|
[Main Tabs]
[Table of Contents - 8000]
[Index]
[Previous Page]
[Next Page]
[Search]
8000 - Miscellaneous Statutes and Regulations
Functions and Activities of Investment
Companies
Sec. 12. (a) It shall be unlawful for any registered investment
company, in contravention of such rules and regulations or orders as
the Commission may prescribe as necessary or appropriate in the public
interest or for the protection of investors--
(1) to purchase any security on margin, except such short-term
credits as are necessary for the clearance of transactions;
(2) to participate on a joint or a joint and several basis in any
trading account in securities, except in connection with an
underwriting in which such registered company is a participant; or
(3) to effect a short sale of any security, except in connection
with an underwriting in which such registered company is a participant.
(b) It shall be unlawful for any registered open-end company (other
than a company complying with the provisions of
section 10(d)) to act as a
distributor of securities of which it is the issuer, except through an
underwriter, in contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate in the public
interest or for the protection of investors.
(c) It shall be unlawful for any registered diversified company to
make any commitment as underwriter, if immediately thereafter the
amount of its outstanding underwriting commitments, plus the value of
its investments in securities of issuers (other than investment
companies) of which it owns more than 10 per centum of the outstanding
voting securities, exceeds 25 per centum of the value of its total
assets.
(d)(1)(A) It shall be unlawful for any registered investment
company (the "acquiring company") and any company or companies
controlled by such acquiring company to purchase or otherwise acquire
any security issued by any other investment company (the "acquired
company"), and for any investment company (the "acquiring
company") and any company or companies controlled by such acquiring
company to purchase or otherwise acquire any security issued by any
registered investment company (the "acquired company"), if the
acquiring company and any company or companies controlled by it
immediately after such purchase or acquisition own in the aggregate--
(i) more than 3 per centum of the total outstanding voting stock
of the acquired company;
(ii) securities issued by the acquired company having an
aggregate value in excess of 5 per centum of the value of the total
assets of the acquiring company; or
(iii) securities issued by the acquired company and all other
investment companies (other than treasury stock of the acquiring
company) having an aggregate value in excess of 10 per centum of the
value of the total assets of the acquiring company.
(B) It shall be unlawful for any registered open-end investment
company (the "acquired company"), any principal underwriter
therefor, or any broker or dealer registered under the Securities
Exchange Act of 1934, knowingly to sell or otherwise
{{2-28-97 p.9304}}dispose of any
security issued by the acquired company to any other investment company
(the "acquiring company") or any company or companies controlled
by the acquiring company, if immediately after such sale or
disposition--
(i) more than 3 per centum of the total outstanding voting stock
of the acquired company is owned by the acquiring company and any
company or companies controlled by it; or
(ii) more than 10 per centum of the total outstanding voting
stock of the acquired company is owned by the acquiring company and
other investment companies and companies controlled by them.
(C) It shall be unlawful for any investment company (the
"acquiring company") and any company or companies controlled by
the acquiring company to purchase or otherwise acquire any security
issued by a registered closed-end investment company, if immediately
after such purchase or acquisition the acquiring company, other
investment companies having the same investment adviser, and companies
controlled by such investment companies, own more than 10 per centum of
the total outstanding voting stock of such close-end company.
(D) The provisions of this paragaph shall not apply to a security
received as a dividend or as a result of an offer of exchange approved
pursuant to section 11 or of a
plan of reorganization of any company (other than a plan devised for
the purpose of evading the foregoing provisions).
(E) The provisions of this paragraph shall not apply to a
security (or securities) purchased or acquired by an investment company
if--
(i) the depositor of, or principal underwriter for, such
investment company is a broker or dealer registered under the
Securities Exchange Act of 1934, or a person controlled by such a
broker or dealer;
(ii) such security is the only investment security held by such
investment company (or such securities are the only investment
securities held by such investment company, if such investment company
is a registered unit investment trust that issues two or more classes
or series of securities, each of which provides for the accumulation of
shares of a different investment company); and
(iii) the purchase or acquisition is made pursuant to an
arrangement with the issuer of, or principal underwriter for, the
issuer of the security whereby such investment company is obligated--
(aa) either to seek instructions from its security holders with
regard to the voting of all proxies with respect to such security and
to vote such proxies only in accordance with such instructions, or to
vote the shares held by it in the same proportion as the vote of all
other holders of such security, and
(bb) in the event that such investment company is not a
registered investment company, to refrain from substituting such
security unless the Commission shall have approved such substitution in
the manner provided in section
26 of this Act.
(F) The provisions of this paragraph shall not apply to
securities purchased or otherwise acquired by a registered investment
company if--
(i) immediately after such purchase or acquisition not more than
3 per centum of the total outstanding stock of such issuer is owned by
such registered investment company and all affiliated persons of such
registered investment company; and
(ii) such registered investment company has not offered or sold
after January 1, 1971, and is not proposing to offer or sell any
security issued by it through a principal underwriter or otherwise at a
public offering price which includes a sales load of more than
11/2 per centum.
No issuer of any security purchased or acquired by a registered
investment company pursuant to this subparagraph shall be obligated to
redeem such security in an amount exceeding 1 per centum of such
issuer's total outstanding securities during any period of less than
thirty days. Such investment company shall exercise voting rights by
proxy or
{{2-26-99 p.9305}}otherwise with
respect to any security purchased or acquired pursuant to this
subparagraph in the manner prescribed by subparagraph (E) of this
subsection.
(G)(i) This paragraph does not apply to securities of a
registered open-end investment company or a registered unit investment
trust (hereafter in this subparagraph referred to as the "acquired
company") purchased or otherwise acquired by a registered open-end
investment company or a registered unit investment trust (hereafter in
this subparagraph referred to as the "acquiring company") if--
(I) the acquired company and the acquiring company are part of
the same group of investment companies;
(II) the securities of the acquired company, securities of other
registered open-end investment companies and registered unit investment
trusts that are part of the same group of investment companies,
Government securities, and short-term paper are the only investments
held by the acquiring company;
(III) with respect to--
(aa) securities of the acquired company, the acquiring company
does not pay and is not assessed any charges or fees for
distribution-related activities, unless the acquiring company does not
charge a sales load or other fees or charges for distribution-related
activities; or
(bb) securities of the acquiring company, any sales loads and
other distribution-related fees charged, when aggregated with any sales
load and distribution-related fees paid by the acquiring company with
respect to securities of the acquired company, are not excessive under
rules adopted pursuant to section
22(b) or section 22(c) by a securities association registered
under section 15A of the
Securities Exchange Act of 1934, or the Commission;
(IV) the acquired company has a policy that prohibits it from
acquiring any securities of registered open-end investment companies or
registered unit investment trusts in reliance on this subparagraph or
subparagraph (F); and
(V) such acquisition is not in contravention of such rules and
regulations as the Commission may from time to time prescribe with
respect to acquisitions in accordance with this subparagraph, as
necessary and appropriate for the protection of investors.
