marily, an intrastate matter. Another possible approach, which, I believe, warrants consideration would be the amending of S. 2672 to provide for an exemption to the registration requirements if the subdivider is subject to registration in its domiciliary state in substantially the same manner as that contemplated by the bill. This concept was used in the 1964 amendment to the Securities & Exchange Act of 1934.

In summary, we submit that S. 2672 could have been an effective measure to regulate the mail-order land business as it existed in 1956, however, the action of the states, in dealing with this problem, the greater public awareness regarding land by mail offerings, the acts of the major developers in the industry in creating the communities promised and the elimination of many marginal operators by the competitive forces within the industry, indicate to me, that S. 2672 in its present form, is not designed to meet the problems of the land sales business of 1966.

Again, on behalf of the Florida Installment Land Sales Board, I want to assure you of our willingness to work with this Committee or any other group in eliminating any problems in the installment land sales business, and I would further like to express our appreciation for your courtesy in extending us an invitation to appear before this Committee.

EXHIBIT A-SUMMARY OF MEETING IN WASHINGTON, JANUARY 6 AND 7, 1966 After the introductions of the guests, a discussion was held of Senate Bill 2672. Mr. William Oriol, because of illness, was unable to be present. However, Mr. Woodruff Price presented the Bill and its contents were reviewed.

The following is a brief summary of the comments made at this meeting. It was stated that the intent of the proposal was not to make real estate a securities, but to supplement existing state laws and to cover those areas where no present laws exist in order that purchasers could be fully informed regarding the properties being offered to them.

Commencing with the discussion of the definitions included in the law it ap peared that the existing definition of "subdivision" should be amended in several ways. First, that the number of lots in which property could be subdivided should be increased from five to twenty-five or fifty. Words of limitation "residential development" should be eliminated. The definition of "subdivision" as proposed in the Uniform State Law, as being considered by the Conference of Uniform State Law Commissioners was considered as possibly being more appropriate. This definition reads as follows:

"No subdivider or his agent or employee shall dispose of any interest in a subdivision, enter into a contract to dispose of an interest in a subdivision, accept money or obligate the purchaser in any way as to any part of the subdivision unless a prospectus complying with the provisions of this section is first delivered to the purchaser and the purchaser is afforded a reasonable opportunity to examine the public offering statement.

"Subdivision means any land which is divided or proposed to be divided into or in lots, parcels, units or interests for purposes of disposition and includes any land whether contiguous or not if lots, parcels, units or

interests are offered pursuant to a common promotional plan." The definition of "developer" was considered to contain certain problems insofar as the language referred to a person who "having an interest in land" was modified by the words, "including a franchise", and accordingly, an amendment to clarify the intent of the drafters of the Bill appeared necessary.

The definition of the word "agent" was considered also along with 'Section 12 of the Bill which was a requirement for the registration of all agents which appeared to be a "key" problem in that if Section 12 were deleted in order to avoid obtaining the jurisdiction of the sales representatives of the developers, the law would become comparatively weak and ineffective while, however, the inclusion of "sales agent" would appear to include all local real estate representatives of the broker and as presently drawn, would appear to include almost all real estate salesmen. The proposition was discussed that the nature of the "mail order business" having been changed so as that the major portion of this type business being conducted through personal contact required, for effective regulation, control of the on-sight sales and the personal representatives. The corollary of this was also considered that if the person were at the property and sold there, did this not then meet the test of full disclosure?

It was agreed and clearly stated that the purpose of the Bill was not to preempt the right of the States to enact regulation and control of the sale of the subdivided properties in any way they saw fit, and the language of the Securities and Exchange Act of '33 was proposed as being suitable to accomplish this goal. The question was then considered that insofar as the SEC language referred to sales made to residents of a particular State that insofar as many situs States found a substantial proportion of their sales made to tourists, that this exemption would lose its meaning, and accordingly, due to the nature of the commodity being marketed, it would find these offerings to be in inter-state commerce and what would appear to be a local transaction, would be subject to this law in its present form.

It appeared that a more clear-cut definition of "interstate sale" would be appropriate.

