PART 270 — RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
Authority:
15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, 1681w(a)(1),
6801-6809, 6825, and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise
noted.
Section 270.22c-1 also issued under secs. 6(c), 22(c), and 38(a) (15 U.S.C. 80a-6(c),
80a-22(c), and 80a-37(a))
Section 270.0-1 also issued under sec. 38(a) (15 U.S.C. 80a-37(a));
Section 270.0-1(a)(7) is also issued under 15 U.S.C. 80a-10(e);
Section 270.0-11 also issued under secs. 8, 24, 30 and 38, Investment
Company Act (15 U.S.C. 80a-8, 80a-24, 80a-29 and 80a-37), secs. 6, 7, 8, 10 and 19(a),
Securities Act (15 U.S.C. 77f, 77g, 77h, 77j, 77s(a)) and secs. 3(b), 12, 13, 14, 15(d) and
23(a), Exchange Act (15 U.S.C. 78c(b), 78l, 78m, 78n, 78o(d) and 78w(a));
Section 270.6a-5 is also issued under 15 U.S.C. 80a-6(a)(5)(A)(iv)(I).
Section 270.6c-9 is also issued under secs. 6(c) (15 U.S.C. 80a-6(c)) and
38(a) (15 U.S.C. 80a-37(a));
Section 270.6c-10 is also issued under sec. 6(c) (15 U.S.C. 80a-6(c));
Section 270.6c-11 is also issued under 15 U.S.C. 80a-6(c) and 80a-37(a).
Section 270.6e-3 is also issued under 15 U.S.C. 80a-5(e);
Section 270.8b-11 is also issued under 15 U.S.C. 77s, 80a-8, and 80a-37;
Section 270.10e-1 is also issued under 15 U.S.C. 80a-10(e);
Sections 270.12d1-1, 270.12d1-2, and 270.12d1-3 are also issued under 15
U.S.C. 80a-6(c), 80a-12(d)(1)(J), and 80a-37(a).
Section 270.12d3-1 is also issued under 15 U.S.C. 80a-6(c);
Section 270.17a-8 is also issued under 15 U.S.C. 80a-6(c) and 80a-37(a);
Section 270.17d-1 is also issued under 15 U.S.C. 80a-6(c), 80a-17(d), and
80a-37(a);
Section 270.17e-1 is also issued under 15 U.S.C. 80a-6(c), 80a-30(a), and
80a-37(a);
Section 270.17f-5 also issued under sec. 6(c) (15 U.S.C. 80a-6(c);
Section 270.17g-1 is also issued under 15 U.S.C. 80a-6(c), 80a-17(d),
80a-17(g), and 80a-37(a);
Section 270.17j-1 is also issued under secs. 206(4) and 211(a), Investment
Advisers Act (15 U.S.C. 80b-6(4) and 80b-11(a));
Section 270.19b-1 is also issued under secs. 6(c) (15 U.S.C. 80a-6(c)), 19
(a) and (b) (15 U.S.C 80a-19 (a) and (b)), and 38(a) (15 U.S.C. 80a-37(a));
Section 270.22c-1 also issued under secs. 6(c), 22(c), and 38(a) (15 U.S.C.
80a-6(c), 80a-22(c), and 80a-37(a));
Section 270.23c-3 also issued under 15 U.S.C. 80a-23(c).
Section 270.24f-2 also issued under 15 U.S.C. 80a-24(f)(4).
Section 270.30a-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and
80a-29.
Section 270.30a-2 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, 80a-29,
7202, and 7241; and 18 U.S.C. 1350, unless otherwise noted.
Section 270.30a-3 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and
80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745.
Section 270.30b1-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and
80a-29.
Section 270.30b2-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and
80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745.
Section 270.30d-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and
80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745.
Section 270.30e-1 is also issued under 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
78l, 78m, 78n, 78o(d), 78w(a), 80a-8, 80a-29, and 80a-37;
Section 270.31a-2 is also issued under 15 U.S.C. 80a-30.
ATTENTION ELECTRONIC FILERS
THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH
REGULATION S-T (PART 232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE PREPARATION AND SUBMISSION OF
DOCUMENTS IN PAPER FORMAT CONTAINED IN THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF
REGULATION S-T FOR DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.
270.0-1 — Definition of terms used in this part.
(a) As used in the rules and regulations prescribed by the Commission
pursuant to the Investment Company Act of 1940, unless the context otherwise requires:
(1) The term Commission means the Securities and Exchange
Commission.
(2) The term act means the Investment Company Act of 1940.
(3) The term section refers to a section of the act.
(4) The terms rule and regulations refer to the rules and
regulations adopted by the Commission pursuant to the Act, including the forms for
registration and reports and the accompanying instructions thereto.
(5) The term administrator means any person who provides
significant administrative or business affairs management services to an investment
company.
(6)(i) A person is an independent legal counsel with respect to the
directors who are not interested persons of an investment company (“disinterested
directors”) if:
(A) A majority of the disinterested directors reasonably determine in the
exercise of their judgment (and record the basis for that determination in the minutes of
their meeting) that any representation by the person of the company's investment adviser,
principal underwriter, administrator (“management organizations”), or any of their control
persons, since the beginning of the fund's last two completed fiscal years, is or was
sufficiently limited that it is unlikely to adversely affect the professional judgment of
the person in providing legal representation to the disinterested directors; and
(B) The disinterested directors have obtained an undertaking from such
person to provide them with information necessary to make their determination and to update
promptly that information when the person begins to represent, or materially increases his
representation of, a management organization or control person.
(ii) The disinterested directors are entitled to rely on the information
obtained from the person, unless they know or have reason to believe that the information is
materially false or incomplete. The disinterested directors must re-evaluate their
determination no less frequently than annually (and record the basis accordingly), except as
provided in paragraph (iii) of this section.
(iii) After the disinterested directors obtain information that the person
has begun to represent, or has materially increased his representation of, a management
organization (or any of its control persons), the person may continue to be an independent
legal counsel, for purposes of paragraph (a)(6)(i) of this section, for no longer than three
months unless during that period the disinterested directors make a new determination under
that paragraph.
(iv) For purposes of paragraphs (a)(6)(i)-(iii) of this section:
(A) The term person has the same meaning as in section 2(a)(28) of
the Act (15 U.S.C. 80a-2(a)(28)) and, in addition, includes a partner, co-member, or
employee of any person; and
(B) The term control person means any person (other than an
investment company) directly or indirectly controlling, controlled by, or under common
control with any of the investment company's management organizations.
(7) Fund governance standards. The board of directors of an
investment company (“fund”) satisfies the fund governance standards if:
(i) At least seventy-five percent of the directors of the fund are not
interested persons of the fund (“disinterested directors”) or, if the fund has three
directors, all but one are disinterested directors;
(ii) The disinterested directors of the fund select and nominate any other
disinterested director of the fund;
(iii) Any person who acts as legal counsel for the disinterested directors
of the fund is an independent legal counsel as defined in paragraph (a)(6) of this
section;
(iv) A disinterested director serves as chairman of the board of directors
of the fund, presides over meetings of the board of directors and has substantially the same
responsibilities as would a chairman of a board of directors;
(v) The board of directors evaluates at least once annually the
performance of the board of directors and the committees of the board of directors, which
evaluation must include a consideration of the effectiveness of the committee structure of
the fund board and the number of funds on whose boards each director serves;
(vi) The disinterested directors meet at least once quarterly in a session
at which no directors who are interested persons of the fund are present; and
(vii) The disinterested directors have been authorized to hire employees
and to retain advisers and experts necessary to carry out their duties.
(b) Unless otherwise specifically provided, the terms used in the rules
and regulations in this part shall have the meaning defined in the Act. The terms “EDGAR,”
“EDGAR Filer Manual,” “electronic filer,” “electronic filing,” “electronic format,”
“electronic submission,” “paper format,” and “signature” shall have the meanings assigned to
such terms in Regulation S-T — General Rules for Electronic Filings (Part 232 of this
chapter).
(c) A rule or regulation which defines a term without express reference to
the act or to the rules and regulations, or to a portion thereof, defines such terms for all
purposes as used both in the act and in the rules and regulations in this part, unless the
context otherwise requires.
(d) Unless otherwise specified or the context otherwise requires, the term
“prospectus” means a prospectus meeting the requirements of section 10(a) of the Securities
Act of 1933 as amended.
(e) Definition of separate account and conditions for availability of
exemption under §§ 270.6c-6, 270.6c-7, 270.6c-8, 270.11a-2, 270.14a-2, 270.15a-3, 270.16a-1,
270.22c-1, 270.22d-2, 270.22e-1, 270.26a-1, 270.27i-1, and 270.32a-2 (Rules 6c-6, 6c-7,
6c-8, 11a-2, 14a-2, 15a-3, 16a-1, 22c-1, 22d-2, 22e-1, 26a-1, 27i-1, and 32a-2).
(1) As used in the rules and regulations prescribed by the Commission
pursuant to the Investment Company Act of 1940, unless otherwise specified or the context
otherwise requires, the term “separate account” shall mean an account established and
maintained by an insurance company pursuant to the laws of any state or territory of the
United States, or of Canada or any province thereof, under which income, gains and losses,
whether or not realized, from assets allocated to such account, are, in accordance with the
applicable contract, credited to or charged against such account without regard to other
income, gains or losses of the insurance company and the term “variable annuity contract”
shall mean any accumulation or annuity contract, any portion thereof, or any unit of
interest or participation therein pursuant to which the value of the contract, either prior
or subsequent to annuitization, or both, varies according to the investment experience of
the separate account in which the contract participates.
(2) As conditions to the availability of exemptive Rules 6c-6, 6c-7, 6c-8,
11a-2, 14a-2, 15a-3, 16a-1, 22c-1, 22d-2, 22e-1, 26a-1, 27i-1, and 32a-2, the separate
account shall be legally segregated, the assets of the separate account shall, at the time
during the year that adjustments in the reserves are made, have a value at least equal to
the reserves and other contract liabilities with respect to such account, and at all other
times, shall have a value approximately equal to or in excess of such reserves and
liabilities; and that portion of such assets having a value equal to, or approximately equal
to, such reserves and contract liabilities shall not be chargeable with liabilities arising
out of any other business which the insurance company may conduct.
[Rule N-1, 5 FR 4316, Oct. 31, 1940, as amended at 19 FR 6730, Oct. 20,
1954; 30 FR 829, Jan. 27, 1965; 48 FR 36098, Aug. 9, 1983; 50 FR 42682, Oct. 22, 1985; 58
FR 14859, Mar. 18, 1993; 66 FR 3757, Jan. 16, 2001; 69 FR 46389, Aug. 2, 2004; 85 FR
25964, May 1, 2020]
270.0-2 — General requirements of papers and applications.
(a) Filing of papers. All papers required to be filed with the
Commission pursuant to the Act or the rules and regulations thereunder shall, unless
otherwise provided by the rules and regulations in this part, be delivered through the mails
or otherwise to the Secretary of the Securities and Exchange Commission, Washington, DC
20549. Except as otherwise provided by the rules and regulations, the date on which papers
are actually received by the Commission shall be the date of filing thereof. If the last day
for the timely filing of such papers falls on a Saturday, Sunday, or holiday, such papers
may be filed on the first business day following.
(b) Formal specifications respecting applications. Every
application for an order under any provision of the Act, for which a form with instructions
is not specifically prescribed, and every amendment to such application shall be filed in
quintuplicate. One copy shall be signed by the applicant but the other four copies may have
facsimile or typed signatures. Such applications should be on paper no larger than 81/2 × 11
inches in size. To the extent that the reduction of larger documents would render them
illegible, such documents may be filed on paper larger than 81/2 × 11 inches in size. The
application must be typed, printed, copied or prepared by any process which, in the opinion
of the commission, produces copies suitable for microfilming. All typewritten or printed
matter (including deficits in financial statements) should be set forth in black so as to
permit photocopying.
(c) Authorizations respecting applications. (1) Every application
for an order under any provision of the act, for which a form with instructions is not
specifically prescribed and which is executed by a corporation, partnership, or other
company and filed with the Commission, shall contain a concise statement of the applicable
provisions of the articles of incorporation, bylaws, or similar documents, relating to the
right of the person signing and filing such application to take such action on behalf of the
applicant, and a statement that all such requirements have been complied with and that the
person signing and filing the same is fully authorized to do so. If such authorization is
dependent on resolutions of stockholders, directors, or other bodies, such resolutions shall
be attached as an exhibit to, or the pertinent provisions thereof shall be quoted in, the
application.
(2) If an amendment to any such application shall be filed, such amendment
shall contain a similar statement or, in lieu thereof, shall state that the authorization
described in the original application is applicable to the individual who signs such
amendment and that such authorization still remains in effect.
(3) When any such application or amendment is signed by an agent or
attorney, the power of attorney evidencing his authority to sign shall contain similar
statements and shall be filed with the Commission.
(d) Verification of applications and statements of fact. Every
application for an order under any provision of the Act, for which a form with instructions
is not specifically prescribed and every amendment to such application, and every statement
of fact formally filed in support of, or in opposition to, any application or declaration
shall be verified by the person executing the same. An instrument executed on behalf of a
corporation shall be verified in substantially the following form, but suitable changes may
be made in such form for other kinds of companies and for individuals:
The undersigned states that he or she has duly
executed the attached ______ dated ______, 20 ___ for and on behalf of (name of
company); that he or she is (title of officer) of such company; and that all
action by stockholders, directors, and other bodies necessary to authorize the undersigned
to execute and file such instrument has been taken. The undersigned further states that he
or she is familiar with such instrument, and the contents thereof, and that the facts
therein set forth are true to the best of his or her knowledge, information and belief.
(Signature)
(e) Statement of grounds for application. Each application should
contain a brief statement of the reasons why the applicant is deemed to be entitled to the
action requested with a reference to the provisions of the act and of the rules and
regulations under which application is made.
(f) Name and address. Every application shall contain the name and
address of each applicant and the name and address of any person to whom any applicant
wishes any question regarding the application to be directed.
(g) The manually signed original (or in the case of duplicate originals,
one duplicate original) of all registrations, applications, statements, reports, or other
documents filed under the Investment Company Act of 1940, as amended, shall be numbered
sequentially (in addition to any internal numbering which otherwise may be present) by
handwritten, typed, printed, or other legible form of notation from the facing page of the
document through the last page of that document and any exhibits or attachments thereto.
Further, the total number of pages contained in a numbered original shall be set forth on
the first page of the document.
[Rule N-2, 5 FR 4316, Oct. 31, 1940, as amended at 33 FR 9391, June 27,
1968; 33 FR 23325, Aug. 29, 1973; 44 FR 4666, Jan. 23, 1979; 47 FR 58239, Dec. 30, 1982;
48 FR 17065, Apr. 21, 1983; 58 FR 14859, Mar. 18, 1993; 73 FR 65525, Nov. 4, 2008; 87 FR
38943, June 30, 2022]
270.0-3 — Amendments to registration statements and reports.
Registration statements filed with the Commission pursuant to section 8
(54 Stat. 803; 15 U.S.C. 80a-8) and reports filed with the Commission pursuant to section 30
(54 Stat. 836; 15 U.S.C. 80a-35) may be amended in the following manner:
(a) Each amendment shall conform to the requirements for the registration
statement or report it amends with regard to filing, number of copies filed, size, paper,
ink, margins, binding, and similar formal matters.
(b) Each amendment to a particular statement or report shall have a facing
sheet as follows:
Securities and Exchange
Commission
Washington, DC 20549
Amendment No._____
to
Form______
File No.______
(Describe the nature of the statement or report)
Dated __________, 19__,
Pursuant to Section _____ of the Investment Company
Act of 1940
Name of Registrant
Address of Principal Office of Registrant
The facing sheet shall contain in addition any other
information required on the facing sheet of the form for the statement or report which is
being amended. Amendments to a particular statement or report which is being consecutively
in the order in which filed with the Commission.
(c) Each amendment shall contain in the manner required in the original
statement or report the text of every item to which it relates and shall set out a complete
amended answer to each such item. However, amendments to financial statements may contain
only the particular statements or schedules in fact amended.
(d) Each amendment shall have a signature sheet containing the form of
signature required in the statement or report it amends.
(Secs. 8, 30, 54 Stat. 803, 74 Stat. 201; 15 U.S.C. 80a-8, 80a-29)
[Rule N-3, 6 FR 3966, Aug. 8, 1941, as amended at
33 FR 3217, Feb. 21, 1968]
270.0-4 — Incorporation by reference.
(a) Registration statements and reports. Except as provided by this
section or in the appropriate form, information may be incorporated by reference in answer,
or partial answer, to any item of a registration statement or report. Where an item requires
a summary or outline of the provisions of any document, the summary or outline may
incorporate by reference particular items, sections, or paragraphs of any exhibit and may be
qualified in its entirety by such reference.
(b) Financial information. Except as provided in the Commission's
rules, financial information required to be given in comparative form for two or more fiscal
years or periods must not be incorporated by reference unless the information incorporated
by reference includes the entire period for which the comparative data is given. In the
financial statements, incorporating by reference, or cross-referencing to, information
outside of the financial statements is not permitted unless otherwise specifically permitted
or required by the Commission's rules or by U.S. Generally Accepted Accounting Principles or
International Financial Reporting Standards as issued by the International Accounting
Standards Board, whichever is applicable.
(c) Exhibits. Any document or part thereof, including any financial
statement or part thereof, filed with the Commission pursuant to any Act administered by the
Commission may be incorporated by reference as an exhibit to any registration statement,
application, or report filed with the Commission by the same or any other person. If any
modification has occurred in the text of any document incorporated by reference since the
filing thereof, the registrant must file with the reference a statement containing the text
of any such modification and the date thereof.
(d) Hyperlinks. Include an active hyperlink to information
incorporated into a registration statement, application, or report by reference if such
information is publicly available on the Commission's Electronic Data Gathering, Analysis
and Retrieval System (“EDGAR”) at the time the registration statement, application, or
report is filed. For hyperlinking to exhibits, please refer to the appropriate form.
(e) General. Include an express statement clearly describing the
specific location of the information you are incorporating by reference. The statement must
identify the document where the information was originally filed or submitted and the
location of the information within that document. The statement must be made at the
particular place where the information is required, if applicable. Information must not be
incorporated by reference in any case where such incorporation would render the disclosure
incomplete, unclear, or confusing. For example, unless expressly permitted or required,
disclosure must not be incorporated by reference from a second document if that second
document incorporates information pertinent to such disclosure by reference to a third
document.
[Rule N-4, 9 FR 338, Jan. 8, 1944. Redesignated
at 14 FR 2761, May 26, 1949, as amended at 29 FR 2421, Feb. 13, 1964; 58 FR 14860, Mar.
18, 1993; 60 FR 32825, June 23, 1995; 76 FR 71877, Nov. 21, 2011; 84 FR 12674, Apr. 2,
2019]
270.0-5 — Procedure with respect to applications and other matters.
The procedure herein below set forth will be followed with respect to any
proceeding initiated by the filing of an application, or upon the Commission's own motion,
pursuant to any section of the Act or any rule or regulation thereunder, unless in the
particular case a different procedure is provided:
(a) Notice of the initiation of the proceeding will be published in the Federal Register and will indicate the earliest date upon which an
order disposing of the matter may be entered. The notice will also provide that any
interested person may, within the period of time specified therein, submit to the Commission
in writing any facts bearing upon the desirability of a hearing on the matter and may
request that a hearing be held, stating his reasons therefor and the nature of his interest
in the matter.
(b) An order disposing of the matter will be issued as of course,
following the expiration of the period of time referred to in paragraph (a) of this section,
unless the Commission thereafter orders a hearing on the matter.
(c) The Commission will order a hearing on the matter, if it appears that
a hearing is necessary or appropriate in the public interest or for the protection of
investors, (1) upon the request of an interested person or (2) upon its own motion.
(d)(1) An applicant may request expedited review of an application if such
application is substantially identical to two other applications for which an order granting
the requested relief has been issued within three years of the date of the application's
initial filing.
(2) For purposes of this section, “substantially identical” applications are
applications requesting relief from the same sections of the Act and this part, containing
identical terms and conditions, and differing only with respect to factual differences that
are not material to the relief requested.
(e) An application submitted for expedited review must include:
(1) A notation on the cover page of the application that states prominently,
“EXPEDITED REVIEW REQUESTED UNDER 17 CFR 270.0-5(d)”;
(2) Exhibits with marked copies of the application showing changes from the
final versions of the two applications identified as substantially identical under paragraph
(e)(3) of this section; and
(3) An accompanying cover letter, signed, on behalf of the applicant, by the
person executing the application:
(i) Identifying two substantially identical applications and explaining why the
applicant chose those particular applications, and if more recent applications of the same
type have been approved, why the applications chosen, rather than the more recent
applications, are appropriate; and
(ii) Certifying that the applicant believes the application meets the
requirements of paragraph (d) of this section and that the marked copies required by
paragraph (e)(2) of this section are complete and accurate.
(f)(1) No later than 45 days from the date of filing of an application for which
expedited review is requested:
(i) Notice of an application will be issued in accordance with paragraph (a) of
this section; or
(ii) The applicant will be notified that the application is not eligible for
expedited review because it does not meet the criteria set forth in paragraph (d) or (e) of
this section or because additional time is necessary for appropriate consideration of the
application.
(2) For purposes of paragraph (f)(1) of this section:
(i) The 45-day period will stop running upon:
(A) Any request for modification of an application and will resume running on
the 14th day after the applicant has filed an amended application responsive to such
request, including a marked copy showing any changes made and a certification signed by the
person executing the application that such marked copy is complete and accurate;
(B) Any unsolicited amendment of the application and will resume running on the
30th day after such an amendment, provided that the amendment includes a marked copy showing
changes made and a certification signed by the person executing the application that such
marked copy is complete and accurate; and
(C) Any irregular closure of the Commission's Washington, DC office to the
public for normal business, including, but not limited to, closure due to a lapse in Federal
appropriations, national emergency, inclement weather, or ad hoc Federal holiday, and will
resume upon the reopening of the Commission's Washington, DC office to the public for normal
business.
(ii) If the applicant does not file an amendment responsive to any request for
modification within 30 days of receiving such request, including a marked copy showing any
changes made and a certification signed by the person executing the application that such
marked copy is complete and accurate, the application will be deemed withdrawn.
(g) If an applicant has not responded in writing to any request for
clarification or modification of an application filed under this section, other than an
application that is under expedited review under paragraphs (d) and (e) of this section,
within 120 days after the request, the application will be deemed withdrawn.
[38 FR 23325, Aug. 29, 1973, as amended at 61 FR 49961, Sept. 24, 1996; 85
FR 57089, Sept. 15, 2020]
270.0-8 — Payment of fees.
All payment of fees shall be made by wire transfer, or by certified check,
bank cashier's check, United States postal money order, or bank money order payable to the
Securities and Exchange Commission, omitting the name or title of any official of the
Commission. Payment of fees required by this section shall be made in accordance with the
directions set forth in § 202.3a of this chapter.
Amendments
270.0-8 — Payment of filing fees.
All payment of filing fees shall be made by wire transfer, debit card, credit card, or via
the Automated Clearing House Network. Payment of filing fees required by this section shall
be made in accordance with the directions set forth in § 202.3a of this chapter.
End of Amendments
[73 FR 6014, Feb. 1, 2008; as amended at 86 FR 70166, Dec. 9, 2021]
270.0-9 — [Reserved]
270.0-10 — Small entities under the Investment Company Act for purposes of the Regulatory Flexibility Act.
(a) General. For purposes of Commission rulemaking in accordance
with the provisions of Chapter Six of the Administrative Procedure Act (5 U.S.C. 601 et
seq.) and unless otherwise defined for purposes of a particular rulemaking, the term
small business or small organization for purposes of the Investment Company
Act of 1940 shall mean an investment company that, together with other investment companies
in the same group of related investment companies, has net assets of $50 million or less as
of the end of its most recent fiscal year. For purposes of this section:
(1) In the case of a management company, the term group of related
investment companies shall mean two or more management companies (including series
thereof) that:
(i) Hold themselves out to investors as related companies for purposes of
investment and investor services; and
(ii) Either:
(A) Have a common investment adviser or have investment advisers that are
affiliated persons of each other; or
(B) Have a common administrator; and
(2) In the case of a unit investment trust, the term group of related
investment companies shall mean two or more unit investment trusts (including series
thereof) that have a common sponsor.
(b) Special rule for insurance company separate accounts. In
determining whether an insurance company separate account is a small business or
small entity pursuant to paragraph (a) of this section, the assets of the separate
account shall be cumulated with the assets of the general account and all other separate
accounts of the insurance company.
(c) Determination of net assets. The Commission may calculate its
determination of the net assets of a group of related investment companies based on the net
assets of each investment company in the group as of the end of such company's fiscal
year.
[63 FR 35514, June 30, 1998]
270.0-11 — Customer identification programs.
Each registered open-end company is subject to the requirements of 31
U.S.C. 5318(l) and the implementing regulation at 31 CFR 103.131, which requires a customer
identification program to be implemented as part of the anti-money laundering program
required under subchapter II of chapter 53 of title 31, United States Code and the
implementing regulations issued by the Department of the Treasury at 31 CFR part 103. Where
31 CFR 103.131 and this chapter use different definitions for the same term, the definition
in 31 CFR 103.131 shall be used for the purpose of compliance with 31 CFR 103.131. Where 31
CFR 103.131 and this chapter require the same records to be preserved for different periods
of time, such records shall be preserved for the longer period of time.
[68 FR 25146, May 9, 2003]
270.2a-1 — Valuation of portfolio securities in special cases.
(a) Any investment company whose securities are qualified for sale, or for
whose securities application for such qualification has been made, in any State in which the
securities owned by such company are required by applicable State law or regulations to be
valued at cost or on some other basis different from that prescribed by clause (A) of
section 2(a)(41) of the Act for the purpose of determining the percentage of its assets
invested in any particular type or classification of securities or in the securities of any
one issuer, may, in valuing its securities for the purposes of sections 5 and 12 of the Act,
use the same basis of valuation as that used in complying with such State law or regulations
in lieu of the method of valuation prescribed by clause (A) of section 2(a)(41) of the
Act.
(b) Any open-end company which has heretofore valued its securities at
cost for the purpose of qualifying as a “mutual investment company” under the Internal
Revenue Code, prior to its amendment by the Revenue Act of 1942, shall henceforth, for the
purposes of sections 5 and 12 of the Act, value its securities in accordance with the method
prescribed in clause (A) of section 2(a)(41) of the Act unless such company is permitted
under paragraph (a) of this section to use a different method of valuation.
(c) A registered investment company which has adopted for the purposes of
sections 5 and 12 of the Act a method of valuation permitted by paragraph (a) of this
section, shall state in its registration statement filed pursuant to section 8 (54 Stat.
803; 15 U.S.C. 80a-8) of the Act, or in a report filed pursuant to section 30 (54 Stat. 836;
15 U.S.C. 80a-30) of the Act, the method of valuation adopted and the facts which justify
the adoption of such method. A registered investment company which has adopted for the
purposes of sections 5 and 12 of the Act a method of valuation permitted by paragraph (a) of
this section, unless it shall have adopted such method for the purpose or partly for the
purpose of qualifying as a “mutual investment company” under the Internal Revenue Code,
shall continue to use that method until it has notified the Commission of its desire to use
a different method, and has received from the Commission permission for such change. Such
permission may be made effective on a fixed date or within such reasonable time thereafter
as may be deemed advisable under the circumstances.
(d) If at any time it appears that the method of valuation adopted by any
company pursuant to paragraph (a) of this section is no longer justified by the facts, the
Commission may require a change in the method of valuation within a reasonable period of
time either to the method prescribed in clause (A) of section 2(a)(41) of the Act or to some
other method permitted by paragraph (a) of this section which is justified by the existing
facts.
[Rule N-2A-1, 8 FR 3567, Mar. 24, 1943, as
amended at 38 FR 8593, Apr. 4, 1973]
270.2a-2 — Effect of eliminations upon valuation of portfolio securities.
During any fiscal quarter in which elimination of securities from the
portfolio of an investment company occur, the securities remaining in the portfolio shall,
for the purpose of sections 5 and 12 of the Act (54 Stat. 800, 808; 15 U.S.C. 80a-5,
80a-12), be so valued as to give effect to the eliminations in accordance with one of the
following methods:
(a) Specific certificate,
(b) First in — first out,
(c) Last in — first out, or
(d) Average value.
For these purposes, a single method of elimination
shall be used consistently with respect to all portfolio securities. In giving effect to
eliminations pursuant to this section values shall be computed in accordance with section
2(a)(41)(A) of the Act (54 Stat. 790; 15 U.S.C. 80a-2(a)(41)(A)).
[38 FR 8593, Apr. 4, 1973]
270.2a3-1 — Investment company limited partners not deemed affiliated persons.
Preliminary Note to § 270.2a3-1:
This § 270.2a3-1 excepts from the definition of affiliated
person in section 2(a)(3)) (15 U.S.C. 80a-2(a)(3)) those limited partners of
investment companies organized in limited partnership form that are affiliated
persons solely because they are partners under section 2(a)(3)(D) (15 U.S.C.
80a-2(a)(3)(D)). Reliance on this § 270.2a3-1 does not except a limited partner
that is an affiliated person by virtue of any other provision.
No limited partner of a registered management company or a
business development company, organized as a limited partnership and relying on
§ 270.2a19-2, shall be deemed to be an affiliated person of such company, or any
other partner of such company, solely by reason of being a limited partner of
such company.
|
[58 FR 45838, Aug. 31, 1993]
270.2a-4 — Definition of “current net asset value” for use in computing periodically the current price of redeemable security.
(a) The current net asset value of any redeemable security issued by a
registered investment company used in computing periodically the current price for the
purpose of distribution, redemption, and repurchase means an amount which reflects
calculations, whether or not recorded in the books of account, made substantially in
accordance with the following, with estimates used where necessary or appropriate.
(1) Portfolio securities with respect to which market quotations are
readily available shall be valued at current market value, and other securities and assets
shall be valued at fair value as determined in good faith by the board of directors of the
registered company.
(2) Changes in holdings of portfolio securities shall be reflected no
later than in the first calculation on the first business day following the trade date.
(3) Changes in the number of outstanding shares of the registered company
resulting from distributions, redemptions, and repurchases shall be reflected no later than
in the first calculation on the first business day following such change.
(4) Expenses, including any investment advisory fees, shall be included to
date of calculation. Appropriate provision shall be made for Federal income taxes if
required. Investment companies which retain realized capital gains designated as a
distribution to shareholders shall comply with paragraph (h) of § 210.6-03 of Regulation
S-X.
(5) Dividends receivable shall be included to date of calculation either
at ex-dividend dates or record dates, as appropriate.
(6) Interest income and other income shall be included to date of
calculation.
(b) The items which would otherwise be required to be reflected by
paragraphs (a) (4) and (6) of this section need not be so reflected if cumulatively, when
netted, they do not amount to as much as one cent per outstanding share.
(c) Notwithstanding the requirements of paragraph (a) of this section, any
interim determination of current net asset value between calculations made as of the close
of the New York Stock Exchange on the preceding business day and the current business day
may be estimated so as to reflect any change in current net asset value since the closing
calculation on the preceding business day.
(Secs. 7, 19(a), 48 Stat. 78, 85, 908, 15 U.S.C. 77g, 77s(a); secs. 12,
13, 15(d), 23(a), 48 Stat. 892, 894, 895, 901; secs. 3, 8, 49 Stat. 1377, 1379, secs. 3, 4,
78 Stat. 569, 570, secs. 1, 2, 82 Stat. 454, 15 U.S.C. 78l, 78m, 78o(d), 78w(a); secs. 8,
22, 30, 31(c), 38(a), 54 Stat. 803, 823, 836, 838, 841, 15 U.S.C. 80a-8, 80a-22, 80a-29,
80a-30(c))
[29 FR 19101, Dec. 30, 1964, as amended at 35 FR
314, Jan. 8, 1970; 47 FR 56844, Dec. 21, 1982]
270.2a-5 — Fair value determination and readily available market quotations
(a) Fair value determination. For purposes of section 2(a)(41) of the Act (15
U.S.C. 80a-2(a)(41)) and § 270.2a-4, determining fair value in good faith with respect to
a fund requires:
(1) Assess and manage risks. Periodically assessing any material risks associated
with the determination of the fair value of fund investments (“valuation risks”),
including material conflicts of interest, and managing those identified valuation
risks;
(2) Establish and apply fair value methodologies. Performing each of the
following, taking into account the fund's valuation risks:
(i) Selecting and applying in a consistent manner an appropriate methodology or
methodologies for determining (and calculating) the fair value of fund investments,
provided that a selected methodology may be changed if a different methodology is equally
or more representative of the fair value of fund investments, including specifying the key
inputs and assumptions specific to each asset class or portfolio holding;
(ii) Periodically reviewing the appropriateness and accuracy of the methodologies
selected and making any necessary changes or adjustments thereto; and
(iii) Monitoring for circumstances that may necessitate the use of fair value;
(3) Test fair value methodologies. Testing the appropriateness and accuracy of the
fair value methodologies that have been selected, including identifying the testing
methods to be used and the minimum frequency with which such testing methods are to be
used; and
(4) Evaluate pricing services. Overseeing pricing service providers, if used,
including establishing the process for approving, monitoring, and evaluating each pricing
service provider and initiating price challenges as appropriate.
(b) Performance of fair value determinations. The board of the fund must determine
fair value in good faith for any or all fund investments by carrying out the functions
required in paragraph (a) of this section. The board may choose to designate the valuation
designee to perform the fair value determination relating to any or all fund investments,
which shall carry out all of the functions required in paragraph (a) of this section,
subject to the requirements of this paragraph (b).
(1) Oversight and reporting. The board oversees the valuation designee, and the
valuation designee reports to the fund's board, in writing, including such information as
may be reasonably necessary for the board to evaluate the matters covered in the report,
as follows:
(i) Periodic reporting. (A) At least quarterly:
(1) Any reports or materials requested by the board related to the fair value of
designated investments or the valuation designee's process for fair valuing fund
investments; and
(2) A summary or description of material fair value matters that occurred in the
prior quarter, including:
(i) Any material changes in the assessment and management of valuation risks
required under paragraph (a)(1) of this section, including any material changes in
conflicts of interest of the valuation designee (and any other service provider);
(ii) Any material changes to, or material deviations from, the fair value
methodologies established under paragraph (a)(2) of this section; and
(iii) Any material changes to the valuation designee's process for selecting and
overseeing pricing services, as well as any material events related to the valuation
designee's oversight of pricing services; and
(B) At least annually, an assessment of the adequacy and effectiveness of the valuation
designee's process for determining the fair value of the designated portfolio of
investments, including, at a minimum:
(1) A summary of the results of the testing of fair value methodologies required
under paragraph (a)(3) of this section; and
(2) An assessment of the adequacy of resources allocated to the process for
determining the fair value of designated investments, including any material changes to
the roles or functions of the persons responsible for determining fair value under
paragraph (b)(2) of this section; and
(ii) Prompt board notification and reporting. The valuation designee notifies the
board of the occurrence of matters that materially affect the fair value of the designated
portfolio of investments, including a significant deficiency or material weakness in the
design or effectiveness of the valuation designee's fair value determination process, or
material errors in the calculation of net asset value, (any such matter or error, a
“material matter”) within a time period determined by the board (but in no event later
than five business days after the valuation designee becomes aware of the material
matter), with such timely follow-on reporting as the board may determine appropriate;
and
(2) Specify responsibilities. The valuation designee specifies the titles of the
persons responsible for determining the fair value of the designated investments,
including by specifying the particular functions for which they are responsible, and
reasonably segregates fair value determinations from the portfolio management of the fund
such that the portfolio manager(s) may not determine, or effectively determine by exerting
substantial influence on, the fair values ascribed to portfolio investments.
(c) Readily available market quotations. For purposes of section 2(a)(41) of the
Act (15 U.S.C. 80a-2(a)(41)), a market quotation is readily available only when that
quotation is a quoted price (unadjusted) in active markets for identical investments that
the fund can access at the measurement date, provided that a quotation will not be readily
available if it is not reliable.
(d) Unit investment trusts. If the fund is a unit investment trust, and the
initial deposit of portfolio securities into the unit investment trust occurs after
March 8, 2021, the fund's trustee or depositor must carry out the requirements of
paragraph (a) of this section. If the initial deposit of portfolio securities into the
unit investment trust occurred before March 8, 2021, and an entity other than the
fund's trustee or depositor has been designated to carry out the fair value determination,
that entity must carry out the requirements of paragraph (a) of this section.
(e) Definitions. For purposes of this section:
(1) Fund means a registered investment company or business development
company.
(2) Fair value means the value of a portfolio investment for which market
quotations are not readily available under paragraph (c) of this section.
(3) Board means either the fund's entire board of directors or a designated
committee of such board composed of a majority of directors who are not interested persons
of the fund.
(4) Valuation designee means the investment adviser, other than a sub-adviser, of
a fund or, if the fund does not have an investment adviser, an officer or officers of the
fund.
[86 FR 748, Jan. 6, 2021]
270.2a-6 — Certain transactions not deemed assignments.
A transaction which does not result in a change of actual control or
management of the investment adviser to, or principal underwriter of, an investment company
is not an assignment for purposes of section 15(a)(4) or section 15(b)(2) of the act,
respectively.
(Secs. 6(c) and 38(a) (15 U.S.C. 80a-6(c) and 80a-37(a)))
[45 FR 1861, Jan. 9, 1980]
270.2a-7 — Money market funds.
(a) Definitions — (1) Acquisition (or acquire) means
any purchase or subsequent rollover (but does not include the failure to exercise a demand
feature).
(2) Amortized cost method of valuation means the method of
calculating an investment company's net asset value whereby portfolio securities are valued
at the fund's acquisition cost as adjusted for amortization of premium or accretion of
discount rather than at their value based on current market factors.
(3) Asset-backed security means a fixed income security (other than
a government security) issued by a special purpose entity (as defined in this paragraph
(a)(3)), substantially all of the assets of which consist of qualifying assets (as defined
in this paragraph (a)(3)). Special purpose entity means a trust, corporation,
partnership or other entity organized for the sole purpose of issuing securities that
entitle their holders to receive payments that depend primarily on the cash flow from
qualifying assets, but does not include a registered investment company. Qualifying
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.
(4) Business day means any day, other than Saturday, Sunday, or any
customary business holiday.
(5) Collateralized fully has the same meaning as defined in §
270.5b-3(c)(1) except that § 270.5b-3(c)(1)(iv)(C) shall not apply.
(6) Conditional demand feature means a demand feature that is not
an unconditional demand feature. A conditional demand feature is not a guarantee.
(7) Conduit security means a security issued by a municipal issuer
(as defined in this paragraph (a)(7)) involving an arrangement or agreement entered into,
directly or indirectly, with a person other than a municipal issuer, which arrangement or
agreement provides for or secures repayment of the security. Municipal issuer means a
state or territory of the United States (including the District of Columbia), or any
political subdivision or public instrumentality of a state or territory of the United
States. A conduit security does not include a security that is:
(i) Fully and unconditionally guaranteed by a municipal issuer;
(ii) Payable from the general revenues of the municipal issuer or other
municipal issuers (other than those revenues derived from an agreement or arrangement with a
person who is not a municipal issuer that provides for or secures repayment of the security
issued by the municipal issuer);
(iii) Related to a project owned and operated by a municipal issuer;
or
(iv) Related to a facility leased to and under the control of an
industrial or commercial enterprise that is part of a public project which, as a whole, is
owned and under the control of a municipal issuer.
(8) Daily liquid assets means:
(i) Cash;
(ii) Direct obligations of the U.S. Government;
(iii) Securities that will mature, as determined without reference to the
exceptions in paragraph (i) of this section regarding interest rate readjustments, or are
subject to a demand feature that is exercisable and payable, within one business day.
(iv) Amounts receivable and due unconditionally within one business day on
pending sales of portfolio securities.
(9) Demand feature means a feature permitting the holder of a
security to sell the security at an exercise price equal to the approximate amortized cost
of the security plus accrued interest, if any, at the later of the time of exercise or the
settlement of the transaction, paid within 397 calendar days of exercise.
(10) Demand feature issued by a non-controlled person means a
demand feature issued by:
(i) A person that, directly or indirectly, does not control, and is not
controlled by or under common control with the issuer of the security subject to the demand
feature (control means “control” as defined in section 2(a)(9) of the Act) (15 U.S.C.
80a-2(a)(9)); or
(ii) A sponsor of a special purpose entity with respect to an asset-backed
security.
(11) Eligible security means a security:
(i) With a remaining maturity of 397 calendar days or less that the fund's
board of directors determines presents minimal credit risks to the fund, which determination
must include an analysis of the capacity of the security's issuer or guarantor (including
for this paragraph (a)(11)(i) the provider of a conditional demand feature, when applicable)
to meet its financial obligations, and such analysis must include, to the extent
appropriate, consideration of the following factors with respect to the security's issuer or
guarantor:
(A) Financial condition;
(B) Sources of liquidity;
(C) Ability to react to future market-wide and issuer- or
guarantor-specific events, including ability to repay debt in a highly adverse situation;
and
(D) Strength of the issuer or guarantor's industry within the economy and
relative to economic trends, and issuer or guarantor's competitive position within its
industry.
(ii) That is issued by a registered investment company that is a money
market fund; or
(iii) That is a government security.
Note
to paragraph (a)(11): For a discussion of
additional factors that may be relevant in evaluating certain specific asset
types see Investment Company Act Release No. IC-31828 (9/16/15). |
(12) Event of insolvency has the same meaning as defined in §
270.5b-3(c)(2).
(13) Floating rate security means a security the terms of which
provide for the adjustment of its interest rate whenever a specified interest rate changes
and that, at any time until the final maturity of the instrument or the period remaining
until the principal amount can be recovered through demand, can reasonably be expected to
have a market value that approximates its amortized cost.
(14) Government money market fund means a money market fund that
invests 99.5 percent or more of its total assets in cash, government securities, and/or
repurchase agreements that are collateralized fully.
(15) Government security has the same meaning as defined in section
2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16)).
(16) Guarantee:
(i) Means an unconditional obligation of a person other than the issuer of
the security to undertake to pay, upon presentment by the holder of the guarantee (if
required), the principal amount of the underlying security plus accrued interest when due or
upon default, or, in the case of an unconditional demand feature, an obligation that
entitles the holder to receive upon the later of exercise or thte settlement of the
transaction the approximate amortized cost of the underlying security or securities, plus
accrued interest, if any. A guarantee includes a letter of credit, financial guaranty (bond)
insurance, and an unconditional demand feature (other than an unconditional demand feature
provided by the issuer of the security).
(ii) The sponsor of a special purpose entity with respect to an
asset-backed security shall be deemed to have provided a guarantee with respect to the
entire principal amount of the asset- backed security for purposes of this section, except
paragraphs (a)(11) (definition of eligible security), (d)(2)(ii) (credit substitution),
(d)(3)(iv)(A) (fractional guarantees) and (e) (guarantees not relied on) of this section,
unless the money market fund’s board of directors has determined that the fund is not
relying on the sponsor’s financial strength or its ability or willingness to provide
liquidity, credit or other support to determine the quality (pursuant to paragraph (d)(2) of
this section) or liquidity (pursuant to paragraph (d)(4) of this section) of the
asset-backed security, and maintains a record of this determination (pursuant to paragraphs
(g)(7) and (h)(6) of this section).
(17) Guarantee issued by a non-controlled person means a guarantee
issued by:
(i) A person that, directly or indirectly, does not control, and is not
controlled by or under common control with the issuer of the security subject to the
guarantee (control means “control” as defined in section 2(a)(9) of the Act) (15
U.S.C. 80a-2(a)(9)); or
(ii) A sponsor of a special purpose entity with respect to an asset-backed
security.
(18) Illiquid security means a security that cannot be sold or
disposed of in the ordinary course of business within seven calendar days at approximately
the value ascribed to it by the fund.
(19) Penny-rounding method of pricing means the method of computing
an investment company's price per share for purposes of distribution, redemption and
repurchase whereby the current net asset value per share is rounded to the nearest one
percent.
(20) Refunded security has the same meaning as defined in §
270.5b-3(c)(4).
(21) Retail money market fund means a money market fund that has
policies and procedures reasonably designed to limit all beneficial owners of the fund to
natural persons.
(22) Single state fund means a tax exempt fund that holds itself
out as seeking to maximize the amount of its distributed income that is exempt from the
income taxes or other taxes on investments of a particular state and, where applicable,
subdivisions thereof.
(23) Tax exempt fund means any money market fund that holds itself
out as distributing income exempt from regular federal income tax.
(24) Total assets means, with respect to a money market fund using
the Amortized Cost Method, the total amortized cost of its assets and, with respect to any
other money market fund, means the total value of the money market fund's assets, as defined
in section 2(a)(41) of the Act (15 U.S.C. 80a-2(a)(41)) and the rules thereunder.
(25) Unconditional demand feature means a demand feature that by
its terms would be readily exercisable in the event of a default in payment of principal or
interest on the underlying security or securities.
(26) United States dollar-denominated means, with reference to a
security, that all principal and interest payments on such security are payable to security
holders in United States dollars under all circumstances and that the interest rate of, the
principal amount to be repaid, and the timing of payments related to such security do not
vary or float with the value of a foreign currency, the rate of interest payable on foreign
currency borrowings, or with any other interest rate or index expressed in a currency other
than United States dollars.
(27) Variable rate security means a security the terms of which
provide for the adjustment of its interest rate on set dates (such as the last day of a
month or calendar quarter) and that, upon each adjustment until the final maturity of the
instrument or the period remaining until the principal amount can be recovered through
demand, can reasonably be expected to have a market value that approximates its amortized
cost.
(28) Weekly liquid assets means:
(i) Cash;
(ii) Direct obligations of the U.S. Government;
(iii) Government securities that are issued by a person controlled or
supervised by and acting as an instrumentality of the government of the United States
pursuant to authority granted by the Congress of the United States that:
(A) Are issued at a discount to the principal amount to be repaid at
maturity without provision for the payment of interest; and
(B) Have a remaining maturity date of 60 days or less.
(iv) Securities that will mature, as determined without reference to the
exceptions in paragraph (i) of this section regarding interest rate readjustments, or are
subject to a demand feature that is exercisable and payable, within five business days;
or
(v) Amounts receivable and due unconditionally within five business days
on pending sales of portfolio securities.
(b) Holding out and use of names and titles—(1) Holding out.
It shall be an untrue statement of material fact within the meaning of section 34(b) of the
Act (15 U.S.C. 80a-33(b)) for a registered investment company, in any registration
statement, application, report, account, record, or other document filed or transmitted
pursuant to the Act, including any advertisement, pamphlet, circular, form letter, or other
sales literature addressed to or intended for distribution to prospective investors that is
required to be filed with the Commission by section 24(b) of the Act (15 U.S.C. 80a-24(b)),
to hold itself out to investors as a money market fund or the equivalent of a money market
fund, unless such registered investment company complies with this section.
(2) Names. It shall constitute the use of a materially deceptive or
misleading name or title within the meaning of section 35(d) of the Act (15 U.S.C.
80a-34(d)) for a registered investment company to adopt the term “money market” as part of
its name or title or the name or title of any redeemable securities of which it is the
issuer, or to adopt a name that suggests that it is a money market fund or the equivalent of
a money market fund, unless such registered investment company complies with this
section.
(3) Titles. For purposes of paragraph (b)(2) of this section, a
name that suggests that a registered investment company is a money market fund or the
equivalent thereof includes one that uses such terms as “cash,” “liquid,” “money,” “ready
assets” or similar terms.
(c) Pricing and Redeeming Shares — (1) Share price
calculation.
(i)The current price per share, for purposes of distribution, redemption
and repurchase, of any redeemable security issued by a government money market fund or
retail money market fund, notwithstanding the requirements of section 2(a)(41) of the Act
(15 U.S.C. 80a-2(a)(41)) and of §§ 270.2a-4 and 270.22c-1 thereunder, may be computed by use
of the amortized cost method and/or the penny-rounding method. To use these methods, the
board of directors of the government or retail money market fund must determine, in good
faith, that it is in the best interests of the fund and its shareholders to maintain a
stable net asset value per share or stable price per share, by virtue of either the
amortized cost method and/or the penny-rounding method. The government or retail money
market fund may continue to use such methods only so long as the board of directors believes
that they fairly reflect the market-based net asset value per share and the fund complies
with the other requirements of this section.
(ii) Any money market fund that is not a government money market fund or a
retail money market fund must compute its price per share for purposes of distribution,
redemption and repurchase by rounding the fund’s current net asset value per share to a
minimum of the fourth decimal place in the case of a fund with a $1.0000 share price or an
equivalent or more precise level of accuracy for money market funds with a different share
price (e.g. $10.000 per share, or $100.00 per share).
(2) Liquidity fees. Except as provided in paragraph (c)(2)(v) of
this section, and notwithstanding section 27(i) of the Act (15 U.S.C. 80a–27(i)) and
§ 270.22c–1:
(i) Discretionary liquidity fees. If the fund's board of directors,
including a majority of the directors who are not interested persons of the fund, determines
that a liquidity fee is in the best interests of the fund, the fund must institute a
liquidity fee (not to exceed two percent of the value of the shares redeemed).
(A) Duration and application of discretionary liquidity fee. Once
imposed, a discretionary liquidity fee must be applied to all shares redeemed and must
remain in effect until the money market fund's board of directors, including a majority of
the directors who are not interested persons of the fund, determines that imposing such
liquidity fee is no longer in the best interests of the fund.
(B) Government money market funds. The requirements of this
paragraph (c)(2)(i) do not apply to a government money market fund. A government money
market fund may, however, choose to rely on the ability to impose discretionary liquidity
fees consistent with the requirements of this paragraph (c)(2)(i) and any other requirements
that apply to liquidity fees ( e.g., Item 4(b)(1)(ii) of Form N–1A (§ 274.11A of this
chapter)).
(ii) Determination, duration, and application of mandatory liquidity fees. If a
money market fund that is not a government money market fund or a retail money market fund
has total daily net redemptions that exceed five percent of the fund's net assets, or such
smaller amount of net redemptions as the board determines, based on flow information
available within a reasonable period after the last computation of the fund's net asset
value on that day, the fund must apply a liquidity fee to all shares that are redeemed at a
price computed on that day, in an amount determined pursuant to paragraph (c)(2)(iii) of
this section.
(iii) Amount of mandatory liquidity fees. The amount of a mandatory liquidity fee
must be determined pursuant to paragraph (c)(2)(iii)(A) of this section, except as provided
in paragraph (c)(2)(iii)(C) or (D) of this section.
(A) Good faith estimate of liquidity costs. The fee amount must be based on a good
faith estimate, supported by data, of the costs the fund would incur if it sold a pro rata
amount of each security in its portfolio to satisfy the amount of net redemptions,
including:
( 1) Spread costs, such that the fund is valuing each security at its bid price, and
any other charges, fees, and taxes associated with portfolio security sales; and
( 2) Market impacts for each security. The fund must determine market impacts by
first establishing a market impact factor for each security, which is a good faith estimate
of the percentage change in the value of the security if it were sold, per dollar of the
amount of the security that would be sold if the fund sold a pro rata amount of each
security in its portfolio to satisfy the amount of net redemptions under current market
conditions and, second, multiplying the market impact factor by the dollar amount of the
security that would be sold. A fund may assume a market impact of zero for its daily liquid
assets and weekly liquid assets.
(B) Cost estimates by type of security. For purposes of paragraph (c)(2)(iii)(A) of
this section, a fund may estimate costs and market impacts for each type of security with
the same or substantially similar characteristics and apply those estimates to all
securities of that type rather than analyze each security separately.
(C) Default fee amount. If the costs of selling a pro rata amount of each portfolio
security cannot be estimated in good faith and supported by data, the liquidity fee amount
is one percent of the value of shares redeemed.
(D) De minimis exception. A fund is not required to apply a liquidity fee if the
amount of the fee determined under paragraph (c)(2)(iii)(A) of this section is less than
0.01% of the value of the shares redeemed.
(iv) Variable contracts. Notwithstanding section 27(i) of the Act (15 U.S.C.
80a–27(i)), a variable insurance contract issued by a registered separate account funding
variable insurance contracts or the sponsoring insurance company of such separate account
may apply a liquidity fee pursuant to paragraph (c)(2) of this section to contract owners
who allocate all or a portion of their contract value to a subaccount of the separate
account that is either a money market fund or that invests all of its assets in shares of a
money market fund.
(v) Master feeder funds. Any money market fund (“feeder fund”) that owns, pursuant
to section 12(d)(1)(E) of the Act (15 U.S.C. 80a–12(d)(1)(E)), shares of another money
market fund (“master fund”) may not impose liquidity fees under paragraph (c)(2) of this
section, provided however, that if a master fund, in which the feeder fund invests, imposes
a liquidity fee pursuant to paragraph (c)(2) of this section, then the feeder fund shall
pass through to its investors the fee on the same terms and conditions as imposed by the
master fund.
(3) Share cancellation. A money market fund may not reduce the number of its shares
outstanding to seek to maintain a stable net asset value per share or stable price per share
unless:
(i) The money market fund calculates its share price pursuant to paragraph (c)(1)(i) of
this section;
(ii) The fund has negative gross yield as a result of negative interest rates (“negative
interest rate event”);
(iii) The board of directors determines that reducing the number of the fund's shares
outstanding is in the best interests of the fund and its shareholders; and
(iv) Timely, concise, and plain English disclosure is provided to investors about the
fund's share cancellation practices and their effects on investors, including:
(A) Advance notification to investors in the fund's prospectus that the fund plans to use
share cancellation in a negative interest rate event and the potential effects on investors;
and
(B) When the fund is cancelling shares, information in each account statement or in a
separate writing accompanying each account statement identifying that such practice is in
use and explaining its effects on investors.
(d) Risk-limiting conditions — (1) Portfolio maturity. The
money market fund must maintain a dollar-weighted average portfolio maturity appropriate to
its investment objective; provided, however, that the money market fund must not:
(i) Acquire any instrument with a remaining maturity of greater than 397
calendar days;
(ii) Maintain a dollar-weighted average portfolio maturity (“WAM”) that
exceeds 60 calendar days, with the dollar-weighted average based on the percentage of each
security's market value in the portfolio; or
(iii) Maintain a dollar-weighted average portfolio maturity that exceeds
120 calendar days, determined without reference to the exceptions in paragraph (i) of this
section regarding interest rate readjustments (“WAL”) and with the dollar-weighted average
based on the percentage of each security's market value in the portfolio.
(2) Portfolio quality — (i) General. The money market fund
must limit its portfolio investments to those United States dollar-denominated securities
that at the time of acquisition are eligible securities.
