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a business or businesses other than that of investing, supervision over banks, if a majority of the units of reinvesting, owning, holding, or trading in securities. beneficial interest in such fund, other than units

(2) Any issuer which the Commission, upon appli- owned by charitable or educational institutions, are cation by such issuer, finds and by order declares to held under instruments providing for payment of be primarily engaged in a business or businesses other income to one or more persons and of principal to than that of investing, reinvesting, owning, holding,

another or others. or trading in securities either directly or (A) through (4) Any holding company affiliate, as defined in majority-owned subsidiaries or (B) through con- section 221a (c) of Title 12, which is under the supertrolled companies conducting similar types of busi- vision of the Board of Governors of the Federal Renesses. The filing of an application under this para- serve System by reason of the fact that such holding graph by an issuer other than a registered investment company affiliate holds a general voting permit iscompany shall exempt the applicant for a period of sued to it by such Board prior to January 1, 1940; and sixty days from all provisions of this subchapter and any holding company affiliate which is under such sections 72 (a) and 107 (f) of Title 11 applicable to supervision by reason of the fact that it holds a geninvestment companies as such. For cause shown, eral voting permit thereafter issued to it by the Board the Commission by order may extend such period of of Governors and which is determined by such exemption for an additional period or periods. Board to be primarily engaged, directly or indirectly, Whenever the Commission, upon its own motion in the business of holding the stock of, and managing or upon application, finds that the circumstances or controlling, banks, banking associations, savings which gave rise to the issuance of an order granting banks, or trust companies. The Commission shall be an application under this paragraph no longer exist, given appropriate notice prior to any such determithe Commission shall by order revoke such order. nation and shall be entitled to be heard. The defini

(3) Any issuer all the outstanding securities of tion of the term "control" in section 80a-2 (a) of which (other than short-term paper and directors' this title shall not apply to this paragraph. qualifying shares) are directly or indirectly owned (5) Any person substantially all of whose busiby a company excepted from the definition of in- ness is confined to making small loans, industrial vestment company by paragraph (1) or (2) of this banking, or similar businesses. subsection.

(6) Any person who is not engaged in the business (c) Notwithstanding subsections (a) and (b) of of issuing face-amount certificates of the installthis section, none of the following persons is an ment type or periodic payment plan certificates, and investment company within the meaning of this sub- who is primarily engaged in one or more of the chapter and sections 72 (a) and 107 (f) of Title 11: following businesses: (A) Purchasing or otherwise

(1) Any issuer whose outstanding securities (other acquiring notes, drafts, acceptances, open accounts than short-term paper) are beneficially owned by receivable, and other obligations representing part or not more than one hundred persons and which is all of the sales price of merchandise, insurance, and not making and does not presently propose to make services; (B) making loans to manufacturers, wholea public offering of its securities. For the purposes salers, and retailers of, and to prospective purchasers of this paragraph, beneficial ownership by a company of, specified merchandise, insurance, and services; shall be deemed to be beneficial ownership by one and (C) purchasing or otherwise acquiring mortgages person; except that, if such company owns 10 per and other liens on and interests in real estate. centum or more of the outstanding voting securities · (7) Any company primarily engaged, directly or of the issuer, the beneficial ownership shall be through majority-owned subsidiaries, in one or more deemed to be that of the holders of such company's of the businesses described in paragraphs (3), (5), outstanding securities (other than short-term and (6) of this subsection, or in one or more of such paper).

businesses (from which not less than 25 per centum (2) Any person primarily engaged in the business of such company's gross income during its last fiscal of underwriting and distributing securities issued by year was derived) together with an additional busiother persons, selling securities to customers, and ness or businesses other than investing, reinvesting, acting as broker, or any one or more of such activi- owning, holding, or trading in securities. ties, whose gross income normally is derived prin- (8) Any company 90 per centum or more of the cipally from such business and related activities.

value of whose investment securities are represented (3) Any bank or insurance company; any savings

by securities of a single issuer included within a class and loan association, building and loan association,

of persons enumerated in paragraphs (5), (6), or cooperative bank, homestead association, or similar

(7) of this subsection. institution, or any receiver, conservator, liquidator, (9) Any company subject to regulation under liquidating agent, or similar official or person thereof

the Interstate Commerce Act, or any company or therefor; any common trust fund or similar fund whose entire outstanding capital stock is owned or maintained by a bank exclusively for the collective controlled by such a company: Provided, That the investment and reinvestment of moneys contributed assets of the controlled company consist substanthereto by the bank in its capacity as a trustee, ex- tially of securities issued by companies which are ecutor, administrator, or guardian; or any common subject to regulation under said chapters. trust fund or similar fund, established before June (10) Any company with a registration in effect as 22, 1936, by a corporation which is supervised or a holding company under the Public Utility Holdexamined by State or Federal authority having ing Company Act of 1935.

