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8000 - Miscellaneous Statutes and Regulations
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INVESTMENT COMPANY ACT OF 1940
An Act
To provide for the registration and regulation of investment
companies and investment advisers, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
TITLE I—INVESTMENT COMPANIES
Findings and Declaration of Policy
Sec. 1. (a) Upon the basis of facts disclosed by the record and
reports of the Securities and Exchange Commission made pursuant to
section 30 of the Public Utility Holding Company Act of 1935, and facts
otherwise disclosed and ascertained, it is hereby found that investment
companies are affected with a national public interest in that, among
other things--
(1) the securities issued by such companies, which constitute a
substantial part of all securities publicly offered, are distributed,
purchased, paid for, exchanged, transferred, redeemed, and repurchased
by the use of the mails and means and instrumentalities of interstate
commerce, and in the case of the numerous companies which issue
redeemable securities this process of distribution and redemption is
continuous;
(2) the principal activities of such companies--investing,
reinvesting, and trading in securities--are conducted by use of the
mails and means and instrumentalities of interstate commerce, including
the facilities of national securities exchanges, and constitute a
substantial part of all transactions effected in the securities markets
of the Nation;
(3) such companies customarily invest and trade in securities
issued by, and may dominate and control or otherwise affect the
policies and management of, companies engaged in business in interstate
commerce;
(4) such companies are media for the investment in the national
economy of a substantial part of the national savings and may have a
vital effect upon the flow of such savings into the capital markets;
and
(5) the activities of such companies, extending over many States,
their use of the instrumentalities of interstate commerce and the wide
geographic distribution of their security holders, make difficult, if
not impossible, effective State regulation of such companies in the
interest of investors.
(b) Upon the basis of facts disclosed by the record and reports of
the Securities and Exchange Commission made pursuant to section 30 of
the Public Utility Holding Company Act of 1935, and facts otherwise
disclosed and ascertained, it is hereby declared that the national
public interest and the interest of investors are adversely affected--
(1) when investors purchase, pay for, exchange, receive dividends
upon, vote, refrain from voting, sell, or surrender securities issued
by investment companies without adequate, accurate, and explicit
information, fairly presented, concerning the character of such
securities and the circumstances, policies, and financial
responsibility of such companies and their management;
(2) when investment companies are organized, operated, managed,
or their portfolio securities are selected, in the interest of
directors, officers, investment advisers, depositors, or other
affiliated persons thereof, in the interest of underwriters, brokers,
or dealers, in the interest of special classes of their security
holders, or in the interest of other investment companies or persons
engaged in other lines of business, rather than in the interest of all
classes of such companies' security holders;
(3) when investment companies issue securities containing
inequitable or discriminatory provisions, or fail to protect the
preferences and privileges of the holders of their outstanding
securities;
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(4) when the control of investment companies is unduly
concentrated through pyramiding or inequitable methods of control, or
is inequitably distributed, or when investment companies are managed by
irresponsible persons;
(5) when investment companies, in keeping their accounts, in
maintaining reserves, and in computing their earnings and the asset
value of their outstanding securities, employ unsound or misleading
methods, or are not subject to adequate independent scrutiny;
(6) when investment companies are reorganized, become inactive,
or change the character of their business, or when the control or
management thereof is transferred, without the consent of their
security holders;
(7) when investment companies by excessive borrowing and the
issuance of excessive amounts of senior securities increase unduly the
speculative character of their junior securities; or
(8) when investment companies operate without adequate asset or
reserves.
It is hereby declared that the policy and purposes of this title, in
accordance with which the provision of this title shall be interpreted,
are to mitigate and, so far as is feasible, to eliminate the conditions
enumerated in this section which adversely affect the national public
interest and the interest of investors.
[Codified to 15 U.S.C. 80a-1]
[Source: Section 1 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 789), effective November 1, 1940]
General Definitions
Sec. 2. (a) When used in this title, unless the context otherwise
requires--
(1) "Advisory board" means a board, whether elected or
appointed, which is distinct from the board of directors or board of
trustees, of an investment company, and which is composed solely of
persons who do not serve such company in any other capacity, whether or
not the functions of such board are such as to render its members
"directors" within the definition of that term, which board has
advisory functions as to investments but has no power to determine that
any security or other investment shall be purchased or sold by such
company.
(2) "Affiliated company" means a company which is an
affiliated person.
(3) "Affiliated person" of another person means (A) any
person directly or indirectly owning, controlling, or holding with
power to vote, 5 per centum or more of the outstanding voting
securities of such other person; (B) any person 5 per centum or more of
whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote, by such other person; (C) any
person directly or indirectly controlling, controlled by, or under
common control with, such other person; (D) any officer, director,
partner, copartner, or employee of such other person; (E) if such other
person is an investment company, any investment adviser thereof or any
member of an advisory board thereof; and (F) if such other person is an
unincorporated investment company not having a board of directors, the
depositor thereof.
(4) "Assignment" includes any direct or indirect
transfer or hypothecation of a contract or chose in action by the
assignor, or of a controlling block of the assignor's outstanding
voting securities by a security holder of the assignor; but does not
include an assignment of partnership interests incidental to the death
or withdrawal of a minority of the members of the partnership having
only a minority interest in the partnership business or to the
admission to the partnership of one or more members who, after such
admission, shall be only a minority of the members and shall have only
a minority interest in the business.
(5) "Bank" means (A) a depository institution (as defined
in section 3 of the Federal
Deposit Insurance Act) or a branch or agency of a foreign bank (as such
terms are defined in section
1(b) of the International Banking Act of 1978), (B) a member
bank of the Federal Reserve System, (C) any other banking
institution or trust company, whether incorporated or not, doing
business under the laws of any State or of the United States, a
substantial portion of the business of which consists of receiving
deposits or exercising fiduciary powers similar to those permitted
to national banks under the authority of the Comptroller of the
Currency, and which is supervised and examined
{{12-30-99 p.9285}}by State or
Federal authority having supervision over banks, and which is not
operated for the purpose of evading the provisions of this title, and
(D) a receiver, conservator, or other liquidating agent of any
institution or firm included in clauses (A), (B), or (C) of this
paragraph.
(6) The term "broker" has the same meaning as given in
section 3 of the Securities
Exchange Act of 1934, except that such term does not include any person
solely by reason of the fact that such person is an underwriter for one
or more investment companies.
(7) "Commission" means the Securities and Exchange
Commission.
(8) "Company" means a corporation, a partnership, an
association, a joint-stock company, a trust, a fund, or any organized
group of persons whether incorporated or not; or any receiver, trustee
in a case under title 11 of the United States Code or similar official
or any liquidating agent for any of the foregoing, in his capacity as
such.
(9) "Control" means the power to exercise a controlling
influence over the management or policies of a company, unless such
power is solely the result of an official position with such company.
Any person who owns beneficially, either directly or through one or
more controlled companies, more than 25 per centum of the voting
securities of a company shall be presumed to control such company. Any
person who does not so own more than 25 per centum of the voting
securities of any company shall be presumed not to control such
company. A natural person shall be presumed not to be a controlled
person within the meaning of this title. Any such presumption may be
rebutted by evidence, but except as hereinafter provided, shall
continue until a determination to the contrary made by the Commission
by order either on its own motion or on application by an interested
person. If an application filed hereunder is not granted or denied by
the Commission within sixty days after filing thereof, the
determination sought by the application shall be deemed to have been
temporarily granted pending final determination of the Commission
thereon. The Commission, upon its own motion or upon application, may
by order revoke or modify any order issued under this paragraph
whenever it shall find that the determination embraced in such original
order is no longer consistent with the facts.
(10) "Convicted" includes a verdict, judgment, or plea of
guilty, or a finding of guilt on a plea of nolo contendere, if such
verdict, judgment, plea, or finding has not been reversed, set aside,
or withdrawn, whether or not sentence has been imposed.
