15 USC 80a-6(c)

Page 387

§ 80a–6

TITLE 15—COMMERCE AND TRADE

(d) Definitions
For purposes of this section—
(1) the term ‘‘charitable organization’’
means an organization described in paragraphs
(1) through (5) of section 170(c) or section
501(c)(3) of title 26;
(2) the term ‘‘security’’ has the same meaning as in section 78c of this title; and
(3) the term ‘‘State’’ means each of the several States of the United States, the District
of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern Mariana Islands.
(Pub. L. 104–62, § 6, Dec. 8, 1995, 109 Stat. 685.)
CODIFICATION
Section was enacted as part of the Philanthropy Protection Act of 1995, and not as part of the Investment
Company Act of 1940 which comprises this subchapter.
EFFECTIVE DATE
Section applicable as defense to any claim in administrative and judicial actions pending on or commenced
after Dec. 8, 1995, that any person, security, interest, or
participation of type described in Pub. L. 104–62 is subject to the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of
1940, the Investment Advisers Act of 1940, or any State
statute or regulation preempted as provided in this section, except as specifically provided in such statutes,
see section 7 of Pub. L. 104–62, set out as an Effective
Date of 1995 Amendment note under section 77c of this
title.

§ 80a–4. Classification of investment companies
For the purposes of this subchapter, investment companies are divided into three principal
classes, defined as follows:
(1) ‘‘Face-amount certificate company’’
means an investment company which is engaged or proposes to engage in the business of
issuing face-amount certificates of the installment type, or which has been engaged in such
business and has any such certificate outstanding.
(2) ‘‘Unit investment trust’’ means an investment company which (A) is organized
under a trust indenture, contract of custodianship or agency, or similar instrument, (B) does
not have a board of directors, and (C) issues
only redeemable securities, each of which represents an undivided interest in a unit of specified securities; but does not include a voting
trust.
(3) ‘‘Management company’’ means any investment company other than a face-amount
certificate company or a unit investment
trust.
(Aug. 22, 1940, ch. 686, title I, § 4, 54 Stat. 799.)
TRANSFER OF FUNCTIONS
For transfer of functions of Securities and Exchange
Commission, with certain exceptions, to Chairman of
such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2,
eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under
section 78d of this title.

§ 80a–5. Subclassification of management companies
(a) Open-end and closed-end companies
For the purposes of this subchapter, management companies are divided into open-end and
closed-end companies, defined as follows:
(1) ‘‘Open-end company’’ means a management company which is offering for sale or has
outstanding any redeemable security of which
it is the issuer.
(2) ‘‘Closed-end company’’ means any management company other than an open-end
company.
(b) Diversified and non-diversified companies
Management companies are further divided
into diversified companies and non-diversified
companies, defined as follows:
(1) ‘‘Diversified company’’ means a management company which meets the following requirements: At least 75 per centum of the
value of its total assets is represented by cash
and cash items (including receivables), Government securities, securities of other investment companies, and other securities for the
purposes of this calculation limited in respect
of any one issuer to an amount not greater in
value than 5 per centum of the value of the
total assets of such management company and
to not more than 10 per centum of the outstanding voting securities of such issuer.
(2) ‘‘Non-diversified company’’ means any
management company other than a diversified
company.
(c) Loss of status as diversified company
A registered diversified company which at the
time of its qualification as such meets the requirements of paragraph (1) of subsection (b) of
this section shall not lose its status as a diversified company because of any subsequent discrepancy between the value of its various investments and the requirements of said paragraph,
so long as any such discrepancy existing immediately after its acquisition of any security or
other property is neither wholly nor partly the
result of such acquisition.
(Aug. 22, 1940, ch. 686, title I, § 5, 54 Stat. 800;
Pub. L. 100–181, title VI, § 607, Dec. 4, 1987, 101
Stat. 1261.)
AMENDMENTS
1987—Subsec. (a)(2). Pub. L.
‘‘Closed-end’’ for ‘‘Close-end’’.