(ii) For purposes of this subparagraph, the term "group of
investment companies" means any 2 or more registered investment
companies that hold themselves out to investors as related companies
for purposes of investment and investor services.
(H) For the purposes of this paragraph, the value of an
investment company's total assets shall be computed as of the time of a
purchase or acquisition or as closely thereto as is reasonably
possible.
(I) In any action brought to enforce the provisions of this
paragraph, the Commission may join as a party the issuer of any
security purchased or otherwise acquired in violation of this
paragraph, and the court may issue any order with respect to such
issuer as may be necessary or appropriate for the enforcement of the
provisions of this paragraph.
(J) The Commission, by rule or regulation, 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 provision of this
subsection, if and to the extent that such exemption is consistent with
the public interest and the protection of investors.
(2) It shall be unlawful for any registered investment company
and any company or companies controlled by such registered investment
company to purchase or otherwise acquire any security (except a
security received as a dividend or as a result of a plan of
reorganization of any company, other than a plan devised for the
purpose of evading the provisions of this paragraph) issued by any
insurance company of which such registered investment company and any
company or companies controlled by such registered company do not, at
the time of such purchase or acquisition, own in the aggregate at least
25 per centum of the total outstanding voting stock, if such registered
company and any company or companies controlled by it own in the
aggregate, or as a result of such purchase or
{{2-26-99 p.9306}}acquisition will
own in the aggregate, more than 10 per centum of the total outstanding
voting stock of such insurance company.
(3) It shall be unlawful for any registered investment company
and any company or companies controlled by such registered investment
company to purchase or otherwise acquire any security issued by or any
other interest in the business of any person who is a broker, a dealer,
is engaged in the business of underwriting, or is either an investment
adviser of an investment company or an investment adviser registered
under title II of this Act, unless (A) such person is a corporation all
the outstanding securities of which (other than short-term paper,
securities representing bank loans, and directors' qualifying shares)
are, or after such acquisition will be, owned by one or more registered
investment companies; and (B) such person is primarily engaged in the
business of underwriting and distributing securities issued by other
persons, selling securities to customers, or any one or more of such or
related activities, and the gross income of such person normally is
derived principally from such business or related activities.
(e) Notwithstanding any provisions of this title, any registered
investment company may hereafter purchase or otherwise acquire any
security issued by any one corporation engaged or proposing to engage
in the business of underwriting, furnishing capital to industry,
financing promotional enterprises, purchasing securities of issuers for
which no ready market is in existence, and reorganizing companies or
similar activities; provided--
(1) That the securities issued by such corporation (other than
short-term paper and securities representing bank loans) shall consist
solely of one class of common stock and shall have been originally
issued or sold for investment to registered investment companies only;
(2) That the aggregate cost of the securities of such corporation
purchased by such registered investment company does not exceed 5 per
centum of the value of the total assets of such registered company at
the time of any purchase or acquisition of such securities; and
(3) That the aggregate paid-in capital and surplus of such
corporation does not exceed $100,000,000.
For the purpose of paragraph (1) of section 5(b) any investment in
any such corporation shall be deemed to be an investment in an
investment company.
(f) Notwithstanding any provisions of this Act, any registered
face-amount certificate company may organize not more than two
face-amount certificate companies and acquire and own all or any part
of the capital stock thereof only if such stock is acquired and held
for investment: Provided, That the aggregate cost to such
registered company of all such stock so acquired shall not exceed six
times the amount of the minimum capital stock requirement provided in
subdivision (1) of subsection (a) of section 28 for a face-amount
company organized on or after March 15, 1940; And provided
further, That the aggregate cost to such registered company of all
such capital stock issued by face-amount certificate companies
organized or otherwise created under laws other than the laws of the
United States or any State thereof shall not exceed twice the amount of
the minimum capital stock requirement provided in subdivision (1) of
subsection (a) of section 28 for a company organized on or after March
15, 1940. Nothing contained in this subsection shall be deemed to
prevent the sale of any such stock to any other person if the original
purchase was made by such registered face-amount certificate company in
good faith for investment and not for resale.
(g) Notwithstanding the provisions of this section any registered
investment company and any company or companies controlled by such
registered company may purchase or otherwise acquire from another
investment company or any company or companies controlled by such
registered company more than 10 per centum of the total outstanding
voting stock of any insurance company owned by any such company or
companies, or may acquire the securities of any insurance company if
the Commission by order determines that such acquisition is in the
public interest because the financial condition of such insurance
company will be improved as a result of such acquisition or any plan
contemplated as a result thereof. This section shall not be deemed to
prohibit the promotion of a new
{{2-29-08 p.9306.01}}insurance company
or the acquisition of the securities of any newly created insurance
company by a registered investment company, alone or with other
persons. Nothing contained in this section shall in any way affect or
derogate from the powers of any insurance commissioner or similar
official or agency of the United States or any State, or to affect the
right under State law of any insurance company to acquire securities of
any other insurance company or insurance companies.
[Codified to 15 U.S.C. 80a--12]
[Source: Section 12 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 610 of title VI of the Act of December 4, 1987 (Pub. L. No.
100--181; 101 Stat. 1261), effective December 4, 1987; section 202 of
title II of the Act of October 11, 1996 (Pub. L. No. 104--290; 110
Stat. 3426 and 3427), effective October 11, 1996; section 301(c)(3) of
title III of the Act of November 3, 1998 (Pub. L. No. 105--353; 112
Stat. 3236), effective November 3, 1998]
Changes in Investment Policy
Sec. 13. (a) No registered investment company shall, unless
authorized by the vote of a majority of its outstanding voting
securities--
(1) change its subclassification as defined in
section 5(a)(1) and (2) of this
title or its subclassification from a diversified to a nondiversified
company;
(2) borrow money, issue senior securities, underwrite securities
issued by other persons, purchase or sell real estate or commodities or
make loans to other persons, except in each case in accordance with the
recitals of policy contained in its registration statement in respect
thereto;
(3) deviate from its policy in respect of concentration of
investments in any particular industry or group of industries as
recited in its registration statement, deviate from any investment
policy which is changeable only if authorized by shareholder vote, or
deviate from any policy recited in its registration statement pursuant
to section 8(b)(3);
(4) change the nature of its business so as to cease to be an
investment company.
