17 C.F.R. § 270.22c-2 Redemption fees for redeemable securities.
Title 17 - Commodity and Securities Exchanges
(a) Redemption fee. It is unlawful for any fund issuing redeemable securities, its principal underwriter, or any dealer in such securities, to redeem a redeemable security issued by the fund within seven calendar days after the security was purchased, unless it complies with the following requirements: (1) Board determination. The fund's board of directors, including a majority of directors who are not interested persons of the fund, must either: (i) Approve a redemption fee, in an amount (but no more than two percent of the value of shares redeemed) and on shares redeemed within a time period (but no less than seven calendar days), that in its judgment is necessary or appropriate to recoup for the fund the costs it may incur as a result of those redemptions or to otherwise eliminate or reduce so far as practicable any dilution of the value of the outstanding securities issued by the fund, the proceeds of which fee will be retained by the fund; or (ii) Determine that imposition of a redemption fee is either not necessary or not appropriate. (2) Shareholder information. The fund or its principal underwriter must enter into a written agreement with each financial intermediary of the fund, under which the intermediary agrees to: (i) Provide, promptly upon request by the fund, the Taxpayer Identification Number of all shareholders that purchased, redeemed, transferred, or exchanged shares held through an account with the financial intermediary, and the amount and dates of such shareholder purchases, redemptions, transfers, and exchanges; and (ii) Execute any instructions from the fund to restrict or prohibit further purchases or exchanges of fund shares by a shareholder who has been identified by the fund as having engaged in transactions of fund shares (directly or indirectly through the intermediary's account) that violate policies established by the fund for the purpose of eliminating or reducing any dilution of the value of the outstanding securities issued by the fund. (3) Recordkeeping. The fund must maintain a copy of the written agreement under paragraph (a)(2) that is in effect, or at any time within the past six years was in effect, in an easily accessible place. (b) Excepted funds. The requirements of paragraphs (a) of this section do not apply to the following funds, unless they elect to impose a redemption fee pursuant to paragraph (a)(1) of this section: (1) Money market funds; (2) Any fund that issues securities that are listed on a national securities exchange; and (3) Any fund that affirmatively permits short-term trading of its securities, if its prospectus clearly and prominently discloses that the fund permits short-term trading of its securities and that such trading may result in additional costs for the fund. (c) Definitions. For the purposes of this section: (1) Financial intermediary means: (i) Any broker, dealer, bank, or other entity that holds securities of record issued by the fund, in nominee name; (ii) A unit investment trust or fund that invests in the fund in reliance on section 12(d)(1)(E) of the Act (15 U.S.C. 80a–12(d)(1)(E)); and (iii) In the case of a participant-directed employee benefit plan that owns the securities issued by the fund, a retirement plan's administrator under section 3(16)(A) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(16)(A)) or any entity that maintains the plan's participant records. (2) Fund means an open-end management investment company that is registered or required to register under section 8 of the Act (15 U.S.C. 80a–8), and includes a separate series of such an investment company. (3) Money market fund means an open-end management investment company that is registered under the Act and is regulated as a money market fund under §270.2a–7. (4) Shareholder includes a beneficial owner of securities held in nominee name, a participant in a participant-directed employee benefit plan, and a holder of interests in a fund or unit investment trust that has invested in the fund in reliance on section 12(d)(1)(E) of the Act. A shareholder does not include a fund investing pursuant to section 12(d)(1)(G) of the Act (15 U.S.C. 80a–12(d)(1)(G)), a trust established pursuant to section 529 of the Internal Revenue Code (26 U.S.C. 529), or a holder of an interest in such a trust. [70 FR 13341, Mar. 18, 2005]
Title 17: Commodity and Securities Exchanges
PART 270—RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
§ 270.22c-2 Redemption fees for redeemable securities.
