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8000 - Miscellaneous Statutes and Regulations
Transactions by Unregistered Investment
Companies
Sec. 7. (a) No investment company organized or otherwise created
under the laws of the United States or of a State and having a board of
directors, unless registered under
section 8, shall directly or
indirectly--
(1) offer for sale, sell, or deliver after sale, by the use of
the mails or any means or instrumentality of interstate commerce, any
security or any interest in a security, whether the issuer of such
security is such investment company or another person; or offer for
sale, sell, or deliver after sale any such security or interest, having
reason to believe that such security or interest will be made the
subject of a public offering by use of the mails or any means or
instrumentality of interstate commerce;
(2) purchase, redeem, retire, or otherwise acquire or attempt to
acquire, by use of the mails or any means or instrumentality of
interstate commerce, any security or any interest in a security,
whether the issuer of such security is such investment company or
another person;
(3) control any investment company which does any of the acts
enumerated in paragraphs (1) and (2);
(4) engage in any business in interstate commerce; or
(5) control any company which is engaged in any business in
interstate commerce.
The provisions of this subsection (a) shall not apply to
transactions of an investment company which are merely incidental to
its dissolution.
(b) No depositor or trustee of or underwriter for any investment
company, organized or otherwise created under the laws of the United
States or of a State and not having a board of directors, unless such
company is registered under section 8 or exempt under section 6, shall
directly or indirectly--
{{2-29-00 p.9298.04}}
(1) offer for sale, sell, or deliver after sale, by use of the
mails or any means or instrumentality of interstate commerce, any
security or any interest in a security of which such company is the
issuer; or offer for sale, sell, or deliver after sale any such
security or interest, having reason to believe that such security or
interest will be made the subject of a public offering by use of the
mails or any means or instrumentality of interstate commerce;
(2) purchase, redeem, or otherwise acquire or attempt to acquire,
by use of the mails or any means or instrumentality of interstate
commerce, any security or any interest in a security of which such
company is the issuer; or
(3) sell or purchase for the account of such company, by use of
the mails or any means or instrumentality of interstate commerce, any
security or interest in a security, by whomever issued.
The provisions of this subsection (b) shall not apply to
transactions which are merely incidental to the dissolution of an
investment company.
(c) No promoter of a proposed investment company, and no
underwriter for such a promoter, shall make use of the mails or any
means or instrumentality of interstate commerce, directly or
indirectly, to offer for sale, sell, or deliver after sale, in
connection with a public offering, any preorganization certificate or
subscription for such a company.
(d) No investment company, unless organized or otherwise created
under the laws of the United States or of a State, and no depositor or
trustee of or underwriter for such a company not so organized or
created, shall make use of the mails or any means or instrumentality of
interstate commerce, directly or indirectly, to offer for sale, sell,
or deliver after sale, in connection with a public offering, any
security of which such company is the issuer. Notwithstanding the
provisions of this subsection and of section 8(a), the Commission is
authorized, upon application by an investment company organized or
otherwise created under the laws of a foreign country, to issue a
conditional or unconditional order permitting such company to register
under this title and to make a public offering of its securities by use
of the mails and means or instrumentalities of interstate commerce, if
the Commission finds that, by reason of special circumstances or
arrangements, it is both legally and practically feasible effectively
to enforce the provisions of this title against such company and that
the issuance of such order is otherwise consistent with the public
interest and the protection of investors.
(e) DISCLOSURE BY EXEMPT CHARITABLE ORGANIZATIONS.--Each
fund that is excluded from the definition of an investment company
under section 3(c)(10)(B) of
this Act shall provide, to each donor to such fund, at the time of the
donation or within 90 days after the date of enactment of this
subsection, whichever is later, written information describing the
material terms of the operation of such fund.