(ii) Securities subject to guarantees. A security that is subject
to a guarantee may be determined to be an eligible security based solely on whether the
guarantee is an eligible security, provided however, that the issuer of the guarantee, or
another institution, has undertaken to promptly notify the holder of the security in the
event the guarantee is substituted with another guarantee (if such substitution is
permissible under the terms of the guarantee).
(iii) Securities subject to conditional demand features. A security
that is subject to a conditional demand feature (“underlying security”) may be determined to
be an eligible security only if:
(A) The conditional demand feature is an eligible security;
(B) The underlying security or any guarantee of such security is an
eligible security, except that the underlying security or guarantee may have a remaining
maturity of more than 397 calendar days.
(C) At the time of the acquisition of the underlying security, the money
market fund's board of directors has determined that there is minimal risk that the
circumstances that would result in the conditional demand feature not being exercisable will
occur; and
(1) The conditions limiting exercise either can be monitored
readily by the fund or relate to the taxability, under federal, state or local law, of the
interest payments on the security; or
(2) The terms of the conditional demand feature require that the
fund will receive notice of the occurrence of the condition and the opportunity to exercise
the demand feature in accordance with its terms; and
(D) The issuer of the conditional demand feature, or another institution,
has undertaken to promptly notify the holder of the security in the event the conditional
demand feature is substituted with another conditional demand feature (if such substitution
is permissible under the terms of the conditional demand feature).
(3) Portfolio diversification — (i) Issuer diversification.
The money market fund must be diversified with respect to issuers of securities acquired by
the fund as provided in paragraphs (d)(3)(i) and (ii) of this section, other than with
respect to government securities.
(A) Taxable and national funds. Immediately after the acquisition
of any security, a money market fund other than a single state fund must not have invested
more than:
(1) Five percent of its total assets in securities issued by the
issuer of the security, provided, however, that with respect to paragraph (d)(3)(i)(A) of
this section, such a fund may invest up to twenty-five percent of its total assets in the
securities of a single issuer for a period of up to three business days after the
acquisition thereof; provided, further, that the fund may not invest in the securities of
more than one issuer in accordance with the foregoing proviso in this paragraph
(d)(3)(i)(A)(1) at any time; and
(2) Ten percent of its total assets in securities issued by or
subject to demand features or guarantees from the institution that issued the demand feature
or guarantee, provided, however, that a tax exempt fund need only comply with this paragraph
(d)(3)(i)(A)(2) with respect to eighty-five percent of its total assets, subject to
paragraph (d)(3)(iii) of this section.
(B) Single state funds. Immediately after the acquisition of any
security, a single state fund must not have invested:
(1) With respect to seventy-five percent of its total assets, more
than five percent of its total assets in securities issued by the issuer of the security;
and
(2) With respect to seventy-five percent of its total assets, more
than ten percent of its total assets in securities issued by or subject to demand features
or guarantees from the institution that issued the demand feature or guarantee, subject to
paragraph (d)(3)(iii) of this section.
(ii) Issuer diversification calculations. For purposes of making
calculations under paragraph (d)(3)(i) of this section:
(A) Repurchase agreements. The acquisition of a repurchase
agreement may be deemed to be an acquisition of the underlying securities, provided the
obligation of the seller to repurchase the securities from the money market fund is
collateralized fully and the fund's board of directors has evaluated the seller's
creditworthiness.
(B) Refunded securities. The acquisition of a refunded security
shall be deemed to be an acquisition of the escrowed government securities.
(C) Conduit securities. A conduit security shall be deemed to be
issued by the person (other than the municipal issuer) ultimately responsible for payments
of interest and principal on the security.
(D) Asset-backed securities — (1) General. An
asset-backed security acquired by a fund (“primary ABS”) shall be deemed to be issued by the
special purpose entity that issued the asset-backed security, provided, however:
(i) Holdings of primary ABS. Any person whose obligations
constitute ten percent or more of the principal amount of the qualifying assets of the
primary ABS (“ten percent obligor”) shall be deemed to be an issuer of the portion of the
primary ABS such obligations represent; and
(ii) Holdings of secondary ABS. If a ten percent obligor of
a primary ABS is itself a special purpose entity issuing asset-backed securities (“secondary
ABS”), any ten percent obligor of such secondary ABS also shall be deemed to be an issuer of
the portion of the primary ABS that such ten percent obligor represents.
(2) Restricted special purpose entities. A ten percent
obligor with respect to a primary or secondary ABS shall not be deemed to have issued any
portion of the assets of a primary ABS as provided in paragraph (d)(3)(ii)(D)(1) of
this section if that ten percent obligor is itself a special purpose entity issuing
asset-backed securities (“restricted special purpose entity”), and the securities that it
issues (other than securities issued to a company that controls, or is controlled by or
under common control with, the restricted special purpose entity and which is not itself a
special purpose entity issuing asset-backed securities) are held by only one other special
purpose entity.
(3) Demand features and guarantees. In the case of a ten
percent obligor deemed to be an issuer, the fund must satisfy the diversification
requirements of paragraph (d)(3)(iii) of this section with respect to any demand feature or
guarantee to which the ten percent obligor's obligations are subject.
(E) Shares of other money market funds. A money market fund that
acquires shares issued by another money market fund in an amount that would otherwise be
prohibited by paragraph (d)(3)(i) of this section shall nonetheless be deemed in compliance
with this section if the board of directors of the acquiring money market fund reasonably
believes that the fund in which it has invested is in compliance with this section.
(F) Treatment of certain affiliated entities—(1) General. The money
market fund, when calculating the amount of its total assets invested in securities issued
by any particular issuer for purposes of paragraph (d)(3)(i) of this section, must treat as
a single issuer two or more issuers of securities owned by the money market fund if one
issuer controls the other, is controlled by the other issuer, or is under common control
with the other issuer, provided that “control” for this purpose means ownership of more than
50 percent of the issuer’s voting securities.
(2) Equity owners of asset-backed commercial paper special purpose
entities. The money market fund is not required to aggregate an asset-backed
commercial paper special purpose entity and its equity owners under paragraph
(d)(3)(ii)(F)(1) of this section provided that a primary line of business of its equity
owners is owning equity interests in special purpose entities and providing services to
special purpose entities, the independent equity owners’ activities with respect to the SPEs
are limited to providing management or administrative services, and no qualifying assets of
the special purpose entity were originated by the equity owners.
(3) Ten percent obligors. For purposes of determining ten percent
obligors pursuant to paragraph (d)(3)(ii)(D)(1)(i) of this section, the money
market fund must treat as a single person two or more persons whose obligations in the
aggregate constitute ten percent or more of the principal amount of the qualifying assets of
the primary ABS if one person controls the other, is controlled by the other person, or is
under common control with the person, provided that “control” for this purpose means
ownership of more than 50 percent of the person’s voting securities.
(iii) Diversification rules for demand features and guarantees. The
money market fund must be diversified with respect to demand features and guarantees
acquired by the fund as provided in paragraphs (d)(3)(i), (iii), and (iv) of this section,
other than with respect to a demand feature issued by the same institution that issued the
underlying security, or with respect to a guarantee or demand feature that is itself a
government security.
(A) General. Immediately after the acquisition of any demand
feature or guarantee, any security subject to a demand feature or guarantee, or a security
directly issued by the issuer of a demand feature or guarantee, a money market fund must not
have invested more than ten percent of its total assets in securities issued by or subject
to demand features or guarantees from the institution that issued the demand feature or
guarantee, subject to paragraphs (d)(3)(i) and (d)(3)(iii)(B) of this section.
(B) Tax exempt funds. Immediately after the acquisition of any
demand feature or guarantee, any security subject to a demand feature or guarantee, or a
security directly issued by the issuer of a demand feature or guarantee (any such
acquisition, a “demand feature or guarantee acquisition”), a tax exempt fund, with respect
to eighty-five percent of its total assets, must not have invested more than ten percent of
its total assets in securities issued by or subject to demand features or guarantees from
the institution that issued the demand feature or guarantee; provided that any demand
feature or guarantee acquisition in excess of ten percent of the fund’s total assets in
accordance with this paragraph must be a demand feature or guarantee issued by a
non-controlled person.
(iv) Demand feature and guarantee diversification calculations —
(A) Fractional demand features or guarantees. In the case of a security subject to a
demand feature or guarantee from an institution by which the institution guarantees a
specified portion of the value of the security, the institution shall be deemed to guarantee
the specified portion thereof.
(B) Layered demand features or guarantees. In the case of a
security subject to demand features or guarantees from multiple institutions that have not
limited the extent of their obligations as described in paragraph (d)(3)(iv)(A) of this
section, each institution shall be deemed to have provided the demand feature or guarantee
with respect to the entire principal amount of the security.
(v) Diversification safe harbor. A money market fund that satisfies
the applicable diversification requirements of paragraphs (d)3) and (e) of this section
shall be deemed to have satisfied the diversification requirements of section 5(b)(1) of the
Act (15 U.S.C. 80a-5(b)(1)) and the rules adopted thereunder.
(4) Portfolio liquidity. The money market fund must hold securities
that are sufficiently liquid to meet reasonably foreseeable shareholder redemptions in light
of the fund's obligations under section 22(e) of the Act (15 U.S.C. 80a-22(e)) and any
commitments the fund has made to shareholders; provided, however, that:
(i) Illiquid securities. The money market fund may not acquire any
illiquid security if, immediately after the acquisition, the money market fund would have
invested more than five percent of its total assets in illiquid securities.
(ii) Minimum daily liquidity requirement. The money market fund may
not acquire any security other than a daily liquid asset if, immediately after the
acquisition, the fund would have invested less than twenty-five percent of its total assets
in daily liquid assets. This provision does not apply to tax exempt funds.
(iii) Minimum weekly liquidity requirement. The money market fund
may not acquire any security other than a weekly liquid asset if, immediately after the
acquisition, the fund would have invested less than fifty percent of its total assets in
weekly liquid assets.
(e) Demand features and guarantees not relied upon. If the fund's
board of directors has determined that the fund is not relying on a demand feature or
guarantee to determine the quality (pursuant to paragraph (d)(2) of this section), or
maturity (pursuant to paragraph (i) of this section), or liquidity of a portfolio security
(pursuant to paragraph (d)(4) of this section), and maintains a record of this determination
(pursuant to paragraphs (g)(3) and (h)(7) of this section), then the fund may disregard such
demand feature or guarantee for all purposes of this section.
(f) Defaults and other events — (1) Adverse events. Upon the
occurrence of any of the events specified in paragraphs (f)(1)(i) through (iii) of this
section with respect to a portfolio security, the money market fund shall dispose of such
security as soon as practicable consistent with achieving an orderly disposition of the
security, by sale, exercise of any demand feature or otherwise, absent a finding by the
board of directors that disposal of the portfolio security would not be in the best
interests of the money market fund (which determination may take into account, among other
factors, market conditions that could affect the orderly disposition of the portfolio
security):
(i) The default with respect to a portfolio security (other than an
immaterial default unrelated to the financial condition of the issuer);
(ii) A portfolio security ceases to be an eligible security (e.g.,
no longer presents minimal credit risks); or
(iii) An event of insolvency occurs with respect to the issuer of a
portfolio security or the provider of any demand feature or guarantee.
(2) Notice to the Commission. The money market fund must notify the
Commission of the occurrence of certain material events, as specified in Form N-CR (§
274.222 of this chapter).
(3) Defaults for purposes of paragraphs (f)(1) and (2) of this
section. For purposes of paragraphs (f)(1) and (2) of this section, an instrument
subject to a demand feature or guarantee shall not be deemed to be in default (and an event
of insolvency with respect to the security shall not be deemed to have occurred) if:
(i) In the case of an instrument subject to a demand feature, the demand
feature has been exercised and the fund has recovered either the principal amount or the
amortized cost of the instrument, plus accrued interest;
(ii) The provider of the guarantee is continuing, without protest, to make
payments as due on the instrument; or
(iii) The provider of a guarantee with respect to an asset-backed security
pursuant to paragraph (a)(16)(ii) of this section is continuing, without protest, to provide
credit, liquidity or other support as necessary to permit the asset-backed security to make
payments as due.
(4) Notice to the board of directors. (i) The money market fund must notify its
board of directors within one business day following the occurrence of:
(A) The money market fund investing less than twelve and a half percent of its total assets
in daily liquid assets; or
(B) The money market fund investing less than twenty-five percent of its total assets in
weekly liquid assets.
(ii) Following an event described in paragraph (f)(4)(i) of this section, the money market
fund must provide its board of directors with a brief description of the facts and
circumstances leading to such event within four business days after occurrence of the event.
(g) Required procedures. The money market fund's board of directors
must adopt written procedures including the following:
(1) Funds using amortized costs. In the case of a government or retail
money market fund that uses the amortized cost method of valuation, in supervising the money
market fund's operations and delegating special responsibilities involving portfolio
management to the money market fund's investment adviser, the money market fund's board of
directors, as a particular responsibility within the overall duty of care owed to its
shareholders, shall establish written procedures reasonably designed, taking into account
current market conditions and the money market fund's investment objectives, to stabilize
the money market fund's net asset value per share, as computed for the purpose of
distribution, redemption and repurchase, at a single value.
(i) Specific procedures. Included within the procedures adopted by
the board of directors shall be the following:
(A) Shadow pricing. Written procedures shall provide:
(1) That the extent of deviation, if any, of the current net asset
value per share calculated using available market quotations (or an appropriate substitute
that reflects current market conditions) from the money market fund's amortized cost price
per share, shall be calculated at least daily, and at such other intervals that the board of
directors determines appropriate and reasonable in light of current market conditions;
(2) For the periodic review by the board of directors of the amount
of the deviation as well as the methods used to calculate the deviation; and
(3) For the maintenance of records of the determination of
deviation and the board's review thereof.
(B) Prompt consideration of deviation. In the event such deviation
from the money market fund's amortized cost price per share exceeds ½ of 1 percent, the
board of directors shall promptly consider what action, if any, should be initiated by the
board of directors.
(C) Material dilution or unfair results. Where the board of
directors believes the extent of any deviation from the money market fund's amortized cost
price per share may result in material dilution or other unfair results to investors or
existing shareholders, it shall cause the fund to take such action as it deems appropriate
to eliminate or reduce to the extent reasonably practicable such dilution or unfair
results.
(ii) [Reserved]
(2) Funds using penny rounding. In the case of a government or
retail money market fund that uses the penny rounding method of pricing, in supervising the
money market fund's operations and delegating special responsibilities involving portfolio
management to the money market fund's investment adviser, the money market fund's board of
directors, as a particular responsibility within the overall duty of care owed to its
shareholders, must establish written procedures reasonably designed, taking into account
current market conditions and the money market fund's investment objectives, to assure to
the extent reasonably practicable that the money market fund's price per share as computed
for the purpose of distribution, redemption and repurchase, rounded to the nearest one
percent, will not deviate from the single price established by the board of directors.
(3) Ongoing Review of Credit Risks. The written procedures must
require the adviser to provide ongoing review of whether each security (other than a
government security) continues to present minimal credit risks. The review must:
(i) Include an assessment of each security's credit quality, including
the capacity of the issuer or guarantor (including conditional demand feature provider, when
applicable) to meet its financial obligations; and
(ii) Be based on, among other things, financial data of the issuer of the
portfolio security or provider of the guarantee or demand feature, as the case may be, and
in the case of a security subject to a conditional demand feature, the issuer of the
security whose financial condition must be monitored under paragraph (d)(2)(iii) of this
section, whether such data is publicly available or provided under the terms of the
security's governing documents.
(4) Securities subject to demand features or guarantees. In the
case of a security subject to one or more demand features or guarantees that the fund's
board of directors has determined that the fund is not relying on to determine the quality
(pursuant to paragraph (d)(2) of this section), maturity (pursuant to paragraph (i) of this
section) or liquidity (pursuant to paragraph (d)(4) of this section) of the security subject
to the demand feature or guarantee, written procedures must require periodic evaluation of
such determination.
(5) Adjustable rate securities without demand features. In the case
of a variable rate or floating rate security that is not subject to a demand feature and for
which maturity is determined pursuant to paragraphs (i)(1), (i)(2) or (i)(4) of this
section, written procedures shall require periodic review of whether the interest rate
formula, upon readjustment of its interest rate, can reasonably be expected to cause the
security to have a market value that approximates its amortized cost value.
(6) Ten percent obligors of asset-backed securities. In the case of
an asset-backed security, written procedures must require the fund to periodically determine
the number of ten percent obligors (as that term is used in paragraph (d)(3)(ii)(D) of this
section) deemed to be the issuers of all or a portion of the asset-backed security for
purposes of paragraph (d)(3)(ii)(D) of this section; provided, however, written procedures
need not require periodic determinations with respect to any asset-backed security that a
fund's board of directors has determined, at the time of acquisition, will not have, or is
unlikely to have, ten percent obligors that are deemed to be issuers of all or a portion of
that asset-backed security for purposes of paragraph (d)(3)(ii)(D) of this section, and
maintains a record of this determination.
(7) Asset-backed securities not subject to guarantees. In the case
of an asset-backed security for which the fund’s board of directors has determined that the
fund is not relying on the sponsor’s financial strength or its ability or willingness to
provide liquidity, credit or other support in connection with the asset-backed security to
determine the quality (pursuant to paragraph (d)(2) of this section) or liquidity (pursuant
to paragraph (d)(4) of this section) of the asset-backed security, written procedures must
require periodic evaluation of such determination.
(8) Stress Testing. Written procedures must provide for:
(i) General. The periodic stress testing, at such intervals as the
board of directors determines appropriate and reasonable in light of current market
conditions, of the money market fund's ability to have invested at least ten percent of its
total assets in weekly liquid assets, and the fund’s ability to minimize principal
volatility (and, in the case of a money market fund using the amortized cost method of
valuation or penny rounding method of pricing as provided in paragraph (c)(1) of this
section, the fund’s ability to maintain the stable price per share established by the board
of directors for the purpose of distribution, redemption and repurchase), based upon
specified hypothetical events that include, but are not limited to:
(A) Increases in the general level of short-term interest rates, in
combination with various levels of an increase in shareholder redemptions;
(B) An event indicating or evidencing deterioration, such as a downgrade
or default of particular portfolio security positions, each representing various portions of
the fund’s portfolio (with varying assumptions about the resulting loss in the value of the
security), in combination with various levels of an increase in shareholder redemptions;
(C) A widening of spreads compared to the indexes to which portfolio
securities are tied in various sectors in the fund’s portfolio (in which a sector is a
logically related subset of portfolio securities, such as securities of issuers in similar
or related industries or geographic region or securities of a similar security type), in
combination with various levels of an increase in shareholder redemptions; and
(D) Any additional combinations of events that the adviser deems
relevant.
(ii) A report on the results of such testing to be provided to the board
of directors at its next regularly scheduled meeting (or sooner, if appropriate in light of
the results), which report must include:
(A) The date(s) on which the testing was performed and an assessment of
the money market fund's ability to have invested at least ten percent of its total assets in
weekly liquid assets and to minimize principal volatility (and, in the case of a money
market fund using the amortized cost method of valuation or penny rounding method of pricing
as provided in paragraph (c)(1) of this section to maintain the stable price per share
established by the board of directors); and
(B) An assessment by the fund's adviser of the fund's ability to withstand
the events (and concurrent occurrences of those events) that are reasonably likely to occur
within the following year, including such information as may reasonably be necessary for the
board of directors to evaluate the stress testing conducted by the adviser and the results
of the testing. The fund adviser must include a summary of the significant assumptions made
when performing the stress tests.
(h) Recordkeeping and reporting — (i) Written procedures.
For a period of not less than six years following the replacement of existing procedures
with new procedures (the first two years in an easily accessible place), a written copy of
the procedures (and any modifications thereto) described in this section must be maintained
and preserved.
(2) Board considerations and actions. For a period of not less than
six years (the first two years in an easily accessible place) a written record must be
maintained and preserved of the board of directors' considerations and actions taken in
connection with the discharge of its responsibilities, as set forth in this section, to be
included in the minutes of the board of directors' meetings.
(3) Credit risk analysis. For a period of not less than three years
from the date that the credit risks of a portfolio security were most recently reviewed, a
written record must be maintained and preserved in an easily accessible place of the
determination that a portfolio security is an eligible security, including the determination
that it presents minimal credit risks at the time the fund acquires the security, or at such
later times (or upon such events) that the board of directors determines that the investment
adviser must reassess whether the security presents minimal credit risks.
(4) Determinations with respect to adjustable rate securities. For
a period of not less than three years from the date when the determination was most recently
made, a written record must be preserved and maintained, in an easily accessible place, of
the determination required by paragraph (g)(5) of this section (that a variable rate or
floating rate security that is not subject to a demand feature and for which maturity is
determined pursuant to paragraphs (i)(1), (i)(2) or (i)(4) of this section can reasonably be
expected, upon readjustment of its interest rate at all times during the life of the
instrument, to have a market value that approximates its amortized cost).
(5) Determinations with respect to asset-backed securities. For a
period of not less than three years from the date when the determination was most recently
made, a written record must be preserved and maintained, in an easily accessible place, of
the determinations required by paragraph (g)(6) of this section (the number of ten percent
obligors (as that term is used in paragraph (d)(3)(ii)(D) of this section) deemed to be the
issuers of all or a portion of the asset-backed security for purposes of paragraph
(d)(3)(ii)(D) of this section). The written record must include:
(i) The identities of the ten percent obligors (as that term is used in
paragraph (d)(3)(ii)(D) of this section), the percentage of the qualifying assets
constituted by the securities of each ten percent obligor and the percentage of the fund's
total assets that are invested in securities of each ten percent obligor; and
(ii) Any determination that an asset-backed security will not have, or is
unlikely to have, ten percent obligors deemed to be issuers of all or a portion of that
asset-backed security for purposes of paragraph (d)(3)(ii)(D) of this section.
(6) Evaluations with respect to asset-backed securities not subject to
guarantees. For a period of not less than three years from the date when the
evaluation was most recently made, a written record must be preserved and maintained, in an
easily accessible place, of the evaluation required by paragraph (g)(7) of this section
(regarding asset-backed securities not subject to guarantees).
(7) Evaluations with respect to securities subject to demand features
or guarantees. For a period of not less than three years from the date when the
evaluation was most recently made, a written record must be preserved and maintained, in an
easily accessible place, of the evaluation required by paragraph (g)(4) of this section
(regarding securities subject to one or more demand features or guarantees).
(8) Reports with respect to stress testing. For a period of not
less than six years (the first two years in an easily accessible place), a written copy of
the report required under paragraph (g)(8)(ii) of this section must be maintained and
preserved.
(9) Inspection of records. The documents preserved pursuant to
paragraph (h) of this section are subject to inspection by the Commission in accordance with
section 31(b) of the Act (15 U.S.C. 80a-30(b)) as if such documents were records required to
be maintained pursuant to rules adopted under section 31(a) of the Act (15 U.S.C.
80a-30(a)).
(10) Website disclosure of portfolio holdings and other fund
information. The money market fund must post prominently on its website the following
information:
(i) For a period of not less than six months, beginning no later than the
fifth business day of the month, a schedule of its investments, as of the last business day
or subsequent calendar day of the preceding month, that includes the following
information:
(A) With respect to the money market fund and each class of redeemable
shares thereof:
(1) The WAM; and
(2) The WAL.
(B) With respect to each security held by the money market fund:
(1) Name of the issuer;
(2) Category of investment (indicate the category that identifies
the instrument from among the following: U.S. Treasury Debt; U.S. Government Agency Debt, if
categorized as coupon-paying notes; U.S. Government Agency Debt, if categorized as no-coupon
discount notes; Non-U.S. Sovereign, Sub-Sovereign and Supra-National debt; Certificate of
Deposit; Non-Negotiable Time Deposit; Variable Rate Demand Note; Other Municipal Security;
Asset Backed Commercial Paper; Other Asset Backed Securities; U.S. Treasury Repurchase
Agreement, if collateralized only by U.S. Treasuries (including Strips) and cash; U.S.
Government Agency Repurchase Agreement, collateralized only by U.S. Government Agency
securities, U.S. Treasuries, and cash; Other Repurchase Agreement, if any collateral falls
outside Treasury, Government Agency and cash; Insurance Company Funding Agreement;
Investment Company; Financial Company Commercial Paper; Non-Financial Company Commercial
Paper; and Other Instrument. If Other Instrument, include a brief description);
(3) CUSIP number (if any);
(4) Principal amount;
(5) The maturity date determined by taking into account the
maturity shortening provisions in paragraph (i) of this section (i.e., the maturity
date used to calculate WAM under paragraph (d)(1)(ii) of this section);
(6) The maturity date determined without reference to the
exceptions in paragraph (i) of this section regarding interest rate readjustments (i.e., the
maturity used to calculate WAL under paragraph (d)(1)(iii) of this section);
(7) Coupon or yield; and
(8) Value.
(ii) A schedule, chart, graph, or other depiction, which must be updated
each business day as of the end of the preceding business day, showing, as of the end of
each business day during the preceding six months:
(A) The percentage of the money market fund’s total assets invested in
daily liquid assets;
(B) The percentage of the money market fund’s total assets invested in
weekly liquid assets; and
(C) The money market fund’s net inflows or outflows.
(iii) A schedule, chart, graph, or other depiction showing the money
market fund's net asset value per share (which the fund must calculate based on current
market factors before applying the amortized cost or penny-rounding method, if used),
rounded to the fourth decimal place in the case of funds with a $1.0000 share price or an
equivalent level of accuracy for funds with a different share price ( e.g., $10.000
per share), as of the end of each business day during the preceding six months, which must
be updated each business day as of the end of the preceding business day.
(iv) A link to a website of the Securities and Exchange Commission where a
user may obtain the most recent 12 months of publicly available information filed by the
money market fund pursuant to § 270.30b1–7.
(v) For a period of not less than one year, beginning no later than the
same business day on which the money market fund files an initial report on Form N–CR
(§ 274.222 of this chapter) in response to the occurrence of any event specified in Part C
of Form N–CR, the same information that the money market fund is required to report to the
Commission on Part C (Items C.1, C.2, C.3, C.4, C.5, C.6, and C.7) of Form N–CR concerning
such event, along with the following statement: “The Fund was required to disclose
additional information about this event on Form N–CR and to file this form with the
Securities and Exchange Commission. Any Form N–CR filing submitted by the Fund is available
on the EDGAR Database on the Securities and Exchange Commission's internet site at
https://www.sec.gov. ”
(11) Processing of transactions. A government money market fund and
a retail money market fund (or its transfer agent) must have the capacity to redeem and sell
securities issued by the fund at a price based on the current net asset value per share
pursuant to § 270.22c-1. Such capacity must include the ability to redeem and sell
securities at prices that do not correspond to a stable price per share.
(i) Maturity of portfolio securities. For purposes of this section,
the maturity of a portfolio security shall be deemed to be the period remaining (calculated
from the trade date or such other date on which the fund's interest in the security is
subject to market action) until the date on which, in accordance with the terms of the
security, the principal amount must unconditionally be paid, or in the case of a security
called for redemption, the date on which the redemption payment must be made, except as
provided in paragraphs (i)(1) through (i)(8) of this section:
(1) Adjustable rate government securities. A government security
that is a variable rate security where the variable rate of interest is readjusted no less
frequently than every 397 calendar days shall be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate. A government security
that is a floating rate security shall be deemed to have a remaining maturity of one
day.
(2) Short-term variable rate securities. A variable rate security,
the principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have a maturity
equal to the earlier of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered through demand.
(3) Long-term variable rate securities. A variable rate security,
the principal amount of which is scheduled to be paid in more than 397 calendar days, that
is subject to a demand feature, shall be deemed to have a maturity equal to the longer of
the period remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
(4) Short-term floating rate securities. A floating rate security,
the principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have a maturity of
one day, except for purposes of determining WAL under paragraph (d)(1)(iii) of this section,
in which case it shall be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
(5) Long-term floating rate securities. A floating rate security,
the principal amount of which is scheduled to be paid in more than 397 calendar days, that
is subject to a demand feature, shall be deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.
(6) Repurchase agreements. A repurchase agreement shall be deemed
to have a maturity equal to the period remaining until the date on which the repurchase of
the underlying securities is scheduled to occur, or, where the agreement is subject to
demand, the notice period applicable to a demand for the repurchase of the securities.
(7) Portfolio lending agreements. A portfolio lending agreement
shall be treated as having a maturity equal to the period remaining until the date on which
the loaned securities are scheduled to be returned, or where the agreement is subject to
demand, the notice period applicable to a demand for the return of the loaned
securities.
(8) Money market fund securities. An investment in a money market
fund shall be treated as having a maturity equal to the period of time within which the
acquired money market fund is required to make payment upon redemption, unless the acquired
money market fund has agreed in writing to provide redemption proceeds to the investing
money market fund within a shorter time period, in which case the maturity of such
investment shall be deemed to be the shorter period.
(j) Delegation. The money market fund's board of directors may
delegate to the fund's investment adviser or officers the responsibility to make any
determination required to be made by the board of directors under this section other than
the determinations required by paragraphs (c)(1) (board findings), (c)(3) (share
cancellation), (f)(1) (adverse events), (g)(1) and (2) (amortized cost and penny rounding
procedures), and (g)(8) (stress testing procedures) of this section.
(1) Written guidelines. The board of directors must establish and
periodically review written guidelines (including guidelines for determining whether
securities present minimal credit risks as required in paragraphs (d)(2) and (g)(3) of this
section and guidelines for determining the application and size of liquidity fees as
required in paragraph (c)(2) of this section) and procedures under which the delegate makes
such determinations.
(2) Oversight. The board of directors must take any measures
reasonably necessary (through periodic reviews of fund investments and the delegate's
procedures in connection with investment decisions, periodic review of the delegate's
liquidity fee determinations under paragraph (c)(2) of this section, and prompt review of
the adviser's actions in the event of the default of a security or event of insolvency with
respect to the issuer of the security or any guarantee or demand feature to which it is
subject that requires notification of the Commission under paragraph (f)(2) of this section
by reference to Form N–CR (§ 274.222 of this chapter) to assure that the guidelines and
procedures are being followed.
[75 FR 10109, Mar. 4, 2010, as amended at 79 FR 47735, Aug. 14, 2014; 80 FR
58123, Sept. 25, 2015; 88 FR 51404, Aug 3, 2023]
270.2a19-2 — Investment company general partners not deemed interested persons.
Preliminary Note to § 270.2a19-2:
This § 270.2a19-2 conditionally excepts from the definition of
interested person in section 2(a)(19) (15 U.S.C. 80a-2(a)(19)) general partners
of investment companies organized in limited partnership form. Compliance with
the conditions of this § 270.2a19-2 does not relieve an investment company of
any other requirement of this Act, or except a general partner that is an
interested person by virtue of any other provision.
|
(a) Director General Partners Not Deemed Interested Persons. A
general partner serving as a director of a limited partnership investment company shall not
be deemed to be an interested person of such company, or of any investment adviser of, or
principal underwriter for, such company, solely by reason of being a partner of the limited
partnership investment company, or a copartner in the limited partnership investment company
with any investment adviser of, or principal underwriter for, the company, provided
that the Limited Partnership Agreement contains in substance the following:
(1) Only general partners who are natural persons shall serve as, and
perform the functions of, directors of the limited partnership investment company, except
that any general partner may act as provided in paragraph (a)(2)(iii) of this section.
(2) A general partner shall not have the authority to act individually on
behalf of, or to bind, the Limited Partnership Investment Company, except:
(i) In such person's capacity as investment adviser, principal
underwriter, or administrator;
(ii) Within the scope of such person's authority as delegated by the board
of directors; or
(iii) In the event that no director of the company remains, to the extent
necessary to continue the Limited Partnership Investment Company, for such limited periods
as are permitted under the Act to fill director vacancies.
(3) Limited partners shall have all of the rights afforded shareholders
under the Act. If a limited partnership interest is transferred in a manner that is
effective under the Partnership Agreement, the transferee shall have all of the rights
afforded shareholders under the Act.
(4) A general partner shall not withdraw from the Limited Partnership
Investment Company or reduce its Federal Tax Status Contribution without giving at least one
year's prior written notice to the Limited Partnership Investment Company, if such
withdrawal or reduction is likely to cause the company to lose its partnership tax
classification. This paragraph (a)(4) shall not apply to an investment adviser general
partner if the company terminates its advisory agreement with such general partner.
(b) Definitions. (1) “Federal Tax Status Contribution” shall mean
the interest (including limited partnership interest) in each material item of partnership
income, gain, loss, deduction, or credit, and other contributions, required to be held or
made by general partners, pursuant to section 4 of Internal Revenue Service Revenue
Procedure 89-12, or any successor provisions thereto.
(2) “Limited Partnership Investment Company” shall mean a registered
management company or a business development company that is organized as a limited
partnership under state law.
(3) “Partnership Agreement” shall mean the agreement of the partners of
the Limited Partnership Investment Company as to the affairs of the limited partnership and
the conduct of its business.
[58 FR 45838, Aug. 31, 1993; 58 FR 64353, Dec. 6,
1993; 59 FR 15501, Apr. 1, 1994]
270.2a19-3 — Certain investment company directors not considered interested persons because of ownership of index fund securities.
If a director of a registered investment company (“Fund”) owns shares of a
registered investment company (including the Fund) with an investment objective to replicate
the performance of one or more broad-based securities indices (“Index Fund”), ownership of
the Index Fund shares will not cause the director to be considered an “interested person” of
the Fund or of the Fund's investment adviser or principal underwriter (as defined by section
2(a)(19)(A)(iii) and (B)(iii) of the Act (15 U.S.C. 80a-2(a)(19)(A)(iii) and (B)(iii)).
[66 FR 3758, Jan. 16, 2001]
270.2a41-1 — Valuation of standby commitments by registered investment companies.
(a) A standby commitment means a right to sell a specified underlying
security or securities within a specified period of time and at an exercise price equal to
the amortized cost of the underlying security or securities plus accrued interest, if any,
at the time of exercise, that may be sold, transferred or assigned only with the underlying
security or securities. A standby commitment entitles the holder to receive same day
settlement, and will be considered to be from the party to whom the investment company will
look for payment of the exercise price. A standby commitment may be assigned a fair value of
zero, Provided, That:
(1) The standby commitment is not used to affect the company's valuation
of the security or securities underlying the standby commitment; and
(2) Any consideration paid by the company for the standby commitment,
whether paid in cash or by paying a premium for the underlying security or securities, is
accounted for by the company as unrealized depreciation until the standby commitment is
exercised or expires.
(b) [Reserved]
[51 FR 9779, Mar. 21, 1986, as amended at 56 FR
8128, Feb. 27, 1991; 61 FR 13982, Mar. 28, 1996; 62 FR 64986, Dec. 9, 1997]
270.2a-46 — Certain issuers as eligible portfolio companies.
The term eligible portfolio company shall include any issuer that
meets the requirements set forth in paragraphs (A) and (B) of section 2(a)(46) of the Act
(15 U.S.C. 80a-2(a)(46)(A) and (B)) and that:
(a) Does not have any class of securities listed on a national securities
exchange; or
(b) Has a class of securities listed on a national securities exchange,
but has an aggregate market value of outstanding voting and non-voting common equity of less
than $250 million. For purposes of this paragraph:
(1) The aggregate market value of an issuer's outstanding voting
and non-voting common equity shall be computed by use of the price at which the common
equity was last sold, or the average of the bid and asked prices of such common equity, in
the principal market for such common equity as of a date within 60 days prior to the date of
acquisition of its securities by a business development company; and
(2) Common equity has the same meaning as in 17 CFR 230.405.
[73 FR 29051, May 20, 2008]
270.2a51-1 — Definition of investments for purposes of section 2(a)(51) (definition of “qualified purchaser”); certain calculations.
(a) Definitions. As used in this section:
(1) The term Commodity Interests means commodity futures contracts,
options on commodity futures contracts, and options on physical commodities traded on or
subject to the rules of:
(i) Any contract market designated for trading such transactions under the
Commodity Exchange Act and the rules thereunder; or
(ii) Any board of trade or exchange outside the United States, as
contemplated in Part 30 of the rules under the Commodity Exchange Act [17 CFR 30.1 through
30.11].
(2) The term Family Company means a company described in paragraph
(A)(ii) of section 2(a)(51) of the Act [15 U.S.C. 80a-2(a)(51)].
(3) The term Investment Vehicle means an investment company, a
company that would be an investment company but for the exclusions provided by sections
3(c)(1) through 3(c)(9) of the Act [15 U.S.C. 80a-3(c)(1) through 3(c)(9)] or the exemptions
provided by §§ 270.3a-6 or 270.3a-7, or a commodity pool.
(4) The term Investments has the meaning set forth in paragraph (b)
of this section.
(5) The term Physical Commodity means any physical commodity with
respect to which a Commodity Interest is traded on a market specified in paragraph (a)(1) of
this section.
(6) The term Prospective Qualified Purchaser means a person seeking
to purchase a security of a Section 3(c)(7) Company.
(7) The term Public Company means a company that:
(i) Files reports pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [15 U.S.C. 78m or 78o(d)]; or
(ii) Has a class of securities that are listed on a “designated offshore
securities market” as such term is defined by Regulation S under the Securities Act of 1933
[17 CFR 230.901 through 230.904].
(8) The term Related Person means a person who is related to a
Prospective Qualified Purchaser as a sibling, spouse or former spouse, or is a direct lineal
descendant or ancestor by birth or adoption of the Prospective Qualified Purchaser, or is a
spouse of such descendant or ancestor, provided that, in the case of a Family
Company, a Related Person includes any owner of the Family Company and any person who is a
Related Person of such owner.
(9) The term Relying Person means a Section 3(c)(7) Company or a
person acting on its behalf.
(10) 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) Types of Investments. For purposes of section 2(a)(51) of the
Act [15 U.S.C. 80a-2(a)(51)], the term Investments means:
(1) Securities (as defined by section 2(a)(1) of the Securities Act of
1933 [15 U.S.C. 77b(a)(1)]), other than securities of an issuer that controls, is controlled
by, or is under common control with, the Prospective Qualified Purchaser that owns such
securities, unless the issuer of such securities is:
(i) An Investment Vehicle;
(ii) A Public Company; or
(iii) A company with shareholders' equity of not less than $50 million
(determined in accordance with generally accepted accounting principles) as reflected on the
company's most recent financial statements, provided that such financial statements
present the information as of a date within 16 months preceding the date on which the
Prospective Qualified Purchaser acquires the securities of a Section 3(c)(7) Company;
(2) Real estate held for investment purposes;
(3) Commodity Interests held for investment purposes;
(4) Physical Commodities held for investment purposes;
(5) To the extent not securities, financial contracts (as such term is
defined in section 3(c)(2)(B)(ii) of the Act [15 U.S.C. 80a-3(c)(2)(B)(ii)] entered into for
investment purposes;
(6) In the case of a Prospective Qualified Purchaser that is a Section
3(c)(7) Company, 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)], or a commodity pool, any
amounts payable to such Prospective Qualified Purchaser pursuant to a firm agreement or
similar binding commitment pursuant to which a person has agreed to acquire an interest in,
or make capital contributions to, the Prospective Qualified Purchaser upon the demand of the
Prospective Qualified Purchaser; and
(7) Cash and cash equivalents (including foreign currencies) held for
investment purposes. For purposes of this section, cash and cash equivalents include:
(i) Bank deposits, certificates of deposit, bankers acceptances and
similar bank instruments held for investment purposes; and
(ii) The net cash surrender value of an insurance policy.
(c) Investment Purposes. For purposes of this section:
(1) Real estate shall not be considered to be held for investment purposes
by a Prospective Qualified Purchaser if it is used by the Prospective Qualified Purchaser or
a Related Person for personal purposes or as a place of business, or in connection with the
conduct of the trade or business of the Prospective Qualified Purchaser or a Related Person,
provided that real estate owned by a Prospective Qualified Purchaser who is engaged
primarily in the business of investing, trading or developing real estate in connection with
such business may de deemed to be held for investment purposes. Residential real estate
shall not be deemed to be used for personal purposes if deductions with respect to such real
estate are not disallowed by section 280A of the Internal Revenue Code [26 U.S.C. 280A].
(2) A Commodity Interest or Physical Commodity owned, or a financial
contract entered into, by the Prospective Qualified Purchaser who is engaged primarily in
the business of investing, reinvesting, or trading in Commodity Interests, Physical
Commodities or financial contracts in connection with such business may be deemed to be held
for investment purposes.
(d) Valuation. For purposes of determining whether a Prospective
Qualified Purchaser is a qualified purchaser, the aggregate amount of Investments owned and
invested on a discretionary basis by the Prospective Qualified Purchaser shall be the
Investments' fair market value on the most recent practicable date or their cost,
provided that:
(1) In the case of Commodity Interests, the amount of Investments shall be
the value of the initial margin or option premium deposited in connection with such
Commodity Interests; and
(2) In each case, there shall be deducted from the amount of Investments
owned by the Prospective Qualified Purchaser the amounts specified in paragraphs (e) and (f)
of this section, as applicable.
(e) Deductions. In determining whether any person is a qualified
purchaser there shall be deducted from the amount of such person's Investments the amount of
any outstanding indebtedness incurred to acquire or for the purpose of acquiring the
Investments owned by such person.
(f) Deductions: Family Companies. In determining whether a Family
Company is a qualified purchaser, in addition to the amounts specified in paragraph (e) of
this section, there shall be deducted from the value of such Family Company's Investments
any outstanding indebtedness incurred by an owner of the Family Company to acquire such
Investments.
(g) Special rules for certain Prospective Qualified Purchasers — 1)
Qualified institutional buyers. Any Prospective Qualified Purchaser who is, or who
a Relying Person reasonably believes is, a qualified institutional buyer as defined in
paragraph (a) of § 230.144A of this chapter, acting for its own account, the account of
another qualified institutional buyer, or the account of a qualified purchaser, shall be
deemed to be a qualified purchaser provided:
(i) That a dealer described in paragraph (a)(1)(ii) of § 230.144A of this
chapter shall own and invest on a discretionary basis at least $25 million in securities of
issuers that are not affiliated persons of the dealer; and
(ii) That a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of
§ 230.144A of this chapter, or a trust fund referred to in paragraph (a)(1)(i)(F) of §
230.144A of this chapter that holds the assets of such a plan, will not be deemed to be
acting for its own account if investment decisions with respect to the plan are made by the
beneficiaries of the plan, except with respect to investment decisions made solely by the
fiduciary, trustee or sponsor of such plan.
(2) Joint Investments. In determining whether a natural person is a
qualified purchaser, there may be included in the amount of such person's Investments any
Investments held jointly with such person's spouse, or Investments in which such person
shares with such person's spouse a community property or similar shared ownership interest.
In determining whether spouses who are making a joint investment in a Section 3(c)(7)
Company are qualified purchasers, there may be included in the amount of each spouse's
Investments any Investments owned by the other spouse (whether or not such Investments are
held jointly). In each case, there shall be deducted from the amount of any such Investments
the amounts specified in paragraph (e) of this section incurred by each spouse.
(3) Investments by Subsidiaries. For purposes of determining the
amount of Investments owned by a company under section 2(a)(51)(A)(iv) of the Act [15 U.S.C.
80a-2(a)(51)(A)(iv)], there may be included Investments owned by majority-owned subsidiaries
of the company and Investments owned by a company (“Parent Company”) of which the company is
a majority-owned subsidiary, or by a majority-owned subsidiary of the company and other
majority-owned subsidiaries of the Parent Company.
(4) Certain Retirement Plans and Trusts. In determining whether a
natural person is a qualified purchaser, there may be included in the amount of such
person's Investments any Investments held in an individual retirement account or similar
account the Investments of which are directed by and held for the benefit of such
person.
(h) Reasonable Belief. The term “qualified purchaser” as used in
section 3(c)(7) of the Act [15 U.S.C. 80a-3(c)(7)] means any person that meets the
definition of qualified purchaser in section 2(a)(51)(A) of the Act [15 U.S.C.
80a-2(a)(51)(A)]) and the rules thereunder, or that a Relying Person reasonably believes
meets such definition.
[62 FR 17526, Apr. 9, 1997]
270.2a51-2 — Definitions of beneficial owner for certain purposes under sections 2(a)(51) and 3(c)(7) and determining indirect ownership interests.
(a) Beneficial ownership: General. Except as set forth in this
section, for purposes of sections 2(a)(51)(C) and 3(c)(7)(B)(ii) of the Act [15 U.S.C.
80a-2(a)(51)(C) and -3(c)(7)(B)(ii)], the beneficial owners of securities of an excepted
investment company (as defined in section 2(a)(51)(C) of the Act [15 U.S.C.
80a-2(a)(51)(C)]) shall be determined in accordance with section 3(c)(1) of the Act [15
U.S.C. 80a-3(c)(1)].
(b) Beneficial ownership: Grandfather provision. For purposes of
section 3(c)(7)(B)(ii) of the Act [15 U.S.C. 80a-3(c)(7)(B)(ii)], securities of an issuer
beneficially owned by a company (without giving effect to section 3(c)(1)(A) of the Act [15
U.S.C. 80a-3(c)(1)(A)]) (“owning company”) shall be deemed to be beneficially owned by one
person unless:
(1) The owning company is an investment company or an excepted investment
company;
(2) The owning company, directly or indirectly, controls, is controlled
by, or is under common control with, the issuer; and
(3) On October 11, 1996, under section 3(c)(1)(A) of the Act as then in
effect, the voting securities of the issuer were deemed to be beneficially owned by the
holders of the owning company's outstanding securities (other than short-term paper), in
which case, such holders shall be deemed to be beneficial owners of the issuer's outstanding
voting securities.
(c) Beneficial ownership: Consent provision. For purposes of
section 2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)], securities of an excepted
investment company beneficially owned by a company (without giving effect to section
3(c)(1)(A) of the Act [15 U.S.C. 80a-3(c)(1)(A)]) (“owning company”) shall be deemed to be
beneficially owned by one person unless:
(1) The owning company is an excepted investment company;
(2) The owning company directly or indirectly controls, is controlled by,
or is under common control with, the excepted investment company or the company with respect
to which the excepted investment company is, or will be, a qualified purchaser; and
(3) On April 30, 1996, under section 3(c)(1)(A) of the Act as then in
effect, the voting securities of the excepted investment company were deemed to be
beneficially owned by the holders of the owning company's outstanding securities (other than
short-term paper), in which case the holders of such excepted company's securities shall be
deemed to be beneficial owners of the excepted investment company's outstanding voting
securities.
(d) Indirect ownership: Consent provision. For purposes of section
2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)], an excepted investment company shall not
be deemed to indirectly own the securities of an excepted investment company seeking a
consent to be treated as a qualified purchaser (“qualified purchaser company”) unless such
excepted investment company, directly or indirectly, controls, is controlled by, or is under
common control with, the qualified purchaser company or a company with respect to which the
qualified purchaser company is or will be a qualified purchaser.
(e) Required consent: Consent provision. For purposes of section
2(a)(51)(C) of the Act [15 U.S.C. 80a-2(a)(51)(C)], the consent of the beneficial owners of
an excepted investment company (“owning company”) that beneficially owns securities of an
excepted investment company that is seeking the consents required by section 2(a)(51)(C)
(“consent company”) shall not be required unless the owning company directly or indirectly
controls, is controlled by, or is under common control with, the consent company or the
company with respect to which the consent company is, or will be, a qualified purchaser.
Notes to § 270.2a51-2:
1. On both April 30, 1996 and October 11, 1996, section
3(c)(1)(A) of the Act as then in effect provided that: (A) Beneficial ownership
by a company shall be deemed to be beneficial ownership by one person, except
that, if the company owns 10 per centum or more of the outstanding voting
securities of the issuer, the beneficial ownership shall be deemed to be that of
the holders of such company's outstanding securities (other than short-term
paper) unless, as of the date of the most recent acquisition by such company of
securities of that issuer, the value of all securities owned by such company of
all issuers which are or would, but for the exception set forth in this
subparagraph, be excluded from the definition of investment company solely by
this paragraph, does not exceed 10 per centum of the value of the company's
total assets. Such issuer nonetheless is deemed to be an investment company for
purposes of section 12(d)(1).
2. Issuers seeking the consent required by section 2(a)(51)(C)
of the Act should note that section 2(a)(51)(C) requires an issuer to obtain the
consent of the beneficial owners of its securities and the beneficial owners of
securities of any “excepted investment company” that directly or indirectly owns
the securities of the issuer. Except as set forth in paragraphs (d) (with
respect to indirect owners) and (e) (with respect to direct owners) of this
section, nothing in this section is designed to limit this consent
requirement.
|
[62 FR 17528, Apr. 9, 1997]
270.2a51-3 — Certain companies as qualified purchasers.
(a) For purposes of section 2(a)(51)(A) (ii) and (iv) of the Act [15
U.S.C. 80a-2(a)(51)(A) (ii) and (iv)], a company shall not be deemed to be a qualified
purchaser if it was formed for the specific purpose of acquiring the securities offered by a
company excluded from the definition of investment company by section 3(c)(7) of the Act [15
U.S.C. 80a-3(c)(7)] unless each beneficial owner of the company's securities is a qualified
purchaser.
(b) For purposes of section 2(a)(51) of the Act [15 U.S.C. 80a-2(a)(51)],
a company may be deemed to be a qualified purchaser if each beneficial owner of the
company's securities is a qualified purchaser.
[62 FR 17528, Apr. 9, 1997]
270.3a-1 — Certain prima facie investment companies.
Notwithstanding section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(c)),
an issuer will be deemed not to be an investment company under the Act; Provided,
That:
(a) No more than 45 percent of the value (as defined in section 2(a)(41)
of the Act) of such issuer's total assets (exclusive of Government securities and cash
items) consists of, and no more than 45 percent of such issuer's net income after taxes (for
the last four fiscal quarters combined) is derived from, securites other than:
(1) Government securities;
(2) Securities issued by employees' securities companies;
(3) Securities issued by majority-owned subsidiaries of the issuer (other
than subsidiaries relying on the exclusion from the definition of investment company in
section 3(b)(3) or (c)(1) of the Act) which are not investment companies; and
(4) Securities issued by companies:
(i) Which are controlled primarily by such issuer;
(ii) Through which such issuer engages in a business other than that of
investing, reinvesting, owning, holding or trading in securities; and
(iii) Which are not investment companies;
(b) The issuer is not an investment company as defined in section
3(a)(1)(A) or 3(a)(1)(B) of the Act (15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(B)) and is not
a special situation investment company; and
(c) The percentages described in paragraph (a) of 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.
[46 FR 6881, Jan. 22, 1981, as amended at 67 FR
43536, June 28, 2002]
270.3a-2 — Transient investment companies.
(a) For purposes of 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 is deemed not to be engaged in the
business of investing, reinvesting, owning, holding or trading in securities during a period
of time not to exceed one year; Provided, That the issuer has a bona fide
intent to be engaged primarily, as soon as is reasonably possible (in any event by the
termination of such period of time), in a business other than that of investing,
reinvesting, owning, holding or trading in securities, such intent to be evidenced by:
(1) The issuer's business activities; and
(2) An appropriate resolution of the issuer's board of directors, or by an
appropriate action of the person or persons performing similar functions for any issuer not
having a board of directors, which resolution or action has been recorded contemporaneously
in its minute books or comparable documents.
(b) For purposes of this rule, the period of time described in paragraph
(a) shall commence on the earlier of:
(1) The date on which an issuer owns securities and/or cash having a value
exceeding 50 percent of the value of such issuer's total assets on either a consolidated or
unconsolidated basis; or
(2) The date on which an issuer owns or proposes to acquire investment
securities (as defined in section 3(a) of the Act) having a value exceeding 40 per centum of
the value of such issuer's total assets (exclusive of Government securities and cash items)
on an unconsolidated basis.
(c) No issuer may rely on this section more frequently than once during
any three-year period.
[46 FR 6883, Jan. 22, 1981, as amended at 67 FR
43536, June 28, 2002]
270.3a-3 — Certain investment companies owned by companies which are not investment companies.
Notwithstanding section 3(a)(1)(A) or section 3(a)(1)(C) of the Act (15
U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(C)), an issuer will be deemed not to be an investment
company for purposes of the Act; Provided, That all of the outstanding securities of
the issuer (other than short-term paper, directors' qualifying shares, and debt securities
owned by the Small Business Administration) are directly or indirectly owned by a company
which satisfies the conditions of § 270.3a-1(a) and which is:
(a) A company that is not an investment company as defined in section 3(a)
of the Act;
(b) A company that is an investment company as defined in section
3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(C)), but which is excluded from the definition
of the term “investment company” by section 3(b)(1) or 3(b)(2) of the Act (15 U.S.C.
80a-3(b)(1) or 80a-3(b)(2)); or
(c) A company that is deemed not to be an investment company for purposes
of the Act by rule 3a-1.
[46 FR 6884, Jan. 22, 1981, as amended at 67 FR
43536, June 28, 2002]
270.3a-4 — Status of investment advisory programs.
Note:
This section is a nonexclusive safe harbor from the definition
of investment company for programs that provide discretionary investment
advisory services to clients. There is no registration requirement under section
5 of the Securities Act of 1933 [15 U.S.C. 77e] with respect to programs that
are organized and operated in the manner described in § 270.3a-4. The section is
not intended, however, to create any presumption about a program that is not
organized and operated in the manner contemplated by the section.
|
(a) Any program under which discretionary investment advisory services are
provided to clients that has the following characteristics will not be deemed to be an
investment company within the meaning of the Act [15 U.S.C. 80a, et seq.]:
(1) Each client's account in the program is managed on the basis of the
client's financial situation and investment objectives and in accordance with any reasonable
restrictions imposed by the client on the management of the account.
(2)(i) At the opening of the account, the sponsor or another person
designated by the sponsor obtains information from the client regarding the client's
financial situation and investment objectives, and gives the client the opportunity to
impose reasonable restrictions on the management of the account;
(ii) At least annually, the sponsor or another person designated by the
sponsor contacts the client to determine whether there have been any changes in the client's
financial situation or investment objectives, and whether the client wishes to impose any
reasonable restrictions on the management of the account or reasonably modify existing
restrictions;
(iii) At least quarterly, the sponsor or another person designated by the
sponsor notifies the client in writing to contact the sponsor or such other person if there
have been any changes in the client's financial situation or investment objectives, or if
the client wishes to impose any reasonable restrictions on the management of the client's
account or reasonably modify existing restrictions, and provides the client with a means
through which such contact may be made; and
(iv) The sponsor and personnel of the manager of the client's account who
are knowledgeable about the account and its management are reasonably available to the
client for consultation.
(3) Each client has the ability to impose reasonable restrictions on the
management of the client's account, including the designation of particular securities or
types of securities that should not be purchased for the account, or that should be sold if
held in the account; Provided, however, that nothing in this section requires that a
client have the ability to require that particular securities or types of securities be
purchased for the account.