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(2) In the case of a stock bonus, pension, profit sharing or annuity plan put into effect after September 1, 1942, such & plan shall be considered as satisfying the requirements of section 165 (a) (3), (4), (5), and (6) (of Title 26) for the period beginning with the date such plan is put into effect and ending December 31, 1944, 1f the provisions thereof satisfy such requirements by December 31, 1944, and if by that time such provisions are made effective for all purposes as of a date not later than the effective date of such plan or January 1, 1944, whichever is the later."

TRANSFER OF FUNCTIONS All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, $$ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

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(11) Any person substantially all of whose business consists of owning or holding oil, gas, or other mineral royalties or leases, or fractional interests therein, or certificates of interest or participation in or investment contracts relative to such royalties, leases, or fractional interests,

(12) Any company organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

(13) Any employees' stock bonus, pension, or profit-sharing trust which meets the conditions of section 165 of Title 26.

(14) Any voting trust the assets of which consist exclusively of securities of a single issuer which is not an investment company.

(15) Any security holders' protective committee or similar issuer having outstanding and issuing no securities other than certificates of deposit and shortterm paper. (Aug. 22, 1940, ch. 686, title I, § 3, 54 Stat. 797; Oct. 21, 1942, 4:30 p. m., E. W. T., ch. 619, title I, § 162 (e), 56 Stat. 867.)

REFERENCES IN TEXT The Interstate Commerce Act, referred to in subsection (c) (9), is classified to chapters 1, 8, 12 and 13 of Title 49, Transportation.

The Public Utility Holding Company Act of 1935, referred to in subsection (c) (10), is classified to section 79 et seq. of this title.

AMENDMENTS 1942—Subsection (c) (13) amended by act Oct. 31, 1942, which added “as amended”.

EFFECTIVE DATE Section 162 (d) of act Oct. 21, 1942 (Revenue Act of 1942), as amended by act Dec. 17, 1943, ch. 346, § 3, 57 Stat. 602, provided:

"Taxable Years to Which Amendments Applicable. The amendments made by this section (to this section and sections 22, 23 and 165 of Title 26 ] shall be applicable as to both the employer and employees only with respect to taxable years of the employer beginning after December 31, 1941, except that,

(1) In the case of a stock bonus, pension, profit-sharing, or annuity plan in effect on or before September 1, 1942,

(A) such a plan shall not become subject to the requirements of section 165 (a) (3), (4), (5), and (6) (of Title 26] until the beginning of the first taxable year beginning after December 31, 1942.

(B) such a plan shall be considered as satisfying the requirements of section 165 (a), (3), (4), and (6) and (6) (of Title 26] for the period beginning with the beginning of the first taxable year following December 31, 1942, and ending December 31, 1944, if the provisions thereof satisfy such requirements by December 31, 1944, and if by that time such provisions are made effective for all purposes as of a date not later than January 1, 1944.

(C) if the contribution of an employer to such a plan in the employer's taxable year beginning in 1942 exceeds the maximum amount deductible for such year under section 23 (p) (1), as amended by this section, the amount deductible in such year shall be not less than the sum of

(1) the amount paid in such taxable year prior to September 1, 1942, and deductible under section 23 (a) or 23 (p) prior to amendment by this section, and

(11) with respect to the amount paid in such taxable year on or after September 1, 1942, that proportion of the amount deductible for the taxable year under section 23 (p) (1), as amended by this section, which the number of months after August 31, 1942, in the taxable year bears to twelve.

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8 80a-4. Classification of investment companies.

For the purposes of this subchapter and sections 72 (a) and 107 (f) of Title 11, investment companies are divided into three principal classes, defined as follows:

(1) "Face-amount certificate company" means an investment company which is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or which has been engaged in such business and has any such certificate outstanding.

(2) “Unit investment trust” means an investment company which (A) is organized under a trust indenture, contract of custodianship or agency, or similar instrument, (B) does not have a board of directors, and (C) issues only redeemable securities, each of which represents an undivided interest in a unit of specified securities; but does not include a voting trust.

