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8000 - Miscellaneous Statutes and Regulations


Periodic and Other Reports; Reports of Affiliated Persons

Sec. 30.  (a)  Every registered investment company shall file annually with the Commission such information, documents and reports as investment companies having securities registered on a national securities exchange are required to file annually pursuant

to section 13(a) of the Securities Exchange Act of 1934 and the rules and regulations issued thereunder.

(b)  Every registered investment company shall file with the Commission--

(1)  such information, documents, and reports (other than financial statements), as the Commission may require to keep reasonably current the information and documents contained in the registration statement of such company filed under this title; and

(2)  copies of every periodic or interim report or similar communication containing financial statements and transmitted to any class of such company's security holders, such copies to be filed not later than ten days after such transmission.

Any information or documents contained in a report or other communication to security holders filed pursuant to paragraph (2) may be incorporated by reference in any report subsequently or concurrently filed pursuant to paragraph (1).

(c)(1)  The Commission shall take such action as its deems necessary or appropriate, consistent with the public interest and the protection of investors, to avoid unnecessary reporting by, and minimize the compliance burdens on, registered investment companies and their affiliated persons in exercising its authority--

(A)  under subsection (f); and

(B)  under subsection (b)(1), if the Commission requires the filing of information, documents, and reports under that subsection on a basis more frequently than semiannually.

(2)  Action taken by the Commission under paragraph (1) shall include considering, and requesting public comment on--

(A)  feasible alternatives that minimize the reporting burdens on registered investment companies; and

(B)  the utility of such information, documents, and reports to the Commission in relation to the costs to registered investment companies and their affiliated persons of providing such information, documents, and reports.

(d)  The Commission shall issue rules and regulations permitting the filing with the Commission, and with any national securities exchange concerned, of copies of periodic reports, or of extracts therefrom, filed by any registered investment company pursuant to subsections (a) and (b), in lieu of any reports and documents required of such company under section 13 or 15(d) of the Securities Exchange Act of 1934.

(e)  Every registered investment company shall transmit to its stockholders, at least semiannually, reports containing such of the following information and financial statements or their equivalent, as of a reasonably current date, as the Commission may prescribe by rules and regulations for the protection of investors, which reports shall not be misleading in any material respect in the light of the reports required to be filed pursuant to subsections (a) and (b):

(1)  a balance sheet accompanied by a statement of the aggregate value of investments on the date of such balance sheet;

(2)  a list showing the amounts and values of securities owned on the date of such balance sheet;

(3)  a statement of income, for the period covered by the report, which shall be itemized at least with respect to each category of income and expense representing more than 5 per centum of total income or expense;

(4)  a statement of surplus, which shall be itemized at least with respect to each charge or credit to the surplus account which represents more than 5 per centum of the total charges or credits during the period covered by the report;

(5)  a statement of the aggregate remuneration paid by the company during the period covered by the report (A) to all directors and to all members of any advisory board for regular compensation; (B) to each director and to each member of an advisory board for special compensation; (C) to all officers; and (D) to each person of whom any officer or director of the company is an affiliated person; and

(6)  a statement of the aggregate dollar amounts of purchase and sales of investment securities, other than government securities, made during the period covered by the report:

Provided, That if in the judgment of the Commission any item required under this subsection is inapplicable or inappropriate to any specified type or types of investment company, the Commission may by rules and regulations permit in lieu thereof the inclusion of such item of a comparable character as it may deem applicable or appropriate to such type or types of investment company.

(f)  The Commission may, by rule, require that semiannual reports containing the information set forth in subsection (e) include such other information as the Commission deems necessary or appropriate in the public interest or for the protection of investors.

(g)  Financial statements contained in annual reports required pursuant to subsections (a) and (e), if required by the rules and regulations of the Commission, shall be accompanied by a certificate of independent public accountants. The certificate of such independent public accountants shall be based upon an audit not less in scope or procedures followed than that which independent public accountants would ordinarily make for the purpose of presenting comprehensive and dependable financial statements, and shall contain such information as the Commission may prescribe, by rules and regulations in the public interest or for the protection of investors, as to the nature and scope of the audit and the findings and opinion of the accountants. Each such report shall state that such independent public accountants have verified securities owned, either by actual examination, or by receipt of a certificate from the custodian, as the Commission may prescribe by rules and regulations.

(h)  Every person who is directly or indirectly the beneficial owner of more than 10 per centum of any class of outstanding securities (other than short-term paper) of which a registered closed-end company is the issuer or who is an officer, director, member of an advisory board, investment adviser, or affiliated person of an investment adviser of such a company shall in respect of his transactions in any securities of such company (other than short-term paper) be subject to the same duties and liabilities as those imposed by section 16 of the Securities Exchange Act of 1934 upon certain beneficial owners, directors, and officers in respect of their transactions in certain equity securities.

(i)  DISCLOSURE TO CHURCH PLAN PARTICIPANTS.--A person that maintains a church plan that is excluded from the definition of an investment company solely by reason of section 3(c)(14) shall provide disclosure to plan participants, in writing, and not less frequently than annually, and for new participants joining such a plan after May 31, 1996, as soon as is practicable after joining such plan, that--

(1)  the plan, or any company or account maintained to manage or hold plan assets and interests in such plan, company, or account, are not subject to registration, regulation, or reporting under this title, the Securities Act of 1933, the Securities Exchange Act of 1934, or State securities laws; and

(2)  plan participants and beneficiaries therefore will not be afforded the protections of those provisions.

(j)  NOTICE TO COMMISSION.--The Commission may issue rules and regulations to require any person that maintains a church plan that is excluded from the definition of an investment company solely by reason of section 3(c)(14) to file a notice with the Commission containing such information and in such form as the Commission may prescribe as necessary or appropriate in the public interest or consistent with the protection of investors.

[Codified to 15 U.S.C. 80a--29]

[Source: Section 30 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 836), effective November 1, 1940; as amended by sections 206 of title II and 508(g) of title V of the Act of October 11, 1996 (Pub. L. No. 104--290; 110 Stat. 3430 and 3449), effective October 11, 1996; section 301(c)(5)(b) of title III of the Act of November 3, 1998 (Pub. L. No. 105--353; 112 Stat. 3237), effective November 3, 1998]


Accounts and Records

Sec. 31.  (a)  MAINTENANCE OF RECORDS.--

(1)  IN GENERAL.--Each registered investment company, and each underwriter, broker, dealer, or investment adviser that is a majority-owned subsidiary of such a company, shall maintain and preserve such records (as defined in section 3(a)(37) of the Securities Exchange Act of 1934) for such period or periods as the Commission, by rules and regulations, may prescribe as necessary or appropriate in the public interest or for the protection of investors. Each investment adviser that is not a majority-owned subsidiary of, and each depositor of any registered investment company, and each principal underwriter for any registered investment company other than a closed-end company, shall maintain and preserve for such period or periods as the Commission shall prescribe by rules and regulations, such records as are necessary or appropriate to record such person's transactions with such registered company. Each person having custody or use of the securities, deposits, or credits of a registered investment company shall maintain and preserve all records that relate to the custody or use by such person of the securities, deposits, or credits of the registered investment company for such period or periods as the Commission, by rule or regulation, may prescribe, as necessary or appropriate in the public interest or for the protection of investors.

(2)  MINIMIZING COMPLIANCE BURDEN.--In exercising its authority under this subsection, the Commission shall take such steps as it deems necessary or appropriate, consistent with the public interest and for the protection of investors, to avoid unnecessary recordkeeping by, and minimize the compliance burden on, persons required to maintain records under this subsection (hereafter in this section referred to as "subject persons"). Such steps shall include considering, and requesting public comment on--

(A)  feasible alternatives that minimize the recordkeeping burdens on subject persons;

(B)  the necessity of such records in view of the public benefits derived from the independent scrutiny of such records through Commission examination;

(C)  the costs associated with maintaining the information that would be required to be reflected in such records; and

(D)  the effects that a proposed recordkeeping requirement would have on internal compliance policies and procedures.

(b)  EXAMINATIONS OF RECORDS.--

(1)  IN GENERAL.--All records required to be maintained and preserved in accordance with subsection (a) shall be subject at any time and from time to time to such reasonable periodic, special, and other examinations by the Commission, or any member or representative thereof, as the Commission may prescribe.

(2)  AVAILABILITY.--For purposes of examinations referred to in paragraph (1), any subject person shall make available to the Commission or its representatives any copies or extracts from such records as may be prepared without undue effort, expense, or delay as the Commission or its representatives may reasonably request.

(3)  COMMISSION ACTION.--The Commission shall exercise its authority under this subsection with due regard for the benefits of internal compliance policies and procedures and the effective implementation and operation thereof.