(b) In the case of a common-law trust of the character described in
section 16(c), either written approval by holders of a majority of the
outstanding shares of beneficial interest or the vote of a majority of
such outstanding shares cast in person or by proxy at a meeting called
for the purpose shall for the purposes of subsection (a) be deemed the
equivalent of the vote of a majority of the outstanding voting
securities, and the provisions of paragraph (42) of
section 2(a) as to a majority
shall be applicable to the votes cast at such a meeting.
(c) LIMITATION ON ACTIONS.--
(1) IN GENERAL.--Notwithstanding any other provision of
Federal or State law, no person may bring any civil, criminal, or
administrative action against any registered investment company, or any
employee, officer, director, or investment adviser thereof, based
solely upon the investment company divesting from, or avoiding
investing in, securities issued by persons that the investment company
determines, using credible information that is available to the public,
conduct or have direct investments in business operations in Sudan
described in section 3(d) of the Sudan Accountability and Divestment
Act of 2007.
(2) APPLICABILITY.--
(A) ACTIONS FOR BREACHES OF FIDUCIARY DUTIES.--Paragraph
(1) does not prevent a person from bringing an action based on a breach
of a fiduciary duty owed to that person with respect to a divestment or
non-investment decision, other than as described in paragraph (1).
(B) DISCLOSURES.--Paragraph (1) shall not apply to a
registered investment company, or any employee, officer, director, or
investment adviser thereof, unless the investment company makes
disclosures in accordance with regulations prescribed by the
Commission.
(3) PERSON DEFINED.--For purposes of this subsection the
term "person" includes the Federal Government and any State or
political subdivision of a State.
{{2-29-08 p.9306.02}}
[Codified to 15 U.S.C. 80a--13]
[Source: Section 13 of title I of the Act of August 22,
1940, (Pub. L. No. 768; 54 Stat. 811), effective November 1, 1940, as
amended by section 2(b) and 3(d) of the Act of December 14, 1970 (Pub.
L. No. 91--547; 84 Stat. 1414 and 1415), effective December 14, 1970;
and section 28(f) of the Act of June 4, 1975 (Pub. L. No. 94--29; 89
Stat. 165), effective June 4, 1975; section 4(a) of the Act of December
31, 2007 (Pub. L. No. 110--174; 121 Stat. 2519), effective December 31,
2007]
{{4-29-88 p.9307}}
Size of Investment Companies
Sec. 14. (a) No registered investment company organized after the
date of enactment of this title, and no principal underwriter for such
a company, shall make a public offering of securities of which such
company is the issuer, unless--
(1) such company has a net worth of at least $100,000;
(2) such company has previously made a public offering of its
securities, and at the time of such offering had a net worth of a least
$100,000; or
(3) provision is made in connection with and as a condition of
the registration of such securities under the Securities Act of 1933
which in the opinion of the Commission adequately insures (A) that
after the effective date of such registration statement such company
will not issue any security or receive any proceeds of any subscription
for any security until firm agreements have been made with such company
by not more than twenty-five responsible persons to purchase from it
securities to be issued by it for an aggregate net amount which plus
the then net worth of the company, if any, will equal at least
$100,000; (B) that said aggregate net amount will be paid in to such
company before any subscriptions for such securities will be accepted
from any persons in excess of twenty-five; (C) that arrangements will
be made whereby any proceeds so paid in, as well as any sales load,
will be refunded to any subscriber on demand without any deduction, in
the event that the net proceeds so received by the company do not
result in the company having a net worth of at least $100,000 within
ninety days after such registration statement becomes effective.
At any time after the occurrence of the event specified in clause
(C) of paragraph (3) of this subsection the Commission may issue a stop
order suspending the effectiveness of the registration statement of
such securities under the Securities Act of 1933 and may suspend or
revoke the registration of such company under this title.
(b) The Commission is authorized, at such times as it deems that
any substantial further increase in size of investment companies
creates any problem involving the protection of investors or the public
interest, to make a study and investigation of the effects of size on
the investment policy of investment companies and on security markets,
on concentration of control of wealth and industry, and on companies in
which investment companies are interested, and from time to time to
report the results of its studies and investigations and its
recommendations to the Congress.
[Codified to 15 U.S.C. 80a--14]
[Source: Section 14 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 811), effective November 1, 1940]
Investment Advisory and Underwriting
Contracts
Sec. 15. (a) It shall be unlawful for any person to serve or act
as investment advisor of a registered investment company, except
pursuant to a written contract, which contract, whether with such
registered company or with an investment adviser of such registered
company, has been approved by the vote of a majority of the outstanding
voting securities of such registered company, and--
(1) precisely describes all compensation to be paid thereunder;
(2) shall continue in effect for a period more than two years
from the date of its execution, only so long as such continuance is
specifically approved at least annually by the board of directors or by
vote of a majority of the outstanding voting securities of such
company;
(3) provides, in substance, that it may be terminated at any
time, without the payment of any penalty, by the board of directors of
such registered company or by vote of a majority of the outstanding
voting securities of such company on not more than sixty days' written
notice to the investment adviser; and
(4) provides, in substance, for its automatic termination in the
event of its assignment.
{{4-29-88 p.9308}}
(b) It shall be unlawful for any principal underwriter for a
registered open-end company to offer for sale, sell, or deliver after
sale any security of which such company is the issuer, except pursuant
to a written contract with such company, which contract--
(1) shall continue in effect for a period, more than two years
from the date of its execution, only so long as such continuance is
specifically approved at least annually by the board of directors or by
vote of a majority of the outstanding voting securities of such
company; and
(2) provides, in substance, for its automatic termination in the
event of its assignment.
(c) In addition to the requirements of subsection (a) and (b) of
this section, it shall be unlawful for any registered investment
company having a board of directors to enter into, renew, or perform
any contract or agreement, written or oral, whereby a person undertakes
regularly to serve or act as investment adviser of or principal
underwriter for such company unless the terms of such contract or
agreement and any renewal thereof have been approved by the vote of a
majority of directors, who are not parties to such contract or
agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. It shall be
the duty of the directors of a registered investment company to request
and evaluate, and the duty of an investment adviser to such company to
furnish, such information as may reasonably be necessary to evaluate
the terms of any contract whereby a person undertakes regularly to
serve or act as investment adviser of such company. It shall be
unlawful for the directors of a registered investment company, in
connection with their evaluation of the terms of any contract whereby a
person undertakes regularly to serve or act as investment adviser of
such company, to take into account the purchase price or other
consideration any person may have paid in connection with a transaction
of the type referred to in paragraph (1), (3), or (4) of subsection
(f).