[Codified to 15 U.S.C. 80a--7]
[Source: Section 7 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 802), effective November 1, 1940; as amended by
section 2(b) of the Act of December 8, 1995 (Pub. L. No. 104--62; 109
Stat. 683), effective December 8, 1995]
Registration of Investment
Companies
Sec. 8. (a) Any investment company organized or otherwise created
under the laws of the United States or of a State may register for the
purposes of this title by filing with the Commission a notification of
registration, in such form as the Commission shall by rules and
regulations prescribe as necessary or appropriate in the public
interest or for the protection of investors. An investment company
shall be deemed to be registered upon receipt by the Commission of such
notification of registration.
(b) Every registered investment company shall file with the
Commission, within such reasonable time after registration as the
Commission shall fix by rules and regulations, an original and such
copies of a registration statement, in such form and containing such of
the following information and documents as the Commission shall by
rules and regulations prescribe as necessary or appropriate in the
public interest or for the protection of investors:
{{2-29-00 p.9298.05}}
(1) a recital of the policy of the registrant in respect of each
of the following types of activities, such recital consisting in each
case of a statement whether the registrant reserves freedom of action
to engage in activities of such type, and if such freedom of action is
reserved, a statement briefly indicating, insofar as is practicable,
the extent to which the registrant intends to engage therein: (A) the
classification and subclassifications, as defined in sections 4 and 5,
within which the registrant proposes to operate; (B) borrowing money;
(C) the issuance of senior securities; (D) engaging in the business of
underwriting securities issued by other persons; (E) concentrating
investments in a particular industry or group of industries; (F) the
purchase and sale of real estate and commodities, or either of them;
(G) making loans to other persons; and (H) portfolio turnover
(including a statement showing the aggregate dollar amount of purchases
and sales of portfolio securities, other than Government securities, in
each of the last three full fiscal years preceding the filing of such
registration statement);
(2) a recital of all investment policies of the registrant, not
enumerated in paragraph (1), which are changeable only if authorized by
shareholder vote;
(3) a recital of all policies of the registrant, not enumerated
in paragraphs (1) and (2), in respect of matters which the registrant
deems matters of fundamental policy;
(4) the name and address of each affiliated person of the
registrant; the name and principal address of every company, other than
the registrant, of which each such person is an officer, director, or
partner; a brief statement of the business experience for the preceding
five years of each officer and director of the registrant;
and
(5) the information and documents which would be required to be
filed in order to register under the Securities Act of 1933 and the
Securities Exchange Act of 1934 all securities (other than short-term
paper) which the registrant has outstanding or proposes to issue.
(c) The Commission shall make provision, by permissive rules and
regulations or order, for the filing of the following, or so much of
the following as the Commission may designate, in lieu of the
information and documents required pursuant to subsection (b):
(1) copies of the most recent registration statement filed by the
registrant under the Securities Act of 1933 and currently effective
under such Act, or if the registrant has not filed such a statement,
copies of a registration statement filed by the registrant under the
Securities Exchange Act of 1934 and currently effective under such
Act;
{{12-29-06 p.9299}}
(2) copies of any reports filed by the registrant pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1934; and
(3) a report containing reasonably current information regarding
the matters included in copies filed pursuant to paragraphs (1) and
(2), and such further information regarding matters not included in
such copies as the Commission is authorized to require under subsection
(b).
(d) If the registrant is a unit investment trust substantially all
of the assets of which are securities issued by another registered
investment company, the Commission is authorized to prescribe for the
registrant, by rules and regulations or order, a registration statement
which eliminates inappropriate duplication of information contained in
the registration statement filed under this section by such other
investment company.