(4)  RECORDS OF PERSONS WITH CUSTODY OR USE.--

(A)  IN GENERAL.--Records of persons having custody or use of the securities, deposits, or credits of a registered investment company that relate to such custody or use, are subject at any time, or from time to time, to such reasonable periodic, special, or other examinations and other information and document requests by representatives of the Commission, as the Commission deems necessary or appropriate in the public interest or for the protection of investors.

(B)  CERTAIN PERSONS SUBJECT TO OTHER REGULATION.--

Any person that is subject to regulation and examination by a Federal financial institution regulatory agency (as such term is defined under section 212(c)(2) of title 18, United States Code) may satisfy any examination request, information request, or document request described under subparagraph (A), by providing to the Commission a detailed listing, in writing, of the securities, deposits, or credits of the registered investment company within the custody or use of such person.

(c)  REGULATORY AUTHORITY.--The Commission may, in the public interest or for the protection of investors, issue rules and regulations providing for a reasonable degree of uniformity in the accounting policies and principles to be followed by registered investment companies in maintaining their accounting records and in preparing financial statements required pursuant to this title.

(d)  EXEMPTION AUTHORITY.--The Commission, upon application made by any registered investment company, may by order exempt a specific transaction or transactions from the provisions of any rule or regulation made pursuant to subsection (e), if the Commission finds that such rule or regulation should not reasonably be applied to such transaction.

[Codified to 15 U.S.C. 80a--30]

[Source: Section 31 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 838), effective November 1, 1940; as amended by section 207 of title II of the Act of October 31, 1996 (PUb. L. No. 140--290; 110 Stat. 3430), 3431, and 3432), effective October 11, 1996; section 301(c)(6) of title III of the Act of November 3, 1998, (Pub. L. No. 105--353; 112 Stat. 3237), effective November 3, 1998; sections 929I(b) and 929Q(a) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1858 and 1865), effective July 21, 2010; section 1(b) of the Act of October 5, 2010 (Pub. L. No. 111--257; 124 Stat. 2646), effective October 5, 2010]

Accountants and Auditors

Sec. 32.  (a)  It shall be unlawful for any registered management company or registered face-amount certificate company to file with the Commission any financial statement signed or certified by an independent public accountant, unless--

(1)  such accountant shall have been selected at a meeting held within thirty days before or after the beginning of the fiscal year or before the annual meeting of stockholders in that year by the vote, cast in person, of a majority of those members of the board of directors who are not interested persons of such registered company;

(2)  such selection shall have been submitted for ratification or rejection at the next succeeding annual meeting of stockholders if such meeting be held, except that any vacancy occurring between annual meetings, due to the death or resignation of the accountant, may be filled by the vote of a majority of those members of the board of directors who are not interested persons of such registered company, cast in person at a meeting called for the purpose of voting on such action;

(3)  the employment of such accountant shall have been conditioned upon the right of the company by vote of a majority of the outstanding voting securities at any meeting called for the purpose to terminate such employment forthwith without any penalty; and

(4)  such certificate or report of such accountant shall be addressed both to the board of directors of such registered company and to the security holders thereof.

If the selection of an accountant has been rejected pursuant to paragraph (2) or his employment terminated pursuant to paragraph (3), the vacancy so occurring may be filled by a vote of a majority of the outstanding voting securities, either at the meeting at which the rejection or termination occurred or, if not so filled, at a subsequent meeting which shall be called for the purpose. In the case of a common-law trust of the character described in section 16(c), no ratification of the employment of such accountant shall be required but such employment may be terminated and such accountant removed by action of the holders of record of a majority of the outstanding shares of beneficial interest in such trust in the same manner as is provided in section 16(c) in respect of the removal of a trustee, and all the provisions therein contained as to the calling of a meeting shall be applicable. In the event of such termination and removal, the vacancy so occurring may be filled by action of the holders of record of a majority of the shares of beneficial interest either at the meeting, if any, at which such termination and removal occurs, or by instruments in writing filed with the custodian, or if not so filed within a reasonable time then at a subsequent meeting which shall be called by the trustees for the purpose. The provisions of paragraph (42) of section 2(a) as to a majority shall be applicable to the vote cast at any meeting of the shareholders of such a trust held pursuant to this subsection.

(b)  No registered management company or registered face-amount certification company shall file with the Commission any financial statement in the preparation of which the controller or other principal accounting officer or employee of such company participated, unless such controller, officer or employee was selected, either by vote of the holders of such company's voting securities at the last annual meeting of such security holders, or by the board of directors of such company.

(c)  The Commission is authorized, by rules and regulations or order in the public interest or for the protection of investors, to require accountants and auditors to keep reports, work sheets, and other documents and papers relating to registered investment companies for such period or periods as the Commission may prescribe, and to make the same available for inspection by the Commission or any member or representative thereof.

[Codified to 15 U.S.C. 80a--31]

[Source: Section 32 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 838), effective November 1, 1940; as amended by section 18 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat 1427), effective December 14, 1971; section 28(4) of the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 165), effective June 4, 1975]

Filing of Documents with Commission in Civil Actions

Sec. 33.  Every registered investment company which is a party and every affiliated person of such company who is a party defendant to any action or claim by a registered investment company or a security holder thereof in a derivative or representative capacity against an officer, director, investment adviser, trustee, or depositor of such company, shall file with the Commission, unless already so filed, (1) a copy of all pleadings, verdicts, or judgments filed with the court or served in connection with such action or claim, (2) a copy of any proposed settlement, compromise, or discontinuance of such action, and (3) a copy of such motions, transcripts, or other documents filed in or issued by the court or served in connection with such action or claim as may be requested in writing by the Commission. If any document referred to in clause (1) or (2)--

(A)  is delivered to such company or party defendant, such document shall be filed with the Commission not later than ten days after the receipt thereof; or

(B)  is filed in such court or delivered by such company or party defendant, such document shall be filed with the Commission not later than five days after such filing or delivery.

[Codified to 15 U.S.C. 80a--32]

[Source: Section 33 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 839), effective November 1, 1940; as amended by section 19 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1428), effective December 14, 1970]

Destruction and Falsification of Reports and Records

Sec. 34.  (a)  MISREPRESENTATION OF GUARANTEES.--

(1)  IN GENERAL.--It shall be unlawful for any person, issuing or selling any security of which a registered investment company is the issuer, to represent or imply in any manner whatsoever that such security or company--

(A)  has been guaranteed, sponsored, recommended, or approved by the United States, or any agency, instrumentality or officer of the United States;

(B)  has been insured by the Federal Deposit Insurance Corporation; or

(C)  is guaranteed by or is otherwise an obligation of any bank or insured depository institution.

(2)  DISCLOSURES.--Any person issuing or selling the securities of a registered investment company that is advised by, or sold through, a bank shall prominently disclose that an investment in the company is not insured by the Federal Deposit Insurance Corporation or any other government agency. The Commission may, after consultation with and taking into consideration the views of the Federal banking agencies (as defined in section 3 of the Federal Deposit Insurance Act), adopt rules and regulations, and issue orders, consistent with the protection of investors, prescribing the manner in which the disclosure under this paragraph shall be provided.

(3)  DEFINITIONS.--The terms "insured depository institution" and "appropriate Federal banking agency" have the same meanings as given in section 3 of the Federal Deposit Insurance Act.

[Codified to 15 U.S.C. 80a--33]

[Source: Section 34 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 840), effective November 1, 1940; as amended by section 214 of title II of the Act of November 12, 1999 (Pub. L. No. 106--102; 113 Stat. 1398), effective May 12, 2001]

Unlawful Representations and Names

Sec. 35.  (a)  It shall be unlawful for any person, in issuing or selling any security of which a registered investment company is the issuer, to represent or imply in any manner whatsoever that such security or company has been guaranteed, sponsored, recommended, or approved by the United States or any agency or officer thereof.

(b)  It shall be unlawful for any person registered under any section of this title to represent or imply in any manner whatsoever that such person has been sponsored, recommended, or approved, or that his abilities or qualifications have in any respect been passed upon by the United States or any agency or officer thereof.

(c)  No provision of subsection (a) or (b) shall be construed to prohibit a statement that a person or security is registered under this Act, the Securities Act of 1933, or the Securities Exchange Act of 1934, if such statement is true in fact and if the effect of such registration is not misrepresented.

(d)  DECEPTIVE OR MISLEADING NAMES.--It shall be unlawful for any registered investment company to adopt as a part of the name or title of such company, or of any securities of which it is the issuer, any word or words that the Commission finds are materially deceptive or misleading. The Commission is authorized, by rule, regulation, or order, to define such names or titles as are materially deceptive or misleading.

