Rule 3a-8 text

ebenthall on PRODPC60 with CFR

§ 270.3a–8

17 CFR Ch. II (4–1–08 Edition)

(4) If the issuer issues any securities
other than securities exempted from
the Securities Act by section 3(a)(3)
thereof (15 U.S.C. 77c(a)(3)), the issuer:
(i) Appoints a trustee that meets the
requirements of section 26(a)(1) of the
Act and that is not affiliated, as that
term is defined in rule 405 under the
Securities Act (17 CFR 230.405), with
the issuer or with any person involved
in the organization or operation of the
issuer, which does not offer or provide
credit or credit enhancement to the
issuer, and that executes an agreement
or instrument concerning the issuer’s
securities containing provisions to the
effect set forth in section 26(a)(3) of the
Act;
(ii) Takes reasonable steps to cause
the trustee to have a perfected security
interest or ownership interest valid
against third parties in those eligible
assets that principally generate the
cash flow needed to pay the fixed-income security holders, provided that
such assets otherwise required to be
held by the trustee may be released to
the extent needed at the time for the
operation of the issuer; and
(iii) Takes actions necessary for the
cash flows derived from eligible assets
for the benefit of the holders of fixedincome securities to be deposited periodically in a segregated account that is
maintained or controlled by the trustee consistent with the rating of the
outstanding fixed-income securities.
(b) For purposes of this section:
(1) Eligible assets means financial assets, either fixed or revolving, that by
their terms convert into cash within a
finite time period plus any rights or
other assets designed to assure the
servicing or timely distribution of proceeds to security holders.
(2) Fixed-income securities means any
securities that entitle the holder to receive:
(i) A stated principal amount; or
(ii) Interest on a principal amount
(which may be a notional principal
amount) calculated by reference to a
fixed rate or to a standard or formula
which does not reference any change in
the market value or fair value of eligible assets; or
(iii) Interest on a principal amount
(which may be a notional principal
amount) calculated by reference to

auctions among holders and prospective holders, or through remarketing of
the security; or
(iv) An amount equal to specified
fixed or variable portions of the interest received on the assets held by the
issuer; or
(v) Any combination of amounts described in paragraphs (b)(2) (i), (ii),
(iii), and (iv) of this section;
Provided, That substantially all of the
payments to which the holders of such
securities are entitled consist of the
foregoing amounts.
[57 FR 56256, Nov. 27, 1992]

§ 270.3a–8 Certain research and development companies.
(a)
Notwithstanding
sections
3(a)(1)(A) and 3(a)(1)(C) of the Act (15
U.S.C. 80a–3(a)(1)(A) and 80a–3(a)(1)(C)),
an issuer will be deemed not to be an
investment company if:
(1) Its research and development expenses, for the last four fiscal quarters
combined, are a substantial percentage
of its total expense for the same period;
(2) Its net income derived from investments in securities, for the last
four fiscal quarters combined, does not
exceed twice the amount of its research
and development expenses for the same
period;
(3) Its expenses for investment advisory and management activities, investment research and custody, for the
last four fiscal quarters, combined, do
not exceed five percent of its total expenses for the same period;
(4) Its investments in securities are
capital preservation investments, except that:
(i) No more than 10 percent of the
issuer’s total assets may consist of
other investments, or
(ii) No more than 25 percent of the
issuer’s total assets may consist of
other investments, provided that at
least 75 percent of such other investments are investments made pursuant
to a collaborative research and development arrangement;
(5) It does not hold itself out as being
engaged in the business of investing,
reinvesting or trading in securities,
and it is not a special situation investment company;
(6) It is primarily engaged, directly,
through majority-owned subsidiaries,

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ebenthall on PRODPC60 with CFR

Securities and Exchange Commission

§ 270.3c–1

or through companies which it controls
primarily, in a business or businesses
other than that of investing, reinvesting, owning, holding, or trading in
securities, as evidenced by:
(i) The activities of its officers, directors and employees;
(ii) Its public representations of policies;
(iii) Its historical development; and
(iv) An appropriate resolution of its
board of directors, which resolution or
action has been recorded contemporaneously in its minute books or comparable documents; and
(7) Its board of directors has adopted
a written investment policy with respect to the issuer’s capital preservation investments.
(b) For purposes of this section:
(1) All assets shall be valued in accordance with section 2(a)(41)(A) of the
Act (15 U.S.C. 80a–2(a)(41)(A));
(2) The percentages described in this
section are determined on an unconsolidated basis, except that the issuer
shall consolidate its financial statements with the financial statements of
any wholly-owned subsidiaries;
(3) Board of directors means the
issuer’s board of directors or an appropriate person or persons performing
similar functions for any issuer not
having a board of directors;
(4) Capital preservation investment
means an investment that is made to
conserve capital and liquidity until the
funds are used in the issuer’s primary
business or businesses;
(5) Controlled primarily means controlled within the meaning of section
2(a)(9) of the Act (15 U.S.C. 80a–2(a)(9))
with a degree of control that is greater
than that of any other person;
(6) Investment made pursuant to a collaborative research and development arrangement means an investment in an
investee made pursuant to a business
relationship which:
(i) Is designed to achieve narrowly focused goals that are directly related to,
and an integral part of, the issue’s research and development activities;
(ii) Calls for the issuer to conduct
joint research and development activities with the investee or a company
controlled primarily by, or which controls primarily, the investee; and

(iii) Is not entered into for the purpose of avoiding regulation under the
Act;
(7) Investments in securities means all
securities other than securities issued
by majority-owned subsidiaries and
companies controlled primarily by the
issuer that conduct similar types of
businesses, through which the issuer is
engaged primarily in a business other
than that of investing, reinvesting,
owning, holding, or trading in securities;
(8) Other investment means an investment in securities that is not a capital
preservation investment; and
(9) Research and development expenses
means research and development expenses as defined in FASB Statement
of Financial Accounting Standards No.
2, Accounting for Research and Development Costs, as currently in effect or
as it may be subsequently revised.
[68 FR 37052, June 20, 2003]

§ 270.3c–1 Definition of beneficial ownership for certain 3(c)(1) funds.
(a) As used in this section:
(1) The term Covered Company means
a company that is an investment company, a Section 3(c)(1) Company or a
Section 3(c)(7) Company.
(2) The term Section 3(c)(1) Company
means a company that would be an investment company but for the exclusion provided by section 3(c)(1) of the
Act [15 U.S.C. 80a–3(c)(1)].
(3) The term Section 3(c)(7) Company
means a company that would be an investment company but for the exclusion provided by section 3(c)(7) of the
Act [15 U.S.C. 80a–3(c)(7)].
(b) For purposes of section 3(c)(1)(A)
of the Act [15 U.S.C. 80a–3(c)(1)(A)],
beneficial ownership by a Covered
Company owning 10 percent or more of
the outstanding voting securities of a
Section 3(c)(1) Company shall be
deemed to be beneficial ownership by
one person, provided that:
(1) On April 1, 1997, the Covered Company owned 10 percent or more of the
outstanding voting securities of the
Section 3(c)(1) Company or non-voting
securities that, on such date and in accordance with the terms of such securities, were convertible into or exchangeable for voting securities that, if converted or exchanged on or after such

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