(4) The sponsor or person designated by the sponsor provides each client
with a statement, at least quarterly, containing a description of all activity in the
client's account during the preceding period, including all transactions made on behalf of
the account, all contributions and withdrawals made by the client, all fees and expenses
charged to the account, and the value of the account at the beginning and end of the period.
(5) Each client retains, with respect to all securities and funds in the
account, to the same extent as if the client held the securities and funds outside the
program, the right to:
(i) Withdraw securities or cash;
(ii) Vote securities, or delegate the authority to vote securities to
another person;
(iii) Be provided in a timely manner with a written confirmation or other
notification of each securities transaction, and all other documents required by law to be
provided to security holders; and
(iv) Proceed directly as a security holder against the issuer of any
security in the client's account and not be obligated to join any person involved in the
operation of the program, or any other client of the program, as a condition precedent to
initiating such proceeding.
(b) As used in this section, the term sponsor refers to any person who
receives compensation for sponsoring, organizing or administering the program, or for
selecting, or providing advice to clients regarding the selection of, persons responsible
for managing the client's account in the program. If a program has more than one sponsor,
one person shall be designated the principal sponsor, and such person shall be considered
the sponsor of the program under this section.
[62 FR 15109, Mar. 31, 1997]
270.3a-5 — Exemption for subsidiaries organized to finance the operations of domestic or foreign companies.
(a) A finance subsidiary will not be considered an investment company
under section 3(a) of the Act (15 U.S.C. 80a-3(a)) and securities of a finance subsidiary
held by the parent company or a company controlled by the parent company will not be
considered “investment securities” under section 3(a)(1)(C) of the Act (15 U.S.C.
80a-3(a)(1)(C)); Provided, That:
(1) Any debt securities of the finance subsidiary issued to or held by the
public are unconditionally guaranteed by the parent company as to the payment of principal,
interest, and premium, if any (except that the guarantee may be subordinated in right of
payment to other debt of the parent company);
(2) Any non-voting preferred stock of the finance subsidiary issued to or
held by the public is unconditionally guaranteed by the parent company as to payment of
dividends, payment of the liquidation preference in the event of liquidation, and payments
to be made under a sinking fund, if a sinking fund is to be provided (except that the
guarantee may be subordinated in right of payment to other debt of the parent company);
(3) The parent company's guarantee provides that in the event of a default
in payment of principal, interest, premium, dividends, liquidation preference or payments
made under a sinking fund on any debt securities or non-voting preferred stock issued by the
finance subsidiary, the holders of those securities may institute legal proceedings directly
against the parent company (or, in the case of a partnership or joint venture, against the
partners or participants in the joint venture) to enforce the guarantee without first
proceeding against the finance subsidiary;
(4) Any securities issued by the finance subsidiary which are convertible
or exchangeable are convertible or exchangeable only for securities issued by the parent
company (and, in the case of a partnership or joint venture, for securities issued by the
partners or participants in the joint venture) or for debt securities or non-voting
preferred stock issued by the finance subsidiary meeting the applicable requirements of
paragraphs (a)(1) through (a)(3);
(5) The finance subsidiary invests in or loans to its parent company or a
company controlled by its parent company at least 85% of any cash or cash equivalents raised
by the finance subsidiary through an offering of its debt securities or non-voting preferred
stock or through other borrowings as soon as practicable, but in no event later than six
months after the finance subsidiary's receipt of such cash or cash equivalents;
(6) The finance subsidiary does not invest in, reinvest in, own, hold or
trade in securities other than Government securities, securities of its parent company or a
company controlled by its parent company (or in the case of a partnership or joint venture,
the securities of the partners or participants in the joint venture) or debt securities
(including repurchase agreements) which are exempted from the provisions of the Securities
Act of 1933 by section 3(a)(3) of that Act; and
(7) Where the parent company is a foreign bank as the term is used in rule
3a-6 (17 CFR 270.3a-6 of this chapter), the parent company may, in lieu of the guaranty
required by paragraph (a)(1) or (a)(2) of this section, issue, in favor of the holders of
the finance subsidiary's debt securities or non-voting preferred stock, as the case may be,
an irrevocable letter of credit in an amount sufficient to fund all of the amounts required
to be guaranteed by paragraphs (a)(1) and (a)(2) of this section, provided, that:
(i) Payment on such letter of credit shall be conditional only upon the
presentation of customary documentation, and
(ii) The beneficiary of such letter of credit is not required by either
the letter of credit or applicable law to institute proceedings against the finance
subsidiary before enforcing its remedies under the letter of credit.
(b) For purposes of this rule,
(1) A finance subsidiary shall mean any corporation —
(i) All of whose securities other than debt securities or non-voting
preferred stock meeting the applicable requirements of paragraphs (a)(1) through (3) or
directors' qualifying shares are owned by its parent company or a company controlled by its
parent company; and
(ii) The primary purpose of which is to finance the business operations of
its parent company or companies controlled by its parent company;
(2) A parent company shall mean any corporation, partnership or
joint venture:
(i) That is not considered an investment company under section 3(a) or
that is excepted or exempted by order from the definition of investment company by section
3(b) or by the rules or regulations under section 3(a);
(ii) That is organized or formed under the laws of the United States or of
a state or that is a foreign private issuer, or that is a foreign bank or foreign insurance
company as those terms are used in rule 3a-6 (17 CFR 270.3a-6 of this chapter); and
(iii) In the case of a partnership or joint venture, each partner or
participant in the joint venture meets the requirements of paragraphs (b)(2)(i) and
(ii).
(3) A company controlled by the parent company shall mean any
corporation, partnership or joint venture:
(i) That is not considered an investment company under section 3(a) or
that is excepted or exempted by order from the definition of investment company by section
3(b) or by the rules or regulations under section 3(a);
(ii) That is either organized or formed under the laws of the United
States or of a state or that is a foreign private issuer, or that is a foreign bank or
foreign insurance company as those terms are used in rule 3a-6; and
(iii) In the case of a corporation, more than 25 percent of whose
outstanding voting securities are beneficially owned directly or indirectly by the parent
company; or
(iv) In the case of a partnership or joint venture, each partner or
participant in the joint venture meets the requirements of paragraphs (b)(3) (i) and (ii),
and the parent company has the power to exercise a controlling influence over the management
or policies of the partnership or joint venture.
(4) A foreign private issuer shall mean any issuer which is
incorporated or organized under the laws of a foreign country, but not a foreign government
or political subdivision of a foreign government.
[49 FR 49446, Dec. 20, 1984, as amended at 56 FR
56299, Nov. 4, 1991; 67 FR 43536, June 28, 2002]
270.3a-6 — Foreign banks and foreign insurance companies.
(a) Notwithstanding section 3(a)(1)(A) or section 3(a)(1)(C) of the Act
(15 U.S.C. 80a-3(a)(1)(A) or 80a-3(a)(1)(C)), a foreign bank or foreign insurance company
shall not be considered an investment company for purposes of the Act.
(b) For purposes of this section:
(1)(i) Foreign bank means a banking institution incorporated or
organized under the laws of a country other than the United States, or a political
subdivision of a country other than the United States, that is:
(A) Regulated as such by that country's or subdivision's government or any
agency thereof;
(B) Engaged substantially in commercial banking activity; and
(C) Not operated for the purpose of evading the provisions of the Act;
(ii) The term foreign bank shall also include:
(A) A trust company or loan company that is:
(1) Organized or incorporated under the laws of Canada or a
political subdivision thereof;
(2) Regulated as a trust company or a loan company by that
country's or subdivision's government or any agency thereof; and
(3) Not operated for the purpose of evading the provisions of the
Act; and
(B) A building society that is:
(1) Organized under the laws of the United Kingdom or a political
subdivision thereof;
(2) Regulated as a building society by the country's or
subdivision's government or any agency thereof; and
(3) Not operated for the purpose of evading the provisions of the
Act.
(iii) Nothing in this section shall be construed to include within the
definition of foreign bank a common or collective trust or other separate pool of
assets organized in the form of a trust or otherwise in which interests are separately
offered.
(2) Engaged substantially in commercial banking activity means
engaged regularly in, and deriving a substantial portion of its business from, extending
commercial and other types of credit, and accepting demand and other types of deposits, that
are customary for commercial banks in the country in which the head office of the banking
institution is located.
(3) Foreign insurance company means an insurance company
incorporated or organized under the laws of a country other than the United States, or a
political subdivision of a country other than the United States, that is:
(i) Regulated as such by that country's or subdivision's government or any
agency thereof;
(ii) Engaged primarily and predominantly in:
(A) The writing of insurance agreements of the type specified in section
3(a)(8) of the Securities Act of 1933 (15 U.S.C. 77c(a)(8)), except for the substitution of
supervision by foreign government insurance regulators for the regulators referred to in
that section; or
(B) The reinsurance of risks on such agreements underwritten by insurance
companies; and
(iii) Not operated for the purpose of evading the provisions of the Act.
Nothing in this section shall be construed to include within the definition of “foreign
insurance company” a separate account or other pool of assets organized in the form of a
trust or otherwise in which interests are separately offered.
Note:
Foreign banks and foreign insurance companies (and certain of
their finance subsidiaries and holding companies) relying on rule 3a-6 for
exemption from the Act may be required by rule 489 (17 CFR 230.489) under the
Securities Act of 1933 (15 U.S.C. 77a et seq.) to file Form F-N with the
Commission in connection with the filing of a registration statement under the
Securities Act of 1933.
|
[56 FR 56299, Nov. 4, 1991, as amended at 67 FR
43536, June 28, 2002]
270.3a-7 — Issuers of asset-backed securities.
(a) Notwithstanding section 3(a) of the Act, any issuer who is engaged in
the business of purchasing, or otherwise acquiring, and holding eligible assets (and in
activities related or incidental thereto), and who does not issue redeemable securities will
not be deemed to be an investment company; Provided That:
(1) The issuer issues fixed-income securities or other securities which
entitle their holders to receive payments that depend primarily on the cash flow from
eligible assets;
(2) Securities sold by the issuer or any underwriter thereof are
fixed-income securities rated, at the time of initial sale, in one of the four highest
categories assigned long-term debt or in an equivalent short-term category (within either of
which there may be sub-categories or gradations indicating relative standing) by at least
one nationally recognized statistical rating organization that is not an affiliated person
of the issuer or of any person involved in the organization or operation of the issuer,
except that:
(i) Any fixed-income securities may be sold to accredited investors as
defined in paragraphs (1), (2), (3), and (7) of rule 501(a) under the Securities Act of 1933
(17 CFR 230.501(a)) and any entity in which all of the equity owners come within such
paragraphs; and
(ii) Any securities may be sold to qualified institutional buyers as
defined in rule 144A under the Securities Act (17 CFR 230.144A) and to persons (other than
any rating organization rating the issuer's securities) involved in the organization or
operation of the issuer or an affiliate, as defined in rule 405 under the Securities Act (17
CFR 230.405), of such a person;
Provided, That the issuer or any underwriter thereof effecting such sale exercises
reasonable care to ensure that such securities are sold and will be resold to persons
specified in paragraphs (a)(2) (i) and (ii) of this section;
(3) The issuer acquires additional eligible assets, or disposes of
eligible assets, only if:
(i) The assets are acquired or disposed of in accordance with the terms
and conditions set forth in the agreements, indentures, or other instruments pursuant to
which the issuer's securities are issued;
(ii) The acquisition or disposition of the assets does not result in a
downgrading in the rating of the issuer's outstanding fixed-income securities; and
(iii) The assets are not acquired or disposed of for the primary purpose
of recognizing gains or decreasing losses resulting from market value changes; and
(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 fixed-income 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, 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 costs as defined in FASB ASC Topic 730, Research and Development, as
currently in effect or as it may be subsequently revised.
[68 FR 37052, June 20, 2003, as amended at 76 FR
50123, Aug. 12, 2011]
270.3a-9 — Crowdfunding vehicle.
(a) Notwithstanding section 3(a) of the Act, a crowdfunding vehicle will be
deemed not to be an investment company if the vehicle:
(1) Is organized and operated for the sole purpose of directly acquiring,
holding, and disposing of securities issued by a single crowdfunding issuer and raising
capital in one or more offerings made in compliance with §§ 227.100 through 227.504
(Regulation Crowdfunding);
(2) Does not borrow money and uses the proceeds from the sale of its
securities solely to purchase a single class of securities of a single crowdfunding
issuer;
(3) Issues only one class of securities in one or more offerings under
Regulation Crowdfunding in which the crowdfunding vehicle and the crowdfunding issuer are
deemed to be co-issuers under the Securities Act (15 U.S.C. 77a et seq.);
(4) Receives a written undertaking from the crowdfunding issuer to fund or
reimburse the expenses associated with its formation, operation, or winding up, receives
no other compensation, and any compensation paid to any person operating the vehicle is
paid solely by the crowdfunding issuer;
(5) Maintains the same fiscal year-end as the crowdfunding issuer;
(6) Maintains a one-to-one relationship between the number, denomination,
type and rights of crowdfunding issuer securities it owns and the number, denomination,
type and rights of its securities outstanding;
(7) Seeks instructions from the holders of its securities with regard to:
(i) The voting of the crowdfunding issuer securities it holds and votes the
crowdfunding issuer securities only in accordance with such instructions; and
(ii) Participating in tender or exchange offers or similar transactions
conducted by the crowdfunding issuer and participates in such transactions only in
accordance with such instructions;
(8) Receives, from the crowdfunding issuer, all disclosures and other
information required under Regulation Crowdfunding and the crowdfunding vehicle promptly
provides such disclosures and other information to the investors and potential investors
in the crowdfunding vehicle's securities and to the relevant intermediary; and
(9) Provides to each investor the right to direct the crowdfunding vehicle to
assert the rights under State and Federal law that the investor would have if he or she
had invested directly in the crowdfunding issuer and provides to each investor any
information that it receives from the crowdfunding issuer as a shareholder of record of
the crowdfunding issuer.
(b) For purposes of this section:
(1) Crowdfunding issuer means a company that seeks to raise capital as
a co-issuer with a crowdfunding vehicle in an offering that complies with all of the
requirements under section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) and
Regulation Crowdfunding.
(2) Crowdfunding vehicle means an issuer formed by or on behalf of a
crowdfunding issuer for the purpose of conducting an offering under section 4(a)(6) of the
Securities Act (15 U.S.C. 77d(a)(6)) as a co-issuer with the crowdfunding issuer, which
offering is controlled by the crowdfunding issuer.
(3) Regulation Crowdfunding means the regulations set forth in
§§ 227.100 through 227.504 of this chapter.
[86 FR 3496, Jan. 14, 2021]
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 date,
would have constituted 10 percent or more of the outstanding voting securities of the
Section 3(c)(1) Company; and
(2) On the date of any acquisition of securities of the Section 3(c)(1)
Company by the Covered Company, the value of all securities owned by the Covered Company of
all issuers that are Section 3(c)(1) or Section 3(c)(7) Companies does not exceed 10 percent
of the Covered Company's total assets.
[62 FR 17529, Apr. 9, 1997]
270.3c-2 — Definition of beneficial ownership in small business investment companies.
For the purpose of section 3(c)(1) of the Act, beneficial ownership by a
company owning 10 per centum or more of the outstanding voting securities of any issuer
which is a small business investment company licensed to operate under the Small Business
Investment Act of 1958, or which has received from the Small Business Administration notice
to proceed to qualify for a license, which notice or license has not been revoked, shall be
deemed to be beneficial ownership by one person (a) if and so long as the value of all
securities of small business investments companies owned by such company does not exceed 5
per centum of the value of its total assets; or (b) if and so long as such stock of the
small business investment company shall be owned by a state development corporation which
has been created by or pursuant to an act of the State legislature to promote and assist the
growth and development of the economy within such State on a state-wide basis:
Provided, That such State development corporation is not, or as a result of its
investment in the small business investment company (considering such investment as an
investment security) would not be, an investment company as defined in section 3 of the
Act.
(Sec. 6, 74 Stat. 412; 15 U.S.C. 80a-6)
[33 FR 11451, Aug. 13, 1968]
270.3c-3 — Definition of certain terms used in section 3(c)(1) of the Act with respect to certain debt securities offered by small business investment companies.
The term public offering as used in section 3(c)(1) of the Act
shall not be deemed to include the offer and sale by a small business investment company,
licensed under the Small Business Investment Act of 1958, of any debt security issued by it
which is (a) not convertible into, exchangeable for, or accompanied by any equity security,
and (b) guaranteed as to timely payment of principal and interest by the Small Business
Administration and backed by the full faith and credit of the United States. The holders of
any securities offered and sold as described in this section shall be counted, in the
aggregate, as one person for purposes of section 3(c)(1) of the Act.
[37 FR 7590, Apr. 18, 1972]
270.3c-4 — Definition of “common trust fund” as used in section 3(c)(3) of the Act.
The term common trust fund as used in section 3(c)(3) of the Act
(15 U.S.C. 80a-3(c)(3)) shall include a common trust fund which is maintained by a bank
which is a member of an affiliated group, as defined in section 1504(a) of the Internal
Revenue Code of 1954 (26 U.S.C. 1504(a)), and which is maintained exclusively for the
collective investment and reinvestment of monies contributed thereto by one or more bank
members of such affiliated group in the capacity of trustee, executor, administrator, or
guardian; Provided, That:
(a) The common trust fund is operated in compliance with the same State
and Federal regulatory requirements as would apply if the bank maintaining such fund and any
other contributing banks were the same entity; and
(b) The rights of persons for whose benefit a contributing bank acts as
trustee, executor, administrator, or guardian would not be diminished by reason of the
maintenance of such common trust fund by another bank member of the affiliated group.
(15 U.S.C. 80a-6(c), 80a-37(a))
[43 FR 2393, Jan. 17, 1978]
270.3c-5 — Beneficial ownership by knowledgeable employees and certain other persons.
(a) As used in this section:
(1) The term Affiliated Management Person means an affiliated
person, as such term is defined in section 2(a)(3) of the Act [15 U.S.C. 80a-2(a)(3)], that
manages the investment activities of a Covered Company. For purposes of this definition, the
term “investment company” as used in section 2(a)(3) of the Act includes a Covered
Company.
(2) The term Covered Company means a Section 3(c)(1) Company or a
Section 3(c)(7) Company.
(3) The term Executive Officer means the president, any vice
president in charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making function, or any
other person who performs similar policy-making functions, for a Covered Company or for an
Affiliated Management Person of the Covered Company.
(4) The term Knowledgeable Employee with respect to any Covered
Company means any natural person who is:
(i) An Executive Officer, director, trustee, general partner, advisory
board member, or person serving in a similar capacity, of the Covered Company or an
Affiliated Management Person of the Covered Company; or
(ii) An employee of the Covered Company or an Affiliated Management Person
of the Covered Company (other than an employee performing solely clerical, secretarial or
administrative functions with regard to such company or its investments) who, in connection
with his or her regular functions or duties, participates in the investment activities of
such Covered Company, other Covered Companies, or investment companies the investment
activities of which are managed by such Affiliated Management Person of the Covered Company,
provided that such employee has been performing such functions and duties for or on
behalf of the Covered Company or the Affiliated Management Person of the Covered Company, or
substantially similar functions or duties for or on behalf of another company for at least
12 months.
(5) 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)].
(6) 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 determining the number of beneficial owners of a
Section 3(c)(1) Company, and whether the outstanding securities of a Section 3(c)(7) Company
are owned exclusively by qualified purchasers, there shall be excluded securities
beneficially owned by:
(1) A person who at the time such securities were acquired was a
Knowledgeable Employee of such Company;
(2) A company owned exclusively by Knowledgeable Employees;
(3) Any person who acquires securities originally acquired by a
Knowledgeable Employee in accordance with this section, provided that such securities were
acquired by such person in accordance with § 270.3c-6
[62 FR 17529, Apr. 9, 1997]
270.3c-6 — Certain transfers of interests in section 3(c)(1) and section 3(c)(7) funds.
(a) As used in this section:
(1) The term Donee means a person who acquires a security of a
Covered Company (or a security or other interest in a company referred to in paragraph
(b)(3) of this section) as a gift or bequest or pursuant to an agreement relating to a legal
separation or divorce.
(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)].
(4) The term Transferee means a Section 3(c)(1) Transferee or a
Qualified Purchaser Transferee, in each case as defined in paragraph (b) of this
section.
(5) The term Transferor means a Section 3(c)(1) Transferor or a
Qualified Purchaser Transferor, in each case as defined in paragraph (b) of this
section.
(b) Beneficial ownership by any person (“Section 3(c)(1) Transferee”) who
acquires securities or interests in securities of a Section 3(c)(1) Company from a person
other than the Section 3(c)(1) Company shall be deemed to be beneficial ownership by the
person from whom such transfer was made (“Section 3(c)(1) Transferor”), and securities of a
Section 3(c)(7) Company that are owned by persons who received the securities from a
qualified purchaser other than the Section 3(c)(7) Company (“Qualified Purchaser
Transferor”) or a person deemed to be a qualified purchaser by this section shall be deemed
to be acquired by a qualified purchaser (“Qualified Purchaser Transferee”), provided that
the Transferee is:
(1) The estate of the Transferor;
(2) A Donee; or
(3) A company established by the Transferor exclusively for the benefit of
(or owned exclusively by) the Transferor and the persons specified in paragraphs (b)(1) and
(b)(2) of this section.
[62 FR 17529, Apr. 9, 1997]
270.3c-7 — Inflation-adjusted definition of qualifying venture capital fund.
(a) Inflation-adjusted definition of qualifying venture capital
fund. For purposes of section 3(c)(1)(C)(i) of the Act (15 U.S.C. 80a-3(c)(1)(C)(i)),
the term qualifying venture capital fund means a venture capital fund (as that term
is defined in 17 CFR 275.203(l)-1) that has not more than $12,000,000 in aggregate capital
contributions and uncalled committed capital, or, following November 1, 2029, the dollar
amount specified in the most recent order issued by the Commission in accordance with
paragraph (b) of this section and as published in the Federal
Register.
(b) Future inflation adjustments. Pursuant to section 3(c)(1)(C)(i) of the Act (15
U.S.C. 80a-3(c)(1)(C)(i)), the dollar amount specified in paragraph (a) of this section
shall be adjusted by order of the Commission, issued on or about November 1, 2029, and
approximately every five years thereafter. The adjusted dollar amount established in such
orders shall be computed by:
(1) Dividing the year-end value of the Personal Consumption Expenditures Chain-Type Price
Index (or any successor index thereto), as published by the United States Department of
Commerce, for the calendar year preceding the calendar year in which the order is being
issued, by the year-end value of such index (or successor) for the calendar year 2018;
and
(2) Multiplying $10,000,000 times the quotient obtained in paragraph (b)(1) of this section
and rounding the product to the nearest multiple of $1,000,000.
[89 FR 70479, Aug 30, 2024]
270.5b-1 — Definition of “total assets.”
The term total assets, when used in computing values for the
purposes of sections 5 and 12 of the Act, shall mean the gross assets of the company with
respect to which the computation is made, taken as of the end of the fiscal quarter of the
company last preceding the date of computation. This section shall not apply to any company
which has adopted either of the alternative methods of valuation permitted by §
270.2a-1.
[Rule N-5B-1, 6 FR 5920, Nov. 22,
1941]
270.5b-2 — Exclusion of certain guarantees as securities of the guarantor.
(a) For the purposes of section 5 of the act, a guarantee of a security
shall not be deemed to be a security issued by the guarantor: Provided, That the
value of all securities issued or guaranteed by the guarantor, and owned by the management
company, does not exceed 10 percent of the value of the total assets of such management
company.
(b) Notwithstanding paragraph (a) of this section, for the purposes of
section 5 of the Act, a guarantee by a railroad company of a security issued by a terminal
company, warehouse company, switching company, or bridge company, shall not be deemed to be
a security issued by such railroad company: Provided:
(1) The security is guaranteed jointly or severally by more than one
railroad company; and
(2) No one of such guaranteeing railroad companies directly or indirectly
controls all of its co-guarantors.
(c) For the purposes of section 5 of the Act, a lease or other arrangement
whereby a railroad company is or becomes obligated to pay a stipulated annual sum of rental
either to another railroad company or to the security holders of such other railroad company
shall not be deemed in itself a guarantee.
[Rule N-5B-2, 10 FR 581, Jan. 16,
1945]
270.5b-3 — Acquisition of repurchase agreement or refunded security treated as acquisition of underlying securities.
(a) Repurchase Agreements. For purposes of sections 5 and 12(d)(3)
of the Act (15 U.S.C. 80a-5 and 80a-12(d)(3)), the acquisition of a repurchase agreement may
be deemed to be an acquisition of the underlying securities, provided the obligation of the
seller to repurchase the securities from the investment company is Collateralized Fully.
(b) Refunded Securities. For purposes of section 5 of the Act (15
U.S.C. 80a-5), the acquisition of a Refunded Security is deemed to be an acquisition of the
escrowed Government Securities.
(c) Definitions. As used in this section:
(1) Collateralized Fully in the case of a repurchase agreement
means that:
(i) The value of the securities collateralizing the repurchase agreement
(reduced by the transaction costs (including loss of interest) that the investment company
reasonably could expect to incur if the seller defaults) is, and during the entire term of
the repurchase agreement remains, at least equal to the Resale Price provided in the
agreement;
(ii) The investment company has perfected its security interest in the
collateral;
(iii) The collateral is maintained in an account of the investment company
with its custodian or a third party that qualifies as a custodian under the Act;
(iv) The collateral consists entirely of:
(A) Cash items;
(B) Government Securities; or
(C) Securities that the investment company's board of directors, or its
delegate, determines at the time the repurchase agreement is entered into:
(1) Each issuer of which has an exceptionally strong capacity to
meet its financial obligations; and
Note
to paragraph (c)(1)(iv)(C)(l): For a discussion of the phrase
“exceptionally strong capacity to meet its financial obligations” see Investment
Company Act Release No. 30847, (December 27, 2013).
|
(2) Are sufficiently liquid that they can be sold at approximately
their carrying value in the ordinary course of business within seven calendar days; and
(v) Upon an Event of Insolvency with respect to the seller, the repurchase
agreement would qualify under a provision of applicable insolvency law providing an
exclusion from any automatic stay of creditors' rights against the seller.
(2) Event of Insolvency means, with respect to a person:
(i) An admission of insolvency, the application by the person for the
appointment of a trustee, receiver, rehabilitator, or similar officer for all or
substantially all of its assets, a general assignment for the benefit of creditors, the
filing by the person of a voluntary petition in bankruptcy or application for reorganization
or an arrangement with creditors; or
(ii) The institution of similar proceedings by another person which
proceedings are not contested by the person; or
(iii) The institution of similar proceedings by a government agency
responsible for regulating the activities of the person, whether or not contested by the
person.
(3) Government Security means any “Government Security” as defined
in section 2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16)).
(4) Issuer, as used in paragraph (c)(1)(iv)(C)(1) of this
section, means the issuer of a collateral security or the issuer of an unconditional
obligation of a person other than the issuer of the collateral security to undertake to pay,
upon presentment by the holder of the obligation (if required), the principal amount of the
underlying collateral security plus accrued interest when due or upon default.
(5) Refunded Security means a debt security the principal and
interest payments of which are to be paid by Government Securities (“deposited securities”)
that have been irrevocably placed in an escrow account pursuant to an agreement between the
issuer of the debt security and an escrow agent that is not an “affiliated person,” as
defined in section 2(a)(3)(C) of the Act (15 U.S.C. 80a-2(a)(3)(C)), of the issuer of the
debt security, and, in accordance with such escrow agreement, are pledged only to the
payment of the debt security and, to the extent that excess proceeds are available after all
payments of principal, interest, and applicable premiums on the Refunded Securities, the
expenses of the escrow agent and, thereafter, to the issuer or another party;
provided that:
(i) The deposited securities are not redeemable prior to their final
maturity;
(ii) The escrow agreement prohibits the substitution of the deposited
securities unless the substituted securities are Government Securities; and
(iii) At the time the deposited securities are placed in the escrow
account, or at the time a substitution of the deposited securities is made, an independent
certified public accountant has certified to the escrow agent that the deposited securities
will satisfy all scheduled payments of principal, interest and applicable premiums on the
Refunded Securities.
(6) Resale Price means the acquisition price paid to the seller of
the securities plus the accrued resale premium on such acquisition price. The accrued resale
premium is the amount specified in the repurchase agreement or the daily amortization of the
difference between the acquisition price and the resale price specified in the repurchase
agreement.
[66 FR 36161, July 11, 2001, as amended at 74 FR
52373, Oct. 9, 2009, 79 FR 1316, Jan 8, 2014]
270.6a-5 — Purchase of certain debt securities by companies relying on section 6(a)(5) of the Act.
For purposes of reliance on the exemption for certain companies under
section 6(a)(5)(A) of the Act (15 U.S.C. 80a-6(a)(5)(A)), a company shall be deemed to have
met the requirement for credit-worthiness of certain debt securities under section
6(a)(5)(A)(iv)(I) of the Investment Company Act (15 U.S.C. 80a-6(a)(5)(A)(iv)(I)) if, at the
time of purchase, the board of directors (or its delegate) determines or members of the
company (or their delegate) determine that the debt security is:
(a) Subject to no greater than moderate credit risk; and
(b) Sufficiently liquid that it can be sold at or near its carrying value
within a reasonably short period of time.
[77 FR 70120, Nov. 23, 2012]
270.6b-1 — Exemption of employees' securities company pending determination of application.
Any employees' securities company which files an application for an order
of exemption under section 6(b) of the Act (54 Stat. 801; 15 U.S.C. 80a-6) shall be exempt,
pending final determination of such application by the Commission, from all provisions of
the Act applicable to investment companies as such.
[Rule N-6B-1, 6 FR 6126, Dec. 2, 1941]
270.6c-3 — Exemptions for certain registered variable life insurance separate accounts.
A separate account which meets the requirements of paragraph (a) of Rule
6e-2 (17 CFR 270.6e-2) or paragraph (a) of Rule 6e-3(T) (17 CFR 270.6e-3(T)) and registers
as an investment company under section 8(a) of the Act (15 U.S.C. 80a-8(a)), and the
investment adviser, principal underwriter and depositor of such separate account, shall be
exempt from the provisions of the Act specified in paragraph (b) of Rule 6e-2 or paragraph
(b) of Rule 6e-3(T), except for sections 7 (15 U.S.C. 80a-7) and 8(a) of the Act, under the
same terms and conditions as a separate account claiming exemption under Rule 6e-2 or Rule
6e-3(T).
(Secs. 6(c); 15 U.S.C. 80a-6(C) and 38(a))
[49 FR 49228, Dec. 3, 1984]
270.6c-6 — Exemption for certain registered separate accounts and other persons.
(a) As used in this section,
(1) Revenue Ruling shall mean Revenue Ruling 81-225, 1981-41 I.R.B.
(October 13, 1981), issued by the Internal Revenue Service on September 25, 1981.
(2) Existing separate account shall mean a separate account which
is, or is a part of, a unit investment trust registered under the Act, engaged in a
continuous offering of its securities on September 25, 1981.
(3) Existing portfolio company shall mean a registered open-end
management investment company, engaged in a continuous offering of its securities on
September 25, 1981, all or part of whose securities were owned by an existing separate
account on September 25, 1981.
(4) New portfolio company shall mean any registered open-end
management investment company the shares of which will be sold to one or more registered
separate accounts for the purpose of minimizing the impact of the Revenue Ruling on the
contractowners of an existing separate account, which new portfolio company has the
same:
(i) Investment objectives,
(ii) Fundamental policies, and
(iii) Voting rights as the existing portfolio company and has an advisory
fee schedule, including expenses assumed by the adviser, that is at least as advantageous to
the new portfolio company as was the fee schedule of the existing portfolio company.
(5) New separate account shall mean a separate account which
(i) Is, or is a part of, a unit investment trust registered under the
Act;
(ii) Is intended to minimize the impact of the Revenue Ruling on the
contractowners of an existing separate account;
(iii) Invests solely in one or more new portfolio companies;
(iv) Has the same
(A) Sales loads,
(B) Depositor, and
(C) Custodial arrangements
As the existing separate account; and
(v) Has
(A) Asset charges,
(B) Administrative fees, and
(C) Any other fees and charges (not including taxes) that correspond only
to fees of the existing separate account and are no greater than those corresponding
fees.
(b) Any order of the Commission under the Act, granted to an existing
separate account on or before September 25, 1981, shall remain in full force and effect
notwithstanding that the existing separate account invests in one or more new portfolio
companies in lieu of, or in addition to, investing in one or more existing portfolio
companies; Provided, That:
(1) No material changes in the facts upon which the order was based have
occurred;
(2) All representations, undertakings, and conditions made or agreed to by
the existing separate account, and any other person or persons, other than any existing
portfolio company, in connection with the issuance of the order are, and continue to be,
applicable to the existing separate account and any such other person or persons, unless
modified in accordance with this section;
(3) All representations, undertakings, and conditions made or agreed to by
the existing portfolio company in connection with the issuance of the order are made or
agreed to by the new portfolio company, unless modified in accordance with this section;
and
(4) Part II of the Registration Statement under the Securities Act of 1933
of the existing separate account
(i) Indicates that the existing separate account is relying upon paragraph
(b) of this section,
(ii) Lists the Investment Company Act release numbers of any orders upon
which the existing separate account intends to rely, and
(iii) Contains a representation that the provisions of this paragraph (b)
have been complied with.
(c) Any order of the Commission under the Act, granted to an existing
separate account on or before September 25, 1981, shall apply with full force and effect to
a new separate account and the depositor of and principal underwriter for the new separate
account notwithstanding that the new separate account invests in one or more new portfolio
companies; Provided, That:
(1) No material changes in the facts upon which the order was based have
occurred;
(2) All representations, undertakings, and conditions made or agreed to by
the depositor, principal underwriter, and any other person or persons other than the
existing separate account or any existing portfolio companies, in connection with the
issuance of the order are, and continue to be, applicable to such depositor, principal
underwriter, and other person or persons, unless modified in accordance with this
section;
(3) All representations, undertakings, and conditions made or agreed to by
the existing separate account in connection with the issuance of the order are made or
agreed to by the new separate account, unless modified in accordance with this section;
(4) All representations, undertakings, and conditions made or agreed to by
an existing portfolio company in connection with the issuance of the order are made or
agreed to by the new portfolio company, unless modified in accordance with this section;
and
(5) Part II of the Registration Statement under the Securities Act of 1933
of the new separate account
(i) Indicates that the new separate account is relying upon paragraph (c)
of this section,
(ii) Lists the Investment Company Act release numbers of any orders upon
which the new separate account intends to rely, and
(iii) Contains a representation that the provisions of this paragraph (c)
have been complied with.
(d) Any affiliated person or depositor of or principal underwriter for a
new or existing separate account or any affiliated person of or principal underwriter for a
new or existing portfolio company, and any affiliated person of such persons, principal
underwriters, or depositor shall be exempt from section 17(d) of the Act (15 U.S.C
80a-17(d)) and rule 17d-1 thereunder (17 CFR 270.17d-1) to the extent necessary to permit
the organization of one or more new portfolio companies; Provided, That, any expenses
borne by the existing portfolio company or the new portfolio company in connection with such
organization are necessary and appropriate and are allocated in a manner that is fair and
reasonable to all of the shareholders of these companies.
(e) Any affiliated person or depositor of or principal underwriter for a
new or existing separate account and any affiliated persons of such a person, principal
underwriter, or depositor shall be exempt from section 17(d) of the Act and Rule 17d-1
thereunder to the extent necessary to permit such person to bear any reasonable expenses
arising out of the organization of one or more new portfolio companies or the new separate
account.
(f) Any affiliated persons or depositor of or principal underwriter for a
new or existing separate account or any affiliated person of or principal underwriter for a
new or existing portfolio company, and any affiliated person of such persons, principal
underwriters, or depositor shall be exempt from section 17(a) (15 U.S.C. 80a-17(a)), and any
existing portfolio company which has made an election pursuant to Rule 18f-1 (17 CFR
270.18f-1) shall be permitted to revoke that election to the extent necessary to permit
transactions involving the transfer of assets from the existing portfolio company to a new
portfolio company; Provided, That:
(1) Such assets are transferred without the imposition of any fees or
charges;
(2) The board of directors of the existing portfolio company, including a
majority of the directors of the company who are not interested persons of such company,
determines that the transfer of assets is fair and reasonable to all shareholders of the
company and such determination, and the basis upon which it was made, is recorded in the
minute book of the existing portfolio company;
(3) Any securities involved are valued by the existing portfolio company
for purposes of the transfer in accordance with its valuation practices for determining net
asset value per share; and
(4) With respect to Rule 18f-1, the existing separate account requests
that the existing portfolio company redeem in kind the shares of the portfolio company held
by the separate account.
(g) The new portfolio company shall be exempt from section 2(a)(41) (15
U.S.C. 80a-2(a)(41)) of the Act and rules 2a-4 (17 CFR 270.2a-4) and 22c-1 (17 CFR
270.22c-1) under the Act to the extent necessary to permit it to use the same method of
valuation for the purpose of pricing its shares for sale, redemption, and repurchase, as the
existing portfolio company; Provided, That:
(1) The existing portfolio company had on September 25, 1981, an order of
the Commission exempting it, for the purposes of pricing its shares for sale, redemption,
and repurchase, from:
(i) Section 2(a)(41) of the Act and rules 2a-4 and 22c-1 under the Act to
the extent necessary to permit it to use the amortized cost valuation method or
(ii) Rules 2a-4 and 22c-1 under the Act to the extent necessary to permit
it to calculate its net asset value per share to the nearest one cent on share values of
$1.00;
(2) All representations, undertakings, and conditions made or agreed to by
the existing portfolio company in connection with the order are made or agreed to by the new
portfolio company unless modified in accordance with this section; and
(3) Part II of the Registration Statement under the Securities Act of 1933
of the new portfolio company
(i) Indicates that the new portfolio company is relying upon paragraph (g)
of this section,
(ii) Lists the Investment Company Act release numbers of any orders upon
which the new portfolio company intends to rely, and
(iii) Contains a representation that the provisions of paragraph (g) have
been complied with.
(h) The depositor or trustee of an existing separate account shall be
exempt from section 26(c) of the Act (15 U.S.C. 80a-26(c)) to the extent necessary to permit
the substitution of securities of the new portfolio company for securities of the existing
portfolio company; Provided; That, within thirty days of such substitution:
(1) The existing separate account notifies all contractowners of the
substitution of securities and any determinations of the board of directors of the new
portfolio company required by paragraph (d) of this section;
(2) The existing separate account delivers a copy of the prospectus of the
new portfolio company to all contractowners; and
(3) The existing separate account, concurrently with the notification
referred to in paragraph (h)(1) of this section or the delivery of the prospectus of the new
portfolio company referred to in paragraph (h)(2) of this section, whichever is later,
offers to those contractowners who would otherwise have surrender rights under their
contracts the right, for a period of at least thirty days from the receipt of this offer, to
surrender their contracts without the imposition of any withdrawal charge or contingent
deferred sales load, and any surrendering contractowner receives the price next determined
after the request for surrender is received by the insurance company.
(i) The existing separate account shall be exempt from section 22(d) of
the Act (15 U.S.C. 80a-22(d)) to the extent necessary to permit it to comply with paragraph
(h) of this section and the principal underwriter for or depositor of the existing separate
account shall be exempt from section 26(a)(4)(B) of the Act (15 U.S.C. 80a-26(a)(4)(B)) to
the extent necessary to permit them to rely on paragraph (h) of this section.
(j) Notwithstanding section 11 of the Act (15 U.S.C. 80a-11), the existing
separate account or any principal underwriter for the existing separate account may make or
cause to be made to the contractowners of the existing separate account an offer to exchange
a security funded by an existing portfolio company for a security funded by a new portfolio
company without the terms of that offer having first been submitted to and approved by the
Commission; Provided, That the exchange is to be made on the basis of the relative
net asset values of the securities to be exchanged without the imposition of any fees or
charges.
(k) Notwithstanding section 11 of the Act, the new separate account or any
principal underwriter for the new separate account may make or cause to be made an offer to
the contractowners of the existing separate account to exchange their securities for
securities of the new separate account without the terms of that offer having first been
submitted to and approved by the Commission;
Provided, That:
(1) The exchange is to be made on the basis of the relative net asset
values of the securities to be exchanged without the imposition of any fees or charges;
and
(2) If the new separate account imposes a contingent deferred sales load
(“sales load”) on the securities to be acquired in the exchange
(i) At the time this sales load is imposed, it is calculated as if
(A) The contractowner had been a contractowner of the new separate account
from the date on which he became a contractowner of the existing separate account, in the
case of a sales load based on the amount of time the contractowner has been invested in the
new separate account, and
(B) Amounts attributable to purchase payments made to the existing
separate account had been made to the new separate account on the date on which they were
made to the existing separate account, in the case of a sales load based on the amount of
time purchase payments have been invested in the new separate account, and
(ii) The total sales load imposed does not exceed 9 percent of the sum of
the purchase payments made to the new separate account and that portion of purchase payments
made to the existing separate account attributable to the securities exchanged.
(l) Notwithstanding the foregoing, the provisions of this section will be
available to a new separate account or new portfolio company, or to any affiliated person or
depositor of or principal underwriter for such a new separate account, to any affiliated
person of or principal underwriter for such a new portfolio company, to any affiliated
person of such persons, depositor, or principal underwriters, or to any substitution of
securities effected in reliance on this section, only if such new separate account or new
portfolio company is registered under the Act or such substitution is effected prior to
September 21, 1983.
[47 FR 42559, Sept. 28, 1982, as amended at 67 FR
43536, June 28, 2002]
270.6c-7 — Exemptions from certain provisions of sections 22(e) and 27 for registered separate accounts offering variable annuity contracts to participants in the Texas Optional Retirement Program.
A registered separate account, and any depositor of or underwriter for
such account, shall be exempt from the provisions of sections 22(e), 27(i)(2)(A), and 27(d)
of the Act (15 U.S.C. 80a-22(e), 80a-27(i)(2)(A), and 80a-27(d), respectively) with respect
to any variable annuity contract participating in such account to the extent necessary to
permit compliance with the Texas Optional Retirement Program (“Program”), Provided,
That the separate, account, depositor, or underwriter for such account:
(a) Includes appropriate disclosure regarding the restrictions on
redemption imposed by the Program in each registration statement, including the prospectus,
used in connection with the Program;
(b) Includes appropriate disclosure regarding the restrictions on
redemption imposed by the Program in any sales literature used in connection with the offer
of annuity contracts to potential Program participants;
(c) Instructs salespeople who solicit Program participants to purchase
annuity contracts specifically to bring the restrictions on redemption imposed by the
Program to the attention of potential Program participants;
(d) Obtains from each Program participant who purchases an annuity
contract in connection with the Program, prior to or at the time of such purchase, a signed
statement acknowledging the restrictions on redemption imposed by the Program; and
(e) Includes in Part II of the separate account's registration statement
under the Securities Act of 1933 a representation that this section is being relied upon and
that the provisions of paragraphs (a) through (d) of this section have been complied
with.
[49 FR 1479, Jan. 12, 1984; as amended at 85 FR 25964, May 1, 2020]
270.6c-8 — Exemptions for registered separate accounts to impose a deferred sales load and to deduct certain administrative charges.
(a) As used in this section Deferred sales load shall mean any
sales load, including a contingent deferred sales load, that is deducted upon redemption or
annuitization of amounts representing all or a portion of a securityholder's interest in a
registered separate account.
(b) A registered separate account, and any depositor of or principal
underwriter for such account, shall be exempt from the provisions of sections 22(c) and
27(i)(2)(A) of the Act (15 U.S.C. 80a-22(c) and 80a-27(i)(2)(A), respectively) and
§ 270.22c-1 (Rule 22c-1) to the extent necessary to permit them to impose a deferred sales
load on any variable annuity contract participating in such account; provided that the terms
of any offer to exchange another contract for the contract are in compliance with the
requirements of paragraph (d) or (e) of § 270.11a-2 (Rule 11a-2).
(c) A registered separate account, and any depositor of or principal
underwriter for such account, shall be exempt from sections 22(c) and 27(i)(2)(A) of the Act
(15 U.S.C. 80a-22(c) and 80a-27(i)(2)(A), respectively) and § 270.22c-1 (Rule 22c-1) to the
extent necessary to permit them to deduct from the value of any variable annuity contract
participating in such account, upon total redemption of the contract prior to the last day
of the year, the full annual fee for administrative services that otherwise would have been
deducted on that date.
[48 FR 36098, Aug. 9, 1983; as amended at 85 FR 25964, May 1, 2020]
270.6c-10 — Exemption for certain open-end management investment companies to impose deferred sales loads.
(a) A company and any exempted person shall be exempt from the provisions
of sections 2(a)(32), 2(a)(35), and 22(d) of the Act [15 U.S.C. 80a-2(a)(32), 80a-2(a)(35),
and 80a-22(d), respectively] and § 270.22c-1 to the extent necessary to permit a deferred
sales load to be imposed on shares issued by the company, Provided, that:
(1) The amount of the deferred sales load does not exceed a specified
percentage of the net asset value or the offering price at the time of purchase;
(2) The terms of the deferred sales load are covered by the provisions of
Rule 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc.;
and
(3) The same deferred sales load is imposed on all shareholders, except
that scheduled variations in or elimination of a deferred sales load may be offered to a
particular class of shareholders or transactions, Provided, that the conditions in §
270.22d-1 are satisfied. Nothing in this paragraph (a) shall prevent a company from offering
to existing shareholders a new scheduled variation that would waive or reduce the amount of
a deferred sales load not yet paid.
(b) For purposes of this section:
(1) Company means a registered open-end management investment
company, other than a registered separate account, and includes a separate series of the
company;
(2) Exempted person means any principal underwriter of, dealer in,
and any other person authorized to consummate transactions in, securities issued by a
company; and
(3) Deferred sales load means any amount properly chargeable to
sales or promotional expenses that is paid by a shareholder after purchase but before or
upon redemption.
[61 FR 49016, Sept. 17, 1996]
270.6c-11 — Exchange-traded funds.
(a) Definitions. (1) For purposes of this section:
Authorized participant means a member or participant of a clearing
agency registered with the Commission, which has a written agreement with the
exchange-traded fund or one of its service providers that allows the authorized participant
to place orders for the purchase and redemption of creation units.
Basket means the securities, assets or other positions in exchange
for which an exchange-traded fund issues (or in return for which it redeems) creation
units.
Business day means any day the exchange-traded fund is open for
business, including any day when it satisfies redemption requests as required by section
22(e) of the Act (15 U.S.C. 80a-22(e)).
Cash balancing amount means an amount of cash to account for any
difference between the value of the basket and the net asset value of a creation unit.
Creation unit means a specified number of exchange-traded fund
shares that the exchange-traded fund will issue to (or redeem from) an authorized
participant in exchange for the deposit (or delivery) of a basket and a cash balancing
amount if any.
Custom basket means:
(A) A basket that is composed of a non-representative selection of the
exchange-traded fund’s portfolio holdings; or
(B) A representative basket that is different from the initial basket used
in transactions on the same business day.
Exchange-traded fund means a registered open-end management
company:
(A) That issues (and redeems) creation units to (and from) authorized
participants in exchange for a basket and a cash balancing amount if any; and
(B) Whose shares are listed on a national securities exchange and traded
at market-determined prices.
Exchange-traded fund share means a share of stock issued by an
exchange-traded fund.
Foreign investment means any security, asset or other position of
the ETF issued by a foreign issuer as that term is defined in § 240.3b-4 of this title, and
that is traded on a trading market outside of the United States.
Market price means:
(A) The official closing price of an exchange-traded fund share; or
(B) If it more accurately reflects the market value of an exchange-traded
fund share at the time as of which the exchange-traded fund calculates current net asset
value per share, the price that is the midpoint between the national best bid and national
best offer as of that time.
National securities exchange means an exchange that is registered
with the Commission under section 6 of the Securities Exchange Act of 1934 (15 U.S.C.
78f).
Portfolio holdings means the securities, assets or other positions
held by the exchange-traded fund.
Premium or discount means the positive or negative difference
between the market price of an exchange-traded fund share at the time as of which the
current net asset value is calculated and the exchange-traded fund’s current net asset value
per share, expressed as a percentage of the exchange-traded fund share’s current net asset
value per share.
(2) Notwithstanding the definition of exchange-traded fund in paragraph
(a)(1) of this section, an exchange-traded fund is not prohibited from selling (or
redeeming) individual shares on the day of consummation of a reorganization, merger,
conversion or liquidation, and is not limited to transactions with authorized participants
under these circumstances.
(b) Application of the Act to exchange-traded funds. If the
conditions of paragraph (c) of this section are satisfied:
(1) Redeemable security. An exchange-traded fund share is
considered a “redeemable security” within the meaning of section 2(a)(32) of the Act (15
U.S.C. 80a-2(a)(32)).
(2) Pricing. A dealer in exchange-traded fund shares is exempt from
section 22(d) of the Act (15 U.S.C. 80a-22(d)) and § 270.22c-1(a) with regard to purchases,
sales and repurchases of exchange-traded fund shares at market-determined prices.
(3) Affiliated transactions. A person who is an affiliated person
of an exchange-traded fund (or who is an affiliated person of such a person) solely by
reason of the circumstances described in paragraphs (b)(3)(i) and (ii) of this section is
exempt from sections 17(a)(1) and 17(a)(2) of the Act (15 U.S.C. 80a-17(a)(1) and (a)(2))
with regard to the deposit and receipt of baskets:
(i) Holding with the power to vote 5% or more of the exchange-traded
fund’s shares; or
(ii) Holding with the power to vote 5% or more of any investment company
that is an affiliated person of the exchange-traded fund.
(4) Postponement of redemptions. If an exchange-traded fund
includes a foreign investment in its basket, and if a local market holiday, or series of
consecutive holidays, or the extended delivery cycles for transferring foreign investments
to redeeming authorized participants prevents timely delivery of the foreign investment in
response to a redemption request, the exchange-traded fund is exempt, with respect to the
delivery of the foreign investment, from the prohibition in section 22(e) of the Act (15
U.S.C. 80a-22(e)) against postponing the date of satisfaction upon redemption for more than
seven days after the tender of a redeemable security if the exchange-traded fund delivers
the foreign investment as soon as practicable, but in no event later than 15 days after the
tender of the exchange-traded fund shares.
(c) Conditions. (1) Each business day, an exchange-traded fund must
disclose prominently on its website, which is publicly available and free of charge:
(i) Before the opening of regular trading on the primary listing exchange
of the exchange-traded fund shares, the following information (as applicable) for each
portfolio holding that will form the basis of the next calculation of current net asset
value per share:
(A) Ticker symbol;
(B) CUSIP or other identifier;
(C) Description of holding;
(D) Quantity of each security or other asset held; and
(E) Percentage weight of the holding in the portfolio;
(ii) The exchange-traded fund’s current net asset value per share, market
price, and premium or discount, each as of the end of the prior business day;
(iii) A table showing the number of days the exchange-traded fund’s shares
traded at a premium or discount during the most recently completed calendar year and the
most recently completed calendar quarters since that year (or the life of the
exchange-traded fund, if shorter);
(iv) A line graph showing exchange-traded fund share premiums or discounts
for the most recently completed calendar year and the most recently completed calendar
quarters since that year (or the life of the exchange-traded fund, if shorter);
(v) The exchange-traded fund’s median bid-ask spread, expressed as a
percentage rounded to the nearest hundredth, computed by:
(A) Identifying the exchange-traded fund’s national best bid and national
best offer as of the end of each 10 second interval during each trading day of the last 30
calendar days;
(B) Dividing the difference between each such bid and offer by the
midpoint of the national best bid and national best offer; and
(C) Identifying the median of those values; and
(vi) If the exchange-traded fund’s premium or discount is greater than 2%
for more than seven consecutive trading days, a statement that the exchange-traded fund’s
premium or discount, as applicable, was greater than 2% and a discussion of the factors that
are reasonably believed to have materially contributed to the premium or discount, which
must be maintained on the website for at least one year thereafter.
(2) The portfolio holdings that form the basis for the exchange-traded
fund’s next calculation of current net asset value per share must be the ETF’s portfolio
holdings as of the close of business on the prior business day.
(3) An exchange-traded fund must adopt and implement written policies and
procedures that govern the construction of baskets and the process that will be used for the
acceptance of baskets; provided, however, if the exchange-traded fund utilizes a
custom basket, these written policies and procedures also must:
(i) Set forth detailed parameters for the construction and acceptance of
custom baskets that are in the best interests of the exchange-traded fund and its
shareholders, including the process for any revisions to, or deviations from, those
parameters; and
(ii) Specify the titles or roles of the employees of the exchange-traded
fund’s investment adviser who are required to review each custom basket for compliance with
those parameters.
(4) An exchange-traded fund that seeks, directly or indirectly, to provide
investment returns that correspond to the performance of a market index by a specified
multiple, or to provide investment returns that have an inverse relationship to the
performance of a market index, over a predetermined period of time, must comply with all
applicable provisions of § 270.18f-4.
(d) Recordkeeping. The exchange-traded fund must maintain and
preserve for a period of not less than five years, the first two years in an easily
accessible place:
(1) All written agreements (or copies thereof) between an authorized
participant and the exchange-traded fund or one of its service providers that allows the
authorized participant to place orders for the purchase or redemption of creation units;
(2) For each basket exchanged with an authorized participant, records
setting forth:
(i) The ticker symbol, CUSIP or other identifier, description of holding,
quantity of each holding, and percentage weight of each holding composing the basket
exchanged for creation units;
(ii) If applicable, identification of the basket as a custom basket and a
record stating that the custom basket complies with policies and procedures that the
exchange-traded fund adopted pursuant to paragraph (c)(3) of this section;
(iii) Cash balancing amount (if any); and
(iv) Identity of authorized participant transacting with the
exchange-traded fund.
[84 FR 57162, Oct. 24, 2019; as amended at 85 FR 83162, Dec. 21, 2020]
270.6d-1 — Exemption for certain closed-end investment companies.
(a) An application under section 6(d) of the Act shall contain the
following information:
(1) A brief description of the character of the business and investment
policy of the applicant.
(2) The information relied upon by the applicant to satisfy the conditions
of paragraphs (1) and (2) of section 6(d) of the Act.
(3) The number of holders of each class of the applicant's outstanding
securities.
(4) An unconsolidated balance sheet as of a date not earlier than the end
of the applicant's first fiscal year, together with a schedule specifying the title, the
amount, the book value and, if determinable, the market value of each security in the
applicant's portfolio.
(5) An unconsolidated profit and loss statement for the applicant's last
fiscal year.
(6) A statement of each provision of the act from which the applicant
seeks exemption, together with a statement of the facts by reason of which, in the
applicant's opinion, such exemption is not contrary to the public interest or inconsistent
with the protection of investors.