(d) In the case of a common-law trust of the character described in
section 16(c), either written approval by holders of a majority of the
outstanding shares of beneficial interest or the vote of a majority of
such outstanding shares cast in person or by proxy at a meeting called
for the purpose shall for the purposes of this section be deemed the
equivalent of the vote of a majority of the outstanding voting
securities, and the provisions of paragraph (42) of section 2(a) as to
a majority shall be applicable to the vote cast at such a meeting.
(e) Nothing contained in this section shall be deemed to require or
contemplate any action by an advisory board of any registered company
or by any of the members of such a board.
(f)(1) An investment adviser, or a corporate trustee performing the
functions of an investment adviser, of a registered investment company
or an affiliated person of such investment adviser or corporate trustee
may receive any amount or benefit in connection with a sale of
securities of, or a sale of any other interest in, such investment
adviser or corporate trustee which results in an assignment of an
investment advisory contract with such company or the change in control
of or identity of such corporate trustee, if--
(A) for a period of three years after the time of such action, at
least 75 per centum of the members of the board of directors of such
registered company or such corporate trustee (or successor thereto, by
reorganization or otherwise) are not (i) interested persons of the
investment adviser of such company or such corporate trustee, or (ii)
interested persons of the predecessor investment adviser or such
corporate trustee; and
(B) there is not imposed an unfair burden on such company as a
result of such transactions or any express or implied terms,
conditions, or understandings applicable thereto.
(2)(A) For the purpose of paragraph (1)(A) of this subsection,
interested persons of a corporate trustee shall be determined in
accordance with section
2(a)(19)(B): Provided, That no person shall be
deemed to be an interested person of a corporate trustee solely by
reason of (i) his being a member of its board of directors or advisory
board or (ii) his membership in the immediate family of any person
specified in clause (i) of this subparagraph.
(B) For the purpose of paragraph (1)(B) of this subsection, an
unfair burden on a registered investment company includes any
arrangement, during the two-year period after the date on which any
such transaction occurs, whereby the investment adviser or
corporate
{{4-29-88 p.9309}}trustee or
predecessor or successor investment advisers or corporate trustee or
any interested person of any such adviser or any such corporate trustee
receives or is entitled to receive any compensation directly or
indirectly (i) from any person in connection with the purchase or sale
of securities or other property to, from, or on behalf of such company,
other than bona fide ordinary compensation as principal underwriter for
such company, or (ii) from such company or its security holders for
other than bona fide investment advisory or other services.
(3) If--
(A) an assignment of an investment advisory contract with a
registered investment company results in a successor investment adviser
to such company, or if there is a change in control of or identity of a
corporate trustee of a registered investment company, and such adviser
or trustee is then an investment adviser or corporate trustee with
respect to other assets substantially greater in amount than the amount
of assets of such company, or
(B) as a result of a merger of, or a sale of substantially all
the assets by, a registered investment company with or to another
registered investment company with assets substantially greater in
amount, a transaction occurs which would be subject to paragraph (1)(A)
of this subsection, such discrepancy in size of assets shall be
considered by the Commission in determining whether or to what extent
an application under section
6(c) for exemption from the provisions of paragraph (1)(A)
should be granted,
(4) Paragraph (1)(A) of this section shall not apply to a
transaction in which a controlling block of outstanding voting
securities of an investment adviser to a registered investment company
or of a corporate trustee performing the functions of an investment
adviser to a registered investment company is--
(A) distributed to the public and in which there is, in fact, no
change in the identity of the persons who control such investment
adviser or corporate trustee, or
(B) transferred to the investment adviser or the corporate
trustee, or an affiliated person or persons of such investment adviser
or corporate trustee, or is transferred from the investment adviser or
corporate trustee to an affiliated person or persons of the investment
adviser or corporate trustee: Provided, That (i) each
transferee (other than such adviser or trustee) is a natural person and
(ii) the transferees (other than such adviser or trustee) owned in the
aggregate more than 25 per centum of such voting securities for a
period of at least six months prior to such transfer.
[Codified to 15 U.S.C. 80a--15]
[Source: Section 15 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 812), effective November 1, 1940, as amended by
section 8 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84
Stat. 1419), effective December 14, 1970; section 28(1), (2) and (4) of
the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 164 and 165),
effective June 4, 1975; and section 611 of title VI of the Act of
December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1261), effective
December 4, 1987]
Changes in Board of Directors; Provisions Relative to Strict
Trusts
Sec. 16. (a) No person shall serve as a director of a registered
investment company unless elected to that office by the holders of the
outstanding voting securities of such company, at an annual or a
special meeting duly called for that purpose; except that vacancies
occurring between such meetings may be filled in any otherwise legal
manner if immediately after filling any such vacancy at least
two-thirds of the directors then holding office shall have been elected
to such office by the holders of the outstanding voting securities of
the company at such an annual or special meeting. In the event that at
any time less than a majority of the directors of such company holding
office at that time were so elected by the holders of the outstanding
voting securities, the board of directors or proper officer of such
company shall forthwith cause to be held as promptly as possible and in
any event within sixty days a meeting of such holders for the purpose
of electing directors to fill any existing vacancies in the board of
directors unless the Commission shall by order extend such period. The
foregoing provisions of this subsection shall not apply to members of
an advisory board.
{{4-29-88 p.9310}}
Nothing herein shall, however, preclude a registered investment
company from dividing its directors into classes if its charter,
certificate of incorporation, articles of association, by-laws, trust
indenture, or other instrument or the law under which it is organized,
so provides and prescribes the tenure of office of the several classes:
Provided, That no class shall be elected for a shorter
period than one year or for a longer period than five years and the
term of office of at least one class shall expire each year.
(b) Any vacancy on the board of directors of a registered
investment company which occurs in connection with compliance with
section 15(f)(1)(A) and which must be filed by a person who is not an
interested person of either party to a transaction subject to section
15(f)(1)(A) shall be filled only by a person (1) who has been selected
and proposed for election by a majority of the directors of such
company who are not such interested persons, and (2) who has been
elected by the holders of the outstanding voting securities of such
company, except that in the case of the death, disqualification, or
bona fide resignation of a director selected and elected pursuant to
clauses (1) and (2) of this subsection (b), the vacancy created thereby
may be filled as provided in subsection (a).
