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8000 - Miscellaneous Statutes and Regulations
* * * * *
Periodic and Other Reports; Reports of Affiliated
Persons
Sec. 30. (a) Every registered investment company shall file
annually with the Commission such information, documents and reports as
investment companies having securities registered on a national
securities exchange are required to file annually
pursuant
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to section 13(a) of the
Securities Exchange Act of 1934 and the rules and regulations issued
thereunder.
(b) Every registered investment company shall file with the
Commission--
(1) such information, documents, and reports (other than
financial statements), as the Commission may require to keep reasonably
current the information and documents contained in the registration
statement of such company filed under this title; and
(2) copies of every periodic or interim report or similar
communication containing financial statements and transmitted to any
class of such company's security holders, such copies to be filed not
later than ten days after such transmission.
Any information or documents contained in a report or other
communication to security holders filed pursuant to paragraph (2) may
be incorporated by reference in any report subsequently or concurrently
filed pursuant to paragraph (1).
(c)(1) The Commission shall take such action as its deems necessary
or appropriate, consistent with the public interest and the protection
of investors, to avoid unnecessary reporting by, and minimize the
compliance burdens on, registered investment companies and their
affiliated persons in exercising its authority--
(A) under subsection (f); and
(B) under subsection (b)(1), if the Commission requires the
filing of information, documents, and reports under that subsection on
a basis more frequently than semiannually.
(2) Action taken by the Commission under paragraph (1) shall
include considering, and requesting public comment on--
(A) feasible alternatives that minimize the reporting burdens on
registered investment companies; and
(B) the utility of such information, documents, and reports to
the Commission in relation to the costs to registered investment
companies and their affiliated persons of providing such information,
documents, and reports.
(d) The Commission shall issue rules and regulations permitting the
filing with the Commission, and with any national securities exchange
concerned, of copies of periodic reports, or of extracts therefrom,
filed by any registered investment company pursuant to subsections (a)
and (b), in lieu of any reports and documents required of such company
under section 13 or 15(d) of the Securities Exchange Act of 1934.
(e) Every registered investment company shall transmit to its
stockholders, at least semiannually, reports containing such of the
following information and financial statements or their equivalent, as
of a reasonably current date, as the Commission may prescribe by rules
and regulations for the protection of investors, which reports shall
not be misleading in any material respect in the light of the reports
required to be filed pursuant to subsections (a) and (b):
(1) a balance sheet accompanied by a statement of the aggregate
value of investments on the date of such balance sheet;
(2) a list showing the amounts and values of securities owned on
the date of such balance sheet;
(3) a statement of income, for the period covered by the report,
which shall be itemized at least with respect to each category of
income and expense representing more than 5 per centum of total income
or expense;
(4) a statement of surplus, which shall be itemized at least with
respect to each charge or credit to the surplus account which
represents more than 5 per centum of the total charges or credits
during the period covered by the report;
(5) a statement of the aggregate remuneration paid by the company
during the period covered by the report (A) to all directors and to all
members of any advisory board for regular compensation; (B) to each
director and to each member of an advisory board for special
compensation; (C) to all officers; and (D) to each person of whom any
officer or director of the company is an affiliated person; and
(6) a statement of the aggregate dollar amounts of purchase and
sales of investment securities, other than government securities, made
during the period covered by the report:
{{2-26-99 p.9334}}
Provided, That if in the judgment of the Commission any
item required under this subsection is inapplicable or inappropriate to
any specified type or types of investment company, the Commission may
by rules and regulations permit in lieu thereof the inclusion of such
item of a comparable character as it may deem applicable or appropriate
to such type or types of investment company.
(f) The Commission may, by rule, require that semiannual reports
containing the information set forth in subsection (e) include such
other information as the Commission deems necessary or appropriate in
the public interest or for the protection of investors.
(g) Financial statements contained in annual reports required
pursuant to subsections (a) and (e), if required by the rules and
regulations of the Commission, shall be accompanied by a certificate of
independent public accountants. The certificate of such independent
public accountants shall be based upon an audit not less in scope or
procedures followed than that which independent public accountants
would ordinarily make for the purpose of presenting comprehensive and
dependable financial statements, and shall contain such information as
the Commission may prescribe, by rules and regulations in the public
interest or for the protection of investors, as to the nature and scope
of the audit and the findings and opinion of the accountants. Each such
report shall state that such independent public accountants have
verified securities owned, either by actual examination, or by receipt
of a certificate from the custodian, as the Commission may prescribe by
rules and regulations.
(h) Every person who is directly or indirectly the beneficial owner
of more than 10 per centum of any class of outstanding securities
(other than short-term paper) of which a registered closed-end company
is the issuer or who is an officer, director, member of an advisory
board, investment adviser, or affiliated person of an investment
adviser of such a company shall in respect of his transactions in any
securities of such company (other than short-term paper) be subject to
the same duties and liabilities as those imposed by
section 16 of the Securities
Exchange Act of 1934 upon certain beneficial owners, directors, and
officers in respect of their transactions in certain equity securities.
(i) DISCLOSURE TO CHURCH PLAN PARTICIPANTS.--A person that
maintains a church plan that is excluded from the definition of an
investment company solely by reason of
section 3(c)(14) shall provide
disclosure to plan participants, in writing, and not less frequently
than annually, and for new participants joining such a plan after May
31, 1996, as soon as is practicable after joining such plan, that--
(1) the plan, or any company or account maintained to manage or
hold plan assets and interests in such plan, company, or account, are
not subject to registration, regulation, or reporting under this title,
the Securities Act of 1933, the Securities Exchange Act of 1934, or
State securities laws; and
(2) plan participants and beneficiaries therefore will not be
afforded the protections of those provisions.
(j) NOTICE TO COMMISSION.--The Commission may issue rules
and regulations to require any person that maintains a church plan that
is excluded from the definition of an investment company solely by
reason of section 3(c)(14) to file a notice with the Commission
containing such information and in such form as the Commission may
prescribe as necessary or appropriate in the public interest or
consistent with the protection of investors.
[Codified to 15 U.S.C. 80a--29]
[Source: Section 30 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 836), effective November 1, 1940; as
amended by sections 206 of title II and 508(g) of title V of the Act of
October 11, 1996 (Pub. L. No. 104--290; 110 Stat. 3430 and 3449),
effective October 11, 1996; section 301(c)(5)(b) of title III of the
Act of November 3, 1998 (Pub. L. No. 105--353; 112 Stat. 3237),
effective November 3, 1998]
{{2-26-99 p.9335}}
Accounts and Records
Sec. 31. (a) MAINTENANCE OF RECORDS.--
(1) IN GENERAL.--Each registered investment company, and
each underwriter, broker, dealer, or investment adviser that is a
majority-owned subsidiary of such a company, shall maintain and
preserve such records (as defined in
section 3(a)(37) of the
Securities Exchange Act of 1934) for such period or periods as the
Commission, by rules and regulations, may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
Each investment adviser that is not a majority-owned subsidiary of, and
each depositor of any registered investment company, and each principal
underwriter for any registered investment company other than a
closed-end company, shall maintain and preserve for such period or
periods as the Commission shall prescribe by rules and regulations,
such records as are necessary or appropriate to record such person's
transactions with such registered company.
(2) MINIMIZING COMPLIANCE BURDEN.--In exercising its
authority under this subsection, the Commission shall take such steps
as it deems necessary or appropriate, consistent with the public
interest and for the protection of investors, to avoid unnecessary
recordkeeping by, and minimize the compliance burden on, persons
required to maintain records under this subsection (hereafter in this
section referred to as "subject persons"). Such steps shall
include considering, and requesting public comment on--
(A) feasible alternatives that minimize the recordkeeping burdens
on subject persons;
(B) the necessity of such records in view of the public benefits
derived from the independent scrutiny of such records through
Commission examination;
(C) the costs associated with maintaining the information that
would be required to be reflected in such records; and
(D) the effects that a proposed recordkeeping requirement would
have on internal compliance policies and procedures.
(b) EXAMINATIONS OF RECORDS.--
(1) IN GENERAL.--All records required to be maintained
and preserved in accordance with subsection (a) shall be subject at any
time and from time to time to such reasonable periodic, special, and
other examinations by the Commission, or any member or representative
thereof, as the Commission may prescribe.
(2) AVAILABILITY.--For purposes of examinations referred
to in paragraph (1), any subject person shall make available to the
Commission or its representatives any copies or extracts from such
records as may be prepared without undue effort, expense, or delay as
the Commission or its representatives may reasonably request.
(3) COMMISSION ACTION.--The Commission shall exercise
its authority under this subsection with due regard for the benefits of
internal compliance policies and procedures and the effective
implementation and operation thereof.
(c) Limitations on Disclosure by
Commission.--Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any internal compliance
or audit records, or information contained therein, provided to the
Commission under this section. Nothing in this subsection shall
authorize the Commission to withhold information from the Congress or
prevent the Commission from complying with a request for information
from any other Federal department or agency requesting the information
for purposes within the scope of the jurisdiction of that department or
agency, or complying with an order of a court of the United States in
an action brought by the United States or the Commission. For purposes
of section 552 of title 5,
United States Code, this section shall be considered a statute
described in subsection (b)(3)(B) of such section 552.