(11) The term "dealer" has the same meaning as given in the
Securities Exchange Act of 1934, but does not include an insurance
company or investment company.
(12) "Director" means any director of a corporation or any
person performing similar functions with respect to any organization,
whether incorporated or unincorporated, including any natural person
who is a member of a board of trustees of a management company created
as a common-law trust.
(13) "Employees' securities company" means any investment
company or similar issuer all of the outstanding securities of which
(other than short-term paper) are beneficially owned (A) by the
employees or persons on retainer of a single employer or of two or more
employers each of which is an affiliated company of the other, (B) by
former employees of such employer or employers, (C) by members of the
immediate family of such employees, persons on retainer, or former
employees, (D) by any two or more of the foregoing classes of persons,
or (E) by such employer or employers together with any one or more of
the foregoing classes of persons.
(14) "Exchange" means any organization, association,
or group of persons, whether incorporated or unincorporated, which
constitutes, maintains, or provides a market place or facilities for
bringing together purchasers and sellers of securities or for otherwise
performing with respect to securities the functions commonly performed
by a stock exchange as that term is generally understood, and includes
the market place and the market facilities maintained by such exchange.
(15) "Face-amount certificate" means any certificate,
investment contract, or other security which represents an obligation
on the part of its issuer to pay a stated or determinable sum or sums
at a fixed or determinable date or dates more than
twenty-four
{{12-30-99 p.9286}}months after the
date of issuance, in consideration of the payment of periodic
installments of a stated or determinable amount (which security shall
be known as a face-amount certificate of the "installment type");
or any security which represents a similar obligation on the part of a
face-amount certificate company, the consideration for which is the
payment of a single lump sum (which security shall be known as a
"fully paid" face-amount certificate).
(16) "Government security" means any security issued or
guaranteed as to principal or interest by the United States, or by a
person controlled or supervised by and acting as an instrumentality of
the Government of the United States pursuant to authority granted by
the Congress of the United States; or any certificate of deposit for
any of the foregoing.
(17) "Insurance company" means a company which is organized
as an insurance company, whose primary and predominant business
activity is the writing of insurance or the reinsuring of risks
underwritten by insurance companies, and which is subject to
supervision by the insurance commissioner or a similar official or
agency of a State; or any receiver or similar official or any
liquidating agent for such a company, in his capacity as such.
(18) "Interstate commerce" means trade, commerce,
transportation, or communication among the several States, or between
any foreign country and any State, or between any State and any place
or ship outside thereof.
(19) "Interested person" of another person means--
(A) when used with respect to an investment company--
(i) any affiliated person of such company,
(ii) any member of the immediate family of any natural person who
is an affiliated person of such company,
(iii) any interested person of any investment adviser of or
principal underwriter for such company,
(iv) any person or partner or employee of any person who at any
time since the beginning of the last two completed fiscal years of such
company has acted as legal counsel for such company,
(v) any person or any affiliated person of a person (other than a
registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person
or affiliated person is an interested person, has executed any
portfolio transactions for, engaged in any principal transactions with,
or distributed shares for--
(I) the investment company;
(II) any other investment company having the same investment
adviser as such investment company or holding itself out to investors
as a related company for purposes of investment or investor services;
or
(III) any account over which the investment company's investment
adviser has brokerage placement discretion,
(vi) any person or any affiliated person of a person (other than
a registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person
or affiliated person is an interested person, has loaned money or other
property to--
(I) the investment company;
(II) any other investment company having the same investment
adviser as such investment company or holding itself out to investors
as a related company for purposes of investment or investor services;
or
(III) any account for which the investment company's investment
adviser has borrowing authority, and
(vii) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having had, at any
time since the beginning of the last two completed fiscal years of such
company, a material business or professional relationship with such
company or with the principal executive officer of such company or with
any other investment company having the same investment adviser or
principal underwriter or with the principal executive officer of such
other investment company:
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Provided, That no person shall be deemed to be an
interested person of an investment company solely by reason of (aa) his
being a member of its board of directors or advisory board or an owner
of its securities, or (bb) his membership in the immediate family of
any person specified in clause (aa) of this proviso; and
(B) when used with respect to an investment adviser of or
principal underwriter for any investment company--
(i) any affiliated person of such investment adviser or principal
underwriter,
(ii) any member of the immediate family of any natural person who
is an affiliated person of such investment adviser or principal
underwriter,
(iii) any person who knowingly has any direct or indirect
beneficial interest in, or who is designated as trustee, executor, or
guardian of any legal interest in, any security issued either by such
investment adviser or principal underwriter or by a controlling person
of such investment adviser or principal underwriter,
(iv) any person or partner or employee of any person who at any
time since the beginning of the last two completed fiscal years of such
investment company has acted as legal counsel for such investment
adviser or principal underwriter,
(v) any person or any affiliated person of a person (other than a
registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person
or affiliated person is an interested person, has executed any
portfolio transactions for, engaged in any principal transactions with,
or distributed shares for--
(I) any investment company for which the investment adviser or
principal underwriter serves as such;
(II) any investment company holding itself out to investors, for
purposes of investment or investor services, as a company related to
any investment company for which the investment adviser or principal
underwriter serves as such; or
(III) any account over which the investment adviser has brokerage
placement discretion,
(vi) any person or any affiliated person of a person (other than
a registered investment company) that, at any time during the 6-month
period preceding the date of the determination of whether that person
or affiliated person is an interested person, has loaned money or other
property to--
(I) any investment company for which the investment adviser or
principal underwriter serves as such;
(II) any investment company holding itself out to investors, for
purposes of investment or investor services, as a company related to
any investment company for which the investment adviser or principal
underwriter serves as such; or
(III) any account for which the investment adviser has borrowing
authority, and
(vii) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having had at any
time since the beginning of the last two completed fiscal years of such
investment company a material business or professional relationship
with such investment adviser or principal underwriter or with the
principal executive officer or any controlling person of such
investment adviser or principal underwriter.
For the purposes of this paragraph (19), "member of the
immediate family" means any parent, spouse of a parent, child,
spouse of a child, spouse, brother or sister, and includes step and
adoptive relationships. The Commission may modify or revoke any order
issued under clause (vi) of subparagraph (A) or (B) of this paragraph
whenever it finds that such order is no longer consistent with the
facts. No order issued pursuant to clause (vi) of subparagraph (A) or
(B) of this paragraph shall become effective until at least sixty days
after the entry thereof, and no such order shall affect the status of
any person for the purposes of this title or for any other purpose for
any period prior to the effective date of such order.
{{12-30-99 p.9288}}
(20) "Investment adviser" of an investment company means
(A) any person (other than a bona fide officer, director, trustee,
member of an advisory board, or employee of such company, as such) who
pursuant to contract with such company regularly furnishes advice to
such company with respect to the desirability of investing in,
purchasing or selling securities or other property, or is empowered to
determine what securities or other property shall be purchased or sold
by such company, and (B) any other person who pursuant to contract with
a person described in clause (A) regularly performs substantially all
of the duties undertaken by such person described in clause (A); but
does not include (i) a person whose advice is furnished solely through
uniform publications distributed to subscribers thereto, (ii) a person
who furnishes only statistical and other factual information, advice
regarding economic factors and trends, or advice as to occasional
transactions in specific securities, but without generally furnishing
advice or making recommendations regarding the purchase or sale of
securities, (iii) a company furnishing such services at cost to one or
more investment companies, insurance companies, or other financial
institutions, (iv) any person the character and amount of whose
compensation for such services must be approved by a court, or (v) such
other persons as the Commission may by rules and regulations or order
determine not to be within the intent of this definition.
(21) "Investment banker" means any person engaged in the
business of underwriting securities issued by other persons, but does
not include an investment company, any person who acts as an
underwriter in isolated transactions but not as a part of a regular
business, or any person solely by reason of the fact that such person
is an underwriter for one or more investment companies.