[Codified to 15 U.S.C. 80a--34]

[Source: Section 35 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 840), effective November 1, 1940; as amended by seciton 208 of title II of the Act of October 11, 1996 (Pub. L. No. 104--290; 110 Stat. 3432), effective October 11, 1996]

Breach of Fiduciary Duty

Sec. 36.  (a)  The Commission is authorized to bring an action in the proper district court of the United States, or in the United States court of any territory or other place subject to the jurisdiction of the United States, alleging that a person who is, or at the time of the alleged misconduct was, serving or acting in one or more of the following capacities has engaged within five years of the commencement of the action or is about to engage in any act or practice constituting a breach of fiduciary duty involving personal misconduct in respect of any registered investment company for which such person so serves or acts, or at the time of the alleged misconduct, so served or acted--

(1)  as officer, director, member of any advisory board, investment adviser, or depositor; or

(2)  as principal underwriter, if such registered company is an open-end company, unit investment trust, or face-amount certificate company.

If such allegations are established, the court may enjoin such person from acting in any or all such capacities either permanently or temporarily and award such injunctive or other relief against such person as may be reasonable and appropriate in the circumstances, have due regard to the protection of investors and to the effectuation of the policies declared in section 1(b) of this title.

(b)  For the purposes of this subsection, the investment adviser of a registered investment company shall be deemed to have a fiduciary duty with respect to the receipt of compensation for services, or of payment of a material nature, paid by such registered investment company, or by the security holders thereof, to such investment adviser or any affiliated person of such investment adviser. An action may be brought under this subsection by the Commission, or by a security holder of such registered investment company on behalf of such company, against such investment adviser, or any affiliated person of such investment adviser, or any other person enumerated in subsection (a) of this section who has a fiduciary duty concerning such compensation or payments, for breach of fiduciary duty in respect of such compensation or payments paid by such registered investment company or by the security holders thereof to such investment adviser or person. With respect to any such action the following provisions shall apply:

(1)  It shall not be necessary to allege or prove that any defendant engaged in personal misconduct, and the plaintiff shall have the burden of proving a breach of fiduciary duty.

(2)  In any such action approval by the board of directors of such investment company of such compensation or payments, or of contract or other arrangements providing for such compensation or payments, and ratification or approval of such compensation or payments, or of contracts or other arrangements providing for such compensation or payments, by the shareholders of such investment company, shall be given such consideration by the court as is deemed appropriate under all the circumstances.

(3)  No such action shall be brought or maintained against any person other than the recipient of such compensation or payments, and no damages or other relief shall be granted against any person other than the recipient of such compensation or payments. No award of damages shall be recoverable for any period prior to one year before the action was instituted. Any award of damages against such recipient shall be limited to the actual damages resulting from the breach of fiduciary duty and shall in no event exceed the amount of compensation or payments received from such investment company, or the security holders thereof, by such recipient.

(4)  This subsection shall not apply to compensation or payments made in connection with transactions subject to section 17 of this title, or rules, regulations, or orders thereunder, or to sales loads for the acquisition of any security issued by a registered investment company.

(5)  Any action pursuant to this subsection may be brought only in an appropriate district court of the United States.

(6)  No finding by a court with respect to a breach of fiduciary duty under this subsection shall be made a basis (A) for a finding of a violation of this title for the purposes of sections 9 and 49 of this title, section 15 of the Securities Exchange Act of 1934, or section 203 of title II of this Act, or (B) for an injunction to prohibit any person from serving in any of the capacities enumerated in subsection (a) of this section.

(c)  For the purposes of subsections (a) and (b) the term "investment adviser" includes a corporate or other trustee performing the functions of an investment adviser.

[Codified to 15 U.S.C. 80a--35]

[Source: Section 36 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 841), effective November 1, 1940, as amended by section 20 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1428), effective December 14, 1970, subsection (b) effective June 13, 1971; section 28(7) of the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 166), effective June 4, 1975; and section 622 of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1262), effective December 4, 1987; section 929F(f) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1854), effective July 21, 2010]


Larceny and Embezzlement

Sec. 37.  Whoever steals, unlawfully abstracts, unlawfully and willfully converts to his own use or to the use of another, or embezzles any of the moneys, funds, securities, credits, property, or assets of any registered investment company shall be deemed guilty of a crime, and upon conviction thereof shall be subject to the penalties provided in section 49. A judgment of conviction or acquittal on the merits under the laws of any State shall be a bar to any prosecution under this section for the same act or acts.

[Codified to 15 U.S.C. 80a--36]

[Source: Section 37 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 841), effective November 1, 1940]

Rules, Regulations, and Orders; General Powers of Commission

Sec. 38.  (a)  The Commission shall have authority from time to time to make, issue, amend, and rescind such rules and regulations and such orders as are necessary or appropriate to the exercise of the powers conferred upon the Commission elsewhere in this title, including rules and regulations defining accounting, technical, and trade terms used in this title, and prescribing the form or forms in which information required in registration statements, applications, and reports to the Commission shall be set forth. For the purposes of its rules or regulations the Commission may classify persons, securities, and other matters within its jurisdiction and prescribe different requirements for different classes of persons, securities, or matters.

(b)  The Commission, by such rules and regulations or order as it deems necessary or appropriate in the public interest or for the protection of investors, may authorize the filing of any information or documents required to be filed with the Commission under this title, title II of this Act, the Securities Act of 1933, the Securities Exchange Act of 1934, or the Trust Indenture Act of 1939, by incorporating by reference any information or documents theretofore or concurrently filed with the Commission under this title or any of such Acts.

(c)  No provision of this title imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or order of the Commission, notwithstanding that such rule, regulation, or order may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

[Codified to 15 U.S.C. 80a--37]

[Source: Section 38 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 841), effective November 1, 1940; section 986(c)(3) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1936), effective July 21, 2010]

Rules and Regulations; Procedure for Issuance

Sec. 39.  Subject to the provisions of the Federal Register Act and regulations prescribed under the authority thereof, the rules and regulations of the Commission under this title, and amendments thereof, shall be effective upon publication in the manner which the Commission shall prescribe, or upon such later date as may be provided in such rules and regulations.

[Codified to 15 U.S.C. 80a--38]

[Source: Section 39 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 842), effective November 1, 1940]

Orders; Procedure for Issuance

Sec. 40.  (a)  Orders of the Commission under this title shall be issued only after appropriate notice and opportunity for hearing. Notice to the parties to a proceeding before the Commission shall be given by personal service upon each party or by registered mail or by certified mail or confirmed telegraphic notice to the party's last known business address. Notice to interested persons, if any, other than parties may be given in the same manner or by publication in the Federal Register.

(b)  The Commission may provide, by appropriate rules or regulations, that an application verified under oath may be admissible in evidence in a proceeding before the Commission and that the record in such a proceeding may consist, in whole or in part, of such application.

(c)  In any proceeding before the Commission, the Commission, in accordance with such rules and regulations as it may prescribe, shall admit as a party any interested State or State agency, and may admit as a party any representative of interested security holders, or any other person whose participation in the proceeding may be in the public interest or for the protection of investors.

[Codified to 15 U.S.C. 80a--39]

[Source: Section 40 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 842), effective November 1, 1940, as amended by section 1(15) of the Act of June 11, 1960 (Pub. L. No. 86-507; 74 Stat. 201), effective June 11, 1960]

Hearings by Commission

Sec. 41.  Hearings may be public and may be held before the Commission, any member or members thereof, or any officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.

[Codified to 15 U.S.C. 80a--40]

[Source: Section 41 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 842), effective November 1, 1940]

Enforcement of Title

Sec. 42.  (a)  The Commission may make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this title or of any rule, regulation, or order hereunder, or to determine whether any action in any court or any proceeding before the Commission shall be instituted under this title against a particular person or persons, or with respect to a particular transaction or transactions. The Commission shall permit any person to file with it a statement in writing, under oath or otherwise as the Commission shall determine, as to all the facts and circumstances concerning the matter to be investigated.

(b)  For the purpose of any investigation or any other proceeding under this title, any member of the Commission, or any officer thereof designated by it, is empowered to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, contracts, agreements, or other records which are relevant or material to the inquiry. Such attendance of witnesses and the production of any such records may be required from any place in any State or in any Territory or other place subject to the jurisdiction of the United States at any designated place of hearing.