(b) There shall be attached to each copy of the application a copy of Form
N-8A. The form need not be executed, but it shall be clearly marked on its facing page as an
exhibit to the application. The filing of Form N-8A in this manner shall not be construed as
the filing of a notification of registration under section 8(a) of the Act.
(c) The application may contain any additional information which the
applicant desires to submit.
[Rule N-6D-1, 5 FR 4346, Nov. 2, 1940]
270.6e-2 — Exemptions for certain variable life insurance separate accounts.
(a) A separate account, and the investment adviser, principal underwriter and
depositor of such separate account, shall, except for the exemptions provided in paragraph
(b) of this section, be subject to all provisions of the Act and this part as though such
separate account were a registered investment company issuing periodic payment plan
certificates if:
(1) Such separate account is established and maintained by a life insurance
company pursuant to the insurance laws or code of:
(i) Any state or territory of the United States or the District of Columbia;
or
(ii) Canada or any province thereof, if it complies to the extent necessary
with § 270.7d-1 (Rule 7d-1) under the Act;
(2) The assets of the separate account are derived solely from the sale of
variable life insurance contracts as defined in paragraph (c) of this section, and advances
made by the life insurance company which established and maintains the separate account
(“life insurer”) in connection with the operation of such separate account;
(3) The separate account is not used for variable annuity contracts or for
funds corresponding to dividend accumulations or other contract liabilities not involving
life contingencies;
(4) The income, gains and losses, whether or not realized, from assets
allocated to such separate account, are, in accordance with the applicable variable life
insurance contract, credited to or charged against such account without regard to other
income, gains or losses of the life insurer;
(5) The separate account is legally segregated, and that portion of its assets
having a value equal to, or approximately equal to, the reserves and other contract
liabilities with respect to such separate account are not chargeable with liabilities
arising out of any other business that the life insurer may conduct;
(6) The assets of the separate account have, at each time during the year that
adjustments in the reserves are made, a value at least equal to the reserves and other
contract liabilities with respect to such separate account, and at all other times, except
pursuant to an order of the Commission, have a value approximately equal to or in excess of
such reserves and liabilities; and
(7) The investment adviser of the separate account is registered under the
Investment Advisers Act of 1940.
(b) If a separate account meets the requirements of paragraph (a) of this
section, then such separate account and the other persons described in paragraph (a) of this
section shall be exempt from the provisions of the Act as follows:
(1) Section 7 (15 U.S.C. 80a-7).
(2) Section 8 (15 U.S.C. 80a-8) to the extent that:
(i) For purposes of paragraph (a) of section 8, the separate account shall file
with the Commission a notification on § 274.301 of this chapter (Form N-6EI-1) which
identifies such separate account; and
(ii) For purposes of paragraph (b) of section 8, the separate account shall
file with the Commission a form to be designated by the Commission within 90 days after
filing the notification on Form N-6EI-1; provided, however, that if the fiscal year of the
separate account ends within this 90 day period the form may be filed within ninety days
after the end of such fiscal year.
(3) Section 9 (15 U.S.C. 80a-9) to the extent that:
(i) The eligibility restrictions of section 9(a) shall not be applicable to
those persons who are officers, directors and employees of the life insurer or its
affiliates who do not participate directly in the management or administration of the
separate account or in the sale of variable life insurance contracts funded by such separate
account; and
(ii) A life insurer shall be ineligible pursuant to paragraph (3) of section
9(a) to serve as investment adviser, depositor of or principal underwriter for a variable
life insurance separate account only if an affiliated person of such life insurer,
ineligible by reason of paragraph (1) or (2) of section 9(a), participates directly in the
management or administration of the separate account or in the sale of variable life
insurance contracts funded by such separate account.
(4) Section 13(a) (15 U.S.C. 80a-13(a)) to the extent that:
(i) An insurance regulatory authority may require pursuant to insurance law or
regulation that the separate account make (or refrain from making) certain investments which
would result in changes in the subclassification or investment policies of the separate
account;
(ii) Changes in the investment policy of the separate account initiated by
contractholders or the board of directors of the separate account may be disapproved by the
life insurer, provided that such disapproval is reasonable and is based upon a determination
by the life insurer in good faith that:
(A) Such change would be contrary to state law; or
(B) Such change would be inconsistent with the investment objectives of the
separate account or would result in the purchase of securities for the separate account
which vary from the general quality and nature of investments and investment techniques
utilized by other separate accounts of the life insurer or of an affiliated life insurance
company, which separate accounts have investment objectives similar to the separate account;
and
(iii) Any action taken in accordance with paragraph (b)(4)(i) or (ii) of this
section and the reasons therefor shall be disclosed in the proxy statement for the next
meeting of variable life insurance contractholders of the separate account.
(5) Section 14(a) (15 U.S.C. 80a-14(a)).
(6)(i) Section 15(a) (15 U.S.C. 80a-15(a)) to the extent this section requires
that the initial written contract pursuant to which the investment adviser serves or acts
shall have been approved by the vote of a majority of the outstanding voting securities of
the registered company; provided that:
(A) Such investment adviser is selected and a written contract is entered into
before the effective date of the registration statement under the Securities Act of 1933, as
amended, for variable life insurance contracts which are funded by the separate account, and
that the terms of the contract are fully disclosed in such registration statement; and
(B) A written contract is submitted to a vote of variable life insurance
contractholders at their first meeting after the effective date of the registration
statement under the Securities Act of 1933, as amended, on condition that such meeting shall
take place within one year after such effective date, unless the time for the holding of
such meeting shall be extended by the Commission upon written request for good cause shown;
and
(ii) Sections 15(a), (b) and (c) (15 U.S.C. 80a-15(a), (b), and (c)) to the
extent that:
(A) An insurance regulatory authority may disapprove pursuant to insurance law
or regulation any contract between the separate account and an investment adviser or
principal underwriter;
(B) Changes in the principal underwriter for the separate account initiated by
contractholders or the board of directors of the separate account may be disapproved by the
life insurer; provided that such disapproval is reasonable;
(C) Changes in the investment adviser of the separate account initiated by
contractholders or the board of directors of the separate account may be disapproved by the
life insurer; provided that such disapproval is reasonable and is based upon a determination
by the life insurer in good faith that:
(1) The rate of the proposed investment advisory fee will exceed the
maximum rate that is permitted to be charged against the assets of the separate account for
such services as specified by any variable life insurance contract funded by such separate
account; or
(2) The proposed investment adviser may be expected to employ investment
techniques which vary from the general techniques utilized by the current investment adviser
to the separate account, or advise the purchase or sale of securities which would be
inconsistent with the investment objectives of the separate account, or which would vary
from the quality and nature of investments made by other separate accounts of the life
insurer or of an affiliated life insurance company, which separate accounts have investment
objectives similar to the separate account; and
(D) Any action taken in accordance with paragraph (b)(6)(ii)(A), (B), or (C) of
this section and the reasons therefor shall be disclosed in the proxy statement for the next
meeting of variable life insurance contractholders of the separate account.
(7) Section 16(a) (15 U.S.C. 80a-16(a)) to the extent that:
(i) Persons serving as directors of the separate account prior to the first
meeting of such account's variable life insurance contractholders are exempt from the
requirement of section 16(a) that such persons be elected by the holders of outstanding
voting securities of such account at an annual or special meeting called for that purpose;
provided that:
(A) Such persons have been appointed directors of such account by the life
insurer before the effective date of the registration statement under the Securities Act of
1933, as amended, for variable life insurance contracts which are funded by the separate
account and are identified in such registration statement (or are replacements appointed by
the life insurer for any such persons who have become unable to serve as directors); and
(B) An election of directors for such account shall be held at the first
meeting of variable life insurance contractholders after the effective date of the
registration statement under the Securities Act of 1933, as amended, relating to contracts
funded by such account, which meeting shall take place within one year after such effective
date, unless the time for holding such meeting shall be extended by the Commission upon
written request for good cause shown; and
(ii) A member of the board of directors of such separate account may be
disapproved or removed by the appropriate insurance regulatory authority if such person is
ineligible to serve as a director of the separate account pursuant to insurance law or
regulation of the jurisdiction in which the life insurer is domiciled.
(8) Section 17(f) (15 U.S.C. 80a-17(f)) to the extent that the securities and
similar investments of the separate account may be maintained in the custody of the life
insurer or an insurance company which is an affiliated person of such life insurer; provided
that:
(i) The securities and similar investments allocated to such separate account
are clearly identified as to ownership by such account, and such securities and similar
investments are maintained in the vault of an insurance company which meets the
qualifications set forth in paragraph (b)(8)(ii) of this section, and whose procedures and
activities with respect to such safekeeping function are supervised by the insurance
regulatory authorities of the jurisdiction in which the securities and similar investments
will be held;
(ii) The insurance company maintaining such investments must file with an
insurance regulatory authority of a State or territory of the United States or the District
of Columbia an annual statement of its financial condition in the form prescribed by the
National Association of Insurance Commissioners, must be subject to supervision and
inspection by such authority and must be examined periodically as to its financial condition
and other affairs by such authority, must hold the securities and similar investments of the
separate account in its vault, which vault must be equivalent to that of a bank which is a
member of the Federal Reserve System, and must have a combined capital and surplus, if a
stock company, or an unassigned surplus, if a mutual company, of not less than $1,000,000 as
set forth in its most recent annual statement filed with such authority;
(iii) Access to such securities and similar investments shall be limited to
employees of or agents authorized by the Commission, representatives of insurance regulatory
authorities, independent public accountants for the separate account, accountants for the
life insurer and to no more than 20 persons authorized pursuant to a resolution of the board
of directors of the separate account, which persons shall be directors of the separate
account, officers and responsible employees of the life insurer or officers and responsible
employees of the affiliated insurance company in whose vault such investments are maintained
(if applicable), and access to such securities and similar investments shall be had only by
two or more such persons jointly, at least one of whom shall be a director of the separate
account or officer of the life insurer;
(iv) The requirement in paragraph (b)(8)(i) of this section that the securities
and similar investments of the separate account be maintained in the vault of a qualified
insurance company shall not apply to securities deposited with insurance regulatory
authorities or deposited in a system for the central handling of securities established by a
national securities exchange or national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such person as may be
permitted by the Commission, or to securities on loan which are collateralized to the extent
of their full market value, or to securities hypothecated, pledged, or placed in escrow for
the account of such separate account in connection with a loan or other transaction
authorized by specific resolution of the board of directors of the separate account, or to
securities in transit in connection with the sale, exchange, redemption, maturity or
conversion, the exercise of warrants or rights, assents to changes in terms of the
securities, or to other transactions necessary or appropriate in the ordinary course of
business relating to the management of securities;
(v) Each person when depositing such securities or similar investments in or
withdrawing them from the depository or when ordering their withdrawal and delivery from the
custody of the life insurer or affiliated insurance company, shall sign a notation in
respect of such deposit, withdrawal or order which shall show:
(A) The date and time of the deposit, withdrawal, or order;
(B) The title and amount of the securities or other investments deposited,
withdrawn or ordered to be withdrawn, and an identification thereof by certificate numbers
or otherwise;
(C) The manner of acquisition of the securities or similar investments
deposited or the purpose for which they have been withdrawn, or ordered to be withdrawn;
and
(D) If withdrawn and delivered to another person the name of such person. Such
notation shall be transmitted promptly to an officer or director of the separate account or
the life insurer designated by the board of directors of the separate account who shall not
be a person designated for the purpose of paragraph (b)(8)(iii) of this section. Such
notation shall be on serially numbered forms and shall be preserved for at least one
year;
(vi) Such securities and similar investments shall be verified by complete
examination by an independent public accountant retained by the separate account at least
three times during each fiscal year, at least two of which shall be chosen by such
accountant without prior notice to such separate account. A certificate of such accountant
stating that he has made an examination of such securities and investments and describing
the nature and extent of the examination shall be transmitted to the Commission by the
accountant promptly after each examination; and
(vii) Securities and similar investments of a separate account maintained with
a bank or other company whose functions and physical facilities are supervised by Federal or
state authorities pursuant to any arrangement whereby the directors, officers, employees or
agents of the separate account or the life insurer are authorized or permitted to withdraw
such investments upon their mere receipt are deemed to be in the custody of the life insurer
and shall be exempt from the requirements of section 17(f) so long as the arrangement
complies with all provisions of paragraph (b)(8) of this section, except that such
securities will be maintained in the vault of a bank or other company rather than the vault
of an insurance company.
(9) Section 18(i) (15 U.S.C. 80a-18(i)) to the extent that:
(i) For the purposes of any section of the Act which provides for the vote of
securityholders on matters relating to the investment company:
(A) Variable life insurance contractholders shall have one vote for each $100
of cash value funded by the separate account, with fractional votes allocated for amounts
less than $100;
(B) The life insurer shall have one vote for each $100 of assets of the
separate account not otherwise attributable to contractholders pursuant to paragraph
(b)(9)(i)(A) of this section, with fractional votes allocated for amounts less than $100;
provided that after the commencement of sales of variable life insurance contracts funded by
the separate account, the life insurer shall cast its votes for and against each matter
which may be voted upon by contractholders in the same proportion as the votes cast by
contractholders; and
(C) The number of votes to be allocated shall be determined as of a record date
not more than 90 days prior to any meeting at which such vote is held; provided that if a
quorum is not present at the meeting, the meeting may be adjourned for up to 60 days without
fixing a new record date; and
(ii) The requirement of this section that every share of stock issued by a
registered management investment company (except a common-law trust of the character
described in section 16(c)) shall be a voting stock and have equal voting rights with every
other outstanding voting stock shall not be deemed to be violated by actions specifically
permitted by any provision of this section.
(10) Section 19 (15 U.S.C. 80a-19) to the extent that the provisions of this
section shall not be applicable to any dividend or similar distribution paid or payable
pursuant to provisions of participating variable life insurance contracts.
(11) Sections 22(d), 22(e), and 27(i)(2)(A) (15 U.S.C. 80a-22(d), 80a-22(e),
and 80a-27(i)(2)(A), respectively) and § 270.22c-1 (Rule 22c-1) promulgated under section
22(c) to the extent:
(i) That the amount payable on death and the cash surrender value of each
variable life insurance contract shall be determined on each day during which the New York
Stock Exchange is open for trading, not less frequently than once daily as of the time of
the close of trading on such exchange; provided that the amount payable on death need not be
determined more than once each contract month if such determination does not reduce the
participation of the contract in the investment experience of the separate account; provided
further, however, that if the net valuation premium for such contract is transferred at
least annually, then the amount payable on death need be determined only when such net
premium is transferred; and
(ii) Necessary for compliance with this section or with insurance laws and
regulations and established administrative procedures of the life insurer with respect to
issuance, transfer and redemption procedures for variable life insurance contracts funded by
the separate account including, but not limited to, premium rate structure and premium
processing, insurance underwriting standards, and the particular benefit afforded by the
contract; provided, however, that any procedure or action shall be reasonable, fair and not
discriminatory to the interests of the affected contractholder and to all other holders of
contracts of the same class or series funded by the separate account; and, further provided
that any such action shall be disclosed in the form required to be filed by the separate
account with the Commission pursuant to paragraph (b)(2)(ii) of this section.
(12) Section 27(i)(2)(A) (15 U.S.C. 80a-27(i)(A)), to the extent that such
sections require that the variable life insurance contract be redeemable or provide for a
refund in cash; provided that such contract provides for election by the contractholder of a
cash surrender value or certain non-forfeiture and settlement options which are required or
permitted by the insurance law or regulation of the jurisdiction in which the contract is
offered; and further provided that unless required by the insurance law or regulation of the
jurisdiction in which the contract is offered or unless elected by the contractholder, such
contract shall not provide for the automatic imposition of any option, including, but not
limited to, an automatic premium loan, which would involve the accrual or payment of an
interest or similar charge;
(13) Section 32(a)(2) (15 U.S.C. 80a-31(a)(2)); provided that:
(i) The independent public accountant is selected before the effective date of
the registration statement under the Securities Act of 1933, as amended, for variable life
insurance contracts which are funded by the separate account, and the identity of such
accountant is disclosed in such registration statement; and
(ii) The selection of such accountant is submitted for ratification or
rejection to variable life insurance contractholders at their first meeting after the
effective date of the registration statement under the Securities Act of 1933, as amended,
on condition that such meeting shall take place within one year after such effective date,
unless the time for the holding of such meeting shall be extended by the Commission upon
written request for good cause shown.
(14) If the separate account is organized as a unit investment trust, all the
assets of which consist of the shares of one or more registered management investment
companies which offer their shares exclusively to variable life insurance separate accounts
of the life insurer or of any affiliated life insurance company:
(i) The eligibility restrictions of section 9(a) (15 U.S.C. 80a-9(a)) shall not
be applicable to those persons who are officers, directors, and employees of the life
insurer or its affiliates who do not participate directly in the management or
administration of any registered management investment company described in paragraph
(b)(14) introductory text;
(ii) The life insurer shall be ineligible pursuant to paragraph (3) of section
9(a) to serve as investment adviser of or principal underwriter for any registered
management investment company described in paragraph (b)(14) of this section only if an
affiliated person of such life insurer, ineligible by reason of paragraph (1) or (2) of
section 9(a), participates in the management or administration of such company;
(iii) The life insurer may vote shares of the registered management investment
companies held by the separate account without regard to instructions from contractholders
of the separate account if such instructions would require such shares to be voted:
(A) To cause such companies to make (or refrain from making) certain
investments which would result in changes in the sub-classification or investment objectives
of such companies or to approve or disapprove any contract between such companies and an
investment adviser when required to do so by an insurance regulatory authority subject to
the provisions of paragraphs (b)(4)(i) and (b)(6)(ii)(A) of this section; or
(B) In favor of changes in investment objectives, investment adviser of or
principal underwriter for such companies subject to the provisions of paragraphs (b)(4)(ii)
and (b)(6)(ii)(B) and (C) of this section;
(iv) Any action taken in accordance with paragraph (b)(14)(iii)(A) or (B) of
this section and the reasons therefor shall be disclosed in the next report to
contractholders made pursuant to section 30(e) (15 U.S.C. 80a-29(e)) and § 270.30e-2 (Rule
30e-2);
(v) Any registered management investment company established by the insurer and
described in paragraph (b)(14) of this section shall be exempt from section 14(a); and
(vi) Any registered management investment company established by the insurer
and described in paragraph (b)(14) of this section shall be exempt from sections 15(a),
16(a), and 32(a)(2) (15 U.S.C. 80a-15(a), 80-16(a), and 80-31(a)(2), respectively), to the
extent prescribed by paragraphs (b)(6)(i), (b)(7)(i), and (b)(13) of this section, provided
that such company complies with the conditions set forth in those paragraphs as if it were a
separate account.
(c) When used in this section, variable life insurance contract means a
contract of life insurance, subject to regulation under the insurance laws or code of every
jurisdiction in which it is offered, funded by a separate account of a life insurer, which
contract, so long as premium payments are duly paid in accordance with its terms, provides
for:
(1) A death benefit and cash surrender value which vary to reflect the
investment experience of the separate account;
(2) An initial stated dollar amount of death benefit, and payment of a death
benefit guaranteed by the life insurer to be at least equal to such stated amount; and
(3) Assumption of the mortality and expense risks thereunder by the life insurer for which
a charge against the assets of the separate account may be assessed. Such charge shall be
disclosed in the prospectus and shall not be less than fifty per centum of the maximum
charge for risk assumption as disclosed in the prospectus and as provided for in the
contract.
[41 FR 47027, Oct. 27, 1976; 41 FR 52668, Dec. 1, 1976, as amended
at 49 FR 1477, Jan. 12, 1984; 67 FR 43536, June 28, 2002; 85 FR 25964, May 1, 2020]
270.6e-3 — Exemptions for flexible premium variable life insurance separate accounts.
(a) A separate account, and its investment adviser, principal
underwriter and depositor, shall, except as provided in paragraph (b) of this section,
comply with all provisions of the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.) and this part that apply to a registered investment company issuing periodic
payment plan certificates if:
(1) It is a separate account within the
meaning of section 2(a)(37) of the Act (15 U.S.C. 80a-2(a)(37)) and is established and
maintained by a life insurance company pursuant to the insurance laws or code of:
(i) Any state or territory of the United States or the District of Columbia;
or
(ii) Canada or any province thereof, if it complies with § 270.7d-1
(Rule 7d-1) under the Act (the “life insurer”);
(2) The assets of the
separate account are derived solely from:
(i) The sale of flexible
premium variable life insurance contracts (“flexible contracts”) as defined in paragraph
(c)(1) of this section;
(ii) The sale of scheduled premium variable
life insurance contracts (“scheduled contracts”) as defined in paragraph (c) of
§ 270.6e-2 (Rule 6e-2) under the Act;
(iii) Funds corresponding to
dividend accumulations with respect to such contracts; and
(iv)
Advances made by the life insurer in connection with the operation of such separate
account;
(3) The separate account is not used for variable annuity
contracts or other contract liabilities not involving life contingencies;
(4) The separate account is legally segregated, and that part of its assets
with a value approximately equal to the reserves and other contract liabilities for such
separate account are not chargeable with liabilities arising from any other business of
the life insurer;
(5) The value of the assets of the separate account,
each time adjustments in the reserves are made, is at least equal to the reserves and
other contract liabilities of the separate account, and at all other times approximately
equals or exceeds the reserves and liabilities; and
(6) The investment
adviser of the separate account is registered under the Investment Advisers Act of 1940
(15 U.S.C. 80b-1 et seq.).
(b) A separate account that meets
the requirements of paragraph (a) of this section, and its investment adviser, principal
underwriter and depositor shall be exempt with respect to flexible contracts funded by
the separate account from the following provisions of the Act:
(1)
Subject to section 26(f) of the Act, in connection with any sales charge deducted under
the flexible contract, the separate account and other persons shall be exempt from
sections 12(b), 22(c), and 27(i)(2)(A) (15 U.S.C. 80a-12(b), 80-22(c), and
80a-27(i)(2)(A), respectively) of the Act, and §§ 270.12b-1 (Rule 12b-1) and 270.22c-1
(Rule 22c-1) under the Act.
(2) Section 7 (15 U.S.C. 80a-7).
(3) Section 8 (15 U.S.C. 80a-8), to the extent that:
(i)
For purposes of paragraph (a) of section 8, the separate account filed with the
Commission a notification on § 274.301 of this chapter (Form N-6EI-1) which identifies
the separate account; and
(ii) For purposes of paragraph (b) of
section 8, the separate account shall file with the Commission the form designated by
the Commission within ninety days after filing the notification on Form N-6EI-1;
provided, however, that if the fiscal year of the separate account end within this
ninety day period, the form may be filed within ninety days after the end of such fiscal
year.
(4) Section 9 (15 U.S.C. 80a-9), to the extent that:
(i) The eligibility restrictions of section 9(a) shall not apply to persons
who are officers, directors or employees of the life insurer or its affiliates and who
do not participate directly in the management or administration of the separate account
or in the sale of flexible contracts; and
(ii) A life insurer shall be
ineligible under paragraph (3) of section 9(a) to serve as investment adviser, depositor
of or principal underwriter for the separate account only if an affiliated person of
such life insurer, ineligible by reason of paragraphs (1) or (2) of section 9(a),
participates directly in the management or administration of the separate account or in
the sale of flexible contracts.
(5) Section 13(a) (15 U.S.C.
80a-13(a)), to the extent that:
(i) An insurance regulatory authority
may require pursuant to insurance law or regulation that the separate account make (or
refrain from making) certain investments which would result in changes in the
subclassification or investment policies of the separate account;
(ii)
Changes in the investment policy of the separate account initiated by its
contractholders or board of directors may be disapproved by the life insurer, if the
disapproval is reasonable and is based on a good faith determination by the life insurer
that:
(A) The change would violate state law; or
(B)
The change would not be consistent with the investment objectives of the separate
account or would result in the purchase of securities for the separate account which
vary from the general quality and nature of investments and investment techniques used
by other separate accounts of the life insurer or of an affiliated life insurance
company with similar investment objectives; and
(iii) Any action
described in paragraph (b)(5)(i) or (ii) of this section and the reasons for it shall be
disclosed in the next communication to contractholders, but in no case, later than
twelve months from the date of such action.
(6) Section 14(a) (15
U.S.C. 80a-14(a)).
(7)(i) Section 15(a) (15 U.S.C. 80a-15(a)), to the
extent it requires that the initial written contract with the investment adviser shall
have been approved by the vote of a majority of the outstanding voting securities of the
registered investment company; provided that:
(A) The investment
adviser is selected and a written contract is entered into before the effective date of
the 1933 Act registration statement for flexible contracts, and that the terms of the
contract are fully disclosed in the registration statement; and
(B) A
written contract is submitted to a vote of contractholders at their first meeting and
within one year after the effective date of the 1933 Act registration statement, unless
the Commission upon written request and for good cause shown extends the time for the
holding of such meeting; and
(ii) Sections 15(a), (b), and (c), to the
extent that:
(A) An insurance regulatory authority may disapprove
pursuant to insurance law or regulation any contract between the separate account and an
investment adviser or principal underwriter;
(B) Changes in the
principal underwriter for the separate account initiated by contractholders or the board
of directors of the separate account may be disapproved by the life insurer; provided
that such disapproval is reasonable;
(C) Changes in the investment
adviser of the separate account initiated by contractholders or the board of directors
of the separate account may be disapproved by the life insurer; provided that such
disapproval is reasonable and is based on a good faith determination by the life insurer
that:
(1) The proposed investment advisory fee will exceed the
maximum rate specified in any flexible contract that may be charged against the assets
of the separate account for such services; or
(2) The proposed
investment adviser may be expected to employ investment techniques which vary from the
general techniques used by the current investment adviser to the separate account, or
advise the purchase or sale of securities which would not be consistent with the
investment objectives of the separate account, or which would vary from the quality and
nature of investments made by other separate accounts with similar investment objectives
of the life insurer or an affiliated life insurance company; and
(D)
Any action described in paragraph (b)(7)(ii)(A), (B), or (C) of this section and the
reasons for it shall be disclosed in the next communication to contractholders, but in
no case, later than twelve months from the date of such action.
(8)
Section 16(a) (15 U.S.C. 80a-16(a)), to the extent that:
(i) Directors
of the separate account serving before the first meeting of the account's
contractholders are exempt from the requirement of section 16(a) that they be elected by
the holders of outstanding voting securities of the account at an annual or special
meeting called for that purpose; provided that:
(A) Such persons were
appointed directors of the account by the life insurer before the effective date of the
1933 Act registration statement for flexible contracts and are identified in the
registration statement (or are replacements appointed by the life insurer for any such
persons who have become unable to serve as directors); and
(B) An
election of directors for the account is held at the first meeting of contractholders
and within one year after the effective date of the 1933 Act registration statement for
flexible contracts, unless the time for holding the meeting is extended by the
Commission upon written request and for good cause shown; and
(ii) A
member of the board of directors of the separate account may be disapproved or removed
by an insurance regulatory authority if the person is not eligible to be a director of
the separate account under the law of the life insurer's domicile.
(9)
Section 17(f) (15 U.S.C. 80a-17(f)), to the extent that the securities and similar
investments of a separate account organized as a management investment company may be
maintained in the custody of the life insurer or of an affiliated life insurance
company; provided that:
(i) The securities and similar investments
allocated to the separate account are clearly identified as owned by the account, and
the securities and similar investments are kept in the vault of an insurance company
which meets the qualifications in paragraph (b)(9)(ii) of this section, and whose
safekeeping function is supervised by the insurance regulatory authorities of the
jurisdiction in which the securities and similar investments will be held;
(ii) The insurance company maintaining such investments must file with an
insurance regulatory authority of a state or territory of the United States or the
District of Columbia an annual statement of its financial condition in the form
prescribed by the National Association of Insurance Commissioners, must be subject to
supervision and inspection by such authority and must be examined periodically as to its
financial condition and other affairs by such authority, must hold the securities and
similar investments of the separate account in its vault, which vault must be equivalent
to that of a bank which is a member of the Federal Reserve System, and must have a
combined capital and surplus, if a stock company, or an unassigned surplus, if a mutual
company, of not less than $1,000,000 as set forth in its most recent annual statement
filed with such authority;
(iii) Access to such securities and similar
investments shall be limited to employees of the Commission, representatives of
insurance regulatory authorities, independent public accountants retained by the
separate account (or on its behalf by the life insurer), accountants for the life
insurer, and to no more than 20 persons authorized by a resolution of the board of
directors of the separate account, which persons shall be directors of the separate
account, officers and responsible employees of the life insurer or officers and
responsible employees of the affiliated life insurance company in whose vault the
investments are kept (if applicable), and access to such securities and similar
investments shall be had only by two or more such persons jointly, at least one of whom
shall be a director of the separate account or officer of the life insurer;
(iv) The requirement in paragraph (b)(9)(i) of this section that the
securities and similar investments of the separate account be maintained in the vault of
a qualified insurance company shall not apply to securities deposited with insurance
regulatory authorities or deposited in accordance with any rule under section 17(f), or
to securities on loan which are collateralized to the extent of their full market value,
or to securities hypothecated, pledged, or placed in escrow for the account of such
separate account in connection with a loan or other transaction authorized by specific
resolution of the board of directors of the separate account, or to securities in
transit in connection with the sale, exchange, redemption, maturity or conversion, the
exercise of warrants or rights, assents to changes in terms of the securities, or to
other transactions necessary or appropriate in the ordinary course of business relating
to the management of securities;
(v) Each person when depositing such
securities or similar investments in or withdrawing them from the depository or when
ordering their withdrawal and delivery from the custody of the life insurer or
affiliated life insurance company, shall sign a notation showing:
(A)
The date and time of the deposit, withdrawal or order;
(B) The title
and amount of the securities or other investments deposited, withdrawn or ordered to be
withdrawn, and an identification thereof by certificate numbers or otherwise;
(C) The manner of acquisition of the securities or similar investments
deposited or the purpose for which they have been withdrawn, or ordered to be withdrawn;
and
(D) If withdrawn and delivered to another person, the name of such
person. The notation shall be sent promptly to an officer or director of the separate
account or the life insurer designated by the board of directors of the separate account
who is not himself permitted to have access to the securities or investments under
paragraph (b)(9)(iii) of this section. The notation shall be on serially numbered forms
and shall be kept for at least one year;
(vi) The securities and
similar investments shall be verified by complete examination by an independent public
accountant retained by the separate account (or on its behalf by the life insurer) at
least three times each fiscal year, at least two of which shall be chosen by the
accountant without prior notice to the separate account. A certificate of the accountant
stating that he has made an examination of such securities and investments and
describing the nature and extent of the examination shall be sent to the Commission by
the accountant promptly after each examination; and
(vii) Securities
and similar investments of a separate account maintained with a bank or other company
whose functions and physical facilities are supervised by Federal or state authorities
under any arrangement whereby the directors, officers, employees or agents of the
separate account or the life insurer are authorized or permitted to withdraw such
investments upon their mere receipt are deemed to be in the custody of the life insurer
and shall be exempt from the requirements of section 17(f) so long as the arrangement
complies with all provisions of paragraph (b)(9) of this section, except that such
securities will be maintained in the vault of a bank or other company rather than the
vault of an insurance company.
(10) Section 18(i) (15 U.S.C.
80a-18(i)), to the extent that:
(i) For the purposes of any section of
the Act which provides for the vote of securityholders on matters relating to the
investment company:
(A) Flexible contractholders shall have one vote
for each $100 of cash value funded by the separate account, with fractional votes
allocated for amounts less than $100;
(B) The life insurer shall have
one vote for each $100 of assets of the separate account not otherwise attributable to
contractholders under paragraph (b)(10)(i)(A) of this section, with fractional votes
allocated for amounts less than $100; provided that after the commencement of sales of
flexible contracts, the life insurer shall cast its votes for and against each matter
which may be voted upon by contractholders in the same proportion as the votes cast by
contractholders; and
(C) The number of votes to be allocated shall be
determined as of a record date not more than 90 days before any meeting at which such
vote is held; provided that if a quorum is not present at the meeting, the meeting may
be adjourned for up to 60 days without fixing a new record date; and
(ii) The requirement of section 18(i) that every share of stock issued by a registered
management investment company (except a common-law trust of the character described in
section 16(c) (15 U.S.C. 80a-16(c))) shall be a voting stock and have equal voting
rights with every other outstanding voting stock shall not be deemed to be violated by
actions specifically permitted by any provisions of this section.
(11)
Section 19 (15 U.S.C. 80a-19), to the extent that the provisions of this section shall
not apply to any dividend or similar distribution paid or payable under provisions of
participating flexible contracts.
(12) Sections 22(c), 22(d), 22(e)
and 27(i)(2)(A) (15 U.S.C. 80a-22(c)), 80a-22(d), 80a-22(e), and 80a-27(i)(2)(A),
respectively) and § 270.22c-1 (Rule 22c-1) to the extent:
(i) The cash
value of each flexible contract shall be computed in accordance with Rule 22c-1(b);
provided, however, that where actual computation is not necessary for the operation of a
particular contract, then the cash value of that contract must only be capable of
computation; and provided further that to the extent the calculation of the cash value
reflects deductions for the cost of insurance and other insurance benefits or
administrative expenses and fees or sales charges, such deductions need only be made at
such times as specified in the contract or as necessary for compliance with insurance
laws and regulations;
(ii) The death benefit, unless required by
insurance laws and regulations, shall be computed on any day that the investment
experience of the separate account would affect the death benefit under the terms of the
contract provided that such terms are reasonable, fair, and nondiscriminatory; and
(iii) Necessary to comply with this section or with insurance laws and
regulations and established administrative procedures of the life insurer for issuance,
increases in or additions of insurance benefits, transfer and redemption of flexible
contracts, including, but not limited to, premium rate structure and premium processing,
insurance underwriting standards, and the particular benefit afforded by the contract;
provided, however, that any procedure or action shall be reasonable, fair, and not
discriminatory to the interests of the affected contractholders and to all other holders
of contracts of the same class or series funded by the separate account; and provided
further that any such action shall be disclosed in the form filed by the separate
account with the Commission under paragraph (b)(3)(ii) of this section.
(13) Sections 27(i)(2)(A) and 22(c) (15 U.S.C. 80a-27(i)(2)(A) and
80a-22(c)) and § 270.22c-1 (Rule 22c-1), to the extent that:
(i) Such
sections require that the flexible contract be redeemable or provide for a refund in
cash; provided that the contract provides for election by the contractholder of a cash
surrender value or certain non-forfeiture and settlement options which are required or
permitted by the insurance law or regulation of the jurisdiction in which the contract
is offered; and provided further that unless required by the insurance law or regulation
of the jurisdiction in which the contract is offered or unless elected by the
contractholder, the contract shall not provide for the automatic imposition of any
option, including, but not limited to, an automatic premium loan, which would involve
the accrual or payment of an interest or similar charge.
(ii)
Notwithstanding the provisions of paragraph (b)(13)(i) of this section, if the amounts
available under the contract to pay the charges due under the contract on any contract
processing day are less than such charges due, the contract may provide that the cash
surrender value shall be applied to purchase a non-forfeiture option specified by the
life insurer in such contract; provided that the contract also provides that Contract
processing days occur not less frequently than monthly.
(iii) Subject
to section 26(f) (15 U.S.C. 80a-26(f)), sales charges and administrative expenses or
fees may be deducted upon redemption.
(14) Section 32(a)(2) (15 U.S.C.
80a-31(a)(2)); provided that:
(i) The independent public accountant is
selected before the effective date of the 1933 Act registration statement for flexible
contracts, and the identity of the accountant is disclosed in the registration
statement; and
(ii) The selection of the accountant is submitted for
ratification or rejection to flexible contractholders at their first meeting and within
one year after the effective date of the 1933 Act registration statement for flexible
contracts, unless the time for holding the meeting is extended by order of the
Commission.
(15) If the separate account is organized as a unit
investment trust, all the assets of which consist of the shares of one or more
registered management investment companies which offer their shares exclusively to
separate accounts of the life insurer, or of any affiliated life insurance company,
offering either scheduled contracts or flexible contracts, or both; or which also offer
their shares to variable annuity separate accounts of the life insurer or of an
affiliated life insurance company, or which offer their shares to any such life
insurance company in consideration solely for advances made by the life insurer in
connection with the operation of the separate account; provided that the board of
directors of each investment company, constituted with a majority of disinterested
directors, will monitor such company for the existence of any material irreconcilable
conflict between the interests of variable annuity contractholders and scheduled or
flexible contractholders investing in such company; the life insurer agrees that it will
be responsible for reporting any potential or existing conflicts to the directors; and
if a conflict arises, the life insurer will, at its own cost, remedy such conflict up to
and including establishing a new registered management investment company and
segregating the assets underlying the variable annuity contracts and the scheduled or
flexible contracts; then:
(i) The eligibility restrictions of section
9(a) shall not apply to those persons who are officers, directors or employees of the
life insurer or its affiliates who do not participate directly in the management or
administration of any registered management investment company described in paragraph
(b)(15) of this section;
(ii) The life insurer shall be ineligible
under paragraph (3) of section 9(a) to serve as investment adviser of or principal
underwriter for any registered management investment company described in paragraph
(b)(15) of this section only if an affiliated person of such life insurer, ineligible by
reason of paragraphs (1) or (2) of section 9(a), participates in the management or
administration of such company;
(iii) For purposes of any section of
the Act which provides for the vote of securityholders on matters relating to the
separate account or the underlying registered investment company, the voting provisions
of paragraphs (b)(10)(i) and (ii) of this section apply; provided that:
(A) The life insurer may vote shares of the registered management investment
companies held by the separate account without regard to instructions from
contractholders of the separate account if such instructions would require such shares
to be voted:
(1) To cause such companies to make (or refrain
from making) certain investments which would result in changes in the sub-classification
or investment objectives of such companies or to approve or disapprove any contract
between such companies and an investment adviser when required to do so by an insurance
regulatory authority subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A)
of this section; or
(2) In favor of changes in investment
objectives, investment adviser of or principal underwriter for such companies subject to
the provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of this section;
(B) Any action taken in accordance with paragraph (b)(15)(iii)(A)(1)
or (2) of this section and the reasons therefor shall be disclosed in the next
report contractholders made under section 30(e) (15 U.S.C. 80a-29(e)) and § 270.30e-2
(Rule 30e-2);
(iv) Any registered management investment company
established by the life insurer and described in paragraph (b)(15) of this section shall
be exempt from section 14(a); and
(v) Any registered management
investment company established by the life insurer and described in paragraph (b)(14) of
this section shall be exempt from sections 15(a), 16(a), and 32(a)(2) (15 U.S.C.
80a-15(a), 80-16(a), and 80-31(a)(2), respectively), to the extent prescribed by
paragraphs (b)(7)(i), (b)(8)(i), and (b)(14) of this section; provided that the company
complies with the conditions set forth in paragraphs (b)(7)(i), (b)(8)(i), and (b)(14)
of this section as if it were a separate account.
(c) When used in
this section:
(1) Flexible premium variable life insurance
contract means a contract of life insurance, subject to regulation under the
insurance laws or code of every jurisdiction in which it is offered, funded by a
separate account of a life insurer, which contract provides for:
(i)
Premium payments which are not fixed by the life insurer as to both timing and amount;
provided, however, that the life insurer may fix the timing and minimum amount of
premium payments for the first two contract periods following issuance of the contract
or of an increase in or addition of insurance benefits, and may prescribe a reasonable
minimum amount for any additional premium payment;
(ii) A death
benefit the amount or duration of which may vary to reflect the investment experience of
the separate account;
(iii) A cash value which varies to reflect the
investment experience of the separate account; and
(iv) There is a
reasonable expectation that subsequent premium payments will be made.
(2) Contract period means the period from a contract issue or anniversary date
to the earlier of the next following anniversary date (or, if later, the last day of any
grace period commencing before such next following anniversary date) or the termination
date of the contract.
(3) Cash value means the amount that
would be available in cash upon voluntary termination of a contract by its owner before
it becomes payable by death or maturity, without regard to any charges that may be
assessed upon such termination and before deduction of any outstanding contract
loan.
(4) Cash surrender value means the amount available in cash upon
voluntary termination of a contract by its owner before it becomes payable by death or
maturity, after any charges assessed in connection with the termination have been deducted
and before deduction of any outstanding contract loan. (5) Contract
processing day means any day on which charges under the contract are deducted from
the separate account.
[52 FR 11208, Apr. 8, 1987, as amended at 59 FR 43467, Aug. 24, 1994; 67 FR
43536, June 28, 2002; 85 FR 25964, May 1, 2020]
270.7d-1 — Specification of conditions and arrangements for Canadian management investment companies requesting order permitting registration.
(a) A management investment company organized under the laws of Canada or
any province thereof may obtain an order pursuant to section 7(d) permitting its
registration under the act and the public offering of its securities, if otherwise
appropriate, upon the filing of an application complying with paragraph (b) of this section.
All such applications will be considered by the Commission pursuant to the procedure set
forth in § 270.0-5 and other applicable rules. Conditions and arrangements proposed by
investment companies organized under the laws of other countries will be considered by the
Commission in the light of the special circumstances and local laws involved in each
case.
(b) An application filed pursuant to this section shall contain, inter
alia, the following undertakings and agreements of the applicant:
(1) Applicant will cause each present and future officer, director,
investment adviser, principal underwriter and custodian of the applicant to enter into an
agreement, to be filed by applicant with the Commission upon the filing of its registration
statement or upon the assumption of such office by such person which will provide, among
other things, that each such person agrees (i) to comply with the applicant's Letters Patent
(Charter) and By Laws, the act and the rules thereunder, and the undertakings and agreements
contained in said application insofar as applicable to such person; (ii) to do nothing
inconsistent with the applicant's undertakings and agreements required by this section;
(iii) that the undertakings enumerated as paragraphs (b)(1)(i) and (ii) of this section
constitute representations and inducements to the Commission to issue its order in the
premises and continue the same in effect, as the case may be; (iv) that each such agreement
constitutes a contract between such person and the applicant and its shareholders with the
intent that applicant's shareholders shall be beneficiaries of and shall have the status of
parties to such agreement so as to enable them to maintain actions at law or in equity
within the United States and Canada for any violation thereof. In addition the agreement of
each officer and director will contain provisions similar to those contained in paragraph
(b)(6) of this section.
(2) That every agreement and undertaking of the applicant, its officers,
directors, investment adviser, principal underwriter and custodian required by this section
(i) constitute inducements to the Commission for the issuance and continuance in effect of,
and conditions to, the Commission's order to be entered under this section; (ii) constitute
a contract among applicant and applicant's shareholders with the same intent as set forth in
paragraph (b)(1)(iv) of this section; and (iii) failure by the applicant or any of the above
enumerated persons to comply with any such agreement and undertaking, unless permitted by
the Commission, shall constitute a violation of the order entered under this section.
(3) That the Commission, in its discretion, may revoke its order
permitting registration of the applicant and the public offering of its securities if it
shall find after notice and opportunity for hearing that there shall have been a violation
of such order or the act and may determine whether distribution of applicant's assets is
necessary or appropriate in the interests of investors and may so direct.
(4) That applicant will perform every action and thing necessary to cause
and assist the custodian of its assets to distribute the same, or the proceeds thereof, if
the Commission or a court of competent jurisdiction, shall have so directed by a final
order.
(5) That any shareholder of the applicant or the Commission on its own
motion or on request of shareholders shall have the right to initiate a proceeding (i)
before the Commission for the revocation of the order permitting registration of the
applicant or (ii) before a court of competent jurisdiction for the liquidation of applicant
and a distribution of its assets to its shareholders and creditors. Such court may enter
such order in the event that it shall find, after notice and opportunity for hearing that
applicant, its officers, directors, investment adviser, principal underwriter or custodian
shall have violated any provision of the act or the Commission's order of registration of
the applicant.
A court of competent jurisdiction for the purpose of
paragraphs (b)(4) and (5) of this paragraph means the District Court of the United States of
the district in which the assets of the applicant are maintained.
(6) That any shareholder of the applicant shall have the right to bring
suit at law or in equity, in any court of the United States or Canada having jurisdiction
over applicant, its assets or any of its officers or directors to enforce compliance by
applicant, its officers and directors with any provision of applicant's Charter or By Laws,
the act and the rules thereunder, or undertakings and agreements required by this section,
insofar as applicable to such persons. That such court may appoint a trustee or receiver of
the applicant with all powers necessary to implement the purposes of such suit, including
the administration of the estate, the collection of corporate property including
choses-in-action, and distribution of applicant's assets to its creditors and shareholders.
That applicant and its officers and directors waive any objection they may be entitled to
raise and any right they may have to object to the power and right of any shareholder of the
applicant to bring such suit, reserving, however, their right to maintain that they have
complied with the aforesaid provisions, undertakings and agreements, and otherwise to
dispute such suit on its merits. Applicant, its officers and directors also agree that any
final judgment or decree of any United States court as aforesaid, may be granted full faith
and credit by a court of competent jurisdiction of Canada and consent that such Canadian
court may enter judgment or decree thereon at the instance of any shareholder, receiver or
trustee of the applicant.
(7) Applicant will file, and will cause each of its present or future
directors, officers, or investment advisers who is not a resident of the United States to
file with the Commission irrevocable designation of the applicant's custodian as an agent in
the United States to accept service of process in any suit, action or proceeding before the
Commission or any appropriate court to enforce the provisions of the acts administered by
the Commission, or to enforce any right or liability based upon applicant's Charter, By
Laws, contracts, or the respective undertakings and agreements of any such person required
by this section, or which alleges a liability on the part of any such persons arising out of
their service, acts of transactions relating to the applicant.
(8) Applicant's Charter and By Laws, taken together, will contain, so long
as applicant is registered under the act in substance the following:
(i) The provisions of the Act as follows: Section 2(a): Provided,
That the term “government securities” defined in section 2(a)(16) may include securities
issued or guaranteed by Canada or any instrumentality of the government of Canada; the term
“value” defined in section 2(a)(41) may be defined solely for the purposes of sections 5 and
12 in accordance with the provisions of § 270.2a-1 (Rule 2a-1) if the same shall be
necessary or desirable to comply with Canadian regulatory or revenue laws or rules or
regulations thereunder; the term “bank” defined in section 2(a)(5) shall be defined solely
for the purposes of section 9 and 10, as any banking institution; section 4; section 5;
section 6(c); section 9; section 10 (a), (b), (c), (e), (f) and (g): Provided, That
the provisions of section 10(d) may be substituted for the provisions of section 10(a) and
10(b)(2) if applicable; section 11; section 12 (a), (b), (c), and (d); section 13(a);
section 15 (a), (b), and (c); section 16(a); sections 17, 18, 19, 20 and 21; section 22(d);
section 22(e): Provided, That the Toronto Stock Exchange or the Montreal Stock
Exchange or both may be included in addition to the New York Stock Exchange; section 22(f);
section 22(g); section 23; section 25 (a) and (b); section 30 (a), (b), (d), (e), and (f);
section 31; section 32(a): Provided, That provision may be made for the selection and
termination of employment of the accountant in compliance with The Companies Act of Canada;
section 32(b). Where a provision of the act prohibits or directs action by an investment
company, or its directors, officers or employees, the Charter or By Laws shall state that
the applicant of its directors, officers or employees shall or shall not act, as the case
may be, in conformity with the intent of the statute; where the provision applies to others,
such as principal underwriters, investment advisers, controlled companies and affiliated
persons, the Charter or By Laws shall also state that the applicant will not permit the
prohibited conduct or will obtain the required action. Any of the provisions of sections 11,
12, 15, 18, 22, 23, 30, and 31 may be omitted if not applicable to a company of applicant's
classification or sub-classification as defined in section 4 or 5 of the act or if not
applicable because the subject matter of such provisions is prohibited by the Charter or By
Laws. Other provisions of the act not specified above may be incorporated in the applicant's
Charter or By Laws at its option.
(ii) Any question of interpretation of any term or provision of the
Charter or By Laws having a counterpart in or otherwise derived from a term or provision of
the act shall be resolved by reference to interpretations, if any, of the corresponding term
or provision of the act by the courts of the United States of America or, in the absence of
any controlling decision of any such court, by rules, regulations, orders or interpretations
of the Commission.
(iii) Applicant will maintain the original or duplicate copies of its
books and records at the office of its custodian or other office located within the United
States.
(iv) At least a majority of the directors and of the officers of the
applicant will be United States citizens of whom a majority will be resident in the United
States.
(v) Except as provided in § 270.17f-5 and § 270.17f-7, applicant will
appoint, by contract, a bank, as defined in section 2(a)(5) of the Act (15 U.S.C.
80a-2(a)(5)) and having the qualification described in section 26(a)(1) of the Act (15
U.S.C. 80a-26(a)(1)), to act as trustee of, and maintain in its sole custody in the United
States, all of applicant's securities and cash, other than cash necessary to meet
applicant's current administrative expenses. The contract will provide, inter alia,
that the custodian will:
(A) Consummate all purchases and sales of securities by applicant, other
than purchases and sales on an established securities exchange, through the delivery of
securities and receipt of cash, or vice versa as the case may be, within the United
States, and (B) redeem in the United States such of applicant's shares as shall be
surrendered therefor, and (C) distribute applicant's assets, or the proceeds thereof, to
applicant's creditors and shareholders, upon service upon the custodian of an order of the
Commission or court directing such distribution as provided in paragraphs (b) (3) and (5) of
this section.
(vi) Applicant's principal underwriter for the sale of its shares will be
a citizen and resident of the United States or a corporation organized under the laws of a
state of the United States, and having its principal place of business therein, and if
redeemable shares are offered, also a member in good standing of a securities association
registered under section 15A of the Securities Exchange Act of 1934.
(vii) Applicant will appoint an accountant, qualified to act as an
independent public accountant for the applicant under the act and the rules thereunder, who
maintains a permanent office and place of business in the United States.
(viii) Any contract entered into between the applicant and its investment
adviser and principal underwriter will contain provisions in compliance with the
requirements of sections 15, 17(i) and 31 and the rules thereunder, and require that the
investment adviser maintain in the United States its books and records or duplicate copies
thereof relating to applicant.
(ix) Applicant's Charter and By Laws will not be changed in any manner
inconsistent with this paragraph or the Act and the rules thereunder unless authorized by
the Commission.
(9) Contracts of the applicant, other than those executed on an
established securities exchange which do not involve affiliated persons, will provide
that:
(i) Such contracts, irrespective of the place of their execution or
performance, will be performed in accordance with the requirements of the Act, the
Securities Act of 1933, and the Securities Exchange Act of 1934, if the subject matter of
such contracts is within the purview of such acts; and
(ii) In effecting the purchase or sale of assets the parties thereto will
utilize the United States mails or means of interstate commerce.
(10) Applicant will furnish to the Commission with its registration
statement filed under the Act a list of persons affiliated with it and with its investment
adviser and principal underwriter and will furnish revisions of such list, if any,
concurrently with the filing of periodic reports required to be filed under the Act.
(Sec. 7, 54 Stat. 802; 15 U.S.C. 80a-7; secs. 6(c); 15 U.S.C. 80a-6(c);
and 38(a); 15 U.S.C. 80a-37(a) of the Act)
[19 FR 2585, May 5, 1954, as amended at 38 FR
8593, Apr. 4, 1973; 49 FR 36084, Sept. 14, 1984; 65 FR 25637, May 3, 2000]
270.7d-2 — Definition of “public offering” as used in section 7(d) of the Act with respect to certain Canadian tax-deferred retirement savings accounts.
(a) Definitions. As used in this section:
(1) Canadian law means the federal laws of Canada, the laws of any
province or territory of Canada, and the rules or regulations of any federal, provincial, or
territorial regulatory authority, or any self-regulatory authority, of Canada.
(2) Canadian Retirement Account means a trust or other arrangement,
including, but not limited to, a “Registered Retirement Savings Plan” or “Registered
Retirement Income Fund” administered under Canadian law, that is managed by the Participant
and:
(i) Operated to provide retirement benefits to a Participant; and
(ii) Established in Canada, administered under Canadian law, and qualified
for tax-deferred treatment under Canadian law.
(3) Eligible Security means a security issued by a Qualified
Company that:
(i) Is offered to a Participant, or sold to his or her Canadian Retirement
Account, in reliance on this section; and
(ii) May also be purchased by Canadians other than Participants.
(4) Foreign Government means the government of any foreign country
or of any political subdivision of a foreign country.
(5) Foreign Issuer means any issuer that is a Foreign Government, a
national of any foreign country or a corporation or other organization incorporated or
organized under the laws of any foreign country, except an issuer meeting the following
conditions:
(i) More than 50 percent of the outstanding voting securities of the
issuer are held of record either directly or through voting trust certificates or depositary
receipts by residents of the United States; and
(ii) Any of the following:
(A) The majority of the executive officers or directors are United States
citizens or residents;
(B) More than 50 percent of the assets of the issuer are located in the
United States; or
(C) The business of the issuer is administered principally in the United
States.
(iii) For purposes of this definition, the term resident, as
applied to security holders, means any person whose address appears on the records of the
issuer, the voting trustee, or the depositary as being located in the United States.
(6) Participant means a natural person who is a resident of the
United States, or is temporarily present in the United States, and who contributes to, or is
or will be entitled to receive the income and assets from, a Canadian Retirement
Account.
(7) Qualified Company means a Foreign Issuer whose securities are
qualified for investment on a tax-deferred basis by a Canadian Retirement Account under
Canadian law.
(8) United States means the United States of America, its
territories and possessions, any State of the United States, and the District of
Columbia.
(b) Public Offering. For purposes of section 7(d) of the Act (15
U.S.C. 80a-7(d)), the term “public offering” does not include the offer to a Participant, or
the sale to his or her Canadian Retirement Account, of Eligible Securities issued by a
Qualified Company, if the Qualified Company:
(1) Includes in any written offering materials delivered to a Participant,
or to his or her Canadian Retirement Account, a prominent statement that the Eligible
Security, and the Qualified Company that issued the Eligible Security, are not registered
with the U.S. Securities and Exchange Commission, and that the Eligible Security and the
Qualified Company are relying on exemptions from registration.
(2) Has not asserted that Canadian law, or the jurisdiction of the courts
of Canada, does not apply in a proceeding involving an Eligible Security.
[65 FR 37677, June 15, 2000]
270.8b-1 — Scope of §§ 270.8b-1 to 270.8b-31.
The rules contained in §§ 270.8b-1 through 270.8b-31 shall govern all
registration statements pursuant to section 8 of the Act (15 U.S.C. 80a-8), including
notifications of registration pursuant to section 8(a), and all reports pursuant to section
30(a) or (b) of the Act (15 U.S.C. 80a-29(a) or (b)), including all amendments to such
statements and reports, except that any provision in a form covering the same subject matter
as any such rule shall be controlling.
[70 FR 6572, Feb. 8, 2005; as amended at 83 FR 40846, Aug. 16, 2018; 85 FR
25964, May 1, 2020]
270.8b-2 — Definitions.