With reference to the exemption as set forth in the law, under Section 3, subparagraph 2, it was felt that some time limitation would be required with reference to the contract under which the seller is obligated to complete a dwelling thereon in order to avoid creating a loophole; also that possibly the use of "residence" rather than a "dwelling" might be appropriate, however, this might require additional definition in order that the intent is more clear. It was further offered that possibly condominiums should come within this definition, which constitutes a major policy decision and it appeared to be the understanding of the drafters of the Bill that condominiums would be exempt notwithstanding the fact that the question was raised that the law to be effective should include condominiums, due to the similarity of the problem between this and the sale of subdivided lands. Subparagraphs 3, 4 and 5 appeared to be "boiler-plate" provisions taken from the Securities and Exchange Act. Subparagraph 6, however, appeared to create a problem in that it would appear that the labeling of property as being commercial or industrial would exempt it from the provisions of the law.

It was 'suggested that subparagraphs 2 and 6 be combined in order that the exemption would be limited to residential, commercial or industrial property on which buildings had been constructed.

Section 4 of the law provides that advertising is prohibited until the registration is effective and subparagraph (c) thereof requires registration of the agents of the subdivider in order to make a lawful offering. It appeared to be the intent of the proponents of the law that advertising as such would not be regulated and that upon the registration becoming effective, a subdivider could advertise subject only to the anti-fraud provisions of the law.

Section 9 was discussed with reference to the provisions for cooperation with State authorities and the essence of the provisions is that the SEC may accept a filing from a State which has a law which is considered to be comparable to that law. This means that the filing materials, as such, would be accepted, but there would be no waiver of fees or automatic registration until the prospectus was submitted and accepted by the SEC. The problem was discussed of a subdivider in "X" State, a situs state, who makes a filing in "Y" State, a consumer state and who files with the SEC and assuming the standards of the Law of "Y" State were greater than the standards of "X" State and the Federal Law, could the subdivider, by complying with the laws of "X" State, circumvent the laws of "Y" State? It appeared there were also other complicating factors involved and this possibly should be clarified in order to simplify things for the states as well as industry.

With reference to Section 11, the section creating civil liabilities, the question came about as to whether or not this law would create some kind of a defective title for properties which may be subject to the law and require on the part of land owners "comfort" letters from the SEC to facilitate the alienation of their property.

With reference to Section 14, the question came up as to whether or not, due to the nature of the offerings, a one-year limitation, after the discovery of an untrue statement, or after it should have been discovered, with a three-year maximum, is adequate or not. It was suggested that maybe a five-year period might be more realistic.

It was pointed out that it is conceivable that in certain circumstances a purchaser would be in the process of receiving a minimum of three reports; a report from the situs state, a report from the consumer state and an SEC prospectus. Accordingly, it appeared that some simplification of this should be considered as well as a determination made as to when the Prospectus or Report should be delivered. It was considered that the language in the Uniform Law as proposed

by Jon Moyle, might be adequate for meeting this situation as to the time of delivery of the report, however, no solution was proferred with reference to the ability to eliminate the inundating of a prospective purchaser with Property Reports and Prospectai.

At the close of the meeting on Thursday, our expressions of appreciation were extended to the Staff of Senator Harrison Williams for their courtesy in meeting with the representatives of the states in attendance and presenting their views and their frankness in answering the comments of the various states' administrators present.

On Friday, January 7th, the following persons met to consider the previous day's meeting: Alfieri, Kucherepa, Winters, Moyle, Armstrong, McIsaac, Borgshatz, Voorhees and Bertoch.

The group convened and discussed the previous day's conference and pointed out that a number of problems still existed. First, that the proposal being full disclosure and limited in effect was considerably weaker than the existing law in a number of regulatory states. Accordingly, it was felt that this may have a tendency to weaken the existing strong laws and, secondly, it was felt that the presence of the Federal Law may or could have a tendency to discourage or demonstrate a lack of need for a local law in some of the states where a local law was being sought, to control this activity. It was considered that thought should be given to the creation of a law which would set certain standards which, if not met by a state, would, therefore, mean that the Federal Law would control while exempting from its operation those states that had laws meeting or exceeding the minimum standards.

