17 CFR 270.38a-1

§ 270.38a–1

17 CFR Ch. II (4–1–07 Edition)

(i) To invest, under normal circumstances, at least 80% of the value
of its Assets in investments the income
from which is exempt, as applicable,
from federal income tax or from both
federal and state income tax; or
(ii) To invest, under normal circumstances, its Assets so that at least
80% of the income that it distributes
will be exempt, as applicable, from federal income tax or from both federal
and state income tax.
(b) The requirements of paragraphs
(a)(2) through (a)(4) of this section
apply at the time a Fund invests its
Assets, except that these requirements
shall not apply to any unit investment
trust (as defined in section 4(2) of the
Act (15 U.S.C. 80a–4(2))) that has made
an initial deposit of securities prior to
July 31, 2002. If, subsequent to an investment, these requirements are no
longer met, the Fund’s future investments must be made in a manner that
will bring the Fund into compliance
with those paragraphs.
(c) A policy to provide a Fund’s
shareholders with notice of a change in
a Fund’s investment policy as described in paragraphs (a)(2)(ii) and
(a)(3)(iii) of this section must provide
that:
(1) The notice will be provided in
plain English in a separate written document;
(2) The notice will contain the following prominent statement, or similar clear and understandable statement, in bold-face type: ‘‘Important
Notice Regarding Change in Investment Policy’’; and
(3) The statement contained in paragraph (c)(2) of this section also will appear on the envelope in which the notice is delivered or, if the notice is delivered separately from other communications to investors, that the statement will appear either on the notice
or on the envelope in which the notice
is delivered.
(d) For purposes of this section:
(1) Fund means a registered investment company and any series of the investment company.
(2) Assets means net assets, plus the
amount of any borrowings for investment purposes.
[66 FR 8518, Feb. 1, 2001; 66 FR 14828, Mar. 14,
2001]

§ 270.38a–1 Compliance
procedures
and practices of certain investment
companies.
(a) Each registered investment company and business development company (‘‘fund’’) must:
(1) Policies and procedures. Adopt and
implement written policies and procedures reasonably designed to prevent
violation of the Federal Securities
Laws by the fund, including policies
and procedures that provide for the
oversight of compliance by each investment adviser, principal underwriter,
administrator, and transfer agent of
the fund;
(2) Board approval. Obtain the approval of the fund’s board of directors,
including a majority of directors who
are not interested persons of the fund,
of the fund’s policies and procedures
and those of each investment adviser,
principal underwriter, administrator,
and transfer agent of the fund, which
approval must be based on a finding by
the board that the policies and procedures are reasonably designed to prevent violation of the Federal Securities
Laws by the fund, and by each investment adviser, principal underwriter,
administrator, and transfer agent of
the fund;
(3) Annual review. Review, no less frequently than annually, the adequacy of
the policies and procedures of the fund
and of each investment adviser, principal underwriter, administrator, and
transfer agent and the effectiveness of
their implementation;
(4) Chief compliance officer. Designate
one individual responsible for administering the fund’s policies and procedures adopted under paragraph (a)(1) of
this section:
(i) Whose designation and compensation must be approved by the fund’s
board of directors, including a majority
of the directors who are not interested
persons of the fund;
(ii) Who may be removed from his or
her responsibilities by action of (and
only with the approval of) the fund’s
board of directors, including a majority
of the directors who are not interested
persons of the fund;
(iii) Who must, no less frequently
than annually, provide a written report
to the board that, at a minimum, addresses:

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Securities and Exchange Commission

§ 270.45a–1

(A) The operation of the policies and
procedures of the fund and each investment adviser, principal underwriter,
administrator, and transfer agent of
the fund, any material changes made
to those policies and procedures since
the date of the last report, and any material changes to the policies and procedures recommended as a result of the
annual review conducted pursuant to
paragraph (a)(3) of this section; and
(B) Each Material Compliance Matter
that occurred since the date of the last
report; and
(iv) Who must, no less frequently
than annually, meet separately with
the fund’s independent directors.
(b) Unit investment trusts. If the fund
is a unit investment trust, the fund’s
principal underwriter or depositor
must approve the fund’s policies and
procedures and chief compliance officer, must receive all annual reports,
and must approve the removal of the
chief compliance officer from his or her
responsibilities.
(c) Undue influence prohibited. No officer, director, or employee of the fund,
its investment adviser, or principal underwriter, or any person acting under
such person’s direction may directly or
indirectly take any action to coerce,
manipulate, mislead, or fraudulently
influence the fund’s chief compliance
officer in the performance of his or her
duties under this section.
(d) Recordkeeping. The fund must
maintain:
(1) A copy of the policies and procedures adopted by the fund under paragraph (a)(1) that are in effect, or at any
time within the past five years were in
effect, in an easily accessible place;
and
(2) Copies of materials provided to
the board of directors in connection
with their approval under paragraph
(a)(2) of this section, and written reports provided to the board of directors
pursuant to paragraph (a)(4)(iii) of this
section (or, if the fund is a unit investment trust, to the fund’s principal underwriter or depositor, pursuant to
paragraph (b) of this section) for at
least five years after the end of the fiscal year in which the documents were
provided, the first two years in an easily accessible place; and

(3) Any records documenting the
fund’s annual review pursuant to paragraph (a)(3) of this section for at least
five years after the end of the fiscal
year in which the annual review was
conducted, the first two years in an
easily accessible place.
(e) Definitions. For purposes of this
section:
(1) Federal Securities Laws means the
Securities Act of 1933 (15 U.S.C. 77a–
aa), the Securities Exchange Act of
1934 (15 U.S.C. 78a–mm), the SarbanesOxley Act of 2002 (Pub. L. 107–204, 116
Stat. 745 (2002)), the Investment Company Act of 1940 (15 U.S.C. 80a), the Investment Advisers Act of 1940 (15
U.S.C. 80b), Title V of the GrammLeach-Bliley Act (Pub. L. No. 106–102,
113 Stat. 1338 (1999), any rules adopted
by the Commission under any of these
statutes, the Bank Secrecy Act (31
U.S.C. 5311–5314; 5316–5332) as it applies
to funds, and any rules adopted thereunder by the Commission or the Department of the Treasury.
(2) A Material Compliance Matter
means any compliance matter about
which the fund’s board of directors
would reasonably need to know to
oversee fund compliance, and that involves, without limitation:
(i) A violation of the Federal securities laws by the fund, its investment
adviser, principal underwriter, administrator or transfer agent (or officers,
directors, employees or agents thereof),
(ii) A violation of the policies and
procedures of the fund, its investment
adviser, principal underwriter, administrator or transfer agent, or
(iii) A weakness in the design or implementation of the policies and procedures of the fund, its investment adviser, principal underwriter, administrator or transfer agent.
[68 FR 74729, Dec. 24, 2003]

§ 270.45a–1 Confidential treatment of
names and addresses of dealers of
registered investment company securities.
(a) Exhibits calling for the names and
addresses of dealers to or through
whom principal underwriters of registered investment companies are currently offering securities and which are

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