(e) If it appears to the Commission that a registered investment
company has failed to file the registration statement required by this
section or a report required pursuant to
section 30(a) or (b), or has
filed such a registration statement or report but omitted therefrom
material facts required to be stated therein, or has filed such a
registration statement or report in violation of
section 34(b), the Commission
shall notify such company by registered mail or by certified mail of
the failure to file such registration statement or report, or of the
respects in which such registration statement or report appears to be
materially incomplete or misleading, as the case may be, and shall fix
a date (in no event earlier than thirty days after the mailing of such
notice) prior to which such company may file such registration
statement or report or correct the same. If such registration statement
or report is not filed or corrected within the time so fixed by the
Commission or any extension thereof, the Commission, after appropriate
notice and opportunity for hearing, and upon such conditions and with
such exemptions as it deems appropriate for the protection of
investors, may by order suspend the registration of such company until
such statement or report is filed or corrected, or may by order revoke
such registration, if the evidence establishes--
(1) that such company has failed to file a registration statement
required by this section or a report required pursuant to section 30(a)
or (b), or has filed such a registration statement or report but
omitted therefrom material facts required to be stated therein, or has
filed such a registration statement or report in violation of section
34(b); and
(2) that such suspension or revocation is in the public interest.
(f) Whenever the Commission, on its own motion or upon application,
finds that a registered investment company has ceased to be an
investment company, it shall so declare by order and upon the taking
effect of such order the registration of such company shall cease to be
in effect. If necessary for the protection of investors, an order under
this subsection may be made upon appropriate conditions. The
Commission's denial of any application under this subsection shall be
by order.
[Codified to 15 U.S.C. 80a--8]
[Source: Section 8 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 803), effective November 1, 1940; as amended by
section 1(14) of the Act of June 11, 1960 (Pub. L. No. 86--507; 74
Stat. 201), effective June 11, 1960; section 3(c) of the Act of
December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1415), effective
December 14, 1970]
Ineligibility of Certain Affiliated Persons and
Underwriters
Sec. 9. (a) It shall be unlawful for any of the following persons
to serve or act in the capacity of employee, officer, director, member
of an advisory board, investment adviser, or depositor of any
registered investment company, or principal underwriter for any
registered open-end company, registered unit investment trust, or
registered face-amount certificate company.
(1) any person who within 10 years has been convicted of
any felony or misdemeanor involving the purchase or sale of any
security or arising out of such person's conduct as an
{{12-29-06 p.9300}}underwriter,
broker, dealer, investment adviser, municipal securities dealer,
government securities broker, government securities dealer, bank,
transfer agent, credit rating agency, or entity or person required to
be registered under the Commodity Exchange Act, or as an affiliated
person, salesman, or employee of any investment company, bank,
insurance company, or entity or person required to be registered under
the Commodity Exchange Act;
(2) any person who, by reason of any misconduct, is permanently
or temporarily enjoined by order, judgment, or decree of any court of
competent jurisdiction from acting as an underwriter, broker, dealer,
investment adviser, municipal securities dealer, government securities
broker, government securities dealer, bank, transfer agent, credit
rating agency, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or
employee of any investment company, bank, insurance company, or entity
or person required to be registered under the Commodity Exchange Act,
or from engaging in or continuing any conduct or practice in connection
with any such activity or in connection with the purchase or sale of
any security; or
(3) a company any affiliated person of which is ineligible, by
reason of paragraph (1) or (2), to serve or act in the foregoing
capacities.
For the purposes of paragraphs (1), (2), and (3) of this subsection,
the term "investment adviser" shall include an investment adviser
as defined in title II of this Act.