(c) The foregoing provisions of this section shall not apply to a
common-law trust existing on the date of enactment of this title under
an indenture of trust which does not provide for the election of
trustees by the shareholders. No natural person shall serve as trustee
of such a trust, which is registered as an investment company, after
the holders of record of not less than two-thirds of the outstanding
shares of beneficial interest in such trust have declared that he be
removed from that office either by declaration in writing filed with
the custodian of the securities of the trust or by votes cast in person
or by proxy at a meeting called for the purpose. Solicitation of such a
declaration shall be deemed a solicitation of a proxy within the
meaning of section 20(a).
The trustees of such a trust shall promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of
any such trustee or trustees when requested in writing so to do by the
record holders of not less than 10 per centum of the outstanding
shares.
Whenever ten or more shareholders of record who have been such for
at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever
is less, shall apply to the trustees in writing, stating that they wish
to communicate with other shareholders with a view to obtaining
signatures to a request for a meeting pursuant to this subsection (c)
and accompanied by a form of communication and request which they wish
to transmit, the trustees shall within five business days after receipt
of such application either--
(1) afford to such applicants access to a list of the names and
addresses of all shareholders as recorded on the books of the trust; or
(2) inform such applicants as to the approximate number of
shareholders of record, and the approximate cost of mailing to them the
proposed communication and form of request.
If the trustees elect to follow the course specified in paragraph
(2) of this subsection (b) the trustees, upon the written request of
such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days
after such tender the trustees shall mail to such applicants and file
with the Commission, together with a copy of the material to be mailed,
a written statement signed by at least a majority of the trustees to
the effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation
of applicable law, and specifying the basis of such opinion.
After opportunity for hearing upon the objections specified in
the written statement so filed, the Commission may, and if demanded by
the trustees or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of
them. If the Commission shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one
or more of such objections, the Commission shall
{{12-30-99 p.9311}}find, after
notice and opportunity for hearing, that all objections so sustained
have been met, and shall enter an order so declaring, the trustees
shall mail copies of such material to all shareholders with reasonable
promptness after the entry of such order and the renewal of such
tender.
[Codified to 15 U.S.C. 80a--16]
[Source: Section 16 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 813), effective November 1, 1940, as amended by
section 28(3) of the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat.
165), effective June 4, 1975]
Transactions of Certain Affiliated Persons and
Underwriters
Sec. 17. (a) It shall be unlawful for any affiliated person or
promoter of or principal underwriter for a registered investment
company (other than a company of the character described in
section 12(d)(3)(A) and (B)),
or any affiliated person of such a person, promoter, or principal
underwriter, acting as principal--
(1) knowingly to sell any security or other property to such
registered company or to any company controlled by such registered
company, unless such sale involves solely (A) securities of which the
buyer is the issuer, (B) securities of which the seller is the issuer
and which are part of a general offering to the holders of a class of
its securities, or (C) securities deposited with the trustee of a unit
investment trust or periodic payment plan by the depositor thereof;
(2) knowingly to purchase from such registered company, or from
any company controlled by such registered company, any security or
other property (except securities of which the seller is the issuer);
(3) to borrow money or other property from such registered
company or from any company controlled by such registered company
(unless the borrower is controlled by the lender) except as permitted
in section 21(b); or
(4) to loan money or other property to such registered company,
or to any company controlled by such registered company, in
contravention of such rules, regulations, or orders as the Commission
may, after consultation with and taking into consideration the views of
the Federal banking agencies (as defined in
section 3 of the Federal Deposit
Insurance Act), prescribe or issue consistent with the protection of
investors.
(b) Notwithstanding subsection (a), any person may file with the
Commission an application for an order exempting a proposed transaction
of the applicant from one or more provisions of that subsection. The
Commission shall grant such application and issue such order of
exemption if evidence establishes that--
(1) the terms of the proposed transaction, including the
consideration to be paid or received, are reasonable and fair and do
not involve overreaching on the part of any person concerned;
(2) the proposed transaction is consistent with the policy of
each registered investment company concerned, as recited in its
registration statement and reports filed under this title; and
(3) the proposed transaction is consistent with the general
purposes of this title.
(c) Notwithstanding subsection (a), a person may, in the ordinary
course of business, sell to or purchase from any company merchandise or
may enter into a lessor-lessee relationship with any person and furnish
the services incident thereto.
(d) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company (other than a company
of the character described in section
12(d)(3)(A) and (B)), or any affiliated person of such a person
or principal underwriter, acting as principal to effect any transaction
in which such registered company, or a company controlled by such
registered company, is a joint or a joint and several participant with
such person, principal underwriter, or affiliated person, in
contravention of such rules and regulations as the Commission may
prescribe for the purpose of limiting or preventing participation by
such registered or controlled company on a basis different from or less
advantageous than that of such other participant. Nothing contained in
this subsection shall
{{12-30-99 p.9312}}be deemed to
preclude any affilated person from acting as manager of any
underwriting syndicate or other group in which such registered or
controlled company is a participant and receiving compensation
therefor.
(e) It shall be unlawful for any affiliated person of a registered
investment company, or any affiliated person of such person--
(1) acting as agent, to accept from any source any compensation
(other than a regular salary or wages from such registered company) for
the purpose or sale of any property to or for such registered company
or any controlled company thereof, except in the course of such
person's business as an underwriter or broker; or
(2) acting as broker, in connection with the sale of securities
to or by such registered company or any controlled company thereof, to
receive from any source a commission, fee, or other remuneration for
effecting such transaction which exceeds (A) the usual and customary
broker's commission if the sale is effected on a securities exchange,
or (B) 2 per centum of the sales price if the sale is effected in
connection with a secondary distribution of such securities, or (C) 1
per centum of the purchase or sale price of such securities if the sale
is otherwise effected unless the Commission shall, by rules and
regulations or order in the public interest and consistent with the
protection of investors, permit a larger commission.
(f) CUSTODY OF SECURITIES.--
(1) Every registered management company shall place and maintain
its securities and similar investments in the custody of (A) a bank or
banks having the qualification prescribed in paragraph (1) of
section 26(a) of this title for
the trustees of unit investment trusts; or (B) a company which is a
member of a national securities exchange as defined in the Securities
Exchange Act of 1934, subject to such rules and regulations as the
Commission may from time to time prescribe for the protection of
investors; or (C) such registered company, but only in accordance with
such rules and regulations or orders as the Commission may from time to
time prescribe for the protection of investors.
(2) Subject to such rules, regulations, and orders as the
Commission may adopt as necessary or appropriate for the protection of
investors, a registered management company or any such custodian, with
the consent of the registered management company for which it acts as
custodian, may deposit all or any part of the securities owned by such
registered management company in a system for the central handling of
securities established by a national securities exchange or national
securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be
permitted by the Commission, pursuant to which system all securities of
any particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities.