(d) DEFINITIONS.--For purposes of this section--
(1) the term "internal compliance policies and procedures"
means policies and procedures designed by subject persons to promote
compliance with the Federal securities laws; and
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(2) the term "internal compliance and audit record" means
any record prepared by a subject person in accordance with internal
compliance policies and procedures.
(e) REGULATORY AUTHORITY.--The Commission may, in the
public interest or for the protection of investors, issue rules and
regulations providing for a reasonable degree of uniformity in the
accounting policies and principles to be followed by registered
investment companies in maintaining their accounting records and in
preparing financial statements required pursuant to this title.
(f) EXEMPTION AUTHORITY.--The Commission, upon application
made by any registered investment company, may by order exempt a
specific transaction or transactions from the provisions of any rule or
regulation made pursuant to subsection (e), if the Commission finds
that such rule or regulation should not reasonably be applied to such
transaction.
[Codified to 15 U.S.C. 80a--30]
[Source: Section 31 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 838), effective November 1, 1940; as amended by
section 207 of title II of the Act of October 31, 1996 (PUb. L. No.
140--290; 110 Stat. 3430), 3431, and 3432), effective October 11, 1996;
section 301(c)(6) of title III of the Act of November 3, 1998, (Pub. L.
No. 105--353; 112 Stat. 3237), effective November 3, 1998]
Accountants and Auditors
Sec. 32. (a) It shall be unlawful for any registered management
company or registered face-amount certificate company to file with the
Commission any financial statement signed or certified by an
independent public accountant, unless--
(1) such accountant shall have been selected at a meeting held
within thirty days before or after the beginning of the fiscal year or
before the annual meeting of stockholders in that year by the vote,
cast in person, of a majority of those members of the board of
directors who are not interested persons of such registered company;
(2) such selection shall have been submitted for ratification or
rejection at the next succeeding annual meeting of stockholders if such
meeting be held, except that any vacancy occurring between annual
meetings, due to the death or resignation of the accountant, may be
filled by the vote of a majority of those members of the board of
directors who are not interested persons of such registered company,
cast in person at a meeting called for the purpose of voting on such
action;
(3) the employment of such accountant shall have been conditioned
upon the right of the company by vote of a majority of the outstanding
voting securities at any meeting called for the purpose to terminate
such employment forthwith without any penalty; and
(4) such certificate or report of such accountant shall be
addressed both to the board of directors of such registered company and
to the security holders thereof.
If the selection of an accountant has been rejected pursuant to
paragraph (2) or his employment terminated pursuant to paragraph (3),
the vacancy so occurring may be filled by a vote of a majority of the
outstanding voting securities, either at the meeting at which the
rejection or termination occurred or, if not so filled, at a subsequent
meeting which shall be called for the purpose. In the case of a
common-law trust of the character described in
section 16(c), no ratification
of the employment of such accountant shall be required but such
employment may be terminated and such accountant removed by action of
the holders of record of a majority of the outstanding shares of
beneficial interest in such trust in the same manner as is provided in
section 16(c) in respect of the removal of a trustee, and all the
provisions therein contained as to the calling of a meeting shall be
applicable. In the event of such termination and removal, the vacancy
so occurring may be filled by action of the holders of record of a
majority of the shares of beneficial interest either at the meeting, if
any, at which such termination and removal occurs, or by instruments in
writing filed with the custodian, or if not so filed within a
reasonable time then at a subsequent meeting which shall be called by
the trustees for the purpose. The provisions of paragraph (42) of
section 2(a) as to a majority
shall be applicable to the vote cast at any meeting of the shareholders
of such a trust held pursuant to this subsection.
{{12-30-99 p.9337}}
(b) No registered management company or registered face-amount
certification company shall file with the Commission any financial
statement in the preparation of which the controller or other principal
accounting officer or employee of such company participated, unless
such controller, officer or employee was selected, either by vote of
the holders of such company's voting securities at the last annual
meeting of such security holders, or by the board of directors of such
company.
(c) The Commission is authorized, by rules and regulations or order
in the public interest or for the protection of investors, to require
accountants and auditors to keep reports, work sheets, and other
documents and papers relating to registered investment companies for
such period or periods as the Commission may prescribe, and to make the
same available for inspection by the Commission or any member or
representative thereof.
[Codified to 15 U.S.C. 80a--31]
[Source: Section 32 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 838), effective November 1, 1940; as
amended by section 18 of the Act of December 14, 1970 (Pub. L. No.
91--547; 84 Stat 1427), effective December 14, 1971; section 28(4) of
the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 165), effective
June 4, 1975]
Filing of Documents with Commission in Civil
Actions
Sec. 33. Every registered investment company which is a
party and every affiliated person of such company who is a party
defendant to any action or claim by a registered investment company or
a security holder thereof in a derivative or representative capacity
against an officer, director, investment adviser, trustee, or depositor
of such company, shall file with the Commission, unless already so
filed, (1) a copy of all pleadings, verdicts, or judgments filed with
the court or served in connection with such action or claim, (2) a copy
of any proposed settlement, compromise, or discontinuance of such
action, and (3) a copy of such motions, transcripts, or other documents
filed in or issued by the court or served in connection with such
action or claim as may be requested in writing by the Commission. If
any document referred to in clause (1) or (2)--
(A) is delivered to such company or party defendant, such
document shall be filed with the Commission not later than ten days
after the receipt thereof; or
(B) is filed in such court or delivered by such company or party
defendant, such document shall be filed with the Commission not later
than five days after such filing or delivery.
[Codified to 15 U.S.C. 80a--32]
[Source: Section 33 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 839), effective November 1, 1940; as
amended by section 19 of the Act of December 14, 1970 (Pub. L. No.
91--547; 84 Stat. 1428), effective December 14, 1970]
Destruction and Falsification of Reports and
Records
Sec. 34. (a) MISREPRESENTATION OF GUARANTEES.--
(1) IN GENERAL.--It shall be unlawful for any person,
issuing or selling any security of which a registered investment
company is the issuer, to represent or imply in any manner whatsoever
that such security or company--
(A) has been guaranteed, sponsored, recommended, or approved by
the United States, or any agency, instrumentality or officer of the
United States;
(B) has been insured by the Federal Deposit Insurance
Corporation; or
(C) is guaranteed by or is otherwise an obligation of any bank or
insured depository institution.
(2) DISCLOSURES.--Any person issuing or selling the
securities of a registered investment company that is advised by, or
sold through, a bank shall prominently disclose that an investment in
the company is not insured by the Federal Deposit Insurance Corporation
or any other government agency. 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 manner in which the disclosure under this
paragraph shall be provided.
(3) DEFINITIONS.--The terms "insured depository
institution" and "appropriate Federal banking agency" have the
same meanings as given in section 3 of the Federal Deposit Insurance
Act.
{{12-30-99 p.9338}}
[Codified to 15 U.S.C. 80a--33]
[Source: Section 34 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 840), effective November 1, 1940; as
amended by section 214 of title II of the Act of November 12, 1999
(Pub. L. No. 106--102; 113 Stat. 1398), effective May 12, 2001]
Unlawful Representations and
Names
Sec. 35. (a) It shall be unlawful for any person, in issuing or
selling any security of which a registered investment company is the
issuer, to represent or imply in any manner whatsoever that such
security or company has been guaranteed, sponsored, recommended, or
approved by the United States or any agency or officer thereof.
(b) It shall be unlawful for any person registered under any
section of this title to represent or imply in any manner whatsoever
that such person has been sponsored, recommended, or approved, or that
his abilities or qualifications have in any respect been passed upon by
the United States or any agency or officer thereof.
(c) No provision of subsection (a) or (b) shall be construed to
prohibit a statement that a person or security is registered under this
Act, the Securities Act of 1933, or the Securities Exchange Act of
1934, if such statement is true in fact and if the effect of such
registration is not misrepresented.
(d) DECEPTIVE OR MISLEADING NAMES.--It shall be unlawful
for any registered investment company to adopt as a part of the name or
title of such company, or of any securities of which it is the issuer,
any word or words that the Commission finds are materially deceptive or
misleading. The Commission is authorized, by rule, regulation, or
order, to define such names or titles as are materially deceptive or
misleading.
[Codified to 15 U.S.C. 80a--34]
[Source: Section 35 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 840), effective November 1, 1940; as
amended by seciton 208 of title II of the Act of October 11, 1996 (Pub.
L. No. 104--290; 110 Stat. 3432), effective October 11, 1996]
Breach of Fiduciary Duty
Sec. 36. (a) The Commission is authorized to bring an action in
the proper district court of the United States, or in the United States
court of any territory or other place subject to the jurisdiction of
the United States, alleging that a person serving or acting in one or
more of the following capacities has engaged within five years of the
commencement of the action or is about to engage in any act or practice
constituting a breach of fiduciary duty involving personal misconduct
in respect of any registered investment company for which such person
so serves or acts--
(1) as officer, director, member of any advisory board,
investment adviser, or depositor; or
(2) as principal underwriter, if such registered company is an
open-end company, unit investment trust, or face-amount certificate
company.