100–181

substituted

TRANSFER OF FUNCTIONS
For transfer of functions of Securities and Exchange
Commission, with certain exceptions, to Chairman of
such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2,
eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under
section 78d of this title.

§ 80a–6. Exemptions
(a) Exemption of specified investment companies
The following investment companies are exempt from the provisions of this subchapter:
(1) Any company organized or otherwise created under the laws of and having its principal
office and place of business in Puerto Rico, the
Virgin Islands, or any other possession of the

§ 80a–6

TITLE 15—COMMERCE AND TRADE

United States; but such exemption shall terminate if any security of which such company
is the issuer is offered for sale or sold after the
effective date of this subchapter, by such company or an underwriter therefor, to a resident
of any State other than the State in which
such company is organized.
(2) Any company which since the effective
date of this subchapter or within five years
prior to such date has been reorganized under
the supervision of a court of competent jurisdiction, if (A) such company was not an investment company at the commencement of
such reorganization proceedings, (B) at the
conclusion of such proceedings all outstanding
securities of such company were owned by
creditors of such company or by persons to
whom such securities were issued on account
of creditors’ claims, and (C) more than 50 per
centum of the voting securities of such company, and securities representing more than 50
per centum of the net asset value of such company, are currently owned beneficially by not
more than twenty-five persons; but such exemption shall terminate if any security of
which such company is the issuer is offered for
sale or sold to the public after the conclusion
of such proceedings by the issuer or by or
through any underwriter. For the purposes of
this paragraph, any new company organized as
part of the reorganization shall be deemed the
same company as its predecessor; and beneficial ownership shall be determined in the
manner provided in section 80a–3(c)(1) of this
title.
(3) Any issuer as to which there is outstanding a writing filed with the Commission by the
Federal Savings and Loan Insurance Corporation stating that exemption of such issuer
from the provisions of this subchapter is consistent with the public interest and the protection of investors and is necessary or appropriate by reason of the fact that such issuer
holds or proposes to acquire any assets or any
product of any assets which have been segregated (A) from assets of any company which
at the filing of such writing is an insured institution within the meaning of section
1724(a) 1 of title 12, or (B) as a part of or in connection with any plan for or condition to the
insurance of accounts of any company by said
corporation or the conversion of any company
into a Federal savings and loan association.
Any such writing shall expire when canceled
by a writing similarly filed or at the expiration of two years after the date of its filing,
whichever first occurs; but said corporation
may, nevertheless, before, at, or after the expiration of any such writing file another writing or writings with respect to such issuer.
(4) Any company which prior to March 15,
1940, was and now is a wholly-owned subsidiary
of a registered face-amount certificate company and was prior to said date and now is organized and operating under the insurance
laws of any State and subject to supervision
and examination by the insurance commissioner thereof, and which prior to March 15,
1940, was and now is engaged, subject to such
1 See

References in Text note below.