(22) "Issuer" means every person who issues or proposes to
issue any security, or has outstanding any security which it has
issued.
(23) "Lend" includes a purchase coupled with an agreement
by the vendor to repurchase; "borrow" includes a sale coupled
with a similar agreement.
(24) "Majority-owned subsidiary" of a person means a
company 50 per centum or more of the outstanding voting securities of
which are owned by such person, or by a company which, within the
meaning of this paragraph, is a majority-owned subsidiary of such
person.
(25) "Means or instrumentality of interstate commerce"
includes any facility of a national securities exchange.
(26) "National securities exchange" means an exchange
registered under section 6 of the Securities Exchange Act of 1934.
(27) "Periodic payment plan certificate" means (A) any
certificate, investment contract, or other security providing for a
series of periodic payments by the holder, and representing an
undivided interest in certain specified securities or in a unit or fund
of securities purchased wholly or partly with the proceeds of such
payments and (B) any security the issuer of which is also issuing
securities of the character described in clause (A) and the holder of
which has substantially the same rights and privileges as those which
holders of securities of the character described in clause (A) have
upon completing the periodic payments for which such securities
provide.
(28) "Person" means a natural person or a company.
(29) "Principal underwriter" of or for any investment
company other than a closed-end company, or of any security issued by
such a company, means any underwriter who as principal purchases from
such company, or pursuant to contract has the right (whether absolute
or conditional) from time to time to purchase from such company, any
such security for distribution, or who as agent for such company sells
or has the right to sell any such security to a dealer or to the public
or both, but does not include a dealer who purchases from such company
through a principal underwriter acting as agent for such company.
"Principal underwriter" of or for a closed-end company or any
issuer which is not an investment company, or of any security issued by
such a company or issuer, means any underwriter who, in connection with
a primary distribution of securities, (A) is in privity of contract
with the issuer or an affiliated person of the issuer; (B) acting alone
or in concert with one or more other persons, initiates or directs the
formation of an
{{12-30-99 p.9288.01}}underwriting
syndicate; or (C) is allowed a rate of gross commission, spread, or
other profit greater than the rate allowed another underwriter
participating in the distribution.
(30) "Promoter" of a company or a proposed company means a
person who, acting alone or in concert with other persons, is
initiating or directing, or has within one year initiated or directed,
the organization of such company.
(31) "Prospectus," as used in
section 22, means a written
prospectus intended to meet the requirements of
section 10(a) of the Securities
Act of 1933 and currently in use. As used elsewhere, "prospectus"
means a prospectus as defined in the Securities Act of 1933.
(32) "Redeemable security" means any security, other than
short-term paper, under the terms of which the holder, upon its
presentation to the issuer or to a person designated by the issuer, is
entitled (whether absolutely or only out of surplus) to receive
approximately his proportionate share of the issuer's current net
assets, or the cash equivalent thereof.
(33) "Reorganization" means (A) a reorganization under the
supervision of a court of competent jurisdiction; (B) a merger or
consolidation; (C) a sale of 75 per centum or more in value of the
assets of a company; (D) a restatement of the capital of a company, or
an exchange of securities issued by a company for any of its own
outstanding securities; (E) a voluntary dissolution or liquidation of a
company; (F) a recapitalization or other procedure or transaction which
has for its purpose the alteration, modification, or elimination of any
of the rights, preferences, or privileges of any class of securities
issued by a company, as provided in its charter or other instrument
creating or defining such rights, preferences, and privileges; (G) an
exchange of securities issued by a company for outstanding securities
issued by another company or companies, preliminary to and for the
purpose of effecting or consummating any of the foregoing; or (H) any
exchange of securities by a company which is not an investment company
for securities issued by a registered investment company.
(34) "Sale", "sell", "offer to sell", or
"offer for sale" includes every contract of sale or disposition
of, attempt or offer to dispose of, or solicitation of an offer to buy,
a security or interest in a security, for value. Any security given or
delivered with, or as a bonus on account of, any purchase of securities
or any other thing, shall be conclusively presumed to constitute a part
of the subject of such purchase and to have been sold for value.
(35) "Sales load" means the difference between the price of
a security to the public and that portion of the proceeds from its sale
which is received and invested or held for investment by the issuer (or
in the case of a unit investment trust, by the depositor or trustee),
less any portion of such difference deducted for trustee's or
custodian's fees, insurance premiums, issue taxes, or administrative
expenses or fees which are not properly
{{6-29-01 p.9289}}chargeable to
sales or promotional activities. In the case of a periodic payment plan
certificate, "sales load" includes the sales load on any
investment company securities in which the payments made on such
certificate are invested, as well as the sales load on the certificate
itself.
(36) "Security" means any note, stock, treasury stock,
security future, bond, debenture, evidence of indebtedness, certificate
of interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call,
straddle, option, or privilege on any security (including a certificate
of deposit) or on any group or index of securities (including any
interest therein or based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a national securities
exchange relating to foreign currency, or, in general, any interest or
instrument commonly known as a "security," or any certificate of
interest or participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing.
(37) "Separate account" means an account established and
maintained by an insurance company pursuant to the laws of any State or
territory of the United States, or of Canada or any province thereof,
under which income, gains and losses, whether or not realized, from
assets allocated to such account, are, in accordance with the
applicable contract, credited to or charged against such account
without regard to other income, gains, or losses of the insurance
company.
(38) "Short-term paper" means any note, draft, bill of
exchange, or banker's acceptance payable on demand or having a maturity
at the time of issuance of not exceeding nine months, exclusive of days
of grace, or any renewal thereof payable on demand or having a maturity
likewise limited; and such other classes of securities, of a commercial
rather than an investment character, as the Commission may designate by
rules and regulations.
(39) "State" means any State of the United States, the
District of Columbia, Puerto Rico, the Virgin Islands, or any other
possession of the United States.
(40) "Underwriter" means any person who has purchased from
an issuer with a view to, or sells for an issuer in connection with,
the distribution of any security, or participates or has a direct or
indirect participation in any such undertaking, or participates or has
a participation in the direct or indirect underwriting of any such
undertaking; but such terms shall not include a person whose interest
is limited to a commission from an underwriter or dealer not in excess
of the usual and customary distributor's or seller's commission. As
used in this paragraph the term "issuer" shall include, in
addition to an issuer, any person directly or indirectly controlling or
controlled by the issuer, or any person under direct or indirect common
control with the issuer. When the distribution of the securities in
respect of which any person is an underwriter is completed such person
shall cease to be an underwriter in respect of such securities or the
issuer thereof.
(41) "Value," with respect to assets of registered
investment companies, except as provided in subsection (b) of
section 28 of this title,
means--
(A) as used in sections 3,
5, and
12 of this title, (i) with
respect to securities owned at the end of the last preceding fiscal
quarter for which market quotations are readily available, the market
value at the end of such quarter; (ii) with respect to other securities
and assets owned at the end of the last preceding fiscal quarter, fair
value at the end of such quarter, as determined in good faith by the
board of directors; and (iii) with respect to securities and other
assets acquired after the end of the last preceding fiscal quarter, the
cost thereof; and
(B) as used elsewhere in this title, (i) with respect to
securities for which market quotations are readily available, the
market value of such securities; and (ii) with respect to other
securities and assets, fair value as determined in good faith by the
board of directors:
In each case as of such time or times as determined pursuant to this
title, and the rules and regulations issued by the Commission
hereunder. Notwithstanding the fact that market quotations for
securities issued by controlled companies are available, the board of
directors
{{6-29-01 p.9290}}may in good faith
determine the value of such securities: Provided, That the
value so determined is not in excess of the higher of market value or
asset value of such securities in the case of majority-owned
subsidiaries, and is not in excess of market value in the case of other
controlled companies.