Unless the context otherwise requires, the terms in paragraphs (a) through
(m) of this section, when used in the rules contained in §§ 270.8b-1 through 270.8b-32, in
the rules under section 30(a) or (b) of the Act or in the forms for registration statements
and reports pursuant to section 8 or 30(a) or (b) of the Act, shall have the respective
meanings indicated in this section. The terms “EDGAR,” “EDGAR Filer Manual,” “electronic
filer,” “electronic filing,” “electronic format,” “electronic submission,” “paper format,”
and “signature” shall have the meanings assigned to such terms in part 232 of this chapter
(Regulation S-T—General Rules for Electronic Filings).
(a) Amount. The term “amount”, when used in regard to securities,
means the principal amount if relating to evidences of indebtedness, the number of shares if
relating to shares, and the number of units if relating to any other kind of security.
(b) Certified. The term “certified”, when used in regard to
financial statements, means certified by an independent public or independent certified
public accountant or accountants.
(c) Charter. The term “charter” includes articles of incorporation,
declaration of trust, articles of association or partnership, or any similar instrument, as
amended, effecting (either with or without filing with any governmental agency) the
organization or creation of an incorporated or unincorporated person.
(d) Employee. The term “employee” does not include a director,
trustee, officer or member of the advisory board.
(e) Fiscal year. The term “fiscal year” means the annual accounting
period or, if no closing date has been adopted, the calendar year ending on December 31.
(f) Investment income. The term “investment income” means the
aggregate of net operating income or loss from real estate and gross income from interest,
dividends and all other sources, exclusive of profit or loss on sales of securities or other
properties.
(g) Material. The term “material”, when used to qualify a
requirement for the furnishing of information as to any subject, limits the information
required to those matters as to which an average prudent investor ought reasonably to be
informed before buying or selling any security of the particular company.
(h) Parent. A “parent” of a specified person is an affiliated
person who controls the specified person directly or indirectly through one or more
intermediaries.
(i) Previously filed or reported. The terms “previously filed” and
“previously reported” means previously filed with, or reported in, a registration statement
filed under section 8 of the Act or under the Securities Act of 1933, a report filed under
section 30 of the Act or section 13 or 15(d) of the Securities Exchange Act of 1934, a
definitive proxy statement filed under section 20 of the Act or section 14 of the Securities
Exchange Act of 1934, or a prospectus filed under the Securities Act of 1933:
Provided, That information contained in any such document shall be deemed to have
been previously filed with, or reported to, an exchange only if such document is filed with
such exchange.
(j) Share. The term “share” means a share of stock in a corporation
or unit of interest in an unincorporated person.
(k) Significant subsidiary. The term “significant subsidiary” means
a subsidiary, including its subsidiaries, which meets any of the following conditions, using
amounts determined under U.S. Generally Accepted Accounting Principles and, if applicable,
section 2(a)(41) of the Act:
(1) Investment test. The value of the registrant's and its other
subsidiaries' investments in and advances to the tested subsidiary exceed 10 percent of the
value of the total investments of the registrant and its subsidiaries consolidated as of the
end of the most recently completed fiscal year; or
(2) Income test. The absolute value of the sum of combined investment
income from dividends, interest, and other income, the net realized gains and losses on
investments, and the net change in unrealized gains and losses on investments from the
tested subsidiary, for the most recently completed fiscal year exceeds:
(i) 80 percent of the absolute value of the change in net assets resulting from
operations of the registrant and its subsidiaries consolidated for the most recently
completed fiscal year; or
(ii) 10 percent of the absolute value of the change in net assets resulting from operations
of the registrant and its subsidiaries consolidated for the most recently completed fiscal
year and the investment test (paragraph (k)(1) of this section) condition exceeds 5 percent.
However, if the absolute value of the change in net assets resulting from operations of the
registrant and its subsidiaries consolidated is at least 10 percent lower than the average
of the absolute value of such amounts for each of its last five fiscal years, then the
registrant may compute both conditions of the income test using the average of the absolute
value of such amounts for the registrant and its subsidiaries consolidated for each of its
last five fiscal years.
(l) Subsidiary. A “subsidiary” of a specified person is an
affiliated person who is controlled by the specified person, directly or indirectly, through
one or more intermediaries.
(m) Totally-held subsidiary. The term “totally-held subsidiary”
means a subsidiary (1) substantially all of whose outstanding securities are owned by its
parent and/or the parent's other totally-held subsidiaries, and (2) which is not indebted to
any person other than its parent and/or the parent's other totally-held subsidiaries in an
amount which is material in relation to the particular subsidiary, excepting indebtedness
incurred in the ordinary course of business which is not over-due and which matures within
one year from the date of its creation, whether evidenced by securities or not.
[18 FR 8575, Dec. 19, 1953, as amended at 19 FR 2779, May 14, 1954; 58 FR
14860, Mar. 18, 1993; 65 FR 24802, Apr. 27, 2000; 70 FR 6572, Feb. 8, 2005; 83 FR 40846,
Aug. 16, 2018; 85 FR 54002, Aug. 31, 2020]
270.8b-3 — [Removed]
[18 FR 8575, Dec. 19, 1953; as amended at 83 FR
40846, Aug. 16, 2018]
270.8b-4 — Interpretation of requirements.
Unless the context clearly shows otherwise:
(a) The forms require information only as to the company filing the
registration statement or report.
(b) Whenever any fixed period of time in the past is indicated, such
period shall be computed from the date of filing.
(c) Whenever words relate to the future, they have reference solely to
present intention.
(d) Any words indicating the holder of a position or office include
persons, by whatever titles designated, whose duties are those ordinarily performed by
holders of such positions or officers.
[18 FR 8575, Dec. 18, 1953]
270.8b-5 — Time of filing original registration statement.
An investment company shall file a registration statement with the
Commission on the appropriate form within three months after the filing of notification of
registration under section 8(a) of the Act, provided that if the fiscal year of the company
ends within the three months period, its registration statement may be filed within three
months after the end of such fiscal year.
[19 FR 2779, May 14, 1954]
270.8b-6 — [Reserved]
270.8b-10 — Requirements as to proper form.
Every registration statement or report shall be prepared in accordance
with the form prescribed therefor by the Commission, as in effect on the date of filing. Any
such statement or report shall be deemed to be filed on the proper form unless objection to
the form is made by the Commission within thirty days after the date of filing.
[18 FR 8576, Dec. 19, 1953]
270.8b-11 — Number of copies; signatures; binding.
(a) Three complete copies of each registration statement or report,
including exhibits and all other papers and documents filed as a part thereof, shall be
filed with the Commission.
(b) In the case of a registration statement filed on Form N-1A (§ 239.15A
and § 274.11A of this chapter), Form N-2 (§ 239.14 and § 274.11a-1 of this chapter), Form
N-3 (§ 239.17a and § 274.11b of this chapter), Form N-4 (§ 239.17b and § 274.11c of this
chapter), or Form N-6 (§ 239.17c and § 274.11d of this chapter), three complete copies of
each part of the registration statement (including, if applicable, exhibits and all other
papers and documents filed as part of Part C of the registration statement) shall be filed
with the Commission.
(c) At least one copy of the registration statement or report shall be
signed in the manner prescribed by the appropriate form. Unsigned copies shall be conformed.
If the signature of any person is affixed pursuant to a power of attorney or other similar
authority, a copy of such power of attorney or other authority shall also be filed with the
registration statement or report.
(d) Each copy of a registration statement or report filed with the
Commission shall be bound in one or more parts without stiff covers. The binding shall be
made on the left-hand side and in such manner as to leave the reading matter legible.
(e) Signatures. Where the Act or the rules thereunder, including
paragraph (c) of this section, require a document filed with or furnished to the Commission
to be signed, the document should be manually signed, or signed using either typed
signatures or duplicated or facsimile versions of manual signatures. When typed, duplicated,
or facsimile signatures are used, each signatory to the filing shall manually or
electronically sign a signature page or other document authenticating, acknowledging, or
otherwise adopting his or her signature that appears in the filing (“authentication
document”). Execute each such authentication document before or at the time the filing is
made and retain for a period of five years. The requirements set forth in § 232.302(b) must
be met with regards to the use of an electronically signed authentication document pursuant
to this paragraph (e). Upon request, the registrant shall furnish to the Commission or its
staff a copy of any or all documents retained pursuant to this section.
[49 FR 32059, Aug. 10, 1984, as amended at 50 FR 26160, June 25, 1985; 57
FR 56835, Dec. 1, 1992; 60 FR 26622, May 17, 1995; 63 FR 13944, Mar. 23, 1998; 67 FR
19870, Apr. 23, 2002; 85 FR 78221, Dec. 4, 2020]
270.8b-12 — Requirements as to paper, printing and language.
(a) Registration statements and reports shall be filed on good quality,
unglazed, white paper, no larger than 81/2 × 11 inches in size, insofar as practicable. To
the extent that the reduction of larger documents would render them illegible, such
documents may be filed on paper larger than 81/2 × 11 inches in size.
(b) In the case of a registration statement filed on Form N-1A (§§ 239.15A
and 274.11A of this chapter), Form N-2 (§§ 239.14 and 274.11a-1 of this chapter), Form N-3
(§§ 239.17a and 274.11b of this chapter), Form N-4 (§§ 239.17b and 274.11c of this chapter),
or Form N-6 (§ 239.17c and § 274.11d of this chapter), Part C of the registration statement
shall be filed on good quality, unglazed, white paper, no larger than 81/2 × 11 inches in
size, insofar as practicable. The prospectus and, if applicable, the Statement of Additional
Information, however, may be filed on smaller-sized paper provided that the size of paper
used in each document is uniform.
(c) The registration statement or report and, insofar as practicable all
papers and documents filed as a part thereof, shall be printed, lithographed, mimeographed
or typewritten. However, the registration statement or report or any portion thereof may be
prepared by any similar process which, in the opinion of the Commission, produces copies
suitable for permanent record. Irrespective of the process used, all copies of any such
material shall be clear, easily readable and suitable for repeated photocopying. Debits in
credit categories and credits in debit categories shall be designated so as to be clearly
distinguishable as such on photocopies.
(d) The body of all printed registration statements and reports and all
notes to financial statements and other tabular data included therein shall be in roman type
at least as large as 10-point modern type. However, to the extent necessary for convenient
presentation, financial statements and other statistical or tabular data, including tabular
data in notes, may be set in type at least as large and as legible as 8-point modern type.
All type shall be leaded at least 2-points.
(e) Registration statements and reports shall be in the English language.
If any exhibit or other paper or document filed with a registration statement or report is
in a foreign language, it shall be accompanied by a translation into the English
language.
(f) Where a registration statement or report is distributed through an
electronic medium, issuers may satisfy legibility requirements applicable to printed
documents, such as paper size, type size and font, bold-face type, italics and red ink, by
presenting all required information in a format readily communicated to investors, and where
indicated, in a manner reasonably calculated to draw investor attention to specific
information.
[49 FR 32060, Aug. 10, 1984, as amended at 50 FR
26160, June 25, 1985; 57 FR 56836, Dec. 1, 1992; 61 FR 24657, May 15, 1996; 67 FR 19870,
Apr. 23, 2002]
270.8b-13 — Preparation of registration statement or report.
The registration statement or report shall contain the numbers and
captions of all items of the appropriate form, but the text of the items may be omitted
provided the answers thereto are so prepared as to indicate to the reader the coverage of
the items without the necessity of his referring to the text of the items or instructions
thereto. However, where any item requires information to be given in tabular form, it shall
be given in substantially the tabular form specified in the item. All instructions, whether
appearing under the items of the form or elsewhere therein, are to be omitted from the
registration statement or report. Unless expressly provided otherwise, if any item is
inapplicable or the answer thereto is in the negative, an appropriate statement to that
effect shall be made.
[18 FR 8576, Dec. 19, 1953]
270.8b-14 — Riders; inserts.
Riders shall not be used. If the registration statement or report is typed
on a printed form, and the space provided for the answer to any given item is insufficient,
reference shall be made in such space to a full insert page or pages on which the item
number and caption and the complete answer are given.
[18 FR 8576, Dec. 19, 1953]
270.8b-15 — Amendments.
All amendments shall be filed under cover of the facing sheet of the
appropriate form, shall be clearly identified as amendments, and shall comply with all
pertinent requirements applicable to registration statements and reports. Amendments shall
be filed separately for each separate registration or report amended. Except as permitted
under rule 102(b) of Regulation S-T (§ 232.102(b) of this chapter), any amendment filed
under this section shall state the complete text of each item amended. An amendment to any
report required to include the certifications as specified in § 270.30a-2(a) must include
new certifications by each principal executive and principal financial officer of the
registrant, and an amendment to any report required to be accompanied by the certifications
as specified in § 240.13a-14(b) or § 240.15d-14(b) and § 270.30a-2(b) must be accompanied by
new certifications by each principal executive and principal financial officer of the
registrant.
[18 FR 8576, Dec. 19, 1953, as amended at 58 FR
14860, Mar. 18, 1993; 68 FR 5365, Feb. 3, 2003; 68 FR 36671, June 18, 2003]
270.8b-16 — Amendments to registration statement.
(a) Every registered management investment company which is required to
file an annual report on Form N-CEN, as prescribed by § 270.30a-1 of this chapter, shall
amend the registration statement required pursuant to Section 8(b) by filing, not more than
120 days after the close of each fiscal year ending on or after the date upon which such
registration statement was filed, the appropriate form prescribed for such amendments.
(b) Paragraph (a) of this section shall not apply to a registered
closed-end management investment company whose registration statement was filed on Form N-2;
provided that the following information is transmitted to shareholders in its annual report
to shareholders:
(1) If the company offers a dividend reinvestment plan to shareholders,
information about the plan required to be disclosed in the company's prospectus by Item
10.1.e of Form N-2 (17 CFR 274.11a-1);
(2) The company's investment objectives and policies (described in Item
8.2 of Form N-2), and any material changes to same that have not been approved by
shareholders;
(3) Any changes in the company's charter or by-laws that would delay or
prevent a change of control of the company (described in Item 10.1.f of Form N-2) that have
not been approved by shareholders;
(4) The principal risk factors associated with investment in the company
(described in Item 8.3 of Form N-2), and any material changes to same; and
(5) Any changes in the persons who are primarily responsible for the
day-to-day management of the company's portfolio (described in Item 9.1.c of Form N-2),
including any new person's business experience during the past five years and the length of
time he or she has been responsible for the management of the portfolio.
(c) In lieu of including a description of the dividend reinvestment plan
in its annual report, a company may comply with the disclosure requirement of paragraph
(b)(1) of this section concerning a company's dividend reinvestment plan by delivering to
each shareholder annually a separate document containing the information about the plan
required to be disclosed in the company's prospectus by Item 10.1.e of Form N-2. Any such
document shall be deemed to be a record or document subject to the record-keeping
requirements of section 31 (15 U.S.C. 80a-30) and the rules adopted thereunder (17 CFR
270.31a-1 et seq.).
(d) The changes required to be disclosed by paragraphs (b)(2) through
(b)(5) of this section are those that occurred since the later of either the effective date
of the company's registration statement relating to its initial offering of securities under
the Securities Act of 1933 (15 U.S.C. 77a et seq.) (or the most recent post-effective
amendment thereto) or the close of the period covered by the previously transmitted annual
shareholder report.
(e) The changes required to be disclosed by paragraphs (b)(2) through (5) of this section
must be described in enough detail to allow investors to understand each change and how it
may affect the fund. Such disclosures must be prefaced with the following legend: “The
following information [in this annual report] is a summary of certain changes since [date].
This information may not reflect all of the changes that have occurred since you purchased
[this fund].”
[54 FR 10321, Mar. 13, 1989, as amended at 57 FR 56836, Dec. 1, 1992; 81 FR
81870, Nov. 18, 2016; 85 FR 33290, June 1, 2020]
270.8b-20 — Additional information.
In addition to the information expressly required to be included in a
registration statement or report, there shall be added such further material information, if
any, as may be necessary to make the required statements, in the light of the circumstances
under which they are made, not misleading.
[18 FR 8576, Dec. 19, 1953]
270.8b-21 — Information unknown or not available.
Information required need be given only insofar as it is known or
reasonably available to the registrant. If any required information is unknown and not
reasonably available to the registrant, either because the obtaining thereof would involve
unreasonable effort or expense, or because it rests peculiarly within the knowledge of
another person not affiliated with the registrant, the information may be omitted subject to
the following conditions:
(a) The registrant shall give such information on the subject as it
possesses or can acquire without unreasonable effort or expense, together with the sources
thereof.
(b) The registrant shall include a statement either showing that
unreasonable effort or expense would be involved or indicating the absence of any
affiliation with the person within whose knowledge the information rests and stating the
result of a request made to such person for the information.
[18 FR 8576, Dec. 19, 1953]
270.8b-22 — Disclaimer of control.
If the existence of control is open to reasonable doubt in any instance,
the registrant may disclaim the existence of control and any admission thereof; in such
case, however, the registrant shall state the material facts pertinent to the possible
existence of control.
[18 FR 8576, Dec. 19, 1953]
270.8b-23 — [Removed and Reserved]
[18 FR 8576, Dec. 19, 1953, as amended at 19 FR
2779, May 14, 1954; 58 FR 14860, Mar. 18, 1993; 64 FR 27896, May 21, 1999; 65 FR 24802,
Apr. 27, 2000; 84 FR 12674, Apr. 2, 2019]
270.8b-24 — [Removed and Reserved]
[18 FR 8576, Dec. 19, 1953; as amended at 84 FR
12674, Apr. 2, 2019]
270.8b-25 — [Removed and Reserved]
(a) Subject to paragraph (b) of this section, if it is impractical to
furnish any required information, document or report at the time it is required to be filed,
there may be filed with the Commission as a separate document an application (a) identifying
the information, document or report in question, (b) stating why the filing thereof at the
time required is impracticable, and (c) requesting an extension of time for filing the
information, document or report to a specified date not more than 60 days after the date it
would otherwise have to be filed. The application shall be deemed granted unless the
Commission, within 10 days after receipt thereof, shall enter an order denying the
application. Section 270.0-5 (Rule N-5) shall not apply to such applications.
(b) If it is impracticable to furnish any document or report required to
be filed in electronic format at the time it is required to be filed, the electronic filer
may file under the temporary hardship provision of rule 201 of Regulation S-T (§ 232.201 of
this chapter) or may submit a written application for a continuing hardship exemption, in
accordance with rule 202 of Regulation S-T (§ 232.202 of this chapter). Applications for
such exemptions shall be considered in accordance with the provisions of those sections and
paragraphs (h) and (i) of § 200.30-5 of this chapter.
[18 FR 8576, Dec. 19, 1953, as amended at 58 FR
14860, Mar. 18, 1993; 60 FR 14630, Mar. 20, 1995]
270.8b-30 — Additional exhibits.
A company may file such exhibits as it may desire, in addition to those
required by the appropriate form. Such exhibits shall be so marked as to indicate clearly
the subject matters to which they refer.
[18 FR 8576, Dec. 19, 1953]
270.8b-31 — Omission of substantially identical documents.
In any case where two or more indentures, contracts, franchises, or other
documents required to be filed as exhibits are substantially identical in all material
respects except as to the parties thereto, the dates of execution, or other details, copies
of only one of such documents need be filed, with a schedule identifying the other documents
omitted and setting forth the material details in which such documents differ from the
documents filed. The Commission may at any time in its discretion require the filing of
copies of any documents so omitted.
[18 FR 8576, Dec. 19, 1953]
270.8b-32 — [Removed and Reserved]
[18 FR 8576, Dec. 19, 1953, as amended at 29 FR
2421, Feb. 13, 1964; 58 FR 14860, Mar. 18, 1993; 60 FR 32825, June 23, 1995; 64 FR 27896,
May 21, 1999; 65 FR 24802, Apr. 27, 2000; 76 FR 71877, Nov. 21, 2011; 84 FR 12674, Apr. 2,
2019]
270.8b-33 — [Removed]
[72 FR 39299, July 17, 2007; as amended at 81 FR
81870, Nov. 18, 2016; as amended at 83 FR 40846, Aug. 16, 2018]]
270.8f-1 — Deregistration of certain registered investment companies.
A registered investment company that seeks a Commission order declaring
that it is no longer an investment company may file an application with the Commission on
Form N-8F (17 CFR 274.218) if the investment company:
(a) Has sold substantially all of its assets to another registered
investment company or merged into or consolidated with another registered investment
company;
(b) Has distributed substantially all of its assets to its shareholders
and has completed, or is in the process of, winding up its affairs;
(c) Qualifies for an exclusion from the definition of “investment company”
under section 3(c)(1) (15 U.S.C. 80a-3(c)(1)) or section 3(c)(7) (15 U.S.C. 80a-3(c)(7)) of
the Act; or
(d) Has become a business development company.
Note to § 270.8f-1:
Applicants who are not eligible to use Form N-8F to file an
application to deregister may follow the general guidance for filing
applications under rule 0-2 (17 CFR 270.0-2) of this chapter.
|
[64 FR 19471, Apr. 21, 1999]
270.10b-1 — Definition of regular broker or dealer.
The term regular broker or dealer of an investment company shall
mean:
(a) One of the ten brokers or dealers that received the greatest dollar
amount of brokerage commissions by virtue of direct or indirect participation in the
company's portfolio transactions during the company's most recent fiscal year;
(b) One of the ten brokers or dealers that engaged as principal in the
largest dollar amount of portfolio transactions of the investment company during the
company's most recent fiscal year; or
(c) One of the ten brokers or dealers that sold the largest dollar amount
of securities of the investment company during the company's most recent fiscal year.
[49 FR 40572, Oct. 17, 1984]
270.10e-1 — Death, disqualification, or bona fide resignation of directors.
If a registered investment company, by reason of the death,
disqualification, or bona fide resignation of any director, does not meet any requirement of
the Act or any rule or regulation thereunder regarding the composition of the company's
board of directors, the operation of the relevant subsection of the Act, rule, or regulation
will be suspended as to the company:
(a) For 90 days if the vacancy may be filled by action of the board of
directors; or
(b) For 150 days if a vote of stockholders is required to fill the
vacancy.
[66 FR 3758, Jan. 16, 2001]
270.10f-1 — Conditional exemption of certain underwriting transactions.
Any purchase or other acquisition by a registered management company
acting, pursuant to a written agreement, as an underwriter of securities of an issuer which
is not an investment company shall be exempt from the provisions of section 10(f) (54 Stat.
806; 15 U.S.C. 80a-10) upon the following conditions:
(a) The party to such agreement other than such registered company is a
principal underwriter of such securities, which principal underwriter (1) is a person
primarily engaged in the business of underwriting and distributing securities issued by
other persons, selling securities to customers, or related activities, whose gross income
normally is derived principally from such business or related activities, and (2) does not
control or is not under common control with such registered company.
(b) No public offering of the securities underwritten by such agreement
has been made prior to the execution thereof.
(c) Such securities have been effectively registered pursuant to the
Securities Act of 1933 (48 Stat. 74; 15 U.S.C. 77a-aa) prior to the execution of such
agreement.
(d) In regard to any securities underwritten, whether or not purchased, by
the registered company pursuant to such agreement, such company shall be allowed a rate of
gross commission, spread, concession or other profit not less than the amount allowed to
such principal underwriter, exclusive of any amounts received by such principal underwriter
as a management fee from other principal underwriters.
(e) Such agreement is authorized by resolution adopted by a vote of not
less than a majority of the board of directors of such registered company, none of which
majority is an affiliated person of such principal underwriter, of the issuer of the
securities underwritten pursuant to such agreement or of any person engaged in a business
described in paragraph (a)(1) of this section.
(f) The resolution required in paragraph (e) of this section shall state
that it has been adopted pursuant to this section, and shall incorporate the terms of the
proposed agreement by attaching a copy thereof as an exhibit or otherwise.
(g) A copy of the resolution required in paragraph (e) of this section,
signed by each member of the board of directors of the registered company who voted in favor
of its adoption, shall be transmitted to the Commission not later than the fifth day
succeeding the date on which such agreement is executed.
[Rule N-10F-1, 6 FR 1191, Feb. 28,
1941]
270.10f-2 — Exercise of warrants or rights received on portfolio securities.
Any purchase or other acquisition of securities by a registered investment
company pursuant to the exercise of warrants or rights to subscribe to or to purchase
securities shall be exempt from the provisions of section 10(f) (section 10(f), 54 Stat.
807; 15 U.S.C. 80a-10) of the Act, Provided, That the warrants or rights so exercised
(a) were offered or issued to such company as a security holder on the same basis as all
other holders of the class or classes of securities to whom such warrants or rights were
offered or issued, and (b) do not exceed 5 percent of the total amount of such warrants or
rights so issued.
[Rule N-10F-2, 9 FR 339, Jan. 8, 1944]
270.10f-3 — Exemption for the acquisition of securities during the existence of an underwriting or selling syndicate.
(a) Definitions — (1) Domestic Issuer means any issuer other
than a foreign government, a national of any foreign country, or a corporation or other
organization incorporated or organized under the laws of any foreign country.
(2) Eligible Foreign Offering means a public offering of
securities, conducted under the laws of a country other than the United States, that meets
the following conditions:
(i) The offering is subject to regulation by a “foreign financial
regulatory authority,” as defined in section 2(a)(50) of the Act [15 U.S.C. 80a-2(a)(50)],
in such country;
(ii) The securities are offered at a fixed price to all purchasers in the
offering (except for any rights to purchase securities that are required by law to be
granted to existing security holders of the issuer);
(iii) Financial statements, prepared and audited in accordance with
standards required or permitted by the appropriate foreign financial regulatory authority in
such country, for the two years prior to the offering, are made available to the public and
prospective purchasers in connection with the offering; and
(iv) If the issuer is a Domestic Issuer, it meets the following
conditions:
(A) It has a class of securities registered pursuant to section 12(b) or
12(g) of the Securities Exchange Act of 1934 [15 U.S.C. 78l(b) or 78l(g)] or
is required to file reports pursuant to section 15(d) of the Securities Exchange Act of 1934
[15 U.S.C. 78o(d)]; and
(B) It has filed all the material required to be filed pursuant to section
13(a) or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78m(a) or 78o(d)] for a
period of at least twelve months immediately preceding the sale of securities made in
reliance upon this (or for such shorter period that the issuer was required to file such
material).
(3) Eligible Municipal Securities means “municipal securities,” as
defined in section 3(a)(29) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(29)),
that are sufficiently liquid that they can be sold at or near their carrying value within a
reasonably short period of time and either:
(i) Are subject to no greater than moderate credit risk; or
(ii) If the issuer of the municipal securities, or the entity supplying
the revenues or other payments from which the issue is to be paid, has been in continuous
operation for less than three years, including the operation of any predecessors, the
securities are subject to a minimal or low amount of credit risk.
(4) Eligible Rule 144A Offering means an offering of securities
that meets the following conditions:
(i) The securities are offered or sold in transactions exempt from
registration under section 4(2) of the Securities Act of 1933 [15 U.S.C. 77d(2)], rule 144A
thereunder [§ 230.144A of this chapter], or rules 501-508 thereunder [§§ 230.501-230.508 of
this chapter];
(ii) The securities are sold to persons that the seller and any person
acting on behalf of the seller reasonably believe to include qualified institutional buyers,
as defined in § 230.144A(a)(1) of this chapter; and
(iii) The seller and any person acting on behalf of the seller reasonably
believe that the securities are eligible for resale to other qualified institutional buyers
pursuant to § 230.144A of this chapter.
(5) Managed portion of a portfolio of a registered investment
company means a discrete portion of a portfolio of a registered investment company for which
a subadviser is responsible for providing investment advice, provided that:
(i) The subadviser is not an affiliated person of any investment adviser,
promoter, underwriter, officer, director, member of an advisory board, or employee of the
registered investment company; and
(ii) The subadviser's advisory contract:
(A) Prohibits it from consulting with any subadviser of the investment
company that is a principal underwriter or an affiliated person of a principal underwriter
concerning transactions of the investment company in securities or other assets; and
(B) Limits its responsibility in providing advice to providing advice with
respect to such portion.
(6) Series of a series company means any class or series of a
registered investment company that issues two or more classes or series of preferred or
special stock, each of which is preferred over all other classes or series with respect to
assets specifically allocated to that class or series.
(7) Subadviser means an investment adviser as defined in section
2(a)(20)(B) of the Act (15 U.S.C. 80a-2(a)(20)(B)).
(b) Exemption for purchases by series companies and investment
companies with managed portions. For purposes of this section and section 10(f) of the
Act (15 U.S.C. 80a-10(f)), each Series of a Series Company, and each Managed Portion of a
registered investment company, is deemed to be a separate investment company. Therefore, a
purchase or acquisition of a security by a registered investment company is exempt from the
prohibitions of section 10(f) of the Act if section 10(f) of the Act would not prohibit such
purchase if each Series and each Managed Portion of the company were a separately registered
investment company.
(c) Exemption for other purchases. Any purchase of securities by a
registered investment company prohibited by section 10(f) of the Act [15 U.S.C. 80a-10(f)]
shall be exempt from the provisions of such section if the following conditions are met:
(1) Type of Security. The securities to be purchased are:
(i) Part of an issue registered under the Securities Act of 1933 (15
U.S.C. 77a — aa) that is being offered to the public;
(ii) Part of an issue of government securities, as defined in section
2(a)(16) of the Act (15 U.S.C. 80a-2(a)(16));
(iii) Eligible Municipal Securities;
(iv) Securities sold in an Eligible Foreign Offering; or
(v) Securities sold in an Eligible Rule 144A Offering.
(2) Timing and Price. (i) The securities are purchased prior to the
end of the first day on which any sales are made, at a price that is not more than the price
paid by each other purchaser of securities in that offering or in any concurrent offering of
the securities (except, in the case of an Eligible Foreign Offering, for any rights to
purchase that are required by law to be granted to existing security holders of the issuer);
and
(ii) If the securities are offered for subscription upon exercise of
rights, the securities shall be purchased on or before the fourth day preceding the day on
which the rights offering terminates.
(3) Reasonable reliance. For purposes of determining compliance
with paragraphs (c)(1)(v) and (c)(2)(i) of this section, an investment company may
reasonably rely upon written statements made by the issuer or a syndicate manager, or by an
underwriter or seller of the securities through which such investment company purchases the
securities.
(4) Continuous operation. If the securities to be purchased are
part of an issue registered under the Securities Act of 1933 (15 U.S.C. 77a-aa) that is
being offered to the public, are government securities (as defined in section 2(a)(16) of
the Act (15 U.S.C. 80a-2(a)(16))), or are purchased pursuant to an Eligible Foreign Offering
or an Eligible Rule 144A Offering, the issuer of the securities must have been in continuous
operation for not less than three years, including the operations of any predecessors.
(5) Firm Commitment Underwriting. The securities are offered
pursuant to an underwriting or similar agreement under which the underwriters are committed
to purchase all of the securities being offered, except those purchased by others pursuant
to a rights offering, if the underwriters purchase any of the securities.
(6) Reasonable commission. The commission, spread or profit
received or to be received by the principal underwriters is reasonable and fair compared to
the commission, spread or profit received by other such persons in connection with the
underwriting of similar securities being sold during a comparable period of time.
(7) Percentage limit — (i) Generally. The amount of
securities of any class of such issue to be purchased by the investment company, aggregated
with purchases by any other investment company advised by the investment company's
investment adviser, and any purchases by another account with respect to which the
investment adviser has investment discretion if the investment adviser exercised such
investment discretion with respect to the purchase, does not exceed the following
limits:
(A) If purchased in an offering other than an Eligible Rule 144A Offering,
25 percent of the principal amount of the offering of such class; or
(B) If purchased in an Eligible Rule 144A Offering, 25 percent of the
total of:
(1) The principal amount of the offering of such class sold by
underwriters or members of the selling syndicate to qualified institutional buyers, as
defined in § 230.144A(a)(1) of this chapter; plus
(2) The principal amount of the offering of such class in any
concurrent public offering.
(ii) Exemption from percentage limit. The requirement in paragraph
(c)(7)(i) of this section applies only if the investment adviser of the investment company
is, or is an affiliated person of, a principal underwriter of the security; and
(iii) Separate aggregation. The requirement in paragraph (c)(7)(i)
of this section applies independently with respect to each investment adviser of the
investment company that is, or is an affiliated person of, a principal underwriter of the
security.
(8) Prohibition of Certain Affiliate Transactions. Such investment
company does not purchase the securities being offered directly or indirectly from an
officer, director, member of an advisory board, investment adviser or employee of such
investment company or from a person of which any such officer, director, member of an
advisory board, investment adviser or employee is an affiliated person; provided,
that a purchase from a syndicate manager shall not be deemed to be a purchase from a
specific underwriter if:
(i) Such underwriter does not benefit directly or indirectly from the
transaction; or
(ii) In respect to the purchase of Eligible Municipal Securities, such
purchase is not designated as a group sale or otherwise allocated to the account of any
person from whom this paragraph prohibits the purchase.
(9) Reserved.
(10) Board review. The board of directors of the investment
company, including a majority of the directors who are not interested persons of the
investment company:
(i) Has approved procedures, pursuant to which such purchases may be
effected for the company, that are reasonably designed to provide that the purchases comply
with all the conditions of this section;
(ii) Approves such changes to the procedures as the board deems necessary;
and
(iii) Determines no less frequently than quarterly that all purchases made
during the preceding quarter were effected in compliance with such procedures.
(11) Board composition. The board of directors of the investment
company satisfies the fund governance standards defined in § 270.0-1(a)(7).
(12) Maintenance of records. The investment company:
(i) Shall maintain and preserve permanently in an easily accessible place
a written copy of the procedures, and any modification thereto, described in paragraphs
(c)(10)(i) and (c)(10)(ii) of this section; and
(ii) Shall maintain and preserve for a period not less than six years from
the end of the fiscal year in which any transactions occurred, the first two years in an
easily accessible place, a written record of each such transaction, setting forth from whom
the securities were acquired, the identity of the underwriting syndicate's members, the
terms of the transaction, and the information or materials upon which the determination
described in paragraph (c)(10)(iii) of this section was made.
[62 FR 42408, Aug. 7, 1997, as amended at 66 FR
3758, Jan. 16, 2001; 67 FR 31079, May 8, 2002; 68 FR 3152, Jan. 22, 2003; 69 FR 46389,
Aug. 7, 2004; 74 FR 52373, Oct. 9, 2009; 81 FR 81870, Nov. 18, 2016]
270.11a-1 — Definition of “exchange” for purposes of section 11 of the Act.
(a) For the purposes of section 11 of the Act, the term exchange as
used therein shall include the issuance of any security by a registered investment company
in an amount equal to the proceeds, or any portion of the proceeds, paid or payable —
(1) Upon the repurchase, by or at the instance of such issuer, of an
outstanding security the terms of which provide for its termination, retirement or
cancellation, or
(2) Upon the termination, retirement or cancellation of an outstanding
security of such issuer in accordance with the terms thereof.
(b) A security shall not be deemed to have been repurchased by or at the
instance of the issuer, or terminated, retired or canceled in accordance with the terms of
the security if —
(1) The security was redeemed or repurchased at the instance of the
holder; or
(2) A security holder's account was closed for failure to make payments as
prescribed in the security or instruments pursuant to which the security was issued, and
notice of intention to close the account was mailed to the security holder, and he had a
reasonable time in which to meet the deficiency; or
(3) Sale of the security was restricted to a specified, limited group of
persons and, in accordance with the terms of the security or the instruments pursuant to
which the security was issued, upon its being transferred by the holder to a person not a
member of the group eligible to purchase the security, the issuer required the surrender of
the security and paid the redemption price thereof.
(c) The provisions of paragraph (a) of this section shall not apply if,
following the repurchase of an outstanding security by or at the instance of the issuer or
the termination, retirement or cancellation of an outstanding security in accordance with
the terms thereof —
(1) The proceeds are actually paid to the security holder by or on behalf
of the issuer within 7 days, and
(2) No sale and no offer (other than by way of exchange) of any security
of the issuer is made by or on behalf of the issuer to the person to whom such proceeds were
paid, within 60 days after such payment.
(d) The provisions of paragraph (a) of this section shall not apply to the
repurchase, termination, retirement, or cancellation of a security outstanding on the
effective date of this section or issued pursuant to a subscription agreement or other plan
of acquisition in effect on such date.
(Sec. 11, 54 Stat. 808; 15 U.S.C. 80a-11)
[32 FR 10728, July 21, 1967]
270.11a-2 — Offers of exchange by certain registered separate accounts or others the terms of which do not require prior Commission approval.
(a) As used in this section:
(1) Deferred sales load shall mean any sales load, including a
contingent deferred sales load, that is deducted upon redemption or annuitization of amounts
representing all or a portion of a securityholder's interest in a separate account;
(2) Exchanged security shall include not only the security or
securities (or portion[s] thereof) of a securityholder actually exchanged pursuant to an
exchange offer but also any security or securities (or portion[s] thereof) of the
securityholder previously exchanged for the exchanged security or its predecessors;
(3) Front-end sales load shall mean any sales load that is deducted
from one or more purchase payments made by a securityholder before they are invested in a
separate account; and
(4) Purchase payments made for the acquired security, as used in
paragraphs (c)(2) and (d)(2) of this section, shall not include any purchase payments made
for the exchanged security or any appreciation attributable to those purchase payments that
are transferred to the offering account in connection with an exchange.
(b) Notwithstanding section 11 of the Act [15 U.S.C. 80a-11], any
registered separate account or any principal underwriter for such an account (collectively,
the “offering account”) may make or cause to be made an offer to the holder of a security of
the offering account, or of any other registered separate account having the same insurance
company depositor or sponsor as the offering account or having an insurance company
depositor or sponsor that is an affiliate of the offering account's depositor or sponsor, to
exchange his security (or portion thereof) (the “exchanged security”) for a security (or
portion thereof) of the offering account (the “acquired security”) without the terms of such
exchange offer first having been submitted to and approved by the Commission, as provided
below:
(1) If the securities (or portions thereof) involved are variable annuity
contracts, then
(i) The exchange must be made on the basis of the relative net asset
values of the securities to be exchanged, except that the offering account may deduct at the
time of the exchange
(A) An administrative fee which is disclosed in the part of the offering
account's registration statement under the Securities Act of 1933 relating to the
prospectus, and
(B) Any front-end sales load permitted by paragraph (c) of this section,
and
(ii) Any deferred sales load imposed on the acquired security by the
offering account shall be calculated in the manner prescribed by paragraph (d) or (e) of
this section; or
(2) If the securities (or portions thereof) involved are variable life
insurance contracts offered by a separate account registered under the Act as a unit
investment trust, then the exchange must be made on the basis of the relative net asset
values of the securities to be exchanged, except that the offering account may deduct at the
time of the exchange an administrative fee which is disclosed in the part of the offering
account's registration statement under the Securities Act of 1933 relating to the
prospectus.
(c) If the offering account imposes a front-end sales load on the acquired
security, then such sales load shall be a percentage that is no greater than the excess of
the rate of the front-end sales load otherwise applicable to that security over the rate of
any front-end sales load previously paid on the exchanged security.
(d) If the offering account imposes a deferred sales load on the acquired
security and the exchanged security was also subject to a deferred sales load, then any
deferred sales load imposed on the acquired security shall be calculated as if:
(1) The holder of the acquired security had been the holder of that
security from the date on which he became the holder of the exchanged security; and
(2) Purchase payments made for the exchanged security had been made for
the acquired security on the date on which they were made for the exchanged security.
(e) If the offering account imposes a deferred sales load on the acquired
security and a front-end sales load was paid on the exchanged security, then any deferred
sales load imposed on the acquired security may not be imposed on purchase payments made for
the exchanged security or any appreciation attributable to purchase payments made for the
exchanged security that are transferred in connection with the exchange.
(f) Notwithstanding the foregoing, no offer of exchange shall be made in
reliance on this section if both a front-end sales load and a deferred sales load are to be
imposed on the acquired security or if both such sales loads are imposed on the exchanged
security.
[48 FR 36245, Aug. 10, 1983; as amended at 85 FR 25964, May 1, 2020]
270.11a-3 — Offers of exchange by open-end investment companies other than separate accounts.
(a) For purposes of this rule:
(1) Acquired security means the security held by a securityholder
after completing an exchange pursuant to an exchange offer;
(2) Administrative fee means any fee, other than a sales load,
deferred sales load or redemption fee, that is
(i) Reasonably intended to cover the costs incurred in processing
exchanges of the type for which the fee is charged, Provided that: the offering
company will maintain and preserve records of any determination of the costs incurred in
connection with exchanges for a period of not less than six years, the first two years in an
easily accessible place. The records preserved under this provision shall be subject to
inspection by the Commission in accordance with section 31(b) of the Act (15 U.S.C.
80a-30(b)) as if such records were records required to be maintained under rules adopted
under section 31(a) of the Act (15 U.S.C. 80a-30a)); or
(ii) A nominal fee as defined in paragraph (a)(8) of this section;
(3) Deferred sales load means any amount properly chargeable to
sales or promotional expenses that is paid by a shareholder after purchase but before or
upon redemption;
(4) Exchanged security means
(i) The security actually exchanged pursuant to an exchange offer, and
(ii) Any security previously exchanged for such security or for any of its
predecessors;
(5) Group of investment companies means any two or more registered
open-end investment companies that hold themselves out to investors as related companies for
purposes of investment and investor services, and
(i) That have a common investment adviser or principal underwriter, or
(ii) The investment adviser or principal underwriter of one of the
companies is an affiliated person as defined in section 2(a)(3) of the Act (15 U.S.C.
80a-2(a)(3)) of the investment adviser or principal underwriter of each of the other
companies;
(6) Offering company means a registered open-end investment company
(other than a registered separate account) or any principal underwriter thereof that makes
an offer (an “exchange offer”) to the holder of a security of that company, or of another
open-end investment company within the same group of investment companies as the offering
company, to exchange that security for a security of the offering company;
(7) Redemption fee means a fee that is imposed by the fund pursuant
to section 270.22c-2; and
(8) Nominal fee means a slight or de minimis fee.
(b) Nothwithstanding section 11(a) of the Act (15 U.S.C. 80a-11(a)), and
except as provided in paragraphs (d) and (e) of this section, in connection with an exchange
offer an offering company may cause a securityholder to be charged a sales load on the
acquired security, a redemption fee, an administrative fee, or any combination of the
foregoing, Provided that:
(1) Any administrative fee or scheduled variation thereof is applied
uniformly to all securityholders of the class specified;
(2) Any redemption fee charged with respect to the exchanged security or
any scheduled variation thereof
(i) Is applied uniformly to all securityholders of the class specified,
and
(ii) Does not exceed the redemption fee applicable to a redemption of the
exchanged security in the absence of an exchange.
(3) No deferred sales load is imposed on the exchanged security at the
time of an exchange;
(4) Any sales load charged with respect to the acquired security is a
percentage that is no greater than the excess, if any, of the rate of the sales load
applicable to that security in the absence of an exchange over the sum of the rates of all
sales loads previously paid on the exchanged security, Provided that:
(i) The percentage rate of any sales load charged when the acquired
security is redeemed, that is solely the result of a deferred sales load imposed on the
exchanged security, may be no greater than the excess, if any, of the applicable rate of
such sales load, calculated in accordance with paragraph (b)(5) of this section, over the
sum of the rates of all sales loads previously paid on the acquired security, and
(ii) In no event may the sum of the rates of all sales loads imposed prior
to and at the time the acquired security is redeemed, including any sales load paid or to be
paid with respect to the exchanged security, exceed the maximum sales load rate, calculated
in accordance with paragraph (b)(5) of this section, that would be applicable in the absence
of an exchange to the security (exchanged or acquired) with the highest such rate;
(5) Any deferred sales load charged at the time the acquired security is
redeemed is calculated as if the holder of the acquired security had held that security from
the date on which he became the holder of the exchanged security, Provided that:
(i) The time period during which the acquired security is held need not be
included when the amount of the deferred sales load is calculated, if the deferred sales
load is
(A) reduced by the amount of any fees collected on the acquired security
under the terms of any plan of distribution adopted in accordance with rule 12b-1 under the
Act (17 CFR 270.12b-1) (a “12b-1 plan”), and
(B) Solely the result of a sales load imposed on the exchanged security,
and no other sales loads, including deferred sales loads, are imposed with respect to the
acquired security,
(ii) The time period during which the exchanged security is held need not
be included when the amount of the deferred sales load on the acquired security is
calculated, if
(A) The deferred sales load is reduced by the amount of any fees
previously collected on the exchanged security under the terms of any 12b-1 plan, and
(B) The exchanged security was not subject to any sales load, and
(iii) The holding periods in this subsection may be computed as of the end
of the calendar month in which a security was purchased or redeemed;
(6) The prospectus of the offering company discloses
(i) The amount of any administrative or redemption fee imposed on an
exchange transaction for its securities, as well as the amount of any administrative or
redemption fee imposed on its securityholders to acquire the securities of other investment
companies in an exchange transaction, and
(ii) If the offering company reserves the right to change the terms of or
terminate an exchange offer, that the exchange offer is subject to termination and its terms
are subject to change;
(7) Any sales literature or advertising that mentions the existence of the
exchange offer also discloses
(i) The existence of any administrative fee or redemption fee that would
be imposed at the time of an exchange; and
(ii) If the offering company reserves the right to change the terms of or
terminate the exchange offer, that the exchange offer is subject to termination and its
terms are subject to change;
(8) Whenever an exchange offer is to be terminated or its terms are to be
amended materially, any holder of a security subject to that offer shall be given prominent
notice of the impending termination or amendment at least 60 days prior to the date of
termination or the effective date of the amendment, Provided that:
(i) No such notice need be given if the only material effect of an
amendment is to reduce or eliminate an administrative fee, sales load or redemption fee
payable at the time of an exchange, and
(ii) No notice need be given if, under extraordinary circumstances,
either
(A) There is a suspension of the redemption of the exchanged security
under section 22(e) of the Act [15 U.S.C. 80a-22(e)] and the rules and regulations
thereunder, or
(B) The offering company temporarily delays or ceases the sale of the
acquired security because it is unable to invest amounts effectively in accordance with
applicable investment objectives, policies and restrictions; and
(9) In calculating any sales load charged with respect to the acquired
security:
(i) If a securityholder exchanges less than all of his securities, the
security upon which the highest sales load rate was previously paid is deemed exchanged
first; and
(ii) If the exchanged security was acquired through reinvestment of
dividends or capital gains distributions, that security is deemed to have been sold with a
sales load rate equal to the sales load rate previously paid on the security on which the
dividend was paid or distribution made.
(c) If either no sales load is imposed on the acquired security or the
sales load imposed is less than the maximum allowed by paragraph (b)(4) of this section, the
offering company may require the exchanging securityholder to have held the exchanged
security for a minimum period of time previously established by the offering company and
applied uniformly to all securityholders of the class specified.
(d) Any offering company that has previously made an offer of exchange may
continue to impose fees or sales loads permitted by an order under section 11(a) of the Act
upon shares purchased before the earlier of (1) One year after the effective date of this
section, or (2) When the offer has been brought into compliance with the terms of this
section, and upon shares acquired through reinvestment of dividends or capital gains
distributions based on such shares, until such shares are redeemed.
(e) Any offering company that has previously made an offer of exchange
cannot rely on this section to amend such prior offer unless
(1) The offering company's prospectus disclosed, during at least the two
year period prior to the amendment of the offer (or, if the fund is less than two years old,
at all times the offer has been outstanding) that the terms of the offer were subject to
change, or
(2) The only effect of such change is to reduce or eliminate an
administrative fee, sales load or redemption fee payable at the time of an exchange.
[54 FR 35185, Aug. 24, 1989, as amended at 61 FR
49016, Sept. 17, 1996; 70 FR 13341, Mar. 18, 2005]
270.12b-1 — Distribution of shares by registered open-end management investment company.
(a)(1) Except as provided in this section, it shall be unlawful for any
registered open-end management investment company (other than a company complying with the
provisions of section 10(d) of the Act (15 U.S.C. 80a-10(d))) to act as a distributor of
securities of which it is the issuer, except through an underwriter;
(2) For purposes of this section, such a company will be deemed to be
acting as a distributor of securities of which it is the issuer, other than through an
underwriter, if it engages directly or indirectly in financing any activity which is
primarily intended to result in the sale of shares issued by such company, including, but
not necessarily limited to, advertising, compensation of underwriters, dealers, and sales
personnel, the printing and mailing of prospectuses to other than current shareholders, and
the printing and mailing of sales literature;
(b) A registered, open-end management investment company (“Company”) may
act as a distributor of securities of which it is the issuer: Provided, That any
payments made by such company in connection with such distribution are made pursuant to a
written plan describing all material aspects of the proposed financing of distribution and
that all agreements with any person relating to implementation of the plan are in writing:
And further provided, That:
(1) Such plan has been approved by a vote of at least a majority of the
outstanding voting securities of such company, if adopted after any public offering of the
company's voting securities or the sale of such securities to persons who are not affiliated
persons of the company, affiliated persons of such persons, promoters of the company, or
affiliated persons of such promoters;
(2) Such plan, together with any related agreements, has been approved by
a vote of the board of directors of such company, and of the directors who are not
interested persons of the company and have no direct or indirect financial interest in the
operation of the plan or in any agreements related to the plan, cast in person at a meeting
called for the purpose of voting on such plan or agreements;
(3) Such plan or agreement provides, in substance:
(i) That it shall continue in effect for a period of more than one year
from the date of its execution or adoption only so long as such continuance is specifically
approved at least annually in the manner described in paragraph (b)(2) of this section;
(ii) That any person authorized to direct the disposition of monies paid
or payable by such company pursuant to the plan or any related agreement shall provide to
the company's board of directors, and the directors shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such expenditures were
made; and
(iii) In the case of a plan, that it may be terminated at any time by vote
of a majority of the members of the board of directors of the company who are not interested
persons of the company and have no direct or indirect financial interest in the operation of
the plan or in any agreements related to the plan or by vote of a majority of the
outstanding voting securities of such company;
(iv) In the case of an agreement related to a plan:
(A) That it may be terminated at any time, without the payment of any
penalty, by vote of a majority of the members of the board of directors of such company who
are not interested persons of the company and have no direct or indirect financial interest
in the operation of the plan or in any agreements related to the plan or by vote of a
majority of the outstanding voting securities of such company on not more than sixty days'
written notice to any other party to the agreement, and
(B) For its automatic termination in the event of its assignment;
(4) Such plan provides that it may not be amended to increase materially
the amount to be spent for distribution without shareholder approval and that all material
amendments of the plan must be approved in the manner described in paragraph (b)(2) of this
section; and
(5) Such plan is implemented and continued in a manner consistent with the
provisions of paragraphs (c), (d), and (e) of this section;
(c) A registered open-end management investment company may rely on the
provisions of paragraph (b) of this section only if its board of directors satisfies the
fund governance standards as defined in § 270.0-1(a)(7);
(d) In considering whether a registered open-end management investment
company should implement or continue a plan in reliance on paragraph (b) of this section,
the directors of such company shall have a duty to request and evaluate, and any person who
is a party to any agreement with such company relating to such plan shall have a duty to
furnish, such information as may reasonably be necessary to an informed determination of
whether such plan should be implemented or continued; in fulfilling their duties under this
paragraph the directors should consider and give appropriate weight to all pertinent
factors, and minutes describing the factors considered and the basis for the decision to use
company assets for distribution must be made and preserved in accordance with paragraph (f)
of this section;
Note:
For a discussion of factors which may be relevant to a
decision to use company assets for distribution, see Investment Company Act
Releases Nos. 10862, September 7, 1979, and 11414, October 28, 1980.
|
(e) A registered open-end management investment company may implement or
continue a plan pursuant to paragraph (b) of this section only if the directors who vote to
approve such implementation or continuation conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under state law and under sections 36(a) and
(b) (15 U.S.C. 80a-35 (a) and (b)) of the Act, that there is a reasonable likelihood that
the plan will benefit the company and its shareholders;
(f) A registered open-end management investment company must preserve
copies of any plan, agreement or report made pursuant to this section for a period of not
less than six years from the date of such plan, agreement or report, the first two years in
an easily accessible place;
(g) If a plan covers more than one series or class of shares, the
provisions of the plan must be severable for each series or class, and whenever this rule
provides for any action to be taken with respect to a plan, that action must be taken
separately for each series or class affected by the matter. Nothing in this paragraph (g)
shall affect the rights of any purchase class under § 270.18f-3(f)(2)(iii).; and
(h) Notwithstanding any other provision of this section, a company may
not:
(1) Compensate a broker or dealer for any promotion or sale of shares
issued by that company by directing to the broker or dealer:
(i) The company's portfolio securities transactions; or
(ii) Any remuneration, including but not limited to any commission,
mark-up, mark-down, or other fee (or portion thereof) received or to be received from the
company's portfolio transactions effected through any other broker (including a government
securities broker) or dealer (including a municipal securities dealer or a government
securities dealer); and
(2) Direct its portfolio securities transactions to a broker or dealer
that promotes or sells shares issued by the company, unless the company (or its investment
adviser):
(i) Is in compliance with the provisions of paragraph (h)(1) of this
section with respect to that broker or dealer; and
(ii) Has implemented, and the company's board of directors (including a
majority of directors who are not interested persons of the company) has approved, policies
and procedures reasonably designed to prevent:
(A) The persons responsible for selecting brokers and dealers to effect
the company's portfolio securities transactions from taking into account the brokers' and
dealers' promotion or sale of shares issued by the company or any other registered
investment company; and
(B) The company, and any investment adviser and principal underwriter of
the company, from entering into any agreement (whether oral or written) or other
understanding under which the company directs, or is expected to direct, portfolio
securities transactions, or any remuneration described in paragraph (h)(1)(ii) of this
section, to a broker (including a government securities broker) or dealer (including a
municipal securities dealer or a government securities dealer) in consideration for the
promotion or sale of shares issued by the company or any other registered investment
company.
[45 FR 73905, Nov. 7, 1980, as amended at 60 FR
11885, Mar. 2, 1995; 61 FR 49011, Sept. 17, 1996; 62 FR 51765, Oct. 3, 1997; 66 FR 3758,
Jan. 16, 2001; 69 FR 46389, Aug. 2, 2004; 69 FR 54733, Sept. 9, 2004, 78 FR 79298, Dec.
30, 2013]
270.12d1-1 — Exemptions for investments in money market funds.
(a) Exemptions for acquisition of money market fund shares. If the
conditions of paragraph (b) of this section are satisfied, notwithstanding sections
12(d)(1)(A), 12(d)(1)(B), 12(d)(1)(G), 17(a), and 57 of the Act (15 U.S.C. 80a-12(d)(1)(A),
80a-12(d)(1)(B), 80a-12(d)(1)(G), 80a-17(a), and 80a-56)) and § 270.17d-1:
(1) An investment company (acquiring fund) may purchase and redeem
shares issued by a money market fund; and
(2) A money market fund, any principal underwriter thereof, and a broker
or a dealer may sell or otherwise dispose of shares issued by the money market fund to any
acquiring fund.
