited partnership, limited liability company, trust (other than a trust referred to in paragraph (a)(1)(iv) of this section), or other legal organization (any of which are referred to hereinafter as a \u201clegal organization\u201d) to which you provide investment advice based on its investment objectives rather than the individual investment objectives of its shareholders, partners, limited partners, members, or beneficiaries (any of which are referred to hereinafter as an \u201cowner\u201d); and\n\n(ii) Two or more legal organizations referred to in paragraph (a)(2)(i) of this section that have identical owners.\n\n(b)  Special rules regarding clients.  For purposes of this section:\n\n(1) You must count an owner as a client if you provide investment advisory services to the owner separate and apart from the investment advisory services you provide to the legal organization, provided, however, that the determination that an owner is a client will not affect the applicability of this section with regard to any other owner;\n\n(2) You are not required to count an owner as a client solely because you, on behalf of the legal organization, offer, promote, or sell interests in the legal organization to the owner, or report periodically to the owners as a group solely with respect to the performance of or plans for the legal organization's assets or similar matters;\n\n(3) A limited partnership or limited liability company is a client of any general partner, managing member or other person acting as investment adviser to the partnership or limited liability company;\n\n(4) You are not required to count a private fund as a client if you count any investor, as that term is defined in paragraph (c)(2) of this section, in that private fund as an investor in the United States in that private fund; and\n\n(5) You are not required to count a person as an investor, as that term is defined in paragraph (c)(2) of this section, in a private fund you advise if you count such person as a client in the United States.\n\nThese paragraphs are a safe harbor and are not intended to specify the exclusive method for determining who may be deemed a single client for purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)).\n\n(c)  Definitions.  For purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)):\n\n(1)  Assets under management  means the regulatory assets under management as determined under Item 5.F of Form ADV (\u00a7 279.1 of this chapter).\n\n(2)  Investor  means:\n\n(i) Any person who would be included in determining the number of beneficial owners of the outstanding securities of a private fund under section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1)), or whether the outstanding securities of a private fund are owned exclusively by qualified purchasers under section 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(7)); and\n\n(ii) Any beneficial owner of any outstanding short-term paper, as defined in section 2(a)(38) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(38)), issued by the private fund.\n\nYou may treat as a single investor any person who is an investor in two or more private funds you advise.\n\n(3)  In the United States  means with respect to:\n\n(i) Any client or investor, any person who is a U.S. person as defined in \u00a7 230.902(k) of this chapter, except that any discretionary account or similar account that is held for the benefit of a person in the United States by a dealer or other professional fiduciary is in the United States if the dealer or professional fiduciary is a related person, as defined in \u00a7 275.206(4)-2(d)(7), of the investment adviser relying on this section and is not organized, incorporated, or (if an individual) resident in the United States.\n\nA person who is in the United States may be treated as not being in the United States if such person was not in the United States at the time of becoming a client or, in the case of an investor in a private fund, each time the investor acquires securities issued by the fund.\n\n(ii) Any place of business,  in the United States,  as that term is defined in \u00a7 230.902(l) of this chapter; and\n\n(iii) The public,  in the United States,  as that term is defined in \u00a7 230.902(l) of this chapter.\n\n(4)  Place of business  has the same meaning as in \u00a7 275.222-1(a).\n\n(5)  Spousal equivalent  has the same meaning as in \u00a7 275.202(a)(11)(G)-1(d)(9).\n\n(d)  Holding out.  If you are relying on this section, you shall not be deemed to be holding yourself out generally to the public in the United States as an investment adviser, within the meaning of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)), solely because you participate in a non-public offering in the United States of securities issued by a private fund under the Securities Act of 1933 (15 U.S.C. 77a)."], ["7:7:4.1.1.3.23.1.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "A", "Subpart A\u2014Administration", "", "\u00a7 275.1 General scope and purpose.", "FNS", "", "", "[Amdt. 160, 45 FR 15898, Mar. 11, 1980, as amended by Amdt. 266, 52 FR 3407, Feb. 4, 1987; Amdt. 328, 56 FR 60051, Nov. 27, 1991; 75 FR 33436, June 11, 2010]", "Under the Food and Nutrition Act of 2008, each State agency is responsible for the administration of SNAP in accordance with the Act, Regulations, and the State agency's plan of operation. To fulfill the requirements of the Act, each State agency shall have a system for monitoring and improving its administration of the program. The State agency is also responsible for reporting on its administration to FNS. These reports shall identify program deficiencies and the specific administrative action proposed to meet the program requirements established by the Secretary. If it is determined, however, that a State has failed without good cause to meet any of the program requirements established by the Secretary, or has failed to carry out the approved State plan of operation, the Department shall suspend and/or disallow from the State such funds as are determined to be appropriate in accordance with part 276 of this chapter."], ["7:7:4.1.1.3.23.1.1.2", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "A", "Subpart A\u2014Administration", "", "\u00a7 275.2 State agency responsibilities.", "FNS", "", "", "[Amdt. 160, 45 FR 15898, Mar. 11, 1980, as amended by Amdt. 266, 52 FR 3407, Feb. 4, 1987; 86 FR 44586, Aug. 13, 2021; 88 FR 23559, Apr. 18, 2023]", "(a)  Establishment of the performance reporting system.  (1) The State agency shall establish a continuing performance reporting system to monitor program administration and program operations. The method for establishing each component of the system is identified and explained in subparts B through F of this part. The components of the State agency's performance reporting system shall be:\n\n(i) Data collection through management evaluation (ME) reviews and quality control (QC) reviews;\n\n(ii) Analysis and evaluation of data from all sources;\n\n(iii) Corrective action planning;\n\n(iv) Corrective action implementation and monitoring; and\n\n(v) Reporting to FNS on program performance.\n\n(2) The State agency must ensure corrective action is effected at the State and project area levels.\n\n(b)  Staffing standards.  The State agency shall employ sufficient State level staff to perform all aspects of the Performance Reporting System as required in this part of the regulations. The staff used to conduct QC reviews shall not have prior knowledge of either the household or the decision under review. Where there is prior knowledge, the reviewer must disqualify her/himself. Prior knowledge is defined as having:\n\n(1) Taken any part in the decision that has been made in the case; (2) any discussion of the case with staff who participated in the decision; or (3) any personal knowledge of or acquaintance with persons in the case itself. To ensure no prior knowledge on the part of QC or ME reviewers, local project area staff shall not be used to conduct QC or ME reviews; exceptions to this requirement concerning local level staff may be granted with prior approval from FNS. However, local personnel shall not, under any circumstances, participate in ME reviews of their own project areas.\n\n(c)  Use of third party contractors.  Any State agency procuring services of a contractor for quality control related services, including any project or training that involves the interpretation of SNAP regulations, policies, or handbooks for quality control or payment accuracy purpose, must ensure that all activities and deliverables performed by the contractor within the scope of the contract adhere to Federal law, regulations, and policies. Activities performed or deliverables provided by a contractor that are not in accordance with Federal law, regulations, or policies are unallowable SNAP administrative costs and are not eligible for Federal reimbursement.\n\n(1) For expenses related to the hiring of a contractor for any quality control related work to qualify for SNAP administrative cost reimbursement under \u00a7 277.4(b), FNS requires the following:\n\n(i) The State must notify FNS in writing of its intent to hire a contractor at least 30 days prior to entering into the contract to do so. The notification must include a copy of the selected contractor's complete proposal, which must receive FNS approval before the State may proceed with the procuring the contract.\n\n(ii) Once the contract is procured, the State must submit to FNS a copy of the signed contract and documentation that outlines all tasks and deliverables to be performed or produced by the contractor.\n\n(iii) The State must submit to FNS a copy of all deliverables, including any training materials, provided by the contractor.\n\n(iv) The State must notify FNS of the date, time, and location of any training sessions led by the contractor at least 10 days in advance of the training. FNS shall be allowed to attend any such training session with or without providing prior notice to the State agency or the contractor.\n\n(v) If the State discusses individual sampled cases with the contractor, the State must document, within the case file, the contents of the discussion and any action taken by the State as a result of the discussion. If the discussion occurs orally, FNS shall be given notice 24 hours in advance of the discussion and shall be allowed to participate in the discussion. If the discussion occurs in writing, the State must ensure that FNS is copied on all written correspondence discussing individual sampled cases.\n\n(2) Copies of documentation and notices required in paragraph (c)(1) of this section must be provided to the appropriate FNS Regional SNAP Director.\n\n(3) In accordance with the non-procurement debarment procedures under 2 CFR part 417, or successor regulations, FNS shall debar any person that, in carrying out the quality control system, knowingly submits or causes to be submitted false information to FNS.\n\n(d)  FNS Access to State Systems.  Subject to data and security protocols agreed to by FNS and a State agency administering SNAP, each State agency shall ensure that FNS has complete access, including remote access for QC purposes, to both the records that are used in the administration of SNAP, including but not limited to the records contained within certification and EBT systems, and the information systems in which such records are contained."], ["7:7:4.1.1.3.23.1.1.3", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "A", "Subpart A\u2014Administration", "", "\u00a7 275.3 Federal monitoring.", "FNS", "", "", "[Amdt. 160, 45 FR 15898, Mar. 11, 1980, as amended by Amdt. 237, 47 FR 57669, Dec. 28, 1982; Amdt. 260, 49 FR 6303, Feb. 17, 1984; Amdt. 266, 52 FR 3407, Feb. 4, 1987; 53 FR 1604, Jan. 21, 1988; 54 FR 23951, June 5, 1989; Amdt. 309, 55 FR 1672, Jan. 18, 1990; Amdt. 328, 56 FR 60051, Nov. 27, 1991; Amdt. 366, 62 FR 29658, June 2, 1997; Amdt. 373, 64 FR 38294, July 16, 1999; 68 FR 59523, Oct. 16, 2003; 75 FR 33436, June 11, 2010; 86 FR 44586, Aug. 13, 2021]", "The Food and Nutrition Service shall conduct the review described in this section to determine whether a State agency is operating SNAP and the Performance Reporting System in accordance with program requirements. The Federal reviewer may consolidate the scheduling and conduction of these reviews to reduce the frequency of entry into the State agency. FNS regional offices will conduct additional reviews to examine State agency and project area operations, as considered necessary to determine compliance with program requirements. FNS shall notify the State agency of any deficiencies detected in program or system operations. Any deficiencies detected in program or system operations which do not necessitate long range analytical and evaluative measures for corrective action development shall be immediately corrected by the State agency. Within 60 days of receipt of the findings of each review established below, State agencies shall develop corrective action addressing all other deficiencies detected in either program or system operations and shall ensure that the State agency's own corrective action plan is amended and that FNS is provided this information at the time of the next formal semiannual update to the State agency's Corrective Action Plan, as required in \u00a7 275.17.\n\n(a)  Reviews of State Agency's Administration/Operation of SNAP.  FNS shall conduct an annual review of certain functions performed at the State agency level in the administration/operation of the program. FNS will designate specific areas required to be reviewed each fiscal year.\n\n(b)  Reviews of State Agency's Management Evaluation System.  FNS will review each State agency's management evaluation system on a biennial basis; however, FNS may review a State agency's management evaluation system on a more frequent basis if a regular review reveals serious deficiencies in the ME system. The ME review will include but not be limited to a determination of whether or not the State agency is complying with FNS regulations, an assessment of the State agency's methods and procedures for conducting ME reviews, and an assessment of the data collected by the State agency in conducting the reviews.\n\n(c)  Reviews of State Agency's Quality Control System.  FNS will conduct a management evaluation (ME) of at least two State Quality Control systems annually, to the maximum extent practicable. The ME will include, but not be limited to, a determination of whether the State agency is complying with FNS regulations; an assessment of the State agency's methods and procedures for conducting and managing the Quality Control system; and an assessment of the data collected by the State agency and submitted to the FNS Regional Office for conducting reviews.\n\n(d)  Validation of State Agency error rates.  FNS shall validate each State agency's payment error rate, as described in \u00a7 275.23(c), during each annual quality control review period. Federal validation reviews shall be conducted by reviewing against the Food and Nutrition Act of 2008 and the regulations, taking into account any FNS-authorized waivers to deviate from specific regulatory provisions. FNS shall validate each State agency's reported negative error rate. Any deficiencies detected in a State agency's QC system shall be included in the State agency's corrective action plan. The findings of validation reviews shall be used as outlined in \u00a7 275.23(d)(4).\n\n(1)  Payment error rate.  The validation review of each State agency's payment error rate shall consist of the following actions:\n\n(i) FNS will select a subsample of a State agency's completed active cases, as follows:\n\n(A) For State agencies that determine their active sample sizes in accordance with \u00a7 275.11(b)(1)(ii), the Federal review sample for completed active cases is determined as follows:\n\n(B) For State agencies that determine their active sample sizes in accordance with \u00a7 275.11(b)(1)(iii), the Federal review sample for completed active cases is determined as follows:\n\n(C) In the above formula, n' is the minimum number of Federal review sample cases which must be selected when conducting a validation review, except that FNS may select a lower number of sample cases if:\n\n( 1 ) The State agency does not report a change in sampling procedures associated with a revision in its required sample size within 10 days of effecting the change; and/or\n\n( 2 ) The State agency does not complete the number of case reviews specified in its approved sampling plan.\n\n(D) The reduction in the number of Federal cases selected will be equal to the number of cases that would have been selected had the Federal sampling interval been applied to the State agency's shortfall in its required sample size. This number may not be exact due to random starts and rounding.\n\n(E) In the above formula, N is the State agency's minimum active case sample size as determined in accordance with \u00a7 275.11(b)(1).\n\n(ii) FNS Regional Offices will conduct case record reviews to the extent necessary to determine the accuracy of the State agency's findings using the household's certification records and the State agency's QC records as the basis of determination. The FNS Regional Office may choose to verify any aspects of a State agency's QC findings through telephone interviews with participants or collateral contacts. In addition, the FNS Regional Office may choose to conduct field investigations to the extent necessary.\n\n(iii) Upon the request of a State agency, the appropriate FNS Regional Office will assist the State agency in completing active cases reported as not completed due to household refusal to cooperate.\n\n(iv) FNS will also review the State agency's sampling procedures, estimation procedures, and the State agency's system for data management to ensure compliance with \u00a7\u00a7 275.11 and 275.12.\n\n(v) FNS validation reviews of the State agency's active sample cases will be conducted on an ongoing basis as the State agency reports the findings for individual cases and supplies the necessary case records. FNS will begin the remainder of each State agency's validation review as soon as possible after the State agency has supplied the necessary information regarding its sample and review activity.\n\n(2)  Underissuance error rate.  The validation review of each State agency's underissuance error rate shall occur as a result of the Federal validation of the State agency's payment error rate as outlined in paragraph (c)(1) of this section.\n\n(3)  Negative case error rate.  The validation review of each State agency's negative case error rate shall consist of the following actions:\n\n(i) FNS will select a subsample of a State agency's completed negative cases, as follows:\n\n(A) In the above formula, n' is the minimum number of Federal review sample cases which must be selected when conducting a validation review, except that FNS may select a lower number of sample cases if:\n\n( 1 ) The State agency does not report a change in sampling procedures associated with a revision in its required sample size within 10 days of effecting the change; and/or\n\n( 2 ) The State agency does not complete the number of case reviews specified in its approved sampling plan.\n\n(B) The reduction in the number of Federal cases selected will be equal to the number of cases that would have been selected had the Federal sampling interval been applied to the State agency's shortfall in its required sample size. This number may not be exact due to random starts and rounding.\n\n(C) In the above formula, N is the State agency's minimum negative case sample size as determined in accordance with \u00a7 275.11(b)(2).\n\n(ii) FNS Regional Offices will conduct case record reviews to the extent necessary to determine whether the household case record contained sufficient documentation to justify the State agency's QC findings of the correctness of the State agency's decision to deny, suspend or terminate a household's participation.\n\n(iii) FNS will also review each State agency's negative case sampling and review procedures against the provisions of \u00a7\u00a7 275.11 and 275.13.\n\n(iv) FNS will begin each State agency's negative sample case validation review as soon as possible after the State agency has supplied the necessary information, including case records and information regarding its sample and review activity.\n\n(4)  Arbitration.  (i) Whenever the State agency disagrees with the FNS regional office concerning individual QC case findings and the appropriateness of actions taken to dispose of an individual case, the State agency may request that the dispute be arbitrated on a case-by-case basis by an FNS Arbitrator, subject to the following limitations.