For purposes of the valuation of those assets of a registered
diversified company which are not subject to the limitations provided
for in section 5(b)(1), the
Commission may, by rules and regulations or orders, permit any security
to be carried at cost, if it shall determine that such procedure is
consistent with the general intent and purposes of this title. For
purposes of sections 5 and 12,
in lieu of values determined as provided in clause (A) above, the
Commission shall by rules and regulations permit valuation of
securities at cost or other basis in cases where it may be more
convenient for such company to make its computations on such basis by
reason of the necessity or desirability of complying with the
provisions of any United States revenue laws or rules and regulations
issued thereunder, or the laws or the rules and regulations issued
thereunder of any State in which the securities of such company may be
qualified for sale.
The foregoing definition shall not derogate from the authority of
the Commission with respect to the reports, information, and documents
to be filed with the Commission by any registered company, or with
respect to the accounting policies and principles to be followed by any
such company, as provided in sections
8, 30, and
31.
(42) "Voting security" means any security presently
entitling the owner or holder thereof to vote for the election of
directors of a company. A specified percentage of the outstanding
voting securities of a company means such amount of its outstanding
voting securities as entitles the holder or holders thereof to cast
said specified percentage of the aggregate votes which the holders of
all the outstanding voting securities of such company are entitled to
cast. The vote of a majority of the outstanding voting securities of a
company means the vote, at the annual or a special meeting of the
security holders of such company duly called, (A) of 67 per centum or
more of the voting securities present at such meeting, if the holders
of more than 50 per centum of the outstanding voting securities of such
company are present or represented by proxy; or (B) of more than 50 per
centum of the outstanding voting securities of such company, whichever
is the less.
(43) "Wholly-owned subsidiary" of a person means a company
95 per centum or more of the outstanding voting securities of which are
owned by such person, or by a company which, within the meaning of this
paragraph, is a wholly-owned subsidiary of such person.
(44) "Securities Act 1933," "Securities Exchange Act of
1934," "Public Utility Holding Company Act of 1935," and
"Trust Indenture Act of 1939" mean those Acts, respectively, as
heretofore or hereafter amended.
(45) "Savings and loan association" means a savings and
loan association, building and loan association, cooperative bank,
homestead association, or similar institution, which is supervised and
examined by State or Federal authority having supervision over any such
institution, and a receiver, conservator, or other liquidating agent of
any such institution.
(46) "Eligible portfolio company" means any issuer which--
(A) is organized under the laws of, and has its principal place
of business in, any State or States;
(B) is neither an investment company as defined in
section 3 (other than a small
business investment company which is licensed by the Small Business
Administration to operate under the Small Business Investment Act of
1958 and which is a wholly-owned subsidiary of the business development
company) nor a company which would be an investment company except for
the exclusion from the definition of investment company in section
3(c); and
(C) satisfies one of the following:
(i) it does not have any class of securities with respect to
which a member of a national securities exchange, broker, or dealer may
extend or maintain credit to or for a customer pursuant to rules or
regulations adopted by the Board of Governors of the Federal Reserve
System under section 7 of the Securities Exchange Act of
1934;
{{12-29-06 p.9291}}
(ii) it is controlled by a business development company, either
alone or as part of a group acting together, and such business
development company in fact exercises a controlling influence over the
management or policies of such eligible portfolio company and, as a
result of such control, has an affiliated person who is a director of
such eligible portfolio company;
(iii) it has total assets of not more than $4,000,000, and
capital and surplus (shareholders' equity less retained earnings) of
not less than $2,000,000, except that the Commission may adjust such
amounts by rule, regulation, or order to reflect changes in 1 or more
generally accepted indices or other indicators for small businesses; or
(iv) it meets such other criteria as the Commission may, by rule,
establish as consistent with the public interest, the protection of
investors, and the purposes fairly intended by the policy and
provisions of this title.
(47) "Making available significant managerial assistance"
by a business development company means--
(A) any arrangement whereby a business development company,
through its directors, officers, employees, or general partners, offers
to provide, and, if accepted, does so provide, significant guidance and
counsel concerning the management, operations, or business objectives
and policies of a portfolio company;
(B) the exercise by a business development company of a
controlling influence over the management or policies of a portfolio
company by the business development company acting individually or as
part of a group acting together which controls such portfolio company;
or
(C) with respect to a small business investment company licensed
by the Small Business Administration to operate under the Small
Business Investment Act of 1958, the making of loans to a portfolio
company.
For purposes of subparagraph (A), the requirement that a business
development company make available significant managerial assistance
shall be deemed to be satisfied with respect to any particular
portfolio company where the business development company purchases
securities of such portfolio company in conjunction with one or more
other persons acting together, and at least one of the persons in the
group makes available significant managerial assistance to such
portfolio company, except that such requirement will not be deemed to
be satisfied if the business development company, in all cases, makes
available significant managerial assistance solely in the manner
described in this sentence.
(48) "Business development company" means any closed-end
company which--
(A) is organized under the laws of, and has its principal place
of business in, any State or States;
(B) is operated for the purpose of making investments in
securities described in paragraphs (1) through (3) of
section 55(a), and makes
available significant managerial assistance with respect to the issuers
of such securities, provided that a business development company must
make available significant managerial assistance only with respect to
the companies which are treated by such business development company as
satisfying the 70 per centum of the value of its total assets condition
of section 55; and provided further that a business development company
need not make available significant managerial assistance with respect
to any company described in paragraph (46)(C)(iii), or with respect to
any other company that meets such criteria as the Commission may by
rule, regulation, or order permit, as consistent with the public
interest, the protection of investors, and the purposes of this title;
and
(C) has elected pursuant to
section 54(a) to be subject to
the provisions of sections 55 through 65.
(49) "Foreign securities authority" means any foreign
government or any governmental body or regulatory organization
empowered by a foreign government to administer or enforce its laws as
they relate to securities matters.
(50) "Foreign financial regulatory authority" means any (A)
foreign securities authority, (B) other governmental body or foreign
equivalent of a self-regulatory organization empowered by a foreign
government to administer or enforce its laws relating
{{12-29-06 p.9292}}to the regulation
of fiduciaries, trusts, commercial lending, insurance, trading in
contracts of sale of a commodity for future delivery, or other
instruments traded on or subject to the rules of a contract market,
board of trade or foreign equivalent, or other financial activities, or
(C) membership organization a function of which is to regulate the
participation of its members in activities listed above.
(51)(A) ``Qualified purchaser'' means—
(i) any natural person (including any person who holds a joint,
community property, or other similar shared ownership interest in an
issuer that is excepted under section 3(c)(7) with that person's
qualified purchaser spouse) who owns not less than $5,000,000 in
investments, as defined by the Commission;
(ii) any company that owns not less than $5,000,000 in
investments and that is owned directly or indirectly by or for 2 or
more natural persons who are related as siblings or spouse (including
former spouses), or direct lineal descendants by birth or adoption,
spouses of such persons, the estates of such persons, or foundations,
charitable organizations, or trusts established by or for the benefit
of such persons;
(iii) any trust that is not covered by clause (ii) and that was
not formed for the specific purpose of acquiring the securities
offered, as to which the trustee or other person authorized to make
decisions with respect to the trust, and each settlor or other person
who has contributed assets to the trust, is a person described in
clause (i), (ii), or (iv); or
(iv) any person, acting for its own account or the accounts of
other qualified purchasers, who in the aggregate owns and invests on a
discretionary basis, not less than $25,000,000 in investments.
(B) The Commission may adopt such rules and regulations
applicable to the persons and trusts specified in clauses (i) through
(iv) of subparagraph (A) as it determines are necessary or appropriate
in the public interest or for the protection of investors.
(C) The term "qualified purchaser" does not include a
company that, but for the exceptions provided for in paragraph (1) or
(7) of section 3(c), would be an
investment company (hereafter in this paragraph referred to as an
"excepted investment company"), unless all beneficial owners of
its outstanding securities (other than short-term paper), determined in
accordance with section 3(c)(1)(A), that acquired such securities on or
before April 30, 1996 (hereafter in this paragraph referred to as
"pre-amendment beneficial owners"), and all pre-amendment
beneficial owners of the outstanding securities (other than short-term
paper) of any excepted investment company that, directly or indirectly,
owns any outstanding securities of such excepted investment company,
have consented to its treatment as a qualified purchaser. Unanimous
consent of all trustees, directors, or general partners of a company or
trust referred to in clause (ii) or (iii) of subparagraph (A) shall
constitute consent for purposes of this subparagraph.