(3) “Management company" means any investment company other than a face-amount certificate company or a unit investment trust. (Aug. 22, 1940, ch. 686, title I, § 4, 54 Stat. 799.)

TRANSFER OF FUNCTIONS All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, $$ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

CROSS REFERENCES Appointment of trustees in bankruptcy for faceamount certificate company, see section 72 (a) of Title 11, Bankruptcy. 8 80a-5. Subclassification of management companies.

(a) For the purposes of this subchapter and sections 72 (a) and 107 (f) of Title 11, management companies are divided into open-end and closed-end companies, defined as follows:

(1) "Open-end company" means a management company which is offering for sale or has outstanding any redeemable security of which it is the issuer.

(2) "Close-end company" means any management company other than an open-end company.

(b) Management companies are further divided into diversified companies and non-diversified companies, defined as follows:

(1) "Diversified company" means a management company which meets the following requirements: At least 75 per centum of the value of its total assets is represented by cash and cash items (including receivables), Government securities, securities of other investment companies, and other securities for the purposes of this calculation limited in respect of any one issuer to an amount not greater in value than 5 per centum of the value of the total assets of such management company and to not more than 10 per centum of the outstanding voting securities of such issuer.

(2) "Non-diversified company" means any management company other than a diversified company.

(c) A registered diversified company which at the time of its qualification as such meets the requirements of paragraph (1) of subsection (b) of this section shall not lose its status as a diversified company because of any subsequent discrepancy between the value of its various investments and the requirements of said paragraph, so long as any such discrepancy existing immediately after its acquisition of any security or other property is neither wholly nor partly the result of such acquisition. (Aug. 22, 1940, ch. 686, title I, § 5, 54 Stat. 800.)

TRANSFER OF FUNCTIONS All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, $$ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

(B) such company does not sell exclusively for cash any security of which it is the issuer, except shortterm paper and ordinary receiver's or trustee's certificates.

(3) Any company which since the effective date of this subchapter and sections 72 (a) and 107 (f) of Title 11 or within five years prior to such date has been reorganized under the supervision of a court of competent jurisdiction, if (A) such company was not an investment company at the commencement of such reorganization proceedings, (B) at the conclusion of such proceedings all outstanding securities of such company were owned by creditors of such company or by persons to whom such securities were issued on account of creditors' claims, and (C) more than 50 per centum of the voting securities of such company, and securities representing more than 50 per centum of the net asset value of such company, are currently owned beneficially by not more than twenty-five persons; but such exemption shall terminate if any security of which such company is the issuer is offered for sale or sold to the public after the conclusion of such proceedings by the issuer or by or through any underwriter. For the purposes of this paragraph, any new company rganized as part of the reorganization shall be deemed the same company as its predecessor; and beneficial ownership shall be determined in the manner provided in section 80a-3 (c) (1) of this title.

(4) Any issuer as to which there is outstanding a writing filed with the Commission by the Federal Savings and Loan Insurance Corporation stating that exemption of such issuer from the provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11 is consistent with the public interest and the protection of investors and is necessary or appropriate by reason of the fact that such issuer holds or proposes to acquire any assets or any product of any assets which have been segregated (A) from assets of any company which at the filing of such writing is an insured institution within the meaning of section 1724 (a) of Title 12, or (B) as a part of or in connection with any plan for or condition to the insurance of accounts of any company by said corporation or the conversion of any company into a Federal savings and loan association. Any such writing shall expire when canceled by a writing similarly filled or at the expiration of two years after the date of its filing, whichever first occurs; but said corporation may, nevertheless, before, at, or after the expiration of any such writing file another writing or writings with respect to such issuer.

(5) Any company which prior to March 15, 1940, was and now is a wholly-owned subsidiary of a registered face-amount certificate company and was prior to said date and now is organized and operating under the insurance laws of any State and subject to supervision and examination by the insurance commissioner thereof, and which prior to March 15, 1940, was and now is engaged, subject to such laws, in business substantially all of which consists of issuing and selling only to residents of such

$ 80a-6. Exemptions.

(a) The following investment companies are exempt from the provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11:

(1) Any company organized or otherwise created under the laws of and having its principal office and place of business in Alaska, Hawaii, Puerto Rico, the Canal Zone, the Virgin Islands, or any other possession of the United States; but such exemption shall terminate if any security of which such company is the issuer is offered for sale or sold after the effective date of this subchapter and sections 72 (a) and 107 (f) of Title 11, by such company or an underwriter therefor, to a resident of any State other than the State in which such company is organized.