\n\n(A) The State agency may only request arbitration when the State agency's and FNS regional office's findings or disposition of an individual QC case disagree.\n\n(B) The arbitration review shall be limited to the point(s) within the Federal findings or disposition that the State agency disputes. However, if the arbitrator in the course of the review discovers a mathematical error in the computational sheet, the arbitration shall correct the error while calculating the allotment.\n\n(ii) The FNS Arbitrator(s) shall be an individual or individuals who are not directly involved in the validation effort.\n\n(iii) With the exception of the restrictions contained in paragraph (c)(4)(iii), for an arbitration request to be considered, it must be received by the appropriate FNS regional office within 20 calendar days of the date of receipt by the State agency of the regional office case findings. In the event the last day of this time period falls on a Saturday, Sunday, or Federal or State holiday, the period shall run to the end of the next work day. The State agency shall be restricted in its eligibility to request arbitration of an individual case if that case was not disposed of and the findings reported in accordance with the timeframes specified in \u00a7 275.21(b)(2). For each day late that a case was disposed of and the findings reported, the State agency shall have one less day to request arbitration of the case.\n\n(iv) When the State agency requests arbitration, it shall submit all required documentation to the appropriate FNS regional office addressed to the attention of the FNS Arbitrator. The FNS regional office QC staff may submit an explanation of the Federal position regarding a case to the FNS Arbitrator.\n\n(A) A complete request is one that contains all information necessary for the arbitrator to render an accurate, timely decision.\n\n(B) If the State agency's request is not complete the arbitrator shall make a decision based solely on the available documents.\n\n(v) The FNS Arbitrator shall have 20 calendar days from the date of receipt of a State agency's request for arbitration to review the case and make a decision.\n\n(5)  Household cooperation.  Households are required to cooperate with Federal QC reviewers. Refusal to cooperate shall result in termination of the household's eligibility. The Federal reviewer shall follow the procedures in \u00a7 275.12(g)(1)(ii) in order to determine whether a household is refusing to cooperate with the Federal QC reviewer. If the Federal reviewer determines that the household has refused to cooperate, as opposed to failed to cooperate, the household shall be reported to the State agency for termination of eligibility.\n\n(e)  Assessment of Corrective Action.  (1) FNS will conduct will conduct a comprehensive annual assessment of a State agency's corrective action process by compiling all information relative to that State agency's corrective action efforts, including the State agency's system for data analysis and evaluation. The purpose of this assessment and review is to determine if: identified deficiencies are analyzed in terms of causes and magnitude and are properly included in either the State or Project Area/Management Unit corrective action plan; the State agency is implementing corrective actions according to the appropriate plan; target completion dates for reduction or elimination of deficiencies are being met; and, corrective actions are effective. In addition, FNS will examine the State agency's corrective action monitoring and evaluative efforts. The assessment of corrective action will be conducted at the State agency, project area, and local level offices, as necessary.\n\n(2) In addition, FNS will conduct on-site reviews of selected corrective actions as frequently as considered necessary to ensure that State agencies are implementing proposed corrective actions within the timeframes specified in the State agency and/or Project Area/Management Unit corrective action plans and to determine the effectiveness of the corrective action. The on-site reviews will provide State agencies and FNS with a mechanism for early detection of problems in the corrective action process to minimize losses to the program, participants, or potential participants."], ["7:7:4.1.1.3.23.1.1.4", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "A", "Subpart A\u2014Administration", "", "\u00a7 275.4 Record retention.", "FNS", "", "", "[Amdt. 160, 45 FR 15898, Mar. 11, 1980, as amended by Amdt. 260, 49 FR 6304, Feb. 17, 1984; Amdt. 262, 49 FR 50597, Dec. 31, 1984; 75 FR 33436, June 11, 2010; 86 FR 44586, Aug. 13, 2021]", "(a) The State agency shall maintain Performance Reporting System records to permit ready access to, and use of, these records. Performance Reporting System records include information used in data analysis and evaluation, corrective action plans, corrective action monitoring records in addition to ME review records and QC review records as explained in paragraphs (b) and (c) of this section. To be readily accessible, system records shall be retained and filed in an orderly fashion. Precautions should be taken to ensure that these records are retained without loss or destruction for the 3-year period required by these regulations. Information obtained on individual households for Performance Reporting System purposes shall be safeguarded in accordance with FNS policies on disclosure of information for SNAP.\n\n(b) ME review records consist of thorough documentation of review findings, sources from which information was obtained, procedures used to review SNAP requirements including sampling techniques and lists, and ME review plans. The State agency must submit documented evidence of review findings to the FNS Regional Office upon request for purposes of evaluating State corrective action plans.\n\n(c) QC review records consist of Forms FNS-380, Worksheet for Supplemental Nutrition Assistance Program, FNS-380-1, Quality Control Review Schedule, FNS-245, Negative Quality Control Review Schedule; other materials supporting the review decision, including all correspondence with the household and all case notes, digital or otherwise, taken or used by the eligibility worker that are applicable to the review period; sample lists; sampling frames; tabulation sheets; and reports of the results of all quality control reviews during each review period."], ["7:7:4.1.1.3.23.2.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "B", "Subpart B\u2014Management Evaluation (ME) Reviews", "", "\u00a7 275.5 Scope and purpose.", "FNS", "", "", "[Amdt. 160, 45 FR 15900, Mar. 11, 1980, as amended by Amdt. 262, 49 FR 50597, Dec. 31, 1984; Amdt. 266, 52 FR 3408, Feb. 4, 1987]", "(a)  Objectives.  Each State agency shall ensure that project areas operate SNAP in accordance with the Act, regulations, and FNS-approved State Plan of Operation. To ensure compliance with program requirements, ME reviews shall be conducted to measure compliance with the provisions of FNS regulations. The objectives of an ME review are to:\n\n(1) Provide a systematic method of monitoring and assessing program operations in the project areas;\n\n(2) Provide a basis for project areas to improve and strengthen program operations by identifying and correcting deficiencies; and\n\n(3) Provide a continuing flow of information between the project areas, the States, and FNS, necessary to develop the solutions to problems in program policy and procedures.\n\n(b)  Frequency of review.  (1) State agencies shall conduct a review once every year for large project areas, once every two years for medium project areas, and once every three years for small project areas, unless an alternate schedule is approved by FNS. The most current and accurate information on active monthly caseload available at the time the review schedule is developed shall be used to determine project area size.\n\n(2) A request for an alternate review schedule shall be submitted for approval in writing with a proposed schedule and justification. In any alternate schedule, each project area must be reviewed at least once every three years. Approval of an alternate schedule is dependent upon a State agency's justification that the project areas that will be reviewed less frequently than required in paragraph (b)(1) of this section are performing adequately and that previous reviews indicate few problems or that known problems have been corrected. FNS retains the authority for approving any alternate schedule and may approve a schedule in whole or in part. Until FNS approval of an alternate schedule is obtained, the State agency shall conduct reviews in accordance with paragraph (b)(1) of this section.\n\n(3) FNS may require the State agency to conduct additional on-site reviews when a serious problem is detected in a project area which could result in a substantial dollar or service loss.\n\n(4) State agencies shall also establish a system for monitoring those project areas' operations which experience a significant influx of migratory workers during such migrations. This requirement may be satisfied by either scheduling ME reviews to coincide with such migrations or by conducting special reviews. As part of the review the State agency shall contact local migrant councils, advocate groups, or other organizations in the project area to ensure that migrants are receiving the required services."], ["7:7:4.1.1.3.23.2.1.2", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "B", "Subpart B\u2014Management Evaluation (ME) Reviews", "", "\u00a7 275.6 Management units.", "FNS", "", "", "[Amdt. 160, 45 FR 15900, Mar. 11, 1980; 45 FR 23637, Apr. 8, 1980, as amended by Amdt. 266, 52 FR 3408, Feb. 4, 1987]", "(a)  Establishment of management units.  For the purpose of ME reviews, State agencies may, subject to FNS approval, establish \u201cmanagement units\u201d which are different from project areas designated by FNS for participation in the program. For example, State-established welfare districts, regions or other administrative structures within a State may be so designated. Management units can be designated as either large, medium, or small for purposes of frequency of review. However, establishment of management units solely for the purpose of reducing the frequency of review will not be approved by FNS.\n\n(b)  FNS approval of management units.  State agencies shall submit requests for establishment of management units to FNS, which shall have final authority for approval of such units as well as any changes in those previously approved by FNS.\n\n(1) The following minimum criteria must be met prior to requesting FNS approval:\n\n(i) The proposed management unit must correspond with existing State-established welfare districts, regions, or other administrative structures; and\n\n(ii) The unit must have supervisory control over SNAP operations within that geographic area and have authority for implementation of corrective action.\n\n(2) In submitting the request for FNS approval, the State agency shall include the following information regarding the proposed management unit:\n\n(i) That the proposed management unit meets the minimum criteria described in paragraphs (b)(1) (i) and (ii) of this section;\n\n(ii) Geographic coverage, including the names of the counties/project areas within the unit and the identification (district or region number) and location (city) of the office which has supervisory control over the management unit;\n\n(iii) SNAP participation, including the number of persons and number of households;\n\n(iv) The number of certification offices;\n\n(v) The number of issuance units;\n\n(vi) The dollar value of allotments issued as reflected in the most recent available data; and\n\n(vii) Any other relevant information."], ["7:7:4.1.1.3.23.2.1.3", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "B", "Subpart B\u2014Management Evaluation (ME) Reviews", "", "\u00a7 275.7 Selection of sub-units for review.", "FNS", "", "", "[Amdt. 160, 45 FR 15900, Mar. 11, 1980; 45 FR 23638, Apr. 8, 1980; 45 FR 46784, July 11, 1980, as amended by Amdt. 266, 52 FR 3408, Feb. 4, 1987; 81 FR 2741, Jan. 19, 2016]", "(a)  Definition of sub-units.  Sub-units are the physical locations of organizational entities within project areas responsible for operating various aspects of SNAP and include but are not limited to certification offices, call centers, and employment and training offices.\n\n(b)  Selection of Sub-units for Review.  State agencies shall select a representative number of sub-units of each category for review in order to determine a project area's compliance with program standards."], ["7:7:4.1.1.3.23.2.1.4", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "B", "Subpart B\u2014Management Evaluation (ME) Reviews", "", "\u00a7 275.8 Review coverage.", "FNS", "", "", "[Amdt. 266, 52 FR 3408, Feb. 4, 1987, as amended by Amdt. 356, 59 FR 29713, June 9, 1994]", "(a) During each review period, State agencies shall review the national target areas of program operation specified by FNS. FNS will notify State agencies of the minimum program areas to be reviewed at least 90 days before the beginning of each annual review period, which is the Federal fiscal year. FNS may add additional areas during the review period if deemed necessary. The FNS headquarters office will add national target areas during the review period only for deficiencies of national scope. State agencies have 60 days in which to establish a plan schedule for such reviews.\n\n(b) State agencies shall be responsible for reviewing each national target area or other program requirement based upon the provisions of the regulations governing SNAP and the FNS-approved Plan of Operation. If FNS approves a State agency's request for a waiver from a program requirement, any different policy approved by FNS would also be reviewed. When, in the course of a review, a project area is found to be out of compliance with a given program requirement, the State agency shall identify the specifics of the problem including: the extent of the deficiency, the cause of the deficiency, and, as applicable, the specific procedural requirements the project area is misapplying."], ["7:7:4.1.1.3.23.2.1.5", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "B", "Subpart B\u2014Management Evaluation (ME) Reviews", "", "\u00a7 275.9 Review process.", "FNS", "", "", "[Amdt. 160, 45 FR 15900, Mar. 11, 1980; 45 FR 25375, Apr. 15, 1980, as amended by Amdt. 266, 52 FR 3409, Feb. 4, 1987; Amdt. 356, 59 FR 29713, June 9, 1994; 81 FR 2741, Jan. 19, 2016]", "(a)  Review procedures.  State agencies shall review the program requirements specified for review in \u00a7 275.8 of this part using procedures that are adequate to identify problems and the causes of those problems. As each project area's operational structure will differ, State agencies shall review each program requirement applicable to the project area in a manner which will best measure the project area's compliance with each program requirement.\n\n(b)  ME review plan.  (1) State agencies shall develop a review plan prior to each ME review. This review plan shall specify whether each project area is large, medium, or small and shall contain:\n\n(i) Identification of the project area to be reviewed, program areas to be reviewed, the dates the review will be conducted, and the period of time that the review will cover;\n\n(ii) Information secured from the project area regarding its caseload and organization;\n\n(iii) Identification of the sub-units selected for review and the techniques used to select them;\n\n(iv) At State agency option it may also indicate whether the State agency is using the ME review process to perform non-discrimination reviews; and\n\n(v) A description of the review method(s) the State agency plans to use for each program area being reviewed.\n\n(2) ME review plans shall be maintained in an orderly fashion and be made available to FNS upon request.\n\n(c)  Review methods.  (1) State agenices shall determine the method of reviewing the program requirements associated with each program area. For some areas of program operation it may be necessary to use more than one method of review to determine if the project area is in compliance with program requirements. The procedures used shall be adequate to identify any problems and the causes of those problems.\n\n(2) State agencies shall ensure that the method used to review a program requirement does not bias the review findings. Bias can be introduced through leading questions, incomplete reviews, incorrect sampling techniques, etc.\n\n(d)  Review worksheet.  (1) State agencies shall use a review worksheet to record all review findings. For each sub-unit reviewed the State agency shall, on the worksheet, identify:\n\n(i) The sub-unit being reviewed;\n\n(ii) Each program requirement reviewed in the sub-unit;\n\n(iii) The method used to review each program requirement;\n\n(iv) A description of any deficiency detected;\n\n(v) The cause(s) of any deficiency detected, if known;\n\n(vi) The number of casefiles and/or program records selected and examined within the sub-unit, identification of those selected (record case number, household name, etc.), the proportion which were not subject to review, as well as the method used to select the sample;\n\n(vii) Where applicable, the numerical extent of any deficiency detected through examination of program records; and\n\n(viii) Any pertinent comments concerning the sub-unit's operation.\n\n(2) State agencies shall promptly forward review findings to the appropriate State office for analysis, evaluation, and corrective action planning. Review worksheets shall be retained in an orderly fashion and made available to FNS upon request."], ["7:7:4.1.1.3.23.3.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "C", "Subpart C\u2014Quality Control (QC) Reviews", "", "\u00a7 275.10 Scope and purpose.", "FNS", "", "", "[Amdt. 149, 44 FR 45893, Aug. 3, 1979, as amended by Amdt. 260, 49 FR 6304, Feb. 17, 1984; 54 FR 7016, Feb. 15, 1989; Amdt. 328, 56 FR 60051, Nov. 27, 1991; Amdt. 373, 64 FR 38294, July 16, 1999; 75 FR 33436, June 11, 2010]", "(a) As part of the Performance Reporting System, each State agency is responsible for conducting quality control reviews. For SNAP quality control reviews, a sample of households shall be selected from two different categories: Households which are participating in SNAP (called active cases) and households for which participation was denied, suspended or terminated (called negative cases). Reviews shall be conducted on active cases to determine if households are eligible and receiving the correct allotment of SNAP benefits. The determination of whether the household received the correct allotment will be made by comparing the eligibility data gathered during the review against the amount authorized on the master issuance file. Reviews of negative cases shall be conducted to determine whether the State agency's decision to deny, suspend or terminate the household, as of the review date, was correct. Quality control reviews measure the validity of SNAP cases at a given time (the review date) by reviewing against SNAP standards established in the Food and Nutrition Act of 2008 and the Regulations, taking into account any FNS authorized waivers to deviate from specific regulatory provisions. FNS and the State agency shall analyze findings of the reviews to determine the incidence and dollar amounts of errors, which will determine the State agency's liability for payment errors in accordance with the Food and Nutrition Act of 2008, as amended, and to plan corrective action to reduce excessive levels of errors for any State agency.\n\n(b) The objectives of quality control reviews are to provide:\n\n(1) A systematic method of measuring the validity of the SNAP caseload;\n\n(2) A basis for determining error rates;\n\n(3) A timely continuous flow of information on which to base corrective action at all levels of administration; and\n\n(4) A basis for establishing State agency liability for errors that exceed the National performance measure.\n\n(c) The review process is the activity necessary to complete reviews and document findings of all cases selected in the sample for quality control reviews. The review process shall consist of:\n\n(1) Case assignment and completion monitoring;\n\n(2) Case reviews;\n\n(3) Supervisory review of completed worksheets and schedules; and\n\n(4) Transmission of completed worksheets and schedules to the State agency for centralized data compilation and analysis."], ["7:7:4.1.1.3.23.3.1.2", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "C", "Subpart C\u2014Quality Control (QC) Reviews", "", "\u00a7 275.11 Sampling.", "FNS", "", "", "[Amdt. 260, 49 FR 6304, Feb. 17, 1984; 49 FR 14495, Apr. 12, 1984, as amended by Amdt. 262, 49 FR 50598, Dec. 31, 1984; Amdt. 266, 52 FR 3409, Feb. 4, 1987; Amdt. 328, 56 FR 60051, Nov. 27, 1991; Amdt. 366, 62 FR 29658, June 2, 1997; Amdt. 373, 64 FR 38295, July 16, 1999; 68 FR 59523, Oct. 16, 2003; 75 FR 33436, June 11, 2010; 86 FR 44586, Aug. 13, 2021]", "(a)  Sampling plan.  