(c)  In case of contumacy by, or refusal to obey a subpena issued to, any person, the Commission may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, correspondence, memoranda, contracts, agreements, and other records. And such court may issue an order requiring such person to appear before the Commission or member or officer designated by the Commission, there to produce records, if so ordered, or to give testimony touching the matter under investigation or in question; any failure to obey such order of the court may be punished by such court as a contempt thereof. All process in any such case may be served in the judicial district whereof such person is an inhabitant or wherever he may be found. Any person who without just cause shall fail or refuse to attend and testify or to answer any lawful inquiry or to produce books, papers, correspondence, memoranda, contracts, agreements, or other records, if in his or its power so to do, in obedience to the subpena of the Commission, shall be guilty of a misdemeanor and upon conviction shall be subject to a fine of not more than $1,000 or to imprisonment for a term of not more than one year, or both.

(d)  Whenever it shall appear to the Commission that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this title, or of any rule, regulation, or order hereunder, it may in its discretion bring an action in the proper district court of the United States, or the proper United States court of any Territory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices and to enforce compliance with this title or any rule, regulation, or order hereunder. Upon a showing that such person has engaged or is about to engage in any such act or practice, a permanent or temporary injunction or decree or restraining order shall be granted without bond. In any proceeding under this subsection to enforce compliance with section 7, the court as a court of equity may, to the extent it deems necessary or appropriate, take exclusive jurisdiction and possession of the investment company or companies involved and the books, records, and assets thereof, wherever located; and the court shall have jurisdiction to appoint a trustee, who with the approval of the court shall have power to dispose of any or all of such assets, subject to such terms and conditions as the court may prescribe. The Commission may transmit such evidence as may be available concerning any violation of the provisions of this title, or of any rule, regulation, or order thereunder, the Attorney General, who, in his discretion, may institute the appropriate criminal proceedings under this title.

(e)  MONEY PENALTIES IN CIVIL ACTIONS.--

(1)  AUTHORITY OF COMMISSION.--Whenever it shall appear to the Commission that any person has violated any provision of this title, the rules or regulations thereunder, or a cease-and-desist order entered by the Commission pursuant to section 9(f) of this title, the Commission may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, upon a proper showing, a civil penalty to be paid by the person who committed such violation.

(2)  AMOUNT OF PENALTY.--

(A)  FIRST TIER.--The amount of the penalty shall be determined by the court in light of the facts and circumstances. For each violation, the amount of the penalty shall not exceed the greater of (i) $5,000 for a natural person or $50,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation.

(B)  SECOND TIER.--Notwithstanding subparagraph (A), the amount of penalty for each such violation shall not exceed the greater of (i) $50,000 for a natural person or $250,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation, if the violation described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.

(C)  THIRD TIER.--Notwithstanding subparagraphs (A) and (B), the amount of penalty for each such violation shall not exceed the greater of (i) $100,000 for a natural person or $500,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation, if--

(I)  the violation described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and

(II)  such violation directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons.

(3)  PROCEDURES FOR COLLECTION.--

(A)  PAYMENT OF PENALTY TO TREASURY.--A penalty imposed under this section shall be payable into the Treasury of the United States except as otherwise provided in section 308 of the Sarbanes--Oxley Act of 2002 and section 21F of the Securities Exchange Act of 1934.

(B)  COLLECTION OF PENALTIES.--If a person upon whom such a penalty is imposed shall fail to pay such penalty within the time prescribed in the court's order, the Commission may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court.

(C)  REMEDY NOT EXCLUSIVE.--The actions authorized by this subsection may be brought in addition to any other action that the Commission or the Attorney General is entitled to bring.

(D)  JURISDICTION AND VENUE.--For purposes of section 44 of this title, actions under this paragraph shall be actions to enforce a liability or a duty created by this title.

(4)  SPECIAL PROVISIONS RELATING TO A VIOLATION OF A CEASE-AND-DESIST ORDER.--In an action to enforce a cease-and-desist order entered by the Commission pursuant to section 9(f), each separate violation of such order shall be a separate offense, except that in the case of a violation through a continuing failure to comply with the order, each day of the failure to comply shall be deemed a separate offense.

[Codified to 15 U.S.C. 80a--41]

[Source: Section 42 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 842), effective November 1, 1940, as amended by section 215 of title II of the Act of October 15, 1970 (Pub. L. No. 91--452; 84 Stat. 929), effective December 14, 1970; section 623 of title VI of the Act of December 4, 1987, (Pub. L. No. 100--181; 101 Stat. 1262), effective December 4, 1987; and section 302 of title III of the Act of October 15, 1990 (Pub. L. No. 101--429; 104 Stat. 945), effective October 15, 1990; section 308(d)(4) of title III of the Act of July 30, 2002 (Pub. L. No. 107--204; 116 Stat. 785), effective July 30, 2002; section 923(a)(2) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1849), effective July 21, 2010]

Court Review of Orders

Sec. 43.  (a)  Any person or party aggrieved by an order issued by the Commission under this title may obtain a review of such order in the court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such court within sixty days after the entry of such order, a written petition praying that the order of the Commission be modified or set aside in whole or in part. A copy of such petition shall be forthwith transmitted by the clerk of the court to any member of the Commission or any officer thereof designated by the Commission for that purpose, and thereupon the Commission shall file in the court the record upon which the order complained of was entered, as provided in section 2112 of title 28, United States Code. Upon the filing of such petition such court shall have jurisdiction, which upon the filing of the record shall be exclusive, to affirm, modify, or set aside such order, in whole or in part. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission or unless there were reasonable grounds for failure so to do. The findings of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. If application is made to the court for leave to adduce additional evidence, and it is shown to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceeding before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts by reason of the additional evidence so taken, and it shall file with the court such modified or new findings, which, if supported by substantial evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original order. The judgment and decree of the court affirming, modifying, or setting aside, in whole or in part, any such order of the Commission shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in section 1254 of title 28, United States Code.

(b)  The commencement of proceedings under subsection (a) to review an order of the Commission issued under section 8(e) shall operate as a stay of the Commission's order unless the court otherwise orders. The commencement of proceedings under subsection (a) to review an order of the Commission issued under any provision of this title other than section 8(e) shall not operate as a stay of the Commission's order unless the court specifically so orders.

[Codified to 15 U.S.C. 80a--42]

[Source: Section 43 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 844); effective November 1, 1940, as amended by section 32(a) of the Act of June 25, 1948 (Pub. L. No. 772; 62 Stat. 991), effective September 1, 1948; section 127 of the Act of May 24, 1949 (Pub. L. No. 72; 63 Stat. 107), effective May 24, 1949; section 25 of the Act of August 28, 1958 (Pub. L. 85--791; 72 Stat. 949), effective August 28, 1958; section 21 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1430), effective December 14, 1970]

Jurisdiction of Offenses and Suits

Sec. 44.  The district courts of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have jurisdiction of violations of this title or the rules, regulations, or orders thereunder, and, concurrently with State and Territorial courts, of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, this title or the rules, regulations, or orders thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. A criminal proceeding based upon a violation of section 34, or upon a failure to file a report or other document required to be filed under this title, may be brought in the district wherein the defendant is an inhabitant or maintains his principal office or place of business. Any suit or action to enforce any liability or duty created by, or to enjoin any violation of, this title or rules, regulations, or orders thereunder, may be brought in any such district or in the district wherein the defendant is an inhabitant or transacts business, and process in such cases may be served in any district of which the defendant is an inhabitant or transacts business or wherever the defendant may be found. In any action or proceeding instituted by the Commission under this title in a United States district court for any judicial district, a subpoena issued to compel the attendance of a witness or the production of documents or tangible things (or both) at a hearing or trial may be served at any place within the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules of Civil Procedure shall not apply to a subpoena issued under the preceding sentence. Judgments and decrees so rendered shall be subject to review as provided in sections 1254, 1291, 1292, and 1294 of title 28, United States Code. No costs shall be assessed for or against the Commission in any proceeding under this title brought by or against the Commission in any court. The Commission may intervene as a party in any action or suit to enforce any liability or duty created by, or to enjoin any noncompliance with, section 36(b) of this title at any stage of such action or suit prior to final judgment therein.

[Codified to 15 U.S.C. 80a--43]

[Source: Section 44 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 844), effective November 1, 1940, as amended by section 22 of the Act of December 14, 1970 (Pub. L. No. 91--547; 84 Stat. 1430), effective December 14, 1970; section 929E(c) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1853), effective July 21, 2010]

Information Filed with Commission

Sec. 45.  (a)  The information contained in any registration statement, application, report, or other document filed with the Commission pursuant to any provision of this title or of any rule or regulation thereunder (as distinguished from any information or document transmitted to the Commission) shall be made available to the public, unless and except insofar as the Commission, by rules and regulations upon its own motion, or by order upon application, finds that public disclosure is neither necessary nor appropriate in the public interest or for the protection of investors. Except as provided in section 24(c) of the Securities Exchange Act of 1934, it shall be unlawful for any member, officer, or employee of the Commission to use for personal benefit, or to disclose to any person other than an official or employee of the United States or of a State, for official use, or for any such official or employee to use for personal benefit, any information contained in any document so filed or transmitted, if such information is not available to the public.