(3) Rules, regulations, and orders of the Commission under this
subsection, among other things, may make appropriate provision with
respect to such matters as the earmarking, segregation, and
hypothecation of such securities and investments, and may provide for
or require periodic or other inspections by any or all of the
following: Independent public acccountants, employees and agents of the
Commission, and such other persons as the Commission may designate.
(4) No such member which trades in securities for its own account
may act as custodian except in accordance with rules and regulations
prescribed by the Commission for the protection of investors.
(5) If a registered company maintains its securities and similar
investments in the custody of a qualified bank or banks, the cash
proceeds from the sale of such securities and similar investments and
other cash assets of the company shall likewise be kept in the custody
of such a bank or banks, or in accordance with such rules and
regulations or orders as the Commission may from time to time prescribe
for the protection of investors, except that such a registered company
may maintain a checking account in a bank or banks having the
qualifications prescribed in paragraph (1) of section 26(a) of this
title for the trustees of unit investment trusts with the balance of
such account or the aggregate balances of such accounts at no time in
excess of the amount of the fidelity bond, maintained pursuant
to
{{12-30-99 p.9313}}section
17(g) of this title, covering the officers or employees
authorized to draw on such account or accounts.
(6) The Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in
section 3 of the Federal
Deposit Insurance Act), adopt rules and regulations, and issue orders,
consistent with the protection of investors, prescribing the conditions
under which a bank, or an affiliated person of a bank, either of which
is an affiliated person, promoter, organizer, or sponsor of, or
principal underwriter for, a registered management company may serve as
custodian of that registered management company.
(g) The Commission is authorized to require by rules and
regulations or orders for the protection of investors that any officer
or employee of a registered management investment company who may
singly, or jointly with others, have access to securities or funds of
any registered company, either directly or through authority to draw
upon such funds or to direct generally the disposition of such
securities (unless the officer or employee has such access solely
through his position as an officer or employee of a bank) be bonded by
a reputable fidelity insurance company against larceny and embezzlement
in such reasonable minimum amounts as the Commission may prescribe.
(h) After one year from the effective date of this title, neither
the charter, certificate of incorporation, articles of association,
indenture of trust, nor the by-laws of any registered investment
company, nor any other instrument pursuant to which such a company is
organized or administered, shall contain any provision which protects
or purports to protect any director or officer of such company against
any liability to the company or to its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office.
(i) After one year from the effective date of this title no
contract or agreement under which any person undertakes to act as
investment adviser of, or principal underwriter for, a registered
investment company shall contain any provision which protects or
purports to protect such person against any liability to such company
or its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence, in the
performance of his duties, or by reason of his reckless disregard of
his obligations and duties under such contract or agreement.
(j) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company or any affiliated
person of an investment adviser of or principal underwriter for a
registered investment company, to engage in any act, practice, or
course of business in connection with the purchase or sale, directly or
indirectly, by such person of any security held or to be acquired by
such registered investment company in contravention of such rules and
regulations as the Commission may adopt to define, and prescribe means
reasonably necessary to prevent such acts, practices, or courses of
business as are fraudulent, deceptive or manipulative. Such rules and
regulations may include requirements for the adoption of codes or
ethics by registered investment companies and investment advisers of,
and principal underwriters for, such investment companies establishing
such standards as are reasonably necessary to prevent such acts,
practices, or courses of business.
[Codified to 15 U.S.C. 80a--17]
[Source: Section 17 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 815), effective November 1, 1940, as
amended by section 9 of the Act of December 14, 1970 (Pub. L. No.
91--547; 84 Stat. 1420), effective December 14, 1970; and section 612
of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101
Stat. 1261), effective December 4, 1987; sections 211(a) and 212 of
title II of the Act of November 12, 1999 (Pub. L. No. 106-102; 113
Stat. 1396), effective May 12, 2001]
{{12-30-99 p.9314}}
Capital Structure
Sec. 18. (a) It shall be unlawful for any registered closed-end
company to issue any class of senior security, or to sell any such
security of which it is the issuer, unless--
(1) if such class of senior security represents an indebtedness--
(A) immediately after such issuance or sale, it will have an
asset coverage of at least 300 per centum;
(b) provision is made to prohibit the declaration of any dividend
(except a dividend payable in stock of the issuer), or the declaration
of any other distribution, upon any class of the capital stock of such
investment company, or the purchase of any such capital stock, unless,
in every such case, such class of senior securities has at the time of
the declaration of any such dividend or distribution or at the time of
any such purchase an asset coverage of at least 300 per centum after
deducting the amount of such dividend, distribution, or purchase price,
as the case may be, except that dividends may be declared upon any
preferred stock if such senior security representing indebtedness has
an asset coverage of at least 200 per centum at the time of declaration
thereof after deducting the amount of such dividend; and
(C) provision is made either--
(i) that, if on the last business day of each of twelve
consecutive calendar months such class of senior securities shall have
an asset coverage of less than 100 per centum, the holders of such
securities voting as a class shall be entitled to elect at least a
majority of the members of the board of directors of such registered
company, such voting right to continue until such class of senior
security shall have an asset coverage of 110 per centum or more on the
last business day of each of three consecutive calendar months, or
(ii) that, if on the last business day of each of twenty-four
consecutive calendar months such class of senior securities shall have
an asset coverage of less than 100 per centum, an event of default
shall be deemed to have occurred;
(2) if such class of senior security is a stock--
(A) immediately after such issuance or sale it will have an asset
coverage of at least 200 per centum;
(B) provision is made to prohibit the declaration of any dividend
(except a dividend payable in common stock of the issuer), or the
declaration of any other distribution, upon the common stock of such
investment company, or the purchase of any such common stock, unless in
every such case such class of senior security has at the time of the
declaration of any such dividend or distribution or at the time of any
such purchase an asset coverage of at least 200 per centum after
deducting the amount of such dividend, distribution or purchase price,
as the case may be;
(C) provision is made to entitle the holders of such senior
securities, voting as a class, to elect at least two directors at all
times, and, subject to the prior rights, if any, of the holders of any
other class of senior securities outstanding, to elect a majority of
the directors if at any time dividends on such class of securities
shall be unpaid in an amount equal to two full years' dividends on such
securities, and to continue to be so represented until all dividends in
arrears shall have been paid or otherwise provided for;
(D) provision is made requiring approval by the vote of a
majority of such securities, voting as a class, of any plan of
reorganization adversely affecting such securities or of any action
requiring a vote of security holders as in section 13(a) provided; and
(E) such class of stock shall have complete priority over any
other class as to distribution of assets and payment of dividends,
which dividends shall be cumulative.