(b) Conditions — (1) Fees. The acquiring fund pays no sales charge,
as defined in FINRA Rule 2341(b)(8) (“sales charge”), or service fee, as defined in FINRA
Rule 2341(b)(9), charged in connection with the purchase, sale, or redemption of securities
issued by a money market fund (“service fee”); or the acquiring fund's investment adviser
waives its advisory fee in an amount necessary to offset any sales charge or service
fee.
(2) Unregistered money market funds. If the money market fund is
not an investment company registered under the Act:
(i) The acquiring fund reasonably believes that the money market fund
satisfies the following conditions as if it were a registered open-end investment
company:
(A) Operates in compliance with § 270.2a-7;
(B) Complies with sections 17(a), (d), (e), 18, and 22(e) of the Act (15
U.S.C. 80a-17(a), (d), (e), 80a-18, and 80a-22(e));
(C) Has adopted procedures designed to ensure that it complies with
sections 17(a), (d), (e), 18, and 22(e) of the Act (15 U.S.C. 80a-17(a), (d), (e), 80a-18,
and 80a-22(e)), periodically reviews and updates those procedures, and maintains books and
records describing those procedures;
(D) Maintains the records required by §§ 270.31a-1(b)(1),
270.31a-1(b)(2)(ii), 270.31a-1(b)(2)(iv), and 270.31a-1(b)(9); and
(E) Preserves permanently, the first two years in an easily accessible
place, all books and records required to be made under paragraphs (b)(2)(i)(C) and (D) of
this section, and makes those records available for examination on request by the Commission
or its staff; and
(ii) The adviser to the money market fund is registered with the
Commission as an investment adviser under section 203 of the Investment Advisers Act of 1940
(15 U.S.C. 80b-3).
(c) Exemption from certain monitoring and recordkeeping requirements
under § 270.17e-1. Notwithstanding the requirements of §§ 270.17e-1(b)(3) and
270.17e-1(d)(2), the payment of a commission, fee, or other remuneration to a broker shall
be deemed as not exceeding the usual and customary broker's commission for purposes of
section 17(e)(2)(A) of the Act if:
(1) The commission, fee, or other remuneration is paid in connection with
the sale of securities to or by an acquiring fund;
(2) The broker and the acquiring fund are affiliated persons because each
is an affiliated person of the same money market fund; and
(3) The acquiring fund is an affiliated person of the money market fund
solely because the acquiring fund owns, controls, or holds with power to vote five percent
or more of the outstanding securities of the money market fund.
(d) Definitions. (1) Investment company includes a company
that would be an investment company under section 3(a) of the Act (15 U.S.C. 80a-3(a)) but
for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the
Act (15 U.S.C. 80a-3(c)(1) and 80a-3(c)(7)).
(2) Money market fund means:
(i) An open-end management investment company registered under the Act
that is regulated as a money market fund under § 270.2a-7; or
(ii) A company that would be an investment company under section 3(a) of
the Act (15 U.S.C. 80a-3(a)) but for the exceptions to that definition provided for in
sections 3(c)(1) and 3(c)(7) of the Act (15 U.S.C. 80a-3(c)(1) and 80a-3(c)(7)) and
that:
(A) Is limited to investing in the types of securities and other
investments in which a money market fund may invest under § 270.2a-7; and
(B) Undertakes to comply with all the other requirements of § 270.2a-7,
except that, if the company has no board of directors, the company's investment adviser
performs the duties of the board of directors.
[71 FR 36655, June 27, 2006; as amended at 85 FR 73924, Nov. 19, 2020; 88
FR 37986, June 12, 2023]
270.12d1-2 — [Removed and Reserved]
[71 FR 36655, June 27, 2006; as amended at 85 FR 73924, Nov. 19,
2020]
270.12d1-3 — Exemptions for investment companies relying on section 12(d)(1)(F) of the Act.
(a) Exemption from sales charge limits. A registered investment
company (“acquiring fund”) that relies on section 12(d)(1)(F) of the Act (15 U.S.C.
80a-12(d)(1)(F)) to acquire securities issued by an investment company (“acquired fund”) may
offer or sell any security it issues through a principal underwriter or otherwise at a
public offering price that includes a sales load of more than 11/2 percent if any sales
charges and service fees charged with respect to the acquiring fund's securities do not
exceed the limits set forth in FINRA Rule 2341 applicable to a fund of funds.
(b) Definitions. For purposes of this section, the terms fund of
funds, sales charge, and service fee have the same meanings as in FINRA Rule
2341(b).
[71 FR 36655, June 27, 2006; as amended at 88 FR 37986, June 12,
2023]
270.12d1-4 — Exemptions for investments in certain investment companies.
(a) Exemptions for acquisition and sale of acquired fund shares. If the conditions
of paragraph (b) of this section are satisfied, notwithstanding sections 12(d)(1)(A),
12(d)(1)(B), 12(d)(1)(C), 17(a), 57(a)(1)-(2), and 57(d)(1)-(2) of the Act (15 U.S.C. 80a
12(d)(1)(A), 80a-12(d)(1)(C), 80a 17(a), 80a-56(a)(1)-(2), and 80a-56(d)(1)-(2)):
(1) A registered investment company (other than a face-amount certificate company) or
business development company (an acquiring fund) may purchase or otherwise acquire
the securities issued by another registered investment company (other than a face-amount
certificate company) or business development company (an acquired fund);
(2) An acquired fund, any principal underwriter thereof, and any broker or dealer
registered under the Securities Exchange Act of 1934 may sell or otherwise dispose of the
securities issued by the acquired fund to any acquiring fund and any acquired fund may
redeem or repurchase any securities issued by the acquired fund from any acquiring fund;
and
(3) An acquiring fund that is an affiliated person of an exchange-traded fund (or who is an
affiliated person of such a fund) solely by reason of the circumstances described in
§ 270.6c-11(b)(3)(i) and (ii), may deposit and receive the exchange-traded fund's baskets,
provided that the acquired exchange-traded fund is not otherwise an affiliated person (or
affiliated person of an affiliated person) of the acquiring fund.
(b) Conditions—(1) Control. (i) The acquiring fund and its advisory group
will not control (individually or in the aggregate) an acquired fund;
(ii) If the acquiring fund and its advisory group, in the aggregate,
(A) Hold more than 25% of the outstanding voting securities of an acquired fund that is a
registered open-end management investment company or registered unit investment trust as a
result of a decrease in the outstanding voting securities of the acquired fund, or
(B) Hold more than 10% of the outstanding voting securities of an acquired fund that is a
registered closed-end management investment company or business development company, each of
those holders will vote its securities in the same proportion as the vote of all other
holders of such securities; provided, however, that in circumstances where all holders of
the outstanding voting securities of the acquired fund are required by this section or
otherwise under section 12(d)(1) to vote securities of the acquired fund in the same
proportion as the vote of all other holders of such securities, the acquiring fund will seek
instructions from its security holders with regard to the voting of all proxies with respect
to such acquired fund securities and vote such proxies only in accordance with such
instructions; and
(iii) The conditions in paragraphs (b)(1)(i) through (ii) of this section do not apply
if:
(A) The acquiring fund is in the same group of investment companies as an acquired fund;
or
(B) The acquiring fund's investment sub-adviser or any person controlling, controlled by,
or under common control with such investment sub-adviser acts as an acquired fund's
investment adviser or depositor.
(2) Findings and agreements. (i) Management companies.
(A) If the acquiring fund is a management company, prior to the initial acquisition of an
acquired fund in excess of the limits in section 12(d)(1)(A)(i) of the Act (15 U.S.C.
80a-12(d)(1)(A)(i)), the acquiring fund's investment adviser must evaluate the complexity of
the structure and fees and expenses associated with the acquiring fund's investment in the
acquired fund, and find that the acquiring fund's fees and expenses do not duplicate the
fees and expenses of the acquired fund;
(B) If the acquired fund is a management company, prior to the initial acquisition of an
acquired fund in excess of the limits in section 12(d)(1)(A)(i) of the Act (15 U.S.C.
80a-12(d)(1)(A)(i)), the acquired fund's investment adviser must find that any undue
influence concerns associated with the acquiring fund's investment in the acquired fund are
reasonably addressed and, as part of this finding, the investment adviser must consider at a
minimum the following items:
(1) The scale of contemplated investments by the acquiring fund and any maximum
investment limits;
(2) The anticipated timing of redemption requests by the acquiring fund;
(3) Whether and under what circumstances the acquiring fund will provide advance
notification of investments and redemptions; and
(4) The circumstances under which the acquired fund may elect to satisfy redemption
requests in kind rather than in cash and the terms of any such redemptions in kind; and
(C) The investment adviser to each acquiring or acquired management company must report its
evaluation, finding, and the basis for its evaluations or findings required by paragraphs
(b)(2)(i)(A) or (B) of this section, as applicable, to the fund's board of directors, no
later than the next regularly scheduled board of directors meeting.
(ii) Unit investment trusts. If the acquiring fund is a unit investment trust (UIT)
and the date of initial deposit of portfolio securities into the UIT occurs after the
effective date of this section, the UIT's principal underwriter or depositor must evaluate
the complexity of the structure associated with the UIT's investment in acquired funds and,
on or before such date of initial deposit, find that the UIT's fees and expenses do not
duplicate the fees and expenses of the acquired funds that the UIT holds or will hold at the
date of deposit.
(iii) Separate accounts funding variable insurance contracts. With respect to a separate
account funding variable insurance contracts that invests in an acquiring fund, the
acquiring fund must obtain a certification from the insurance company offering the separate
account that the insurance company has determined that the fees and expenses borne by the
separate account, acquiring fund, and acquired fund, in the aggregate, are consistent with
the standard set forth in section 26(f)(2)(A) of the Act (15 U.S.C. 80a-26(f)(2)(A)).
(iv) Fund of funds investment agreement. Unless the acquiring fund's investment adviser
acts as the acquired fund's investment adviser and such adviser is not acting as the
sub-adviser to either fund, the acquiring fund must enter into an agreement with the
acquired fund effective for the duration of the funds' reliance on this section, which must
include the following:
(A) Any material terms regarding the acquiring fund's investment in the acquired fund
necessary to make the finding required under paragraph (b)(2)(i) through (ii) of this
section;
(B) A termination provision whereby either the acquiring fund or acquired fund may
terminate the agreement subject to advance written notice no longer than 60 days; and
(C) A requirement that the acquired fund provide the acquiring fund with information on the
fees and expenses of the acquired fund reasonably requested by the acquiring fund.
(3) Complex fund structures. (i) No investment company may rely on section
12(d)(1)(G) of the Act (15 U.S.C. 80a-12(d)(1)(G)) or this section to purchase or otherwise
acquire, in excess of the limits in section 12(d)(1)(A) of the Act (15 U.S.C.
80a-12(d)(1)(A)), the outstanding voting securities of an investment company (a
second-tier fund) that relies on this section to acquire the securities of an
acquired fund, unless the second-tier fund makes investments permitted by paragraph
(b)(3)(ii) of this section; and
(ii) No acquired fund may purchase or otherwise acquire the securities of an investment
company or private fund if immediately after such purchase or acquisition, the securities of
investment companies and private funds owned by the acquired fund have an aggregate value in
excess of 10 percent of the value of the total assets of the acquired fund; provided,
however, that the 10 percent limitation of this paragraph shall not apply to investments by
the acquired fund in:
(A) Reliance on section 12(d)(1)(E) of the Act (15 U.S.C. 80a-12(d)(1)(E));
(B) Reliance on § 270.12d1-1;
(C) A subsidiary that is wholly-owned and controlled by the acquired fund;
(D) Securities received as a dividend or as a result of a plan of reorganization of a
company; or
(E) Securities of another investment company received pursuant to exemptive relief from the
Commission to engage in interfund borrowing and lending transactions.
(c) Recordkeeping. The acquiring and acquired funds relying upon this section must
maintain and preserve for a period of not less than five years, the first two years in an
easily accessible place, as applicable:
(1) A copy of each fund of funds investment agreement that is in effect, or at any time
within the past five years was in effect, and any amendments thereto;
(2) A written record of the evaluations and findings required by paragraph (b)(2)(i) of
this section, and the basis therefor within the past five years;
(3) A written record of the finding required by paragraph (b)(2)(ii) of this section and
the basis for such finding; and
(4) The certification from each insurance company required by paragraph (b)(2)(iii) of this
section.
(d) Definitions. For purposes of this section:
Advisory group means either:
(1) An acquiring fund's investment adviser or depositor, and any person controlling,
controlled by, or under common control with such investment adviser or depositor; or
(2) An acquiring fund's investment sub-adviser and any person controlling, controlled by,
or under common control with such investment sub-adviser.
Baskets has the same meaning as in 17 CFR 270.6c-11(a)(1).
Exchange-traded fund means a fund or class, the shares of which are listed and
traded on a national securities exchange, and that has formed and operates in reliance on
§ 6c-11 or under an exemptive order granted by the Commission.
Group of investment companies means any two or more registered investment companies
or business development companies that hold themselves out to investors as related companies
for purposes of investment and investor services.
Private fund means an issuer that would be an investment company under section 3(a)
of the Act but for the exclusions from that definition provided for in section 3(c)(1) or
section 3(c)(7) of the Act (15 U.S.C. 80a-3(c)(1) or 80a-3(c)(7)).
[85 FR 73924, Nov. 19, 2020; as amended at 85 FR 73924, Nov. 19, 2020]
270.12d2-1 — Definition of insurance company for purposes of sections 12(d)(2) and 12(g) of the Act.
For purposes of sections 12(d)(2) and 12(g) of the Act [15 U.S.C.
80a-12(d)(2) and 80a-12(g)], insurance company shall include a foreign insurance
company as that term is used in rule 3a-6 under the Act (17 CFR 270.3a-6).
[56 FR 56300, Nov. 4, 1991]
270.12d3-1 — Exemption of acquisitions of securities issued by persons engaged in securities related businesses.
(a) Notwithstanding section 12(d)(3) of the Act, a registered investment
company, or any company or companies controlled by such registered investment company
(“acquiring company”) may acquire any security issued by any person that, in its most recent
fiscal year, derived 15 percent or less of its gross revenues from securities related
activities unless the acquiring company would control such person after the acquisition.
(b) Notwithstanding section 12(d)(3) of the Act, an acquiring company may
acquire any security issued by a person that, in its most recent fiscal year, derived more
than 15 percent of its gross revenues from securities related activities, provided
that:
(1) Immediately after the acquisition of any equity security, the
acquiring company owns not more than five percent of the outstanding securities of that
class of the issuer's equity securities;
(2) Immediately after the acquisition of any debt security, the acquiring
company owns not more than ten percent of the outstanding principal amount of the issuer's
debt securities; and
(3) Immediately after any such acquisition, the acquiring company has
invested not more than five percent of the value of its total assets in the securities of
the issuer.
(c) Notwithstanding paragraphs (a) and (b) of this section, this section
does not exempt the acquisition of:
(1) A general partnership interest; or
(2) A security issued by the acquiring company's promoter, principal
underwriter, or any affiliated person of such promoter, or principal underwriter; or
(3) A security issued by the acquiring company's investment adviser, or an
affiliated person of the acquiring company's investment adviser, other than a security
issued by a subadviser or an affiliated person of a subadviser of the acquiring company
provided that:
(i) Prohibited relationships. The subadviser that is (or whose
affiliated person is) the issuer is not, and is not an affiliated person of, an investment
adviser responsible for providing advice with respect to the portion of the acquiring
company that is acquiring the securities, or of any promoter, underwriter, officer,
director, member of an advisory board, or employee of the acquiring company;
(ii) Advisory contract. The advisory contracts of the Subadviser
that is (or whose affiliated person is) the issuer, and any Subadviser that is advising the
portion of the acquiring company that is purchasing the securities:
(A) Prohibit them from consulting with each other concerning transactions
of the acquiring company in securities or other assets, other than for purposes of complying
with the conditions of paragraphs (a) and (b) of this section; and
(B) Limit their responsibility in providing advice to providing advice
with respect to a discrete portion of the acquiring company's portfolio.
(d) For purposes of this section:
(1) Securities related activities are a person's activities as a
broker, a dealer, an underwriter, an investment adviser registered under the Investment
Advisers Act of 1940, as amended, or as an investment adviser to a registered investment
company.
(2) An issuer's gross revenues from its own securities related activities
and from its ratable share of the securities related activities of enterprises of which it
owns 20 percent or more of the voting or equity interest should be considered in determining
the degree to which an issuer is engaged in securities related activities. Such information
may be obtained from the issuer's annual report to shareholders, the issuer's annual reports
or registration statement filed with the Commission, or the issuer's chief financial
officer.
(3) Equity security is as defined in § 240.3a-11 of this
chapter.
(4) Debt security includes all securities other than equity
securities.
(5) Determination of the percentage of an acquiring company's ownership of
any class of outstanding equity securities of an issuer shall be made in accordance with the
procedures described in the rules under § 240.16 of this chapter.
(6) Where an acquiring company is considering acquiring or has acquired
options, warrants, rights, or convertible securities of a securities related business, the
determination required by paragraph (b) of this section shall be made as though such
options, warrants, rights, or conversion privileges had been exercised.
(7) The following transactions will not be deemed to be an acquisition of
securities of a securities related business:
(i) Receipt of stock dividends on securities acquired in compliance with
this section;
(ii) Receipt of securities arising from a stock-for-stock split on
securities acquired in compliance with this section;
(iii) Exercise of options, warrants, or rights acquired in compliance with
this section;
(iv) Conversion of convertible securities acquired in compliance with this
section; and
(v) Acquisition of Demand Features or Guarantees, as these terms are
defined in §§ 270.2a-7(a)(9) and 270.2a-7(a)(16) respectively, provided that, immediately
after the acquisition of any Demand Feature or Guarantee, the company will not, with respect
to 75 percent of the total value of its assets, have invested more than ten percent of the
total value of its assets in securities underlying Demand Features or Guarantees from the
same institution. For the purposes of this section, a Demand Feature or Guarantee will be
considered to be from the party to whom the company will look for a payment of the exercise
price.
(8) Any class or series of an investment company that issues two or more
classes or series of preferred or special stock, each of which is preferred over all other
classes or series with respect to assets specifically allocated to that class or series,
shall be treated as if it is a registered investment company.
(9) Subadviser means an investment adviser as defined in section
2(a)(20)(B) of the Act (15 U.S.C. 80a-2(a)(20)(B)).
[58 FR 49427, Sept. 23, 1993, as amended at 61 FR
13982, Mar. 28, 1996; 62 FR 64986, Dec. 9, 1997; 66 FR 36162, July 11, 2001; 68 FR 3152,
Jan. 22, 2003; 79 FR 47735, Aug. 14, 2014; 80 FR 58123, Sept. 25, 2015]
270.13a-1 — Exemption for change of status by temporarily diversified company.
A change of its subclassification by a registered management company from
that of a diversified company to that of a nondiversified company shall be exempt from the
provisions of section 13(a)(1) of the Act (54 Stat. 811; 15 U.S.C. 80a-13), if such change
occurs under the following circumstances:
(a) Such company was a nondiversified company at the time of its
registration pursuant to section 8(a) (54 Stat. 803; 15 U.S.C. 80a-8), or thereafter legally
became a nondiversified company.
(b) After its registration and within 3 years prior to such change, such
company became a diversified company.
(c) At the time such company became a diversified company, its
registration statement filed pursuant to section 8(b) (54 Stat. 803; 15 U.S.C. 80a-8), as
supplemented and modified by any amendments and reports theretofore filed, did not stated
that the registrant proposed to become a diversified company.
[Rule N-13A-1, 6 FR 3967, Aug. 8,
1941]
270.14a-1 — Use of notification pursuant to regulation E under the Securities Act of 1933.
For the purposes of section 14(a)(3) of the Act, registration of
securities under the Securities Act of 1933 by a small business investment company operating
under the Small Business Investment Act of 1958 shall be deemed to include the filing of a
notification under Rule 604 of Regulation E promulgated under said Act if provision is made
in connection with such notification which in the opinion of the Commission adequately
insures (a) that after the effective date of such notification such company will not issue
any security or receive any proceeds of any subscription for any security until firm
agreements have been made with such company by not more than twenty-five responsible persons
to purchase from it securities to be issued by it for an aggregate net amount which plus the
then net worth of the company, if any, will equal at least $100,000; (b) that said aggregate
net amount will be paid into such company before any subscriptions for such securities will
be accepted from any persons in excess of twenty-five; (c) that arrangements will be made
whereby any proceeds so paid in, as well as any sales load, will be refunded to any
subscriber on demand without any deduction, in the event that the net proceeds so received
by the company do not result in the company having a net worth of at least $100,000 within
ninety days after such notification becomes effective.
[25 FR 3512, Apr. 22, 1960]
270.14a-2 — Exemption from section 14(a) of the Act for certain registered separate accounts and their principal underwriters.
(a) A registered separate account, and any principal underwriter for such
account, shall be exempt from section 14(a) of the Act (15 U.S.C. 80a-14(a)) with respect to
a public offering of variable annuity contracts participating in such account.
(b) Any registered management investment company which has as a promoter an
insurance company and which offers its securities to separate accounts of such insurance
company that offer variable annuity contracts and are registered under the Act as unit
investment trusts (“trust accounts”), and any principal underwriter for such investment
company, shall be exempt from section 14(a) with respect to such offering and to the
offering of such securities to trust accounts of other insurance companies.
(c) Any registered management investment company exempt from section 14(a) of the Act
pursuant to paragraph (b) of this section shall be exempt from sections 15(a), 16(a), and
32(a)(2) of the Act (15 U.S.C. 80a-15(a), 80a-16(a), and 80a-31(a)(2)), to the extent
prescribed in §§ 270.15a-3, 270.16a-1, and 270.32a-2 (Rules 15a-3, 16a-1, and 32a-2 under
the Act), provided that such investment company complies with the conditions set forth in
Rules 15a-3, 16a-1, and 32a-2 as if it were a separate account.
[49 FR 1479, Jan. 12, 1984; as amended at 85 FR 25964, May 1, 2020]
270.14a-3 — Exemption from section 14(a) of the Act for certain registered unit investment trusts and their principal underwriters.
(a) A registered unit investment trust (hereinafter referred to as the
“Trust”) engaged exclusively in the business of investing in eligible trust securities, and
any principal underwriter for the Trust, shall be exempt from section 14(a) of the Act with
respect to a public offering of Trust units: Provided, That:
(1) At the commencement of such offering the Trust holds at least $100,000
principal amount of eligible trust securities (or delivery statements relating to contracts
for the purchase of any such securities which, together with cash or an irrevocable letter
of credit issued by a bank in the amount required for their purchase, are held by the Trust
for purchase of the securities);
(2) If, within ninety days from the time that the Trust's registration
statement has become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.) the
net worth of the Trust declines to less than $100,000 or the Trust is terminated, the
sponsor for the Trust shall —
(i) Refund, on demand and without deduction, all sales charges to any
unitholders who purchased Trust units from the sponsor (or from any underwriter or dealer
participating in the distribution), and
(ii) Liquidate the eligible trust securities held by the Trust and
distribute the proceeds thereof to the unitholders of the Trust;
(3) The sponsor instructs the trustee when the eligible trust securities
are deposited in the Trust that, in the event that redemptions by the sponsor or any
underwriter of units constituting a part of the unsold units results in the Trust having a
net worth of less than 40 percent of the principal amount of the eligible trust securities
(or delivery statements relating to contracts for the purchase of any such securities which,
together with cash or an irrevocable letter of credit issued by a bank in the amount
required for their purchase, are held by the Trust for purchase of the securities) initially
deposited in the Trust —
(i) The trustee shall terminate the Trust and distribute the assets
thereof to the unitholders of the Trust, and
(ii) The sponsor for the Trust shall refund, on demand and without
deduction, all sales charges to any unitholder who purchased Trust units from the sponsor or
from any underwriter or dealer participating in the distribution.
(b) For the purposes of determining the availability of the exemption
provided by the foregoing subsection, the term “eligible trust securities” shall mean:
(1) Securities (other than convertible securities) which are issued by a
corporation and which have their interest or dividend rate fixed at the time they are
issued;
(2) Interest bearing obligations issued by a state, or by any agency,
instrumentality, authority or political subdivision thereof;
(3) Government securities; and
(4) Units of a previously issued series of the Trust: Provided,
That:
(i) The aggregate principal amount of units of existing series so
deposited shall not exceed 10% of the aggregate principal amount of the portfolio of the new
series;
(ii) The aggregate principal amount of units of any particular existing
series so deposited shall not exceed 5% of the aggregate principal amount of the portfolio
of the new series;
(iii) No units shall be so deposited which do not substantially meet
investment quality criteria at least as high as those applicable to the new series in which
such units are deposited;
(iv) The value of the eligible trust securities underlying units of an
existing series deposited in a new series shall not, by reason of maturity of such
securities according to their terms within ten years following the date of deposit, be
reduced sufficiently for such existing series to be voluntarily terminated;
(v) Units of existing series so deposited shall constitute units purchased
by the sponsor as market maker and not remaining unsold units from the original distribution
of such units; and
(vi) The sponsor shall deposit units of existing series in the new series
without a sales charge.
(Secs. 6(c) and 38(a) (15 U.S.C. 80a-6(c) and 15 U.S.C. 80a-37(a)))
[44 FR 29646, May 22, 1979; 44 FR 40064, July 9,
1979]
270.15a-1 — Exemption from stockholders' approval of certain small investment advisory contracts.
An investment adviser of a registered investment company shall be exempt
from the requirement of sections 15(a) and 15(e) of the Act (54 Stat. 812; 15 U.S.C. 80a-15)
that the written contract pursuant to which he acts shall have been approved by the vote of
a majority of the outstanding votingsecurities of such company, if the following conditions
are met:
(a) Such investment adviser is not an affiliated person of such company
(except as investment adviser) nor of any principal underwriter for such company.
(b) His compensation as investment adviser of such company in any fiscal
year of the company during which any such contract is in effect either (1) is not more than
$100 or (2) is not more than $2,500 and not more than 1/40 of 1 percent of the value of the
company's net assets averaged over the year or taken as of a definite date or dates within
the year.
(c) The aggregate compensation of all investment advisers of such company
exempted pursuant to this section in any fiscal year of the company either (1) is not more
than $200 or (2) is not more than 1/20 of 1 percent of the value of the company's net assets
averaged over the year or taken as of a definite date or dates within the year.
[Rule N-15A-1, 6 FR 2275, Jan. 8,
1944]
270.15a-2 — Annual continuance of contracts.
(a) For purposes of sections 15(a) and 15(b) of the Act, the continuance
of a contract for a period more than two years after the date of its execution shall be
deemed to have been specifically approved at least annually by the board of directors or by
a vote of a majority of the outstanding voting securities of a registered investment company
if such approval occurs:
(1) With respect to the first continuance of a contract, during the 90
days prior to and including the earlier of (i) the date specified in such contract for its
termination in the absence of such approval, or (ii) the second anniversary of the date upon
which such contract was executed; or
(2) With respect to any subsequent continuance of a contract, during the
90 days prior to and including the first anniversary of the date upon which the most recent
previous annual continuance of such contract became effective.
(b) The provisions of paragraph (a) of this section shall not apply to any
continuance of a contract which shall have been approved not later than 90 days after the
date of adoption of this section, provided that such contract shall expire, by its terms,
not later than 17 months from the date of adoption of this section.
Note:
This section does not establish the exclusive method of
complying with the Act. It provides one procedure by which a registered
investment company may comply with the applicable provisions of sections 15(a)
and 15(b) of the Act; it does not preclude any other appropriate procedure. Any
annual continuance of a contract approved in accordance with the provisions of
paragraph (a)(1) or (a)(2) of § 270.15a-2 will constitute a renewal of such
contract for the purposes of section 15(c) of the Act, and therefore such
renewal must be approved by the disinterested directors within the times
specified in the section for a continuance.
|
[41 FR 41911, Sept. 24, 1976]
270.15a-3 — Exemption for initial period of investment adviser of certain registered separate accounts from requirement of security holder approval of investment advisory contract.
(a) An investment adviser of a registered separate account shall be exempt
from the requirement under section 15(a) of the Act that the initial written contract
pursuant to which the investment adviser serves or acts shall have been approved by the vote
of a majority of the outstanding voting securities of such registered separate account,
subject to the following conditions:
(1) Such registered separate account qualifies for exemption from section
14(a) of the Act pursuant to § 270.14a-2, or is exempt therefrom by order of the Commission
upon application; and
(2) Such written contract shall be submitted to a vote of variable annuity
contract owners at their first meeting after the effective date of the registration
statement under the Securities Act of 1933, as amended (15 U.S.C. 77a et seq.) relating to
variable annuity contracts participating in such account: Provided, That such meeting
shall take place within 1 year after such effective date, unless the time for the holding of
such meeting shall be extended by the Commission upon written request showing good cause
therefor.
(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)
[34 FR 12695, Aug. 5, 1969]
270.15a-4 — Temporary exemption for certain investment advisers.
(a) For purposes of this section:
(1) Fund means an investment company, and includes a separate
series of the company.
(2) Interim contract means a written investment advisory
contract:
(i) That has not been approved by a majority of the fund's outstanding
voting securities; and
(ii) That has a duration no greater than 150 days following the date on
which the previous contract terminates.
(3) Previous contract means an investment advisory contract that
has been approved by a majority of the fund's outstanding voting securities and has been
terminated.
(b) Notwithstanding section 15(a) of the Act (15 U.S.C. 80a-15(a)), a
person may act as investment adviser for a fund under an interim contract after the
termination of a previous contract as provided in paragraphs (b)(1) or (b)(2) of this
section:
(1) In the case of a previous contract terminated by an event described in
section 15(a)(3) of the Act (15 U.S.C. 80a-15(a)(3)), by the failure to renew the previous
contract, or by an assignment (other than an assignment by an investment adviser or a
controlling person of the investment adviser in connection with which assignment the
investment adviser or a controlling person directly or indirectly receives money or other
benefit):
(i) The compensation to be received under the interim contract is no
greater than the compensation the adviser would have received under the previous contract;
and
(ii) The fund's board of directors, including a majority of the directors
who are not interested persons of the fund, has approved the interim contract within 10
business days after the termination, at a meeting in which directors may participate by any
means of communication that allows all directors participating to hear each other
simultaneously during the meeting.
(2) In the case of a previous contract terminated by an assignment by an
investment adviser or a controlling person of the investment adviser in connection with
which assignment the investment adviser or a controlling person directly or indirectly
receives money or other benefit:
(i) The compensation to be received under the interim contract is no
greater than the compensation the adviser would have received under the previous
contract;
(ii) The board of directors, including a majority of the directors who are
not interested persons of the fund, has voted in person to approve the interim contract
before the previous contract is terminated;
(iii) The board of directors, including a majority of the directors who
are not interested persons of the fund, determines that the scope and quality of services to
be provided to the fund under the interim contract will be at least equivalent to the scope
and quality of services provided under the previous contract;
(iv) The interim contract provides that the fund's board of directors or a
majority of the fund's outstanding voting securities may terminate the contract at any time,
without the payment of any penalty, on not more than 10 calendar days' written notice to the
investment adviser;
(v) The interim contract contains the same terms and conditions as the
previous contract, with the exception of its effective and termination dates, provisions
governed by paragraphs (b)(2)(i), (b)(2)(iv), and (b)(2)(vi) of this section, and any other
differences in terms and conditions that the board of directors, including a majority of the
directors who are not interested persons of the fund, finds to be immaterial;
(vi) The interim contract contains the following provisions:
(A) The compensation earned under the contract will be held in an
interest-bearing escrow account with the fund's custodian or a bank;
(B) If a majority of the fund's outstanding voting securities approve a
contract with the investment adviser by the end of the 150-day period, the amount in the
escrow account (including interest earned) will be paid to the investment adviser; and
(C) If a majority of the fund's outstanding voting securities do not
approve a contract with the investment adviser, the investment adviser will be paid, out of
the escrow account, the lesser of:
(1) Any costs incurred in performing the interim contract (plus
interest earned on that amount while in escrow); or
(2) The total amount in the escrow account (plus interest earned);
and
(vii) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0-1(a)(7).
[64 FR 68023, Dec. 6, 1999, as amended 66 FR
3758, Jan. 16, 2001; 69 FR 46389, Aug. 2, 2004]
270.16a-1 — Exemption for initial period of directors of certain registered accounts from requirements of election by security holders.
(a) Persons serving as the directors of a registered separate account
shall, prior to the first meeting of such account's variable annuity contract owners, be
exempt from the requirement of section 16(a) of the Act that such persons be elected by the
holders of outstanding voting securities of such account at an annual or special meeting
called for that purpose, subject to the following conditions:
(1) Such registered separate account qualifies for exemption from section
14(a) of the Act pursuant to § 270.14a-1 or is exempt therefrom by order of the Commission
upon application; and
(2) Such persons have been appointed directors of such account by the
establishing insurance company; and
(3) An election of directors for such account shall be held at the first
meeting of variable annuity contract owners after the effective date of the registration
statement under the Securities Act of 1933, as amended (15 U.S.C. 77a et seq.), relating to
contracts participating in such account: Provided, That such meeting shall take place
within 1 year after such effective date, unless the time for the holding of such meeting
shall be extended by the Commission upon written request showing good cause therefor.
(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)
[34 FR 12695, Aug. 5, 1969]
270.17a-1 — Exemption of certain underwriting transactions exempted by § 270.10f-1.
Any transaction exempted pursuant to § 270.10f-1 shall be exempt from the
provisions of section 17(a)(1) of the Act (54 Stat. 815; 15 U.S.C. 80a-17).
[Rule N-17A-1, 6 FR 1191, Feb. 28,
1941]
270.17a-2 — Exemption of certain purchase, sale, or borrowing transactions.
Purchase, sale or borrowing transactions occurring in the usual course of
business between affiliated persons of registered investment companies shall be exempt from
section 17(a) of the Act provided (a) the transactions involve notes, drafts, time payment
contracts, bills of exchange, acceptance or other property of a commercial character rather
than of an investment character; (b) the buyer or lender is a bank; and (c) the seller or
borrower is a bank or is engaged principally in the business of installment financing.
[Rule N-17A-2, 12 FR 5008, July 29,
1947]
270.17a-3 — Exemption of transactions with fully owned subsidiaries.
(a) The following transactions shall be exempt from section 17(a) of the
Act:
(1) Transactions solely between a registered investment company and one or
more of its fully owned subsidiaries or solely between two or more fully owned subsidiaries
of such company.
(2) Transactions solely between any subsidiary of a registered investment
company and one or more fully owned subsidiaries of such subsidiary or solely between two or
more fully owned subsidiaries of such subsidiary.
(b) The term fully owned subsidiary as used in this section, means
a subsidiary (1) all of whose outstanding securities, other than directors' qualifying
shares, are owned by its parent and/or the parent's other fully owned subsidiaries, and (2)
which is not indebted to any person other than its parent and/or the parent's other fully
owned subsidiaries in an amount which is material in relation to the particular subsidiary,
excepting (i) indebtedness incurred in the ordinary course of business which is not overdue
and which matures within one year from the date of its creation, whether evidenced by
securities or not, and (ii) any other indebtedness to one or more banks or insurance
companies.
[Rule N-17A-3, 12 FR 3442, May 28,
1947]
270.17a-4 — Exemption of transactions pursuant to certain contracts.
Transactions pursuant to a contract shall be exempt from section 17(a) of
the Act if at the time of the making of the contract and for a period of at least six months
prior thereto no affiliation or other relationship existed which would operate to make such
contract or the subsequent performance thereof subject to the provisions of said section
17(a).
[Rule N-17A-4, 12 FR 5008, July 29,
1947]
270.17a-5 — Pro rata distribution neither “sale” nor “purchase.”
When a company makes a pro rata distribution in cash or in kind among its
common stockholders without giving any election to any stockholder as to the specific assets
which such stockholders shall receive, such distribution shall not be deemed to involve a
sale to or a purchase from such distributing company as those terms are used in section
17(a) of the Act.
[20 FR 7447, Oct. 6, 1955]
270.17a-6 — Exemption for transactions with portfolio affiliates.
(a) Exemption for transactions with portfolio affiliates. A
transaction to which a fund, or a company controlled by a fund, and a portfolio affiliate of
the fund are parties is exempt from the provisions of section 17(a) of the Act (15 U.S.C.
80a-17(a)), provided that none of the following persons is a party to the transaction, or
has a direct or indirect financial interest in a party to the transaction other than the
fund:
(1) An officer, director, employee, investment adviser, member of an
advisory board, depositor, promoter of or principal underwriter for the fund;
(2) A person directly or indirectly controlling the fund;
(3) A person directly or indirectly owning, controlling or holding with
power to vote five percent or more of the outstanding voting securities of the fund;
(4) A person directly or indirectly under common control with the fund,
other than:
(i) A portfolio affiliate of the fund; or
(ii) A fund whose sole interest in the transaction or a party to the
transaction is an interest in the portfolio affiliate; or
(5) An affiliated person of any of the persons mentioned in paragraphs
(a)(1)-(4) of this section, other than the fund or a portfolio affiliate of the fund.
(b) Definitions — (1) Financial interest. (i) The term
financial interest as used in this section does not include:
(A) Any interest through ownership of securities issued by the fund;
(B) Any interest of a wholly-owned subsidiary of a fund;
(C) Usual and ordinary fees for services as a director;
(D) An interest of a non-executive employee;
(E) An interest of an insurance company arising from a loan or policy made
or issued by it in the ordinary course of business to a natural person;
(F) An interest of a bank arising from a loan or account made or
maintained by it in the ordinary course of business to or with a natural person, unless it
arises from a loan to a person who is an officer, director or executive of a company which
is a party to the transaction, or from a loan to a person who directly or indirectly owns,
controls, or holds with power to vote, five percent or more of the outstanding voting
securities of a company which is a party to the transaction;
(G) An interest acquired in a transaction described in paragraph (d)(3) of
§ 270.17d-1; or
(H) Any other interest that the board of directors of the fund, including
a majority of the directors who are not interested persons of the fund, finds to be not
material, provided that the directors record the basis for that finding in the minutes of
their meeting.
(ii) A person has a financial interest in any party in which it has a
financial interest, in which it had a financial interest within six months prior to the
transaction, or in which it will acquire a financial interest pursuant to an arrangement in
existence at the time of the transaction.
(2) Fund means a registered investment company or separate series
of a registered investment company.
(3) Portfolio affiliate of a fund means a person that is an
affiliated person (or an affiliated person of an affiliated person) of a fund solely because
the fund, a fund under common control with the fund, or both:
(i) Controls such person (or an affiliated person of such person); or
(ii) Owns, controls, or holds with power to vote five percent or more of
the outstanding voting securities of such person (or an affiliated person of such
person).
[68 FR 3153, Jan. 22, 2003]
270.17a-7 — Exemption of certain purchase or sale transactions between an investment company and certain affiliated persons thereof.
A purchase or sale transaction between registered investment companies or
separate series of registered investment companies, which are affiliated persons, or
affiliated persons of affiliated persons, of each other, between separate series of a
registered investment company, or between a registered investment company or a separate
series of a registered investment company and a person which is an affiliated person of such
registered investment company (or affiliated person of such person) solely by reason of
having a common investment adviser or investment advisers which are affiliated persons of
each other, common directors, and/or common officers, is exempt from section 17(a) of the
Act; Provided, That:
(a) The transaction is a purchase or sale, for no consideration other than
cash payment against prompt delivery of a security for which market quotations are readily
available;
(b) The transaction is effected at the independent current market price of
the security. For purposes of this paragraph the “current market price” shall be:
(1) If the security is an “NMS stock” as that term is defined in 17 CFR
242.600, the last sale price with respect to such security reported in the consolidated
transaction reporting system (“consolidated system”) or the average of the highest current
independent bid and lowest current independent offer for such security (reported pursuant to
17 CFR 242.602) if there are no reported transactions in the consolidated system that day;
or
(2) If the security is not a reported security, and the principal market
for such security is an exchange, then the last sale on such exchange or the average of the
highest current independent bid and lowest current independent offer on such exchange if
there are no reported transactions on such exchange that day; or
(3) If the security is not a reported security and is quoted in the NASDAQ
System, then the average of the highest current independent bid and lowest current
independent offer reported on Level 1 of NASDAQ; or
(4) For all other securities, the average of the highest current
independent bid and lowest current independent offer determined on the basis of reasonable
inquiry;
(c) The transaction is consistent with the policy of each registered
investment company and separate series of a registered investment company participating in
the transaction, as recited in its registration statement and reports filed under the
Act;
(d) No brokerage commission, fee (except for customary transfer fees), or
other remuneration is paid in connection with the transaction;
(e) The board of directors of the investment company, including a majority
of the directors who are not interested persons of such investment company,
(1) Adopts procedures pursuant to which such purchase or sale transactions
may be effected for the company, which are reasonably designed to provide that all of the
conditions of this section in paragraphs (a) through (d) have been complied with,
(2) Makes and approves such changes as the board deems necessary, and
(3) Determines no less frequently than quarterly that all such purchases
or sales made during the preceding quarter were effected in compliance with such
procedures;
(f) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0-1(a)(7); and
(g) The investment company (1) maintains and preserves permanently in an
easily accessible place a written copy of the procedures (and any modifications thereto)
described in paragraph (e) of this section, and (2) maintains and preserves for a period not
less than six years from the end of the fiscal year in which any transactions occurred, the
first two years in an easily accessible place, a written record of each such transaction
setting forth a description of the security purchased or sold, the identity of the person on
the other side of the transaction, the terms of the purchase or sale transaction, and the
information or materials upon which the determinations described in paragraph (e)(3) of this
section were made.
[46 FR 17013, Mar. 17, 1981, as amended at 58 FR
49921, Sept. 24, 1993; 66 FR 3758, Jan. 16, 2001; 69 FR 46389, Aug. 2, 2004; 70 FR 37632,
June 29, 2005]
270.17a-8 — Mergers of affiliated companies.
(a) Exemption of affiliated mergers. A Merger of a registered
investment company (or a series thereof) and one or more other registered investment
companies (or series thereof) or Eligible Unregistered Funds is exempt from sections
17(a)(1) and (2) of the Act (15 U.S.C. 80a-17(a)(1)-(2)) if:
(1) Surviving company. The Surviving Company is a registered
investment company (or a series thereof).
(2) Board determinations. As to any registered investment company
(or series thereof) participating in the Merger (“Merging Company”):
(i) The board of directors, including a majority of the directors who are
not interested persons of the Merging Company or of any other company or series
participating in the Merger, determines that:
(A) Participation in the Merger is in the best interests of the Merging
Company; and
(B) The interests of the Merging Company's existing shareholders will not
be diluted as a result of the Merger.
Note to paragraph (a)(2)(i):
For a discussion of factors that may be relevant to the
determinations in paragraph (a)(2)(i) of this section, see Investment Company
Act Release No. 25666, July 18, 2002.
|
(ii) The directors have requested and evaluated such information as may
reasonably be necessary to their determinations in paragraph (a)(2)(i) of this section, and
have considered and given appropriate weight to all pertinent factors.
(iii) The directors, in making the determination in paragraph (a)(2)(i)(B)
of this section, have approved procedures for the valuation of assets to be conveyed by each
Eligible Unregistered Fund participating in the Merger. The approved procedures provide for
the preparation of a report by an Independent Evaluator, to be considered in assessing the
value of any securities (or other assets) for which market quotations are not readily
available, that sets forth the fair value of each such asset as of the date of the
Merger.
(iv) The determinations required in paragraph (a)(2)(i) of this section
and the bases thereof, including the factors considered by the directors pursuant to
paragraph (a)(2)(ii) of this section, are recorded fully in the minute books of the Merging
Company.
(3) Shareholder approval. Participation in the Merger is approved
by the vote of a majority of the outstanding voting securities (as provided in section
2(a)(42) of the Act (15 U.S.C. 80a-2(a)(42))) of any Merging Company that is not a Surviving
Company, unless —
(i) No policy of the Merging Company that under section 13 of the Act (15
U.S.C. 80a-13) could not be changed without a vote of a majority of its outstanding voting
securities, is materially different from a policy of the Surviving Company;
(ii) No advisory contract between the Merging Company and any investment
adviser thereof is materially different from an advisory contract between the Surviving
Company and any investment adviser thereof, except for the identity of the investment
companies as a party to the contract;
(iii) Directors of the Merging Company who are not interested persons of
the Merging Company and who were elected by its shareholders, will comprise a majority of
the directors of the Surviving Company who are not interested persons of the Surviving
Company; and
(iv) Any distribution fees (as a percentage of the fund's average net
assets) authorized to be paid by the Surviving Company pursuant to a plan adopted in
accordance with § 270.12b-1 are no greater than the distribution fees (as a percentage of
the fund's average net assets) authorized to be paid by the Merging Company pursuant to such
a plan.
(4) Board composition. The board of directors of the Merging
Company satisfies the fund governance standards defined in § 270.0-1(a)(7).
(5) Merger records. Any Surviving Company preserves written records
that describe the Merger and its terms for six years after the Merger (and for the first two
years in an easily accessible place).
(b) Definitions. For purposes of this section:
(1) Merger means the merger, consolidation, or purchase or sale of
substantially all of the assets between a registered investment company (or a series
thereof) and another company;
(2) Eligible Unregistered Fund means:
(i) A collective trust fund, as described in section 3(c)(11) of the Act
(15 U.S.C. 80a-3(c)(11));
(ii) A common trust fund or similar fund, as described in section 3(c)(3)
of the Act (15 U.S.C. 80a-3(c)(3)); or
(iii) A separate account, as described in section 2(a)(37) of the Act (15
U.S.C. 80a-2(a)(37)), that is neither registered under section 8 of the Act, nor required to
be so registered;
(3) Independent Evaluator means a person who has expertise in the
valuation of securities and other financial assets and who is not an interested person, as
defined in section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)), of the Eligible
Unregistered Fund or any affiliate thereof except the Merging Company; and
(4) Surviving Company means a company in which shareholders of a
Merging Company will obtain an interest as a result of a Merger.
[67 FR 48518, July 24, 2002, as amended at 69 FR
46389, Aug. 2, 2004]
270.17a-9 — Purchase of certain securities from a money market fund by an affiliate, or an affiliate of an affiliate.
The purchase of a security from the portfolio of an open-end investment
company holding itself out as a money market fund by any affiliated person or promoter of or
principal underwriter for the money market fund or any affiliated person of such person
shall be exempt from section 17(a) of the Act (15 U.S.C. 80a-17(a)); provided that:
(a) In the case of a portfolio security that has ceased to be an Eligible
Security (as defined in § 270.2a-7(a)(12)), or has defaulted (other than an immaterial
default unrelated to the financial condition of the issuer):
(1) The purchase price is paid in cash; and
(2) The purchase price is equal to the greater of the amortized cost of
the security or its market price (in each case, including accrued interest).
(b) In the case of any other portfolio security:
(1) The purchase price meets the requirements of paragraph (a)(1) and (2)
of this section; and
(2) In the event that the purchaser thereafter sells the security for a
higher price than the purchase price paid to the money market fund, the purchaser shall
promptly pay to the fund the amount by which the subsequent sale price exceeds the purchase
price paid to the fund.
[75 FR 10117, Mar. 4, 2010]
270.17a-10 — Exemption for transactions with certain subadvisory affiliates.
(a) Exemption. A person that is prohibited by section 17(a) of the
Act (15 U.S.C. 80a-17(a)) from entering into a transaction with a fund solely because such
person is, or is an affiliated person of, a subadviser of the fund, or a subadviser of a
fund that is under common control with the fund, may nonetheless enter into such
transaction, if:
(1) Prohibited relationship. The person is not, and is not an
affiliated person of, an investment adviser responsible for providing advice with respect to
the portion of the fund for which the transaction is entered into, or of any promoter,
underwriter, officer, director, member of an advisory board, or employee of the fund.
(2) Prohibited conduct. The advisory contracts of the subadviser
that is (or whose affiliated person is) entering into the transaction, and any subadviser
that is advising the fund (or portion of the fund) entering into the transaction:
(i) Prohibit them from consulting with each other concerning transactions
for the fund in securities or other assets; and
(ii) If both such subadvisers are responsible for providing investment
advice to the fund, limit the subadvisers' responsibility in providing advice with respect
to a discrete portion of the fund's portfolio.
(b) Definitions. (1) Fund means a registered investment
company and includes a separate series of a registered investment company.
(2) Subadviser means an investment adviser as defined in section
2(a)(20)(B) of the Act (15 U.S.C. 80a-2(a)(20)(B)).
[68 FR 3153, Jan. 22, 2003]
270.17d-1 — Applications regarding joint enterprises or arrangements and certain profit-sharing plans.
(a) No affiliated person of or principal underwriter for any registered
investment company (other than a company of the character described in section 12(d)(3) (A)
and (B) of the Act) and no affiliated person of such a person or principal underwriter,
acting as principal, shall participate in, or effect any transaction in connection with, any
joint enterprise or other joint arrangement or profit-sharing plan in which any such
registered company, or a company controlled by such registered company, is a participant,
and which is entered into, adopted or modified subsequent to the effective date of this
rule, unless an application regarding such joint enterprise, arrangement or profit-sharing
plan has been filed with the Commission and has been granted by an order entered prior to
the submission of such plan or modification to security holders for approval, or prior to
such adoption or modification if not so submitted, except that the provisions of this rule
shall not preclude any affiliated person from acting as manager of any underwriting
syndicate or other group in which such registered or controlled company is a participant and
receiving compensation therefor.
(b) In passing upon such applications, the Commission will consider
whether the participation of such registered or controlled company in such joint enterprise,
joint arrangement or profit-sharing plan on the basis proposed is consistent with the
provisions, policies and purposes of the Act and the extent to which such participation is
on a basis different from or less advantageous than that of other participants.
(c) “Joint enterprise or other joint arrangement or profit-sharing plan”
as used in this section shall mean any written or oral plan, contract, authorization or
arrangement, or any practice or understanding concerning an enterprise or undertaking
whereby a registered investment company or a controlled company thereof and any affiliated
person of or a principal underwriter for such registered investment company, or any
affiliated person of such a person or principal underwriter, have a joint or a joint and
several participation, or share in the profits of such enterprise or undertaking, including,
but not limited to, any stock option or stock purchase plan, but shall not include an
investment advisory contract subject to section 15 of the Act.
(d) Notwithstanding the requirements of paragraph (a) of this section, no
application need be filed pursuant to this section with respect to any of the following:
(1) Any profit-sharing, stock option or stock purchase plan provided by
any controlled company which is not an investment company for its officers, directors or
employees, or the purchase of stock or the granting, modification or exercise of options
pursuant to such a plan, provided:
(i) No individual participates therein who is either:
(a) An affiliated person of any investment company which is an
affiliated person of such controlled company; or
(b) An affiliated person of the investment adviser or principal
underwriter of such investment company; and
(ii) No participant has been an affiliated person of such investment
company, its investment adviser or principal underwriter during the life of the plan and for
six months prior to, as the case may be:
(a) Institution of the profit-sharing plan;
(b) The purchase of stock pursuant to a stock purchase plan; or
(c) The granting of any options pursuant to a stock option
plan.
(2) Any plan provided by any registered investment company or any
controlled company for its officers or employees if such plan has been qualified under
section 401 of the Internal Revenue Code of 1954 and all contributions paid under said plan
by the employer qualify as deductible under section 404 of said Code.
(3) Any loan or advance of credit to, or acquisition of securities or
other property of, a small business concern, or any agreement to do any of the foregoing
(“Investments”), made by a bank and a small business investment company (SBIC) licensed
under the Small Business Investment Act of 1958, whether such transactions are
contemporaneous or separated in time, where the bank is an affiliated person of either (i)
the SBIC or (ii) an affiliated person of the SBIC; but reports containing pertinent details
as to Investments and transactions relating thereto shall be made at such time, on such
forms and by such persons as the Commission may from time to time prescribe.
(4) The issuance by a registered investment company which is licensed by
the Small Business Administration pursuant to the Small Business Investment Act of 1958 of
stock options which qualify under section 422 of the Internal Revenue Code, as amended, and
which conform to § 107.805(b) of Chapter I of Title 13 of the Code of Federal
Regulations.
(5) Any joint enterprise or other joint arrangement or profit-sharing plan
(“joint enterprise”) in which a registered investment company or a company controlled by
such a company, is a participant, and in which a portfolio affiliate (as defined in §
270.17a-6(b)(3)) of such registered investment company is also a participant, provided
that:
(i) None of the persons identified in § 270.17a-6(a) is a participant in
the joint enterprise, or has a direct or indirect financial interest in a participant in the
joint enterprise (other than the registered investment company);
(ii) Financial interest. (A) The term financial interest as
used in this section does not include:
(1) Any interest through ownership of securities issued by the
registered investment company;
(2) Any interest of a wholly owned subsidiary of the registered
investment company;
(3) Usual and ordinary fees for services as a director;
(4) An interest of a non-executive employee;
(5) An interest of an insurance company arising from a loan or
policy made or issued by it in the ordinary course of business to a natural person;
(6) An interest of a bank arising from a loan to a person who is an
officer, director, or executive of a company which is a participant in the joint transaction
or from a loan to a person who directly or indirectly owns, controls, or holds with power to
vote, five percent or more of the outstanding voting securities of a company which is a
participant in the joint transaction;
(7) An interest acquired in a transaction described in paragraph
(d)(3) of this section; or
(8) Any other interest that the board of directors of the
investment company, including a majority of the directors who are not interested persons of
the investment company, finds to be not material, provided that the directors record the
basis for that finding in the minutes of their meeting.
(B) A person has a financial interest in any party in which it has a
financial interest, in which it had a financial interest within six months prior to the
investment company's participation in the enterprise, or in which it will acquire a
financial interest pursuant to an arrangement in existence at the time of the investment
company's participation in the enterprise.
(6) The receipt of securities and/or cash by an investment company or a
controlled company thereof and an affiliated person of such investment company or an
affiliated person of such person pursuant to a plan of reorganization: Provided, That
no person identified in § 270.17a-6(a)(1) or any company in which such a person has a direct
or indirect financial interest (as defined in paragraph (d)(5)(ii) of this section):
(i) Has a direct or indirect financial interest in the corporation under
reorganization, except owning securities of each class or classes owned by such investment
company or controlled company;
(ii) Receives pursuant to such plan any securities or other property,
except securities of the same class and subject to the same terms as the securities received
by such investment company or controlled company, and/or cash in the same proportion as is
received by the investment company or controlled company based on securities of the company
under reorganization owned by such persons; and
(iii) Is, or has a direct or indirect financial interest in any person
(other than such investment company or controlled company) who is:
(A) Purchasing assets from the company under reorganization; or
(B) Exchanging shares with such person in a transaction not in compliance
with the standards described in this paragraph (d)(6).