(b) The Commission may, after notice and opportunity for hearing,
by order prohibit, conditionally or unconditionally, either permanently
or for such period of time as it in its discretion shall deem
appropriate in the public interest, any person from serving or acting
as an employee, officer, director, member of an advisory board,
investment adviser or depositor of, or principal underwriter for, a
registered investment company or affiliated person of such investment
adviser, depositor, or principal underwriter, if such person--
(1) has willfully made or caused to be made in any registration
statement, application or report filed with the Commission under this
title any statement which was at the time and in the light of the
circumstances under which it was made false or misleading with respect
to any material fact, or has omitted to state in any such registration
statement, application, or report any material fact which was required
to be stated therein;
(2) has willfully violated any provision of the Securities Act of
1933, or of the Securities Exchange Act of 1934, or of title II of this
Act, or of this title or of the Commodity Exchange Act, or of any rule
or regulation under any of such statutes;
(3) has willfully aided, abetted, counseled, commanded, induced,
or procured the violation by any other person of the Securities Act of
1933, or of the Securities Exchange Act of 1934, or of title II of this
Act, or of this title, or of the Commodity Exchange Act, or of any rule
or regulation under any of such statutes;
(4) has been found by a foreign financial regulatory authority to
have--
(A) made or caused to be made in any application for registration
or report required to be filed with a foreign securities authority, or
in any proceeding before a foreign securities authority with respect to
registration, any statement that was at the time and in light of the
circumstances under which it was made false or misleading with respect
to any material fact, or has omitted to state in any application or
report to a foreign securities authority any material fact that is
required to be stated therein;
(B) violated any foreign statute or regulation regarding
transactions in securities or contracts of sale of a commodity for
future delivery traded on or subject to the rules of a contract market
or any board of trade;
(C) aided, abetted, counseled, commanded, induced, or procured
the violation by any other person of any foreign statute or regulation
regarding transactions in securities or contracts of sale of a
commodity for future delivery traded on or subject to the rules of a
contract market or any board of trade;
(5) within 10 years has been convicted by a foreign court of
competent jurisdiction of a crime, however denominated by the laws of
the relevant foreign government, that is substantially equivalent to an
offense set forth in paragraph (1) of subsection (a); or
(6) by reason of any misconduct, is temporarily or permanently
enjoined by any foreign court of competent jurisdiction from acting in
any of the capacities, set forth in
{{12-29-06 p.9300.01}}paragraph (2) of
subsection (a), or a substantially equivalent foreign capacity, or from
engaging in or continuing any conduct or practice in connection with
any such activity or in connection with the purchase or sale of any
security.
(c) Any person who is ineligible, by reason of subsection (a), to
serve or act in the capacities enumerated in that subsection, may file
with the Commission an application for an exemption from the provisions
of that subsection. The Commission shall by order grant such
application, either unconditionally or on an appropriate temporary or
other conditional basis, if it is established that the prohibitions of
subsection (a), as applied to such person, are unduly or
disproportionately severe or that the conduct of such person has been
such as not to make it against the public interest or protection of
investors to grant such application.
(d) MONEY PENALTIES IN ADMINISTRATIVE PROCEEDINGS.--
(1) AUTHORITY OF COMMISSION.--In any proceeding
instituted pursuant to subsection (b) against any person, the
Commission may impose a civil penalty if it finds, on the record after
notice and opportunity for hearing, that such person--
(A) has willfully violated any provision of the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Advisers Act
of 1940, or this title, or the rules or regulations thereunder;
(B) has willfully aided, abetted, counseled, commanded, induced,
or procured such a violation by any other person; or
(C) has willfully made or caused to be made in any registration
statement, application, or report required to be filed with the
Commission under this title, any statement which was, at the time and
in the light of the circumstances under which it was made, false or
misleading with respect to any material fact, or has omitted to state
in any such registration statement, application, or report any material
fact which was required to be stated therein;
and that such penalty is in the public interest.
(2) MAXIMUM AMOUNT OF PENALTY.--
(A) FIRST TIER.--The maximum amount of penalty for each
act or omission described in paragraph (1) shall be $5,000 for a
natural person or $50,000 for any other person.
(B) SECOND TIER.--Notwithstanding subparagraph (A), the
maximum amount of penalty for each such act or omission shall be
$50,000 for a natural person or $250,000 for any other person if the
act or omission described in paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a regulatory
requirement.
(C) THIRD TIER.--Notwithstanding subparagraphs (A) and
(B), the maximum amount of penalty for each such act or omission shall
be $100,000 for a natural person or $500,000 for any other person if--
(i) the act or omission described in paragraph (1) involved
fraud, deceit, manipulation, or deliberate or reckless disregard of a
regulatory requirement; and
(ii) such act or omission directly or indirectly resulted in
substantial losses or created a significant risk of substantial losses
to other persons or resulted in substantial pecuniary gain to the
person who committed the act or omission.