(52) The terms "security future" and "narrow-based
security index" have the same meanings as provided in section
3(a)(55) of the Securities Exchange Act of 1934.
(53) The term "credit rating agency" has the same as in
section 3 of the Securities Exchange Act.
(b) No provision in this title shall apply to, or be deemed to
include, the United States, a State, or any political subdivision of a
State, or any agency, authority, or instrumentality of any one or more
of the foregoing, or any corporation which is wholly owned directly or
indirectly by any one or more of the foregoing, or any officer, agent,
or employee of any of the foregoing acting as such in the course of his
official duty, unless such provision makes specific reference thereto.
(c) Consideration of Promotion of Efficiency, Competition, and
Capital Formation.--Whenever pursuant to this title the Commission
is engaged in rulemaking and is required to consider or determine
whether an action is consistent with the public interest, the
Commission shall also consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.
[Codified to 15 U.S.C. 80a--2]
[Source: Section 2 of title I of the Act of August
22, 1940 (Pub. L. No. 768; 54 Stat. 790), effective November 1, 1940;
as amended by Proc. No. 2695 (11 Fed. Reg. 7517, 60
Stat.
{{12-29-06 p.9293}}1352), effective
July 4, 1946; section 401 of the title IV of the Act of August 10, 1954
(Pub. L. No. 577; 68 Stat. 689), effective October 10, 1954; section
12(d) of the Act of June 25, 1959 (Pub. L. No. 86--70; 73 Stat. 143),
effective June 25, 1959; section 7(c) of the Act of July 12, 1960 (Pub.
L. No. 86--624; 74 Stat. 412), effective July 12, 1960; section 2(a) of
the Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1413),
effective December 14, 1970; section 310(a) of title III of the Act of
November 6, 1978 (Pub. L. No. 95--598; 92 Stat. 2676), effective
October 1, 1979; section 101 of title I of the Act of October 21, 1980
(Pub. L. No. 96--477; 94 Stat. 2275), effective October 21, 1980;
section 5 of the Act of October 13, 1982 (Pub. L. No. 97--303; 96 Stat.
1409), effective October 13, 1982; sections 601, 602, and 603 of title
VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat.
1260), effective December 4, 1987; section 206(a) of title II of the
Act of November 15, 1990 (Pub. L. No. 101--550; 104 Stat. 2720),
effective November 15, 1990; sections 106(c) of title I, 209(b) of
title II and 503 and 504 of title V of the Act of October 11, 1996
(Pub. L. No. 104--290; 110 Stat. 3425, 3434, and 3445, respectively),
effective October 11, 1996, except that paragraph (51) is effective the
earlier of April 9, 1997 or the date on which the rulemaking required
under section 209(d)(2) of the Act is completed; section 301(c)(1) of
title III of the Act of November 3, 1998, (Pub. L. No. 105--353; 112
Stat. 3236), effective November 3, 1998; section 223 of title II of the
Act of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1401),
effective May 12, 2001; sections 213(a)(b), 216 and 216 of title II of
the Act of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1397),
effective May 12, 2001; sections 209(a)(1) and (3) of title II of the
Act of December 21, 2000 (Pub. L. No. 106--554; 114 Stat. 2763A--435),
effective December 21, 2000; section 4(b)(2)(A) of the Act of September
29, 2006 (Pub. L. No. 109--291; 120 Stat. 1337), effective September
29, 2006]
Definition of Investment Company
Sec. 3. (a)(1) When used in this title, "investment company"
means any issuer which--
(A) is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing,
reinvesting, or trading in securities;
(B) is engaged or proposes to engage in the business of issuing
face-amount certificates of the installment type, or has been engaged
in such business and has any such certificate outstanding; or
(C) is engaged or proposes to engage in the business of
investing, reinvesting, owning, holding, or trading in securities, and
owns or proposes to acquire investment securities having a value
exceeding 40 per centum of the value of such issuer's total assets
(exclusive of Government securities and cash items) on an
unconsolidated basis.
(2) As used in this section, "investment securities"
includes all securities except (A) Government securities, (B)
securities issued by employees' securities companies, and (C)
securities issued by majority-owned subsidiaries of the owner which (i)
are not investment companies, and (ii) are not relying on the exception
from the definition of investment company in paragraph (1) or (7) of
subsection (c).
(b) Notwithstanding paragraph (1)(c) of subsection (a), none of the
following persons is an investment company within the meaning of this
title:
(1) Any issuer primarily engaged, directly or through a
wholly-owned subsidiary or subsidiaries, in a business or businesses
other than that of investing, reinvesting, owning, holding, or trading
in securities.
(2) Any issuer which the Commission, upon application by such
issuer, finds and by order declares to be primarily engaged in a
business or businesses other than that of investing, reinvesting,
owning, holding, or trading in securities either directly or (A)
through majority-owned subsidiaries or (B) through controlled companies
conducting similar types of businesses. The filing of an application
under this paragraph in good faith by an issuer other than a registered
investment company shall exempt the applicant for a period of sixty
days from all provisions of this title applicable to investment
companies as such. For cause shown, the Commission by order may extend
such period of exemption for an additional period or periods. Whenever
the Commission, upon its own motion or upon application, finds that the
circumstances which gave rise to the issuance of an order granting
an
{{12-29-06 p.9294}}application under
this paragraph no longer exist, the Commission shall by order revoke
such order.
(3) Any issuer all the outstanding securities of which (other
than short-term paper and directors' qualifying shares) are directly or
indirectly owned by a company excepted from the definition of
investment company by paragraph (1) or (2) of this
subsection.
(c) Notwithstanding subsection (a), none of the following persons
is an investment company within the meaning of this title:
(1) Any issuer whose outstanding securities (other than
short-term paper) are beneficially owned by not more than one hundred
persons and which is not making and does not presently propose to make
a public offering of its securities. Such issuer shall be deemed to be
an investment company for purposes of the limitations set forth in
subparagraphs (A)(i) and (B)(i) of
section 12(d)(1) governing the
purchase or other acquisition by such issuer of any security issued by
any registered investment company and the sale of any security issued
by any registered open-end investment company to any such issuer. For
the purposes of this paragraph:
(A) Beneficial ownership by a company shall be deemed to be
beneficial ownership by one person, except that, if such company owns
10 per centum or more of the outstanding voting securities of the
issuer and is or, but for the exception provided for in this paragraph
or paragaraph (7), would be an investment company, the beneficial
ownership shall be deemed to be that of the holders of such company's
outstanding securities (other than short-term paper).
(B) Beneficial ownership by any person who acquires securities or
interests in securities of an issuer described in the first sentence of
this paragraph shall be deemed to be beneficial ownership by the person
from whom such transfer was made, pursuant to such rules and
regulations as the Commission shall prescribe as necessary or
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of this title, where the transfer was caused by legal
separation, divorce, death, or other involuntary event.
(2)(A) Any person primarily engaged in the business of
underwriting and distributing securities issued by other persons,
selling securities to customers, acting as broker, and acting as market
intermediary, or any one or more of such activities, whose gross income
normally is derived principally from such business and related
activities.
(B) For purposes of this paragraph--
(i) the term "market intermediary" means any person that
regularly holds itself out as being willing contemporaneously to engage
in, and that is regularly engaged in, the business of entering into
transactions on both sides of the market for a financial contract or
one or more such financial contracts; and
(ii) the term "financial contract" means any arrangement
that--
(I) takes the form of an individually negotiated contract,
agreement, or option to buy, sell, lend, swap, or repurchase, or other
similar individually negotiated transaction commonly entered into by
participants in the financial markets;
(II) is in respect of securities, commodities, currencies,
interest or other rates, other measures of value, or any other
financial or economic interest similar in purpose or function to any of
the foregoing; and
(III) is entered into in response to a request from a counter
party for a quotation, or is otherwise entered into and structured to
accommodate the objectives of the counter party to such arrangement.