Each State agency shall develop a quality control sampling plan which demonstrates the integrity of its sampling procedures.\n\n(1)  Content.  The sampling plan shall include a complete description of the frame, the method of sample selection, and methods for estimating characteristics of the population and their sampling errors. The description of the sample frames shall include: source, availability, accuracy, completeness, components, location, form, frequency of updates, deletion of cases not subject to review, and structure. The description of the methods of sample selection shall include procedures for: estimating caseload size, overpull, computation of sampling intervals and random starts (if any), stratification or clustering (if any), identifying sample cases, correcting over-or undersampling, and monitoring sample selection and assignment. A time schedule for each step in the sampling procedures shall be included.\n\n(2)  Criteria.  Sampling plans proposing non-proportional or other alternative designs shall document compliance with the approval criteria in paragraph (b)(4) of this section. All sampling plans shall:\n\n(i) Conform to principles of probability sampling;\n\n(ii) Specify and explain the basis for the sample sizes chosen by the State agency;\n\n(iii) If the State agency has chosen an active sample size as specified in paragraph (b)(1)(iii) of this section, include a statement that, whether or not the sample size is increased to reflect an increase in participation as discussed in paragraph (b)(3) of this section, the State agency will not use the size of the sample chosen as a basis for challenging the resulting error rates.\n\n(iv) If the State agency has chosen a negative sample size as specified in paragraph (b)(2)(ii) of this section, include a statement that, whether or not the sample size is increased to reflect an increase in negative actions as discussed in paragraph (b)(3) of this section, the State agency will not use the size of the sample chosen as a basis for challenging the resulting error rates.\n\n(3)  Design.  FNS generally recommends a systematic sample design for both active and negative samples because of its relative ease to administer, its validity, and because it yields a sample proportional to variations in the caseload over the course of the annual review period. (To obtain a systematic sample, a State agency would select every kth case after a random start between 1 and k. The value of k is dependent upon the estimated size of the universe and the sample size.) A State agency may, however, develop an alternative sampling design better suited for its particular situation. Whatever the design, it must conform to commonly acceptable statistical theory and application (see paragraph (b)(4) of this section).\n\n(4)  FNS review and approval.  The State agency shall submit its sampling plan to FNS for approval as a part of its State Plan of Operation in accordance with \u00a7 272.2(e)(4). In addition, all sampling procedures used by the State agency, including frame composition, construction, and content shall be fully documented and available for review by FNS.\n\n(b)  Sample size.  There are two samples for the SNAP quality control review process, an active case sample and a negative case sample. The size of both these samples is based on the State agency's average monthly caseload during the annual review period. Costs associated with a State agency's sample sizes are reimbursable as specified in \u00a7 277.4.\n\n(1)  Active cases.  (i) All active cases shall be selected in accordance with standard procedures, and the review findings shall be included in the calculation of the State agency's payment error rate.\n\n(ii) Unless a State agency chooses to select and review a number of active cases determined by the formulas provided in paragraph (b)(1)(iii) of this section and has included in its sampling plan the reliability certification required by paragraph (a)(2)(iii) of this section, the minimum number of active cases to be selected and reviewed by a State agency during each annual review period shall be determined as follows:\n\n(iii) A State agency which includes in its sampling plan the statement required by paragraph (a)(2)(iii) of this section may determine the minimum number of active cases to be selected and reviewed during each annual review period as follows:\n\n(iv) In the formulas in paragraphs (b)(1)(ii) and (iii) of this section n is the required active case sample size. This is the minimum number of active cases subject to review which must be selected each review period. Also in the formulas, N is the average monthly participating caseload subject to quality control review (i.e., households which are included in the active universe defined in paragraph (e)(1) of this section) during the annual review period.\n\n(2)  Negative cases.  (i) Unless a State agency chooses to select and review a number of negative cases determined by the formulas provided in paragraph (b)(2)(ii) of this section and has included in its sampling plan the reliability certification required by paragraph (a)(2)(iv) of this section, the minimum number of negative cases to be selected and reviewed by a State agency during each annual review period shall be determined as follows:\n\n(ii) A State agency which includes in its sampling plan the statement required by paragraph (a)(2)(iv) of this section may determine the minimum number of negative cases to be selected and reviewed during each annual review period as follows:\n\n(iii) In the formulas in this paragraph (b)(2), n is the required negative sample size. This is the minimum number of negative cases subject to review which must be selected each review period.\n\n(iv) In the formulas in this paragraph (b)(2), N is the average monthly number of negative cases which are subject to quality control review (i.e., households which are part of the negative universe defined in paragraph (e)(2) of this section) during the annual review period.\n\n(3)  Unanticipated changes.  Since the average monthly caseloads (both active and negative) must be estimated at the beginning of each annual review period, unanticipated changes can result in the need for adjustments to the sample size. FNS shall not penalize a State agency that does not adjust its sample size if the actual caseload during a review period is less than 20 percent larger than the estimated caseload initially used to determine sample size. If the actual caseload is more than 20 percent larger than the estimated caseload, the larger sample size appropriate for the actual caseload will be used in computing the sample completion rate.\n\n(4)  Alternative designs.  The active and negative sample size determinations assume that State agencies will use a systematic or simple random sample design. State agencies able to obtain results of equivalent reliability with smaller samples and appropriate design may use an alternative design with FNS approval. To receive FNS approval, proposals for any type of alternative design must:\n\n(i) Demonstrate that the alternative design provides payment error rate estimates with equal-or-better predicted precision than would be obtained had the State agency reviewed simple random samples of the sizes specified in paragraphs (b)(1) and (b)(2) of this section.\n\n(ii) Describe all weighting, and estimation procedures if the sample design is non-self-weighted, or uses a sampling technique other than systematic sampling.\n\n(iii) Demonstrate that self-weighting is actually achieved in sample designs claimed to be self-weighting.\n\n(c)  Sample selection.  The selection of cases for quality control review shall be made separately for active and negative cases each month during the annual review period. Each month each State agency shall select for review approximately one-twelfth of its required sample, unless FNS has approved other numbers of cases specified in the sampling plan.\n\n(1)  Substitutions.  Once a household has been identified for inclusion in the sample by a predesigned sampling procedure, substitutions are not acceptable. An active case must be reviewed each time it is selected for the sample. If a household is selected more than once for the negative sample as the result of separate and distinct instances of denial, suspension or termination, it shall be reviewed each time.\n\n(2)  Corrections.  Excessive undersampling must be corrected during the annual review period. Excessive oversampling may be corrected at the State agency's option. Cases which are dropped to compensate for oversampling shall be reported as not subject to review. Because corrections must not bias the sample results, cases which are dropped to compensate for oversampling must comprise a random subsample of all cases selected (including those completed, not completed, and not subject to review). Cases which are added to the sample to compensate for undersampling must be randomly selected from the entire frame in accordance with the procedures specified in paragraphs (b), (c)(1), and (e) of this section. All sample adjustments must be fully documented and available for review by FNS.\n\n(d)  Required sample size.  A State agency's required sample size is the larger of either the number of cases selected which are subject to review or the number of cases chosen for selection and review according to paragraph (b) of this section.\n\n(e)  Sample frame.  The State agency shall select cases for quality control review from a sample frame. The choice of a sampling frame shall depend upon the criteria of timeliness, completeness, accuracy, and administrative burden. Complete coverage of the sample universes, as defined in paragraph (f) of this section, must be assured so that every household subject to quality control review has an equal or known chance of being selected in the sample. Since the SNAP quality control review process requires an active and negative sample, two corresponding sample frames are also required.\n\n(1)  Active cases.  The frame for active cases shall list all households which were: (i) Certified prior to, or during, the sample month; and (ii) issued benefits for the sample month, except for those households excluded from the universe in paragraph (f)(1) of this section. State agencies may elect to use either a list of certified eligible households or a list of households issued an allotment. If the State agency uses a list of certified eligible households, those households which are issued benefits for the sample month after the frame has been compiled shall be included in a supplemental list. If the State agency uses an issuance list, the State agency shall ensure that the list includes those households which do not actually receive an allotment because the entire amount is recovered for repayment of an overissuance in accordance with the allotment reduction procedures in \u00a7 273.18.\n\n(2)  Negative cases.  The frame for negative cases shall list:\n\n(i) All actions to deny an application in the sample month except those excluded from the universe in paragraph (f)(2) of this section. If a household is subject to more than one denial action in a single sample month, each action shall be listed separately in the sample frame; and\n\n(ii) All actions to suspend or terminate a household in the sample month except those excluded from the universe in paragraph (f)(2) of this section. Each action to suspend or terminate a household in the sample month shall be listed separately in the sample frame.\n\n(3)  Unwanted cases.  A frame may include cases for which information is not desired (e.g., households which have been certified but did not actually participate during the sample month). When such cases cannot be eliminated from the frame beforehand and are selected for the sample, they must be accounted for and reported as being not subject to review in accordance with the provisions in \u00a7\u00a7 275.12(g) and 275.13(e).\n\n(f)  Sample universe.  The State agency shall ensure that its active and negative case frames accurately reflect their sample universes. There are two sample universes for the SNAP quality control review process, an active case universe and a negative case universe. The exceptions noted below for both universes are households not usually amenable to quality control review.\n\n(1)  Active cases.  The universe for active cases shall include all households certified prior to, or during, the sample month and receiving SNAP benefits for the sample month, except for the following:\n\n(i) A household in which all the members had died or had moved out of the State before the review could be undertaken or completed;\n\n(ii) A household receiving SNAP benefits under a disaster certification authorized by FNS;\n\n(iii) A household which is under investigation for intentional Program violation, including a household with a pending administrative disqualification hearing;\n\n(iv) A household appealing an adverse action when the review date falls within the time period covered by continued participation pending the hearing; or\n\n(v) A household receiving restored benefits in accordance with \u00a7 273.17 but not participating based upon an approved application. Other households excluded from the active case universe during the review process are identified in \u00a7 275.12(g).\n\n(2)  Negative cases.  The universe for negative cases shall include all actions taken to deny, suspend, or terminate a household in the sample month except the following:\n\n(i) A household which had its case closed due to expiration of the certification period;\n\n(ii) A household denied SNAP benefits under a disaster certification authorized by FNS;\n\n(iii) A household which withdrew an application prior to the agency's determination;\n\n(iv) A household which is under active investigation for Intentional Program Violation;\n\n(v) A household which has been sent a notice of pending status but which was not actually denied participation;\n\n(vi) A household which was terminated for failure to file a complete monthly report by the extended filing date, but reinstated when it subsequently filed the complete report before the end of the issuance month;\n\n(vii) Other households excluded from the negative case universe during the review process as identified in \u00a7 275.13(e).\n\n(g)  Demonstration projects.  Households correctly classified for participation under the rules of an FNS-authorized demonstration project which FNS determines to significantly modify the rules for determining households' eligibility or allotment level, shall be included in the selection and review process. They shall be included in the universe for calculating sample sizes and included in the sample frames for sample selection as specified in paragraphs (b) through (e) of this section. In addition, they shall be included in the quality control review reports as specified in \u00a7 275.21(d) and included in the calculation of a State agency's completion rate as specified in \u00a7 275.23(b)(1). The review of these cases shall be conducted in accordance with the provisions specified in \u00a7\u00a7 275.12(h) and 275.13(f). FNS shall establish on an individual demonstration project basis whether the results of the reviews of active and negative demonstration project cases shall be included or excluded from the determination of State agencies' error rates as described in \u00a7 275.23(b)."], ["7:7:4.1.1.3.23.3.1.3", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "C", "Subpart C\u2014Quality Control (QC) Reviews", "", "\u00a7 275.12 Review of active cases.", "FNS", "", "", "[Amdt. 260, 49 FR 6306, Feb. 17, 1984; 49 FR 14495, Apr. 12, 1984]", "(a)  General.  A sample of households which were certified prior to, or during, the sample month and issued SNAP benefits for the sample month shall be selected for quality control review. These active cases shall be reviewed to determine if the household is eligible and, if eligible, whether the household is receiving the correct allotment. The determination of a household's eligibility shall be based on an examination and verification of all elements of eligibility (i.e., basic program requirements, resources, income, and deductions). The elements of eligibility are specified in \u00a7\u00a7 273.1 and 273.3 through 273.9 of this chapter. The verified circumstances and the resulting benefit level determined by the quality control review shall be compared to the benefits authorized by the State agency as of the review date. When changes in household circumstances occur, the reviewer shall determine whether the changes were reported by the participant and handled by the agency in accordance with the rules set forth in \u00a7\u00a7 273.12, 273.13 and 273.21 of this chapter, as appropriate. For active cases, the review date shall always fall within the sample month, either the first day of a calendar or fiscal month or the day of certification, whichever is later. The review of active cases shall include: a household case record review; a field investigation, except as provided in paragraph (b) of this section; the identification of any variances; an error analysis; and the reporting of review findings.\n\n(b)  Household case record review.  The reviewer shall examine the household case record to identify the specific facts relating to the household's eligibility and basis of issuance. If the reviewer is unable to locate the household case record, the reviewer shall identify as many of the pertinent facts as possible from the household issuance record. The case record review shall include all information applicable to the case as of the review month, including the application and worksheet in effect as of the review date. Documentation contained in the case record can be used as verification if it is not subject to change and applies to the sample month. If during the case record review the reviewer can determine and verify the household's ineligibility the review can be terminated at that point, provided that if the determination is based on information not obtained from the household then the correctness of that information must be confirmed as provided in paragraph (c)(2) of this section. The reviewer shall utilize information obtained through the case record review to complete column (2) of the Form FNS-380, and to tentatively plan the content of the field investigation.\n\n(c)  Field investigation.  A full field investigation shall be conducted for all active cases selected in the sample month except as provided in paragraph (b) of this section. A full field investigation shall include a review of any information pertinent to a particular case which is available through the State Income and Eligibility Verification System (IEVS) as specified in \u00a7 272.8 of this chapter. If during the field investigation the reviewer determines and verifies the household's ineligibility, the review can be terminated at that point, provided that if the determination is based on information not obtained from the household then the correctness of that information must be confirmed as provided in paragraph (c)(2) of this section. In Alaska an exception to this requirement can be made in those isolated areas not reachable by regularly scheduled commercial air service, automobile, or other public transportation provided one fully documented attempt to contact the household has been made. Such cases may be completed through casefile review and collateral contact. The field investigation will include interviews with the head of household, spouse, or authorized representative; contact with collateral sources of information; and any other materials and activity pertinent to the review of the case. The scope of the review shall not extend beyond the examination of household circumstances which directly relate to the determination of household eligibility and basis of issuance status. The reviewer shall utilize information obtained through the field investigation to complete column (3) of the Form FNS-380.\n\n(1)  Personal interviews.  