(3) DETERMINATION OF PUBLIC INTEREST.--In considering
under this section whether a penalty is in the public interest, the
Commission may consider--
(A) whether the act or omission for which such penalty is
assessed involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement;
(B) the harm to other persons resulting either directly or
indirectly from such act or omission;
(C) the extent to which any person was unjustly enriched, taking
into account any restitution made to persons injured by such behavior;
(D) whether such person previously has been found by the
Commission, another appropriate regulatory agency, or a self-regulatory
organization to have violated the Federal securities laws, State
securities laws, or the rules of a self-regulatory organization,
has been enjoined by a court of competent jurisdiction from
violations of such laws or rules,
{{12-29-06 p.9300.02}}or has
been convicted by a court of competent jurisdiction of violations of
such laws or of any felony or misdemeanor described in
section 203(e)(2) of the
Investment Advisers Act of 1940;
(E) the need to deter such person and other persons from
committing such acts or omissions; and
(F) such other matters as justice may require.
(4) EVIDENCE CONCERNING ABILITY TO PAY.--In any
proceeding in which the Commission may impose a penalty under this
section, a respondent may present evidence of the respondent's ability
to pay such penalty. The Commission may, in its discretion, consider
such evidence in determining whether such penalty is in the public
interest. Such evidence may relate to the extent of such person's
ability to continue in business and the collectability of a penalty,
taking into account any other claims of the United States or third
parties upon such person's assets and the amount of such person's
assets.
(e) Authority To Enter an Order Requiring an Accounting and
Disgorgement.--In any proceeding in which the Commission may impose
a penalty under this section, the Commission may enter an order
requiring accounting and disgorgement, including reasonable interest.
The Commission is authorized to adopt rules, regulations, and orders
concerning payments to investors, rates of interest, periods of
accrual, and such other matters as it deems appropriate to implement
this subsection.
(f) CEASE-AND-DESIST PROCEEDINGS.--
(1) AUTHORITY OF THE COMMISSION.--If the Commission
finds, after notice and opportunity for hearing, that any person is
violating, has violated, or is about to violate any provision of this
title, or any rule or regulation thereunder, the Commission may publish
its findings and enter an order requiring such person, and any other
person that is, was, or would be a cause of the violation, due to an
act or omission the person knew or should have known would contribute
to such violation, to cease and desist from committing or causing such
violation and any future violation of the same provision, rule, or
regulation. Such order may, in addition to requiring a person to cease
and desist from committing or causing a violation, require such person
to comply, or to take steps to effect compliance, with such provision,
rule, or regulation, upon such terms and conditions and within such
time as the Commission may specify in such order. Any such order may,
as the Commission deems appropriate, require future compliance or steps
to effect future compliance, either permanently or for such period of
time as the Commission may specify, with such provision, rule, or
regulation with respect to any security, any issuer, or any other
person.
(2) HEARING.--The notice instituting proceedings
pursuant to paragraph (1) shall fix a hearing date not earlier than 30
days nor later than 60 days after service of the notice unless an
earlier or a later date is set by the Commission with the consent of
any respondent so served.
(3) TEMPORARY ORDER.--
(A) IN GENERAL.--Whenever
the Commission determines that the alleged violation or threatened
violation specified in the notice instituting proceedings pursuant to
paragraph (1), or the continuation thereof, is likely to result in
significant dissipation or conversion of assets, significant harm to
investors, or substantial harm to the public interest, including, but
not limited to, losses to the Securities Investor Protection
Corporation, prior to the completion of the proceeding, the Commission
may enter a temporary order requiring the respondent to cease and
desist from the violation or threatened violation and to take such
action to prevent the violation or threatened violation and to prevent
dissipation or conversion of assets, significant harm to investors, or
substantial harm to the public interest as the Commission deems
appropriate pending completion of such proceedings. Such an order shall
be entered only after notice and opportunity for a hearing, unless the
Commission, notwithstanding section 40(a) of this title, determines
that notice and hearing prior to entry would be impracticable or
contrary to the public interest. A temporary order shall become
effective upon service upon the respondent and, unless set aside,
limited, or suspended by the Commission or a court of
{{12-29-06 p.9300.03}}competent
jurisdiction, shall remain effective and enforceable pending the
completion of the proceedings.