If such allegations are established, the court may enjoin such
person from acting in any or all such capacities either permanently or
temporarily and award such injunctive or other relief against such
person as may be reasonable and appropriate in the circumstances, have
due regard to the protection of investors and to the effectuation of
the policies declared in section 1(b) of this title.
(b) For the purposes of this subsection, the investment adviser of
a registered investment company shall be deemed to have a fiduciary
duty with respect to the receipt of compensation for services, or of
payment of a material nature, paid by such registered investment
company, or by the security holders thereof, to such investment adviser
or any affiliated person of such investment adviser. An action may be
brought under this subsection by the Commission, or by a security
holder of such registered investment company on behalf of such company,
against such investment adviser, or any affiliated person of such
investment adviser, or any other person enumerated in subsection (a) of
this section who has a fiduciary duty concerning such compensation or
payments, for breach of fiduciary duty in respect of such compensation
or payments paid by such registered
{{2-28-97 p.9338.01}}investment
company or by the security holders thereof to such investment adviser
or person. With respect to any such action the following provisions
shall apply:
(1) It shall not be necessary to allege or prove that any
defendant engaged in personal misconduct, and the plaintiff shall have
the burden of proving a breach of fiduciary duty.
(2) In any such action approval by the board of directors of such
investment company of such compensation or payments, or of contract or
other arrangements providing for such compensation or payments, and
ratification or approval of such compensation or payments, or of
contracts or other arrangements providing for such compensation or
payments, by the shareholders of such investment company, shall be
given such consideration by the court as is deemed appropriate under
all the circumstances.
(3) No such action shall be brought or maintained against any
person other than the recipient of such compensation or payments, and
no damages or other relief shall be granted against any person other
than the recipient of such compensation or payments. No award of
damages shall be recoverable for any period prior to one year before
the action was instituted. Any award of damages against such recipient
shall be limited to the actual damages resulting from the breach of
fiduciary duty and shall in no event exceed the amount of compensation
or payments received from such investment company, or the security
holders thereof, by such recipient.
(4) This subsection shall not apply to compensation or payments
made in connection with transactions subject to section 17 of this
title, or rules, regulations, or orders thereunder, or to sales loads
for the acquisition of any security issued by a registered investment
company.
(5) Any action pursuant to this subsection may be brought only in
an appropriate district court of the United States.
(6) No finding by a court with respect to a breach of fiduciary
duty under this subsection shall be made a basis (A) for a finding of a
violation of this title for the purposes of
sections 9 and
49 of this title,
section 15 of the Securities
Exchange Act of 1934, or section 203 of title II of this Act, or (B)
for an injunction to prohibit any person from serving in any of the
capacities enumerated in subsection (a) of this section.
(c) For the purposes of subsections (a) and (b) the term
"investment adviser" includes a corporate or other trustee
performing the functions of an investment adviser.
[Codified to 15 U.S.C. 80a--35]
[Source: Section 36 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 841), effective November 1, 1940, as
amended by section 20 of the Act of December 14, 1970 (Pub. L. No.
91--547; 84 Stat. 1428), effective December 14, 1970, subsection (b)
effective June 13, 1971; section 28(7) of the Act of June 4, 1975 (Pub.
L. No. 94--29; 89 Stat. 166), effective June 4, 1975; and section 622
of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101
Stat. 1262), effective December 4, 1987]
Larceny and Embezzlement
Sec. 37. Whoever steals, unlawfully abstracts, unlawfully and
willfully converts to his own use or to the use of another, or
embezzles any of the moneys, funds, securities, credits, property, or
assets of any registered investment company shall be deemed guilty of a
crime, and upon conviction thereof shall be subject to the penalties
provided in section 49. A
judgment of conviction or acquittal on the merits under the laws of any
State shall be a bar to any prosecution under this section for the same
act or acts.
[Codified to 15 U.S.C. 80a--36]
[Source: Section 37 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 841), effective November 1, 1940]
Rules, Regulations, and Orders; General Powers of
Commission
Sec. 38. (a) The Commission shall have authority from time to time
to make, issue, amend, and rescind such rules and regulations and such
orders as are necessary or appropriate to the exercise of the powers
conferred upon the Commission elsewhere in this
{{2-28-97 p.9338.02}}title, including
rules and regulations defining accounting, technical, and trade terms
used in this title, and prescribing the form or forms in which
information required in registration statements, applications, and
reports to the Commission shall be set forth. For the purposes of its
rules or regulations the Commission may classify persons, securities,
and other matters within its jurisdiction and prescribe different
requirements for different classes of persons, securities, or matters.
(b) The Commission, by such rules and regulations or order as it
deems necessary or appropriate in the public interest or for the
protection of investors, may authorize the filing of any information or
documents required to be filed with the Commission under this title,
title II of this Act, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Public Utility Holding Company Act of 1935,
or the Trust Indenture Act of 1939, by incorporating by reference any
information or documents theretofore or concurrently filed with the
Commission under this title or any of such Acts.
(c) No provision of this title imposing any liability shall apply
to any act done or omitted in good faith in conformity with any rule,
regulation, or order of the Commission, notwithstanding that such rule,
regulation, or order may, after such act or omission, be amended or
rescinded or be determined by judicial or other authority to be invalid
for any reason.
{{2-28-91 p.9339}}
[Codified to 15 U.S.C. 80a--37]
[Source: Section 38 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 841), effective November 1, 1940]
Rules and Regulations; Procedure for
Issuance
Sec. 39. Subject to the provisions of the Federal Register Act and
regulations prescribed under the authority thereof, the rules and
regulations of the Commission under this title, and amendments thereof,
shall be effective upon publication in the manner which the Commission
shall prescribe, or upon such later date as may be provided in such
rules and regulations.
[Codified to 15 U.S.C. 80a--38]
[Source: Section 39 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 842), effective November 1, 1940]
Orders; Procedure for
Issuance
Sec. 40. (a) Orders of the Commission under this title shall be
issued only after appropriate notice and opportunity for hearing.
Notice to the parties to a proceeding before the Commission shall be
given by personal service upon each party or by registered mail or by
certified mail or confirmed telegraphic notice to the party's last
known business address. Notice to interested persons, if any, other
than parties may be given in the same manner or by publication in the
Federal Register.
(b) The Commission may provide, by appropriate rules or
regulations, that an application verified under oath may be admissible
in evidence in a proceeding before the Commission and that the record
in such a proceeding may consist, in whole or in part, of such
application.
(c) In any proceeding before the Commission, the Commission, in
accordance with such rules and regulations as it may prescribe, shall
admit as a party any interested State or State agency, and may admit as
a party any representative of interested security holders, or any other
person whose participation in the proceeding may be in the public
interest or for the protection of investors.
[Codified to 15 U.S.C. 80a--39]
[Source: Section 40 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 842), effective November 1, 1940, as amended by
section 1(15) of the Act of June 11, 1960 (Pub. L. No. 86-507; 74 Stat.
201), effective June 11, 1960]
Hearings by Commission
Sec. 41. Hearings may be public and may be held before the
Commission, any member or members thereof, or any officer or officers
of the Commission designated by it, and appropriate records thereof
shall be kept.
[Codified to 15 U.S.C. 80a--40]
[Source: Section 41 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 842), effective November 1, 1940]
Enforcement of Title
Sec. 42. (a) The Commission may make such investigations as it
deems necessary to determine whether any person has violated or is
about to violate any provision of this title or of any rule,
regulation, or order hereunder, or to determine whether any action in
any court or any proceeding before the Commission shall be instituted
under this title against a particular person or persons, or with
respect to a particular transaction or transactions. The Commission
shall permit any person to file with it a statement in writing, under
oath or
{{2-28-91 p.9340}}otherwise as the
Commission shall determine, as to all the facts and circumstances
concerning the matter to be investigated.
(b) For the purpose of any investigation or any other proceeding
under this title, any member of the Commission, or any officer thereof
designated by it, is empowered to administer oaths and affirmations,
subpena witnesses, compel their attendance, take evidence, and require
the production of any books, papers, correspondence, memoranda,
contracts, agreements, or other records which are relevant or material
to the inquiry. Such attendance of witnesses and the production of any
such records may be required from any place in any State or in any
Territory or other place subject to the jurisdiction of the United
States at any designated place of hearing.
(c) In case of contumacy by, or refusal to obey a subpena issued
to, any person, the Commission may invoke the aid of any court of the
United States within the jurisdiction of which such investigation or
proceeding is carried on, or where such person resides or carries on
business, in requiring the attendance and testimony of witnesses and
the production of books, papers, correspondence, memoranda, contracts,
agreements, and other records. And such court may issue an order
requiring such person to appear before the Commission or member or
officer designated by the Commission, there to produce records, if so
ordered, or to give testimony touching the matter under investigation
or in question; any failure to obey such order of the court may be
punished by such court as a contempt thereof. All process in any such
case may be served in the judicial district whereof such person is an
inhabitant or wherever he may be found. Any person who without just
cause shall fail or refuse to attend and testify or to answer any
lawful inquiry or to produce books, papers, correspondence, memoranda,
contracts, agreements, or other records, if in his or its power so to
do, in obedience to the subpena of the Commission, shall be guilty of a
misdemeanor and upon conviction shall be subject to a fine of not more
than $1,000 or to imprisonment for a term of not more than one year, or
both.