It was also recognized and discussed that it was not proposed under this Federal law to regulate advertising and that false and misleading advertising is part of the problem. Accordingly, it was discussed and considered that possibly another Federal Agency, such as the Federal Trade Commission or a new Agency, or a branch of the Securities and Exchange Commission might be considered as a possible repository of the authority to do a job of accepting the filings and regulating the activities of those persons who come within the purview of the law.

It was further discussed that an effort was being made to regulate the sale of subdivided land pursuant to a philosophy and administrative attitude patterned according to the needs and dictates of the securities industry, which possibly would not be consistent with the requirements and mandates for regulating the sale of subdivided land.

Accordingly, it was the consensus of the opinion of those persons in attendance that the problems existed in the present proposal which warranted further consideration and deliberation by a greater number of states who would be affected by this legislation, and accordingly, it was the unanimous opinion of those persons in attendance that a subsequent meeting should be held prior to a formal hearing on this proposal by the Senate Committee.

It was clearly expressed that the persons present were in favor of a law to eliminate any deception and deceit in the marketing of subdivided land; however, it was of deep concern as to whether or not the proposed Bill, in its existing form, was adequate to cope with the job and even more so, wouldn't dilute or minimize existing state controls. Further, it was the consensus of the group that possibly other agencies may exist which may be able to meet the regulatory demands of this activity and are better prepared to cope with it; as there are certain distinguishing characteristics between the "Securities Business" and the sale of subdivided lands which warrant special attention.

Carl Bertoch was designated to maintain liaison with Marion Voorhees to effect a subsequent meeting with interested state officials at the earliest possible time in order that a further discussion of this Bill could be had.

(Mr. Bertoch later supplied the following information.)

FLORIDA INSTALLMENT LAND SALES BOard,

Senator HARRISON A. WILLIAMS, JR.,
U.S. Senate, Washington, D.C.

Tampa, Fla., June 28, 1966.

DEAR SENATOR: In reviewing the transcript of our testimony before your Committee, a thought has come to mind which I feel compelled to mention.

My presence, as well as Mr. Moyle's, was predicated on the fact that we wanted to call to the attention of the Committee those matters which we felt were of considerable importance in any law designed to regulate the land sales

business, whether the activity is interstate or intrastate. Accordingly, we did not concern ourselves in our preparation for last week's hearing with what would be legislatively feasible in the way of a federal proposal, as by experience or training we felt we were not qualified to comment thereon. Our approach was to call, as forcibly as we could, the Committee's attention to those matters which we felt should be covered in a proposal, such as S. 2672. We felt this should be our function in this matter, and the Committee after hearing, could determine what is politically possible and practically feasible.

We very well recognize that most legislation, if not all, is a result of compromise, however, it was our thinking that the duty of persons testifying in our capacity was to state what was considered to be essential in the bill, if it is to do a full and adequate job. Certainly, a lesser or watered down version may improve the situation, however, we desired to point out the risks attendant to a limited approach. I regret that this thought may not have been conveyed by our comments.

Again, on behalf of Mr. Moyle and myself, I wish to express the appreciation of both of us for the opportunity to present our views to your Committee, and I wish to assure you of our continuing cooperation.

In response to your letter of June 30th, I will restate the questions for ease of reference.

Question 1. You have sent us two notices issued by you within recent weeks. One advises salesmen that "you are limited in your sales presentation to the facts and information contained in the Property Report and the sales materials on file with the Board." Why was such admonition necessary?

Comment. The Board considers the requirement for the submission of promotional materials prior to use, supplemented by the requirement for the delivery of the Property Report to prospective purchasers, provides reasonable assurances that full disclosure of pertinent information is made to purchasers in the written or printed materials used. However, it was of the opinion that it would be beneficial to re-emphasize to the salesmen, the necessity of full disclosure on their part in their oral representations. Accordingly, the notice was issued to inform salesmen as to their responsibilities and clearly establish knowledge of the "law" on their part in the event of any disciplinary action. The notice was distributed to current registrants and is being attached to all new permits issued by the Board.

Question 2. Your second notice establishes a separate form of Property Report to be used by subdividers who are offering unimproved acreage for sale. Why was this Notice necessary and how effective will it be?