Personal interviews shall be conducted in a manner that respects the rights, privacy, and dignity of the participants. Prior to conducting the personal interview, the reviewer shall notify the household that it has been selected, as part of an ongoing review process, for review by quality control, and that a personal face-to-face interview will be conducted in the future. The method of notifying the household and the specificity of the notification shall be determined by the State agency, in accordance with applicable State and Federal laws. The personal interview may take place at the participant's home, at an appropriate State agency certification office, or at a mutually agreed upon alternative location. The State agency shall determine the best location for the interview to take place, but would be subject to the same provisions as those regarding certification interviews at \u00a7 273.2(e)(2) of this chapter. Those regulations provide that an office interview must be waived under certain hardship conditions. Under such hardship conditions the quality control reviewer shall either conduct the personal interview with the participant's authorized representative, if one has been appointed by the household, or with the participant in the participant's home. Except in Alaska, when an exception to the field investigation is made in accordance with this section, the interview with the participant may not be conducted by phone. During the personal interview with the participant, the reviewer shall:\n\n(i) Explore with the head of the household, spouse, authorized representative, or any other responsible household member, household circumstances as they affect each factor of eligibility and basis of issuance;\n\n(ii) Establish the composition of the household;\n\n(iii) Review the documentary evidence in the household's possession and secure information about collateral sources of verification; and\n\n(iv) Elicit from the participant names of collateral contacts. The reviewer shall use, but not be limited to, these designated collateral contacts. If required by the State, the reviewer shall obtain consent from the head of the household to secure collateral information. If the participant refuses to sign the release of information form, the reviewer shall explain fully the consequences of this refusal to cooperate (as contained in paragraph (g)(1)(ii) of this section), and continue the review to the fullest extent possible.\n\n(2)  Collateral contacts.  The reviewer shall obtain verification from collateral contacts in all instances when adequate documentation was not available from the participant. This second party verification shall cover each element of eligibility as it affects the household's eligibility and allotment. The reviewer shall make every effort to use the most reliable second party verification available (for example, banks, payroll listings, etc.), in accordance with FNS guidelines, and shall thoroughly document all verification obtained. If any information obtained by the QC reviewer differs from that given by the participant, then the reviewer shall resolve the differences to determine which information is correct before an error determination is made. The manner in which the conflicting information is resolved shall include recontacting the participant unless the participant cannot be reached. When resolving conflicting information reviewers shall use their best judgement based on the most reliable data available and shall document how the differences were resolved.\n\n(d)  Variance identification.  The reviewer shall identify any element of a basic program requirement or the basis of issuance which varies (i.e., information from review findings which indicates that policy was applied incorrectly and/or information verified as of the review date that differs from that used at the most recent certification action). For each element that varies, the reviewer shall determine whether the variance was State agency or participant caused. The results of these determinations shall be coded and recorded in column (4) of the Form FNS-380.\n\n(1)  Variances included in error analysis.  Except for those variances in an element resulting from one of the situations described in paragraph (d)(2) of this section, any variance involving an element of eligibility or basis of issuance shall be included in the error analysis. Such variances shall include but not be limited to those resulting from a State agency's failure to take the disqualification action related to SSN's specified in \u00a7 273.6(c) of this chapter, and related to work requirements, specified in \u00a7 273.7(f) of this chapter.\n\n(2)  Variances excluded from error analysis.  The following variances shall be excluded from the determination of a household's eligibility and basis of issuance for the sample month:\n\n(i) Any variance resulting from the nonverified portion of a household's gross nonexempt income where there is conclusive documentation (a listing of what attempts were made to verify and why they were unsuccessful) that such income could not be verified at the time of certification because the source of income would not cooperate in providing verification and no other sources of verification were available. If there is no conclusive documentation as explained above, then the reviewer shall not exclude any resulting variance from the error determination. This follows certification policy outlined in \u00a7 273.2(f)(1)(i) of this chapter.\n\n(ii) Any variance in cases certified under expedited certification procedures resulting from postponed verification of an element of eligibility as allowed under \u00a7 273.2(i)(4)(i) of this chapter. Verification of gross income, deductions, resources, household composition, alien status, or tax dependency may be postponed for cases eligible for expedited certification. However, if a case certified under expedited procedures contains a variance as a result of a residency deficiency, a mistake in the basis of issuance computation, a mistake in participant identification, or incorrect expedited income accounting, the variance shall be included in the error determination. This exclusion shall only apply to those cases which are selected for QC review in the first month of participation under expedited certification.\n\n(iii) Any variance subsequent to certification in an element of eligibility or basis of issuance which was not reported and was not required to have been reported as of the review date. The elements participants are required to report and the time requirements for reporting are specified in \u00a7\u00a7 273.12(a) and 273.21(h) and (i) of this chapter, as appropriate. If, however, a change in any element is reported, and the State agency fails to act in accordance with \u00a7\u00a7 273.12(c) and 273.21(j) of this chapter, as appropriate, any resulting variance shall be included in the error determination.\n\n(iv) Any variance in deductible expenses which was not provided for in determining a household's benefit level in accordance with \u00a7 273.2(f)(3)(i)(B) of this chapter. This provision allows households to have their benefit level determined without providing for a claimed expense when the expense is questionable and obtaining verification may delay certification. If such a household subsequently provides the needed verification for the claimed expense and the State agency does not redetermine the household's benefits in accordance with \u00a7 273.12(c) of this chapter, any resulting variance shall be included in the error determination.\n\n(v) Any variance resulting from use by the State agency of information concerning households or individuals from an appropriate Federal source, provided that such information is correctly processed by the State agency. An appropriate Federal source is one which verifies: Income that it provides directly to the household; deductible expenses for which it directly bills the household; or other household circumstances which it is responsible for defining or establishing. To meet the provisions for correct processing, the eligibility worker must have appropriately acted on timely information. In order to be timely, information must be the most current that was available to the State agency at the time of the eligibility worker's action.\n\n(vi) Two variances relating to the Immigration and Naturalization Service's (INS) Systematic Alien Verification for Entitlements (SAVE) Program.\n\n(A) A variance based on a verification of alien documentation by INS. The reviewer shall exclude such variance only if the State agency properly used SAVE and the State agency provides the reviewer with:\n\n( 1 ) The alien's name;\n\n( 2 ) The alien's status; and\n\n( 3 ) Either the Alien Status Verification Index (ASVI) Query Verification Number or the INS Form G-845, as annotated by INS.\n\n(B) A variance based on the State agency's wait for the response of INS to the State agency's request for official verification of the alien's documentation. The reviewer shall exclude such variance only if the State agency properly used SAVE and the State agency provides the reviewer with either:\n\n( 1 ) The date of request, if the State agency was waiting for an automated response; or\n\n( 2 ) A copy of the completed Form G-845, if the State agency was waiting for secondary verification from INS.\n\n(vii) Subject to the limitations provided in paragraphs (d)(2)(vii)(A) through (d)(2)(vii)(F) of this section, any variance resulting from application of a new Program regulation or implementing memorandum of a mandatory or optional change in Federal law that occurs during the first 120 days from the required implementation date. The variance exclusion shall apply to any action taken on a case directly related to implementation of a covered provision during the 120-day exclusionary period until the case is required to be recertified or acted upon for some other reason.\n\n(A) When a regulation allows a State agency an option to implement prior to the required implementation date, the date on which the State agency chooses to implement may, at the option of the State, be considered to be the required implementation date for purposes of this provision. The exclusion period would be adjusted to begin with this date and end on the 120th day that follows. States choosing to implement prior to the required implementation date must notify the appropriate FNS Regional Office, in writing, prior to implementation that they wish the 120 day variance exclusion to commence with actual implementation. Absent such notification, the exclusionary period will commence with the required implementation date.\n\n(B) A State agency shall not exclude variances which occur prior to the States implementation.\n\n(C) A State agency which did not implement until after the exclusion period shall not exclude variances under this provision.\n\n(D) Regardless of when the State agency actually implemented the regulation, the variance exclusion period shall end on the 120th day following the required implementation date, including the required implementation date defined in paragraph (d)(2)(vii)(A) of this section.\n\n(E) For purposes of this provision, implementation occurs on the effective date of State agency's written statewide notification to its eligibility workers.\n\n(F) This variance exclusion applies to changes occasioned by final regulations or interim regulations. In the case of a final regulation issued following an interim regulation, the exclusion applies only to significant changes made to the earlier interim regulation. A significant change is one which the final regulation requires the State agency to implement on or after publication of a final rule.\n\n(viii) Any variance resulting from incorrect written policy that a State agency acts on that is provided by a Departmental employee authorized to issue SNAP policy and that the State agency correctly applies. For purposes of this provision, written Federal policy is that which is issued in regulations, notices, handbooks, category three and four Policy Memoranda under the Policy Interpretation Response System, and regional policy memoranda issued pursuant to these. Written Federal policy is also a letter from the Food and Nutrition Service to a State agency which contains comments on the State agency's SNAP manual or instructions.\n\n(ix) Any variance in a child support deduction which was the result of an unreported change subsequent to the most recent certification action shall be excluded from the error determination.\n\n(3)  Other findings.  Findings other than variances made during the review which are pertinent to the SNAP household or the case record may be acted on at the discretion of the State agency. Examples of such findings are: an incorrect age of a household member which is unrelated to an element of eligibility; an overdue subsequent certification; no current application on file; insufficient documentation; incorrect application of the verification requirements specified in part 273 of this chapter; and deficiencies in work registration procedural requirements. Such deficiencies include: inadequate documentation of each household member's exempt status; work registration form for each nonexempt household member not completed at the time of application and every six months thereafter; and the household not advised of its responsibility to report any changes in the exempt status of any household member.\n\n(e)  Error analysis.  The reviewer shall analyze all appropriate variances in completed cases, in accordance with paragraph (d) of this section, which are based upon verified information and determine whether such cases are either eligible, eligible with a basis of issuance error, or ineligible. The review of an active case determined ineligible shall be considered completed at the point of the ineligibility determination. For households determined eligible, the review shall be completed to the point where the correctness of the basis of issuance is determined, except in the situations outlined in paragraph (g) of this section. In the event that a review is conducted of a household which is receiving restored or retroactive benefits for the sample month, the portion of the allotment which is the restored or retroactive benefit shall be excluded from the determination of the household's eligibility and/or basis of issuance. A SNAP case in which a household member(s) receives public assistance shall be reviewed in the same manner as all other SNAP cases, using income as received. The determination of a household's eligibility and the correctness of the basis of issuance shall be determined based on data entered on the computation sheet as well as other information documented on other portions of the Form FNS-380, as appropriate.\n\n(f)  Reporting of review findings.  All information verified to be incorrect during the review of an active case shall be reported to the State agency for appropriate action on an individual case basis. This includes information on all variances in elements of eligibility and basis of issuance in both error and nonerror cases. In addition, the reviewer shall report the review findings on the Form FNS-380-1, in accordance with the following procedures:\n\n(1)  Eligibility errors.  If the reviewer determines that a case is ineligible, the occurrence and the total allotment issued in the sample month shall be coded and reported. Whenever a case contains a variance in an element which results in an ineligibility determination and there are also variances in elements which would cause a basis of issuance error, the case shall be treated as an eligibility error. The reviewer shall also code and report any variances that directly contributed to the error determination. In addition, if the State agency has chosen to report information on all variances in elements of eligibility and basis of issuance, the reviewer shall code and report any other such variances which were discovered and verified during the course of the review.\n\n(2)  Basis of issuance of errors.  If the reviewer determines that SNAP allotments were either overissued or underissued to eligible households in the sample month, the State agency shall code and report any variances that directly contributed to the error determination that were discovered and verified during the course of the review. For fiscal year 2014, only variances that exceed $37.00 (the threshold) shall be included in the calculation of the underissuance error rate, overissuance error rate, and payment error. For fiscal years 2015 and thereafter, this QC tolerance level shall be adjusted annually by the percentage by which the Thrifty Food Plan (TFP) for the 48 contiguous States and the District of Columbia is adjusted. If the State agency has chosen to report information on all variances in elements of eligibility and basis of issuance, the reviewer shall code and report any other such variances that were discovered and verified during the course of the review.\n\n(g)  Disposition of case reviews.  Each case selected in the sample of active cases must be accounted for by classifying it as completed, not completed, or not subject to review. These case dispositions shall be coded and recorded on the Form FNS-380-1.\n\n(1)  Cases reported as not complete.  Active cases shall be reported as not completed if the household case record cannot be located and the household itself is not subsequently located; if the household case record is located but the household cannot be located unless the reviewer attempts to locate the household as specified in this paragraph; or if the household refuses to cooperate, as discussed in this paragraph. All cases reported as not complete shall be reported to the State agency for appropriate action on an individual case basis. Without FNS approval, no active case shall be reported as not completed solely because the State agency was unable to process the case review in time for it to be reported in accordance with the timeframes specified in \u00a7 275.21(b)(2).\n\n(i) If the reviewer is unable to locate the participant either at the address indicated in the case record or in the issuance record and the State agency is not otherwise aware of the participant's current address, the reviewer shall attempt to locate the household by contacting at least two sources which the State agency determines are most likely to be able to inform the reviewer of the household's current address. Such sources include but are not limited to:\n\n(A) The local office of the U.S. Postal Service;\n\n(B) The State Motor Vehicle Department;\n\n(C) The owner or property manager of the residence at the address in the case record; and\n\n(D) Any other appropriate sources based on information contained in the case record, such as public utility companies, telephone company, employers, or relatives. Once the reviewer has attempted to locate the household and has documented the response of each source contacted, if the household still cannot be located and the State agency has documented evidence that the household did actually exist, the State agency shall report the active case as not subject to review. In these situations documented evidence shall be considered adequate if it either documents two different elements of eligibility or basis of issuance, such as a copy of a birth certificate for age and pay status for income; or documents the statement of a collateral contact indicating that the household did exist. FNS Regional Offices will monitor the results of the contacts which State agencies make in attempting to locate households.\n\n(ii) If a household refuses to cooperate with the quality control reviewer and the State agency has taken other administrative steps to obtain that cooperation without obtaining it, the household shall be notified of the penalities for refusing to cooperate with respect to termination and reapplication, and of the possibility that its case will be referred for investigation for willful misrepresentation. If a household refuses to cooperate after such notice, the reviewer must- attempt to complete the case and shall report the household's refusal to the State agency for termination of its participation without regard for the outcome of that attempt. For a determination of refusal to be made, the household must be able to cooperate, but clearly demonstrate that it will not take actions that it can take and that are required to complete the quality control review process. In certain circumstances, the household may demonstrate that it is unwilling to cooperate by not taking actions after having been given every reasonable opportunity to do so, even though the household or its members do not state that the household refuses to cooperate. Instances where the household's unwillingness to cooperate in completing a quality control review has the effect of a refusal to cooperate shall include the following:\n\n(A) The household does not respond to a letter from the reviewer sent Certified Mail-Return Receipt Requested within 30 days of the date of receipt;\n\n(B) The household does not attend an agreed upon interview with the reviewer and then does not contact the reviewer within 10 days of the date of the scheduled interview to reschedule the interview; or\n\n(C) The household does not return a signed release of information statement to the reviewer within 10 days of either agreeing to do so or receiving a request from the reviewer sent Certified Mail-Return Receipt Requested. However, in these and other situations, if there is any question as to whether the household has merely failed to cooperate, as opposed to refused to cooperate, the household shall not be reported to the State agency for termination.