(d) Whenever it shall appear to the Commission that any person has
engaged or is about to engage in any act or practice constituting a
violation of any provision of this title, or of any rule, regulation,
or order hereunder, it may in its discretion bring an action in the
proper district court of the United States, or the proper United States
court of any Territory or other place subject to the jurisdiction of
the United States, to enjoin such acts or practices and to enforce
compliance with this title or any rule, regulation, or order hereunder.
Upon a showing that such person has engaged or is about to engage in
any such act or practice, a permanent or temporary injunction or decree
or restraining order shall be granted without bond. In any proceeding
under this subsection to enforce compliance with
section 7, the court as a court
of equity may, to the extent it deems necessary or appropriate, take
exclusive jurisdiction and possession of the investment company or
companies involved and the books, records, and assets thereof, wherever
located; and the court shall have jurisdiction to appoint a trustee,
who with the approval of the court shall have power to dispose of any
or all of such assets, subject to such terms and conditions as the
court may prescribe. The Commission may transmit such evidence as may
be available concerning any violation of the provisions of this title,
or of any rule, regulation, or order thereunder, the Attorney General,
who, in his discretion, may institute the appropriate criminal
proceedings under this title.
(e) MONEY PENALTIES IN CIVIL ACTIONS.--
(1) AUTHORITY OF COMMISSION.--Whenever it shall appear
to the Commission that any person has violated any provision of this
title, the rules or regulations thereunder, or a cease-and-desist order
entered by the Commission pursuant to section 9(f) of this title, the
Commission may bring an action in a United States district court to
seek, and the court shall have jurisdiction to impose, upon a proper
showing, a civil penalty to be paid by the person who committed such
violation.
(2) AMOUNT OF PENALTY.--
(A) FIRST TIER.--The amount of the penalty shall be
determined by the court in light of the facts and circumstances. For
each violation, the amount of the penalty shall not
{{8-30-02 p.9341}}exceed the
greater of (i) $5,000 for a natural person or $50,000 for any other
person, or (ii) the gross amount of pecuniary gain to such defendant as
a result of the violation.
(B) SECOND TIER.--Notwithstanding subparagraph (A), the
amount of penalty for each such violation shall not exceed the greater
of (i) $50,000 for a natural person or $250,000 for any other person,
or (ii) the gross amount of pecuniary gain to such defendant as a
result of the violation, if the violation described in paragraph (1)
involved fraud, deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement.
(C) THIRD TIER.--Notwithstanding subparagraphs (A) and
(B), the amount of penalty for each such violation shall not exceed the
greater of (i) $100,000 for a natural person or $500,000 for any other
person, or (ii) the gross amount of pecuniary gain to such defendant as
a result of the violation, if--
(I) the violation described in paragraph (1) involved fraud,
deceit, manipulation, or deliberate or reckless disregard of a
regulatory requirement; and
(II) such violation directly or indirectly resulted in
substantial losses or created a significant risk of substantial losses
to other persons.
(3) PROCEDURES FOR COLLECTION.--
(A) PAYMENT OF PENALTY TO TREASURY.--A penalty imposed
under this section shall be payable into the Treasury of the United
States except as otherwise provided in section 308 of the
Sarbanes--Oxley Act of 2002.
(B) COLLECTION OF PENALTIES.--If a person upon whom such
a penalty is imposed shall fail to pay such penalty within the time
prescribed in the court's order, the Commission may refer the matter to
the Attorney General who shall recover such penalty by action in the
appropriate United States district court.
(C) REMEDY NOT EXCLUSIVE.--The actions authorized by
this subsection may be brought in addition to any other action that the
Commission or the Attorney General is entitled to bring.
(D) JURISDICTION AND VENUE.--For purposes of
section 44 of this title,
actions under this paragraph shall be actions to enforce a liability or
a duty created by this title.
(4) Special provisions relating to a violation of a
cease-and-desist order.--In an action to enforce a cease-and-desist
order entered by the Commission pursuant to section 9(f), each separate
violation of such order shall be a separate offense, except that in the
case of a violation through a continuing failure to comply with the
order, each day of the failure to comply shall be deemed a separate
offense.
[Codified to 15 U.S.C. 80a--41]
[Source: Section 42 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 842), effective November 1, 1940, as amended by
section 215 of title II of the Act of October 15, 1970 (Pub. L. No.
91--452; 84 Stat. 929), effective December 14, 1970; section 623 of
title VI of the Act of December 4, 1987, (Pub. L. No. 100--181; 101
Stat. 1262), effective December 4, 1987; and section 302 of title III
of the Act of October 15, 1990 (Pub. L. No. 101--429; 104 Stat. 945),
effective October 15, 1990; section 308(d)(4) of title III of the Act
of July 30, 2002 (Pub. L. No. 107--204; 116 Stat. 785), effective July
30, 2002]
Court Review of Orders
Sec. 43. (a) Any person or party aggrieved by an order issued by
the Commission under this title may obtain a review of such order in
the court of appeals of the United States within any circuit wherein
such person resides or has his principal place of business, or in the
United States Court of Appeals for the District of Columbia, by filing
in such court within sixty days after the entry of such order, a
written petition praying that the order of the Commission be modified
or set aside in whole or in part. A copy of such petition shall be
forthwith transmitted by the clerk of the court to any member of the
Commission or any officer thereof designated by the Commission for that
purpose, and thereupon the Commission shall file in the court the
record upon which the order complained of was entered, as provided in
section 2112 of title 28, United States Code. Upon the filing of such
petition such court shall have jurisdiction, which upon the filing of
the record shall be exclusive, to affirm, modify, or set aside such
order, in whole or in part. No objection to the order of the Commission
shall be considered by the court unless such
{{8-30-02 p.9342}}objection shall
have been urged before the Commission or unless there were reasonable
grounds for failure so to do. The findings of the Commission as to the
facts, if supported by substantial evidence, shall be conclusive. If
application is made to the court for leave to adduce additional
evidence, and it is shown to the satisfaction of the court that such
additional evidence is material and that there were reasonable grounds
for failure to adduce such evidence in the proceeding before the
Commission, the court may order such additional evidence to be taken
before the Commission and to be adduced upon the hearing in such manner
and upon such terms and conditions as to the court may seem proper. The
Commission may modify its findings as to the facts by reason of the
additional evidence so taken, and it shall file with the court such
modified or new findings, which, if supported by substantial evidence,
shall be conclusive, and its recommendation, if any, for the
modification or setting aside of the original order. The judgment and
decree of the court affirming, modifying, or setting aside, in whole or
in part, any such order of the Commission shall be final, subject to
review by the Supreme Court of the United States upon certiorari or
certification as provided in section 1254 of title 28, United States
Code.
(b) The commencement of proceedings under subsection (a) to review
an order of the Commission issued under section 8(e) shall operate as a
stay of the Commission's order unless the court otherwise orders. The
commencement of proceedings under subsection (a) to review an order of
the Commission issued under any provision of this title other than
section 8(e) shall not operate as a stay of the Commission's order
unless the court specifically so orders.
[Codified to 15 U.S.C. 80a--42]
[Source: Section 43 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 844); effective November 1, 1940, as amended by
section 32(a) of the Act of June 25, 1948 (Pub. L. No. 772; 62 Stat.
991), effective September 1, 1948; section 127 of the Act of May 24,
1949 (Pub. L. No. 72; 63 Stat. 107), effective May 24, 1949; section 25
of the Act of August 28, 1958 (Pub. L. 85--791; 72 Stat. 949),
effective August 28, 1958; section 21 of the Act of December 14, 1970
(Pub. L. No. 91--547; 84 Stat. 1430), effective December 14, 1970]
Jurisdiction of Offenses and
Suits
Sec. 44. The district courts of the United States and the United
States courts of any Territory or other place subject to the
jurisdiction of the United States shall have jurisdiction of violations
of this title or the rules, regulations, or orders thereunder, and,
concurrently with State and Territorial courts, of all suits in equity
and actions at law brought to enforce any liability or duty created by,
or to enjoin any violation of, this title or the rules, regulations, or
orders thereunder. Any criminal proceeding may be brought in the
district wherein any act or transaction constituting the violation
occurred. A criminal proceeding based upon a violation of
section 34, or upon a failure
to file a report or other document required to be filed under this
title, may be brought in the district wherein the defendant is an
inhabitant or maintains his principal office or place of business. Any
suit or action to enforce any liability or duty created by, or to
enjoin any violation of, this title or rules, regulations, or orders
thereunder, may be brought in any such district or in the district
wherein the defendant is an inhabitant or transacts business, and
process in such cases may be served in any district of which the
defendant is an inhabitant or transacts business or wherever the
defendant may be found. Judgments and decrees so rendered shall be
subject to review as provided in sections 1254, 1291, 1292, and 1294 of
title 28, United States Code. No costs shall be assessed for or against
the Commission in any proceeding under this title brought by or against
the Commission in any court. The Commission may intervene as a party in
any action or suit to enforce any liability or duty created by, or to
enjoin any noncompliance with, section
36(b) of this title at any stage of such action or suit prior
to final judgment therein.