(b)  Photostatic or other copies of information contained in documents filed with the Commission under this title and made available to the public shall be furnished any person at such reasonable charge and under such reasonable limitations as the Commission shall prescribe.

[Codified to 15 U.S.C. 80a--44]

[Source: Section 45 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 845), effective November 1, 1940, as amended by section 202(b)(1) of title II of the Act of November 15, 1990 (Pub. L. No. 101--550; 104 Stat. 2715), effective November 15, 1990]

Annual Reports of Commission; Employees of the Commission

Sec. 46.  (a)  The Commission shall submit annually a report to the Congress covering the work of the Commission for the preceding year and including such information, data, and recommendations for further legislation in connection with the matters covered by this title as it may find advisable.

(b)  The provisions of section 4(b) of the Securities Exchange Act of 1934 shall be applicable with respect to the power of the Commission--

(1)  to appoint and fix the compensation of such employees as may be necessary for carrying out its functions under this title, and

(2)  to lease and allocate such real property as may be necessary for carrying out its functions under this title.

[Codified to 15 U.S.C. 80a--45]

[Source: Section 46 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 845), effective November 1, 1940, as amended by section 1106(a) of title XI of the Act of October 28, 1949 (Pub. L. No. 429; 63 Stat. 972), effective October 28, 1949; section 104(c) of title I of the Act of November 15, 1990 (Pub. L. No. 101--550; 104 Stat. 2714), effective November 15, 1990]

Validity of Contracts

Sec. 47.  (a)  Any condition, stipulation, or provision binding any person to waive compliance with any provision of this title or with any rule, regulation, or order thereunder shall be void.

(b)(1)  A contract that is made, or whose performance involves, a violation of this title, or of any rule, regulation, or order thereunder, is unenforceable by either party (or by a nonparty to the contract who acquired a right under the contract with knowledge of the facts by reason of which the making or performance violated or would violate any provision of this title or of any rule, regulation, or order thereunder) unless a court finds that under the circumstances enforcement would produce a more equitable result than non-enforcement and would not be inconsistent with the purposes of this title.

(2)  To the extent that a contract described in paragraph (1) has been performed, a court may not deny rescission at the instance of any party unless such court finds that under the circumstances the denial of rescission would produce a more equitable result than its grant and would not be inconsistent with the purposes of this title.

(3)  This subsection shall not apply (A) to the lawful portion of a contract to the extent that it may be severed from the unlawful portion of the contract, or (B) to preclude recovery against any person for unjust enrichment.

[Codified to 15 U.S.C. 80a--46]

[Source: Section 47 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 845), effective November 1, 1940, as amended by section 104 of title I of the Act of October 21, 1980 (Pub. L. No. 96-477; 94 Stat. 2277), effective October 21, 1980]

Liability of Controlling Persons; Preventing Compliance with Title

Sec. 48.  (a)  It shall be unlawful for any person, directly or indirectly, to cause to be done any act or thing through or by means of any other person which it would be unlawful for such person to do under the provisions of this title or any rule, regulation, or order thereunder.

(b)  For purposes of any action brought by the Commission under subsection (d) or (e) of section 42, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this Act, or of any rule or regulation issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.

(c)  It shall be unlawful for any person without just cause to hinder, delay, or obstruct the making, filing, or keeping of any information, document, report, record, or account required to be made, filed, or kept under any provision of this title or any rule, regulation, or order thereunder.

[Codified to 15 U.S.C. 80a--47]

[Source: Section 48 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 846), effective November 1, 1940; section 929M(b) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1861), effective July 21, 2010]

Penalties

Sec. 49.  Any person who willfully violates any provision of this title or of any rule, regulation, or order hereunder, or any person who willfully in any registration statement, application, report, account, record, or other document filed or transmitted pursuant to this title or the keeping of which is required pursuant to section 31(a) makes any untrue statement of a material fact or omits to state any material fact necessary in order to prevent the statements made therein from being materially misleading in the light of the circumstances under which they were made, shall upon conviction be fined not more than $10,000 or imprisoned not more than five years, or both; but no person shall be convicted under this section for the violation of any rule, regulation, or order if he proves that he had no actual knowledge of such rule, regulation, or order.

[Codified to 15 U.S.C. 80a--48]

[Source: Section 49 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 846), effective November 1, 1940, as amended by section 27(e) of the Act of June 4, 1975 (Pub. L. No. 94--29; 89 Stat. 163), effective June 4, 1975]

Effect on Existing Law

Sec. 50.  Except where specific provision is made to the contrary, nothing in this title shall affect (1) the jurisdiction of the Commission under the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, or title II of this Act, over any person, security, or transaction, or (2) the rights, obligations, duties, or liabilities of any person under such Acts; nor shall anything in this title affect the jurisdiction of any other commission, board, agency, or officer of the United States or of any State or political subdivision of any State, over any person, security, or transaction, insofar as such jurisdiction does not conflict with any provision of this title or of any rule, regulation, or order hereunder.

[Codified to 15 U.S.C. 80a--49]

[Source: Section 50 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 846), effective November 1, 1940; section 986(c)(4) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1936), effective July 21, 2010]

Separability of Provisions

Sec. 51.  If any provision of this title or any provision incorporated in this title by reference, or the application of any such provision to any person or circumstances, shall be held invalid, the remainder of this title and the application of any such provision to person or circumstances other than those as to which it is held invalid shall not be affected thereby.

[Codified to 15 U.S.C. 80a--50]

[Source: Section 51 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 846), effective November 1, 1940]


Short Title

Sec. 52.  This title may be cited as the "Investment Company Act of 1940."

[Codified to 15 U.S.C. 80a--51]

[Source: Section 52 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 847), effective November 1, 1940]

Effective Date

Sec. 53.  The effective date of the provisions of this title, so far as the same relate to faceamount certificates or to face-amount certificate companies, is January 1, 1941. The effective date of provisions hereof, insofar as the same do not apply to face-amount certificates or face-amount certificate companies is November 1, 1940. Except as herein otherwise provided, every provision of this title shall take effect on November 1, 1940.

[Codified to 15 U.S.C. 80a--52]

[Source: Section 53 of title I of the Act of August 22, 1940 (Pub. L. No. 768; 54 Stat. 847), effective November 1, 1940, as amended by section 624 of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1262), effective December 4, 1987]

Election to be Regulated as a Business Development Company

Sec. 54.  (a)  Any company defined in section 2(a)(48)(A) and (B) may elect to be subject to the provisions of sections 55 through 65 by filing with the Commission a notification of election, if such company--

(1)  has a class of its equity securities registered under section 12 of the Securities Exchange Act of 1934; or

(2)  has filed a registration statement pursuant to section 12 of the Securities Exchange Act of 1934 for a class of its equity securities.

(b)  The Commission may, by rule, prescribe the form and manner in which notification of election under this section shall be given. A business development company shall be deemed to be subject to sections 55 through 65 upon receipt by the Commission of such notification of election.

(c)  Whenever the Commission finds, on its own motion or upon application, that a business development company which has filed a notification of election pursuant to subsection (a) of this section has ceased to engage in business, the Commission shall so declare by order revoking such company's election. Any business development company may voluntarily withdraw its election under subsection (a) by filing a notice of withdrawal of election with the Commission, in a form and manner which the Commission may, by rule, prescribe. Such withdrawal shall be effective immediately upon receipt by the Commission.