(7) Any arrangement regarding liability insurance policies (other than a
bond required pursuant to rule 17g-1 (§ 270.17g-1) under the Act); Provided, That
(i) The investment company's participation in the joint liability
insurance policy is in the best interests of the investment company;
(ii) The proposed premium for the joint liability insurance policy to be
allocated to the investment company, based upon its proportionate share of the sum of the
premiums that would have been paid if such insurance coverage were purchased separately by
the insured parties, is fair and reasonable to the investment company;
(iii) The joint liability insurance policy does not exclude coverage for
bona fide claims made against any director who is not an interested person of the investment
company, or against the investment company if it is a co-defendant in the claim with the
disinterested director, by another person insured under the joint liability insurance
policy;
(iv) The board of directors of the investment company, including a
majority of the directors who are not interested persons with respect thereto, determine no
less frequently than annually that the standards described in paragraphs (d)(7)(i) and (ii)
of this section have been satisfied; and
(v) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0-1(a)(7).
(8) An investment adviser's bearing expenses in connection with a merger,
consolidation or purchase or sale of substantially all of the assets of a company which
involves a registered investment company of which it is an affiliated person.
[22 FR 426, Jan. 23, 1957, as amended at 26 FR
11240, Nov. 29, 1961; 35 FR 13123, Aug. 18, 1970; 39 FR 37973, Oct. 25, 1974; 44 FR 58503,
Oct. 10, 1979; 44 FR 58908, Oct. 12, 1979; 45 FR 12409, Feb. 26, 1980; 66 FR 3758, Jan.
16, 2001; 68 FR 3153, Jan. 22, 2003; 69 FR 46389, Aug. 2, 2004, 78 FR 79298, Dec. 30,
2013]
270.17d-2 — Form for report by small business investment company and affiliated bank.
Form N-17D-1 is hereby prescribed as the form for reports required by
paragraph (d)(3) of § 270.17d-1.
[26 FR 11240, Nov. 29, 1961]
270.17d-3 — Exemption relating to certain joint enterprises or arrangements concerning payment for distribution of shares of a registered open-end management investment company.
An affiliated person of, or principal underwriter for, a registered
open-end management investment company and an affiliated person of such a person or
principal underwriter shall be exempt from section 17(d) of the Act (15 U.S.C. 80a-17(d))
and rule 17d-1 thereunder (17 CFR 270.17d-1), to the extent necessary to permit any such
person or principal underwriter to enter into a written agreement with such company whereby
the company will make payments in connection with the distribution of its shares,
Provided, That:
(a) Such agreement is made in compliance with the provisions of §
270.12b-1; and
(b) No other registered management investment company which is either an
affiliated person of such company or an affiliated person of such a person is a party to
such agreement.
[45 FR 73905, Nov. 7, 1980]
270.17e-1 — Brokerage transactions on a securities exchange.
For purposes of section 17(e)(2)(A) of the Act [15 U.S.C.
80a-17(e)(2)(A)], a commission, fee or other remuneration shall be deemed as not exceeding
the usual and customary broker's commission, if:
(a) The commission, fee, or other remuneration received or to be received
is reasonable and fair compared to the commission, fee or other remuneration received by
other brokers in connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time;
(b) The board of directors, including a majority of the directors of the
investment company who are not interested persons thereof:
(1) Has adopted procedures which are reasonably designed to provide that
such commission, fee, or other remuneration is consistent with the standard described in
paragraph (a) of this section;
(2) Makes and approves such changes as the board deems necessary; and
(3) Determines no less frequently than quarterly that all transactions
effected pursuant to this section during the preceding quarter (other than transactions in
which the person acting as broker is a person permitted to enter into a transaction with the
investment company by § 270.17a-10) were effected in compliance with such procedures;
(c) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0-1(a)(7); and
(d) The investment company:
(1) Shall maintain and preserve permanently in an easily accessible place
a copy of the procedures (and any modification thereto) described in paragraph (b)(1) of
this section; and
(2) Shall maintain and preserve for a period not less than six years from
the end of the fiscal year in which any transactions occurred, the first two years in an
easily accessible place, a record of each such transaction (other than any transaction in
which the person acting as broker is a person permitted to enter into a transaction with the
investment company by § 270.17a-10) setting forth the amount and source of the commission,
fee or other remuneration received or to be received, the identity of the person acting as
broker, the terms of the transaction, and the information or materials upon which the
findings described in paragraph (b)(3) of this section were made.
[44 FR 37203, June 26, 1979, as amended at 58 FR
49921, Sept. 24, 1993; 66 FR 3759, Jan. 16, 2001; 68 FR 3154, Jan. 22, 2003; 69 FR 46389,
Aug. 2, 2004]
270.17f-1 — Custody of securities with members of national securities exchanges.
(a) No registered management investment company shall place or maintain
any of its securities or similar investments in the custody of a company which is a member
of a national securities exchange as defined in the Securities Exchange Act of 1934 (whether
or not such company trades in securities for its own account) except pursuant to a written
contract which shall have been approved, or if executed before January 1, 1941, shall have
been ratified not later than that date, by a majority of the board of directors of such
investment company.
(b) The contract shall require, and the securities and investments shall
be maintained in accordance with the following:
(1) The securities and similar investments held in such custody shall at
all times be individually segregated from the securities and investments of any other person
and marked in such manner as to clearly identify them as the property of such registered
management company, both upon physical inspection thereof and upon examination of the books
of the custodian. The physical segregation and marking of such securities and investments
may be accomplished by putting them in separate containers bearing the name of such
registered management investment company or by attaching tags or labels to such securities
and investments.
(2) The custodian shall have no power or authority to assign, hypothecate,
pledge or otherwise to dispose of any such securities and investments, except pursuant to
the direction of such registered management company and only for the account of such
registered investment company.
(3) Such securities and investments shall be subject to no lien or charge
of any kind in favor of the custodian or any persons claiming through the custodian.
(4) Such securities and investments shall be verified by actual
examination at the end of each annual and semi-annual fiscal period by an independent public
accountant retained by the investment company, and shall be examined by such accountant at
least one other time, chosen by the accountant, during each fiscal year. A certificate of
such accountant stating that an examination of such securities has been made, and describing
the nature and extent of the examination, shall be attached to a completed Form N-17f-1 (17
CFR 274.219) and transmitted to the Commission promptly after each examination.
(5) Such securities and investments shall, at all times, be subject to
inspection by the Commission through its employees or agents.
(6) The provisions of paragraphs (b) (1), (2) and (3) of this section
shall not apply to securities and similar investments bought for or sold to such investment
company by the company which is custodian until the securities have been reduced to the
physical possession of the custodian and have been paid for by such investment company:
Provided, That the company which is custodian shall take possession of such
securities at the earliest practicable time. Nothing in this subparagraph shall be construed
to relieve any company which is a member of a national securities exchange of any obligation
under existing law or under the rules of any national securities exchange.
(c) A copy of any contract executed or ratified pursuant to paragraph (a)
of this section shall be transmitted to the Commission promptly after execution or
ratification unless it has been previously transmitted.
(d) Any contract executed or ratified pursuant to paragraph (a) of this
section shall be ratified by the board of directors of the registered management investment
company at least annually thereafter.
[Rule N-17F-1, 5 FR 4317, Oct. 31, 1940, as
amended at 54 FR 32049, Aug. 4, 1989]
270.17f-2 — Custody of investments by registered management investment company.
(a) The securities and similar investments of a registered management
investment company may be maintained in the custody of such company only in accordance with
the provisions of this section. Investments maintained by such a company with a bank or
other company whose functions and physical facilities are supervised by Federal or State
authority under any arrangement whereunder the directors, officers, employees or agents of
such company are authorized or permitted to withdraw such investments upon their mere
receipt, are deemed to be in the custody of such company and may be so maintained only upon
compliance with the provisions of this section.
(b) Except as provided in paragraph (c) of this section, all such
securities and similar investments shall be deposited in the safekeeping of, or in a vault
or other depository maintained by, a bank or other company whose functions and physical
facilities are supervised by Federal or State authority. Investments so deposited shall be
physically segregated at all times from those of any other person and shall be withdrawn
only in connection with transactions of the character described in paragraph (c) of this
section.
(c) The first sentence of paragraph (b) of this section shall not apply to
securities on loan which are collateralized to the extent of their full market value, or to
securities hypothecated, pledged, or placed in escrow for the account of such investment
company in connection with a loan or other transaction authorized by specific resolution of
its board of directors, or to securities in transit in connection with the sale, exchange,
redemption, maturity or conversion, the exercise of warrants or rights, assents to changes
in terms of the securities, or other transactions necessary or appropriate in the ordinary
course of business relating to the management of securities.
(d) Except as otherwise provided by law, no person shall be authorized or
permitted to have access to the securities and similar investments deposited in accordance
with paragraph (b) of this section except pursuant to a resolution of the board of directors
of such investment company. Each such resolution shall designate not more than five persons
who shall be either officers or responsible employees of such company and shall provide that
access to such investments shall be had only by two or more such persons jointly, at least
one of whom shall be an officer; except that access to such investments shall be permitted
(1) to properly authorized officers and employees of the bank or other company in whose
safekeeping the investments are placed and (2) for the purpose of paragraph (f) of this
section to the independent public accountant jointly with any two persons so designated or
with such officer or employee of such bank or such other company. Such investments shall at
all times be subject to inspection by the Commission through its authorized employees or
agents accompanied, unless otherwise directed by order of the Commission, by one or more of
the persons designated pursuant to this paragraph.
(e) Each person when depositing such securities or similar investments in
or withdrawing them from the depository or when ordering their withdrawal and delivery from
the safekeeping of the bank or other company, shall sign a notation in respect of such
deposit, withdrawal or order which shall show (1) the date and time of the deposit,
withdrawal or order, (2) the title and amount of the securities or other investments
deposited, withdrawn or ordered to be withdrawn, and an identification thereof by
certificate numbers or otherwise, (3) the manner of acquisition of the securities or similar
investments deposited or the purpose for which they have been withdrawn, or ordered to be
withdrawn, and (4) if withdrawn and delivered to another person the name of such person.
Such notation shall be transmitted promptly to an officer or director of the investment
company designated by its board of directors who shall not be a person designated for the
purpose of paragraph (d) of this section. Such notation shall be on serially numbered forms
and shall be preserved for at least one year.
(f) Such securities and similar investments shall be verified by actual
examination by an independent public accountant retained by the investment company at least
three times during each fiscal year, at least two of which shall be chosen by such
accountant without prior notice to such company. A certificate of such accountant stating
that an examination of such securities and investments has been made, and describing the
nature and extent of the examination, shall be attached to a completed Form N-17f-2 (17 CFR
274.220) and transmitted to the Commission promptly after each examination.
[Rule N-17F-2, 12 FR 6717, Oct. 11, 1947, as
amended at 54 FR 32049, Aug. 4, 1989]
270.17f-3 — Free cash accounts for investment companies with bank custodians.
No registered investment company having a bank custodian shall hold free
cash except, upon resolution of its board or directors, a petty cash account may be
maintained in an amount not to exceed $500: Provided, That such account is operated
under the imprest system and is maintained subject to adequate controls approved by the
board of directors over disbursements and reimbursements including, but not limited to
fidelity bond coverage of persons having access to such funds.
(Sec. 17(f), 54 Stat. 815, 15 U.S.C. 80a-17(f), sec. 9, Pub. L. 91-547, 84
Stat. 1420)
[37 FR 9989, May 18, 1972]
270.17f-4 — Custody of investment company assets with a securities depository.
(a) Custody arrangement with a securities depository. A fund's
custodian may place and maintain financial assets, corresponding to the fund's security
entitlements, with a securities depository or intermediary custodian, if the custodian:
(1) Is at a minimum obligated to exercise due care in accordance with
reasonable commercial standards in discharging its duty as a securities intermediary to
obtain and thereafter maintain such financial assets;
(2) Is required to provide, promptly upon request by the fund, such
reports as are available concerning the internal accounting controls and financial strength
of the custodian; and
(3) Requires any intermediary custodian at a minimum to exercise due care
in accordance with reasonable commercial standards in discharging its duty as a securities
intermediary to obtain and thereafter maintain financial assets corresponding to the
security entitlements of its entitlement holders.
(b) Direct dealings with securities depository. A fund may place
and maintain financial assets, corresponding to the fund's security entitlements, directly
with a securities depository, if:
(1) The fund's contract with the securities depository or the securities
depository's written rules for its participants:
(i) Obligate the securities depository at a minimum to exercise due care
in accordance with reasonable commercial standards in discharging its duty as a securities
intermediary to obtain and thereafter maintain financial assets corresponding to the fund's
security entitlements; and
(ii) Requires the securities depository to provide, promptly upon request
by the fund, such reports as are available concerning the internal accounting controls and
financial strength of the securities depository; and
(2) The fund has implemented internal control systems reasonably designed
to prevent unauthorized officer's instructions (by providing at least for the form, content
and means of giving, recording and reviewing all officer's instructions).
(c) Definitions. For purposes of this section the terms:
(1) Clearing corporation, financial asset, securities intermediary, and
security entitlement have the same meanings as is attributed to those terms in §
8-102, § 8-103, and §§ 8-501 through 8-511 of the Uniform Commercial Code, 2002 Official
Text and Comments, which are incorporated by reference in this section pursuant to 5 U.S.C.
552(a) and 1 CFR part 51. The Director of the Federal Register has approved this
incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. You may
obtain a copy of the Uniform Commercial Code from the National Conference of Commissioners
on Uniform State Laws, 211 East Ontario Street, Suite 1300, Chicago, Il 60611. You may
inspect a copy at the following addresses: Louis Loss Library, U.S. Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549, or at the National Archives and Records
Administration (NARA). For information on the availability of this material at NARA, call
202-741-6030, or go to:
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.
(2) Custodian means a bank or other person authorized to hold
assets for the fund under section 17(f) of the Act (15 U.S.C. 80a-17(f)) or Commission rules
in this chapter, but does not include a fund itself, a foreign custodian whose use is
governed by § 270.17f-5 or § 270.17f-7, or a vault, safe deposit box, or other repository
for safekeeping maintained by a bank or other company whose functions and physical
facilities are supervised by a federal or state authority if the fund maintains its own
assets there in accordance with § 270.17f-2.
(3) Fund means an investment company registered under the Act and,
where the context so requires with respect to a fund that is a unit investment trust or a
face-amount certificate company, includes the fund's trustee.
(4) Intermediary custodian means any subcustodian that is a
securities intermediary and is qualified to act as a custodian.
(5) Officer's instruction means a request or direction to a
securities depository or its operator, or to a registered transfer agent, in the name of the
fund by one or more persons authorized by the fund's board of directors (or by the fund's
trustee, if the fund is a unit investment trust or a face-amount certificate company) to
give the request or direction.
(6) Securities depository means a clearing corporation that is:
(i) Registered with the Commission as a clearing agency under section 17A
of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1); or
(ii) A Federal Reserve Bank or other person authorized to operate the
federal book entry system described in the regulations of the Department of Treasury
codified at 31 CFR 357, Subpart B, or book-entry systems operated pursuant to comparable
regulations of other federal agencies.
[68 FR 8442, Feb. 20, 2003, as amended at 69 FR
18803, Apr. 9, 2004; 73 FR 32228, June 5, 2008]
270.17f-5 — Custody of investment company assets outside the United States.
(a) Definitions. For purposes of this section:
(1) Eligible Foreign Custodian means an entity that is incorporated
or organized under the laws of a country other than the United States and that is a
Qualified Foreign Bank or a majority-owned direct or indirect subsidiary of a U.S. Bank or
bank-holding company.
(2) Foreign Assets means any investments (including foreign
currencies) for which the primary market is outside the United States, and any cash and cash
equivalents that are reasonably necessary to effect the Fund's transactions in those
investments.
(3) Foreign Custody Manager means a Fund's or a Registered Canadian
Fund's board of directors or any person serving as the board's delegate under paragraphs (b)
or (d) of this section.
(4) Fund means a management investment company registered under the
Act (15 U.S.C. 80a) and incorporated or organized under the laws of the United States or of
a state.
(5) Qualified Foreign Bank means a banking institution or trust
company, incorporated or organized under the laws of a country other than the United States,
that is regulated as such by the country's government or an agency of the country's
government.
(6) Registered Canadian Fund means a management investment company
incorporated or organized under the laws of Canada and registered under the Act pursuant to
the conditions of § 270.7d-1.
(7) U.S. Bank means an entity that is:
(i) A banking institution organized under the laws of the United
States;
(ii) A member bank of the Federal Reserve System;
(iii) Any other banking institution or trust company organized under the
laws of any state or of the United States, whether incorporated or not, doing business under
the laws of any state or of the United States, a substantial portion of the business of
which consists of receiving deposits or exercising fiduciary powers similar to those
permitted to national banks under the authority of the Comptroller of the Currency, and
which is supervised and examined by state or federal authority having supervision over
banks, and which is not operated for the purpose of evading the provisions of this section;
or
(iv) A receiver, conservator, or other liquidating agent of any
institution or firm included in paragraphs (a)(7)(i), (ii), or (iii) of this section.
(b) Delegation. A Fund's board of directors may delegate to the
Fund's investment adviser or officers or to a U.S. Bank or to a Qualified Foreign Bank the
responsibilities set forth in paragraphs (c)(1), (c)(2), or (c)(3) of this section,
provided that:
(1) Reasonable Reliance. The board determines that it is reasonable
to rely on the delegate to perform the delegated responsibilities;
(2) Reporting. The board requires the delegate to provide written
reports notifying the board of the placement of Foreign Assets with a particular custodian
and of any material change in the Fund's foreign custody arrangements, with the reports to
be provided to the board at such times as the board deems reasonable and appropriate based
on the circumstances of the Fund's arrangements; and
(3) Exercise of Care. The delegate agrees to exercise reasonable
care, prudence and diligence such as a person having responsibility for the safekeeping of
the Fund's Foreign Assets would exercise, or to adhere to a higher standard of care, in
performing the delegated responsibilities.
(c) Maintaining Assets with an Eligible Foreign Custodian. A Fund
or its Foreign Custody Manager may place and maintain the Fund's Foreign Assets in the care
of an Eligible Foreign Custodian, provided that:
(1) General Standard. The Foreign Custody Manager determines that
the Foreign Assets will be subject to reasonable care, based on the standards applicable to
custodians in the relevant market, if maintained with the Eligible Foreign Custodian, after
considering all factors relevant to the safekeeping of the Foreign Assets, including,
without limitation:
(i) The Eligible Foreign Custodian's practices, procedures, and internal
controls, including, but not limited to, the physical protections available for certificated
securities (if applicable), the method of keeping custodial records, and the security and
data protection practices;
(ii) Whether the Eligible Foreign Custodian has the requisite financial
strength to provide reasonable care for Foreign Assets;
(iii) The Eligible Foreign Custodian's general reputation and standing;
and
(iv) Whether the Fund will have jurisdiction over and be able to enforce
judgments against the Eligible Foreign Custodian, such as by virtue of the existence of
offices in the United States or consent to service of process in the United States.
(2) Contract. The arrangement with the Eligible Foreign Custodian
is governed by a written contract that the Foreign Custody Manager has determined will
provide reasonable care for Foreign Assets based on the standards specified in paragraph
(c)(1) of this section.
(i) The contract must provide:
(A) For indemnification or insurance arrangements (or any combination)
that will adequately protect the Fund against the risk of loss of Foreign Assets held in
accordance with the contract;
(B) That the Foreign Assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the Eligible Foreign Custodian or
its creditors, except a claim of payment for their safe custody or administration or, in the
case of cash deposits, liens or rights in favor of creditors of the custodian arising under
bankruptcy, insolvency, or similar laws;
(C) That beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value other than for safe custody or
administration;
(D) That adequate records will be maintained identifying the Foreign
Assets as belonging to the Fund or as being held by a third party for the benefit of the
Fund;
(E) That the Fund's independent public accountants will be given access to
those records or confirmation of the contents of those records; and
(F) That the Fund will receive periodic reports with respect to the
safekeeping of the Foreign Assets, including, but not limited to, notification of any
transfer to or from the Fund's account or a third party account containing assets held for
the benefit of the Fund.
(ii) The contract may contain, in lieu of any or all of the provisions
specified in paragraph (c)(2)(i) of this section, other provisions that the Foreign Custody
Manager determines will provide, in their entirety, the same or a greater level of care and
protection for the Foreign Assets as the specified provisions, in their entirety.
(3)(i) Monitoring the Foreign Custody Arrangements. The Foreign
Custody Manager has established a system to monitor the appropriateness of maintaining the
Foreign Assets with a particular custodian under paragraph (c)(1) of this section, and to
monitor performance of the contract under paragraph (c)(2) of this section.
(ii) If an arrangement with an Eligible Foreign Custodian no longer meets
the requirements of this section, the Fund must withdraw the Foreign Assets from the
Eligible Foreign Custodian as soon as reasonably practicable.
(d) Registered Canadian Funds. Any Registered Canadian Fund may
place and maintain its Foreign Assets outside the United States in accordance with the
requirements of this section, provided
(1) The Foreign Assets are placed in the care of an overseas branch of a
U.S. Bank that has aggregate capital, surplus, and undivided profits of a specified amount,
which must not be less than $500,000; and
(2) The Foreign Custody Manager is the Fund's board of directors, its
investment adviser or officers, or a U.S. Bank.
Note to § 270.17f-5:
When a Fund's (or its custodian's) custody arrangement with an
Eligible Securities Depository (as defined in § 270.17f-7) involves one or more
Eligible Foreign Custodians through which assets are maintained with the
Eligible Securities Depository, § 270.17f-5 will govern the Fund's (or its
custodian's) use of each Eligible Foreign Custodian, while § 270.17f-7 will
govern an Eligible Foreign Custodian's use of the Eligible Securities
Depository.
|
[65 FR 25637, May 3, 2000]
270.17f-6 — Custody of investment company assets with Futures Commission Merchants and Commodity Clearing Organizations.
(a) A Fund may place and maintain cash, securities, and similar
investments with a Futures Commission Merchant in amounts necessary to effect the Fund's
transactions in Exchange-Traded Futures Contracts and Commodity Options, Provided
that:
(1) The manner in which the Futures Commission Merchant maintains the
Fund's assets shall be governed by a written contract, which provides that:
(i) The Futures Commission Merchant shall comply with the segregation
requirements of section 4d(2) of the Commodity Exchange Act (7 U.S.C. 6d(2)) and the rules
thereunder (17 CFR Chapter I) or, if applicable, the secured amount requirements of rule
30.7 under the Commodity Exchange Act (17 CFR 30.7);
(ii) The Futures Commission Merchant, as appropriate to the Fund's
transactions and in accordance with the Commodity Exchange Act (7 U.S.C. 1 through 25) and
the rules and regulations thereunder (including 17 CFR part 30), may place and maintain the
Fund's assets to effect the Fund's transactions with another Futures Commission Merchant, a
Clearing Organization, a U.S. or Foreign Bank, or a member of a foreign board of trade, and
shall obtain an acknowledgment, as required under rules 1.20(a) or 30.7(c) under the
Commodity Exchange Act [17 CFR 1.20(a) or 30.7(c)], as applicable, that such assets are held
on behalf of the Futures Commission Merchant's customers in accordance with the provisions
of the Commodity Exchange Act; and
(iii) The Futures Commission Merchant shall promptly furnish copies of or
extracts from the Futures Commission Merchant's records or such other information pertaining
to the Fund's assets as the Commission through its employees or agents may request.
(2) Any gains on the Fund's transactions, other than de minimis amounts,
may be maintained with the Futures Commission Merchant only until the next business day
following receipt.
(3) If the custodial arrangement no longer meets the requirements of this
section, the Fund shall withdraw its assets from the Futures Commission Merchant as soon as
reasonably practicable.
(b) For purposes of this section:
(1) Clearing Organization means a clearing organization as defined
in rule 1.3(d) under the Commodity Exchange Act (17 CFR 1.3(d)) and includes a clearing
organization for a foreign board of trade.
(2) Exchange-Traded Futures Contracts and Commodity Options means
commodity futures contracts, options on commodity futures contracts, and options on physical
commodities traded on or subject to the rules of:
(i) Any contract market designated for trading such transactions under the
Commodity Exchange Act and the rules thereunder; or
(ii) Any board of trade or exchange outside the United States, as
contemplated in Part 30 under the Commodity Exchange Act.
(3) Fund means an investment company registered under the Act (15
U.S.C. 80a-1 et seq.).
(4) Futures Commission Merchant means any person that is registered
as a futures commission merchant under the Commodity Exchange Act and that is not an
affiliated person of the Fund or an affiliated person of such person.
(5) U.S. or Foreign Bank means a bank, as defined in section
2(a)(5) of the Act (15 U.S.C. 80a-2(a)(5)), or a banking institution or trust company that
is incorporated or organized under the laws of a country other than the United States and
that is regulated as such by the country's government or an agency thereof.
[61 FR 66212, Dec. 17, 1996]
270.17f-7 — Custody of investment company assets with a foreign securities depository.
(a) Custody arrangement with an eligible securities depository. A
Fund, including a Registered Canadian Fund, may place and maintain its Foreign Assets with
an Eligible Securities Depository, provided that:
(1) Risk-limiting safeguards. The custody arrangement provides
reasonable safeguards against the custody risks associated with maintaining assets with the
Eligible Securities Depository, including:
(i) Risk analysis and monitoring. (A) The fund or its investment
adviser has received from the Primary Custodian (or its agent) an analysis of the custody
risks associated with maintaining assets with the Eligible Securities Depository; and
(B) The contract between the Fund and the Primary Custodian requires the
Primary Custodian (or its agent) to monitor the custody risks associated with maintaining
assets with the Eligible Securities Depository on a continuing basis, and promptly notify
the Fund or its investment adviser of any material change in these risks.
(ii) Exercise of care. The contract between the Fund and the
Primary Custodian states that the Primary Custodian will agree to exercise reasonable care,
prudence, and diligence in performing the requirements of paragraphs (a)(1)(i)(A) and (B) of
this section, or adhere to a higher standard of care.
(2) Withdrawal of assets from eligible securities depository. If a
custody arrangement with an Eligible Securities Depository no longer meets the requirements
of this section, the Fund's Foreign Assets must be withdrawn from the depository as soon as
reasonably practicable.
(b) Definitions. The terms Foreign Assets, Fund, Qualified
Foreign Bank, Registered Canadian Fund, and U.S. Bank have the same meanings as
in § 270.17f-5. In addition:
(1) Eligible Securities Depository means a system for the central
handling of securities as defined in § 270.17f-4 that:
(i) Acts as or operates a system for the central handling of securities or
equivalent book-entries in the country where it is incorporated, or a transnational system
for the central handling of securities or equivalent book-entries;
(ii) Is regulated by a foreign financial regulatory authority as defined
under section 2(a)(50) of the Act (15 U.S.C. 80a-2(a)(50));
(iii) Holds assets for the custodian that participates in the system on
behalf of the Fund under safekeeping conditions no less favorable than the conditions that
apply to other participants;
(iv) Maintains records that identify the assets of each participant and
segregate the system's own assets from the assets of participants;
(v) Provides periodic reports to its participants with respect to its
safekeeping of assets, including notices of transfers to or from any participant's account;
and
(vi) Is subject to periodic examination by regulatory authorities or
independent accountants.
(2) Primary Custodian means a U.S. Bank or Qualified Foreign Bank
that contracts directly with a Fund to provide custodial services related to maintaining the
Fund's assets outside the United States.
Note to § 270.17f-7:
When a Fund's (or its custodian's) custody arrangement with an
Eligible Securities Depository involves one or more Eligible Foreign Custodians
(as defined in § 270.17f-5) through which assets are maintained with the
Eligible Securities Depository, § 270.17f-5 will govern the Fund's (or its
custodian's) use of each Eligible Foreign Custodian, while § 270.17f-7 will
govern an Eligible Foreign Custodian's use of the Eligible Securities
Depository.
|
[65 FR 25638, May 3, 2000]
270.17g-1 — Bonding of officers and employees of registered management investment companies.
(a) Each registered management investment company shall provide and
maintain a bond which shall be issued by a reputable fidelity insurance company, authorized
to do business in the place where the bond is issued, against larceny and embezzlement,
covering each officer and employee of the investment company, who may singly, or jointly
with others, have access to securities or funds of the investment company, either directly
or through authority to draw upon such funds or to direct generally the disposition of such
securities, unless the officer or employee has such access solely through his position as an
officer or employee of a bank (hereinafter referred to as “covered persons”).
(b) The bond may be in the form of (1) an individual bond for each covered
person or a schedule or blanket bond covering such persons, (2) a blanket bond which names
the registered management investment company as the only insured (hereinafter referred to as
“single insured bond”) or (3) a bond which names the registered management investment
company and one or more other parties as insureds (hereinafter referred to as a “joint
insured bond”), such other insured parties being limited to (i) persons engaged in the
management or distribution of the shares of the registered investment company, (ii) other
registered investment companies which are managed and/or whose shares are distributed by the
same persons (or affiliates of such persons), (iii) persons who are engaged in the
management and/or distribution of shares of companies included in paragraph (b)(3)(i) of
this section, (iv) affiliated persons of any registered management investment company named
in the bond or of any person included in paragraph (b)(3)(i) or (b)(3)(iii) of this section
who are engaged in the administration of any registered management investment company named
as insured in the bond, and (v) any trust, pension, profit-sharing or other benefit plan for
officers, directors or employees of persons named in the bond.
(c) A bond of the type described in paragraph (b)(1) or (b)(2) of this
section shall provide that it shall not be cancelled, terminated or modified except after
written notice shall have been given by the acting party to the affected party and to the
Commission not less than sixty days prior to the effective date of cancellation, termination
or modification. A joint insured bond described in paragraph (b)(3) of this section shall
provide, that (1) it shall not be cancelled terminated or modified except after written
notice shall have been given by the acting party to the affected party, and by the fidelity
insurance company to all registered investment companies named as insureds and to the
Commission, not less than sixty days prior to the effective date of cancellation,
termination, or modification and (2) the fidelity insurance company shall furnish each
registered management investment company named as an insured with (i) a copy of the bond and
any amendment thereto promptly after the execution thereof, (ii) a copy of each formal
filing of a claim under the bond by any other named insured promptly after the receipt
thereof, and (iii) notification of the terms of the settlement of each such claim prior to
the execution of the settlement.
(d) The bond shall be in such reasonable form and amount as a majority of
the board of directors of the registered management investment company who are not
“interested persons” of such investment company as defined by section 2(a)(19) of the Act
shall approve as often as their fiduciary duties require, but not less than once every
twelve months, with due consideration to all relevant factors including, but not limited to,
the value of the aggregate assets of the registered management investment company to which
any covered person may have access, the type and terms of the arrangements made for the
custody and safekeeping of such assets, and the nature of the securities in the company's
portfolio: Provided, however, That (1) the amount of a single insured bond shall be
at least equal to an amount computed in accordance with the following schedule:
Amount of registered managementinvestment company gross assets — at the end of the most recent fiscal quarter prior to date (in dollars) | Minimum amount of bond (in dollars) |
---|---|
Up to 500,000 | 50,000. |
500,000 to 1,000,000 | 75,000. |
1,000,000 to 2,500,000 | 100,000. |
2,500,000 to 5,000,000 | 125,000. |
5,000,000 to 7,500,000 | 150,000. |
7,500,000 to 10,000,000 | 175,000. |
10,000,000 to 15,000,000 | 200,000. |
15,000,000 to 20,000,000 | 225,000. |
20,000,000 to 25,000,000 | 250,000. |
25,000,000 to 35,000,000 | 300,000. |
35,000,000 to 50,000,000 | 350,000. |
50,000,000 to 75,000,000 | 400,000. |
75,000,000, to 100,000,000 | 450,000. |
100,000,000 to 150,000,000 | 525,000. |
150,000,000 to 250,000,000 | 600,000. |
250,000,000 to 500,000,000 | 750,000. |
500,000,000 to 750,000,000 | 900,000. |
750,000,000 to 1,000,000,000 | 1,000,000. |
1,000,000,000 to 1,500,000,000 | 1,250,000. |
1,500,000,000 to 2,000,000,000 | 1,500,000. |
Over 2,000,000,000 | 1,500,000 plus 200,000 for each 500,000,000 of gross assets up to a maximum bond of 2,500,000. |
(2) A joint insured bond shall be in an amount at least equal to the sum
of (i) the total amount of coverage which each registered management investment company
named as an insured would have been required to provide and maintain individually pursuant
to the schedule hereinabove had each such registered management investment company not been
named under a joint insured bond, plus (ii) the amount of each bond which each named insured
other than a registered management investment company would have been required to provide
and maintain pursuant to federal statutes or regulations had it not been named as an insured
under a joint insured bond.
(e) No premium may be paid for any joint insured bond or any amendment
thereto unless a majority of the board of directors of each registered management investment
company named as an insured therein who are not “interested persons” of such company shall
approve the portion of the premium to be paid by such company, taking all relevant factors
into consideration including, but not limited to, the number of the other parties named as
insured, the nature of the business activities of such other parties, the amount of the
joint insured bond, and the amount of the premium for such bond, the ratable allocation of
the premium among all parties named as insureds, and the extent to which the share of the
premium allocated to the investment company is less than the premium such company would have
had to pay if it had provided and maintained a single insured bond.
(f) Each registered management investment company named as an insured in a
joint insured bond shall enter into an agreement with all of the other named insureds
providing that in the event recovery is received under the bond as a result of a loss
sustained by the registered management investment company and one or more other named
insureds, the registered management investment company shall receive an equitable and
proportionate share of the recovery, but at least equal to the amount which it would have
received had it provided and maintained a single insured bond with the minimum coverage
required by paragraph (d)(1) of this section.
(g) Each registered management investment company shall:
(1) File with the Commission (i) within 10 days after receipt of an
executed bond of the type described in paragraph (b)(1) or (2) of this section or any
amendment thereof, (a) a copy of the bond, (b) a copy of the resolution of a
majority of the board of directors who are not “interested persons” of the registered
management investment company approving the form and amount of the bond, and (c) a
statement as to the period for which premiums have been paid; (ii) within 10 days after
receipt of an executed joint insured bond, or any amendment thereof, (a) a copy of
the bond, (b) a copy of the resolution of a majority of the board of directors who
are not “interested persons” of the registered management investment company approving the
amount, type, form and coverage of the bond and the portion of the premium to be paid by
such company, (c) a statement showing the amount of the single insured bond which the
investment company would have provided and maintained had it not been named as an insured
under a joint insured bond, (d) a statement as to the period for which premiums have
been paid, and (e) a copy of each agreement between the investment company and all of
the other named insureds entered into pursuant to paragraph (f) of this section; and (iii) a
copy of any amendment to the agreement entered into pursuant to paragraph (f) of this
section within 10 days after the execution of such amendment,
(2) File with the Commission, in writing, within five days after the
making of any claim under the bond by the investment company, a statement of the nature and
amount of the claim,
(3) File with the Commission, within five days of the receipt thereof, a
copy of the terms of the settlement of any claim made under the bond by the investment
company, and
(4) Notify by registered mail each member of the board of directors of the
investment company at his last known residence address of (i) any cancellation, termination
or modification of the bond, not less than forty-five days prior to the effective date of
the cancellation or termination or modification, (ii) the filing and of the settlement of
any claim under the bond by the investment company, at the time the filings required by
paragraph (g) (2) and (3) of this section are made with the Commission, and (iii) the filing
and of the proposed terms of settlement of any claim under the bond by any other named
insured, within five days of the receipt of a notice from the fidelity insurance
company.
(h) Each registered management investment company shall designate an
officer thereof who shall make the filings and give the notices required by paragraph (g) of
this section.
(i) Where the registered management investment company is an
unincorporated company managed by a depositor, trustee or investment adviser, the terms
“officer” and “employee” shall include, for the purposes of this rule, the officers and
employees of the depositor, trustee, or investment adviser.
(j) Any joint insured bond provided and maintained by a registered
management investment company and one or more other parties shall be a transaction exempt
from the provisions of section 17(d) of the Act (15 U.S.C. 80a-17(d)) and the rules
thereunder, if:
(1) The terms and provisions of the bond comply with the provisions of
this section;
(2) The terms and provisions of any agreement required by paragraph (f) of
this section comply with the provisions of that paragraph; and
(3) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0-1(a)(7).
(k) At the next anniversary date of an existing fidelity bond, but not
later than one year from the effective date of this rule, arrangements between registered
management investment companies and fidelity insurance companies and arrangements between
registered management investment companies and other parties named as insureds under joint
insured bonds which would not permit compliance with the provisions of this rule shall be
modified by the parties so as to effect such compliance.
[39 FR 10579, Mar. 21, 1974, as amended at 66 FR
3759, Jan. 16, 2001; 69 FR 46390, Aug. 2, 2004]
270.17j-1 — Personal investment activities of investment company personnel.
(a) Definitions. For purposes of this section:
(1) Access person means:
(i) Any Advisory Person of a Fund or of a Fund's investment adviser. If an
investment adviser's primary business is advising Funds or other advisory clients, all of
the investment adviser's directors, officers, and general partners are presumed to be Access
Persons of any Fund advised by the investment adviser. All of a Fund's directors, officers,
and general partners are presumed to be Access Persons of the Fund.
(ii) Any director, officer or general partner of a principal underwriter
who, in the ordinary course of business, makes, participates in or obtains information
regarding, the purchase or sale of Covered Securities by the Fund for which the principal
underwriter acts, or whose functions or duties in the ordinary course of business relate to
the making of any recommendation to the Fund regarding the purchase or sale of Covered
Securities.
(2) Advisory person of a Fund or of a Fund's investment adviser
means:
(i) Any director, officer, general partner or employee of the Fund or
investment adviser (or of any company in a control relationship to the Fund or investment
adviser) who, in connection with his or her regular functions or duties, makes, participates
in, or obtains information regarding, the purchase or sale of Covered Securities by a Fund,
or whose functions relate to the making of any recommendations with respect to such
purchases or sales; and
(ii) Any natural person in a control relationship to the Fund or
investment adviser who obtains information concerning recommendations made to the Fund with
regard to the purchase or sale of Covered Securities by the Fund.
(3) Control has the same meaning as in section 2(a)(9) of the Act
[15 U.S.C. 80a-2(a)(9)].
(4) Covered security means a security as defined in section
2(a)(36) of the Act [15 U.S.C. 80a-2(a)(36)], except that it does not include:
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial paper
and high quality short-term debt instruments, including repurchase agreements; and
(iii) Shares issued by open-end Funds.
(5) Fund means an investment company registered under the
Investment Company Act.
(6) An Initial public offering means an offering of securities
registered under the Securities Act of 1933 [15 U.S.C. 77a], the issuer of which,
immediately before the registration, was not subject to the reporting requirements of
sections 13 or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78m or 78o(d)].
(7) Investment personnel of a Fund or of a Fund's investment
adviser means:
(i) Any employee of the Fund or investment adviser (or of any company in a
control relationship to the Fund or investment adviser) who, in connection with his or her
regular functions or duties, makes or participates in making recommendations regarding the
purchase or sale of securities by the Fund.
(ii) Any natural person who controls the Fund or investment adviser and
who obtains information concerning recommendations made to the Fund regarding the purchase
or sale of securities by the Fund.
(8) A Limited offering means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to section 4(a)(2) or section 4(a)(5)
[15 U.S.C. 77d(a)(2) or 77d(a)(5)] or pursuant to rule 504 or rule 506 [17 CFR 230.504 or
230.506] under the Securities Act of 1933.
(9) Purchase or sale of a covered security includes, among other
things, the writing of an option to purchase or sell a Covered Security.
(10) Security held or to be acquired by a Fund means:
(i) Any Covered Security which, within the most recent 15 days:
(A) Is or has been held by the Fund; or
(B) Is being or has been considered by the Fund or its investment adviser
for purchase by the Fund; and
(ii) Any option to purchase or sell, and any security convertible into or
exchangeable for, a Covered Security described in paragraph (a)(10)(i) of this section.
(11) Automatic investment plan means a program in which regular
periodic purchases (or withdrawals) are made automatically in (or from) investment accounts
in accordance with a predetermined schedule and allocation. An Automatic Investment Plan
includes a dividend reinvestment plan.
(b) Unlawful actions. It is unlawful for any affiliated person of
or principal underwriter for a Fund, or any affiliated person of an investment adviser of or
principal underwriter for a Fund, in connection with the purchase or sale, directly or
indirectly, by the person of a Security Held or to be Acquired by the Fund:
(1) To employ any device, scheme or artifice to defraud the Fund;
(2) To make any untrue statement of a material fact to the Fund or omit to
state a material fact necessary in order to make the statements made to the Fund, in light
of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or
would operate as a fraud or deceit on the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
(c) Code of Ethics — (1) Adoption and approval of Code of
Ethics. (i) Every Fund (other than a money market fund or a Fund that does not invest
in Covered Securities) and each investment adviser of and principal underwriter for the
Fund, must adopt a written code of ethics containing provisions reasonably necessary to
prevent its Access Persons from engaging in any conduct prohibited by paragraph (b) of this
section.
(ii) The board of directors of a Fund, including a majority of directors
who are not interested persons, must approve the code of ethics of the Fund, the code of
ethics of each investment adviser and principal underwriter of the Fund, and any material
changes to these codes. The board must base its approval of a code and any material changes
to the code on a determination that the code contains provisions reasonably necessary to
prevent Access Persons from engaging in any conduct prohibited by paragraph (b) of this
section. Before approving a code of a Fund, investment adviser or principal underwriter or
any amendment to the code, the board of directors must receive a certification from the
Fund, investment adviser or principal underwriter that it has adopted procedures reasonably
necessary to prevent Access Persons from violating the Fund's, investment adviser's, or
principal underwriter's code of ethics. The Fund's board must approve the code of an
investment adviser or principal underwriter before initially retaining the services of the
investment adviser or principal underwriter. The Fund's board must approve a material change
to a code no later than six months after adoption of the material change.
(iii) If a Fund is a unit investment trust, the Fund's principal
underwriter or depositor must approve the Fund's code of ethics, as required by paragraph
(c)(1)(ii) of this section. If the Fund has more than one principal underwriter or
depositor, the principal underwriters and depositors may designate, in writing, which
principal underwriter or depositor must conduct the approval required by paragraph
(c)(1)(ii) of this section, if they obtain written consent from the designated principal
underwriter or depositor.
(2) Administration of Code of Ethics. (i) The Fund, investment
adviser and principal underwriter must use reasonable diligence and institute procedures
reasonably necessary to prevent violations of its code of ethics.
(ii) No less frequently than annually, every Fund (other than a unit
investment trust) and its investment advisers and principal underwriters must furnish to the
Fund's board of directors, and the board of directors must consider, a written report
that:
(A) Describes any issues arising under the code of ethics or procedures
since the last report to the board of directors, including, but not limited to, information
about material violations of the code or procedures and sanctions imposed in response to the
material violations; and
(B) Certifies that the Fund, investment adviser or principal underwriter,
as applicable, has adopted procedures reasonably necessary to prevent Access Persons from
violating the code.
(3) Exception for principal underwriters. The requirements of
paragraphs (c)(1) and (c)(2) of this section do not apply to any principal underwriter
unless:
(i) The principal underwriter is an affiliated person of the Fund or of
the Fund's investment adviser; or
(ii) An officer, director or general partner of the principal underwriter
serves as an officer, director or general partner of the Fund or of the Fund's investment
adviser.
(d) Reporting requirements of access persons — (1) Reports
required. Unless excepted by paragraph (d)(2) of this section, every Access Person of
a Fund (other than a money market fund or a Fund that does not invest in Covered Securities)
and every Access Person of an investment adviser of or principal underwriter for the Fund,
must report to that Fund, investment adviser or principal underwriter:
(i) Initial holdings reports. No later than 10 days after the
person becomes an Access Person (which information must be current as of a date no more than
45 days prior to the date the person becomes an Access Person):
(A) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect beneficial ownership when the
person became an Access Person;
(B) The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct or indirect benefit
of the Access Person as of the date the person became an Access Person; and
(C) The date that the report is submitted by the Access Person.
(ii) Quarterly transaction reports. No later than 30 days after the
end of a calendar quarter, the following information:
(A) With respect to any transaction during the quarter in a Covered
Security in which the Access Person had any direct or indirect beneficial ownership:
(1) The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the principal amount of each Covered
Security involved;
(2) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(3) The price of the Covered Security at which the transaction was
effected;
(4) The name of the broker, dealer or bank with or through which
the transaction was effected; and
(5) The date that the report is submitted by the Access Person.
(B) With respect to any account established by the Access Person in which
any securities were held during the quarter for the direct or indirect benefit of the Access
Person:
(1) The name of the broker, dealer or bank with whom the Access
Person established the account;
(2) The date the account was established; and
(3) The date that the report is submitted by the Access Person.
(iii) Annual Holdings Reports. Annually, the following information
(which information must be current as of a date no more than 45 days before the report is
submitted):
(A) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect beneficial ownership;
(B) The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct or indirect benefit of
the Access Person; and
(C) The date that the report is submitted by the Access Person.
(2) Exceptions from reporting requirements. (i) A person need not
make a report under paragraph (d)(1) of this section with respect to transactions effected
for, and Covered Securities held in, any account over which the person has no direct or
indirect influence or control.
(ii) A director of a Fund who is not an “interested person” of the Fund
within the meaning of section 2(a)(19) of the Act [15 U.S.C. 80a-2(a)(19)], and who would be
required to make a report solely by reason of being a Fund director, need not make:
(A) An initial holdings report under paragraph (d)(1)(i) of this section
and an annual holdings report under paragraph (d)(1)(iii) of this section; and
(B) A quarterly transaction report under paragraph (d)(1)(ii) of this
section, unless the director knew or, in the ordinary course of fulfilling his or her
official duties as a Fund director, should have known that during the 15-day period
immediately before or after the director's transaction in a Covered Security, the Fund
purchased or sold the Covered Security, or the Fund or its investment adviser considered
purchasing or selling the Covered Security.
(iii) An Access Person to a Fund's principal underwriter need not make a
report to the principal underwriter under paragraph (d)(1) of this section if:
(A) The principal underwriter is not an affiliated person of the Fund
(unless the Fund is a unit investment trust) or any investment adviser of the Fund; and
(B) The principal underwriter has no officer, director or general partner
who serves as an officer, director or general partner of the Fund or of any investment
adviser of the Fund.
(iv) An Access Person to an investment adviser need not make a separate
report to the investment adviser under paragraph (d)(1) of this section to the extent the
information in the report would duplicate information required to be recorded under §
275.204-2(a)(13) of this chapter.
(v) An Access Person need not make a quarterly transaction report under
paragraph (d)(1)(ii) of this section if the report would duplicate information contained in
broker trade confirmations or account statements received by the Fund, investment adviser or
principal underwriter with respect to the Access Person in the time period required by
paragraph (d)(1)(ii), if all of the information required by that paragraph is contained in
the broker trade confirmations or account statements, or in the records of the Fund,
investment adviser or principal underwriter.
(vi) An Access Person need not make a quarterly transaction report under
paragraph (d)(1)(ii) of this section with respect to transactions effected pursuant to an
Automatic Investment Plan.
(3) Review of reports. Each Fund, investment adviser and principal
underwriter to which reports are required to be made by paragraph (d)(1) of this section
must institute procedures by which appropriate management or compliance personnel review
these reports.
(4) Notification of reporting obligation. Each Fund, investment
adviser and principal underwriter to which reports are required to be made by paragraph
(d)(1) of this section must identify all Access Persons who are required to make these
reports and must inform those Access Persons of their reporting obligation.
(5) Beneficial ownership. For purposes of this section, beneficial
ownership is interpreted in the same manner as it would be under § 240.16a-1(a)(2) of this
chapter in determining whether a person is the beneficial owner of a security for purposes
of section 16 of the Securities Exchange Act of 1934 [15 U.S.C. 78p] and the rules and
regulations thereunder. Any report required by paragraph (d) of this section may contain a
statement that the report will not be construed as an admission that the person making the
report has any direct or indirect beneficial ownership in the Covered Security to which the
report relates.
(e) Pre-approval of investments in IPOs and limited offerings.
Investment Personnel of a Fund or its investment adviser must obtain approval from the Fund
or the Fund's investment adviser before directly or indirectly acquiring beneficial
ownership in any securities in an Initial Public Offering or in a Limited Offering.
(f) Recordkeeping Requirements. (1) Each Fund, investment adviser
and principal underwriter that is required to adopt a code of ethics or to which reports are
required to be made by Access Persons must, at its principal place of business, maintain
records in the manner and to the extent set out in this paragraph (f), and must make these
records available to the Commission or any representative of the Commission at any time and
from time to time for reasonable periodic, special or other examination:
(A) A copy of each code of ethics for the organization that is in effect,
or at any time within the past five years was in effect, must be maintained in an easily
accessible place;
(B) A record of any violation of the code of ethics, and of any action
taken as a result of the violation, must be maintained in an easily accessible place for at
least five years after the end of the fiscal year in which the violation occurs;
(C) A copy of each report made by an Access Person as required by this
section, including any information provided in lieu of the reports under paragraph (d)(2)(v)
of this section, must be maintained for at least five years after the end of the fiscal year
in which the report is made or the information is provided, the first two years in an easily
accessible place;
(D) A record of all persons, currently or within the past five years, who
are or were required to make reports under paragraph (d) of this section, or who are or were
responsible for reviewing these reports, must be maintained in an easily accessible place;
and
(E) A copy of each report required by paragraph (c)(2)(ii) of this section
must be maintained for at least five years after the end of the fiscal year in which it is
made, the first two years in an easily accessible place.
(2) A Fund or investment adviser must maintain a record of any decision,
and the reasons supporting the decision, to approve the acquisition by investment personnel
of securities under paragraph (e), for at least five years after the end of the fiscal year
in which the approval is granted.
[64 FR 46834, Aug. 27, 1999; 65 FR 12943, Mar.
10, 2000, as amended at 69 FR 41707, July 9, 2004; 76 FR 81806, Dec. 29, 2011; 81 FR
83494, Nov. 21, 2016]
270.18c-1 — Exemption of privately held indebtedness.
The issuance or sale of more than one class of senior securities
representing indebtedness by a small business investment company, licensed under the Small
Business Investment Act of 1958, shall not be prohibited by section 18(c) so long as such
small business investment company does not have outstanding any publicly held indebtedness,
and all securities of any such class are (a) privately held by the Small Business
Administration, or banks, insurance companies or other institutional investors, (b) not
intended to be publicly distributed, and (c) not convertible into, exchangeable for, or
accompanied by any option to acquire, any equity security.
[26 FR 11240, Nov. 29, 1961]
270.18c-2 — Exemptions of certain debentures issued by small business investment companies.
(a) The issuance or sale of any class of senior security representing
indebtedness by a small business investment company licensed under the Small Business
Investment Act of 1958 shall not be prohibited by section 18(c) of the Act provided such
senior security representing indebtedness is (1) not convertible into, exchangeable for, or
accompanied by an option to acquire any equity security; (2) fully guaranteed as to timely
payment of all principal and interest by the Small Business Administration and backed by the
full faith and credit of the United States; and (3) subordinated to any other debt
securities not issued pursuant to this section or, if such security is not so subordinated,
that such security, according to its own terms, will not be preferred over any other
unsecured debt securities in the payment of principal and interest: And further
provided, That all other debt securities then outstanding issued by such small
business investment company were issued as permitted by § 270.18c-1 or this section.
(b) Any security issued and sold as permitted by paragraph (a) of this
section shall be deemed for purposes of § 270.18c-1 to be privately held by the Small
Business Administration and for purposes of § 270.18c-1 shall not be deemed to be publicly
held outstanding indebtedness.
(c) The issuance or sale of any security as permitted by paragraph (a) of
this section shall not be deemed to be a sale to any person other than the Small Business
Administration by any small business investment company licensed under the Small Business
Investment Company Act of 1958 which is exempt from any provision of the Investment Company
Act, if such exemption is conditioned on such company not offering or selling its securities
to any person other than the Small Business Administration.
(Secs. 6(c), 38(a), 54 Stat. 800, 841, 15 U.S.C. 80a-6(c), 80a-37(a))
[37 FR 7590, Apr. 18, 1972]
270.18f-1 — Exemption from certain requirements of section 18(f)(1) (of the Act) for registered open-end investment companies which have the right to redeem in kind.
(a) A registered open-end investment company which has the right to redeem
securities of which it is the issuer in assets other than cash may file with the Commission
at any time a notification of election on Form N-18F-1 (§ 274.51 of this chapter) committing
itself to pay in cash all requests for redemption by any shareholder of record, limited in
amount with respect to each shareholder during any 90-day period to the lesser of
(1) $250,000 or
(2) 1 percent of the net asset value of such company at the beginning of
such period.
(b) An election pursuant to paragraph (a) of this section:
(1) Shall be described in either the prospectus or the Statement of
Additional Information, at the discretion of the investment company, and
(2) Shall be irrevocable while this § 270.18f-1 is in effect unless the
Commission by order upon application permits the withdrawal of such notification of election
as being appropriate in the public interest and consistent with the protection of
investors.
(c) Upon making the election described in paragraph (a) of this section,
an investment company shall be exempt from the requirements of section 18(f)(1) (of the Act)
to the extent necessary for such company to effectuate redemptions in the manner set forth
in such paragraph.
(Secs. 7, 10, and 19 of the Securities Act of 1933 (15 U.S.C. 77g, 77j,
and 77s) and secs. 8, 30 and 38 of the Investment Company Act of 1940 (15 U.S.C. 80a-8,
80a-29 and 80a-37))
[36 FR 11919, June 23, 1971, as amended at 48 FR
37940, Aug. 22, 1983]
270.18f-2 — Fair and equitable treatment for holders of each class or series of stock of series investment companies.
(a) For purposes of this § 270.18f-2 a series company is a registered
open-end investment company which, in accordance with the provisions of section 18(f)(2) of
the Act, issues two or more classes or series of preferred or special stock each of which is
preferred over all other classes or series in respect of assets specifically allocated to
that class or series. Any matter required to be submitted by the provisions of the Act or of
applicable State law, or otherwise, to the holders of the outstanding voting securities of a
series company shall not be deemed to have been effectively acted upon less approved by the
holders of a majority of the outstanding voting securities of each class or series of stock
affected by such matter.
(b) For the purposes of paragraph (a) of this § 270.18f-2, a class or
series of stock will be deemed to be affected by such a matter, unless (1) the interests of
each class or series in the matter are substantially identical, or (2) the matter does not
affect any interest of such class or series.
