4.10.2.6. Securities Opinion Parties generally agree that program components like SDG&E’s Share the Sun may result in securities issues and that additional steps should be taken to protect against securities litigation risk. SDG&E cites a recent example of securities litigation involving investments in Hard Rock Hotel condominium units. Plaintiffs (investors in the units) were required to sign a rental-management contract with a different entity. Plaintiffs alleged that this arrangement caused them to unwittingly enter into an unregistered securities transaction. The court agreed that the arrangement resulted in a security. This case clearly illustrates that there is a litigation risk when a group of people are investing in a project with the expectation of a profit. SDG&E recommends requiring a securities opinion from an AmLaw 100 law firm because of the complexity of the law, the importance of getting the securities issues right, and the potential for criminal sanctions. SDG&E argues that the AmLaw 100 requirement is a reasonable proxy for the securities expertise necessary to have assurance that there is not a securities litigation risk. SELC and IREC argue that limiting opinion to an AmLaw 100 firm will create an unnecessary barrier for developers. IREC believes it would be sufficient for a solar provider to declare compliance with the securities laws. SELC would require an opinion from a lawyer in good standing with the California Bar. We agree with SDG&E that the complexity of securities law and the potential for costly and protracted litigation require analysis by attorneys with extensive expertise with securities law. It is essential that participants in the ECR component be protected and that ratepayers do not bear the cost of securities litigation associated with a securities claim related to an ECR project. Therefore,
4.10.2.6. Securities Opinion Parties generally agree that program components like SDG&E’s Share the Sun may result in securities issues and that additional steps should be taken to protect against securities litigation risk. SDG&E cites a recent example of securities litigation involving investments in Hard Rock Hotel condominium units. Plaintiffs (investors in the units) were required to sign a rental-management contract with a different entity. Plaintiffs alleged that this arrangement caused them to unwittingly enter into an unregistered securities transaction. The court agreed that the arrangement resulted in a security. This case clearly illustrates that there is a litigation risk when a group of people are investing in a project with the expectation of a profit. SDG&E recommends requiring a securities opinion from an AmLaw 100 law firm because of the complexity of the law, the importance of getting the securities issues right, and the potential for criminal sanctions. SDG&E argues that the AmLaw 100 requirement is a reasonable proxy for the securities expertise necessary to have assurance that there is not a securities litigation risk. SELC and IREC argue that limiting opinion to an AmLaw 100 firm will create an unnecessary barrier for developers. IREC believes it would be sufficient for a solar provider to declare compliance with the securities laws. SELC would require an opinion from a lawyer in good standing with the California Bar. We agree with SDG&E that the complexity of securities law and the potential for costly and protracted litigation require analysis by attorneys with extensive expertise with securities law. It is essential that participants in the ECR component be protected and that ratepayers do not bear the cost of securities litigation associated with a securities claim related to an ECR project. Therefore,
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