[Codified to 15 U.S.C. 80a--53]

[Source: Section 54 of title I of the Act of August 22, 1940 (Pub. L. No. 768) effective November 1, 1940, as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2278), effective October 21, 1980, as amended by section 625 of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1262), effective December 4, 1987]

Functions and Activities of Business Development Companies

Sec. 55.  (a)  It shall be unlawful for a business development company to acquire any assets (other than those described in paragraphs (1) through (7) of this subsection) unless, at the time the acquisition is made, assets described in paragraphs (1) through (6) below represent at least 70 per centum of the value of its total assets (other than assets described in paragraph (7) below):

(1)  securities purchased, in transactions not involving any public offering or in such other transactions as the Commission may, by rule, prescribe if it finds that enforcement of this title and of the Securities Act of 1933 with respect to such transactions is not necessary in the public interest or for the protection of investors by reason of the small amount, or the limited nature of the public offering, involved in such transactions--

(A)  from the issuer of such securities, which issuer is an eligible portfolio company, from any person who is, or who within the preceeding thirteen months has been, an affiliated person of such eligible portfolio company, or from any other person, subject to such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors; or

(B)  from the issuer of such securities, which issuer is described in section 2(a)(46)(A) and (B) but is not an eligible portfolio company because it has issued a class of securities with respect to which a member of a national securities exchange, broker, or dealer may extend or maintain credit to or for a customer pursuant to rules or regulations adopted by the Board of Governors of the Federal Reserve System under section 7 of the Securities Exchange Act of 1934, or from any person who is an officer or employee of such issuer, if--

(i)  at the time of the purchase, the business development company owns at least 50 per centum of--

(I)  the greatest number of equity securities of such issuer and securities convertible into or exchangeable for such securities; and

(II)  the greatest amount of debt securities of such issuer, held by such business development company at any point in time during the period when such issuer was an eligible portfolio company, except that options, warrants, and similar securities which have by their terms expired and debt securities which have been converted, or repaid or prepaid in the ordinary course of business or incident to a public offering of securities of such issuer, shall not be considered to have been held by such business development company for purposes of this requirement; and

(ii)  the business development company is one of the 20 largest holders of record of such issuer's outstanding voting securities;

(2)  securities of any eligible portfolio company with respect to which the business development company satisfies the requirements of section 2(a)(46)(C)(ii);

(3)  securities purchased in transactions not involving any public offering from an issuer described in sections 2(a)(46)(A) and (B) or from a person who is, or who within the preceding thirteen months has been an affiliated person of such issuer, or from any person in transactions incident thereto, if such securities were--

(A)  issued by an issuer that is, or was immediately prior to the purchase of its securities by the business development company, in bankruptcy proceedings, subject to reorganization under the supervision of a court of competent jurisdiction, or subject to a plan or arrangement resulting from such bankruptcy proceedings or reorganization;

(B)  issued by an issuer pursuant to or in consummation of such a plan or arrangement; or

(C)  issued by an issuer that, immediately prior to the purchase of such issuer's securities by the business development company, was not in bankruptcy proceedings but was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements;

(4)  securities of eligible portfolio companies purchased from any person in transactions not involving any public offering, if there is no ready market for such securities and if immediately prior to such purchase the business development company owns at least 60 per centum of the outstanding equity securities of such issuer (giving effect to all securities presently convertible into or exchangeable for equity securities of such issuer as if such securities were so converted or exchanged);

(5)  securities received in exchange for or distributed on or with respect to securities described in paragraphs (1) through (4) of this subsection, or pursuant to the exercise of options, warrants, or rights relating to securities described in such paragraphs;

(6)  cash, cash items, Government securities, or high quality debt securities maturing in one year or less from the time of investment in such high quality debt securities; and

(7)  office furniture and equipment, interests in real estate and leasehold improvements and facilities maintained to conduct the business operations of the business development company, deferred organization and operating expenses, and other noninvestment assets necessary and appropriate to its operations as a business development company, including notes of indebtedness of directors, officers, employees, and general partners held by a business development company as payment for securities of such company issued in connection with an executive compensation plan described in section 57(j).

(b)  For purposes of this section, the value of a business development company's assets shall be determined as of the date of the most recent financial statements filed by such company with the Commission pursuant to section 13 of the Securities Exchange Act of 1934, and shall be determined no less frequently than annually.

[Codified to 15 U.S.C. 80a--54]

[Source: Section 55 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940, as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2278), effective October 21, 1980; as amended by section 626 of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1263), effective December 4, 1987; section 505 of title V of the Act of October 11, 1996, (Pub. L. No. 104--290; 110 Stat. 3446), effective October 11, 1996]

Qualifications of Directors

Sec. 56.  (a)  A majority of a business development company's directors or general partners shall be persons who are not interested persons of such company.

(b)  If, by reason of the death, disqualification, or bona fide resignation of any director or general partner, a business development company does not meet the requirements of subsection (a) of this section, or the requirements of section 15(f)(1) of this title with respect to directors, the operation of such provisions shall be suspended for a period of 90 days or for such longer period as the Commission may prescribe, upon its own motion or by order upon application, as not inconsistent with the protection of investors.

[Codified to 15 U.S.C. 80a--55]

[Source: Section 56 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940, as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2280), effective October 21, 1980]

Transactions with Certain Affiliates

Sec. 57.  (a)  It shall be unlawful for any person who is related to a business development company in a manner described in subsection (b) of this section, acting as principal--

(1)  knowingly to sell any security or other property to such business development company or to any company controlled by such business development company, unless such sale involves solely (A) securities of which the buyer is the issuer, or (B) securities of which the seller is the issuer and which are part of a general offering to the holders of a class of its securities;

(2)  knowingly to purchase from such business development company or from any company controlled by such business development company, any security or other property (except securities of which the seller is the issuer);

(3)  knowingly to borrow money or other property from such business development company or from any company controlled by such business development company (unless the borrower is controlled by the lender), except as permitted in section 21(b) or section 62; or

(4)  knowingly to effect any transaction in which such business development company or a company controlled by such business development company is a joint or a joint and several participant with such person in contravention of such rules and regulations as the Commission may prescribe for the purpose of limiting or preventing participation by such business development company or controlled company on a basis less advantageous than that of such person, except that nothing contained in this paragraph shall be deemed to preclude any person from acting as manager of any underwriting syndicate or other group in which such business development company or controlled company is a participant and receiving compensation therefor.

(b)  The provisions of subsection (a) of this section shall apply to the following persons:

(1)  Any director, officer, employee, or member of an advisory board of a business development company or any person (other than the business development company itself) who is, within the meaning of section 2(a)(3)(C) of this title, an affiliated person of any such person specified in this paragraph.

(2)  Any investment adviser or promoter of, general partner in, principal underwriter for, or person directly or indirectly either controlling, controlled by, or under common control with, a business development company (except the business development company itself and any person who, if it were not directly or indirectly controlled by the business development company, would not be directly or indirectly under the control of a person who controls the business development company), or any person who is, within the meaning of section 2(a)(3)(C) or (D), an affiliated person of any such person specified in this paragraph.

(c)  Notwithstanding paragraphs (1), (2), and (3) of subsection (a), any person may file with the Commission an application for an order exempting a proposed transaction of the applicant from one or more provisions of such paragraphs. The Commission shall grant such application and issue such order of exemption if evidence establishes that--

(1)  the terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching of the business development company or its shareholders or partners on the part of any person concerned;

(2)  the proposed transaction is consistent with the policy of the business development company as recited in the filings made by such company with the Commission under the Securities Act of 1933, its registration statement and reports filed under the Securities Act of 1934, and its reports to shareholders or partners; and

(3)  the proposed transaction is consistent with the general purposes of this title.

(d)  It shall be unlawful for any person who is related to a business development company in the manner described in subsection (e) of this section and who is not subject to the prohibitions of subsection (a) of this section, acting as principal--

(1)  knowingly to sell any security or other property to such business development company or to any company controlled by such business development company, unless such sale involves solely (A) securities of which the buyer is the issuer, or (B) securities of which the seller is the issuer and which are part of a general offering to the holders of a class of its securities;

(2)  knowingly to purchase from such business development company or from any company controlled by such business development company, and security or other property (except securities of which the seller is the issuer);

(3)  knowingly to borrow money or other property from such business development company or from any company controlled by such business development company (unless the borrower is controlled by the lender), except as permitted in section 21(b);

(4)  knowingly to effect any transaction in which such business development company or a company controlled by such business development company is a joint or a joint and several participant with such affiliated person in contravention of such rules and regulations as the Commission may prescribe for the purpose of limiting or preventing participation by such business development company or controlled company on a basis less advantageous than that of such affiliated person, except that nothing contained in this paragraph shall be deemed to preclude any person from acting as manager of any underwriting syndicate or other group in which such business development company or controlled company is a participant and receiving compensation therefor.

(e)  The provisions of subsection (d) of this section shall apply to the following persons:

(1)  Any person (A) who is, within the meaning of section 2(a)(3)(A), an affiliated person of a business development company, (B) who is an executive officer or a director of, or general partner in, any such affiliated person, or (C) who directly or indirectly either controls, is controlled by, or is under common control with, such affiliated person.

(2)  Any person who is an affiliated person of a director, officer, employee, investment adviser, member of an advisory board or promoter of, principal underwriter for, general partner in, or an affiliated person of any person directly or indirectly either controlling or under common control with a business development company (except the business development company itself and any person who, if it were not directly or indirectly controlled by the business development company, would not be directly or indirectly under the control of a person who controls the business development company).

For purpose[s] of this subsection, the term "executive officer" means the president, secretary, treasurer, and any vice president in charge of a principal business function, and any other person who performs similar policymaking functions.