(b) The asset coverage in respect of a senior security provided for
in subsection (a) may be determined on the basis of values calculated
as of a time within forty-eight hours (not including Sundays or
holidays) next preceding the time of such determination. The time of
issue or sale shall, in the case of an offering of such securities to
existing stockholders of the issuer, be deemed to be the first date on
which such offering is made, and in all other cases shall be deemed to
be the time, as of which a firm commitment to issue or sell and to take
or purchase such securities shall be made.
{{12-30-99 p.9314.01}}
(c) Notwithstanding the provisions of subsection (a) it shall be
unlawful for any registered closed-end investment company to issue or
sell any senior security representing indebtedness if immediately
thereafter such company will have outstanding more than one class of
senior security representing indebtedness, or to issue or sell any
senior security which is a stock if immediately thereafter such company
will have outstanding more than one class of senior security which is a
stock, except that (1) any such class of indebtedness or stock may be
issued in one or more series: Provided, That no such series
shall have a preference or priority over any other series upon the
distribution of the assets of such registered closed-end company or in
respect of the payment of interest or dividends, and (2) promissory
notes or other evidences of indebtedness issued in consideration of any
loan, extension, or renewal thereof, made by a bank or other person and
privately arranged, and not intended to be publicly distributed, shall
not be deemed to be a separate class of senior securities representing
indebtedness within the meaning of this subsection (c).
(d) It shall be unlawful for any registered management company to
issue any warrant or right to subscribe to or purchase a security of
which such company is the issuer, except in the form of warrants or
rights to subscribe expiring not later than one hundred and twenty days
after their issuance and issued exclusively and ratably to a class or
classes of such company's security holders; except that any warrant may
be issued in exchange for outstanding warrants in connection with a
plan of reorganization.
(e) The provisions of this section 18 shall not apply to any senior
securities issued or sold by any registered closed-end company--
(1) for the purpose of refunding through payment, purchase,
redemption, retirement, or exchange, any senior security of such
registered investment company except that no senior
{{2-26-99 p.9315}}security representing
indebtedness shall be so issued or sold for the purpose of refunding
any senior security which is a stock; or
(2) pursuant to any plan of reorganization (other than for
refunding as referred to in paragraph (1) of this subsection,
provided--
(A) that such senior securities are issued or sold for the
purpose of substituting or exchanging such senior securities for
outstanding senior securities, and if such senior securities represent
indebtedness they are issued or sold for the purpose of substituting or
exchanging such senior securities for outstanding senior securities
representing indebtedness, of any registered investment company which
is a party to such plan of reorganization; or
(B) that the total amount of such senior securities so issued or
sold pursuant to such plan does not exceed the total amount of senior
securities of all the companies which are parties to such plan, and the
total amount of senior securities representing indebtedness so issued
or sold pursuant to such plan does not exceed the total amount of
senior securities representing indebtedness of all such companies, or,
alternatively, the total amount of such senior securities so issued or
sold pursuant to such plan does not have the effect of increasing the
ratio of senior securities representing indebtedness to the securities
representing stock or the ratio of senior securities representing stock
to securities junior thereto when compared with such ratios as they
existed before such reorganization.
(f)(1) It shall be unlawful for any registered open-end company to
issue any class of senior security or to sell any senior security of
which it is the issuer, except that any such registered company shall
be permitted to borrow from any bank: Provided, That
immediately after any such borrowing there is an asset coverage of at
least 300 per centum for all borrowings of such registered company:
And provided further, That in the event that such asset
coverage shall at any time fall below 300 per centum such registered
company shall, within three days thereafter (not including Sundays and
holidays) or such longer period as the Commission may prescribe by
rules and regulations, reduce the amount of its borrowings to an extent
that the asset coverage of such borrowings shall be at least 300 per
centum.
(2) "Senior security" shall not, in the case of a
registered open-end company, include a class or classes or a number of
series of preferred or special stock each of which is preferred over
all other classes or series in respect of assets specifically allocated
to that class or series: Provided, That (A) such company has
outstanding no class or series of stock which is not so preferred over
all other classes or series, or (B) the only other outstanding class of
the issuer's stock consists of a common stock upon which no dividend
(other than a liquidating dividend) is permitted to be paid and which
in the aggregate represents not more than one-half of 1 per centum of
the issuer's outstanding voting securities. For the purpose of insuring
fair and equitable treatment of the holders of the outstanding voting
securities of each class or series of stock of such company, the
Commission may by rule, regulation, or order direct that any matter
required to be submitted to the holders of the outstanding voting
securities of such company shall not be deemed to have been effectively
acted upon unless approved by the holders of such percentage (not
exceeding a majority) of the outstanding voting securities of each
class or series of stock affected by such matter as shall be prescribed
in such rule, regulation, or order.
(g) Unless otherwise provided: "Senior security" means any
bond, debenture, note, or similar obligation or instrument constituting
a security and evidencing indebtedness, and any stock of a class having
priority over any other class as to distribution of assets or payment
of dividends; and "senior security representing indebtedness"
means any senior security other than stock.
The term "senior security" when used in subparagraphs (B) and
(C) of paragraph (1) of subsection (a), shall not include any
promissory note or other evidence of indebtedness issued in
consideration of any loan, extension, or renewal thereof, made by a
bank or other person and privately arranged, and not intended to be
publicly distributed; nor shall such term, when used in this section
18, include any such promissory note or other evidence of indebtedness
in any case where such a loan is for temporary purposes only and in an
amount not exceeding 5 per centum of the value of the total assets of
the issuer at the time when the loan is made. A loan shall be presumed
to be for temporary purposes if it is
{{2-26-99 p.9316}}repaid within
sixty days and is not extended or renewed; otherwise it shall be
presumed not to be for temporary purposes. Any such presumption may be
rebutted by evidence.
(h) "Asset coverage" of a class of senior security
representing an indebtedness of an issuer means the ratio which the
value of the total assets of such issuer, less all liabilities and
indebtedness not represented by senior securities, bears to the
aggregate amount of senior securities representing indebtedness of such
issuer. "Asset coverage" of a class of senior security of an
issuer which is a stock means the ratio which the value of the total
assets of such issuer, less all liabilities and indebtedness not
represented by senior securities, bears to the aggregate amount of
senior securities representing indebtedness of such issuer plus the
aggregate of the involuntary liquidation preference of such class of
senior security which is a stock. The involuntary liquidation
preference of a class of senior security which is a stock shall be
deemed to mean the amount to which such class of senior security would
be entitled on involuntary liquidation of the issuer in preference to a
security junior to it.