\n\n(2)  Cases not subject to review.  Active cases which are not subject to review, if they have not been eliminated in the sampling process, shall be eliminated in the review process. In addition to cases listed in \u00a7 275.11(f)(1), these shall include:\n\n(i) Death of all members of a household if they died before the review could be undertaken or completed;\n\n(ii) The household moved out of State before the review could be undertaken or completed;\n\n(iii) The household, at the time of the review, is under active investigation for intentional SNAP violation, including a household with a pending administrative disqualification hearing;\n\n(iv) A household receiving restored benefits in accordance with \u00a7 273.17 of this chapter but not participating based upon an approved application for the sample month;\n\n(v) A household dropped as a result of correction for oversampling;\n\n(vi) A household participating under disaster certification authorized by FNS for a natural disaster;\n\n(vii) A case incorrectly listed in the active frame;\n\n(viii) A household appealing an adverse action when the review date falls within the time period covered by continued participation pending the hearing;\n\n(ix) A household that did not receive benefits for the sample month; or\n\n(x) A household that still cannot be located after the reviewer has attempted to locate it in accordance with paragraph (g)(1)(i) of this section.\n\n(h)  Demonstration projects.  Households correctly classified for participation under the rules of a demonstration project which establishes new FNS-authorized eligibility criteria or modifies the rules for determining households' eligibility or allotment level shall be reviewed following standard procedures provided that FNS does not modify these procedures to reflect modifications in the treatment of elements of eligibility or basis of issuance in the case of a demonstration project. If FNS determines that information obtained from these cases would not be useful, then they may be excluded from review."], ["7:7:4.1.1.3.23.3.1.4", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "C", "Subpart C\u2014Quality Control (QC) Reviews", "", "\u00a7 275.13 Review of negative cases.", "FNS", "", "", "[Amdt. 260, 49 FR 6309, Feb. 17, 1984, as amended at 53 FR 39443, Oct. 7, 1988; Amdt. 373, 64 FR 38296, July 16, 1999; 75 FR 33437, June 11, 2010; 86 FR 44587, Aug. 13, 2021]", "(a)  General.  A sample of actions to deny applications, or suspend or terminate a household in the sample month shall be selected for quality control review. These negative actions shall be reviewed to determine whether the State agency's decision to deny, suspend, or terminate the household, as of the review date, was correct. Depending on the characteristics of individual State systems, the review date for negative cases could be the date of the agency's decision to deny, suspend, or terminate program benefits, the date on which the decision is entered into the computer system, or the date of the notice to the client. State agencies must consistently apply the same definition for review date to all sample cases of the same classification. The review of negative cases shall include a household case record review; an error analysis; and the reporting of review findings, including procedural problems with the action regardless of the validity of the decision to deny, suspend or terminate. In certain instances, contact with the household or a collateral contact may be permitted.\n\n(b)  Household case record review.  The reviewer shall examine the household case record and verify through documentation in it whether the reason given for the denial, suspension, or termination is correct. Through the review of the household case record, the reviewer shall complete the household case record sections and document the reasons for denial, suspension or termination on the Negative Quality Control Review Schedule, Form FNS-245.\n\n(c)  Error analysis.  (1) A negative case shall be considered valid if the reviewer is able to verify through documentation in the household case record that a household was correctly denied, suspended, or terminated from the program in accordance with the reason for the action given by the State agency in the notice. Whenever the reviewer is unable to verify the correctness of the State agency's decision to deny, suspend, or terminate a household's participation through such documentation, the QC reviewer may contact the household or a collateral contact to verify the correctness of the specific negative action under review. If the reviewer is unable to verify the correctness of the State agency's decision to deny, suspend, or terminate the case for the specific reason given for the action, the negative case shall be considered invalid.\n\n(2) The reviewer shall exclude a variance when the State agency erroneously denied, suspended or terminated a household's participation based on an erroneous verification of alien documentation by the Immigration and Nationalization Services (INS) Systematic Alien Verification for Entitlements (SAVE) Program. The reviewer shall exclude the variance only if the State agency properly used SAVE, and the State agency provides the reviewer with:\n\n(i) The alien's name;\n\n(ii) The alien's status; and\n\n(iii) Either the Alien Status Verification Index (ASVI) Query Verification Number or the INS Form G-845, as annotated by INS.\n\n(d)  Reporting of review findings.  When a negative case is incorrect, this information shall be reported to the State agency for appropriate action on an individual case basis, such as recomputation of the allotment and restoration of lost benefits. In addition, the reviewer shall code and record the error determination on the Negative Quality Control Review Schedule, Form FNS-245.\n\n(e)  Disposition of case review.  Each case selected in the sample of negative cases must be accounted for by classifying it as completed, not completed, or not subject to review. These case dispositions shall be coded and recorded on the Negative Quality Control Review Schedule, Form FNS-245.\n\n(1)  Cases reported as not complete.  Negative cases shall be reported as not completed if the reviewer, after all reasonable efforts, is unable to locate the case record. In no event, however, shall any negative case be reported as not completed solely because the State agency was unable to process the case review in time for it to be reported in accordance with the timeframes specified in \u00a7 275.21(b)(2), without prior FNS approval. This information shall be reported to the State agency for appropriate action on an individual case basis.\n\n(2)  Cases not subject to review.  Negative cases which are not subject to review, if they have not been eliminated in the sampling process, shall be eliminated in the review process. In addition to cases listed in \u00a7 275.11(f)(2), these shall include:\n\n(i) A household which was dropped as a result of a correction for oversampling;\n\n(ii) A household which was listed incorrectly in the negative frame.\n\n(f)  Demonstration projects.  A household whose application has been denied or whose participation has been suspended or terminated under the rules of an FNS-authorized demonstration project shall be reviewed following standard procedures unless FNS provides modified procedures to reflect the rules of the demonstration project. If FNS determines that information obtained from these cases would not be useful, then these cases may be excluded from review."], ["7:7:4.1.1.3.23.3.1.5", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "C", "Subpart C\u2014Quality Control (QC) Reviews", "", "\u00a7 275.14 Review processing.", "FNS", "", "", "[Amdt. 260, 49 FR 6310, Feb. 17, 1984, as amended by Amdt. 262, 49 FR 50598, Dec. 31, 1984; 75 FR 33438, June 11, 2010]", "(a)  General.  Each State agency shall use FNS handbooks, worksheets, and schedules in the quality control review process.\n\n(b)  Handbooks.  The reviewer shall follow the procedures outlined in the Quality Control Review Handbook, FNS Handbook 310, to conduct quality control reviews. In addition, the sample of active and negative cases shall be selected in accordance with the sampling techniques described in the Quality Control Sampling Handbook, FNS Handbook 311.\n\n(c)  Worksheets.  The Form FNS-380, shall be used by the reviewer to record required information from the case record, plan and conduct the field investigation, and record findings which contribute to the determination of eligibility and basis of issuance in the review of active cases. In some instances, reviewers may need to supplement Form FNS-380 with other forms. The State forms for appointments, interoffice communications, release of information, etc., should be used when appropriate.\n\n(d)  Schedules.  Decisions reached by the reviewer in active case reviews shall be coded and recorded on the Integrated Review Worksheet, Form FNS-380-1. Such active case review findings must be substantiated by information recorded on the Integrated Review Worksheet, Form FNS-380. In negative case reviews, the review findings shall be coded and recorded on the Negative Quality Control Review Schedule, Form FNS-245, and supplemented as necessary with other documentation substantiating the findings."], ["7:7:4.1.1.3.23.4.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "D", "Subpart D\u2014Data Analysis and Evaluation", "", "\u00a7 275.15 Data management.", "FNS", "", "", "[Amdt. 160, 45 FR 15909, Mar. 11, 1980, as amended by Amdt. 266, 52 FR 3409, Feb. 4, 1987; Amdt. 320, 55 FR 6240, Feb. 22, 1990]", "(a)  Analysis.  Analysis is the process of classifying data, such as by areas of program requirements or use of error-prone profiles, to provide a basis for studying the data and determining trends including significant characteristics and their relationships.\n\n(b)  Evaluation.  Evaluation is the process of determining the cause(s) of each deficiency, magnitude of the deficiency, and geographic extent of the deficiency, to provide the basis for planning and developing effective corrective action.\n\n(c) Each State agency must analyze and evaluate at the State and project area levels all management information sources available to:\n\n(1) Identify all deficiencies in program operations and systems;\n\n(2) Identify causal factors and their relationships;\n\n(3) Identify magnitude of each deficiency, where appropriate (This is the frequency of each deficiency occurring based on the number of program records reviewed and where applicable, the amount of loss either to the program or participants or potential participants in terms of dollars. The State agency shall include an estimate of the number of participants or potential participants affected by the existence of the deficiency, if applicable);\n\n(4) Determine the geographic extent of each deficiency (e.g., Statewide/individual project area or management unit); and,\n\n(5) Provide a basis for management decisions on planning, implementing, and evaluating corrective action.\n\n(d) In the evaluation of data, situations may arise where the State agency identifies the existence of a deficiency, but after reviewing all available management information sources sufficient information is not available to make a determination of the actual causal factor(s), magnitude, or geographic extent necessary for the development of appropriate corrective action. In these situations, the State agency shall be responsible for gathering additional data necessary to make these determinations. This action may include, but is not limited to, conducting additional full or partial ME reviews in one or more project areas/management units or discussions with appropriate officials.\n\n(e) Deficiencies identified from all management information sources must be analyzed and evaluated together to determine their causes, magnitude, and geographic extent. Causes indicated and deficiencies identified must be examined to determine if they are attributable to a single cause and can be effectively eliminated by a single action. Deficiencies and causes identified must also be compared to the results of past corrective action efforts to determine if the new problems arise from the causal factors which contributed to the occurrence of previously identified deficiencies.\n\n(f) Data analysis and evaluation must be an ongoing process to facilitate the development of effective and prompt corrective action. The process shall also identify when deficiencies have been eliminated through corrective action efforts, and shall provide for the reevaluation of deficiencies and causes when it is determined that corrective action has not been effective.\n\n(g)  Identification of High Error Project Areas/Counties/Local Offices.  FNS may use quality control information to determine which project areas/counties/local offices have reported payment error rates that are either significantly greater than the State agency average or greater than the national error standard of the Program. When FNS notifies a State agency that a \u201chigh error\u201d area exists, the State agency shall ensure that corrective action is developed and reported in accordance with the provisions of \u00a7 275.17. If FNS identifies a \u201chigh error\u201d locality which a State agency has previously identified as error-prone and taken appropriate action, no further State agency shall be required. If a State agency's corrective action plan fails to address problems in FNS-identified \u201chigh error\u201d areas, FNS may require a State agency to implement new or modified cost-effective procedures for the certification of households."], ["7:7:4.1.1.3.23.5.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "E", "Subpart E\u2014Corrective Action", "", "\u00a7 275.16 Corrective action planning.", "FNS", "", "", "[Amdt. 160, 45 FR 15909, Mar. 11, 1980, as amended by Amdt. 169, 46 FR 7263, Jan. 23, 1981; Amdt. 262, 49 FR 50598, Dec. 31, 1984; Amdt. 266, 52 FR 3409, Feb. 4, 1987; Amdt. 328, 56 FR 60052, Nov. 27, 1991; 68 FR 59523, Oct. 16, 2003; 75 FR 33438, June 11, 2010; 81 FR 2741, Jan. 19, 2016]", "(a) Corrective action planning is the process by which State agencies shall determine appropriate actions to reduce substantially or eliminate deficiencies in program operations and provide responsive service to eligible households.\n\n(b) The State agency and project area(s)/management unit(s), as appropriate, shall implement corrective action on all identified deficiencies. Deficiencies requiring action by the State agency or the combined efforts of the State agency and the project area(s)/management unit(s) in the planning, development, and implementation of corrective action are those which:\n\n(1) Result from a payment error rate of 6 percent or greater (actions to correct errors in individual cases, however, shall not be submitted as part of the State agency's corrective action plan);\n\n(2) Are the causes of other errors/deficiencies detected through quality control, including error rates of 1 percent or more in negative cases (actions to correct errors in individual cases, however, shall not be submitted as part of the State agency's corrective action plan);\n\n(3) Are identified by FNS reviews, GAO audits, contract audits, reports to FNS regarding the implementation of major changes (as discussed in \u00a7 272.15) or USDA audits or investigations at the State agency or project area level (except deficiencies in isolated cases as indicated by FNS); and,\n\n(4) Result from 5 percent or more of the State agency's QC sample being coded \u201cnot complete\u201d as defined in \u00a7 275.12(g)(1) of this part. This standard shall apply separately to both active and negative samples.\n\n(5) Result in underissuances, improper denials, improper suspensions, improper termination, or improper systemic suspension of benefits to eligible households where such errors are caused by State agency rules, practices, or procedures.\n\n(c) The State agency shall ensure that appropriate corrective action is taken on all deficiencies including each case found to be in error by quality control reviews and those deficiencies requiring corrective action only at the project area level. Moreover, when a substantial number of deficiencies are identified which require State agency level and/or project area/management unit corrective action, the State agency and/or project area/management unit shall establish an order of priority to ensure that the most serious deficiencies are addressed immediately and corrected as soon as possible. Primary factors to be considered when determining the most serious deficiencies are:\n\n(1) Magnitude of the deficiency as defined in \u00a7 275.15(c)(3) of this part;\n\n(2) Geographic extent of the deficiency (e.g., Statewide/project area or management unit);\n\n(3) Anticipated results of corrective actions; and\n\n(4) High probability of errors occurring as identified through all management evaluation sources.\n\n(d) In planning corrective action, the State agency shall coordinate actions in the areas of data analysis, policy development, quality control, program evaluation, operations, administrative cost management, civil rights, and training to develop appropriate and effective corrective action measures."], ["7:7:4.1.1.3.23.5.1.2", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "E", "Subpart E\u2014Corrective Action", "", "\u00a7 275.17 State corrective action plan.", "FNS", "", "", "[Amdt. 160, 45 FR 15909, Mar. 11, 1980, as amended by Amdt. 266, 52 FR 3409, Feb. 4, 1987]", "(a) State agencies shall prepare corrective action plans addressing those deficiencies specified in \u00a7 275.16(b) requiring action by the State agency or the combined efforts of the State agency and the project area(s)/management unit(s). This corrective action plan is an open-ended plan and shall remain in effect until all deficiencies in program operations have been reduced substantially or eliminated. State agencies shall provide updates to their corrective action plans through regular, semiannual updates. These semiannual updates shall be received by FNS by May 1st and November 1st respectively. Such updates must contain:\n\n(1) Any additional deficiencies identified since the previous corrective action plan update;\n\n(2) Documentation that a deficiency has been corrected and is therefore being removed from the plan; and\n\n(3) Any changes to planned corrective actions for previously reported deficiencies.\n\n(b)  Content.  State corrective action plans shall contain, but not necessarily be limited to, the following, based on the most recent information available:\n\n(1) Specific description and identification of each deficiency;\n\n(2) Source(s) through which the deficiency was detected;\n\n(3) Magnitude of each deficiency, if appropriate, as defined in \u00a7 275.15(c)(3) of this part;\n\n(4) Geographic extent of the deficiency (e.g., Statewide/project area or management unit\u2014specific project areas in which the deficiency occurs);\n\n(5) Identification of causal factor(s) contributing to the occurrence of each deficiency;\n\n(6) Identification of any action already completed to eliminate the deficiency;\n\n(7) For each deficiency, an outline of actions to be taken, the expected outcome of each action, the target date for each action, and the date by which each deficiency will have been eliminated; and\n\n(8) For each deficiency, a description of the manner in which the State agency will monitor and evaluate the effectiveness of the corrective action in eliminating the deficiency.\n\n(c) FNS will provide technical assistance in developing corrective action plans when requested by State agencies.\n\n(d) State agencies will be held accountable for the efficient and effective operation of all areas of the program. FNS is not precluded from issuing a warning as specified in part 276 because a deficiency is included in the State agency's corrective action plan."], ["7:7:4.1.1.3.23.5.1.3", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "E", "Subpart E\u2014Corrective Action", "", "\u00a7 275.18 Project area/management unit corrective action plan.", "FNS", "", "", "[Amdt. 160, 45 FR 15909, Mar. 11, 1980]", "(a) The State agency shall ensure that corrective action plans are prepared at the project area/management unit level, addressing those deficiencies not required to be included in the State corrective action plan. State agencies may elect to prepare these plans for or in cooperation with the project area. These project area/management unit corrective action plans shall be open-ended and shall remain in effect until all deficiencies in program operations have been reduced substantially or eliminated. Any deficiencies detected through any source not previously reported to the State agency which require incorporation into the Project Area/Management Unit Corrective Action Plan shall be submitted to the State agency within 60 days of identification. As deficiencies are reduced substantially or eliminated, the project area/management unit shall notify the State agency in writing. The project area/management unit shall be responsible for documenting why each deficiency is being removed from the Plan. The removal of any deficiency from the Plan will be subject to State agency and FNS review and validation.