Second Mortgage FormMortgage second form
3 (c)(5)(C) of the 1940 Act exempts, inter alia, property corporations from the scope of the Umbrella Fund's exemption from the Umbrella Fund's scope of application, to the exclusion that the Umbrella Fund does not grant repayable bonds, instalment bonds or periodical schedule of payments bonds and that the Umbrella Fund is "primarily involved in the purchase or other acquisition of mortgage and other lien rights and interests in property.
" In the course of the years, SEC employees have interprete Section 3(c)(5)(C) according to a test that allows an emitter to rely on an emitter that has at least 55% of its aggregate holdings of "qualifying assets" and no more than 45% of its aggregate holdings of property-related securities (of which no more than 20% may be in any form of investment).
Property mutual funds, mortgage bankers, mortgage bond holders, and other property-related entities may use this 55/45% test to depend on Section 3(c)(5)(C) if they do not register with the SEC as an investor. Great Ajax Founding LLC's No-Action Newsletter changes this traditionally held view, in which a company's activities show organisationally and operationally that its shareholdings are not capital expenditure, but necessary to enable it to conduct an exceptional property transaction.
In fact, the GAF is part of a framework of a Royal Dutch Governmental Real Estate investment confidence ('REIT') in which a GREIT conducts the activities of purchasing, invests and manages a whole mortgage loan and immovable asset portfolios in accordance with Section 3(c)(5)(C). GAF, a fully consolidated affiliate of the German REIT, securitises entire mortgage loan pool assets purchased by the German REIT. GAF is a wholly-owned affiliate of the German REIT.
In other words, GAF purchases mortgage debt from the G-REIT, assigns the debt to a number of trust companies funded by GAF and exerts significant oversight over the operations and administration of each of the trust companies in return for junior debt and participation in each of the trust companies. GAF's sole net worth is represented by junior debt and participating interests, and GAF's earnings are exclusively generated from these net worths.
Besides junior bonds, each of the trust entities will issue, as part of the mortgage securitisation process, a senior note that will be made available to institutions in the form of retail placements. Using the revenue from these offers, the REIT acquires mortgage credits to fund its property activities.
Employees avoid conducting an excessively formalist review in Great Ajax Funding LLC and supported a look at the GAF's historic evolution, policy making briefings, the actions of its executives and managers, the type of property and the current revenue stream (factors that personnel derive from the promising case of the Tonopah Mining Company of Nevada) to determine that GAF was primarily active in the property sector except as provided in Section 3(c)(5)(C).
Remarkable is this assessment because the employees took a comprehensive view of a property corporate entity in which each part is reliant on the other parts, as a whole entity operating in the property sector. Avoidance has been made of an assumption that only the GAF's asset base is considered to be an asset for the entity's core activities at the cost of other elements pertinent to the entity's overall operations.
Great Ajax Funding LLC's facts are also restrictive as the acquisitions of shareholdings, the transfer of asset values and the management of service activities by related companies take place in a vertical integration company and are not the outcome of the acquisitions of shareholdings by non-affiliates. In particular, employees have explicitly stated that their item does not include a similar item if the asset of an issuing company has been purchased from a third person in a deal that has an intended object as an asset and not a object related to the operating of a vertical property integration outside the application of the 1940 Act.