(f)  Notwithstanding subsection (d) of this section, a person described in subsection (e) may engage in a proposed transaction described in subsection (d) if such proposed transaction is approved by the required majority (as defined in subsection (o)) of the directors of or general partners in the business development company on the basis that--

(1)  the terms thereof, including the consideration to be paid or received, are reasonable and fair to the shareholders or partners of the business development company and do not involve overreaching of such company or its shareholders or partners on the part of any person concerned;

(2)  the proposed transaction is consistent with the interest of the the shareholders or partners of the business development company and is consistent with the policy of such company as recited in filings made by such company with the Commission under the Securities Act of 1933, its registration statement and reports filed under the Securities Exchange Act of 1934, and its reports to shareholders or partners; and

(3)  the directors or general partners record in their minutes and preserve in their records, for such periods as if such records were required to be maintained pursuant to section 31(a), a description of such transaction, their findings, the information or materials upon which their findings were based, and the basis therefor.

(g)  Notwithstanding subsection (a) or (d), a person may, in the ordinary course of business, sell to or purchase from any company merchandise or may enter into a lessor-lessee relationship with any person and furnish the services incident thereto.

(h)  The directors of or general partners in any business development company shall adopt, and periodically review and update as appropriate, procedures reasonably designed to ensure that reasonable inquiry is made, prior to the consummation of any transaction in which such business development company or a company controlled by such business development company proposes to participate, with respect to the possible involvement in the transaction of persons described in subsections (b) and (e) of this section.

(i)  Until the adoption by the Commission of rules or regulations under subsections (a) and (d) of this section, the rules and regulations of the Commission under subsections (a) and (d) of section 17 applicable to registered closed-end investment companies shall be deemed to apply to transactions subject to subsections (a) and (d) of this section. Any rules or regulations adopted by the Commission to implement this section shall be no more restrictive than the rules or regulations adopted by the Commission under sections 17(a) and (d) that are applicable to all registered closed-end investment companies.

(j)  Notwithstanding subsections (a) and (d) of this section, any director, officer, or employee of, or general partner in, a business development company may--

(1)  acquire warrants, options, and rights to purchase voting securities of such business development company, and securities issued upon the exercise or conversion thereof, pursuant to an executive compensation plan offered by such company which meets the requirements of section 61(a)(3)(B); and

(2)  borrow money from such business development company for the purpose of purchasing securities issued by such company pursuant to an executive compensation plan, if each such loan--

(A)  has a term of not more than ten years;

(B)  becomes due within a reasonable time, not to exceed sixty days, after the termination of such person's employment or service;

(C)  bears interest at no less than the prevailing rate applicable to 90-day United States Treasury bills at the time the loan is made;

(D)  at all times is fully collateralized (such collateral may include any securities issued by such business development company); and

(E)(i)  in the case of a loan to any officer or employee of such business development company (including any officer or employee who is also a director of such company), is approved by the required majority (as defined in subsection (o)) of the directors of or general partners in such company on the basis that the loan is in the best interests of such company and its shareholders or partners; or

(ii)  in the case of a loan to any director of such business development company who is not also an officer or employee of such company, or to any general partner in such company, is approved by order of the Commission, upon application, on the basis that the terms of the loan are fair and reasonable and do not involve overreaching of such company or its shareholders or partners.

(k)  It shall be unlawful for any person described in subsection (l)--

(1)  acting as agent, to accept from any source any compensation (other than a regular salary or wages from the business development company) for the purchase or sale of any property to or for such business development company or any controlled company thereof, except in the course of such person's business as an underwriter or broker; or

(2)  acting as broker, in connection with the sale of securities to or by the business development company or any controlled company thereof, to receive from any source a commission, fee, or other remuneration for effecting such transaction which exceeds--

(A)  the usual and customary broker's commission if the sale is effected on a securities exchange;

(B)  2 per centum of the sales price if the sale is effected in connection with a secondary distribution of such securities; or

(C)  1 per centum of the purchase or sale price of such securities if the sale is otherwise effected,

unless the Commission, by rules and regulations or order in the public interest and consistent with the protection of investors, permits a larger commission.

(l)  The provisions of subsection (k) of this section shall apply to the following persons:

(1)  Any affiliated person of a business development company.

(2)(A)  Any person who is, within the meaning of section 2(a)(3)(B), (C), or (D), an affiliated person of any director, officer, employee, or member of an advisory board of the business development company.

(B)  Any person who is, within the meaning of section 2(a)(3)(A), (B), (C), or (D), an affiliated person of any investment adviser of, general partner in, or person directly or indirectly either controlling, controlled by, or, under common control with, the business development company.

(C)  Any person who is, within the meaning of section 2(a)(3)(C), an affiliated person of any person who is an affiliated person of the business development company within the meaning of section 2(a)(3)(A).

(m)  For purposes of subsections (a) and (d), a person who is a director, officer, or employee of a party to a transaction and who receives his usual and ordinary fee or salary for usual and customary services as a director, officer, or employee from such party shall not be deemed to have a financial interest or to participate in the transaction solely by reason of his receipt of such fee or salary.

(n)(1)  Notwithstanding subsection (a)(4) of this section, a business development company may establish and maintain a profit-sharing plan for its directors, officers, employees, and general partners and such directors, officers, employees, and general partners may participate in such profit-sharing plan, if--

(A)(i)  in the case of a profit-sharing plan for officers and employees of the business development company (including any officer or employee who is also a director of such company), such profit-sharing plan is approved by the required majority (as defined in subsection (o)) of the directors of or general partners in such company on the basis that such plan is reasonable and fair to the shareholders or partners of such company, does not involve overreaching of such company or its shareholders or partners on the part of any person concerned, and is consistent with the interests of the shareholders or partners of such company; or

(ii)  in the case of a profit-sharing plan which includes one or more directors of the business development company who are not also officers or employees of such company, or one or more general partners in such company, such profit-sharing plan is approved by order of the Commission, upon application, on the basis that such plan is reasonable and fair to the shareholders or partners of such company, does not involve overreaching of such company or its shareholders or partners on the part of any person concerned, and is consistent with the interests of the shareholders or partners of such company; and

(B)  the aggregate amount of benefits which would be paid or accrued under such plan shall not exceed 20 per centum of the business development company's net income after taxes in any fiscal year.

(2)  This subsection may not be used where the business development company has outstanding any stock option, warrant, or right issued as part of an executive compensation plan, including a plan pursuant to section 61(a)(3)(B), or has an investment adviser registered or required to be registered under title II of this Act.

(o)  The term "required majority", when used with respect to the approval of a proposed transaction, plan, or arrangement, means both a majority of a business development company's directors or general partners who have no financial interest in such transaction, plan, or arrangement and a majority of such directors or general partners who are not interested persons of such company.

[Codified to 15 U.S.C. 80a--56]

[Source: Section 57 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940, as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2280), effective October 21, 1980, as amended by section 627 of title VI of the Act of December 4, 1987 (Pub. L. No. 100--181; 101 Stat. 1263), effective December 4, 1987]

Changes in Investment Policy

Sec. 58.  No business development company shall, unless authorized by the vote of a majority of its outstanding voting securities or partnership interests, change the nature of its business so as to cease to be, or to withdraw its election as, a business development company.

[Codified to 15 U.S.C. 80a--57]

[Source: Section 58 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2285), effective October 21, 1980]

Incorporation of Provisions

Sec. 59.  Notwithstanding the exemption set forth in section 6(f), sections 1, 2, 3, 4, 5, 6, 9, 10(f), 15(a), (c), and (f), 16(b), 17(f) through (j), 19(a), 20(b), 32(a) and (c), 33 through 47, and 49 through 53 of this title shall apply to a business development company to the same extent as if it were a registered closed-end investment company.

[Codified to 15 U.S.C. 80a--58]

[Source: Section 59 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2285), effective October 21, 1980]

Functions and Activities of Business Development Companies

Sec. 60.  Notwithstanding the exemption set forth in section 6(f), section 12 shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except that the Commission shall not prescribe any rule, regulation, or order pursuant to section 12(a)(1) governing the circumstances in which a business development company may borrow from a bank in order to purchase any security.

[Codified to 15 U.S.C. 80a--59]

[Source: Section 60 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2285), effective October 21, 1980]

Capital Structure

Sec. 61.  (a)  Notwithstanding the exemption set forth in section 6(f), section 18 shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except as follows:

(1)  The asset coverage requirements of section 18(a)(1)(A) and (B) applicable to business development companies shall be 200 per centum.

(2)  Notwithstanding section 18(c), a business development company may issue more than one class of senior security representing indebtedness.

(A)  A privately held or guaranteed by the Small Business Administration, or banks, insurance companies, or other institutional investors;

(B)  not intended to be publicly distributed.