(3) Any bank or insurance company; any savings and loan
association, building and loan association, cooperative bank, homestead
association, or similar institution, or any receiver, conservator,
liquidator, liquidating agent, or similar official or person thereof or
therefor or any common trust fund or similar fund maintained by a bank
exclusively for the collective investment and reinvestment of moneys
contributed thereto by the bank in its capacity as a trustee, executor,
administrator, or guardian if--
(A) such fund is employed by the bank solely as an aid to the
administration of trusts, estates, or other accounts created and
maintained for a fiduciary purpose;
{{12-29-06 p.9294.01}}
(B) except in connection with the ordinary advertising of the
bank's fiduciary services, interests in such fund are not--
(i) advertised; or
(ii) offered for sale to the general public; and
(C) fees and expenses charged by such fund are not in
contravention of fiduciary principles established under applicable
Federal or State law.
(4) Any person substantially all of whose business is confined to
making small loans, industrial banking, or similar businesses.
(5) Any person who is not engaged in the business of issuing
redeemable securities, face-amount certificates of the installment type
of periodic payment plan certificates, and who is primarily engaged in
one or more of the following businesses: (A) Purchasing or otherwise
acquiring notes, drafts, acceptances, open accounts receivable, and
other obligations representing part or all of the sales price of
merchandise, insurance, and services; (B) making loans to
manufacturers, wholesalers, and retailers of, and to prospective
purchasers of, specified merchandise, insurance, and services; and (C)
purchasing or otherwise acquiring mortgages and other liens on and
interests in real estate.
{{2-28-97 p.9295}}
(6) Any company primarily engaged, directly or through
majority-owned subsidiaries, in one or more of the businesses described
in paragraphs (3), (4), and (5), or in one or more of such businesses
(from which not less than 25 per centum of such company's gross income
during its last fiscal year was derived) together with an additional
business or businesses other than investing, reinvesting, owning,
holding, or trading in securities.
(7)(A) Any issuer, the outstanding securities of which are owned
exclusively by persons who, at the time of acquisition of such
securities, are qualified purchasers, and which is not making and does
not at that time propose to make a public offering of such securities.
Securities that are owned by persons who received the securities from a
qualified purchaser as a gift or bequest, or in a case in which the
transfer was caused by legal separation, divorce, death, or other
involuntary event, shall be deemed to be owned by a qualified
purchaser, subject to such rules, regulations, and orders as the
Commission may prescribe as necessary or appropriate in the public
interest or for the protection of investors.
(B) Notwithstanding subparagraph (A), an issuer is within the
exception provided by this paragraph if--
(i) in addition to qualified purchasers, outstanding securities
of that issuer are beneficially owned by not more than 100 persons who
are not qualified purchasers, if--
(I) such persons acquired any portion of the securities of such
issuer on or before September 1, 1996; and
(II) at the time at which such persons initially acquired the
securities of such issuer, the issuer was excepted by paragraph (1);
and
(ii) prior to availing itself of the exception provided by this
paragraph--
(I) such issuer has disclosed to each beneficial owner, as
determined under paragraph (1), that future investors will be limited
to qualified purchasers, and that ownership in such issuer is no longer
limited to not more than 100 persons; and
(II) concurrently with or after such disclosure, such issuer has
provided each beneficial owner, as determined under paragraph (1), with
a reasonable opportunity to redeem any part or all of their interests
in the issuer, notwithstanding any agreement to the contrary between
the issuer and such persons, for that person's proportionate share of
the issuer's net assets.
(C) Each person that elects to redeem under subparagraph
(B)(ii)(II) shall receive an amount in cash equal to that person's
proportionate share of the issuer's net assets, unless the issuer
elects to provide such person with the option of receiving, and such
person agrees to receive, all or a portion of such person's share in
assets of the issuer. If the issuer elects to provide such persons with
such an opportunity, disclosure concerning such opportunity shall be
made in the disclosure required by subparagraph (B)(ii)(I).
(D) An issuer that is excepted under this paragraph shall
nonetheless be deemed to be an investment company for purposes of the
limitations set forth in subparagraphs (A)(i) and (B)(i) of
section 12(d)(1) relating to
the purchase or other acquisition by such issuer of any security issued
by any registered investment company and the sale of any security
issued by any registered open-end investment company to any such
issuer.
(E) For purposes of determining compliance with this paragraph
and paragraph (1), an issuer that is otherwise excepted under this
paragraph and an issuer that is otherwise excepted under paragraph (1)
shall not be treated by the Commission as being a single issuer for
purposes of determining whether the outstanding securities of the
issuer excepted under paragraph (1) are beneficially owned by not more
than 100 persons or whether the outstanding securities of the issuer
excepted under this paragraph are owned by persons that are not
qualified purchasers. Nothing in this subparagraph shall be construed
to establish that a person is a bona fide qualified purchaser for
purposes of this paragraph or a bona fide beneficial owner for purposes
of paragraph (1).
(8) Any company subject to regulation under the Public Utility
Holding Company Act of 1935.
(9) Any person substantially all of whose business consists of
owning or holding oil, gas, or other mineral royalties or leases, or
fractional interests therein, or certificates of
{{2-28-97 p.9296}}interest or
participation in or investment contracts relative to such royalties,
leases, or fractional interests.
(10)(A) Any company organized and operated exclusively for
religious, educational, benevolent, fraternal, charitable, or
reformatory purposes--
(i) no part of the net earnings of which inures to the benefit of
any private shareholder or individual; or
(ii) which is or maintains a fund described in subparagraph (B).
(B) For the purposes of subparagraph (A)(ii), a fund is described
in this subparagraph if such fund is a pooled income fund, collective
trust fund, collective investment fund, or similar fund maintained by a
charitable organization exclusively for the collective investment and
reinvestment of one or more of the following:
(i) assets of the general endowment fund or other funds of one or
more charitable organizations;
(ii) assets of a pooled income fund;
(iii) assets contributed to a charitable organization in exchange
for the issuance of charitable gift annuities;
(iv) assets of a charitable remainder trust or of any other
trust, the remainder interests of which are irrevocably dedicated to
any charitable organization;
(v) assets of a charitable lead trust;
(vi) assets of a trust, the remainder interests of which are
revocably dedicated to or for the benefit of 1 or more charitable
organizations, if the ability to revoke the dedication is limited to
circumstances involving--
(I) an adverse change in the financial circumstances of a settlor
or an income beneficiary of the trust;
(II) a change in the identity of the charitable organization or
organizations having the remainder interest, provided that the new
beneficiary is also a charitable organization; or
(III) both the changes described in subclauses (I) and (II);
(vii) assets of a trust not described in clauses (i) through (v),
the remainder interests of which are revocably dedicated to a
charitable organization, subject to subparagraph (C); or
(viii) such assets as the Commission may prescribe by rule,
regulation, or order in accordance with section 6(c).
(C) A fund that contains assets described in clause (vii) of
subparagraph (B) shall be excluded from the definition of an investment
company for a period of 3 years after the date of enactment of this
subparagraph, but only if--
(i) such assets were contributed before the date which is 60 days
after the date of enactment of this subparagraph; and
(ii) such assets are commingled in the fund with assets described
in one or more of clauses (i) through (vi) and (viii) of subparagraph
(B).