[Codified to 15 U.S.C. 80a--43]
{{2-28-91 p.9342.01}}
[Source: Section 44 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 844), effective November 1, 1940, as amended by
section 22 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84
Stat. 1430), effective December 14, 1970]
Information Filed with
Commission
Sec. 45. (a) The information contained in any registration
statement, application, report, or other document filed with the
Commission pursuant to any provision of this title or of any rule or
regulation thereunder (as distinguished from any information
or document transmitted to the Commission) shall be made available
to the public, unless and except insofar as the Commission, by rules
and regulations upon its own motion, or by order upon application,
finds that public disclosure is neither necessary nor appropriate in
the public interest or for the protection of investors. Except as
provided in section 24(c) of the Securities Exchange Act of 1934, it
shall be unlawful for any member, officer, or employee of the
Commission to use for personal benefit, or to disclose to any person
other than an official or employee of the United States or of a State,
for official use, or for any such official or employee to use for
personal benefit, any information contained in any document so filed or
transmitted, if such information is not available to the public.
(b) Photostatic or other copies of information contained in
documents filed with the Commission under this title and made available
to the public shall be furnished any person at such reasonable charge
and under such reasonable limitations as the Commission shall
prescribe.
[Codified to 15 U.S.C. 80a--44]
[Source: Section 45 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 845), effective November 1, 1940, as amended by
section 202(b)(1) of title II of the Act of November 15, 1990 (Pub. L.
No. 101--550; 104 Stat. 2715), effective November 15, 1990]
Annual Reports of Commission; Employees of the
Commission
Sec. 46. (a) The Commission shall submit annually a report to the
Congress covering the work of the Commission for the preceding year and
including such information, data, and recommendations for further
legislation in connection with the matters covered by this title as it
may find advisable.
(b) The provisions of section
4(b) of the Securities Exchange Act of 1934 shall be applicable
with respect to the power of the Commission--
(1) to appoint and fix the compensation of such employees as may
be necessary for carrying out its functions under this title, and
(2) to lease and allocate such real property as may be necessary
for carrying out its functions under this title.
[Codified to 15 U.S.C. 80a--45]
[Source: Section 46 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 845), effective November 1, 1940, as
amended by section 1106(a) of title XI of the Act of October 28, 1949
(Pub. L. No. 429; 63 Stat. 972), effective October 28, 1949; section
104(c) of title I of the Act of November 15, 1990 (Pub. L. No.
101--550; 104 Stat. 2714), effective November 15, 1990]
{{12-31-07 p.9343}}
Validity of Contracts
Sec. 47. (a) Any condition, stipulation, or provision binding any
person to waive compliance with any provision of this title or with any
rule, regulation, or order thereunder shall be void.
(b)(1) A contract that is made, or whose performance involves, a
violation of this title, or of any rule, regulation, or order
thereunder, is unenforceable by either party (or by a nonparty to the
contract who acquired a right under the contract with knowledge of the
facts by reason of which the making or performance violated or would
violate any provision of this title or of any rule, regulation, or
order thereunder) unless a court finds that under the circumstances
enforcement would produce a more equitable result than non-enforcement
and would not be inconsistent with the purposes of this title.
(2) To the extent that a contract described in paragraph (1) has
been performed, a court may not deny rescission at the instance of any
party unless such court finds that under the circumstances the denial
of rescission would produce a more equitable result than its grant and
would not be inconsistent with the purposes of this title.
(3) This subsection shall not apply (A) to the lawful portion of
a contract to the extent that it may be severed from the unlawful
portion of the contract, or (B) to preclude recovery against any person
for unjust enrichment.
[Codified to 15 U.S.C. 80a--46]
[Source: Section 47 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 845), effective November 1, 1940, as amended by
section 104 of title I of the Act of October 21, 1980 (Pub. L. No.
96-477; 94 Stat. 2277), effective October 21, 1980]
Liability of Controlling Persons; Preventing Compliance with
Title
Sec. 48. (a) It shall be unlawful for any person, directly or
indirectly, to cause to be done any act or thing through or by means of
any other person which it would be unlawful for such person to do under
the provisions of this title or any rule, regulation, or order
thereunder.
(b) It shall be unlawful for any person without just cause to
hinder, delay, or obstruct the making, filing, or keeping of any
information, document, report, record, or account required to be made,
filed, or kept under any provision of this title or any rule,
regulation, or order thereunder.
[Codified to 15 U.S.C. 80a--47]
[Source: Section 48 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 846), effective November 1, 1940]
Penalties
Sec. 49. Any person who willfully violates any provision of this
title or of any rule, regulation, or order hereunder, or any person who
willfully in any registration statement, application, report, account,
record, or other document filed or transmitted pursuant to this title
or the keeping of which is required pursuant to
section 31(a) makes any untrue
statement of a material fact or omits to state any material fact
necessary in order to prevent the statements made therein from being
materially misleading in the light of the circumstances under which
they were made, shall upon conviction be fined not more than $10,000 or
imprisoned not more than five years, or both; but no person shall be
convicted under this section for the violation of any rule, regulation,
or order if he proves that he had no actual knowledge of such rule,
regulation, or order.
[Codified to 15 U.S.C. 80a--48]
[Source: Section 49 of title I of the Act of August 22,
1940 (Pub. L. No. 768; 54 Stat. 846), effective November 1, 1940, as
amended by section 27(e) of the Act of June 4, 1975 (Pub. L. No.
94--29; 89 Stat. 163), effective June 4, 1975]
{{12-31-07 p.9344}}
Effect on Existing Law
Sec. 50. Except where specific provision is made to the contrary,
nothing in this title shall affect (1) the jurisdiction of the
Commission under the Securities Act of 1933, the Securities Exchange
Act of 1934, the Public Utility Holding Company Act of 1935, the Trust
Indenture Act of 1939, or title II of this Act, over any person,
security, or transaction, or (2) the rights, obligations, duties, or
liabilities of any person under such Acts; nor shall anything in this
title affect the jurisdiction of any other commission, board, agency,
or officer of the United States or of any State or political
subdivision of any State, over any person, security, or transaction,
insofar as such jurisdiction does not conflict with any provision of
this title or of any rule, regulation, or order hereunder.
[Codified to 15 U.S.C. 80a--49]
[Source: Section 50 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 846), effective November 1, 1940]
Separability of Provisions
Sec. 51. If any provision of this title or any provision
incorporated in this title by reference, or the application of any such
provision to any person or circumstances, shall be held invalid, the
remainder of this title and the application of any such provision to
person or circumstances other than those as to which it is held invalid
shall not be affected thereby.
[Codified to 15 U.S.C. 80a--50]
[Source: Section 51 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 846), effective November 1, 1940]
Short Title
Sec. 52. This title may be cited as the "Investment Company Act
of 1940."
[Codified to 15 U.S.C. 80a--51]
[Source: Section 52 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 847), effective November 1, 1940]
Effective Date
Sec. 53. The effective date of the provisions of this title,
so far as the same relate to faceamount certificates or to
face-amount certificate companies, is January 1, 1941. The effective
date of provisions hereof, insofar as the same do not apply to
face-amount certificates or face-amount certificate companies is
November 1, 1940. Except as herein otherwise provided, every provision
of this title shall take effect on November 1, 1940.
[Codified to 15 U.S.C. 80a--52]
[Source: Section 53 of title I of the Act of August 22, 1940 (Pub.
L. No. 768; 54 Stat. 847), effective November 1, 1940, as amended by
section 624 of title VI of the Act of December 4, 1987 (Pub. L. No.
100--181; 101 Stat. 1262), effective December 4, 1987]
Election to be Regulated as a Business Development
Company
Sec. 54. (a) Any company defined in section 2(a)(48)(A) and (B)
may elect to be subject to the provisions of sections 55 through 65 by
filing with the Commission a notification of election, if such
company--
(1) has a class of its equity securities registered under
section 12 of the Securities
Exchange Act of 1934; or
(2) has filed a registration statement pursuant to section 12 of
the Securities Exchange Act of 1934 for a class of its equity
securities.
(b) The Commission may, by rule, prescribe the form and manner in
which notification of election under this section shall be given. A
business development company shall be
{{2-28-97 p.9345}}deemed to be
subject to sections 55 through 65 upon receipt by the Commission of
such notification of election.
(c) Whenever the Commission finds, on its own motion or upon
application, that a business development company which has filed a
notification of election pursuant to subsection (a) of this section has
ceased to engage in business, the Commission shall so declare by order
revoking such company's election. Any business development company may
voluntarily withdraw its election under subsection (a) by filing a
notice of withdrawal of election with the Commission, in a form and
manner which the Commission may, by rule, prescribe. Such withdrawal
shall be effective immediately upon receipt by the Commission.
[Codified to 15 U.S.C. 80a--53]
[Source: Section 54 of title I of the Act of August 22, 1940 (Pub.
L. No. 768) effective November 1, 1940, as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2278), effective October 21, 1980, as amended by section 625 of title
VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat.