Comment. The necessity of developing a separate form of Property Report for Unimproved Acreage offerings was recognized last fall because of a clearly discernible trend to offerings of this type. The Board determined that the Property Report form then in use for all offerings did not cover particular points considered to be of importance to purchasers and accordingly, took action to develop a Property Report exclusively for Unimproved Acreage offerings. Such a form has now been adopted and administrative steps taken to implement its use.

Question 3. You heard the estimate at the hearing that approximately 7 million persons could live in one development if it is eventually developed as it is now zoned. Do you see any problem here?

Comment. Yes, there may be a problem here, whether it develops or not. However, I do not believe that it is the function of this Board as a state agency to pass upon the suitability or appropriateness of the county zoning or to dictate the land uses. The zoning laws and land use controls are matters of local concern. In the area of disclosure it may be important, but I do not want to suggest, nor do I believe that the Committee would want to recommend, that a

Federal or state agency should regulate or control property zoning or dictate land use, or establish limits as to the amount of, or the type of, property that may be offered for sale.

Question 4. An article by Mr. Matt Taylor in the Miami Herald of January 18, 1966, described the experiences of a reporter who asked, I believe, five times for a state report at a "sales party", and he did not receive one. Isn't this a violation of your state law? Has the charge been investigated?

Comment. Yes, the allegation made in the news article has been investigated and administrative action has been taken by the Board affecting persons involved in this transaction. Further, the subdivider involved has taken affirmative action to further assure the use of Property Reports by its sales representatives. The failure to deliver a Property Report to a purchaser prior to the execution of a purchase contract constitutes a violation of the rules and regulations of this Board. The requirement for the preparation of a Property Report and its use was established by the Board in 1964, implementing Chapter 478, Florida Statutes, the Florida Installment Land Sales Law.

Question 5. An article by Miss Juanita Greene in the January 20th issue of the Miami Herald quotes the owner for the company (Leonard Rosen, President of Gulf American) as saying that the company has received $440,000 in forfeitures. The default rate appears to be high. Do you see any problem here?

Comment. The forfeiture figure used in the Miami Herald article refers to the amount of forfeitures for the '65 fiscal of Gulf American Land Corporation. Assuming the correctness of this figure, insofar as the company's contract sales for the fiscal year 1965 were in excess of 98 million dollars, this would not appear to be an unusually high percentage for any type of installment contract selling. With reference to a high default rate constituting a problem, can only state that a high cancellation rate for any business enterprise would create problems.

Question 6. There was some testimony about telephone "boiler rooms" in Florida. Are you satisfied that all buyers who receive such messages receive a copy of the state report if they buy?

Comment. I am not satisfied that all buyers who are solicited by telephone receive a copy of the Florida Property Report. However, I am satisfied that most developers are taking steps to assure themselves that the Report is being delivered. We have, in the past and will continue, to police the operations of Board registrants to assure ourselves that they are delivering to prospects, the Florida Property Report. The failure to deliver a Property Report could constitute a basis for administrative action against the registrant.

Question 7. Your predecessor, Mr. McWhirter, told the Sub-Committee on Frauds and the Elderly that the person who actually sees the site stands the most chance of being fooled. Would you care to develop this?

Comment. I generally concur with Mr. McWhirter's statements concerning the ability of unscrupulous sales personnel to deceive and mislead purchasers who visit the property. However, this can be true in any sales situation, and of course this is why it was suggested in our testimony that the Committee should consider including in S. 2672 a provision for licensing sales personnel. Whether the prospect who sees the property stands the most chance of being fooled is a matter of conjecture. However, the Board is making every effort to eliminate misleading sales tactics, as was demonstrated by its action against All-State Development Corporation.

The Board does recognize that there are many purchasers who visit their property and are quite satisfied with their purchase.

Question 8. Mr. Moyle challenged the accuracy of an allegation that 2,500 investors were left "holding the bag" at Rocket City. An article by Mr. Todd Persons in the Orlando Sentinel of May 29, 1966, discussed Rocket City and said:

"Some of 2,700 other persons, many of them retirees who plunked down life savings for a little plot of security are battling to keep it."

I realize that the Rocket City was in business before your board was established, but I think the record would be incomplete without a report from you on (1) present status of your efforts to find a solution. (2) some information on the present status of claims against the original developer, and (3) details on ownership of the Rocket City land, including the disputed 13,000 acres de scribed in the Sentinel article.