(D) For purposes of this paragraph--
(i) a trust or fund is "maintained" by a charitable
organization if the organization serves as a trustee or administrator
of the trust or fund or has the power to remove the trustees or
administrators of the trust or fund and to designate new trustees or
administrators;
(ii) the term "pooled income fund" has the same meaning as
in section 642(c)(5) of the Internal Revenue Code of 1986;
(iii) the term "charitable organization" means an
organization described in paragraphs (1) through (5) of section 170(c)
or section 501(c)(3) of the Internal Revenue Code of 1986;
(iv) the term "charitable lead trust" means a trust
described in section 170(f)(2)(B), 2055(e)(2)(B), or 2522(c)(2)(B) of
the Internal Revenue Code of 1986;
(v) the term "charitable remainder trust" means a
charitable remainder annuity trust or a charitable remainder unitrust,
as those terms are defined in section 664(d) of the Internal Revenue
Code of 1986; and
{{2-28-05 p.9297}}
(vi) the term "charitable gift annuity" means an annuity
issued by a charitable organization that is described in section
501(m)(5) of the Internal Revenue Code of 1986.
(11) Any employee's stock bonus, pension, or profit-sharing trust
which meets the requirements for qualification under section 401 of the
Internal Revenue Code of 1986 or any governmental plan described in
section 3(a)(2)(C) of the Securities Act of 1933; or any collective
trust fund maintained by a bank consisting solely of assets of one or
more of such trusts, government plans, or church plans, companies or
accounts that are excluded from the definition of an investment company
under paragraph (14) of this subsection; or any separate account the
assets of which are derived solely from (A) contributions under pension
or profit-sharing plans which meet the requirements of section 401 of
the Internal Revenue Code of 1986 or the requirements for deduction of
the employer's contribution under section 404(a)(2) of such Code, (B)
contributions under governmental plans in connection with which
interests, participations, or securities are exempted from the
registration provisions of section
5 of the Securities Act of 1933 by
section 3(a)(2)(C) of such Act,
and (C) advances made by an insurance company in connection with the
operation of such separate account.
(12) Any voting trust the assets of which consist exclusively of
securities of a single issuer which is not an investment company.
(13) Any security holders' protective committee or similar issuer
having outstanding and issuing no securities other than certificates of
deposit and short-term paper.
(14) Any church plan described in section 414(e) of the Internal
Revenue Code of 1986, if, under any such plan, no part of the assets
may be used for, or diverted to, purposes other than the exclusive
benefit of plan participants or beneficiaries, or any company or
account that is--
(A) established by a person that is eligible to establish and
maintain such a plan under section 414(e) of the Internal Revenue Code
of 1986; and
(B) substantially all of the activities of which consist of--
(i) managing or holding assets contributed to such church plans
or other assets which are permitted to be commingled with the assets of
church plans under the Internal Revenue Code of 1986; or
(ii) administering or providing benefits pursuant to church
plans.
[Codified to 15 U.S.C. 80a--3]
[Source: Section 3 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 797), effective November 1, 1940; as amended by
section 162(e) of title I of the Act of October 21, 1942 (Pub. L. No.
753; 56 Stat. 867), effective October 21, 1942; section 13(i) of the
Act of July 1, 1966 (Pub. L. No. 89--485; 80 Stat. 243), effective July
1, 1966; section 3(a) and (b) of the Act of December 14, 1970 (Pub. L.
No. 91--547; 74 Stat. 1414), effective December 14, 1970; section
308(c) of title III of the Act of February 5, 1976 (Pub. L. No.
94--210; 90 Stat. 57), effective April 6, 1976; section 102 of title I
and section 703 of title VII of the Act of October 21, 1980 (Pub. L.
No. 96--477; 94 Stat. 2276, 2295), effective October 21, 1980; and
sections 604, 605 and 606 of title VI of the Act of December 4, 1987
(Pub. L. No. 100--181; 101 Stat. 1260), effective December 4, 1987;
section 2(a) of the Act of December 8, 1995 (Pub. L. No. 104--62; 109
Stat. 682), effective December 8, 1995; sections 209(a) and (c) of
title II and 508(a) of title V of the Act of October 11, 1996 (Pub. L.
No. 104--290; 110 Stat. 3432, 3435, and 3437, respectively), effective
October 11, 1996, except that the amendments made by sections 209(a)
and (c) of the Act are effective the earlier of April 9, 1997, or the
date on which the rulemaking required under section 209(d)(2) of the
Act is completed; section 301(c)(2) of title III of the Act of November
3, 1998 (Pub. L. No. 105--353; 112 Stat. 3236), effective November 3,
1998; section 221(c) of title II of the Act of November 12, 1999 (Pub.
L. No. 106--102; 113 Stat. 1401), effective May 12, 2001; section 1(a)
of the Act of October 30,2004 (Pub. L. No. 108-386; 118 Stat. 1666)
effective October 30, 2004]
Classification of Investment
Companies
Sec. 4. For the purposes of this title, investment companies are
divided into three principal classes, defined as follows:
(1) "Face-amount certificate company" means an investment
company which is engaged or proposes to engage in the business of
issuing face-amount certificates of the installment
{{2-28-05 p.9298}}type,
or which has been engaged in such business and has any such certificate
outstanding.
(2) "Unit investment trust" means an investment company which
(A) is organized under a trust indenture, contract of custodianship or
agency, or similar instrument, (B) does not have a board of directors,
and (C) issues only redeemable securities, each of which represents an
undivided interest in a unit of specified securities, but does not
include a voting trust.
(3) "Management company" means any investment company other
than a face-amount certificate company or a unit investment trust.
[Codified to 15 U.S.C. 80a--4]
[Source: Section 4 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 799), effective November 1, 1940]
Subclassification of Management
Companies
Sec. 5. (a) For the purposes of this title, management companies
are divided into open-end and closed-end companies, defined as follows:
(1) "Open-end company" means a management company which is
offering for sale or has outstanding any redeemable security of which
it is the issuer.
(2) "Closed-end company" means any management company other
than an open-end company.
(b) Management companies are further divided into diversified
companies and non-diversified companies, defined as
follows:
(1) "Diversified company" means a management company which
meets the following requirements: At least 75 per centum of the value
of its total assets is represented by cash and cash items (including
receivables), Government securities, securities of other investment
companies, and other securities for the purposes of this calculation
limited in respect of any one issuer to an amount not greater in value
than 5 per centum of the value of the total assets of such management
company and to not more than 10 per centum of the outstanding voting
securities of such issuer.
(2) "Non-diversified company" means any management company
other than a diversified company.
(c) A registered diversified company which at the time of its
qualification as such meets the requirements of paragraph (1) of
subsection (b) shall not lose its status as a diversified company
because of any subsequent discrepancy between the value of its various
investments and the requirements of said paragraph, so long as any such
discrepancy existing immediately after its acquisition of any security
or other property is neither wholly nor partly the result of such
acquisition.
[Codified to 15 U.S.C. 80a--5]
[Source: Section 5 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 800), effective November 1, 1940, as amended by
section 607 of title VI of the Act of December 4, 1987 (Pub. L. No.
100--181; 101 Stat. 1261), effective December 4, 1987]
Exemptions
Sec. 6. (a) The following investment companies are exempt from the
provisions of this title:
(1) Any company organized or otherwise created under the laws of
and having its principal office and place of business in Puerto Rico,
the Virgin Islands, or any other possession of the United States; but
such exemption shall terminate if any security of which such company is
the issuer is offered for sale or sold after the effective date of this
title, by such company or an underwriter therefor, to a resident of any
State other than the State in which such company is organized.
(2) Any company which since the effective date of this title or
within five years prior to such date has been reorganized under the
supervision of a court of competent jurisdiction, if (A) such company
was not an investment company at the commencement of such
reorganization proceedings, (B) at the conclusion of such proceedings
all outstanding
{{2-29-00 p.9298.01}}securities of such
company were owned by creditors of such company or by persons to whom
such securities were issued on account of creditors' claims, and (C)
more than 50 per centum of the voting securities of such company, and
securities representing more than 50 per centum of the net asset value
of such company, are currently owned beneficially by not more than
twenty-five persons; but such exemption shall terminate if any security
of which such company is the issuer is offered for sale or sold to the
public after the conclusion of such proceedings by the issuer or by or
through any underwriter. For the purposes of this paragraph, any new
company organized as part of the reorganization shall be deemed the
same company as its predecessor; and beneficial ownership shall be
determined in the manner provided in
section 3(c)(1).