1262), effective December 4, 1987]
Functions and Activities of Business Development
Companies
Sec. 55. (a) It shall be unlawful for a business development
company to acquire any assets (other than those described in paragraphs
(1) through (7) of this subsection) unless, at the time the acquisition
is made, assets described in paragraphs (1) through (6) below represent
at least 70 per centum of the value of its total assets (other than
assets described in paragraph (7) below):
(1) securities purchased, in transactions not involving any
public offering or in such other transactions as the Commission may, by
rule, prescribe if it finds that enforcement of this title and of the
Securities Act of 1933 with respect to such transactions is not
necessary in the public interest or for the protection of investors by
reason of the small amount, or the limited nature of the public
offering, involved in such transactions--
(A) from the issuer of such securities, which issuer is an
eligible portfolio company, from any person who is, or who within the
preceeding thirteen months has been, an affiliated person of such
eligible portfolio company, or from any other person, subject to such
rules and regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors;
or
(B) from the issuer of such securities, which issuer is described
in section 2(a)(46)(A) and (B) but is not an eligible portfolio company
because it has issued a 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, or from any person who is an officer
or employee of such issuer, if--
(i) at the time of the purchase, the business development company
owns at least 50 per centum of--
(I) the greatest number of equity securities of such issuer and
securities convertible into or exchangeable for such securities; and
(II) the greatest amount of debt securities of such issuer, held
by such business development company at any point in time during the
period when such issuer was an eligible portfolio company, except that
options, warrants, and similar securities which have by their terms
expired and debt securities which have been converted, or repaid or
prepaid in the ordinary course of business or incident to a public
offering of securities of such issuer, shall not be considered to have
been held by such business development company for purposes of this
requirement; and
(ii) the business development company is one of the 20 largest
holders of record of such issuer's outstanding voting
securities;
{{2-28-97 p.9346}}
(2) securities of any eligible portfolio company with respect to
which the business development company satisfies the requirements of
section 2(a)(46)(C)(ii);
(3) securities purchased in transactions not involving any public
offering from an issuer described in sections 2(a)(46)(A) and (B) or
from a person who is, or who within the preceding thirteen months has
been an affiliated person of such issuer, or from any person in
transactions incident thereto, if such securities were--
(A) issued by an issuer that is, or was immediately prior to the
purchase of its securities by the business development company, in
bankruptcy proceedings, subject to reorganization under the supervision
of a court of competent jurisdiction, or subject to a plan or
arrangement resulting from such bankruptcy proceedings or
reorganization;
(B) issued by an issuer pursuant to or in consummation of such a
plan or arrangement; or
(C) issued by an issuer that, immediately prior to the purchase
of such issuer's securities by the business development company, was
not in bankruptcy proceedings but was unable to meet its obligations as
they came due without material assistance other than conventional
lending or financing arrangements;
(4) securities of eligible portfolio companies purchased from any
person in transactions not involving any public offering, if there is
no ready market for such securities and if immediately prior to such
purchase the business development company owns at least 60 per centum
of the outstanding equity securities of such issuer (giving effect to
all securities presently convertible into or exchangeable for equity
securities of such issuer as if such securities were so converted or
exchanged);
(5) securities received in exchange for or distributed on or with
respect to securities described in paragraphs (1) through (4) of this
subsection, or pursuant to the exercise of options, warrants, or rights
relating to securities described in such paragraphs;
(6) cash, cash items, Government securities, or high quality debt
securities maturing in one year or less from the time of investment in
such high quality debt securities; and
(7) office furniture and equipment, interests in real estate and
leasehold improvements and facilities maintained to conduct the
business operations of the business development company, deferred
organization and operating expenses, and other noninvestment assets
necessary and appropriate to its operations as a business development
company, including notes of indebtedness of directors, officers,
employees, and general partners held by a business development company
as payment for securities of such company issued in connection with an
executive compensation plan described in section 57(j).
(b) For purposes of this section, the value of a business
development company's assets shall be determined as of the date of the
most recent financial statements filed by such company with the
Commission pursuant to section 13 of the Securities Exchange Act of
1934, and shall be determined no less frequently than annually.
[Codified to 15 U.S.C. 80a--54]
[Source: Section 55 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940, as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2278), effective October 21, 1980; as amended by section 626 of title
VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat.
1263), effective December 4, 1987; section 505 of title V of the Act of
October 11, 1996, (Pub. L. No. 104--290; 110 Stat. 3446), effective
October 11, 1996]
Qualifications of Directors
Sec. 56. (a) A majority of a business development company's
directors or general partners shall be persons who are not interested
persons of such company.
(b) If, by reason of the death, disqualification, or bona fide
resignation of any director or general partner, a business development
company does not meet the requirements of subsection (a) of this
section, or the requirements of section
15(f)(1) of this title with respect to directors, the operation
of such provisions shall be suspended for a period of 90
{{2-28-97 p.9346.01}}days or for such
longer period as the Commission may prescribe, upon its own motion or
by order upon application, as not inconsistent with the protection of
investors.
[Codified to 15 U.S.C. 80a--55]
{{12-31-07 p.9347}}
[Source: Section 56 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940, as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2280), effective October 21, 1980]
Transactions with Certain
Affiliates
Sec. 57. (a) It shall be unlawful for any person who is related to
a business development company in a manner described in subsection (b)
of this section, acting as principal--
(1) knowingly to sell any security or other property to such
business development company or to any company controlled by such
business development company, unless such sale involves solely (A)
securities of which the buyer is the issuer, or (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;
(2) knowingly to purchase from such business development company
or from any company controlled by such business development company,
any security or other property (except securities of which the seller
is the issuer);
(3) knowingly to borrow money or other property from such
business development company or from any company controlled by such
business development company (unless the borrower is controlled by the
lender), except as permitted in section
21(b) or section 62; or
(4) knowingly to effect any transaction in which such business
development company or a company controlled by such business
development company is a joint or a joint and several participant with
such person in contravention of such rules and regulations as the
Commission may prescribe for the purpose of limiting or preventing
participation by such business development company or controlled
company on a basis less advantageous than that of such person, except
that nothing contained in this paragraph shall be deemed to preclude
any person from acting as manager of any underwriting syndicate or
other group in which such business development company or controlled
company is a participant and receiving compensation therefor.
(b) The provisions of subsection (a) of this section shall apply to
the following persons:
(1) Any director, officer, employee, or member of an advisory
board of a business development company or any person (other than the
business development company itself) who is, within the meaning of
section 2(a)(3)(C) of this title, an affiliated person of any such
person specified in this paragraph.
(2) Any investment adviser or promoter of, general partner in,
principal underwriter for, or person directly or indirectly either
controlling, controlled by, or under common control with, a business
development company (except the business development company itself and
any person who, if it were not directly or indirectly controlled by the
business development company, would not be directly or indirectly under
the control of a person who controls the business development company),
or any person who is, within the meaning of section 2(a)(3)(C) or (D),
an affiliated person of any such person specified in this paragraph.
(c) Notwithstanding paragraphs (1), (2), and (3) of 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 such paragraphs. 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 of the business development company or its
shareholders or partners on the part of any person concerned;
(2) the proposed transaction is consistent with the policy of the
business development company as recited in the filings made by such
company with the Commission under the Securities Act of 1933, its
registration statement and reports filed under the Securities Act of
1934, and its reports to shareholders or partners; and
(3) the proposed transaction is consistent with the general
purposes of this title.
{{12-31-07 p.9348}}
(d) It shall be unlawful for any person who is related to a
business development company in the manner described in subsection (e)
of this section and who is not subject to the prohibitions of
subsection (a) of this section, acting as principal--
(1) knowingly to sell any security or other property to such
business development company or to any company controlled by such
business development company, unless such sale involves solely (A)
securities of which the buyer is the issuer, or (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;
(2) knowingly to purchase from such business development company
or from any company controlled by such business development company,
and security or other property (except securities of which the seller
is the issuer);
(3) knowingly to borrow money or other property from such
business development company or from any company controlled by such
business development company (unless the borrower is controlled by the
lender), except as permitted in section 21(b);
(4) knowingly to effect any transaction in which such business
development company or a company controlled by such business
development company is a joint or a joint and several participant with
such affiliated person in contravention of such rules and regulations
as the Commission may prescribe for the purpose of limiting or
preventing participation by such business development company or
controlled company on a basis less advantageous than that of such
affiliated person, except that nothing contained in this paragraph
shall be deemed to preclude any person from acting as manager of any
underwriting syndicate or other group in which such business
development company or controlled company is a participant and
receiving compensation therefor.
(e) The provisions of subsection (d) of this section shall apply to
the following persons:
(1) Any person (A) who is, within the meaning of
section 2(a)(3)(A), an
affiliated person of a business development company, (B) who is an
executive officer or a director of, or general partner in, any such
affiliated person, or (C) who directly or indirectly either controls,
is controlled by, or is under common control with, such affiliated
person.
(2) Any person who is an affiliated person of a director,
officer, employee, investment adviser, member of an advisory board or
promoter of, principal underwriter for, general partner in, or an
affiliated person of any person directly or indirectly either
controlling or under common control with a business development company
(except the business development company itself and any person who, if
it were not directly or indirectly controlled by the business
development company, would not be directly or indirectly under the
control of a person who controls the business development company).