(i) Except as provided in subsection (a) of this section, or as
otherwise required by law, every share of stock hereafter issued by a
registered management company (except a common-law trust of the
character described in section
16(c)) shall be a voting stock and have equal voting rights
with every other outstanding voting stock: Provided, That
this subsection shall not apply to shares issued pursuant to the terms
of any warrant or subscription right outstanding on March 15, 1940, or
any firm contract entered into before March 15, 1940, to purchase such
securities from such company nor to shares issued in accordance with
any rules, regulations, or orders which the Commission may make
permitting such issue.
(j) Notwithstanding any provision of this title, it shall be
unlawful, after the date of enactment of this title, for any registered
face-amount certificate company--
(1) to issue, except in accordance with such rules, regulations,
or orders as the Commission may prescribe in the public interest or as
necessary or appropriate for the protection of investors, any security
other than (A) a face-amount certificate; (B) a common stock having a
par value and being without preference as to dividends or distributions
and having at least equal voting rights with any outstanding security
of such company; or (C) short-term payment or promissory notes or other
indebtedness issued in consideration of any loan, extension, or renewal
thereof, made by a bank or other person and privately arranged and not
intended to be publicly offered;
(2) if such company has outstanding any security, other than such
face-amount certificates, common stock, promissory notes, or other
evidence of indebtedness, to make any distribution or declare or pay
any dividend on any capital security in contravention of such rules and
regulations or orders as the Commission may prescribe in the public
interest or as necessary or appropriate for the protection of investors
or to insure the financial integrity of such company, to prevent the
impairment of the company's ability to meet its obligations upon its
face-amount certificates; or
(3) to issue any of its securities except for cash or securities
including securities of which such company is the
issuer.
(k) The provisions of subparagraphs (A) and (B) of paragraph (1) of
subsection (a) of this section shall not apply to investment companies
operating under the Small Business Investment Act of 1958, and the
provisions of paragraph (2) of said subsection shall not apply to such
companies so long as such class of senior security shall be held or
guaranteed by the Small Business Administration.
[Codified to 15 U.S.C. 80a--18]
[Source: Section 18 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 817), effective November 1, 1940, as amended by
section 307(c) of title III of the Act of August 21, 1958 (Pub. L. No.
85--699; 72 Stat. 694), effective August 21, 1958; section 10 of the
Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1421),
effective December 14, 1970; section 2(g) of the Act of October 27,
1972 (Pub. L. No. 92--595; 86 Stat. 1316), effective October 27, 1972;
section 28(4) of the Act of June 4, 1975 (Pub. L. No. 94--29;
89
{{2-26-99 p.9317}}Stat. 165),
effective June 4, 1975; and section 613 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 November 3,
1998 (Pub. L. No. 105--353; 112 Stat. 3236), effective November 3,
1998]
Dividends
Sec. 19. (a) It shall be unlawful for any registered investment
company to pay any dividend, or to make any distribution in the nature
of a dividend payment, wholly or partly from any source other than--
(1) such company's accumulated undistributed net income,
determined in accordance with good accounting practice and not
including profits or losses realized upon the sale of securities or
other properties; or
(2) such company's net income so determined for the current or
preceding fiscal year; unless such payment is accompanied by a written
statement which adequately discloses the source or sources of such
payment. The Commission may prescribe the form of such statement by
rules and regulations in the public interest and for the protection of
investors.
(b) It shall be unlawful in contravention of such rules,
regulations, or orders as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors
for any registered investment company to distribute long-term capital
gains, as defined in the Internal Revenue Code of 1954, more often than
once every twelve months.
[Codified to 15 U.S.C. 80a--19]
[Source: Section 19 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 821), effective November 1, 1940, as amended by
section 11 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84
Stat. 1422), effective December 14, 1970]
Proxies; Voting Trusts; Circular Ownership
Sec. 20. (a) It shall be unlawful for any person, by use of the
mails or any means or instrumentality of interstate commerce or
otherwise, to solicit or to permit the use of his name to solicit any
proxy or consent or authorization in respect of any security of which a
registered investment company is the issuer in contravention of such
rules and regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
(b) It shall be unlawful for any registered investment company or
affiliated person thereof, any issuer of a voting-trust certificate
relating to any security of a registered investment company, or any
underwriter of such a certificate, by use of the mails or any means or
instrumentality of interstate commerce, or otherwise, to offer for
sale, sell, or deliver after sale, in connection with a public
offering, any such voting-trust certificate.
(c) No registered investment company shall purchase any voting
security if, to the knowledge of such registered company,
cross-ownership or circular ownership exists, or after such
acquisitions will exist, between such registered company and the issuer
of such security. Cross-ownership shall be deemed to exist between two
companies when each of such companies beneficially owns more than 3 per
centum of the outstanding voting securities of the other company.
Circular ownership shall be deemed to exist between two companies if
such companies are included within a group of three or more companies,
each of which--
(1) beneficially owns more than 3 per centum of the outstanding
voting securities of one or more other companies of the group; and
(2) has more than 3 per centum of its own outstanding voting
securities beneficially owned by another company, or by each of two or
more other companies, of the group.
(d) If cross-ownership or circular ownership between a registered
investment company and any other company or companies comes into
existence upon the purchase by a registered investment company of the
securities of another company, it shall be the duty of
{{2-26-99 p.9318}}such
registered company, within one year after it first knows of the
existence of such cross-ownership or circular ownership, to eliminate
the same.
[Codified to 15 U.S.C. 80a--20]
[Source: Section 20 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 822), effective November 1, 1940, as amended by
section 614 of title VI of the Act of December 4, 1987 (Pub. L. No.
100--181; 101 Stat. 1262), effective December 4, 1987]
Loans
Sec. 21. It shall be unlawful for any registered management company
to lend money or property to any person, directly or indirectly, if--
(a) the investment policies of such registered company, as recited
in its registration statement and reports filed under this title, do
not permit such a loan; or
(b) such person controls or is under common control with such
registered company; except that the provisions of this paragraph shall
not apply to any loan from a registered company to a company which owns
all of the outstanding securities of such registered company, except
directors' qualifying shares.
[Codified to 15 U.S.C. 80a--21]
[Source: Section 21 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 822), effective November 1, 1940, as amended by
section 615 of title VI of the Act of December 4, 1987 (Pub. L. No.
100--181; 101 Stat. 1262), effective December 4,
1987]
[Main Tabs]
[Table of Contents - 8000]
[Index]
[Previous Page]
[Next Page]
[Search]
|