(c)(1) With respect to the submission of an investment advisory contract
to the holders of the outstanding voting securities of a series company for the approval
required by section 15(a) of the Act, such matter shall be deemed to be effectively acted
upon with respect to any class or series of securities of such company if a majority of the
outstanding voting securities of such class or series vote for the approval of such matter,
notwithstanding (i) that such matter has not been approved by the holders of a majority of
the outstanding voting securities of any other class or series affected by such matter, and
(ii) that such matter has not been approved by the vote of a majority of the outstanding
voting securities of such company, provided that if such a majority is required by State law
or otherwise, such requirement shall apply.
(2) If any class or series of securities of a series company fails to
approve an investment advisory contract in the manner required by paragraph (c)(1) of this
section, the investment adviser of such company may continue to serve or act in such
capacity for the period of time pending such required approval of such contract, of a new
contract with the same or different adviser, or other definitive action: Provided,
That the compensation received by such investment adviser during such period is equal to no
more than its actual costs incurred in furnishing investment advisory services to such class
or series or the amount it would have received under the advisory contract, whichever is
less.
(d) With respect to the submission of a change in investment policy to the
holders of the outstanding voting securities of a series company for the approval required
by section 13 of the Act, such matter shall be deemed to have been effectively acted upon
with respect to any class or series of such company if a majority of the outstanding voting
securities of such class or series vote for the approval of such matter, notwithstanding (1)
that such matter has not been approved by the holders of a majority of the outstanding
voting securities of any other class or series affected by such matter, and (2) that such
matter has not been approved by the vote of a majority of the outstanding voting securities
of such company: Provided, That if such a majority is required by State law or
otherwise, such requirement shall apply.
(e) The submission to shareholders of the selection of the independent
public accountant of a series company required by section 32(a) (of the Act) shall be exempt
from the separate voting requirements of paragraph (a) of this § 270.18f-2.
(f) The submission to shareholders of a contract with a principal
underwriter of a series company required by section 15(b) of the Act shall be exempt from
the separate voting requirements of paragraph (a) of this § 270.18f-2.
(g) The submission to shareholders of nominees for election as directors
required by section 16(a) of the Act shall be exempt from the separate voting requirements
of paragraph (a) of this § 270.18f-2.
(h) For the purposes of this § 270.18f-2 a “majority of the outstanding
voting securities” of a class or series, (1) when used with respect to a matter required by
any provision of the Act to be submitted to the outstanding voting securities of a series
company, shall have the same meaning as a “majority of the outstanding voting securities of
a company” as defined in section 2(a)(42) of the Act; and (2) when used with respect to any
other matter required to be submitted to the outstanding voting securities of a series
company, shall mean the lesser of (i) the minimum vote of the outstanding voting securities
of a company required by applicable State law or other applicable requirement, or (ii) the
minimum vote specified by paragraph (1) of this paragraph (h), unless State law requires
approval of such matters by a specified percentage of the outstanding voting securities of a
particular class or series, in which case, State law shall apply.
(Secs. 6(c), 13, 15(a), 15(b), 16(a), 18(f)(2), 32(a), 54 Stat. 800, 811,
812, 813, 817, 838, 841, 15 U.S.C. 80a-6(c), 80a-13, 80a-15(b), 80a-16(a), 80a-18(f)(2),
80a-31(a), 80a-37(a), Pub. L. 91-547, 84 Stat. 1421)
[37 FR 17386, Aug. 26, 1972]
270.18f-3 — Multiple class companies.
Notwithstanding sections 18(f)(1) and 18(i) of the Act (15 U.S.C.
80a-18(f)(1) and (i), respectively), a registered open-end management investment company or
series or class thereof established in accordance with section 18(f)(2) of the Act (15
U.S.C. 80a-18(f)(2)) whose shares are registered on Form N-1A [§§ 239.15A and 274.11A of
this chapter] (“company”) may issue more than one class of voting stock, provided
that:
(a) Each class:
(1)(i) Shall have a different arrangement for shareholder services or the
distribution of securities or both, and shall pay all of the expenses of that
arrangement;
(ii) May pay a different share of other expenses, not including advisory
or custodial fees or other expenses related to the management of the company's assets, if
these expenses are actually incurred in a different amount by that class, or if the class
receives services of a different kind or to a different degree than other classes; and
(iii) May pay a different advisory fee to the extent that any difference
in amount paid is the result of the application of the same performance fee provisions in
the advisory contract of the company to the different investment performance of each
class;
(2) Shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement;
(3) Shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of any other
class; and
(4) Shall have in all other respects the same rights and obligations as
each other class.
(b) Expenses may be waived or reimbursed by the company's adviser,
underwriter, or any other provider of services to the company.
(c)(1) Income, realized gains and losses, unrealized appreciation and
depreciation, and Fundwide Expenses shall be allocated based on one of the following methods
(which method shall be applied on a consistent basis):
(i) To each class based on the net assets of that class in relation to the
net assets of the company (“relative net assets”);
(ii) To each class based on the Simultaneous Equations Method;
(iii) To each class based on the Settled Shares Method, provided
that the company is a Daily Dividend Fund (such a company may allocate income and
Fundwide Expenses based on the Settled Shares Method and realized gains and losses and
unrealized appreciation and depreciation based on relative net assets);
(iv) To each share without regard to class, provided that the
company is a Daily Dividend Fund that maintains the same net asset value per share in each
class; that the company has received undertakings from its adviser, underwriter, or any
other provider of services to the company, agreeing to waive or reimburse the company for
payments to such service provider by one or more classes, as allocated under paragraph
(a)(1) of this section, to the extent necessary to assure that all classes of the company
maintain the same net asset value per share; and that payments waived or reimbursed under
such an undertaking may not be carried forward or recouped at a future date; or
(v) To each class based on any other appropriate method, provided
that a majority of the directors of the company, and a majority of the directors who
are not interested persons of the company, determine that the method is fair to the
shareholders of each class and that the annualized rate of return of each class will
generally differ from that of the other classes only by the expense differentials among the
classes.
(2) For purposes of this section:
(i) Daily Dividend Fund means any company that has a policy of
declaring distributions of net income daily, including any money market fund that operates
in compliance with § 270.2a-7;
(ii) Fundwide Expenses means expenses of the company not allocated
to a particular class under paragraph (a)(1) of this section;
(iii) The Settled Shares Method means allocating to each class
based on relative net assets, excluding the value of subscriptions receivable; and
(iv) The Simultaneous Equations Method means the simultaneous
allocation to each class of each day's income, realized gains and losses, unrealized
appreciation and depreciation, and Fundwide Expenses and reallocation to each class of
undistributed net investment income, undistributed realized gains or losses, and unrealized
appreciation or depreciation, based on the operating results of the company, changes in
ownership interests of each class, and expense differentials between the classes, so that
the annualized rate of return of each class generally differs from that of the other classes
only by the expense differentials among the classes.
(d) Any payments made under paragraph (a) of this section shall be made
pursuant to a written plan setting forth the separate arrangement and expense allocation of
each class, and any related conversion features or exchange privileges. Before the first
issuance of a share of any class in reliance upon this section, and before any material
amendment of a plan, a majority of the directors of the company, and a majority of the
directors who are not interested persons of the company, shall find that the plan as
proposed to be adopted or amended, including the expense allocation, is in the best
interests of each class individually and the company as a whole; initial board approval of a
plan under this paragraph (d) is not required, however, if the plan does not make any change
in the arrangements and expense allocations previously approved by the board under an
existing order of exemption. Before any vote on the plan, the directors shall request and
evaluate, and any agreement relating to a class arrangement shall require the parties
thereto to furnish, such information as may be reasonably necessary to evaluate the
plan.
(e) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0-1(a)(7).
(f) Nothing in this section prohibits a company from offering any class
with:
(1) An exchange privilege providing that securities of the class may be
exchanged for certain securities of another company; or
(2) A conversion feature providing that shares of one class of the company
(the “purchase class”) will be exchanged automatically for shares of another class of the
company (the “target class”) after a specified period of time, provided that:
(i) The conversion is effected on the basis of the relative net asset
values of the two classes without the imposition of any sales load, fee, or other
charge;
(ii) The expenses, including payments authorized under a plan adopted
pursuant to § 270.12b-1 (“rule 12b-1 plan”), for the target class are not higher than the
expenses, including payments authorized under a rule 12b-1 plan, for the purchase class;
and
(iii) If the shareholders of the target class approve any increase in
expenses allocated to the target class under paragraphs (a)(1)(i) and (a)(1)(ii) of this
section, and the purchase class shareholders do not approve the increase, the company will
establish a new target class for the purchase class on the same terms as applied to the
target class before that increase.
(3) A conversion feature providing that shares of a class in which an
investor is no longer eligible to participate may be converted to shares of a class in which
that investor is eligible to participate, provided that:
(i) The investor is given prior notice of the proposed conversion; and
(ii) The conversion is effected on the basis of the relative net asset
values of the two classes without the imposition of any sales load, fee, or other
charge.
[60 FR 11885, Mar. 2, 1995, as amended at 62 FR
51765, Oct. 3, 1997; 66 FR 3759, Jan. 16, 2001; 69 FR 46390, Aug. 2, 2004; 79 FR 47735,
Aug. 14, 2014]
270.18f-4 Exemption from the requirements of section 18 and section 61 for certain senior securities transactions.
(a) Definitions. For purposes of this section:
Absolute VaR test means that the VaR of the fund's portfolio does not exceed 20%
of the value of the fund's net assets, or in the case of a closed-end company that has
issued to investors and has then outstanding shares of a class of senior security that is
a stock, that the VaR of the fund's portfolio does not exceed 25% of the value of the
fund's net assets.
Derivatives exposure means the sum of the gross notional amounts of the fund's
derivatives transactions described in paragraph (1) of the definition of the term
“derivatives transaction” of this section, and in the case of short sale borrowings, the
value of the assets sold short. If a fund's derivatives transactions include reverse
repurchase agreements or similar financing transactions under paragraph (d)(1)(ii) of this
section, the fund's derivatives exposure also includes, for each transaction, the proceeds
received but not yet repaid or returned, or for which the associated liability has not
been extinguished, in connection with the transaction. In determining derivatives exposure
a fund may convert the notional amount of interest rate derivatives to 10-year bond
equivalents and delta adjust the notional amounts of options contracts and exclude any
closed-out positions, if those positions were closed out with the same counterparty and
result in no credit or market exposure to the fund.
Derivatives risk manager means an officer or officers of the fund's investment
adviser responsible for administering the program and policies and procedures required by
paragraph (c)(1) of this section, provided that the derivatives risk manager:
(1) May not be a portfolio manager of the fund, or if multiple officers serve as
derivatives risk manager, may not have a majority composed of portfolio managers of the
fund; and
(2) Must have relevant experience regarding the management of derivatives risk.
Derivatives risks means the risks associated with a fund's derivatives
transactions or its use of derivatives transactions, including leverage, market,
counterparty, liquidity, operational, and legal risks and any other risks the derivatives
risk manager (or, in the case of a fund that is a limited derivatives user as described in
paragraph (c)(4) of this section, the fund's investment adviser) deems material.
Derivatives transaction means:
(1) Any swap, security-based swap, futures contract, forward contract, option, any
combination of the foregoing, or any similar instrument (“derivatives instrument”), under
which a fund is or may be required to make any payment or delivery of cash or other assets
during the life of the instrument or at maturity or early termination, whether as margin
or settlement payment or otherwise;
(2) Any short sale borrowing; and
(3) If a fund relies on paragraph (d)(1)(ii) of this section, any reverse repurchase
agreement or similar financing transaction.
Designated index means an unleveraged index that is approved by the derivatives
risk manager for purposes of the relative VaR test and that reflects the markets or asset
classes in which the fund invests and is not administered by an organization that is an
affiliated person of the fund, its investment adviser, or principal underwriter, or
created at the request of the fund or its investment adviser, unless the index is widely
recognized and used. In the case of a blended index, none of the indexes that compose the
blended index may be administered by an organization that is an affiliated person of the
fund, its investment adviser, or principal underwriter, or created at the request of the
fund or its investment adviser, unless the index is widely recognized and used.
Designated reference portfolio means a designated index or the
fund's securities portfolio. Notwithstanding the first sentence of the definition of
designated index of this section, if the fund's investment objective is to track
the performance (including a leverage multiple or inverse multiple) of an unleveraged
index, the fund must use that index as its designated reference portfolio.
Fund means a registered open-end or closed-end company or a business development
company, including any separate series thereof, but does not include a registered open-end
company that is regulated as a money market fund under § 270.2a-7.
Leveraged/inverse fund means a fund that seeks, directly or indirectly, to provide
investment returns that correspond to the performance of a market index by a specified
multiple (“leverage multiple”), or to provide investment returns that have an inverse
relationship to the performance of a market index (“inverse multiple”), over a
predetermined period of time.
Relative VaR test means that the VaR of the fund's portfolio does not exceed 200%
of the VaR of the designated reference portfolio, or in the case of a closed-end company
that has issued to investors and has then outstanding shares of a class of senior security
that is a stock, that the VaR of the fund's portfolio does not exceed 250% of the VaR of
the designated reference portfolio.
Securities portfolio means the fund's portfolio of securities and
other investments, excluding any derivatives transactions, that is approved by the
derivatives risk manager for purposes of the relative VaR test, provided that the fund's
securities portfolio reflects the markets or asset classes in which the fund invests
(i.e., the markets or asset classes in which the fund invests directly through
securities and other investments and indirectly through derivatives transactions).
Unfunded commitment agreement means a contract that is not a derivatives
transaction, under which a fund commits, conditionally or unconditionally, to make a loan
to a company or to invest equity in a company in the future, including by making a capital
commitment to a private fund that can be drawn at the discretion of the fund's general
partner.
Value-at-risk or VaR means an estimate of potential losses
on an instrument or portfolio, expressed as a percentage of the value of the portfolio's
assets (or net assets when computing a fund's VaR), over a specified time horizon and at a
given confidence level, provided that any VaR model used by a fund for purposes of
determining the fund's compliance with the relative VaR test or the absolute VaR test
must:
(1) Take into account and incorporate all significant, identifiable market risk factors
associated with a fund's investments, including, as applicable:
(i) Equity price risk, interest rate risk, credit spread risk, foreign currency risk and
commodity price risk;
(ii) Material risks arising from the nonlinear price characteristics of a fund's
investments, including options and positions with embedded optionality; and
(iii) The sensitivity of the market value of the fund's investments to changes in
volatility;
(2) Use a 99% confidence level and a time horizon of 20 trading days; and
(3) Be based on at least three years of historical market data.
(b) Derivatives transactions. If a fund satisfies the conditions of paragraph (c)
of this section, the fund may enter into derivatives transactions, notwithstanding the
requirements of sections 18(a)(1), 18(c), 18(f)(1), and 61 of the Investment Company Act
(15 U.S.C. 80a-18(a)(1), 80a-18(c), 80a-18(f)(1), and 80a-60), and derivatives
transactions entered into by the fund in compliance with this section will not be
considered for purposes of computing asset coverage, as defined in section 18(h) of the
Investment Company Act (15 U.S.C. 80a-18(h)).
(c) Conditions—(1) Derivatives risk management program. The fund adopts and
implements a written derivatives risk management program (“program”), which must include
policies and procedures that are reasonably designed to manage the fund's derivatives
risks and to reasonably segregate the functions associated with the program from the
portfolio management of the fund. The program must include the following elements:
(i) Risk identification and assessment. The program must provide for the
identification and assessment of the fund's derivatives risks. This assessment must take
into account the fund's derivatives transactions and other investments.
(ii) Risk guidelines. The program must provide for the establishment, maintenance,
and enforcement of investment, risk management, or related guidelines that provide for
quantitative or otherwise measurable criteria, metrics, or thresholds of the fund's
derivatives risks. These guidelines must specify levels of the given criterion, metric, or
threshold that the fund does not normally expect to exceed, and measures to be taken if
they are exceeded.
(iii) Stress testing. The program must provide for stress testing to evaluate
potential losses to the fund's portfolio in response to extreme but plausible market
changes or changes in market risk factors that would have a significant adverse effect on
the fund's portfolio, taking into account correlations of market risk factors and
resulting payments to derivatives counterparties. The frequency with which the stress
testing under this paragraph is conducted must take into account the fund's strategy and
investments and current market conditions, provided that these stress tests must be
conducted no less frequently than weekly.
(iv) Backtesting. The program must provide for backtesting to be conducted no less
frequently than weekly, of the results of the VaR calculation model used by the fund in
connection with the relative VaR test or the absolute VaR test by comparing the fund's
gain or loss that occurred on each business day during the backtesting period with the
corresponding VaR calculation for that day, estimated over a one-trading day time horizon,
and identifying as an exception any instance in which the fund experiences a loss
exceeding the corresponding VaR calculation's estimated loss.
(v) Internal reporting and escalation—(A) Internal reporting. The program
must identify the circumstances under which persons responsible for portfolio management
will be informed regarding the operation of the program, including exceedances of the
guidelines specified in paragraph (c)(1)(ii) of this section and the results of the stress
tests specified in paragraph (c)(1)(iii) of this section.
(B) Escalation of material risks. The derivatives risk manager must inform in a
timely manner persons responsible for portfolio management of the fund, and also directly
inform the fund's board of directors as appropriate, of material risks arising from the
fund's derivatives transactions, including risks identified by the fund's exceedance of a
criterion, metric, or threshold provided for in the fund's risk guidelines established
under paragraph (c)(1)(ii) of this section or by the stress testing described in paragraph
(c)(1)(iii) of this section.
(vi) Periodic review of the program. The derivatives risk manager must review the
program at least annually to evaluate the program's effectiveness and to reflect changes
in risk over time. The periodic review must include a review of the VaR calculation model
used by the fund under paragraph (c)(2) of this section (including the backtesting
required by paragraph (c)(1)(iv) of this section) and any designated reference portfolio
to evaluate whether it remains appropriate.
(2) Limit on fund leverage risk. (i) The fund must comply with the relative VaR
test unless the derivatives risk manager reasonably determines that a designated reference
portfolio would not provide an appropriate reference portfolio for purposes of the
relative VaR test, taking into account the fund's investments, investment objectives, and
strategy. A fund that does not apply the relative VaR test must comply with the absolute
VaR test.
(ii) The fund must determine its compliance with the applicable VaR test at least once
each business day. If the fund determines that it is not in compliance with the applicable
VaR test, the fund must come back into compliance promptly after such determination, in a
manner that is in the best interests of the fund and its shareholders.
(iii) If the fund is not in compliance with the applicable VaR test within five business
days:
(A) The derivatives risk manager must provide a written report to the
fund's board of directors and explain how and by when (i.e., number of business
days) the derivatives risk manager reasonably expects that the fund will come back into
compliance;
(B) The derivatives risk manager must analyze the circumstances that caused the fund to
be out of compliance for more than five business days and update any program elements as
appropriate to address those circumstances; and
(C) The derivatives risk manager must provide a written report within thirty calendar
days of the exceedance to the fund's board of directors explaining how the fund came back
into compliance and the results of the analysis and updates required under paragraph
(c)(2)(iii)(B) of this section. If the fund remains out of compliance with the applicable
VaR test at that time, the derivatives risk manager's written report must update the
report previously provided under paragraph (c)(2)(iii)(A) of this section and the
derivatives risk manager must update the board of directors on the fund's progress in
coming back into compliance at regularly scheduled intervals at a frequency determined by
the board.
(3) Board oversight and reporting—(i) Approval of the derivatives risk
manager. A fund's board of directors, including a majority of directors who are not
interested persons of the fund, must approve the designation of the derivatives risk
manager.
(ii) Reporting on program implementation and effectiveness. On or before the
implementation of the program, and at least annually thereafter, the derivatives risk
manager must provide to the board of directors a written report providing a representation
that the program is reasonably designed to manage the fund's derivatives risks and to
incorporate the elements provided in paragraphs (c)(1)(i) through (vi) of this section.
The representation may be based on the derivatives risk manager's reasonable belief after
due inquiry. The written report must include the basis for the representation along with
such information as may be reasonably necessary to evaluate the adequacy of the fund's
program and, for reports following the program's initial implementation, the effectiveness
of its implementation. The written report also must include, as applicable, the
derivatives risk manager's basis for the approval of any designated reference portfolio or
any change in the designated reference portfolio during the period covered by the report;
or an explanation of the basis for the derivatives risk manager's determination that a
designated reference portfolio would not provide an appropriate reference portfolio for
purposes of the relative VaR test.
(iii) Regular board reporting. The derivatives risk manager must provide to the
board of directors, at a frequency determined by the board, a written report regarding the
derivatives risk manager's analysis of exceedances described in paragraph (c)(1)(ii) of
this section, the results of the stress testing conducted under paragraph (c)(1)(iii) of
this section, and the results of the backtesting conducted under paragraph (c)(1)(iv) of
this section since the last report to the board. Each report under this paragraph must
include such information as may be reasonably necessary for the board of directors to
evaluate the fund's response to exceedances and the results of the fund's stress
testing.
(4) Limited derivatives users. (i) A fund is not required to adopt a program as
prescribed in paragraph (c)(1) of this section, comply with the limit on fund leverage
risk in paragraph (c)(2) of this section, or comply with the board oversight and reporting
requirements as prescribed in paragraph (c)(3) of this section, if:
(A) The fund adopts and implements written policies and procedures reasonably designed to
manage the fund's derivatives risk; and
(B) The fund's derivatives exposure does not exceed 10 percent of the fund's net assets,
excluding, for this purpose, currency or interest rate derivatives that hedge currency or
interest rate risks associated with one or more specific equity or fixed-income
investments held by the fund (which must be foreign-currency-denominated in the case of
currency derivatives), or the fund's borrowings, provided that the currency or interest
rate derivatives are entered into and maintained by the fund for hedging purposes and that
the notional amounts of such derivatives do not exceed the value of the hedged investments
(or the par value thereof, in the case of fixed-income investments, or the principal
amount, in the case of borrowing) by more than 10 percent.
(ii) If a fund's derivatives exposure exceeds 10 percent of its net assets, as calculated
in accordance with paragraph (c)(4)(i)(B) of this section, and the fund is not in
compliance with that paragraph within five business days, the fund's investment adviser
must provide a written report to the fund's board of directors informing them whether the
investment adviser intends either:
(A) To reduce the fund's derivatives exposure to less than 10 percent of the fund's net
assets promptly, but within no more than thirty calendar days of the exceedance, in a
manner that is in the best interests of the fund and its shareholders; or
(B) For the fund to establish a program as prescribed in paragraph (c)(1) of this
section, comply with the limit on fund leverage risk in paragraph (c)(2) of this section,
and comply with the board oversight and reporting requirements as prescribed in paragraph
(c)(3) of this section, as soon as reasonably practicable.
(5) Leveraged/inverse funds. A leveraged/inverse fund that cannot comply with the
limit on fund leverage risk in paragraph (c) of this section is not required to comply
with the limit on fund leverage risk if, in addition to complying with all other
applicable requirements of this section:
(i) As of October 28, 2020, the fund is in operation; has outstanding shares issued in
one or more public offerings to investors; and discloses in its prospectus a leverage
multiple or inverse multiple that exceeds 200% of the performance or the inverse of the
performance of the underlying index;
(ii) The fund does not change the underlying market index or increase the level of
leveraged or inverse market exposure the fund seeks, directly or indirectly, to provide;
and
(iii) The fund discloses in its prospectus that it is not subject to the limit on fund
leverage risk in paragraph (c)(2) of this section.
(6) Recordkeeping—(i) Records to be maintained. A fund must maintain a
written record documenting, as applicable:
(A) The fund's written policies and procedures required by paragraph (c)(1) of this
section, along with:
(1) The results of the fund's stress tests under paragraph (c)(1)(iii) of this
section;
(2) The results of the backtesting conducted under paragraph (c)(1)(iv) of this
section;
(3) Records documenting any internal reporting or escalation of material risks
under paragraph (c)(1)(v)(B) of this section; and
(4) Records documenting the reviews conducted under paragraph (c)(1)(vi) of this
section.
(B) Copies of any materials provided to the board of directors in connection with its
approval of the designation of the derivatives risk manager, any written reports provided
to the board of directors relating to the program, and any written reports provided to the
board of directors under paragraphs (c)(2)(iii)(A) and (C) of this section.
(C) Any determination and/or action the fund made under paragraphs (c)(2)(i) and (ii) of
this section, including a fund's determination of: The VaR of its portfolio; the VaR of
the fund's designated reference portfolio, as applicable; the fund's VaR ratio (the value
of the VaR of the fund's portfolio divided by the VaR of the designated reference
portfolio), as applicable; and any updates to any VaR calculation models used by the fund
and the basis for any material changes thereto.
(D) If applicable, the fund's written policies and procedures required by paragraph
(c)(4) of this section, along with copies of any written reports provided to the board of
directors under paragraph (c)(4)(ii) of this section.
(ii) Retention periods. (A) A fund must maintain a copy of the written policies
and procedures that the fund adopted under paragraph (c)(1) or (4) of this section that
are in effect, or at any time within the past five years were in effect, in an easily
accessible place.
(B) A fund must maintain all records and materials that paragraphs (c)(6)(i)(A)(1)
through (4) and (c)(6)(i)(B) through (D) of this section describe for a period of
not less than five years (the first two years in an easily accessible place) following
each determination, action, or review that these paragraphs describe.
(7) Current reports. A fund that experiences an event specified in the parts of
Form N-RN [referenced in 17 CFR 274.223] titled “Relative VaR Test Breaches,” “Absolute
VaR Test Breaches,” or “Compliance with VaR Test” must file with the Commission a report
on Form N-RN within the period and according to the instructions specified in that
form.
(d) Reverse repurchase agreements. (1) A fund may enter into reverse repurchase
agreements or similar financing transactions, notwithstanding the requirements of sections
18(c) and 18(f)(1) of the Investment Company Act, if the fund:
(i) Complies with the asset coverage requirements of section 18, and combines the
aggregate amount of indebtedness associated with all reverse repurchase agreements or
similar financing transactions with the aggregate amount of any other senior securities
representing indebtedness when calculating the asset coverage ratio; or
(ii) Treats all reverse repurchase agreements or similar financing transactions as
derivatives transactions for all purposes under this section.
(2) A fund relying on paragraph (d) of this section must maintain a written record
documenting whether the fund is relying on paragraph (d)(1)(i) or (ii) of this section for
a period of not less than five years (the first two years in an easily accessible place)
following the determination.
(e) Unfunded commitment agreements. (1) A fund may enter into an unfunded
commitment agreement, notwithstanding the requirements of sections 18(a), 18(c), 18(f)(1),
and 61 of the Investment Company Act, if the fund reasonably believes, at the time it
enters into such agreement, that it will have sufficient cash and cash equivalents to meet
its obligations with respect to all of its unfunded commitment agreements, in each case as
they come due. In forming a reasonable belief, the fund must take into account its
reasonable expectations with respect to other obligations (including any obligation with
respect to senior securities or redemptions), and may not take into account cash that may
become available from the sale or disposition of any investment at a price that deviates
significantly from the market value of those investments, or from issuing additional
equity. Unfunded commitment agreements entered into by the fund in compliance with this
section will not be considered for purposes of computing asset coverage, as defined in
section 18(h) of the Investment Company Act (15 U.S.C. 80a-18(h)).
(2) For each unfunded commitment agreement that a fund enters into under paragraph (e)(1)
of this section, a fund must document the basis for its reasonable belief regarding the
sufficiency of its cash and cash equivalents to meet its unfunded commitment agreement
obligations, and maintain a record of this documentation for a period of not less than
five years (the first two years in an easily accessible place) following the date that the
fund entered into the agreement.
(f) When issued, forward-settling, and non-standard settlement cycle
securities transactions. Notwithstanding the requirements of sections 18(a)(1),
18(c), 18(f)(1), and 61 of the Investment Company Act (15 U.S.C. 80a-18(a)(1), 80a018(c),
80a-18(f)(1), and 80a-60), a fund or registered open-end company that is regulated as a
money market fund under § 270.2a-7 may invest in a security on a when-issued or
forward-settling basis, or with a non-standard settlement cycle, and the transaction will
be deemed not to involve a senior security, provided that: The fund intends to physically
settle the transaction; and the transaction will settle within 35 days of its trade
date.
[85 FR 83162, Dec. 21, 2020; as amended at 87 FR 22444, Apr. 15, 2022]
270.19a-1 — Written statement to accompany dividend payments by management companies.
(a) Every written statement made pursuant to section 19 by or on behalf of
a management company shall be made on a separate paper and shall clearly indicate what
portion of the payment per share is made from the following sources:
(1) Net income for the current or preceding fiscal year, or accumulated
undistributed net income, or both, not including in either case profits or losses from the
sale of securities or other properties.
(2) Accumulated undistributed net profits from the sale of securities or
other properties (except that an open-end company may treat as a separate source its net
profits from such sales during its current fiscal year).
(3) Paid-in surplus or other capital source.
To the extent that a payment is properly designated
as being made from a source specified in paragraph (a) (1) or (2) of this section, it need
not be designated as having been made from a source specified in this paragraph.
(b) If the payment is made in whole or in part from a source specified in
paragraph (a)(2) of this section the written statement shall indicate, after giving effect
to the part of such payment so specified, the deficit, if any, in the aggregate of (1)
accumulated undistributed realized profits less losses on the sale of securities or other
properties and (2) the net unrealized appreciation or depreciation of portfolio securities,
all as of a date reasonably close to the end of the period as of which the dividend is paid.
Any statement made pursuant to the preceding sentence shall specify the amount, if any, of
such deficit which represents unrealized depreciation of portfolio securities.
(c) Accumulated undistributed net income and accumulated undistributed net
profits from the sale of securities or other properties shall be determined, at the option
of the company, either (1) from the date of the organization of the company, (2) from the
date of a reorganization, as defined in clause (A) or (B) of section 2(a)(33) of the Act (54
Stat. 790; 15 U.S.C. 80a-2(a)(33)), (3) from the date as of which a write-down of portfolio
securities was made in connection with a corporate readjustment, approved by stockholders,
of the type known as “quasi- reorganization,” or (4) from January 1, 1925, to the close of
the period as of which the dividend is paid, without giving effect to such payment.
(d) For the purpose of this section, open-end companies which upon the
sale of their shares allocate to undistributed income or other similar account that portion
of the consideration received which represents the approximate per share amount of
undistributed net income included in the sales price, and make a corresponding deduction
from undistributed net income upon the purchase or redemption of shares, need not treat the
amounts so allocated as paid-in surplus or other capital source.
(e) For the purpose of this section, the source or sources from which a
dividend is paid shall be determined (or reasonably estimated) to the close of the period as
of which it is paid without giving effect to such payment. If any such estimate is
subsequently ascertained to be inaccurate in a significant amount, a correction thereof
shall be made by a written statement pursuant to section 19(a) of the Act or in the first
report to stockholders following discovery of the inaccuracy.
(f) Insofar as a written statement made pursuant to section 19(a) of the
Act relates to a dividend on preferred stock paid for a period of less than a year, a
company may elect to indicate only that portion of the payment which is made from sources
specified in paragraph (a)(1) of this section, and need not specify the sources from which
the remainder was paid. Every company which in any fiscal year elects to make a statement
pursuant to the preceding sentence shall transmit to the holders of such preferred stock, at
a date reasonably near the end of the last dividend period in such fiscal year, a statement
meeting the requirements of paragraph (a) of this section on an annual basis.
(g) The purpose of this section, in the light of which it shall be
construed, is to afford security holders adequate disclosure of the sources from which
dividend payments are made. Nothing in this section shall be construed to prohibit the
inclusion in any written statement of additional information in explanation of the
information required by this section. Nothing in this section shall be construed to permit a
dividend payment in violation of any State law or to prevent compliance with any requirement
of State law regarding dividends consistent with this rule.
Cross Reference:
For interpretative release applicable to § 270.19a-1, see No. 71 in
tabulation, part 271 of this chapter.
[Rule N-19-1, 6 FR 1114, Feb. 25, 1941.
Redesignated at 36 FR 22901, Dec. 2, 1971, and amended at 38 FR 8593, Apr. 4,
1973]
270.19b-1 — Frequency of distribution of capital gains.
(a) No registered investment company which is a “regulated investment
company” as defined in section 851 of the Internal Revenue Code of 1986 (“Code”) shall
distribute more than one capital gain dividend (“distribution”), as defined in section
852(b)(3)(C) of the Code, with respect to any one taxable year of the company, other than a
distribution otherwise permitted by this rule or made pursuant to section 855 of the Code
which is supplemental to the prior distribution with respect to the same taxable year of the
company and which does not exceed 10% of the aggregate amount distributed for such taxable
year.
(b) No registered investment company which is not a “regulated investment
company” as defined in section 851 of the Code shall make more than one distribution of
long-term capital gains, as defined in the Code, in any one taxable year of the company:
Provided, That a unit investment trust may distribute capital gain dividends
received from a “regulated investment company” within a reasonable time after receipt.
(c) The provisions of this rule shall not apply to a unit investment trust
(hereinafter referred to as the “Trust”) engaged exclusively in the business of investing in
eligible trust securities (as defined in Rule 14a-3(b) (17 CFR 270.14a-3(b)) under this
Act); Provided, That:
(1) The capital gain distribution is a result of —
(i) An issuer's calling or redeeming an eligible trust security held by
the Trust,
(ii) The sale of an eligible trust security by the Trust to provide funds
for redemption of Trust units when the amount received by the Trust for such sale exceeds
the amount required to satisfy the redemption distribution,
(iii) The sale of an eligible trust security to maintain qualification of
the Trust as a “regulated investment company” under section 851 of the Code,
(iv) Regular distributions of principal and prepayment of principal on
eligible trust securities, or
(v) The sale of an eligible trust security in order to maintain the
investment stability of the Trust; and
(2) Capital gains distributions are clearly described as such in a report
to the unitholder which accompanies each such distribution.
(d) For purposes of paragraph (c) of this section, sales made to maintain
the investment stability of the Trust means sales made to prevent deterioration of the value
of the eligible trust securities held in the Trust portfolio when one or more of the
following factors exist:
(1) A default in the payment of principal or interest on an eligible trust
security;
(2) An action involving the issuer of an eligible trust security which
adversely affects the ability of such issuer to continue payment of principal or interest on
its eligible trust securities; or
(3) A change in market, revenue or credit factors which adversely affects
the ability of such issuer to continue payment of principal or interest on its eligible
trust securities.
(e) If a registered investment company because of unforeseen circumstances
in a particular taxable year proposes to make a distribution which would be prohibited by
the provisions of this section, it may file a request with the Commission for authorization
to make such a distribution. Such request shall comply with the requirements of § 270.0-2 of
this chapter and shall set forth the pertinent facts and explain the circumstances which the
company believes justify such distribution. The request shall be deemed granted unless the
Commission within 15 days after receipt thereof shall deny such request as not being
necessary or appropriate in the public interest or for the protection of investors and
notify the company in writing of such denial.
(f) A registered investment company may make one additional distribution
of long-term capital gains, as defined in the Code, with respect to any one taxable year of
the company, which distribution is made, in whole or in part, for the purpose of not
incurring any tax under section 4982 of the Code. Such additional distribution may be made
prior or subsequent to any distribution otherwise permitted by paragraph (a) of this
section.
(Secs. 6(c), 19(b) (15 U.S.C. 80a-19(b), and sec. 38(a)))
[36 FR 22901, Dec. 2, 1971, as amended at 44 FR
29647, May 22, 1979; 44 FR 40064, July 9, 1979; 52 FR 42428, Nov. 5, 1987]
270.20a-1 — Solicitation of proxies, consents and authorizations.
(a) No person shall solicit or permit the use of his or her name to
solicit any proxy, consent, or authorization with respect to any security issued by a
registered fund, except upon compliance with Regulation 14A (§ 240.14a-1 of this chapter),
Schedule 14A (§ 240.14a-101 of this chapter), and all other rules and regulations adopted
pursuant to section 14(a) of the Securities Exchange Act of 1934 that would be applicable to
such solicitation if it were made in respect of a security registered pursuant to section 12
of the Securities Exchange Act of 1934. Unless the solicitation is made in respect of a
security registered on a national securities exchange, none of the soliciting material need
be filed with such exchange.
(b) If the solicitation is made by or on behalf of the management of the
investment company, then the investment adviser or any prospective investment adviser and
any affiliated person thereof as to whom information is required in the solicitation shall
upon request of the investment company promptly transmit to the investment company all
information necessary to enable the management of such company to comply with the rules and
regulations applicable to such solicitation. If the solicitation is made by any person other
than the management of the investment company, on behalf of and with the consent of the
investment adviser or prospective investment adviser, then the investment adviser or
prospective investment adviser and any affiliated person thereof as to whom information is
required in the solicitation shall upon request of the person making the solicitation
promptly transmit to such person all information necessary to enable such person to comply
with the rules and regulations applicable to the solicitation.
Instruction. Registrants that have made a public offering of securities and that hold
security holder votes for which proxies, consents, or authorizations are not being solicited
pursuant to the requirements of this section should refer to section 14(c) of the Securities
Exchange Act of 1934 (15 U.S.C. 78n(c)) and the information statement requirements set forth
in the rules thereunder.
[25 FR 1865, Mar. 3, 1960, as amended at 37 FR 1472, Jan. 29, 1972; 52 FR
48985, Dec. 29, 1987; 57 FR 1102, Jan. 10, 1992; 59 FR 52700, Oct. 19, 1994; 87 FR 22444,
Apr. 15, 2022]
270.20a-2 — 270.20a-4 — [Reserved]
270.22c-1 — Pricing of redeemable securities for distribution, redemption and repurchase.
(a) No registered investment company issuing any redeemable security, no
person designated in such issuer's prospectus as authorized to consummate transactions in
any such security, and no principal underwriter of, or dealer in, any such security shall
sell, redeem, or repurchase any such security except at a price based on the current net
asset value of such security which is next computed after receipt of a tender of such
security for redemption or of an order to purchase or sell such security: Provided,
That:
(1) This paragraph shall not prevent a sponsor of a unit investment trust
(hereinafter referred to as the “Trust”) engaged exclusively in the business of investing in
eligible trust securities (as defined in Rule 14a-3(b) (17 CFR 270.14a-3(b))) from selling
or repurchasing Trust units in a secondary market at a price based on the offering side
evaluation of the eligible trust securities in the Trust's portfolio, determined at any time
on the last business day of each week, effective for all sales made during the following
week, if on the days that such sales or repurchases are made the sponsor receives a letter
from a qualified evaluator stating, in its opinion, that:
(i) In the case of repurchases, the current bid price is not higher than
the offering side evaluation, computed on the last business day of the previous week;
and
(ii) In the case of resales, the offering side evaluation, computed as of
the last business day of the previous week, is not more than one-half of one percent ($5.00
on a unit representing $1,000 principal amount of eligible trust securities) greater than
the current offering price.
(2) This paragraph shall not prevent any registered investment company
from adjusting the price of its redeemable securities sold pursuant to a merger,
consolidation or purchase of substantially all of the assets of a company which meets the
conditions specified in § 270.17a-8.
(3) Notwithstanding this paragraph (a), a registered open-end management
investment company (but not a registered open-end management investment company that is
regulated as a money market fund under § 270.2a-7 or an exchange-traded fund as defined in
paragraph (a)(3)(v)(A) of this section) (a “fund”) may use swing pricing to adjust its
current net asset value per share to mitigate dilution of the value of its outstanding
redeemable securities as a result of shareholder purchase or redemption activity, provided
that it has established and implemented swing pricing policies and procedures in compliance
with the paragraphs (a)(3)(i) through (v) of this section.
(i) The fund's swing pricing policies and procedures must:
(A) Provide that the fund must adjust its net asset value per share by a
single swing factor or multiple factors that may vary based on the swing threshold(s)
crossed once the level of net purchases into or net redemptions from such fund has exceeded
the applicable swing threshold for the fund. In determining whether the fund's level of net
purchases or net redemptions has exceeded the applicable swing threshold(s), the person(s)
responsible for administering swing pricing shall be permitted to make such determination
based on receipt of sufficient information about the fund investors' daily purchase and
redemption activity (“investor flow”) to allow the fund to reasonably estimate whether it
has crossed the swing threshold(s) with high confidence, and shall exclude any purchases or
redemptions that are made in kind and not in cash. This investor flow information may
consist of individual, aggregated, or netted orders, and may include reasonable estimates
where necessary.
(B) Specify the process for how the fund's swing threshold(s) shall be
determined, considering:
(1) The size, frequency, and volatility of historical net purchases
or net redemptions of fund shares during normal and stressed periods;
(2) The fund's investment strategy and the liquidity of the fund's
portfolio investments;
(3) The fund's holdings of cash and cash equivalents, and borrowing
arrangements and other funding sources; and
(4) The costs associated with transactions in the markets in which
the fund invests.
(C) Specify the process for how the swing factor(s) shall be determined,
which must include: The establishment of an upper limit on the swing factor(s) used, which
may not exceed two percent of net asset value per share; and the determination that the
factor(s) used are reasonable in relationship to the costs discussed in this paragraph. In
determining the swing factor(s) and the upper limit, the person(s) responsible for
administering swing pricing may take into account only the near-term costs expected to be
incurred by the fund as a result of net purchases or net redemptions that occur on the day
the swing factor(s) is used, including spread costs, transaction fees and charges arising
from asset purchases or asset sales resulting from those purchases or redemptions, and
borrowing-related costs associated with satisfying redemptions.
(ii) The fund's board of directors, including a majority of directors who
are not interested persons of the fund must:
(A) Approve the fund's swing pricing policies and procedures;
(B) Approve the fund's swing threshold(s) and the upper limit on the
swing factor(s) used, and any changes to the swing threshold(s) or the upper limit on the
swing factor(s) used;
(C) Designate the fund's investment adviser, officer, or officers
responsible for administering the swing pricing policies and procedures (“person(s)
responsible for administering swing pricing”). The administration of swing pricing must be
reasonably segregated from portfolio management of the fund and may not include portfolio
managers; and
(D) Review, no less frequently than annually, a written report prepared by
the person(s) responsible for administering swing pricing that describes:
(1) Its review of the adequacy of the fund's swing pricing policies
and procedures and the effectiveness of their implementation, including the impact on
mitigating dilution;
(2) Any material changes to the fund's swing pricing policies and
procedures since the date of the last report; and
(3) Its review and assessment of the fund's swing threshold(s),
swing factor(s), and swing factor upper limit considering the requirements of paragraphs
(a)(3)(i)(B) and (C) of this section, including the information and data supporting the
determination of the swing threshold(s), swing factor(s), and swing factor upper limit.
(iii) The fund shall maintain the policies and procedures adopted by the
fund under this paragraph (a)(3) that are in effect, or at any time within the past six
years were in effect, in an easily accessible place, and shall maintain a written copy of
the report provided to the board under paragraph (a)(3)(ii)(C) of this section for six
years, the first two in an easily accessible place.
(iv) Any fund (a “feeder fund”) that invests, pursuant to section
12(d)(1)(E) of the Act (15 U.S.C. 80a-12(d)(1)(E)), in another fund (a “master fund”) may
not use swing pricing to adjust the feeder fund's net asset value per share; however, a
master fund may use swing pricing to adjust the master fund's net asset value per share,
pursuant to the requirements set forth in this paragraph (a)(3).
(v) For purposes of this paragraph (a)(3):
(A) Exchange-traded fund means an open-end management investment
company (or series or class thereof), the shares of which are listed and traded on a
national securities exchange, and that has formed and operates under an exemptive order
under the Act granted by the Commission or in reliance on an exemptive rule adopted by the
Commission.
(B) Swing factor means the amount, expressed as a percentage of the
fund's net asset value and determined pursuant to the fund's swing pricing policies and
procedures, by which a fund adjusts its net asset value per share once a fund's applicable
swing threshold has been exceeded.
(C) Swing pricing means the process of adjusting a fund's current
net asset value per share to mitigate dilution of the value of its outstanding redeemable
securities as a result of shareholder purchase and redemption activity, pursuant to the
requirements set forth in this paragraph (a)(3).
(D) Swing threshold means an amount of net purchases or net
redemptions, expressed as a percentage of the fund's net asset value, that triggers the
application of swing pricing.
(E) Transaction fees and charges means brokerage commissions,
custody fees, and any other charges, fees, and taxes associated with portfolio asset
purchases and sales.
(b) For the purposes of this section,
(1) The current net asset value of any such security shall be computed no
less frequently than once daily, Monday through Friday, at the specific time or times during
the day that the board of directors of the investment company sets, in accordance with
paragraph (d) of this section, except on:
(i) Days on which changes in the value of the investment company's
portfolio securities will not materially affect the current net asset value of the
investment company's redeemable securities;
(ii) Days during which no security is tendered for redemption and no order
to purchase or sell such security is received by the investment company; or
(iii) Customary national business holidays described or listed in the
prospectus and local and regional business holidays listed in the prospectus; and
(2) A “qualified evaluator” shall mean any evaluator which represents it
is in a position to determine, on the basis of an informal evaluation of the eligible trust
securities held in the Trust's portfolio, whether —
(i) The current bid price is higher than the offering side evaluation,
computed on the last business day of the previous week, and
(ii) The offering side evaluation, computed as of the last business day of
the previous week, is more than one-half of one percent ($5.00 on a unit representing $1,000
principal amount of eligible trust securities) greater than the current offering price.
(c) Notwithstanding the provisions above, any registered separate account
offering variable annuity contracts, any person designated in such account's prospectus as
authorized to consummate transactions in such contracts, and any principal underwriter of or
dealer in such contracts shall be permitted to apply the initial purchase payment for any
such contract at a price based on the current net asset value of such contract which is next
computed:
(1) Not later than two business days after receipt of the order to
purchase by the insurance company sponsoring the separate account (“insurer”), if the
contract application and other information necessary for processing the order to purchase
(collectively, “application”) are complete upon receipt; or
(2) Not later than two business days after an application which is
incomplete upon receipt by the insurer is made complete, Provided, That, if an
incomplete application is not made complete within five business days after receipt,
(i) The prospective purchaser shall be informed of the reasons for the
delay, and
(ii) The initial purchase payment shall be returned immediately and in
full, unless the prospective purchaser specifically consents to the insurer retaining the
purchase payment until the application is made complete.
(3) As used in this section:
(i) Prospective Purchaser shall mean either an individual
contractowner or an individual participant in a group contract.
(ii) Initial Purchase Payment shall refer to the first purchase
payment submitted to the insurer by, or on behalf of, a prospective purchaser.
(d) The board of directors shall initially set the time or times during
the day that the current net asset value shall be computed, and shall make and approve such
changes as the board deems necessary.
(Secs. 6(c), 22(c) and 38(a), 15 U.S.C. 80a-6(c), 80a-22(c) and
80a-37(a))
[44 FR 29647, May 22, 1979, as amended at 44 FR 48660, Aug. 20, 1979; 45 FR
12409, Feb. 26, 1980; 50 FR 7911, Feb. 27, 1985; 50 FR 24763, June 13, 1985; 50 FR 42682,
Oct. 22, 1985; 58 FR 49922, Sept. 24, 1993; 81 FR 82084, Nov. 18, 2016; 87 FR 22444, Apr.
15, 2022]
270.22c-2 — Redemption fees for redeemable securities.
(a) Redemption fee. It is unlawful for any fund issuing redeemable
securities, its principal underwriter, or any dealer in such securities, to redeem a
redeemable security issued by the fund within seven calendar days after the security was
purchased, unless it complies with the following requirements:
(1) Board determination. The fund's board of directors, including a
majority of directors who are not interested persons of the fund, must either:
(i) Approve a redemption fee, in an amount (but no more than two percent
of the value of shares redeemed) and on shares redeemed within a time period (but no less
than seven calendar days), that in its judgment is necessary or appropriate to recoup for
the fund the costs it may incur as a result of those redemptions or to otherwise eliminate
or reduce so far as practicable any dilution of the value of the outstanding securities
issued by the fund, the proceeds of which fee will be retained by the fund; or
(ii) Determine that imposition of a redemption fee is either not necessary
or not appropriate.
(2) Shareholder information. With respect to each financial
intermediary that submits orders, itself or through its agent, to purchase or redeem shares
directly to the fund, its principal underwriter or transfer agent, or to a registered
clearing agency, the fund (or on the fund's behalf, the principal underwriter or transfer
agent) must either:
(i) Enter into a shareholder information agreement with the financial
intermediary (or its agent); or
(ii) Prohibit the financial intermediary from purchasing in nominee name
on behalf of other persons, securities issued by the fund. For purposes of this paragraph,
“purchasing” does not include the automatic reinvestment of dividends.
(3) Recordkeeping. The fund must maintain a copy of the written
agreement under paragraph (a)(2)(i) of this section that is in effect, or at any time within
the past six years was in effect, in an easily accessible place.
(b) Excepted funds. The requirements of paragraph (a) of this
section do not apply to the following funds, unless they elect to impose a redemption fee
pursuant to paragraph (a)(1) of this section:
(1) Money market funds;
(2) Any fund that issues securities that are listed on a national
securities exchange; and
(3) Any fund that affirmatively permits short-term trading of its
securities, if its prospectus clearly and prominently discloses that the fund permits
short-term trading of its securities and that such trading may result in additional costs
for the fund.
(c) Definitions. For the purposes of this section:
(1) Financial intermediary means:
(i) Any broker, dealer, bank, or other person that holds securities issued
by the fund, in nominee name;
(ii) A unit investment trust or fund that invests in the fund in reliance
on section 12(d)(1)(E) of the Act (15 U.S.C. 80a-12(d)(1)(E)); and
(iii) In the case of a participant-directed employee benefit plan that
owns the securities issued by the fund, a retirement plan's administrator under section
3(16)(A) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(16)(A)) or
any person that maintains the plan's participant records.
(iv) Financial intermediary does not include any person that the
fund treats as an individual investor with respect to the fund's policies established for
the purpose of eliminating or reducing any dilution of the value of the outstanding
securities issued by the fund.
(2) Fund means an open-end management investment company that is
registered or required to register under section 8 of the Act (15 U.S.C. 80a-8), and
includes a separate series of such an investment company.
(3) Money market fund means an open-end management investment
company that is registered under the Act and is regulated as a money market fund under §
270.2a-7.
(4) Shareholder includes a beneficial owner of securities held in
nominee name, a participant in a participant-directed employee benefit plan, and a holder of
interests in a fund or unit investment trust that has invested in the fund in reliance on
section 12(d)(1)(E) of the Act. A shareholder does not include a fund investing pursuant to
section 12(d)(1)(G) of the Act (15 U.S.C. 80a-12(d)(1)(G)), a trust established pursuant to
section 529 of the Internal Revenue Code (26 U.S.C. 529), or a holder of an interest in such
a trust.
(5) Shareholder information agreement means a written agreement
under which a financial intermediary agrees to:
(i) Provide, promptly upon request by a fund, the Taxpayer Identification
Number (or in the case of non U.S. shareholders, if the Taxpayer Identification Number is
unavailable, the International Taxpayer Identification Number or other government issued
identifier) of all shareholders who have purchased, redeemed, transferred, or exchanged fund
shares held through an account with the financial intermediary, and the amount and dates of
such shareholder purchases, redemptions, transfers, and exchanges;
(ii) Execute any instructions from the fund to restrict or prohibit
further purchases or exchanges of fund shares by a shareholder who has been identified by
the fund as having engaged in transactions of fund shares (directly or indirectly through
the intermediary's account) that violate policies established by the fund for the purpose of
eliminating or reducing any dilution of the value of the outstanding securities issued by
the fund; and
(iii) Use best efforts to determine, promptly upon request of the fund,
whether any specific person about whom it has received the identification and transaction
information set forth in paragraph (c)(5)(i) of this section, is itself a financial
intermediary (“indirect intermediary”) and, upon further request by the fund:
(A) Provide (or arrange to have provided) the identification and
transaction information set forth in paragraph (c)(5)(i) of this section regarding
shareholders who hold an account with an indirect intermediary; or
(B) Restrict or prohibit the indirect intermediary from purchasing, in
nominee name on behalf of other persons, securities issued by the fund.
[71 FR 58272, Oct. 3, 2006]
270.22d-1 — Exemption from section 22(d) to permit sales of redeemable securities at prices which reflect sales loads set pursuant to a schedule.
A registered investment company that is the issuer of redeemable
securities, a principal underwriter of such securities or a dealer therein shall be exempt
from the provisions of section 22(d) to the extent necessary to permit the sale of such
securities at prices that reflect scheduled variations in, or elimination of, the sales
load. These price schedules may offer such variations in or elimination of the sales load to
particular classes of investors or transactions, Provided, That:
(a) The company, the principal underwriter and dealers in the company's
shares apply any scheduled variation uniformly to all offerees in the class specified;
(b) The company furnishes to existing shareholders and prospective
investors adequate information concerning any scheduled variation, as prescribed in
applicable registration statement form requirements;
(c) Before making any new sales load variation available to purchasers of
the company's shares, the company revises its prospectus and statement of additional
information to describe that new variation; and
(d) The company advises existing shareholders of any new sales load
variation within one year of the date when that variation is first made available to
purchasers of the company's shares.
(Secs. 6(c) (15 U.S.C. 80a-6(c)) and 38(a) (15 U.S.C. 80a-37(a)))
[50 FR 7911, Feb. 27, 1985]
270.22d-2 — Exemption from section 22(d) for certain registered separate accounts.
A registered separate account, any principal underwriter for such account,
any dealer in contracts or units of interest or participations in such contracts issued by
such account and any insurance company maintaining such account shall, with respect to any
variable annuity contracts, units, or participations therein issued by such account, be
exempted from section 22(d) to the extent necessary to permit the sale of such contracts,
units or participations by such persons at prices which reflect variations in the sales load
or in any administrative charge or other deductions from the purchase payments; Provided,
however, That (a) the prospectus discloses as precisely as possible the amount of the
variations and the circumstances, if any, in which such variations shall be available or
describes the basis for such variations and the manner in which entitlement shall be
determined, and (b) any such variations reflect differences in costs or services and are not
unfairly discriminatory against any person.
(Secs. 6(c) (15 U.S.C. 80a-6(c)) and 38(a) (15 U.S.C. 80a-37(a)))
[40 FR 33970, Aug. 13, 1975. Redesignated at 50
FR 7911, Feb. 27, 1985]
270.22e-1 — Exemption from section 22(e) of the Act during annuity payment period of variable annuity contracts participating in certain registered separate accounts.
(a) A registered separate account, shall during the annuity payment period
of variable annuity contracts participating in such account, be exempt from the provisions
of section 22(e) of the Act prohibiting the suspension of the right of redemption or
postponement of the date of payment or satisfaction upon redemption of any redeemable
security, with respect to such contracts under which payments are being made based upon life
contingencies.
(Sec. 6, 54 Stat. 800; 15 U.S.C. 80a-6)
[34 FR 12696, Aug. 5, 1969]