For purpose[s] of this subsection, the term "executive
officer" means the president, secretary, treasurer, and any vice
president in charge of a principal business function, and any other
person who performs similar policymaking functions.
(f) Notwithstanding subsection (d) of this section, a person
described in subsection (e) may engage in a proposed transaction
described in subsection (d) if such proposed transaction is approved by
the required majority (as defined in subsection (o)) of the directors
of or general partners in the business development company on the basis
that--
(1) the terms thereof, including the consideration to be paid or
received, are reasonable and fair to the shareholders or partners of
the business development company and do not involve overreaching of
such company or its shareholders or partners on the part of any person
concerned;
(2) the proposed transaction is consistent with the interest of
the the shareholders or partners of the business development company
and is consistent with the policy of such company as recited in filings
made by such company with the Commission under the Securities Act of
1933, its registration statement and reports filed under the Securities
Exchange Act of 1934, and its reports to shareholders or partners; and
(3) the directors or general partners record in their minutes and
preserve in their records, for such periods as if such records were
required to be maintained pursuant to
{{12-31-07 p.9349}}section 31(a), a
description of such transaction, their findings, the information or
materials upon which their findings were based, and the basis therefor.
(g) Notwithstanding subsection (a) or (d), 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.
(h) The directors of or general partners in any business
development company shall adopt, and periodically review and update as
appropriate, procedures reasonably designed to ensure that reasonable
inquiry is made, prior to the consummation of any transaction in which
such business development company or a company controlled by such
business development company proposes to participate, with respect to
the possible involvement in the transaction of persons described in
subsections (b) and (e) of this section.
(i) Until the adoption by the Commission of rules or regulations
under subsections (a) and (d) of this section, the rules and
regulations of the Commission under subsections (a) and (d) of section
17 applicable to registered closed-end investment companies shall be
deemed to apply to transactions subject to subsections (a) and (d) of
this section. Any rules or regulations adopted by the Commission to
implement this section shall be no more restrictive than the rules or
regulations adopted by the Commission under
sections 17(a) and (d) that are
applicable to all registered closed-end investment companies.
(j) Notwithstanding subsections (a) and (d) of this section, any
director, officer, or employee of, or general partner in, a business
development company may--
(1) acquire warrants, options, and rights to purchase voting
securities of such business development company, and securities issued
upon the exercise or conversion thereof, pursuant to an executive
compensation plan offered by such company which meets the requirements
of section 61(a)(3)(B); and
(2) borrow money from such business development company for the
purpose of purchasing securities issued by such company pursuant to an
executive compensation plan, if each such loan--
(A) has a term of not more than ten years;
(B) becomes due within a reasonable time, not to exceed sixty
days, after the termination of such person's employment or service;
(C) bears interest at no less than the prevailing rate applicable
to 90-day United States Treasury bills at the time the loan is made;
(D) at all times is fully collateralized (such collateral may
include any securities issued by such business development company);
and
(E)(i) in the case of a loan to any officer or employee of such
business development company (including any officer or employee who is
also a director of such company), is approved by the required majority
(as defined in subsection (o)) of the directors of or general partners
in such company on the basis that the loan is in the best interests of
such company and its shareholders or partners; or
(ii) in the case of a loan to any director of such business
development company who is not also an officer or employee of such
company, or to any general partner in such company, is approved by
order of the Commission, upon application, on the basis that the terms
of the loan are fair and reasonable and do not involve overreaching of
such company or its shareholders or partners.
(k) It shall be unlawful for any person described in subsection
(l)--
(1) acting as agent, to accept from any source any compensation
(other than a regular salary or wages from the business development
company) for the purchase or sale of any property to or for such
business development 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 the business development 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;
{{12-31-07 p.9350}}
(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, by rules and regulations or order in the
public interest and consistent with the protection of investors,
permits a larger commission.
(l) The provisions of subsection (k) of this
section shall apply to the following persons:
(1) Any affiliated person of a business development company.
(2)(A) Any person who is, within the meaning of section
2(a)(3)(B), (C), or (D), an affiliated person of any director, officer,
employee, or member of an advisory board of the business development
company.
(B) Any person who is, within the meaning of
section 2(a)(3)(A), (B), (C),
or (D), an affiliated person of any investment adviser of, general
partner in, or person directly or indirectly either controlling,
controlled by, or, under common control with, the business development
company.
(C) Any person who is, within the meaning of section 2(a)(3)(C),
an affiliated person of any person who is an affiliated person of the
business development company within the meaning of section 2(a)(3)(A).
(m) For purposes of subsections (a) and (d), a person who is a
director, officer, or employee of a party to a transaction and who
receives his usual and ordinary fee or salary for usual and customary
services as a director, officer, or employee from such party shall not
be deemed to have a financial interest or to participate in the
transaction solely by reason of his receipt of such fee or salary.
(n)(1) Notwithstanding subsection (a)(4) of this section, a
business development company may establish and maintain a
profit-sharing plan for its directors, officers, employees, and general
partners and such directors, officers, employees, and general partners
may participate in such profit-sharing plan, if--
(A)(i) in the case of a profit-sharing plan for officers and
employees of the business development company (including any officer or
employee who is also a director of such company), such profit-sharing
plan is approved by the required majority (as defined in subsection
(o)) of the directors of or general partners in such company on the
basis that such plan is reasonable and fair to the shareholders or
partners of such company, does not involve overreaching of such company
or its shareholders or partners on the part of any person concerned,
and is consistent with the interests of the shareholders or partners of
such company; or
(ii) in the case of a profit-sharing plan which includes
one or more directors of the business development company who are not
also officers or employees of such company, or one or more general
partners in such company, such profit-sharing plan is approved by order
of the Commission, upon application, on the basis that such plan is
reasonable and fair to the shareholders or partners of such company,
does not involve overreaching of such company or its shareholders or
partners on the part of any person concerned, and is consistent with
the interests of the shareholders or partners of such company; and
(B) the aggregate amount of benefits which would be paid or
accrued under such plan shall not exceed 20 per centum of the business
development company's net income after taxes in any fiscal year.
(2) This subsection may not be used where the business
development company has outstanding any stock option, warrant, or right
issued as part of an executive compensation plan, including a plan
pursuant to section
61(a)(3)(B), or has an investment adviser registered or
required to be registered under title II of this Act.
(o) The term "required majority", when used with respect to
the approval of a proposed transaction, plan, or arrangement, means
both a majority of a business development company's directors or
general partners who have no financial interest in such transaction,
plan, or arrangement and a majority of such directors or general
partners who are not interested persons of such company.
{{4-29-88 p.9350.01}}
[Codified to 15 U.S.C. 80a--56]
[Source: Section 57 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940, as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2280), effective October 21, 1980, as amended by section 627 of title
VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat.
1263), effective December 4, 1987]
Changes in Investment Policy
Sec. 58. No business development company shall, unless authorized
by the vote of a majority of its outstanding voting securities or
partnership interests, change the nature of its business so as to cease
to be, or to withdraw its election as, a business development company.
[Codified to 15 U.S.C. 80a--57]
{{2-28-97 p.9351}}
[Source: Section 58 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2285), effective October 21, 1980]
Incorporation of Provisions
Sec. 59. Notwithstanding the exemption set forth in section 6(f),
sections 1, 2, 3, 4, 5, 6, 9, 10(f), 15(a), (c), and (f), 16(b), 17(f)
through (j), 19(a), 20(b), 32(a) and (c), 33 through 47, and 49 through
53 of this title shall apply to a business development company to the
same extent as if it were a registered closed-end investment company.
[Codified to 15 U.S.C. 80a--58]
[Source: Section 59 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2285), effective October 21, 1980]
Functions and Activities of Business Development
Companies
Sec. 60. Notwithstanding the exemption set forth in
section 6(f),
section 12 shall apply to a
business development company to the same extent as if it were a
registered closed-end investment company, except that the Commission
shall not prescribe any rule, regulation, or order pursuant to section
12(a)(1) governing the circumstances in which a business development
company may borrow from a bank in order to purchase any security.
[Codified to 15 U.S.C. 80a--59]
[Source: Section 60 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2285), effective October 21, 1980]
Capital Structure
Sec. 61. (a) Notwithstanding the exemption set forth in
section 6(f),
section 18 shall apply to a
business development company to the same extent as if it were a
registered closed-end investment company, except as follows:
(1) The asset coverage requirements of section 18(a)(1)(A) and
(B) applicable to business development companies shall be 200 per
centum.
(2) Notwithstanding section 18(c), a business development company
may issue more than one class of senior security representing
indebtedness.
(A) A privately held or guaranteed by the Small Business
Administration, or banks, insurance companies, or other
institutional investors;
(B) not intended to be publicly distributed.