\n\n(b)  Content.  Project area/management unit corrective action plans shall contain all the information necessary to enable the State agency to monitor and evaluate the corrective action properly. Also, State agencies shall establish requirements for project area/management units in planning, implementing and reporting corrective action to assist the State agency's efforts to fulfill its responsibilities for determining which deficiencies must be addressed in the State corrective action plan. States should consider requiring project area/management unit plans to include the following, based on the most recent information available:\n\n(1) Specific description and identification of each deficiency;\n\n(2) Source(s) through which the deficiency was detected;\n\n(3) Magnitude of each deficiency, if appropriate, as defined in \u00a7 275.15(c)(3) of this part;\n\n(4) Geographic extent of the deficiency (throughout the project area/management unit or only in specific offices);\n\n(5) Identification of causal factor(s) contributing to the occurrence of each deficiency;\n\n(6) Identification of any action already completed to eliminate the deficiency;\n\n(7) For each deficiency, an outline of actions to be taken, the expected outcome of each action, the target date for each action, the date by which each deficiency will have been eliminated; and\n\n(8) For each deficiency, a description of the manner in which the project area/management unit will monitor and evaluate the effectiveness of the corrective action in eliminating the deficiency."], ["7:7:4.1.1.3.23.5.1.4", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "E", "Subpart E\u2014Corrective Action", "", "\u00a7 275.19 Monitoring and evaluation.", "FNS", "", "", "[Amdt. 160, 45 FR 15909, Mar. 11, 1980]", "(a) The State agency shall establish a system for monitoring and evaluating corrective action at the State and project area levels. Monitoring and evaluation shall be an ongoing process to determine that deficiencies are being substantially reduced or eliminated in an efficient manner and that the program provides responsive service to eligible households.\n\n(b) The State agency shall ensure that corrective action on all deficiencies identified in the State Corrective Action Plan and Project Area/Management Unit Corrective Action Plan is implemented and achieves the anticipated results within the specified time frames. The State agency shall monitor and evaluate corrective action at the State and project levels through a combination of reports, field reviews, and examination of current data available through program management tools and other sources.\n\n(c) In instances where the State agency and/or the project area/management unit determines that the proposed corrective action is not effective in reducing substantially or eliminating deficiencies, the State agency and/or the project area/management unit shall promptly reevaluate the deficiency, causes, and the corrective action taken, and develop and implement new corrective actions."], ["7:7:4.1.1.3.23.6.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "F", "Subpart F\u2014Responsibilities for Reporting on Program Performance", "", "\u00a7 275.20 ME review schedules.", "FNS", "", "", "[Amdt. 266, 52 FR 3410, Feb. 4, 1987]", "(a) Each State agency shall submit its review schedule to the appropriate FNS regional office at least 60 days prior to the beginning of the next year's review period (the Federal fiscal year). These schedules must ensure that all project areas/management units will be reviewed within the required time limits. Each schedule shall identify the project areas/management units in each classification and list each project area to be reviewed by month or by quarter. A State agency may submit a request to use an alternate review schedule at any time. The alternate schedule shall not be effective until approved by FNS in accordance with \u00a7 275.5(b)(2).\n\n(b) State agencies shall notify the appropriate FNS regional office of all changes in review schedules."], ["7:7:4.1.1.3.23.6.1.2", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "F", "Subpart F\u2014Responsibilities for Reporting on Program Performance", "", "\u00a7 275.21 Quality control review reports.", "FNS", "", "", "[Amdt. 260, 49 FR 6310, Feb. 17, 1984, as amended by Amdt. 262, 49 FR 50598, Dec. 31, 1984; Amdt. 266, 52 FR 3410, Feb. 4, 1987; 75 FR 33438, June 11, 2010; 86 FR 44857, Aug. 13, 2021; 86 FR 49229, Sept. 2, 2021]", "(a)  General.  Each State agency shall submit reports on the performance of quality control reviews in accordance with the requirements outlined in this section. These reports are designed to enable FNS to monitor the State agency's compliance with Program requirements relative to the Quality Control Review System. Every case selected for review during the sample month must be accounted for and reflected in the appropriate report(s).\n\n(b)  Individual cases.  The State agency shall report the review findings on each case selected for review during the sample month. For active cases, the State agency shall thoroughly document the Quality Control Review Schedule, Form FNS-380, to ensure any subsequent case reviewers fully understand household circumstances pertaining to the QC review as well as the reasons for the individual case finding and disposition. The State agency shall also code the findings on the Form FNS-380-1. For negative cases, the State agency shall submit a summary report, coded and documented on the Negative Quality Control Review Schedule, Form FNS-245, in enough detail to ensure subsequent case reviewers fully understand the reasons for the individual finding and disposition. The review findings shall be reported as follows:\n\n(1) The State agency shall utilize SNAPQCS, FNS' automated, web-based QC System, to report all required QC forms, supporting evidence, and information necessary to understand the disposition and final findings for active and negative sampled cases to FNS. Upon State agency request, FNS will consider approval of any technical changes in the review results after they have been reported to FNS.\n\n(2) The State agency shall have at least 115 days from the end of the sample month to dispose of and report the findings of all cases selected in a sample month. FNS may grant additional time as warranted upon request by a State agency for cause shown to complete and dispose of individual cases.\n\n(3) The State agency shall supply the FNS Regional Office with individual household case records and the pertinent information contained in the individual case records, or legible copies of that material, as well as legible hard copies of individual Forms FNS-380, FNS-380-1, and FNS-245 or other FNS-approved report forms, within 10 days of receipt of a request for such information.\n\n(4) For each case that remains pending 115 days after the end of the sample month, the State agency shall immediately submit a report that includes an explanation of why the case has not been disposed of, documentation describing the progress of the review to date, and the date by which it will be completed. If FNS extends the time frames in paragraph (b)(2) of this section, this date will be extended accordingly. If FNS determines that the report in the first sentence of this paragraph (b)(4) does not sufficiently justify the case's pending status, the case shall be considered overdue. Depending upon the number of overdue cases, FNS may find the State agency's QC system to be inefficient or ineffective and suspend and/or disallow the State agency's Federal share of administrative funds in accordance with the provisions of \u00a7 276.4.\n\n(c)  Monthly status.  The State agency shall report in a manner directed by the regional office the monthly progress of sample selection and completion within 125 days after the end of the sample month. Each report shall reflect sampling and review activity for a given sample month. If FNS extends the time frames in paragraph (b)(2) of this section, this date will be extended accordingly.\n\n(d)  Demonstration projects.  The State agency shall identify the monthly status of active and negative demonstration project ( i.e.,  those cases described in \u00a7 275.11(g)) in accordance with paragraph (c) of this section."], ["7:7:4.1.1.3.23.6.1.3", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "F", "Subpart F\u2014Responsibilities for Reporting on Program Performance", "", "\u00a7 275.22 Administrative procedure.", "FNS", "", "", "[Amdt. 160, 45 FR 15911, Mar. 11, 1980. Redesignated at 52 FR 3410, Feb. 4, 1987]", "Reports on program performance are intended to provide the State an opportunity to determine compliance with program requirements, identify and resolve emerging problems, and assess the effectiveness of actions that have been taken to correct existing problems. States' reports enable FNS to assess the nationwide status of eligibility and basis of issuance determinations, to ensure State compliance with Federal requirements, to assist States in improving and strengthening their programs, and to develop Federal policies. Reports must be submitted in duplicate to the appropriate FNS Regional Office according to the time frames established in \u00a7\u00a7 275.20, 275.21, and 275.22 of this part."], ["7:7:4.1.1.3.23.7.1.1", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "G", "Subpart G\u2014Program Performance", "", "\u00a7 275.23 Determination of State agency program performance.", "FNS", "", "", "[75 FR 33438, June 11, 2010, as amended at 80 FR 53243, Sept. 3, 2015; 86 FR 44587, Aug. 13, 2021]", "(a)  Determination of efficiency and effectiveness.  FNS shall determine the efficiency and effectiveness of a State's administration of the Supplemental Nutrition Assistance Program by measuring State compliance with the standards contained in the Food and Nutrition Act, regulations, and the State Plan of Operation and State efforts to improve program operations through corrective action. This determination shall be made based on:\n\n(1) Reports submitted to FNS by the State;\n\n(2) FNS reviews of State agency operations;\n\n(3) State performance reporting systems and corrective action efforts; and\n\n(4) Other available information such as Federal audits and investigations, civil rights reviews, administrative cost data, complaints, and any pending litigation.\n\n(b)  State agency error rates.  FNS shall estimate each State agency's active case, payment, and negative case error rate based on the results of quality control review reports submitted in accordance with the requirements outlined in \u00a7 275.21. The determination of the correctness of the case shall be based on certification policy as set forth in part 273 of this chapter.\n\n(1)  Demonstration projects.  FNS shall make a determination for each individual project whether the reported results of reviews of active and negative demonstration project cases shall be included or excluded from the estimate of the active case error rate, payment error rate, and negative case error rate.\n\n(2)  Determination of payment error rates.  As specified in \u00a7 275.3(c), FNS will validate each State agency's estimated payment error rate by rereviewing the State agency's active case sample and ensuring that its sampling, estimation, and data management procedures are correct.\n\n(i) Once the Federal case reviews have been completed and all differences with the State agency have been identified, FNS shall calculate regressed error rates using the following linear regression equations.\n\n(A)  y 1 \u2032 =  y 1  +  b 1  ( X 1  \u2212 x 1 ), where  y 1 \u2032 is the average value of allotments overissued to eligible and ineligible households;  y 1  is the average value of allotments overissued to eligible and ineligible households in the rereview sample according to the Federal finding,  b 1  is the estimate of the regression coefficient regressing the Federal findings of allotments overissued to eligible and ineligible households on the corresponding State agency findings,  x 1  is the average value of allotments overissued to eligible and ineligible households in the rereview sample according to State agency findings, and  X 1  is the average value of allotments overissued to eligible and ineligible households in the full quality control sample according to State agency's findings. In stratified sample designs  Y 1 ,  X 1 , and  x 1  are weighted averages and  b 1  is a combined regression coefficient in which stratum weights sum to 1.0 and are proportional to the estimated stratum caseloads subject to review.\n\n(B)  y 2 \u2032 =  y 2  +  b 2 ( X 2 \u2212 x 2 , where  y 2 \u2032 is the average value of allotments underissued to households included in the active error rate,  y 2  is the average value of allotments underissued to participating households in the rereview sample according to the Federal finding,  b 2  is the estimate of the regression coefficient regressing the Federal findings of allotments underissued to participating households on the corresponding State agency findings,  x 2  is the average value of allotments underissued to participating households in the rereview sample according to State agency findings, and  X 2  is the average value of allotments underissued to participating households in the full quality control sample according to the State agency's findings. In stratified sample designs  y 2 ,  X 2 , and  x 2  are weighted averages and  b 2  is a combined regression coefficient in which stratum weights sum to 1.0 and are proportional to the estimated stratum caseloads subject to review.\n\n(C) The regressed error rates are given by  r 1 \u2032 =  y 1 \u2032/ u , yielding the regressed overpayment error rate, and  r 2 \u2032 =  y 2 \u2032/ u , yielding the regressed underpayment error rate, where  u  is the average value of allotments issued to participating households in the State agency sample.\n\n(D) After application of the adjustment provisions of paragraph (b)(2)(iii) of this section, the adjusted regressed payment error rate shall be calculated to yield the State agency's payment error rate. The adjusted regressed payment error rate is given by  r 1 \u2033 +  r 2 \u2033.\n\n(ii) If FNS determines that a State agency has sampled incorrectly, estimated improperly, or has deficiencies in its QC data management system, FNS will correct the State agency's payment and negative case error rates based upon a correction to that aspect of the State agency's QC system which is deficient. If FNS cannot accurately correct the State agency's deficiency, FNS will assign the State agency a payment error rate or negative case error rate based upon the best information available. After consultation with the State agency, the assigned payment error rate will then be used in the liability determination. After consultation with the State agency, the assigned negative case error rate will be the official State negative case error rate for any purpose. State agencies shall have the right to appeal assessment of an error rate in this situation in accordance with the procedures of Part 283 of this chapter.\n\n(iii) Should a State agency fail to complete 98 percent of its required sample size, FNS shall adjust the State agency's regressed error rates using the following equations:\n\n(A)  r 1 \u2033 =  r 1 \u2032 + 2(1\u2212 C ) S 1 , where  r 1 \u2033 is the adjusted regressed overpayment error rate,  r 1 \u2032 is the regressed overpayment error rate computed from the formula in paragraph (b)(2)(i)(C) of this section,  C  is the State agency's rate of completion of its required sample size expressed as a decimal value, and  S 1  is the standard error of the State agency sample overpayment error rate. If a State agency completes all of its required sample size, then  r 1 \u2033 =  r 1 \u2032.\n\n(B)  r 2 \u2033 =  r 2 \u2032 + 2(1\u2212 C ) S 2 , where  r 2 \u2033 is the adjusted regressed underpayment error rate,  r 2 \u2032 is the regressed underpayment error rate computed from the formula in paragraph (b)(2)(i)(C) of this section,  C  is the State agency's rate of completion of its required sample size expressed as a decimal value, and  S 2  is the standard error of the State agency sample underpayment error rate. If a State agency completes all of its required sample size, then  r 2 \u2033 =  r 2 \u2032.\n\n(c)  FNS Time frames for completing case review process, arbitration, and issuing error rates.  The case review process and the arbitration of all difference cases shall be completed by May 31 following the end of the fiscal year. FNS shall determine and announce the national average payment and negative case error rates for the fiscal year by June 30 following the end of the fiscal year. At the same time FNS shall notify all State agencies of their individual payment and negative case error rates and payment error rate liabilities, if any. FNS shall provide a copy of each State agency's notice of potential liability to its respective chief executive officer and legislature. FNS shall initiate collection action on each claim for such liabilities before the end of the fiscal year following the reporting period in which the claim arose unless an appeal relating to the claim is pending. Such appeals include administrative and judicial appeals pursuant to Section 14 of the Food and Nutrition Act. While the amount of a State's liability may be recovered through offsets to their letter of credit as identified in \u00a7 277.16(c) of this chapter, FNS shall also have the option of billing a State directly or using other claims collection mechanisms authorized under the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) and the Federal Claims Collection Standards (31 CFR Parts 900-904), depending upon the amount of the State's liability. FNS is not bound by the time frames referenced in paragraph (c) of this section in cases where a State fails to submit QC data expeditiously to FNS and FNS determines that, as a result, it is unable to calculate the State's payment error rate and payment error rate liability within the prescribed time frame.\n\n(d)  State agencies' liabilities for payment error rates.  At the end of each fiscal year, each State agency's payment error rate over the entire fiscal year will be computed and evaluated to determine whether the payment error rate goal (national performance measure) established in paragraph (d)(1) of this section has been met. Each State agency that fails to achieve its payment error rate goal during a fiscal year shall be liable as specified in the paragraph (d)(2) of this section.\n\n(1)  National performance measure.  FNS shall announce a national performance measure not later than June 30 after the end of the fiscal year. The national performance measure is the sum of the products of each State agency's error rate multiplied by that State agency's proportion of the total value of national allotments issued for the fiscal year using the most recent issuance data available at the time the State agency is notified of its payment error rate. Once announced, the national performance measure for a given fiscal year will not be subject to administrative or judicial appeal.\n\n(2)  Liability.  For fiscal year 2003 and subsequent years, liability for payment shall be established whenever there is a 95 percent statistical probability that, for the second or subsequent consecutive fiscal year, a State agency's payment error rate exceeds 105 percent of the national performance measure. The amount of the liability shall be equal to the product of the value of all allotments issued by the State agency in the second (or subsequent consecutive) fiscal year; multiplied by the difference between the State agency's payment error rate and 6 percent; multiplied by 10 percent.\n\n(3)  Right to appeal payment error rate liability.  