Contract analysis

I. Executive Summary This memorandum analyzes the implications of the Volcker Rule — Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203), codified as Section 13 of the Bank Holding Company Act of 1956 (12 U.S.C. § 1851), and the implementing regulations adopted jointly by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the

1. Whether QRF 2022-1 constitutes a "covered fund" under the Volcker Rule, which would restrict banking entity investment in, and sponsorship of, the Issuer; and

2. Whether the transaction qualifies for any available exclusion from the covered fund definition, most notably the "loan securitization" exclusion set forth in the implementing regulations as amended in 2020. Summary Conclusion. Based on the analysis set forth herein, it is our view that QRF 2022-1 should qualify for the loan securitization exclusion from the covered fund definition under the Volcker Rule, and shoul

II. Background on the Transaction A. Parties and Structure The proposed securitization involves a multi-tier structure consistent with customary practice for asset-backed securities offerings in the insurance premium finance sector. The principal parties and their roles are summarized below. Sponsor/Parent. Quorum Insurance Holdings Corp. ("QIH" or the "Sponsor") is a Delaware corporation that is publicly traded on t

III. Overview of the Volcker Rule A. Statutory Framework

Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, enacted July 21, 2010) added Section 13 to the Bank Holding Company Act of 1956, codified at 12 U.S.C. § 1851. The provision, colloquially known as the "Volcker Rule" after former Federal Reserve Chairman Paul Volcker, who advocated for its adoption, became effective on July 21, 2012. The final implementing regulations were

1. Proprietary Trading Prohibition. A banking entity is generally prohibited from engaging in proprietary trading — defined as engaging as principal for the trading account of the banking entity in any purchase or sale of one or more financial instruments. The proprietary trading prohibition is subject to a number of exemptions, including exemptions for market-making activities, underwriting activities, hedging, and

2. Covered Fund Prohibition. A banking entity is generally prohibited from acquiring or retaining an "ownership interest" in, serving as sponsor to, or having certain covered transactions with, a "covered fund." This prohibition is the primary focus of the present memorandum. The term "banking entity" is defined broadly under the Volcker Rule to include: (i) any insured depository institution (as defined in Section 3

IV. Covered Fund Analysis — QRF 2022-1 A. Investment Company Act Exclusion Relied Upon The threshold question in determining whether QRF 2022-1 is a "covered fund" under the Volcker Rule is identifying the basis upon which QRF 2022-1 relies for its exclusion from the definition of "investment company" under the 1940 Act. As noted above, the covered fund definition captures only those entities that rely on Section 3(c

Section 3(c)(5)(A). As an alternative or additional basis, QRF 2022-1 may also be able to rely on the exclusion from the definition of "investment company" provided by Section 3(c)(5)(A) of the 1940 Act, which excludes any entity that is "primarily engaged in … purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of m

V. The Loan Securitization Exclusion A. Regulatory Basis The implementing regulations, as amended by the 2020 Amendments, provide a specific exclusion from the covered fund definition for "loan securitizations." Under this exclusion, an issuing entity is not a covered fund if it is established for the purpose of holding only "loans" and certain other permissible assets and issuing asset-backed securities supported by

1. The receivables pool consists entirely of insurance premium finance loans, each of which is a "loan" under the expanded definition adopted in the 2020 Amendments.

2. QRF 2022-1 holds no securities, derivatives, or commodity forward contracts outside the permitted categories of assets.

3. The Notes are structured as debt instruments with no equity-like features — no profit participation, no ability to select or remove managers, and limited protective voting rights only.

4. The revolving period feature does not disqualify the vehicle from the loan securitization exclusion. The 2020 Amendments do not require a static pool for purposes of this exclusion, and revolving pools of loans are commonplace in securitization structures that rely on the loan securitization exclusion, including credit card receivables master trusts, auto loan warehouse facilities, and other revolving receivables

VI. Ownership Interest Analysis A. Definition of "Ownership Interest" Even if an entity is a covered fund under the Volcker Rule, the Rule's prohibitions are triggered only when a banking entity acquires or retains an "ownership interest" in the covered fund. The term "ownership interest" is defined in the implementing regulations (12 C.F.R. § 248.10(d)(6)) to include any equity, partnership, or other similar interes

VII. Permissible Activities for Banking Entity Investors A. Acquiring Notes as Non-Ownership Interests in a Non-Covered Fund The primary pathway for banking entity investment in the Notes is straightforward and does not require reliance on any Volcker Rule exemption. As established in the preceding sections:

1. QRF 2022-1 is not a covered fund under the Volcker Rule, because (a) it relies on Rule 3a-7 of the 1940 Act (not Section 3(c)(1) or 3(c)(7)) for its exclusion from investment company registration, and (b) independently, it qualifies for the loan securitization exclusion from the covered fund definition.

