Subject: File No. S7-26-07
From: Michael G Mellos
Affiliation: Realtor - New Horizons Realty

December 3, 2007

Summary:
The notion that a commercial real estate entity should receive compensation from a client for playing an advisory role with regard to any instrument defined by the SEC as a security is very dangerous. It raises questions regarding adequate protection for the public and it conflicts with SEC rules that require registration of Securities Advisors and Securities Advisor Representatives. It is likely that in many cases the RE Participant as defined in the Application will not have sufficient knowledge to advise effectively with regard to TIC Security investments and will in actuality be receiving what amounts to an overly generous referral fee. The public could feel cheated if ever this is the case and if it becomes known. Without specialized training and proven knowledge in IRS and SEC rules as well as a thorough understanding of the benefits and risks inherent in Direct Participation Programs and the pass through tax issues related to passive income the RE Participant is ill equipped to advise the investor. Proven knowledge in these areas is not required for CCIM designation nor is it typically relied upon in the course of transacting most commercial real estate activity. It would be more appropriate to allow the RE Participant, with full disclosure, to receive reasonable compensation for referring clients to qualified duly registered investment professionals and to characterize the RE Participants role as such to the client.

Specific concerns:
1. Where the exemption request discusses the Buyers Agent Agreement what is meant by shall obligate the RE Participant to solely represent the client in connection with the purchase of a TIC Security? Does it somehow obligate the RE Participant to represent only this client? Is the client free to invest in other TICs without obligation to the RE Participant? Or, more likely, is the intent to place an obligation on the client to deal solely with the RE Participant in a TIC transaction?

2. Referring to the client of the RE Participant as a buyer is inappropriate. A person purchasing a TIC Security property is an investor. A TIC Security property has not been excluded by the SEC from the definition of a Security. The SEC sees a TIC as a DPP in real estate. Though there is ongoing discourse in this matter there is no clear resolution to the arguments. It should be clearly disclosed to the client that they are making an investment that is regulated by the SEC unless and until the SEC changes its position.

3. What the exemption request characterizes as an advisory fee and sole representation is actually not much more than a referral. It should be made clear to the client that the RE Participants role as a representative or agent is greatly limited by rule (see last paragraph) and that the RE Participant may rely primarily on the sponsors prospectus in the advise they provide. The compensation provided for under the proposed exemption would probably be better characterized as a referral fee as opposed to an advisory fee. It would also be more appropriate for the role of the RE Participant to be that of referrer rather than advisor with regard to TIC Securities as with any security as defined by SEC rules.

4. There is no requirement in the proposed exemption for the RE Participant to possess the specialized knowledge necessary to properly advise on investing in tax sheltered securities such as TICs. Acting in an advisory capacity or even making an informed referral requires knowledge not called for in the exemption request. Realtors engaging in advising or representing the public in TIC investments should at the very least be required to undergo special training and certification in the following areas:
a. Investor suitability requirements
b. Direct Participation Programs real estate
c. Passive income provisions in the tax code
d. Evaluating the merits of a real estate DPP
e. IRS Section 1031

5. Commercial Real Estate Professionals who have been working predominantly with TICs should not be excluded from qualification as Advisory Fee recipients. These are precisely the people outside the securities community that have the knowledge needed to properly serve the public as advisors in making TIC investments. Paragraph (1)a of the Summary should read shared with a Commercial Real Estate Professional who is predominantly engaged in sales of real estate including TIC Securities

6. With the proposed provisions of the exemption request there is a potential for complaints such as:
a. I wasnt informed I do not qualify as a TIC investor until too late (per exchange rules time constraints).
b. I ended up paying a substantial Advisory Fee to someone who is poorly informed in the security they were advising me on and who is limited by rule in acting on my behalf. I would rather have paid a more reasonable referral fee.
c. Now that Ive been introduced to the securities professional (a Broker/Dealers Agent) I realize I didnt need a third party advisor but Im obligated to pay according to the buyers agent agreement I was compelled to sign. I feel the Realtor has taken advantage of my ignorance. The Realtor could have simply given me some names as a courtesy considering the sizable real estate commission I paid them in the sale of my exchange property.

The RE Participant may not:
handle funds
negotiate
bind the client
act as a purchaser representative (501-h)
close
assist with obtaining financing