15 U.S.C. § 80a-1 — Findings and declaration of policy

Page 504 TITLE 15—COMMERCE AND TRADE § 80a–1 1 See References in Text note below. regulations approved and made effective prior to such date, see section 1274 of Pub. L. 109–58, set out as an Ef- fective Date note under section 16451 of Title 42, The Public Health and Welfare. CHAPTER 2D—INVESTMENT COMPANIES AND ADVISERS SUBCHAPTER I—INVESTMENT COMPANIES Sec. 80a–1. Findings and declaration of policy. 80a–2. Definitions; applicability; rulemaking consid- erations. 80a–3. Definition of investment company. 80a–3a. Protection of philanthropy under State law. 80a–4. Classification of investment companies. 80a–5. Subclassification of management companies. 80a–6. Exemptions. 80a–7. Transactions by unregistered investment companies. 80a–8. Registration of investment companies. 80a–9. Ineligibility of certain affiliated persons and underwriters. 80a–10. Affiliations or interest of directors, officers, and employees. 80a–11. Offers to exchange securities. 80a–12. Functions and activities of investment com- panies. 80a–13. Changes in investment policy. 80a–14. Size of investment companies. 80a–15. Contracts of advisers and underwriters. 80a–16. Board of directors. 80a–17. Transactions of certain affiliated persons and underwriters. 80a–18. Capital structure of investment companies. 80a–19. Payments or distributions. 80a–20. Proxies; voting trusts; circular ownership. 80a–21. Loans by management companies. 80a–22. Distribution, redemption, and repurchase of securities; regulations by securities asso- ciations. 80a–23. Closed-end companies. 80a–24. Registration of securities under Securities Act of 1933. 80a–25. Reorganization plans; reports by Commission. 80a–26. Unit investment trusts. 80a–27. Periodic payment plans. 80a–28. Face-amount certificate companies. 80a–29. Reports and financial statements of invest- ment companies and affiliated persons. 80a–30. Accounts and records. 80a–31. Accountants and auditors. 80a–32. Filing of documents with Commission in civil actions. 80a–33. Destruction and falsification of reports and records. 80a–34. Unlawful representations and names. 80a–35. Breach of fiduciary duty. 80a–36. Larceny and embezzlement. 80a–37. Rules, regulations, and orders. 80a–38. Procedure for issuance of rules and regula- tions. 80a–39. Procedure for issuance of orders. 80a–40. Hearings by Commission. 80a–41. Enforcement of subchapter. 80a–42. Court review of orders. 80a–43. Jurisdiction of offenses and suits. 80a–44. Disclosure of information filed with Commis- sion; copies. 80a–45. Reports by Commission; hiring and leasing authority. 80a–46. Validity of contracts. 80a–47. Liability of controlling persons; preventing compliance with subchapter. 80a–48. Penalties. 80a–49. Construction with other laws. 80a–50. Separability. 80a–51. Short title. 80a–52. Effective date. Sec. 80a–53. Election to be regulated as business develop- ment company. 80a–54. Acquisition of assets by business development companies. 80a–55. Qualifications of directors. 80a–56. Transactions with certain affiliates. 80a–57. Changes in investment policy. 80a–58. Incorporation of subchapter provisions. 80a–59. Functions and activities of business develop- ment companies. 80a–60. Capital structure. 80a–61. Loans. 80a–62. Distribution and repurchase of securities. 80a–63. Accounts and records. 80a–64. Preventing compliance with subchapter; li- ability of controlling persons. SUBCHAPTER II—INVESTMENT ADVISERS 80b–1. Findings. 80b–2. Definitions. 80b–3. Registration of investment advisers. 80b–3a. State and Federal responsibilities. 80b–4. Reports by investment advisers. 80b–4a. Prevention of misuse of nonpublic informa- tion. 80b–5. Investment advisory contracts. 80b–6. Prohibited transactions by investment advis- ers. 80b–6a. Exemptions. 80b–7. Material misstatements. 80b–8. General prohibitions. 80b–9. Enforcement of subchapter. 80b–10. Disclosure of information by Commission. 80b–10a. Consultation. 80b–11. Rules, regulations, and orders of Commission. 80b–12. Hearings. 80b–13. Court review of orders. 80b–14. Jurisdiction of offenses and suits. 80b–15. Validity of contracts. 80b–16. Omitted. 80b–17. Penalties. 80b–18. Hiring and leasing authority of Commission. 80b–18a. State regulation of investment advisers. 80b–18b. Custody of client accounts. 80b–18c. Rule of construction relating to the Commod- ities Exchange Act. 80b–19. Separability. 80b–20. Short title. 80b–21. Effective date. SUBCHAPTER I—INVESTMENT COMPANIES § 80a–1. Findings and declaration of policy (a) Findings Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Com- mission made pursuant to section 79z–4 1 of this title, and facts otherwise disclosed and ascertained, it is found that investment compa- nies are affected with a national public interest in that, among other things— (1) the securities issued by such companies, which constitute a substantial part of all secu- rities publicly offered, are distributed, pur- chased, paid for, exchanged, transferred, re- deemed, and repurchased by use of the mails and means and instrumentalities of interstate commerce, and in the case of the numerous companies which issue redeemable securities this process of distribution and redemption is continuous; (2) the principal activities of such compa- nies—investing, reinvesting, and trading in se- Page 505 TITLE 15—COMMERCE AND TRADE § 80a–2 curities—are