(B) APPLICABILITY.--This paragraph shall apply only to a
respondent that acts, or, at the time of the alleged misconduct acted,
as a broker, dealer, investment adviser, investment company, municipal
securities dealer, government securities broker, government securities
dealer, or transfer agent, or is, or was at the time of the alleged
misconduct, an associated person of, or a person seeking to become
associated with, any of the foregoing.
(4) REVIEW OF TEMPORARY ORDERS.--
(A) COMMISSION REVIEW.--At any time after the respondent
has been served with a temporary cease-and-desist order pursuant to
paragraph (3), the respondent may apply to the Commission to have the
order set aside, limited, or suspended. If the respondent has been
served with a temporary cease-and-desist order entered without a prior
Commission hearing, the respondent may, within 10 days after the date
on which the order was served, request a hearing on such application
and the Commission shall hold a hearing and render a decision on such
application at the earliest possible time.
(B) JUDICIAL REVIEW.--Within--
(i) 10 days after the date the respondent was served with a
temporary cease-and-desist order entered with a prior Commission
hearing, or
(ii) 10 days after the Commission renders a decision on an
application and hearing under subparagraph (A), with respect to any
temporary cease-and-desist order entered without a prior Commission
hearing,
the respondent may apply to the United States district court for the
district in which the respondent resides or has its principal place of
business, or for the District of Columbia, for an order setting aside,
limiting, or suspending the effectiveness or enforcement of the order,
and the court shall have jurisdiction to enter such an order. A
respondent served with a temporary cease-and-desist order entered
without a prior Commission hearing may not apply to the court except
after hearing and decision by the Commission on the respondent's
application under subparagraph (A) of this paragraph.
(C) NO AUTOMATIC STAY OF TEMPORARY ORDER.--The
commencement of proceedings under subparagraph (B) of this paragraph
shall not, unless specifically ordered by the court, operate as a stay
of the Commission's order.
(D) Exclusive
review.--Section 43 of this
title shall not apply to a temporary order entered pursuant to this
section.
(5) Authority to enter an order requiring an accounting and
disgorgement.--In any cease-and-desist proceeding under subsection
(f)(1), the Commission may enter an order requiring accounting and
disgorgement, including reasonable interest. The Commission is
authorized to adopt rules, regulations, and orders concerning payments
to investors, rates of interest, periods of accrual, and such other
matters as it deems appropriate to implement this subsection.
(g) For the purposes of this section, the term "investment
adviser" includes a corporate or other trustee performing the
functions of an investment adviser.
[Codified to 15 U.S.C. 80a--9]
[Source: Section 9 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 805), effective November 1, 1940; as
amended by section 4 of the Act of December 14, 1970 (Pub. L. No.
91--547; 84 Stat. 1415), effective December 14, 1970; section 28(6) of
the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 166), effective
June 4, 1975; section 102(l) of title I of the Act of October 28, 1986
(Pub. L. No. 99--571; 100 Stat. 3220), effective July 25, 1987; section
609 of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181;
101 Stat. 1261), effective December 4, 1987; section 301 of title III
of the Act of October 15, 1990 (Pub. L. No. 101--429; 104 Stat. 941),
effective October 15, 1990; section 205(a) of title II of the Act of
November 15, 1990 (Pub. L. No. 101--550; 104 Stat. 2718), effective
November 15, 1990; section 222 of title II of the Act of November 22,
1999 (Pub. L. No. 106--102; 113 Stat. 1401), effective May 12, 2001;
section 4(b)(2)(B) of the Act of September 29, 2006 (Pub. L. No.