Determination of a State agency's payment error rate or whether that payment error rate exceeds 105 percent of the national performance measure shall be subject to administrative or judicial review only if a liability amount is established for that fiscal year. Procedures for good cause appeals of excessive payment error rates are addressed in paragraph (f) of this section. The established national performance measure is not subject to administrative or judicial appeal, nor is any prior fiscal year payment error rate subject to appeal as part of the appeal of a later fiscal year's liability amount. However, State agencies may address matters related to good cause in an immediately prior fiscal year that impacted the fiscal year for which a liability amount has been established. The State agency will need to address how year 2 was impacted by the event(s) in the prior year.\n\n(4)  Relationship to warning process and negligence.  (i) States' liability for payment error rates as determined above in paragraphs (d)(1) through (d)(3) of this section are not subject to the warning process of \u00a7 276.4(d) of this chapter.\n\n(ii) FNS shall not determine negligence (as described in \u00a7 276.3 of this chapter) based on the overall payment error rate for issuances to ineligible households and overissuances to eligible households in a State or political subdivision thereof. FNS may only establish a claim under \u00a7 276.3 of this chapter for dollar losses from failure to comply, due to negligence on the part of the State agency (as defined in \u00a7 276.3 of this chapter), with specific certification requirements. Thus, FNS will not use the result of States' QC reviews to determine negligence.\n\n(iii) Whenever a State is assessed a liability amount for an excessive payment error rate, the State shall have the right to request an appeal in accordance with procedures set forth in part 283 of this chapter. While FNS may determine a State to be liable for dollar loss under the provisions of this section and the negligence provisions of \u00a7 276.3 of this chapter for the same period of time, FNS shall not bill a State for the same dollar loss under both provisions. If FNS finds a State liable for dollar loss under both the QC liability system and the negligence provisions, FNS shall adjust the billings to ensure that two claims are not made against the State for the same dollar loss.\n\n(e)  Liability amount determinations.  (1) FNS shall provide for each State agency whose payment error rate subjects it to a liability amount the following determinations, each expressed as a percentage of the total liability amount. FNS shall:\n\n(i) Require the State agency to invest up to 50 percent of the liability in activities to improve program administration (new investment money shall not be matched by Federal funds) and\n\n(ii) Designate up to 50 percent of the liability as \u201cat-risk\u201d for repayment if a liability is established based on the State agency's payment error rate for the subsequent fiscal year, or\n\n(iii) Choose any combination of these options.\n\n(2) Once FNS determines the percentages in accordance with paragraphs (e)(1)(i) through (e)(1)(iv) of this section, the amount assigned as at-risk is not subject to settlement negotiation between FNS and the State agency and may not be reduced unless an appeal decision revises the total dollar liability. FNS and the State agency shall settle any waiver percentage amount or new investment percentage amount before the end of the fiscal year in which the liability amount is determined. The determination of percentages for waiver, new investment, and/or at-risk amounts by the Department is not appealable. Likewise, a settlement of the waiver and new investment amounts cannot be appealed.\n\n(f)  Good cause.  When a State agency with otherwise effective administration exceeds the tolerance level for payment errors as described in this section, the State agency may seek relief from liability claims that would otherwise be levied under this section on the basis that the State agency had good cause for not achieving the payment error rate tolerance. State agencies desiring such relief must file an appeal with the Department's Administrative Law Judge (ALJ) in accordance with the procedures established under part 283 of this chapter. Paragraphs (f)(1) through (f)(5) of this section describe the unusual events that are considered to have a potential for disrupting program operations and increasing error rates to an extent that relief from a resulting liability amount or increased liability amount is appropriate. The occurrence of an event(s) does not automatically result in a determination of good cause for an error rate in excess of the national performance measure. The State agency must demonstrate that the event had an adverse and uncontrollable impact on program operations during the relevant period, and the event caused an uncontrollable increase in the error rate. Good cause relief will only be considered for that portion of the error rate/liability amount attributable to the unusual event. The following are unusual events which State agencies may use as a basis for requesting good cause relief and specific information that must be submitted to justify such requests for relief:\n\n(1)  Natural disasters and civil disorders.  Natural disasters such as those under the authority of The Disaster Relief and Emergency Assistance Amendments of 1988 (Pub. L. 100-707), which amended The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Pub. L. 93-288), or civil disorders that adversely affect program operations.\n\n(i) When submitting a request for good cause relief based on this example, the State agency shall provide the following information:\n\n(A) The nature of the disaster(s) ( e.g.,  a tornado, hurricane, earthquake, flood, etc.) or civil disorder(s) and evidence that the President has declared a disaster;\n\n(B) The date(s) of the occurrence;\n\n(C) The date(s) after the occurrence when program operations were affected;\n\n(D) The geographic extent of the occurrence ( i.e.,  the county or counties where the disaster occurred);\n\n(E) The proportion of the Supplemental Nutrition Assistance Program caseload whose management was affected;\n\n(F) The reason(s) why the State agency was unable to control the effects of the disaster on program administration and errors.\n\n(G) The identification and explanation of the uncontrollable nature of errors caused by the event (types of errors, geographic location of the errors, time period during which the errors occurred, etc.).\n\n(H) The percentage of the payment error rate that resulted from the occurrence and how this figure was derived; and\n\n(I) The degree to which the payment error rate exceeded the national performance measure in the subject fiscal year.\n\n(ii) (A) The following criteria and methodology will be used to assess and evaluate good cause in conjunction with the appeals process, and to determine that portion of the error rate/liability amount attributable to the uncontrollable effects of a disaster or civil disorder:\n\n( 1 ) Geographical impact of the disaster;\n\n( 2 ) State efforts to control impact on program operations;\n\n( 3 ) The proportion of Supplemental Nutrition Assistance Program caseload affected; and/or\n\n( 4 ) The duration of the disaster and its impact on program operations.\n\n(B) Adjustments for these factors may result in a waiver of all, part, or none of the liability amount for the applicable period. As appropriate, the waiver amount will be adjusted to reflect States' otherwise effective administration of the program based upon the degree to which the error rate exceeds the national performance measure. For example, a reduction in the waiver amount may be made when a State agency's recent error rate history indicates that even absent the events described the State agency would have exceeded the national performance measure in the review period.\n\n(iii) If a State agency has provided insufficient information to determine a waiver amount for the uncontrollable effects of a natural disaster or civil disorder using factual analysis, the waiver amount shall be evaluated using the following formula and methodology which measures both the duration and intensity of the event. Duration will be measured by the number of months the event had an adverse impact on program operations. Intensity will be a proportional measurement of the issuances for the counties affected to the State's total issuance. This ratio will be determined using issuance figures for the first full month immediately preceding the disaster. This figure will not include issuances made to households participating under disaster certification authorized by FNS and already excluded from the error rate calculations under \u00a7 275.12(g)(2)(vi). The counties considered affected will include counties where the disaster/civil disorder occurred, and any other county that the State agency can demonstrate had program operations adversely impacted due to the event (such as a county that diverted significant numbers of Supplemental Nutrition Assistance Program certification or administrative staff). The amount of the waiver of liability will be determined using the linear equation W = Ia/Ib \u00d7 [M/12 or Mp/18] \u00d7 L, where Ia is the issuance for the first full month immediately preceding the unusual event for the county affected; Ib is the State's total issuance for the first full month immediately preceding the unusual event; M/12 is the number of months in the subject fiscal year that the unusual event had an adverse impact on program operations; Mp/18 is the number of months in the last half (April through September) of the prior fiscal year that the unusual event had an adverse impact on program operations; L is the total amount of the liability for the fiscal year. Mathematically this formula could result in a waiver of more than 100 percent of the liability amount; however, no more than 100 percent of a State's liability amount will be waived for any one fiscal year. Under this approach, unless the State agency can demonstrate a direct uncontrollable impact on the error rate, the effects of disasters or civil disorders that ended prior to the second half of the prior fiscal year will not be considered.\n\n(2)  Strikes.  Strikes by State agency staff necessary to determine Supplemental Nutrition Assistance Program eligibility and process case changes.\n\n(i) When submitting a request for good cause relief based on this example, the State agency shall provide the following information:\n\n(A) Which workers ( i.e.,  eligibility workers, clerks, data input staff, etc.) and how many (number and percentage of total staff) were on strike or refused to cross picket lines;\n\n(B) The date(s) and nature of the strike ( i.e.,  the issues surrounding the strike);\n\n(C) The date(s) after the occurrence when program operations were affected;\n\n(D) The geographic extent of the strike ( i.e.,  the county or counties where the strike occurred);\n\n(E) The proportion of the Supplemental Nutrition Assistance Program caseload whose management was affected;\n\n(F) The reason(s) why the State agency was unable to control the effects of the strike on program administration and errors;\n\n(G) Identification and explanation of the uncontrollable nature of errors caused by the event (types of errors, geographic location of the errors, time period during which the errors occurred, etc.);\n\n(H) The percentage of the payment error rate that resulted from the strike and how this figure was derived; and\n\n(I) The degree to which the payment error rate exceeded the national performance measure in the subject fiscal year.\n\n(ii) (A) The following criteria shall be used to assess, evaluate and respond to claims by the State agency for a good cause waiver of a liability amount in conjunction with the appeals process, and to determine that portion of the error rate/liability amount attributable to the uncontrollable effects of the strike:\n\n( 1 ) Geographical impact of the strike;\n\n( 2 ) State efforts to control impact on program operations;\n\n( 3 ) The proportion of Supplemental Nutrition Assistance Program caseload affected; and/or\n\n( 4 ) The duration of the strike and its impact on program operations.\n\n(B) Adjustments for these factors may result in a waiver of all, part, or none of the liability amount for the applicable period. For example, the amount of the waiver might be reduced for a strike that was limited to a small area of the State. As appropriate, the waiver amount will be adjusted to reflect States' otherwise effective administration of the program based upon the degree to which the error rate exceeded the national performance measure.\n\n(iii) If a State agency has provided insufficient information to determine a waiver amount for the uncontrollable effects of a strike using factual analysis, a waiver amount shall be evaluated by using the formula described in paragraph (f)(1) of this section. Under this approach, unless the State agency can demonstrate a direct uncontrollable impact on the error rate, the effects of strikes that ended prior to the second half of the prior fiscal year will not be considered.\n\n(3)  Caseload growth.  A significant growth in Supplemental Nutrition Assistance Program caseload in a State prior to or during a fiscal year, such as a 15 percent growth in caseload. Caseload growth which historically increases during certain periods of the year will not be considered unusual or beyond the State agency's control.\n\n(i) When submitting a request for good cause relief based on this example, the State agency shall provide the following information:\n\n(A) The amount of growth (both actual and percentage);\n\n(B) The time the growth occurred (what month(s)/year);\n\n(C) The date(s) after the occurrence when program operations were affected;\n\n(D) The geographic extent of the caseload growth ( i.e.  Statewide or in which particular counties);\n\n(E) The impact of caseload growth;\n\n(F) The reason(s) why the State agency was unable to control the effects of caseload growth on program administration and errors;\n\n(G) The percentage of the payment error rate that resulted from the caseload growth and how this figure was derived; and\n\n(H) The degree to which the error rate exceeded the national performance measure in the subject fiscal year.\n\n(ii) (A) The following criteria and methodology shall be used to assess and evaluate good cause in conjunction with the appeals process, and to determine that portion of the error rate/liability amount attributable to the uncontrollable effects of unusual caseload growth:\n\n( 1 ) Geographical impact of the caseload growth;\n\n( 2 ) State efforts to control impact on program operations;\n\n( 3 ) The proportion of Supplemental Nutrition Assistance Program caseload affected; and/or\n\n( 4 ) The duration of the caseload growth and its impact on program operations.\n\n(B) Adjustments for these factors may result in a waiver of all, part, or none of the liability amount for the applicable period. As appropriate, the waiver amount will be adjusted to reflect States' otherwise effective administration of the program based upon the degree to which the error rate exceeded the national performance measure. For example, a reduction in the waiver amount may be made when a State agency's recent error rate history indicates that even absent the events described the State agency would have exceeded the national performance measure in the review period. Under this approach, unless the State agency can demonstrate a direct uncontrollable impact on the error rate, the effects of caseload growth that ended prior to the second half of the prior fiscal year will not be considered.\n\n(iii) If the State agency has provided insufficient information to determine a waiver amount for the uncontrollable effects of caseload growth using factual analysis, the waiver amount shall be evaluated using the following five-step calculation:\n\n(A) Step 1\u2014determine the average number of households certified to participate Statewide in the Supplemental Nutrition Assistance Program for the base period consisting of twelve consecutive months ending with March of the prior fiscal year;\n\n(B) Step 2\u2014determine the percentage of increase in caseload growth from the base period (Step 1) using the average number of households certified to participate Statewide in the Supplemental Nutrition Assistance Program for any twelve consecutive months in the period beginning with April of the prior fiscal year and ending with June of the current year;\n\n(C) Step 3\u2014determine the percentage the error rate for the subject fiscal year, as calculated under paragraph (b)(2) of this section, exceeds the national performance measure determined in accordance with paragraph (d)(1) of this section;\n\n(D) Step 4\u2014divide the percentage of caseload growth increase arrived at in step 2 by the percentage the error rate for the subject fiscal year exceeds the national performance measure as determined in step 3; and\n\n(E) Step 5\u2014multiply the quotient arrived at in step 4 by the liability amount for the current fiscal year to determine the amount of waiver of liability.\n\n(iv) Under this methodology, caseload growth of less than 15% and/or occurring in the last three months of the subject fiscal year will not be considered. Mathematically this formula could result in a waiver of more than 100 percent of the liability amount; however, no more than 100 percent of a State's liability amount will be waived for any one fiscal year.\n\n(4)  Program changes.  A change in the Supplemental Nutrition Assistance Program or other Federal or State program that has a substantial adverse impact on the management of the Supplemental Nutrition Assistance Program of a State. Requests for relief from errors caused by the uncontrollable effects of unusual program changes other than those variances already excluded by \u00a7 275.12(d)(2)(vii) will be considered to the extent the program change is not common to all States.\n\n(i) When submitting a request for good cause relief based on unusual changes in the Supplemental Nutrition Assistance Program or other Federal or State programs, the State agency shall provide the following information:\n\n(A) The type of changes(s) that occurred;\n\n(B) When the change(s) occurred;\n\n(C) The nature of the adverse effect of the changes on program operations and the State agency's efforts to mitigate these effects;\n\n(D) Reason(s) the State agency was unable to adequately handle the change(s);\n\n(E) Identification and explanation of the uncontrollable errors caused by the changes (types of errors, geographic location of the errors, time period during which the errors occurred, etc.);\n\n(F) The percentage of the payment error rate that resulted from the adverse impact of the change(s) and how this figure was derived; and\n\n(G) The degree to which the payment error rate exceeded the national performance measure in the subject fiscal year.\n\n(ii) (A) The following criteria will be used to assess and evaluate good cause in conjunction with the appeals process and to determine that portion of the error rate/liability amount attributable to the uncontrollable effects of unusual changes in the Supplemental Nutrition Assistance Program or other Federal and State programs:\n\n( 1 ) State efforts to control impact on program operations;\n\n( 2 ) The proportion of Supplemental Nutrition Assistance Program caseload affected; and/or\n\n( 3 ) The duration of the unusual changes in the Supplemental Nutrition Assistance Program or other Federal and State programs and the impact on program operations.\n\n(B) Adjustments for these factors may result in a waiver of all, part, or none of the liability amount for the applicable period. As appropriate, the waiver amount will be adjusted to reflect States' otherwise effective administration of the program based upon the degree to which the error rate exceeded the national performance measure.\n\n(5)  Significant circumstances beyond the control of a State agency.  Requests for relief from errors caused by the uncontrollable effect of a significant circumstance other than those specifically set forth in paragraphs (f)(1) through (f)(4) of this section will be considered to the extent that the circumstance is not common to all States, such as a fire in a certification office.\n\n(i) The State agency shall provide the following information when submitting a request for good cause relief based on significant circumstances, the State agency shall provide the following information:\n\n(A) The significant circumstances that the State agency believes uncontrollably and adversely affected the payment error rate for the fiscal year in question;\n\n(B) Why the State agency had no control over the significant circumstances;\n\n(C) How the significant circumstances had an uncontrollable and adverse impact on the State agency's error rate;\n\n(D) Where the significant circumstances existed ( i.e.  