conducted by use of the mails and means and instrumentalities of interstate commerce, including the facilities of national securities exchanges, and constitute a sub- stantial part of all transactions effected in the securities markets of the Nation; (3) such companies customarily invest and trade in securities issued by, and may domi- nate and control or otherwise affect the poli- cies and management of, companies engaged in business in interstate commerce; (4) such companies are media for the invest- ment in the national economy of a substantial part of the national savings and may have a vital effect upon the flow of such savings into the capital markets; and (5) the activities of such companies, extend- ing over many States, their use of the instru- mentalities of interstate commerce and the wide geographic distribution of their security holders, make difficult, if not impossible, ef- fective State regulation of such companies in the interest of investors. (b) Policy Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Com- mission made pursuant to section 79z–4 1 of this title, and facts otherwise disclosed and ascertained, it is declared that the national pub- lic interest and the interest of investors are ad- versely affected— (1) when investors purchase, pay for, ex- change, receive dividends upon, vote, refrain from voting, sell, or surrender securities issued by investment companies without ade- quate, accurate, and explicit information, fair- ly presented, concerning the character of such securities and the circumstances, policies, and financial responsibility of such companies and their management; (2) when investment companies are orga- nized, operated, managed, or their portfolio se- curities are selected, in the interest of direc- tors, officers, investment advisers, depositors, or other affiliated persons thereof, in the in- terest of underwriters, brokers, or dealers, in the interest of special classes of their security holders, or in the interest of other investment companies or persons engaged in other lines of business, rather than in the interest of all classes of such companies’ security holders; (3) when investment companies issue securi- ties containing inequitable or discriminatory provisions, or fail to protect the preferences and privileges of the holders of their out- standing securities; (4) when the control of investment compa- nies is unduly concentrated through pyramiding or inequitable methods of control, or is inequitably distributed, or when invest- ment companies are managed by irresponsible persons; (5) when investment companies, in keeping their accounts, in maintaining reserves, and in computing their earnings and the asset value of their outstanding securities, employ un- sound or misleading methods, or are not sub- jected to adequate independent scrutiny; (6) when investment companies are reorga- nized, become inactive, or change the char- acter of their business, or when the control or management thereof is transferred, without the consent of their security holders; (7) when investment companies by excessive borrowing and the issuance of excessive amounts of senior securities increase unduly the speculative character of their junior secu- rities; or (8) when investment companies operate without adequate assets or reserves. It is declared that the policy and purposes of this subchapter, in accordance with which the provisions of this subchapter shall be inter- preted, are to mitigate and, so far as is feasible, to eliminate the conditions enumerated in this section which adversely affect the national pub- lic interest and the interest of investors. (Aug. 22, 1940, ch. 686, title I, § 1, 54 Stat. 789.) Editorial Notes REFERENCES IN TEXT Section 79z–4 of this title, referred to in text, was re- pealed by Pub. L. 109–58, title XII, § 1263, Aug. 8, 2005, 119 Stat. 974. Executive Documents TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. § 80a–2. Definitions; applicability; rulemaking considerations (a) Definitions When used in this subchapter, unless the con- text otherwise requires— (1) ‘‘Advisory board’’ means a board, whether elected or appointed, which is distinct from the board of directors or board of trustees, of an investment company, and which is com- posed solely of persons who do not serve such company in any other capacity, whether or not the functions of such board are such as to render its members ‘‘directors’’ within the def- inition of that term, which board has advisory functions as to investments but has no power to determine that any security or other in- vestment shall be purchased or sold by such company. (2) ‘‘Affiliated company’’ means a company which is an affiliated person. (3) ‘‘Affiliated person’’ of another person means (A) any person directly or indirectly owning, controlling, or holding with power to vote, 5 per centum or more of the outstanding voting securities of such other person; (B) any person 5 per centum or more of whose out- standing voting securities are directly or indi- rectly owned, controlled, or held with power to vote, by such other person; (C) any person di- rectly or indirectly controlling, controlled by, or under common control with, such other per- son; (D) any officer, director, partner, copart- ner, or employee of such other person; (E) if such other person is an investment company, any investment adviser thereof or any member