(2) Any company for which, in a proceeding in any court of the United States or of a State, a receiver, trustee in bankruptcy, or similar officer had been appointed or elected prior to the effective date of this subchapter and sections 72 (a) and 107 (f) of Title 11, and every such officer so appointed or elected prior to the effective date of this subchapter and sections 72 (a) and 107 (f) of Title 11; but such exemption shall continue only so long as (A) the conduct of such company's business remains subject to the supervision of such court or officer thereof, and

title, the Commission deems it necessary or appropriate in the public interest or for the protection of investors that certain specified provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11 pertaining to registered investment companies shall be applicable in respect of such company, the provisions so specified shall apply to such company, and to other persons in their transactions and relations with such company, as though such company were a registered investment company. (Aug. 22, 1940, ch. 686, title I, § 6, 54 Stat. 800; Proc. No. 2695, eff. July 4, 1946, 11 F. R. 7517, 60 Stat. 1352.)

CODIFICATION Words "Philippine Islands" were deleted from subsec. (a) (1) following “Puerto Rico" under the authority of Proc. No. 2695, granting independence to the Philippine Islands, which was issued pursuant to section 1394 of Title 22, Foreign Relations and Intercourse. Said Proc. No. 2695 is set out as a note under said section 1394.

TRANSFER OF FUNCTIONS All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, $$ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

State and investing the proceeds from, securities providing for or representing participations or interests in intangible assets consisting of mortgages or other liens on real estate or notes or bonds secured thereby or in a fund or deposit of mortgages or other liens on real estate or notes or bonds secured thereby or having outstanding such securities so issued and sold.

(b) Upon application by any employees' security company, the Commission shall by order exempt such company from the provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11 and of the rules and regulations thereunder, if and to the extent that such exemption is consistent with the protection of investors. In determining the provisions to which such an order of exemption shall apply, the Commission shall give due weight, among other things, to the form of organization and the capital structure of such company, the persons by whom its voting securities, evidences of indebtedness, and other securities are owned and controlled, the prices at which securities issued by such company are sold and the sales load thereon, the disposition of the proceeds of such sales, the character of the securities in which such proceeds are invested, and any relationship between such company and the issuer of any such security.

(c) The Commission, by rules and regulations upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11 or of any rule or regulation thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11.

(d) The Commission, by rules and regulations or order, shall exempt a closed-end investment company from any or all provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11, but subject to such terms and conditions as may be necessary or appropriate in the public interest or for the protection of investors, if

(1) the aggregate sums received by such company from the sale of all its outstanding securities, plus the aggregate offering price of all securities of which such company is the issuer and which it proposes to offer for sale, do not exceed $100,000;

(2) no security of which such company is the issuer has been or is proposed to be sold by such company or any underwriter therefor, in connection with a public offering, to any person who is not a resident of the State under the laws of which such company is organized or otherwise created; and

(3) such exemption is not contrary to the public interest or inconsistent with the protection of investors.

(e) If, in connection with any rule, regulation, or order under this section exempting any investment company from any provision of section 80a-7 of this

8 80a-7. Transactions by unregistered investment

companies. (a) No investment company organized or otherwise created under the laws of the United States or of a State and having a board of directors, unless registered under section 80a-8 of this title shall directly or indirectly

(1) offer for sale, sell, or deliver after sale, by the use of the mails or any means or instrumentality of interstate commerce, any security or any interest in a security, whether the issuer of such security is such investment company or another person; or offer for sale, sell, or deliver after sale any such security or interest, having reason to believe that such security or interest will be made the subject of a public offering by use of the mails or any means or instrumentality of interstate commerce;

(2) purchase, redeem, retire, or otherwise acquire or attempt to acquire, by use of the mails or any means or instrumentality of interstate commerce, any security or any interest in a security, whether the issuer of such security is such investment company or another person;

(3) control any investment company which does any of the acts enumerated in paragraphs (1) and (2) of this sụbsection;

(4) engage in any business in interstate commerce;

or

(5) control any company which is engaged in any business in interstate commerce. The provisions of this subsection shall not apply to transactions of an investment company which are merely incidental to its dissolution.