Page 388

laws, in business substantially all of which
consists of issuing and selling only to residents of such State and investing the proceeds
from, securities providing for or representing
participations or interests in intangible assets
consisting of mortgages or other liens on real
estate or notes or bonds secured thereby or in
a fund or deposit of mortgages or other liens
on real estate or notes or bonds secured thereby or having outstanding such securities so issued and sold.
(5)(A) Any company that is not engaged in
the business of issuing redeemable securities,
the operations of which are subject to regulation by the State in which the company is organized under a statute governing entities
that provide financial or managerial assistance to enterprises doing business, or proposing to do business, in that State if—
(i) the organizational documents of the
company state that the activities of the
company are limited to the promotion of
economic, business, or industrial development in the State through the provision of
financial or managerial assistance to enterprises doing business, or proposing to do
business, in that State, and such other activities that are incidental or necessary to
carry out that purpose;
(ii) immediately following each sale of the
securities of the company by the company or
any underwriter for the company, not less
than 80 percent of the securities of the company being offered in such sale, on a classby-class basis, are held by persons who reside or who have a substantial business presence in that State;
(iii) the securities of the company are sold,
or proposed to be sold, by the company or by
any underwriter for the company, solely to
accredited investors, as that term is defined
in section 77b(a)(15) of this title, or to such
other persons that the Commission, as necessary or appropriate in the public interest
and consistent with the protection of investors, may permit by rule, regulation, or
order; and
(iv) the company does not purchase any security issued by an investment company or
by any company that would be an investment company except for the exclusions
from the definition of the term ‘‘investment
company’’ under paragraph (1) or (7) of section 80a–3(c) of this title, other than—
(I) any debt security that is rated investment grade by not less than 1 nationally
recognized statistical rating organization;
or
(II) any security issued by a registered
open-end investment company that is required by its investment policies to invest
not less than 65 percent of its total assets
in securities described in subclause (I) or
securities that are determined by such registered open-end investment company to
be comparable in quality to securities described in subclause (I).
(B) Notwithstanding the exemption provided
by this paragraph, section 80a–9 of this title
(and, to the extent necessary to enforce section 80a–9 of this title, sections 80a–37 through

Page 389

TITLE 15—COMMERCE AND TRADE

80a–50 of this title) shall apply to a company
described in this paragraph as if the company
were an investment company registered under
this subchapter.
(C) Any company proposing to rely on the
exemption provided by this paragraph shall
file with the Commission a notification stating that the company intends to do so, in such
form and manner as the Commission may prescribe by rule.
(D) Any company meeting the requirements
of this paragraph may rely on the exemption
provided by this paragraph upon filing with
the Commission the notification required by
subparagraph (C), until such time as the Commission determines by order that such reliance is not in the public interest or is not consistent with the protection of investors.
(E) The exemption provided by this paragraph may be subject to such additional terms
and conditions as the Commission may by
rule, regulation, or order determine are necessary or appropriate in the public interest or
for the protection of investors.
(b) Exemption of employees’ security company
upon application; matters considered
Upon application by any employees’ security
company, the Commission shall by order exempt
such company from the provisions of this subchapter and of the rules and regulations hereunder, if and to the extent that such exemption
is consistent with the protection of investors. In
determining the provisions to which such an
order of exemption shall apply, the Commission
shall give due weight, among other things, to
the form of organization and the capital structure of such company, the persons by whom its
voting securities, evidences of indebtedness, and
other securities are owned and controlled, the
prices at which securities issued by such company are sold and the sales load thereon, the disposition of the proceeds of such sales, the character of the securities in which such proceeds
are invested, and any relationship between such
company and the issuer of any such security.
(c) Exemption of persons, securities or any class
or classes of persons as necessary and appropriate in public interest
The Commission, by rules and regulations
upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person, security, or transaction, or
any class or classes of persons, securities, or
transactions, from any provision or provisions
of this subchapter or of any rule or regulation
thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by
the policy and provisions of this subchapter.
(d) Exemption of closed-end investment companies
The Commission, by rules and regulations or
order, shall exempt a closed-end investment
company from any or all provisions of this subchapter, but subject to such terms and conditions as may be necessary or appropriate in the
public interest or for the protection of investors,
if—