2. The Notes are not ownership interests under the Volcker Rule, because they are debt instruments that do not carry profit participation rights, management control rights, residual rights, or other indicia of equity ownership. Because QRF 2022-1 is not a covered fund, and because the Notes are not ownership interests, the Volcker Rule's covered fund provisions simply do not apply to banking entity investments in the

VIII. Offering Memorandum Disclosure Recommendations The Preliminary Offering Memorandum (currently v3, dated October 12, 2022) should include a dedicated section addressing Volcker Rule considerations for the benefit of prospective investors, particularly banking entity investors. We recommend that this section include the following elements:

1. Non-Covered Fund Statement. A clear, affirmative statement that QRF 2022-1 is not a "covered fund" as defined in the regulations implementing Section 13 of the Bank Holding Company Act of 1956 (the Volcker Rule). 2. 1940 Act Reliance Specification. A statement specifying that QRF 2022-1 relies on the exemption from the definition of "investment company" provided by Rule 3a-7 under the Investment Company Act of 194

3. Non-Ownership Interest Statement. A statement that the Notes constitute debt instruments and do not constitute "ownership interests" as defined in the Volcker Rule implementing regulations, and that the acquisition and holding of the Notes by banking entities does not implicate the Volcker Rule's prohibitions on the ownership of covered fund interests.

4. Loan Securitization Exclusion Statement. A statement that the loan securitization exclusion from the covered fund definition, as set forth in 12 C.F.R. § 248.10(c)(8) and the parallel provisions of the other agencies' implementing regulations, is available as an independent basis for the exclusion of QRF 2022-1 from the covered fund definition.

5. Investor Responsibility Risk Factor. A standard risk factor, customary in 144A offerings of asset-backed securities, to the effect that each prospective investor that is, or is affiliated with, a banking entity should make its own determination regarding its Volcker Rule compliance status and should consult with its own legal counsel regarding the applicability of the Volcker Rule to its particular circumstances.

6. Regulatory Change Caveat. A statement noting that the Volcker Rule and its implementing regulations are complex and have been subject to significant rulemaking activity, regulatory guidance, and evolving interpretations since their initial adoption. The disclosure should note that the Volcker Rule remains subject to further rulemaking, guidance, and interpretation by the five implementing agencies, and that bankin

IX. Structural Recommendations Based on the foregoing analysis, we recommend the following structural measures to ensure that QRF 2022-1's Volcker Rule position is robust and well-documented:

1. LLC Agreement Representation. The Limited Liability Company Agreement of QRF 2022-1 should include an express representation and covenant that QRF 2022-1 does not rely, and will not rely, on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940 for its exclusion from the definition of "investment company" under the 1940 Act. This representation should be a condition to the issuance of the Notes

2. Indenture Review — Voting Rights. The Indenture should be carefully reviewed to confirm that the voting rights granted to noteholders are limited to protective provisions and do not confer any right to select, remove, or replace the servicer, manager, administrator, or any other person exercising control over QRF 2022-1, except in the context of a servicer event of default. The right of noteholders to direct the i

3. Servicing Fee Confirmation. The servicing fee payable to QPF under the Servicing Agreement (currently set at 1.00% per annum on the outstanding pool balance) should be reviewed to confirm that it is reasonable and consistent with market terms for comparable premium finance receivables servicing arrangements. A servicing fee that is significantly above or below market rates could raise questions about whether the f

4. Asset Characterization Confirmation. All assets held by QRF 2022-1 should be confirmed to be either "loans" (as defined in the Volcker Rule implementing regulations) or other permissible assets within the meaning of the loan securitization exclusion. In particular, the $25,000,000 liquidity facility provided by Northvane Bank, N.A. should be confirmed to be structured as a lending arrangement (i.e., a revolving cr

5. Eligibility Criteria Consistency. The eligible receivables criteria set forth in the Receivables Purchase Agreement and the Indenture should be reviewed to ensure that all receivables acquired by QRF 2022-1 during the revolving period satisfy the definition of "loan" under the expanded Volcker Rule definition. The existing eligibility criteria — which require that each receivable be originated by QPF in the ordina