§ 80a-10. — Affiliations or interest of directors, officers, and employees.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC80a-10]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I--INVESTMENT COMPANIES
Sec. 80a-10. Affiliations or interest of directors, officers,
and employees
(a) Interested persons of company who may serve on board of directors
No registered investment company shall have a board of directors
more than 60 per centum of the members of which are persons who are
interested persons of such registered company.
(b) Employment and use of directors, officers, etc., as regular broker,
principal underwriter, or investment banker
No registered investment company shall--
(1) employ as regular broker any director, officer, or employee
of such registered company, or any person of which any such
director, officer, or employee is an affiliated person, unless a
majority of the board of directors of such registered company shall
be persons who are not such brokers or affiliated persons of any of
such brokers;
(2) use as a principal underwriter of securities issued by it
any director, officer, or employee of such registered company or any
person of which any such director, officer, or employee is an
interested person, unless a majority of the board of directors of
such registered company shall be persons who are not such principal
underwriters or interested persons of any of such principal
underwriters; or
(3) have as director, officer, or employee any investment
banker, or any affiliated person of an investment banker, unless a
majority of the board of directors of such registered company shall
be persons who are not investment bankers or affiliated persons of
any investment banker. For the purposes of this paragraph, a person
shall not be deemed an affiliated person of an investment banker
solely by reason of the fact that he is an affiliated person of a
company of the character described in section 80a-12(d)(3)(A) and
(B) of this title.
(c) Officers, directors, or employees of one bank as majority of board
of directors of company; exceptions
No registered investment company shall have a majority of its board
of directors consisting of persons who are officers, directors, or
employees of any one bank (together with its affiliates and
subsidiaries) or any one bank holding company (together with its
affiliates and subsidiaries) (as such terms are defined in section 1841
of title 12), except that, if on March 15, 1940, any registered
investment company had a majority of its directors consisting of persons
who are directors, officers, or employees of any one bank, such company
may continue to have the same percentage of its board of directors
consisting of persons who are directors, officers, or employees of such
bank.
(d) Exception to limitation of number of interested persons who may
serve on board of directors
Notwithstanding subsections (a) and (b)(2) of this section, a
registered investment company may have a board of directors all the
members of which, except one, are interested persons of the investment
adviser of such company, or are officers or employees of such company,
if--
(1) such investment company is an open-end company;
(2) such investment adviser is registered under subchapter II of
this chapter and is engaged principally in the business of rendering
investment supervisory services as defined in subchapter II;
(3) no sales load is charged on securities issued by such
investment company;
(4) any premium over net asset value charged by such company
upon the issuance of any such security, plus any discount from net
asset value charged on redemption thereof, shall not in the
aggregate exceed 2 per centum;
(5) no sales or promotion expenses are incurred by such
registered company; but expenses incurred in complying with laws
regulating the issue or sale of securities shall not be deemed sales
or promotion expenses;
(6) such investment adviser is the only investment adviser to
such investment company, and such investment adviser does not
receive a management fee exceeding 1 per centum per annum of the
value of such company's net assets averaged over the year or taken
as of a definite date or dates within the year;
(7) all executive salaries and executive expenses and office
rent of such investment company are paid by such investment adviser;
and
(8) such investment company has only one class of securities
outstanding, each unit of which has equal voting rights with every
other unit.
(e) Death, disqualification, or resignation of directors as suspension
of limitation provisions
If by reason of the death, disqualification, or bona fide
resignation of any director or directors, the requirements of the
foregoing provisions of this section or of section 80a-15(f)(1) of this
title in respect of directors shall not be met by a registered
investment company, the operation of such provision shall be suspended
as to such registered company--
(1) for a period of thirty days if the vacancy or vacancies may
be filled by action of the board of directors;
(2) for a period of sixty days if a vote of stockholders is
required to fill the vacancy or vacancies; or
(3) for such longer period as the Commission may prescribe, by
rules and regulations upon its own motion or by order upon
application, as not inconsistent with the protection of investors.
(f) Officer, director, etc., of company acting as principal underwriter
of security acquired by company
No registered investment company shall knowingly purchase or
otherwise acquire, during the existence of any underwriting or selling
syndicate, any security (except a security of which such company is the
issuer) a principal underwriter of which is an officer, director, member
of an advisory board, investment adviser, or employee of such registered
company, or is a person (other than a company of the character described
in section 80a-12(d)(3)(A) and (B) of this title) of which any such
officer, director, member of an advisory board, investment adviser, or
employee is an affiliated person, unless in acquiring such security such
registered company is itself acting as a principal underwriter for the
issuer. The Commission, by rules and regulations upon its own motion or
by order upon application, may conditionally or unconditionally exempt
any transaction or classes of transactions from any of the provisions of
this subsection, if and to the extent that such exemption is consistent
with the protection of investors.