§ 80a–6

(1) the aggregate sums received by such company from the sale of all its outstanding securities, plus the aggregate offering price of all
securities of which such company is the issuer
and which it proposes to offer for sale, do not
exceed $10,000,000, or such other amount as the
Commission may set by rule, regulation, or
order;
(2) no security of which such company is the
issuer has been or is proposed to be sold by
such company or any underwriter therefor, in
connection with a public offering, to any person who is not a resident of the State under
the laws of which such company is organized
or otherwise created; and
(3) such exemption is not contrary to the
public interest or inconsistent with the protection of investors.
(e) Application of certain specified provisions of
subchapter to otherwise exempt companies
If, in connection with any rule, regulation, or
order under this section exempting any investment company from any provision of section
80a–7 of this title, the Commission deems it necessary or appropriate in the public interest or
for the protection of investors that certain specified provisions of this subchapter pertaining to
registered investment companies shall be applicable in respect of such company, the provisions
so specified shall apply to such company, and to
other persons in their transactions and relations
with such company, as though such company
were a registered investment company.
(f) Exemption of closed-end company treated as
business development company
Any closed-end company which—
(1) elects to be treated as a business development company pursuant to section 80a–53 of
this title; or
(2) would be excluded from the definition of
an investment company by section 80a–3(c)(1)
of this title, except that it presently proposes
to make a public offering of its securities as a
business development company, and has notified the Commission, in a form and manner
which the Commission may, by rule, prescribe,
that it intends in good faith to file, within 90
days, a notification of election to become subject to the provisions of sections 80a–54
through 80a–64 of this title,
shall be exempt from sections 80a–1 through
80a–52 of this title, except to the extent provided
in sections 80a–58 through 80a–64 of this title.
(Aug. 22, 1940, ch. 686, title I, § 6, 54 Stat. 800;
Proc. No. 2695, eff. July 4, 1946, 11 F.R. 7517, 60
Stat. 1352; Pub. L. 86–70, § 12(e), June 25, 1959, 73
Stat. 143; Pub. L. 86–624, § 7(c), July 12, 1960, 74
Stat. 412; Pub. L. 95–598, title III, § 310(b), Nov. 6,
1978, 92 Stat. 2676; Pub. L. 96–477, title I, § 103,
Oct. 21, 1980, 94 Stat. 2277; Pub. L. 100–181, title
VI, § 608, Dec. 4, 1987, 101 Stat. 1261; Pub. L.
104–290, title V, §§ 501, 502, Oct. 11, 1996, 110 Stat.
3444, 3445.)
REFERENCES IN TEXT
For the effective date of this subchapter, referred to
in subsec. (a)(2), see section 80a–52 of this title.
Section 1724 of title 12, referred to in subsec. (a)(3),
was repealed by Pub. L. 101–73, title IV, § 407, Aug. 9,
1989, 103 Stat. 363.

§ 80a–7

TITLE 15—COMMERCE AND TRADE
CODIFICATION

Words ‘‘Philippine Islands’’ deleted from subsec. (a)(1)
after ‘‘Puerto Rico’’ under the authority of Proc. No.
2695, granting independence to the Philippine Islands,
which was issued pursuant to section 1394 of Title 22,
Foreign Relations and Intercourse, and is set out as a
note under that section.
AMENDMENTS
1996—Subsec. (a)(5). Pub. L. 104–290, § 501, added par.
(5).
Subsec. (d)(1). Pub. L. 104–290, § 502, substituted
‘‘$10,000,000, or such other amount as the Commission
may set by rule, regulation, or order’’ for ‘‘$100,000’’.
1987—Subsec. (a)(1). Pub. L. 100–181, § 608(1), struck
out reference to Canal Zone.
Subsec. (a)(2) to (5). Pub. L. 100–181, § 608(2), redesignated former pars. (3) to (5) as (2) to (4), and struck out
former par. (2) which read as follows: ‘‘Any company
for which, in a proceeding in any court of the United
States or of a State, a receiver, trustee in a case under
title 11, or similar officer had been appointed or elected
prior to the effective date of this subchapter, and every
such officer so appointed or elected prior to the effective date of this subchapter; but such exemption shall
continue only so long as (A) the conduct of such company’s business remains subject to the supervision of such
court or officer thereof, and (B) such company does not
sell exclusively for cash any security of which it is the
issuer, except short-term paper and ordinary receiver’s
or trustee’s certificates.’’
1980—Subsec. (f). Pub. L. 96–477 added subsec. (f).
1978—Subsec. (a)(2). Pub. L. 95–598 substituted ‘‘a case
under title 11’’ for ‘‘bankruptcy’’.
1960—Subsec. (a)(1). Pub. L. 86–624 struck out reference to Hawaii.
1959—Subsec. (a)(1). Pub. L. 86–70 struck out reference
to Alaska.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95–598 effective Oct. 1, 1979,
see section 402(a) of Pub. L. 95–598, set out as an Effective Date note preceding section 101 of Title 11, Bankruptcy.
TRANSFER OF FUNCTIONS
Federal Savings and Loan Insurance Corporation
abolished and functions transferred, see sections 401 to
406 of Pub. L. 101–73, set out as a note under section 1437
of Title 12, Banks and Banking.
For transfer of functions of Securities and Exchange
Commission, with certain exceptions, to Chairman of
such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2,
eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under
section 78d of this title.
INVESTMENT COMPANY PROVISIONS INAPPLICABLE TO
CERTAIN LIFE INSURANCE BENEFITS ISSUED PRIOR TO
MARCH 23, 1959
Subchapter inapplicable to certain life insurance benefits issued prior to Mar. 23, 1959, under certain conditions, see section 29 of Pub. L. 91–547, Dec. 14, 1970, 84
Stat. 1436, set out as a note under section 77c of this
title.