109--291; 120 Stat. 1337), effective September 29, 2006]
{{12-29-06 p.9301}}
Affiliations of Directors
Sec. 10. (a) No registered investment company shall have a board
of directors more than 60 per centum of the members of which are
persons who are interested persons of such registered company.
(b) No registered investment company shall--
(1) employ as regular broker any director, officer, or employee
of such registered company, or any person of which any such director,
officer, or employee is an affiliated person, unless a majority of the
board of directors of such registered company shall be persons who are
not such brokers or affiliated persons of any such brokers;
(2) use as a principal underwriter of securities issued by it any
director, officer, or employee of such registered company or any person
of which any such director, officer, or employee is an interested
person, unless a majority of the board of directors of such registered
company shall be persons who are not such principal underwriters or
interested persons of any of such principal underwriters; or
(3) have as director, officer, or employee any investment banker,
or any affiliated person of an investment banker, unless a majority of
the board of directors of such registered company shall be persons who
are not investment bankers or affiliated persons of any investment
banker. For the purposes of this paragraph, a person shall not be
deemed an affiliated person of an investment banker solely by reason of
the fact that he is an affiliated person of a company of the character
described in section
12(d)(3)(A) and (B).
(c) No registered investment company shall have a majority of
its board of directors consisting of persons who are officers,
directors, or employees of any one bank (together with its affiliates
and subsidiaries) or any one bank holding company (together with its
affiliates and subsidiaries) (as such terms are defined in
section 2 of the Bank Holding
Company Act of 1956), or any one savings and loan holding company,
together with its affiliates and subsidiaries (as such terms are
defined in section 10 of the Home Owners' Loan Act), except that, if
on March 15, 1940, any registered investment company had a majority
of its directors consisting of persons who are directors, officers, or
employees of any one bank, such company may continue to have the same
percentage of its board of directors consisting of persons who are
directors, officers, or employees of such bank.
(d) Notwithstanding subsections (a) and (b)(2) of this section, a
registered investment company may have a board of directors all the
members of which, except one, are interested persons of the investment
adviser of such company, or are officers or employees of such company,
if--
(1) such investment company is an open-end company;
(2) such investment adviser is registered under title II of
this Act and is engaged principally in the business of rendering
investment supervisory services as defined in title II;
(3) no sales load is charged on securities issued by such
investment company;
(4) any premium over net asset value charged by such company upon
the issuance of any such security, plus any discount from net asset
value charged on redemption thereof, shall not in the aggregate exceed
2 per centum;
(5) no sales or promotion expenses are incurred by such
registered company; but expenses incurred in complying with laws
regulating the issue or sale of securities shall not be deemed sales or
promotion expenses;
(6) such investment adviser is the only investment adviser to
such investment company, and such investment adviser does not receive a
management fee exceeding 1 per centum per annum of the value of such
company's net assets averaged over the year or taken as of a definite
date or dates within the year;
(7) all executive salaries and executive expenses and office rent
of such investment company are paid by such investment adviser; and
(8) such investment company has only one class of securities
outstanding, each unit of which has equal voting rights with every
other unit.
(e) If by reason of the death, disqualification, or bona fide
resignation of any director or directors, the requirements of the
foregoing provisions of this section or of
section 15(f)(1) in respect of
directors shall not be met by a registered investment company, the
operation of such provision shall be suspended as to such registered
company--
(1) for a period of thirty days if the vacancy or vancancies may
be filled by action of the board of directors;
{{12-29-06 p.9302}}
(2) for a period of sixty days if a vote of stockholders is
required to fill the vacancy or vacancies; or
(3) for such longer period as the Commission may prescribe, by
rules and regulations upon its own motion or by order upon application,
as not inconsistent with the protection of investors.