(3)  Notwithstanding section 18(d)--

(A)  a business development company may issue warrants, options, or rights to subscribe or convert to voting securities of such company, accompanied by securities if--

(i)  such warrants, options, or rights expire by their terms within ten years;

(ii)  such warrants, options, or rights are not separately transferable unless no class of such warrants, options, or rights and the securities accompanying them has been publicly distributed;

(iii)  the exercise or conversion price is not less than the current market value at the date of issuance, or if no such market value exists, the current net asset value of such voting securities; and

(iv)  the proposal to issue such securities is authorized by the shareholders or partners of such business development company, and such issuance is approved by the required majority (as defined in section 57(o)) of the directors of or general partners in such company on the basis that such issuance is in the best interests of such company and its shareholders or partners;

(B)  a business development company may issue, to its directors, officers, employees, and general partners, warrants, options, and rights to purchase voting securities of such company pursuant to an executive compensation plan, if--

(i)(I)  in the case of warrants, options, or rights issued to any officer or employee of such business development company (including any officer or employee who is also a director of such company), such securities satisfy the conditions in clauses (i), (iii), and (iv) of subparagraph (A); or (II) in the case of warrants, options, or rights issued to any director of such business development company who is not also an officer or employee of such company, or to any general partner in such company, the proposal to issue such securities satisfies the conditions in clauses (i) and (iii) of subparagraph (A), is authorized by the shareholders or partners of such company, and is approved by order of the Commission, upon application, on the basis that the terms of the proposal are fair and reasonable and do not involve overreaching of such company or its shareholders or partners;

(ii)  such securities are not transferable except for disposition by gift, will, or intestacy;

(iii)  no investment adviser of such business development company receives any compensation described in section 205(a)(1) of title II of this Act, except to the extent permitted by paragraph (1) or (2) of section 205(b); and

(iv)  such business development company does not have a profit-sharing plan described in section 57(n); and

(C)  a business development company may issue warrants, options, or rights to subscribe to, convert to, or purchase voting securities not accompanied by securities, if--

(i)  such warrants, options, or rights satisfy the conditions in clauses (i) and (iii) of subparagraph (A); and

(ii)  the proposal to issue such warrants, options, or rights is authorized by the shareholders or partners of such business development company, and such issuance is approved by the required majority (as defined in section 57(o)) of the directors of or general partners in such company on the basis that such issuance is in the best interests of the company and its shareholders or partners.

Notwithstanding this paragraph, the amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights at the time of issuance shall not exceed 25 per centum of the outstanding voting securities of the business development company, except that if the amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights issued to such company's directors, officers, employees, and general partners pursuant to any executive compensation plan meeting the requirements of subparagraph (B) of this paragraph would exceed 15 per centum of the outstanding voting securities of such company, then the total amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights at the time of issuance shall not exceed 20 per centum of the outstanding voting securities of such company.

(4)  For purposes of measuring the asset coverage requirements of section 18(a), a senior security created by the guarantee by a business development company of indebtedness issued by another company shall be the amount of the maximum potential liability less the fair market value of the net unencumbered assets (plus the indebtedness which has been guaranteed) available in the borrowing company whose debts have been guaranteed, except that a guarantee issued by a business development company of indebtedness issued by a company which is a wholly-owned subsidiary of the business development company and is licensed as a small business investment company under the Small Business Investment Act of 1958 shall not be deemed to be a senior security of such business development company for purposes of section 18(a) if the amount of the indebtedness at the time of its issuance by the borrowing company is itself taken fully into account as a liability by such business development company, as if it were issued by such business development company, in determining whether such business development company, at that time, satisfies the asset coverage requirements of section 18(a).

(b)  A business development company shall comply with the provisions of this section at the time it becomes subject to section 55 through 65, as if it were issuing a security of each class which it has outstanding at such time.

[Codified to 15 U.S.C. 80a--60]

[Source: Section 61 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2286), effective October 21, 1980; as amended by section 506 of title V of the Act of October 11, 1996, (Pub. L. No. 104--290; 110 Stat. 3446), effective October 11, 1996; section 985(d)(5) of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1934 and 1935), effective July 21, 2010]

Loans

Sec. 62.  Notwithstanding the exemption set forth in section 6(f), section 21 shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except that nothing in that section shall be deemed to prohibit--

(1)  any loan to a director, officer, or employee of, or general partner in, a business development company for the purpose of purchasing securities of such company as part of an executive compensation plan, if such loan meets the requirements of section 57(j); or

(2)  any loan to a company controlled by a business development company, which companies could be deemed to be under common control solely because a third person controls such business development company.

[Codified to 15 U.S.C. 80a--61]

[Source: Section 62 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2286), effective October 21, 1980]

Distribution and Repurchase of Securities

Sec. 63.  Notwithstanding the exemption set forth in section 6(f), section 23 shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except as follows:

(1)  The prohibitions of section 23(a)(2) shall not apply to any company which (A) is a wholly-owned subsidiary of, or directly or indirectly controlled by, a business development company, and (B) immediately after the issuance of any of its securities for property other than cash or securities, will not be an investment company within the meaning of section 3(a).

(2)  Notwithstanding the provisions of section 23(b), a business development company may sell any common stock of which it is the issuer at a price below the current net asset value of such stock, and may sell warrants, options, or rights to acquire any such common stock at a price below the current net asset value of such stock, if--

(A)  the holders of a majority of such business development company's outstanding voting securities, and the holders of a majority of such company's outstanding voting securities that are not affiliated persons of such company, approved such company's policy and practice of making such sales of securities at the last annual meeting of shareholders or partners within one year immediately prior to any such sale, except that the shareholder approval requirements of this subparagraph shall not apply to the initial public offering by a business development company of its securities;

(B)  a required majority (as defined in section 57(o)) of the directors of or general partners in such business development company have determined that any such sale would be in the best interests of such company and its shareholders or partners; and

(C)  a required majority (as defined in section 57(o)) of the directors of or general partners in such business development company, in consultation with the underwriter or underwriters of the offering if it is to be underwritten, have determined in good faith, and as of a time immediately prior to the first solicitation by or on behalf of such company of firm commitments to purchase such securities or immediately prior to the issuance of such securities, that the price at which such securities are to be sold is not less than a price which closely approximates the market value of those securities, less any distributing commission or discount.

(3)  A business development company may sell any common stock of which it is the issuer at a price below the current net asset value of such stock upon the exercise of any warrant, option, or right issued in accordance with section 61(a)(3).

[Codified to 15 U.S.C. 80a--62]

[Source: Section 63 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2288), effective October 21, 1980]

Accounts and Records

Sec. 64.  (a)  Notwithstanding the exemption set forth in section 6(f), section 31 shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except that the reference to the financial statements required to be filed pursuant to section 30 shall be construed to refer to the financial statements required to be filed by such business development company pursuant to section 13 of the Securities Exchange Act of 1934.

(b)(1)  In addition to the requirements of subsection (a), a business development company shall file with the Commission and supply annually to its shareholders a written statement, in such form and manner as the Commission may, by rule prescribe, describing the risk factors involved in an investment in the securities of a business development company due to the nature of such company's investment portfolio and capital structure, and shall supply copies of such statement to any registered broker or dealer upon request.

(2)  If the Commission finds it 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 title, the Commission may also require, by rule, any person who, acting as principal or agent, sells a security of a business development company to inform the purchaser of such securities, at or before the time of sale, of the existence of the risk statement prepared by such business development company pursuant to this subsection, and make such risk statement available on request. The Commission in making such rules and regulations shall consider among other matters whether any such rule or regulation would impose any unreasonable burdens on such brokers or dealers or unreasonably impair the maintenance of fair and orderly markets.

[Codified to 15 U.S.C. 80a--63]

[Source: Section 64 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2289), effective October 21, 1980; as amended by section 507 of title V of the Act of October 11, 1996 (Pub. L. No. 104--290; 110 Stat. 3446), effective October 11, 1996]

Liability of Controlling Persons; Preventing Compliance with Title

Sec. 65.  Notwithstanding the exemption set forth in section 6(f), section 48 shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except that the provisions of section 48(a) shall not be construed to require any company which is not an investment company within the meaning of section 3(a) to comply with the provisions of this title which are applicable to a business development company solely because such company is a wholly-owned subsidiary of, or directly or indirectly controlled by, a business development company.

[Codified to 15 U.S.C. 80a--64]

[Source: Section 65 of title I of the Act of August 22, 1940 (Pub. L. No. 768), effective November 1, 1940; as added by section 105 of title I of the Act of October 21, 1980 (Pub. L. No. 96--477; 94 Stat. 2289), effective October 21, 1980]


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