(g) Advisory boards; restrictions on membership
In the case of a registered investment company which has an advisory
board, such board, as a distinct entity, shall be subject to the same
restrictions as to its membership as are imposed upon a board of
directors by this section.
(h) Application of section to unincorporated registered management
companies
In the case of a registered management company which is an
unincorporated company not having a board of directors, the provisions
of this section shall apply as follows:
(1) the provisions of subsection (a) of this section, as
modified by subsection (e) of this section, shall apply to the board
of directors of the depositor of such company;
(2) the provisions of subsections (b) and (c) of this section,
as modified by subsection (e) of this section, shall apply to the
board of directors of the depositor and of every investment adviser
of such company; and
(3) the provisions of subsection (f) of this section shall apply
to purchases and other acquisitions for the account of such company
of securities a principal underwriter of which is the depositor or
an investment adviser of such company, or an affiliated person of
such depositor or investment adviser.
(Aug. 22, 1940, ch. 686, title I, Sec. 10, 54 Stat. 806; Pub. L. 91-547,
Sec. 5, Dec. 14, 1970, 84 Stat. 1416; Pub. L. 94-29, Sec. 28(5), June 4,
1975, 89 Stat. 165; Pub. L. 106-102, title II, Sec. 213(c), Nov. 12,
1999, 113 Stat. 1398.)
Amendments
1999--Subsec. (c). Pub. L. 106-102 substituted ``bank (together with
its affiliates and subsidiaries) or any one bank holding company
(together with its affiliates and subsidiaries) (as such terms are
defined in section 1841 of title 12), except'' for ``bank, except''.
1975--Subsec. (e). Pub. L. 94-29 inserted reference to provisions of
section 80a-15(f)(1) of this title.
1970--Subsec. (a). Pub. L. 91-547, Sec. 5(a), struck out
introductory text ``After one year from the effective date of this
subchapter'' and substituted ``interested persons of such registered
company'' for ``investment advisers of, affiliated persons of an
investment adviser of, or officers or employees of, such registered
company''.
Subsec. (b). Pub. L. 91-547, Sec. 5(b)(1), struck out introductory
text ``After one year from the effective date of this subchapter,'' and
substituted ``No'' for ``no''.
Subsec. (b)(2). Pub. L. 91-547, Sec. 5(b)(2), substituted
``interested'' for ``affiliated'' in two places.
Subsec. (c). Pub. L. 91-547, Sec. 5(c), struck out introductory text
``After the effective date of this subchapter'', substituted ``No'', ``,
except that'', ``had a majority'', and ``such company'' for ``no'', ``:
Provided, That'', ``shall have had a majority'', and ``such company'',
respectively, and inserted reference to employees where first appearing.
Subsec. (d). Pub. L. 91-547, Sec. 5(d), reenacted provisions except
for substitution of ``interested persons'' for ``affiliated persons'' in
introductory text, deletion of ``such investment adviser'' before ``is
engaged'' in item (2), and substitution of ``class of securities'' for
``class of stock'' and ``unit'' for ``share'' in two places in item (8).
Effective Date of 1999 Amendment
Amendment by Pub. L. 106-102 effective 18 months after Nov. 12,
1999, see section 225 of Pub. L. 106-102, set out as a note under
section 77c of this title.
Effective Date of 1975 Amendment
Amendment by Pub. L. 94-29 effective June 4, 1975, see section 31(a)
of Pub. L. 94-29, set out as a note under section 78b of this title.
Effective Date of 1970 Amendment
For effective date of amendment by Pub. L. 91-547, see section 30
(introductory text and pars. (1) and (2)) of Pub. L. 91-547, set out as
a note under section 80a-52 of this title.
Transfer of Functions
For transfer of functions of Securities and Exchange Commission,
with certain exceptions, to Chairman of such Commission, see Reorg. Plan
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat.
1265, set out under section 78d of this title.
Section Referred to in Other Sections
This section is referred to in sections 80a-6, 80a-12, 80a-58 of
this title.