(b) No depositor or trustee of or underwriter for any investment company, organized or otherwise created under the laws of the United States or of a State and not having a board of directors, unless

under his jurisdiction, by 1950 Reorg. Plan No. 10, SS 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

such company is registered under section 80a-8 of this title or exempt under section 80a-6 of this title, shall directly or indirectly

(1) offer for sale, sell, or deliver after sale, by use of the mails or any means or instrumentality of interstate commerce, any security or any interest in a security of which such company is the issuer; or offer for sale, sell, or deliver after sale any such security or interest, having reason to believe that such security or interest will be made the subject of a public offering by use of the mails or any means or instrumentality of interstate commerce;

(2) purchase, redeem, or otherwise acquire or attempt to acquire, by use of the mails or any means or instrumentality of interstate commerce, any security or any interest in a security of which such company is the issuer; or

(3) sell or purchase for the account of such company, by use of the mails or any means or instrumentality of interstate commerce, any security or interest in a security, by whomever issued. The provisions of this subsection shall not apply to transactions which are merely incidental to the dissolution of an investment company.

(c) No promoter of a proposed investment company, and no underwriter for such a promoter, shall make use of the mails or any means or instrumentality of interstate commerce, directly or indirectly, to offer for sale, sell, or deliver after sale, in connection with a public offering, any preorganization certificate or subscription for such a company.

(d) No investment company, unless organized or otherwise created under the laws of the United States or of a State, and no depositor or trustee of or underwriter for such a company not so organized or created, shall make use of the mails or any means or instrumentality of interstate commerce, directly or indirectly, to offer for sale, sell, or deliver after sale, in connection with a public offering, any security of which such company is the issuer. Notwithstanding the provisions of this subsection and of section 80a-8 (a) of this title, the Commission is authorized, upon application by an investment company organized or otherwise created under the laws of a foreign country, to issue a conditional or unconditional order permitting such company to register under this subchapter and sections 72 (a) and 107 (f) of Title 11 and to make a public offering of its securities by use of the mails and means or instrumentalities of interstate commerce, if the Commission finds that, by reason of special circumstances or arrangements, it is both legally and practically feasible effectively to enforce the provisions of this subchapter and sections 72 (a) and 107 (f) of Title 11 against such company and that the issuance of such order is otherwise consistent with the public interest and the protection of investors. (Aug. 22, 1940, ch. 686, title I, § 7, 54 Stat. 802.)

TRANSFER OF FUNCTIONS All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit

80a-8. Registration of investment companies.

(a) Any investment company organized or otherwise created under the laws of the United States or of a State may register for the purposes of this subchapter and sections 72 (a) and 107 (f) of Title 11 by filing with the Commission a notification of registration, in such form as the Commission shall by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors. An investment company shall be deemed to be registered upon receipt by the Commission of such notification of registration.

(b) Every registered investment company shall file with the Commission, within such reasonable time after registration as the Commission shall fix by rules and regulations, an original and such copies of a registration statement, in such form and containing such of the following information and documents as the Commission shall by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors:

(1) a recital of the policy of the registrant in respect of each of the following types of activities, such recital consisting in each case of a statement whether the registrant reserves freedom of action to engage in activities of such type, and if such freedom of action is reserved, a statement briefly indicating, insofar as is practicable, the extent to which the registrant intends to engage therein: (A) the classification and subclassifications, as defined in sections 80a-4 and 80a-5 of this title, within which the registrant proposes to operate; (B) borrowing money; (C) the issuance of senior securities; (D) engaging in the business of underwriting securities issued by other persons; (E) concentrating investments in a particular industry or group of industries; (F) the purchase and sale of real estate and commodities, or either of them; (G) making loans to other persons; and (H) portfolio turn-over (including a statement showing the aggregate dollar amount of purchases and sales of portfolio securities, other than Government securities, in each of the last three full fiscal years preceding filing of such registration statement);

(2) a recital of the policy of the registrant in respect of matters, not enumerated in paragraph (1) of this subsection, which the registrant deems matters of fundamental policy and elects to treat as such;

(3) the name and address of each affiliated person of the registrant; the name and principal address of every company, other than the registrant, of which each such person is an officer, director, or partner; a brief statement of the business experience for the preceding five years of each officer and director of the registrant; and

(4) the information and documents which would be required to be filed in order to register under the Securities Act of 1933 and the Securities Exchange Act of 1934, all securities (other than shortterm paper) which the registrant has outstanding or proposes to issue.

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