Statewide or in particular counties);\n\n(E) When the significant circumstances existed (provide specific dates whenever possible);\n\n(F) The proportion of the Supplemental Nutrition Assistance Program caseload whose management was affected;\n\n(G) Identification and explanation of the uncontrollable errors caused by the event (types of errors, geographic location of the errors, time period during which the errors occurred, etc.);\n\n(H) The percentage of the payment error rate that was caused by the significant circumstances and how this figure was derived; and\n\n(I) The degree to which the payment error rate exceeded the national performance measure in the subject fiscal year.\n\n(ii) (A) The following criteria shall be used to assess and evaluate good cause in conjunction with the appeals process, and to determine that portion of the error rate/liability amount attributable to the uncontrollable effects of a significant circumstance beyond the control of the State agency, other than those set forth in paragraph (f)(5) of this section:\n\n( 1 ) Geographical impact of the significant circumstances;\n\n( 2 ) State efforts to control impact on program operations;\n\n( 3 ) The proportion of Supplemental Nutrition Assistance Program caseload affected; and/or\n\n( 4 ) The duration of the significant circumstances and the impact on program operations.\n\n(B) Adjustments for these factors may result in a waiver of all, part, or none of the liability amount for the applicable period. As appropriate, the waiver amount will be adjusted to reflect States' otherwise effective administration of the program based upon the degree to which the error rate exceeded the national performance measure.\n\n(6)  Adjustments.  When good cause is found under the criteria in paragraphs (f)(1) through (f)(5) of this section, the waiver amount may be adjusted to reflect States' otherwise effective administration of the program based upon the degree to which the error rate exceeds the national performance measure.\n\n(7)  Evidence.  When submitting a request to the ALJ for good cause relief, the State agency shall include such data and documentation as is necessary to support and verify the information submitted in accordance with the requirements of paragraph (f) of this section so as to fully explain how a particular significant circumstance(s) uncontrollably affected its payment error rate.\n\n(8)  Finality.  The initial decision of the ALJ concerning good cause shall constitute the final determination for purposes of judicial review as established under the provisions of \u00a7 283.17 and \u00a7 283.20 of this chapter.\n\n(g)  Results of appeals on liability amount determinations.  (1) If a State agency wholly prevails on appeal and, consequently, its liability amount is reduced to $0 through the appeal, and if the State agency began new investment activities prior to the appeal determination, FNS shall pay to the State agency an amount equal to 50 percent of the new investment amount that was expended by the State agency.\n\n(2) If FNS wholly prevails on a State agency's appeal, FNS will require the State agency to invest all or a portion of the amount designated for new investment to be invested or to be paid to the Federal government.\n\n(3) If neither the State agency nor FNS wholly prevails on a State agency's appeal, FNS shall apply the original waiver, new investment, and at-risk percentage determinations to the liability amount established through the appeal. If the State agency began new investment prior to the appeal decision and has already expended more than the amount produced for new investment as a result of the appeal decision, the Department will match the amount of funds expended in excess of the amount now required by the Department for new investment.\n\n(h)  New investment requirements.  Once FNS has determined the percentage of a liability amount to be invested or following an appeal and recalculation by FNS of an amount to be invested, a State agency shall submit a plan of offsetting investments in program administration activities intended to reduce error rates.\n\n(1) The State agency's investment plan activity or activities must meet the following conditions to be accepted by the Department:\n\n(i) The activity or activities must be directly related to error reduction in the ongoing program, with specific objectives regarding the amount of error reduction, and type of errors that will be reduced. The costs of demonstration, research, or evaluation projects under sections 17(a) through (c) of the Act will not be accepted. The State agency may direct the investment plan to a specific project area or implement the plan on a Statewide basis. In addition, the Department will allow an investment plan to be tested in a limited area, as a pilot project, if the Department determines it to be appropriate. A request by the State agency for a waiver of existing rules will not be acceptable as a component of the investment plan. The State agency must submit any waiver request through the normal channels for approval and receive approval of the request prior to including the waiver in the investment plan. Waivers that have been approved for the State agency's use in the ongoing operation of the program may continue to be used.\n\n(ii) The program administration activity must represent a new or increased expenditure. The proposed activity must also represent an addition to the minimum program administration required by law for State agency administration including corrective action. Therefore, basic training of eligibility workers or a continuing correction action from a Corrective Action Plan shall not be acceptable. The State agency may include a previous initiative in its plan; however, the State agency would have to demonstrate that the initiative is entirely funded by State money, represents an increase in spending and there are no remaining Federal funds earmarked for the activity.\n\n(iii) Investment activities must be funded in full by the State agency, without any matching Federal funds until the entire amount agreed to is spent. Amounts spent in excess of the settlement amount included in the plan may be subject to Federal matching funds.\n\n(2) The request shall include:\n\n(i) A statement of the amount of money that is a quality control liability claim that is to be offset by investment in program improvements;\n\n(ii) A detailed description of the planned program administration activity;\n\n(iii) Planned expenditures, including time schedule and anticipated cost breakdown;\n\n(iv) Anticipated impact of the activity, identifying the types of error expected to be affected;\n\n(v) Documentation that the funds would not replace expenditures already earmarked for an ongoing effort; and\n\n(vi) A statement that the expenditures are not simply a reallocation of resources.\n\n(3) A State agency may choose to begin expending State funds for any amount of the liability designated as \u201cnew investment\u201d in the liability amount determination prior to any appeal. FNS reserves the right to approve whether the expenditure meets the requirements for new investment. Expenditures made prior to approval by the Department will be subject to approval before they are accepted. Once a new investment plan is approved, the State agency shall submit plan modifications to the Department for approval, prior to implementation.\n\n(4) Each State agency which has part of a liability designated for new investment shall submit periodic documented reports according to a schedule in its approved investment plan. At a minimum, these reports shall contain:\n\n(i) A detailed description of the expenditure of funds, including the source of funds and the actual goods and services purchased or rented with the funds;\n\n(ii) A detailed description of the actual activity; and\n\n(iii) An explanation of the activity's effect on errors, including an explanation of any discrepancy between the planned effect and the actual effect.\n\n(5) Any funds that the State agency's reports do not document as spent as specified in the new investment plan may be recovered by the Department. Before the funds are withdrawn, the State agency will be provided an opportunity to provide the missing documentation.\n\n(6) If the funds are recovered, the Department shall charge interest on the funds not spent according to the plan in accordance with paragraph (j) of this section.\n\n(i)  At-risk money.  If appropriate, FNS shall initiate collection action on each claim for such liabilities before the end of the fiscal year following the reporting period in which the claim arose unless an administrative appeal relating to the claim is pending. Such appeals include administrative and judicial appeals pursuant to Section 14 of the Food and Nutrition Act. If a State agency, in the subsequent year, is again subject to a liability amount based on the national performance measure and the error rate issued to the State agency, the State agency will be required to remit to FNS any money designated as at-risk for the prior fiscal year in accordance with either the original liability amount or a revised liability amount arising from an appeal, as appropriate, within 30 days of the date of the final billing. The requirement that the State agency pay the at-risk amount for the prior year will be held in abeyance pending the outcome of any pending appeal for the subsequent liability. If the subsequent year's liability is reduced to $0, the at-risk money from for the prior fiscal year will not be required to be paid. If the subsequent year's liability is not reduced to $0, the State agency will be required to pay the at-risk money within 30 days of the date of the appeal decision. The amount of a State's at-risk money may be recovered through offsets to the State agency's letter of credit as identified in \u00a7 277.16(c) of this chapter. FNS shall also have the option of billing a State directly or using other claims collection mechanisms authorized under the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) and the Federal Claims Collection Standards (31 CFR Parts 900-904), depending upon the amount of the State's liability.\n\n(j)  Interest charges.  (1) To the extent that a State agency does not pay an at-risk amount within 30 days from the date on which the bill for collection is received by the State agency, the State agency shall be liable for interest on any unpaid portion of such claim accruing from the date on which the bill for collection was received by the State agency. If the State agency is notified that it failed to invest funds in accordance with an approved new investment plan, the State agency has 30 days from the date of receipt of notification of non-expenditure of new investment funds to pay the Department the amount of funds not so invested. If the State agency does not pay the Department the amount of funds not invested within 30 days from the date of receipt of the notification of non-expenditure, the State agency shall be liable for interest on the non-expended funds from the date on which the notification was received by the State agency. If the State agency agrees to pay the claim through reduction in Federal financial participation for administrative costs, this agreement shall be considered to be paying the claim. If the State agency appeals such claim (in whole or in part), the interest on any unpaid portion of the claim shall accrue from the date of the decision on the administrative appeal, or from a date that is one year after the date the bill is received, whichever is earlier, until the date the unpaid portion of the payment is received.\n\n(2) A State agency may choose to pay the amount designated as at-risk prior to resolution of any appeals. If the State agency pays such claim (in whole or in part) and the claim is subsequently overturned or adjusted through administrative or judicial appeal, any amounts paid by the State agency above what is actually due shall be promptly returned with interest, accruing from the date the payment was received until the date the payment is returned.\n\n(3) Any interest assessed under paragraph (j)(1) of this section shall be computed at a rate determined by the Secretary based on the average of the bond equivalent of the weekly 90-day Treasury bill auction rates during the period such interest accrues. The bond equivalent is the discount rate ( i.e.,  the price the bond is actually sold for as opposed to its face value) determined by the weekly auction ( i.e.,  the difference between the discount rate and face value) converted to an annualized figure. The Secretary shall use the investment rate ( i.e.,  the rate for 365 days) compounded in simple interest for the period for which the claim is not paid. Interest billings shall be made quarterly with the initial billing accruing from the date the interest is first due. Because the discount rate for Treasury bills is issued weekly, the interest rate for State agency claims shall be averaged for the appropriate weeks."], ["7:7:4.1.1.3.23.7.1.2", 7, "Agriculture", "II", "C", "275", "PART 275\u2014PERFORMANCE REPORTING SYSTEM", "G", "Subpart G\u2014Program Performance", "", "\u00a7 275.24 High performance bonuses.", "FNS", "", "", "[70 FR 6322, Feb. 7, 2005, as amended at 80 FR 53243, Sept. 3, 2015]", "(a)  General rule.  (1) FNS will award bonuses totaling $48 million for each fiscal year to State agencies that show high or improved performance in accordance with the performance measures under paragraph (b) of this section.\n\n(2) FNS will award the bonuses no later than September 30th of the fiscal year following the performance measurement year.\n\n(3) A State agency is not eligible for a bonus payment in any fiscal year for which it has a liability amount established as a result of an excessive payment error rate in the same year. If a State is disqualified from receiving a bonus payment under this paragraph (a)(3), and the State is not tied for a bonus, the State with the next best performance will be awarded a bonus payment.\n\n(4) The determination whether, and in what amount, to award a performance bonus payment is not subject to administrative or judicial review.\n\n(5) In determining the amount of the award, FNS will first award a base amount of $100,000 to each State agency that is an identified winner in each category. Subsequently, FNS will divide the remaining money among the States in each category (see paragraph (b) of this section) in proportion to the size of their caseloads (the average number of households per month for the fiscal year for which performance is measured).\n\n(6) A State cannot be awarded two bonuses in the same category; the relevant categories are payment accuracy (which is outlined in paragraph (b)(1) of this section), negative error rate (which is outlined in paragraph (b)(2) of this section), or program access index (which is outlined in paragraph (b)(3) of this section). If a State is determined to be among the best and the most improved in a category, it will be awarded a bonus only for being the best. The next State in the best category will be awarded a bonus as being among the best States.\n\n(7) Where there is a tie to the fourth decimal point for the categories outlined in paragraphs (b)(1) through (b)(4) of this section, FNS will add the additional State(s) into the category and the money will be divided among all the States in accordance with paragraph (a)(5) of this section.\n\n(8) Bonus award money shall be used only on SNAP-related expenses including, but not limited to, investments in technology; improvements in administration and distribution; and actions to prevent fraud, waste and abuse.\n\n(i) Bonus payments shall not be used for household benefits, including incentive payments.\n\n(ii) State agency awardees shall submit their intended spending plans of bonus payments to FNS to verify appropriate use.\n\n(b)  Performance measures.  FNS will measure performance by and base awards on the following categories of performance measures:\n\n(1)  Payment accuracy.  FNS will divide $24 million among the 10 States with the lowest and the most improved combined payment error rates as specified in paragraphs (b)(1)(i) and (b)(1)(ii) of this section.\n\n(i)  Excellence in payment accuracy.  FNS will provide bonuses to the 7 States with the lowest combined payment error rates based on the validated quality control payment error rates for the performance measurement year as determined in accordance with this part.\n\n(ii)  Most improved in payment accuracy.  FNS will provide bonuses to the 3 States with the largest percentage point decrease in their combined payment error rates based on the comparison of the validated quality control payment error rates for the performance measurement year and the previous fiscal year, as determined in accordance with this part.\n\n(2)  Negative error rate.  FNS will divide $6 million among the 6 States with the lowest and the most improved negative error rates as specified in paragraphs (b)(2)(i) and (b)(2)(ii) of this section.\n\n(i)  Lowest negative error rate.  FNS will provide bonuses to the 4 States with the lowest negative error rates based on the validated quality control negative error rates for the performance year as determined in accordance with this part.\n\n(ii)  Most improved negative error rate.  FNS will provide bonuses to the 2 States with the largest percentage point decrease in their negative error rates, based on the comparison of the performance measurement year's validated quality control negative error rates with those of the previous fiscal year, as determined in accordance with this part. A State agency is not eligible for a bonus under this criterion if the State's negative error rate for the fiscal year is more than 50 percent above the national average.\n\n(3)  Program access index (PAI).  FNS will divide $12 million among the 8 States with the highest and the most improved level of participation as specified in paragraphs (b)(3)(i) through (b)(3)(iii) of this section. The PAI is the ratio of participants to persons with incomes below 125 percent of poverty, as calculated in accordance with paragraph (b)(3)(iii) of this section (the PAI was formerly known as the participant access rate (PAR)).\n\n(i)  High program access index.  FNS will provide bonuses to the 4 States with the highest PAI as determined in accordance with paragraph (b)(3)(iii) of this section.\n\n(ii)  Most improved program access index.  FNS will provide bonuses to the 4 States with the most improved PAI as determined in accordance with paragraph (b)(3)(iii) of this section.\n\n(iii)  Data.  For the number of participants (numerator), FNS will use the administrative annual counts of participants minus new participants certified under special disaster program rules by State averaged over the calendar year. For the number of people below 125 percent of poverty (denominator), FNS will use the Census Bureau's March Supplement to the Current Population Survey's (CPS) count of people below 125 percent of poverty for the same calendar year. FNS will reduce the count in each State where a Food Distribution Program on Indian Reservations (FDPIR) program is operated by the administrative counts of the number of individuals who participate in this program averaged over the calendar year. FNS will reduce the count in California by the Census Bureau's percentage of people below 125% of poverty in California who received Supplemental Security Income in the previous year. FNS reserves the right to use data from the American Community Survey (ACS) in lieu of the CPS, and to use the count of people below 130 percent of poverty, should these data become available in a timely fashion and prove more accurate. Such a substitution would apply to all States.\n\n(4)  Application processing timeliness.  FNS will divide $6 million among the 6 States with the highest percentage of timely processed applications.\n\n(i)  Data.  FNS will use quality control data to determine each State's rate of application processing timeliness.\n\n(ii)  Timely processed applications.  A timely processed application is one that provides an eligible applicant the \u201copportunity to participate\u201d as defined in \u00a7 274.2 of this chapter, within thirty days for normal processing or 7 days for expedited processing. New applications that are processed outside of this standard are untimely for this measure, except for applications that are properly pended in accordance with \u00a7 273.2(h)(2) of this chapter because verification is incomplete and the State agency has taken all the actions described in \u00a7 273.2(h)(1)(i)(C) of this chapter. Such applications will not be included in this measure. Applications that are denied will not be included in this measure.\n\n(iii)  Evaluation of applications.  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