§ 80a–7. Transactions by unregistered investment
companies
(a) Prohibition of transactions in interstate commerce by companies
No investment company organized or otherwise created under the laws of the United States
or of a State and having a board of directors, unless registered under section 80a–8 of this title,
shall directly or indirectly—
(1) offer for sale, sell, or deliver after sale, by
the use of the mails or any means or instru-

Page 390

mentality of interstate commerce, any security or any interest in a security, whether the
issuer of such security is such investment
company or another person; or offer for sale,
sell, or deliver after sale any such security or
interest, having reason to believe that such security or interest will be made the subject of
a public offering by use of the mails or any
means or instrumentality of interstate commerce;
(2) purchase, redeem, retire, or otherwise acquire or attempt to acquire, by use of the
mails or any means or instrumentality of
interstate commerce, any security or any interest in a security, whether the issuer of such
security is such investment company or another person;
(3) control any investment company which
does any of the acts enumerated in paragraphs
(1) and (2) of this subsection;
(4) engage in any business in interstate commerce; or
(5) control any company which is engaged in
any business in interstate commerce.
The provisions of this subsection shall not apply
to transactions of an investment company
which are merely incidental to its dissolution.
(b) Prohibition of transactions in interstate commerce by depositors or trustees of companies
No depositor or trustee of or underwriter for
any investment company, organized or otherwise created under the laws of the United States
or of a State and not having a board of directors,
unless such company is registered under section
80a–8 of this title or exempt under section 80a–6
of this title, shall directly or indirectly—
(1) offer for sale, sell, or deliver after sale, by
use of the mails or any means or instrumentality of interstate commerce, any security or
any interest in a security of which such company is the issuer; or offer for sale, sell, or deliver after sale any such security or interest,
having reason to believe that such security or
interest will be made the subject of a public
offering by use of the mails or any means or
instrumentality of interstate commerce;
(2) purchase, redeem, or otherwise acquire or
attempt to acquire, by use of the mails or any
means or instrumentality of interstate commerce, any security or any interest in a security of which such company is the issuer; or
(3) sell or purchase for the account of such
company, by use of the mails or any means or
instrumentality of interstate commerce, any
security or interest in a security, by whomever issued.
The provisions of this subsection shall not apply
to transactions which are merely incidental to
the dissolution of an investment company.
(c) Prohibition of transactions in interstate commerce by promoters of proposed investment
companies
No promoter of a proposed investment company, and no underwriter for such a promoter,
shall make use of the mails or any means or instrumentality of interstate commerce, directly
or indirectly, to offer for sale, sell, or deliver
after sale, in connection with a public offering,
any preorganization certificate or subscription
for such a company.