(3) Any issuer as to which there is outstanding a writing filed
with the Commission by the Federal Savings and Loan Insurance
Corporation stating that exemption of such issuer from the provisions
of this title is consistent with the public interest and the protection
of investors and is necessary or appropriate by reason of the fact that
such issuer holds or proposes to acquire any assets or any product of
any assets which have been segregated (A) from assets of any company
which at the filing of such writing is an insured institution within
the meaning of section 401(a) of the National Housing Act, as
heretofore or hereafter amended, or (B) as a part of or in connection
with any plan for or condition to the insurance of accounts of any
company by said corporation or the conversion of any company into a
Federal savings and loan association. Any such writing shall expire
when canceled by a writing similarly filed or at the expiration of two
years after the date of its filing, whichever first occurs; but said
corporation may, nevertheless, before, at, or after the expiration of
any such writing file another writing or writings with respect to such
issuer.
(4) Any company which prior to March 15, 1940, was and now is a
wholly-owned subsidiary of a registered face-amount certificate company
and was prior to said date and now is organized and operating under the
insurance laws of any State and subject to supervision and examination
by the insurance commissioner thereof, and which prior to March 15,
1940, was and now is engaged, subject to such laws, in business
substantially all of which consists of issuing and selling only to
residents of such State and investing the proceeds from, securities
providing for or representing participations or interests in intangible
assets consisting of mortgages or other liens on real estate or notes
or bonds secured thereby or in a fund or deposit of mortgages or other
liens on real estate or notes or bonds secured thereby or having
outstanding such securities so issued and sold.
(5)(A) Any company that is not engaged in the business of issuing
redeemable securities, the operations of which are subject to
regulation by the State in which the company is organized under a
statute governing entities that provide financial or managerial
assistance to enterprises doing business, or proposing to do business,
in that State if--
(i) the organizational documents of the company state that the
activities of the company are limited to the promotion of economic,
business, or industrial development in the State through the provision
of financial or managerial assistance to enterprises doing business, or
proposing to do business, in that State, and such other activities that
are incidental or necessary to carry out that purpose;
(ii) immediately following each sale of the securities of the
company by the company or any underwriter for the company, not less
than 80 percent of the securities of the company being offered in such
sale, on a class-by-class basis, are held by persons who reside or who
have a substantial business presence in that State;
(iii) the securities of the company are sold, or proposed to be
sold, by the company or by any underwriter for the company, solely to
accredited investors, as that term is defined in
section 2(a)(15) of the
Securities Act of 1933, or to such other persons that the Commission,
as necessary or appropriate in the public interest and consistent with
the protection of investors, may permit by rule, regulation, or order;
and
(iv) the company does not purchase any security issued by an
investment company or by any company that would be an investment
company except for the
{{2-29-00 p.9298.02}}exclusions from
the definition of the term "investment company" under paragraph
(1) or (7) of section 3(c),
other than--
(I) any debt security that is rated investment grade by not less
than 1 nationally recognized statistical rating organization; or
(II) any security issued by a registered open-end investment
company that is required by its investment policies to invest not less
than 65 percent of its total assets in securities described in
subclause (I) or securities that are determined by such registered
open-end investment company to be comparable in quality to securities
described in subclause (I).
(B) Notwithstanding the exemption provided by this paragraph,
section 9 (and, to the extent
necessary to enforce section 9, sections 38 through 51) shall apply to
a company described in this paragraph as if the company were an
investment company registered under this title.
(C) Any company proposing to rely on the exemption provided by
this paragraph shall file with the Commission a notification stating
that the company intends to do so, in such form and manner as the
Commission may prescribe by rule.
(D) Any company meeting the requirements of this paragraph may
rely on the exemption provided by this paragraph upon filing with the
Commission the notification required by subparagraph (C), until such
time as the Commission determines by order that such reliance is not in
the public interest or is not consistent with the protection of
investors.
(E) The exemption provided by this paragraph may be subject to
such additional terms and conditions as the Commission may by rule,
regulation, or order determine are necessary or appropriate in the
public interest or for the protection of investors.
(b) Upon application by any employees' security company, the
Commission shall by order exempt such company from the provisions of
this title and of the rules and regulations hereunder, if and to the
extent that such exemption is consistent with the protection of
investors. In determining the provisions to which such an order of
exemption shall apply, the Commission shall give due weight, among
other things, to the form of organization and the capital structure of
such company, the persons by whom its voting securities, evidences of
indebtedness, and other securities are owned and controlled, the prices
at which securities issued by such company are sold and the sales load
thereon, the disposition of the proceeds of such sales, the character
of the securities in which such proceeds are invested, and any
relationship between such company and the issuer of any such security.
(c) The Commission, by rules and regulations upon its own motion,
or by order upon application, may conditionally or unconditionally
exempt any person, security, or transaction, or any class or classes of
persons, securities, or transactions, from any provisions of this title
or of any rule or regulation thereunder, if and to the extent that such
exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of this title.
(d) The Commission, by rules and regulations or order, shall exempt
a closed-end investment company from any or all provisions of this
title, but subject to such terms and conditions as may be necessary or
appropriate in the public interest or for the protection of investors,
if--
(1) the aggregate sums received by such company from the sale of
all its outstanding securities, plus the aggregate offering price of
all securities of which such company is the issuer and which it
proposes to offer for sale, do not exceed $10,000,000, or such other
amount as the Commission may set by rule, regulation, or order;
(2) no security of which such company is the issuer has been or
is proposed to be sold by such company or any underwriter therefor, in
connection with a public offering, to any person who is not a resident
of the State under the laws of which such company is organized or
otherwise created; and
{{2-29-00 p.9298.03}}
(3) such exemption is not contrary to the public interest or
inconsistent with the protection of investors.
(e) If, in connection with any rule, regulation, or order under
this section exempting any investment company from any provision of
section 7, the Commission deems
it necessary or appropriate in the public interest or for the
protection of investors that certain specified provisions of this title
pertaining to registered investment companies shall be applicable in
respect of such company, the provisions so specified shall apply to
such company, and to other persons in their transactions and relations
with such company, as though such company were a registered investment
company.
(f) Any closed-end company which--
(1) elects to be treated as a business development company
pursuant to section 54; or
(2) would be excluded from the definition of an investment
company by section 3(c)(1),
except that it presently proposes to make a public offering of its
securities as a business development company, and has notified the
Commission, in a form and manner which the Commission may, by rule,
prescribe, that it intends in good faith to file, within 90 days, a
notification of election to become subject to the provisions of
sections 55 through 65, shall be exempt from sections 1 through 53,
except to the extent provided in sections 59 through 65.
[Codified to 15 U.S.C. 80a--6]
[Source: Section 6 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 800), effective November 1, 1940; Proc. No. 2695
(11 Fed. Reg. 7517; 60 Stat. 1352), effective July 4, 1946; as amended
by section 12(e) of the Act of June 25, 1959 (Pub. L. No. 86--70; 73
Stat. 143), effective June 25, 1959; section 7(c) of the Act of July
12, 1960 (Pub. L. No. 86--634; 74 Stat. 412), effective July 12, 1960;
section 310(b) of title III of the Act of November 6, 1978 (Pub. L. No.
95--598; 92 Stat. 2676), effective October 1, 1979; section 103 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2277), effective October 21, 1980; section 608 of title VI of the Act
of December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1261), effective
December 4, 1987; sections 501 and 502 of title V of the Act of October
11, 1996 (Pub. L. No. 104--290; 110 Stat. 3444 and 3445), effective
October 11, 1996]
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