(3) Notwithstanding section 18(d)--
(A) a business development company may issue warrants, options,
or rights to subscribe or convert to voting securities of such company,
accompanied by securities if--
(i) such warrants, options, or rights expire by their terms
within ten years;
(ii) such warrants, options, or rights are not separately
transferable unless no class of such warrants, options, or rights and
the securities accompanying them has been publicly distributed;
(iii) the exercise or conversion price is not less than the
current market value at the date of issuance, or if no such market
value exists, the current net asset value of such voting securities;
and
(iv) the proposal to issue such securities is authorized by the
shareholders or partners of such business development company, and such
issuance is approved by the required majority (as defined in
section 57(o)) of the directors
of or general partners in such company on the basis that such issuance
is in the best interests of such company and its shareholders or
partners;
(B) a business development company may issue, to its directors,
officers, employees, and general partners, warrants, options, and
rights to purchase voting securities of such company pursuant to an
executive compensation plan, if--
{{2-28-97 p.9352}}
(i)(I) in the case of warrants, options, or rights issued to any
officer or employee of such business development company (including any
officer or employee who is also a director of such company), such
securities satisfy the conditions in clauses (i), (iii), and (iv) of
subparagraph (A); or (II) in the case of warrants, options, or rights
issued to any director of such business development company who is not
also an officer or employee of such company, or to any general partner
in such company, the proposal to issue such securities satisfies the
conditions in clauses (i) and (iii) of subparagraph (A), is authorized
by the shareholders or partners of such company, and is approved by
order of the Commission, upon application, on the basis that the terms
of the proposal are fair and reasonable and do not involve overreaching
of such company or its shareholders or partners;
(ii) such securities are not transferable except for disposition
by gift, will, or intestacy;
(iii) no investment adviser of such business development company
receives any compensation described in paragraph (1) of section 205 of
title II of this Act, except to the extent permitted by clause (A) or
(B) of that section; and
(iv) such business development company does not have a
profit-sharing plan described in section 57(n); and
(C) a business development company may issue warrants, options,
or rights to subscribe to, convert to, or purchase voting securities
not accompanied by securities, if--
(i) such warrants, options, or rights satisfy the conditions in
clauses (i) and (iii) of subparagraph (A); and
(ii) the proposal to issue such warrants, options, or rights is
authorized by the shareholders or partners of such business development
company, and such issuance is approved by the required majority (as
defined in section 57(o)) of
the directors of or general partners in such company on the basis that
such issuance is in the best interests of the company and its
shareholders or partners.
Notwithstanding this paragraph, the amount of voting securities
that would result from the exercise of all outstanding warrants,
options, and rights at the time of issuance shall not exceed 25 per
centum of the outstanding voting securities of the business development
company, except that if the amount of voting securities that would
result from the exercise of all outstanding warrants, options, and
rights issued to such company's directors, officers, employees, and
general partners pursuant to any executive compensation plan meeting
the requirements of subparagraph (B) of this paragraph would exceed 15
per centum of the outstanding voting securities of such company, then
the total amount of voting securities that would result from the
exercise of all outstanding warrants, options, and rights at the time
of issuance shall not exceed 20 per centum of the outstanding voting
securities of such company.
(4) For purposes of measuring the asset coverage requirements of
section 18(a), a senior
security created by the guarantee by a business development company of
indebtedness issued by another company shall be the amount of the
maximum potential liability less the fair market value of the net
unencumbered assets (plus the indebtedness which has been guaranteed)
available in the borrowing company whose debts have been guaranteed,
except that a guarantee issued by a business development company of
indebtedness issued by a company which is a wholly-owned subsidiary of
the business development company and is licensed as a small business
investment company under the Small Business Investment Act of 1958
shall not be deemed to be a senior security of such business
development company for purposes of section 18(a) if the amount of the
indebtedness at the time of its issuance by the borrowing company is
itself taken fully into account as a liability by such business
development company, as if it were issued by such business development
company, in determining whether such business development company, at
that time, satisfies the asset coverage requirements of section 18(a).
(b) A business development company shall comply with the provisions
of this section at the time it becomes subject to section 55 through
65, as if it were issuing a security of each class which it has
outstanding at such time.
{{2-28-97 p.9353}}
[Codified to 15 U.S.C. 80a--60]
[Source: Section 61 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2286), effective October 21, 1980; as amended by section 506 of title V
of the Act of October 11, 1996, (Pub. L. No. 104--290; 110 Stat. 3446),
effective October 11, 1996]
Loans
Sec. 62. Notwithstanding the exemption set forth in
section 6(f),
section 21 shall apply to a
business development company to the same extent as if it were a
registered closed-end investment company, except that nothing in that
section shall be deemed to prohibit--
(1) any loan to a director, officer, or employee of, or general
partner in, a business development company for the purpose of
purchasing securities of such company as part of an executive
compensation plan, if such loan meets the requirements of section
57(j); or
(2) any loan to a company controlled by a business development
company, which companies could be deemed to be under common control
solely because a third person controls such business development
company.
[Codified to 15 U.S.C. 80a--61]
[Source: Section 62 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2286), effective October 21, 1980]
Distribution and Repurchase of
Securities
Sec. 63. Notwithstanding the exemption set forth in
section 6(f),
section 23 shall apply to a
business development company to the same extent as if it were a
registered closed-end investment company, except as follows:
(1) The prohibitions of section 23(a)(2) shall not apply to any
company which (A) is a wholly-owned subsidiary of, or directly or
indirectly controlled by, a business development company, and (B)
immediately after the issuance of any of its securities for property
other than cash or securities, will not be an investment company within
the meaning of section 3(a).
(2) Notwithstanding the provisions of section 23(b), a business
development company may sell any common stock of which it is the issuer
at a price below the current net asset value of such stock, and may
sell warrants, options, or rights to acquire any such common stock at a
price below the current net asset value of such stock, if--
(A) the holders of a majority of such business development
company's outstanding voting securities, and the holders of a majority
of such company's outstanding voting securities that are not affiliated
persons of such company, approved such company's policy and practice of
making such sales of securities at the last annual meeting of
shareholders or partners within one year immediately prior to any such
sale, except that the shareholder approval requirements of this
subparagraph shall not apply to the initial public offering by a
business development company of its securities;
(B) a required majority (as defined in
section 57(o)) of the directors
of or general partners in such business development company have
determined that any such sale would be in the best interests of such
company and its shareholders or partners; and
(C) a required majority (as defined in section 57(o)) of the
directors of or general partners in such business development company,
in consultation with the underwriter or underwriters of the offering if
it is to be underwritten, have determined in good faith, and as of a
time immediately prior to the first solicitation by or on behalf of
such company of firm commitments to purchase such securities or
immediately prior to the issuance of such securities, that the price at
which such securities are to be sold is not less than a price which
closely approximates the market value of those securities, less any
distributing commission or discount.
{{2-28-97 p.9354}}
(3) A business development company may sell any common stock of
which it is the issuer at a price below the current net asset value of
such stock upon the exercise of any warrant, option, or right issued in
accordance with section 61(a)(3).
[Codified to 15 U.S.C. 80a--62]
[Source: Section 63 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2288), effective October 21, 1980]
Accounts and Records
Sec. 64. (a) Notwithstanding the exemption set forth in
section 6(f),
section 31 shall apply to a
business development company to the same extent as if it were a
registered closed-end investment company, except that the reference to
the financial statements required to be filed pursuant to section 30
shall be construed to refer to the financial statements required to be
filed by such business development company pursuant to
section 13 of the Securities
Exchange Act of 1934.
(b)(1) In addition to the requirements of subsection (a), a
business development company shall file with the Commission and supply
annually to its shareholders a written statement, in such form and
manner as the Commission may, by rule prescribe, describing the risk
factors involved in an investment in the securities of a business
development company due to the nature of such company's investment
portfolio and capital structure, and shall supply copies of such
statement to any registered broker or dealer upon request.
(2) If the Commission finds it 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,
the Commission may also require, by rule, any person who, acting as
principal or agent, sells a security of a business development company
to inform the purchaser of such securities, at or before the time of
sale, of the existence of the risk statement prepared by such business
development company pursuant to this subsection, and make such risk
statement available on request. The Commission in making such rules and
regulations shall consider among other matters whether any such rule or
regulation would impose any unreasonable burdens on such brokers or
dealers or unreasonably impair the maintenance of fair and orderly
markets.
[Codified to 15 U.S.C. 80a--63]
[Source: Section 64 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2289), effective October 21, 1980; as amended by section 507 of title V
of the Act of October 11, 1996 (Pub. L. No. 104--290; 110 Stat. 3446),
effective October 11, 1996]
Liability of Controlling Persons; Preventing Compliance with
Title
Sec. 65. Notwithstanding the exemption set forth in
section 6(f),
section 48 shall apply to a
business development company to the same extent as if it were a
registered closed-end investment company, except that the provisions of
section 48(a) shall not be construed to require any company which is
not an investment company within the meaning of
section 3(a) to comply with the
provisions of this title which are applicable to a business development
company solely because such company is a wholly-owned subsidiary of, or
directly or indirectly controlled by, a business development company.
[Codified to 15 U.S.C. 80a--64]
[Source: Section 65 of title I of the Act of August 22, 1940 (Pub.
L. No. 768), effective November 1, 1940; as added by section 105 of
title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat.
2289), effective October 21, 1980]
[The page following this is 9363.]
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