(f) No registered investment company shall knowingly purchase or
otherwise acquire, during the existence of any underwriting or selling
syndicate, any security (except a security of which such company is the
issuer) a principal underwriter of which is an officer, director,
member of an advisory board, investment adviser, or employee of such
registered company, or is a person (other than a company of the
character described in section
12(d)(3)(A) and (B)) of which any such officer, director,
member of an advisory board, investment adviser, or employee is an
affiliated person, unless in acquiring such security such registered
company is itself acting as a principal underwriter for the issuer. The
Commission, by rules and regulations upon its own motion or by order
upon application, may conditionally or unconditionally exempt any
transaction or classes of transactions from any of the provisions of
this subsection, if and to the extent that such exemption is consistent
with the protection of investors.
(g) In the case of a registered investment company which has an
advisory board, such board, as a distinct entity, shall be subject to
the same retrictions as to its membership as are imposed upon a board
of directors by this section.
(h) In the case of a registered management company which is an
unincorporated company not having a board of directors, the provisions
of this section shall apply as follows:
(1) the provisions of subsection (a), as modified by subsection
(e), shall apply to the board of directors of the depositor of such
company;
(2) the provisions of subsections (b) and (c), as modified by
subsection (e), shall apply to the board of directors of the depositor
and of every investment adviser of such company; and
(3) the provisions of subsection (f) shall apply to purchases and
other acquisitions for the account of such company of securities a
principal underwriter of which is the depositor or an investment
adviser of such company, or an affiliated person of such depositor or
investment adviser.
[Codified to 15 U.S.C. 80a--10]
[Source: Section 10 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 806), effective November 1, 1940; as amended by
section 5 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84
Stat. 1416), effective December 14, 1970; section 28(5) of the Act of
June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 165), effective June 4,
1975; section 213(c) of title II of the Act of November 12, 1999 (Pub.
L. No. 106--102; 113 Stat. 1398), effective May 12, 2001; section
401(c) of title IV of the Act of October 13, 2006 (Pub. L. No.
109--351; 120 Stat. 1973), effective October 13, 2006]
OFFERS OF EXCHANGE
Sec. 11. (a) It shall be unlawful for any registered open-end
company or any principal underwriter for such a company to make or
cause to be made an offer to the holder of a security of such company
or of any other open-end investment company to exchange his security
for a security in the same or another such company on any basis other
than the relative net asset values of the respective securities to be
exchanged, unless the terms of the offer have first been submitted to
and approved by the Commission or are in accordance with such rules and
regulations as the Commission may have prescribed in respect of such
offers which are in effect at the time such offer is made. For the
purposes of this section, (A) an offer by a principal underwriter means
an offer communicated to holders of securities of a class or series but
does not include an offer made by such principal underwriter to an
individual investor in the course of a retail business conducted by
such principal underwriter, and (B) the net asset value means the net
asset value which is in effect for the purpose of determining the price
at which the securities, or class or series of securities involved, are
offered for sale to the public either (1) at the time of the receipt by
the offeror of the acceptance of the offer or (2) at such later time as
is specified in the offer.
{{2-28-97 p.9303}}
(b) The provisions of this section shall not apply to any offer
made pursuant to any plan of reorganization, which is submitted to and
requires the approval of the holders of at least a majority of the
outstanding shares of the class or series to which the security owned
by the offeree belongs.
(c) The provisions of subsection (a) shall be applicable,
irrespective of the basis of exchange, (1) to any offer of exchange of
any security of a registered open-end company for a security of a
registered unit investment trust or registered face-amount certificate
company; and (2) to any type of offer of exchange of the securities of
registered unit investment trusts or registered face-amount certificate
companies for the securities of any other investment company.
[Codified to 15 U.S.C. 80a--11]
[Source: Section 11 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 808), effective November 1, 1940; as amended by
section 6 of the Act of December 14, 1970 (Pub. L. No 91--547; 84 Stat.
1417), effective December 14, 1970]
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