§ 80a-26. — Unit investment trusts.
[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-26]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I--INVESTMENT COMPANIES
Sec. 80a-26. Unit investment trusts
(a) Custody and sale of securities
No principal underwriter for or depositor of a registered unit
investment trust shall sell, except by surrender to the trustee for
redemption, any security of which such trust is the issuer (other than
short-term paper), unless the trust indenture, agreement of
custodianship, or other instrument pursuant to which such security is
issued--
(1) designates one or more trustees or custodians, each of which
is a bank, and provides that each such trustee or custodian shall
have at all times an aggregate capital, surplus, and undivided
profits of a specified minimum amount, which shall not be less than
$500,000 (but may also provide, if such trustee or custodian
publishes reports of condition at least annually, pursuant to law or
to the requirements of its supervising or examining authority, that
for the purposes of this paragraph the aggregate capital, surplus,
and undivided profits of such trustee or custodian shall be deemed
to be its aggregate capital, surplus, and undivided profits as set
forth in its most recent report of condition so published);
(2) provides, in substance, (A) that during the life of the
trust the trustee or custodian, if not otherwise remunerated, may
charge against and collect from the income of the trust, and from
the corpus thereof if no income is available, such fees for its
services and such reimbursement for its expenses as are provided for
in such instrument; (B) that no such charge or collection shall be
made except for services theretofore performed or expenses
theretofore incurred; (C) that no payment to the depositor of or a
principal underwriter for such trust, or to any affiliated person or
agent of such depositor or underwriter, shall be allowed the trustee
or custodian as an expense (except that provision may be made for
the payment to any such person of a fee, not exceeding such
reasonable amount as the Commission may prescribe as compensation
for performing bookkeeping and other administrative services, of a
character normally performed by the trustee or custodian itself);
and (D) that the trustee or custodian shall have possession of all
securities and other property in which the funds of the trust are
invested, all funds held for such investment, all equalization,
redemption, and other special funds of the trust, and all income
upon, accretions to, and proceeds of such property and funds, and
shall segregate and hold the same in trust (subject only to the
charges and collections allowed under clauses (A), (B), and (C) of
this paragraph) until distribution thereof to the security holders
of the trust;
(3) provides, in substance, that the trustee or custodian shall
not resign until either (A) the trust has been completely liquidated
and the proceeds of the liquidation distributed to the security
holders of the trust, or (B) a successor trustee or custodian,
having the qualifications prescribed in paragraph (1) of this
subsection, has been designated and has accepted such trusteeship or
custodianship; and
(4) provides, in substance, (A) that a record will be kept by
the depositor or an agent of the depositor of the name and address
of, and the shares issued by the trust and held by, every holder of
any security issued pursuant to such instrument, insofar as such
information is known to the depositor or agent; and (B) that
whenever a security is deposited with the trustee in substitution
for any security in which such security holder has an undivided
interest, the depositor or the agent of the depositor will, within
five days after such substitution, either deliver or mail to such
security holder a notice of substitution, including an
identification of the securities eliminated and the securities
substituted, and a specification of the shares of such security
holder affected by the substitution.
(b) Bank or affiliated person of bank as trustee or custodian
The Commission may, after consultation with and taking into
consideration the views of the Federal banking agencies (as defined in
section 1813 of title 12), adopt rules and regulations, and issue
orders, consistent with the protection of investors, prescribing the
conditions under which a bank, or an affiliated person of a bank, either
of which is an affiliated person of a principal underwriter for, or
depositor of, a registered unit investment trust, may serve as trustee
or custodian under subsection (a)(1) of this section.
(c) Substitution of securities
It shall be unlawful for any depositor or trustee of a registered
unit investment trust holding the security of a single issuer to
substitute another security for such security unless the Commission
shall have approved such substitution. The Commission shall issue an
order approving such substitution if the evidence establishes that it is
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of this subchapter.
(d) Binding contract or agreement embodying applicable provisions deemed
to qualify non-complying instrument by which securities were
issued
In the event that a trust indenture, agreement of custodianship, or
other instrument pursuant to which securities of a registered unit
investment trust are issued does not comply with the requirements of
subsection (a) of this section, such instrument will be deemed to meet
such requirements if a written contract or agreement binding on the
parties and embodying such requirements has been executed by the
depositor on the one part and the trustee or custodian on the other
part, and three copies of such contract or agreement have been filed
with the Commission.
(e) Liquidation of unit investment trust
Whenever the Commission has reason to believe that a unit investment
trust is inactive and that its liquidation is in the interest of the
security holders of such trust, the Commission may file a complaint
seeking the liquidation of such trust in the district court of the
United States in any district wherein any trustee of such trust resides
or has its principal place of business. A copy of such complaint shall
be served on every trustee of such trust, and notice of the proceeding
shall be given such other interested persons in such manner and at such
times as the court may direct. If the court determines that such
liquidation is in the interest of the security holders of such trust,
the court shall order such liquidation and, after payment of necessary
expenses, the distribution of the proceeds to the security holders of
the trust in such manner and on such terms as may to the court appear
equitable.
(f) Exemption
(1) In general
Subsection (a) of this section does not apply to any registered
separate account funding variable insurance contracts, or to the
sponsoring insurance company and principal underwriter of such
account.
(2) Limitation on sales
It shall be unlawful for any registered separate account funding
variable insurance contracts, or for the sponsoring insurance
company of such account, to sell any such contract--
(A) unless the fees and charges deducted under the contract,
in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by the insurance company, and, beginning on the earlier
of August 1, 1997, or the earliest effective date of any
registration statement or amendment thereto for such contract
following October 11, 1996, the insurance company so represents
in the registration statement for the contract; and
(B) unless the insurance company--
(i) complies with all other applicable provisions of
this section, as if it were a trustee or custodian of the
registered separate account;
(ii) files with the insurance regulatory authority of
the State which is the domiciliary State of the insurance
company, an annual statement of its financial condition,
which most recent statement indicates that the insurance
company has a combined capital and surplus, if a stock
company, or an unassigned surplus, if a mutual company, of
not less than $1,000,000, or such other amount as the
Commission may from time to time prescribe by rule, as
necessary or appropriate in the public interest or for the
protection of investors; and
(iii) together with its registered separate accounts, is
supervised and examined periodically by the insurance
authority of such State.
(3) Fees and charges
For purposes of paragraph (2), the fees and charges deducted
under the contract shall include all fees and charges imposed for
any purpose and in any manner.
(4) Regulatory authority
The Commission may issue such rules and regulations to carry out
paragraph (2)(A) as it determines are necessary or appropriate in
the public interest or for the protection of investors.
(Aug. 22, 1940, ch. 686, title I, Sec. 26, 54 Stat. 827; Pub. L. 91-547,
Sec. 15, Dec. 14, 1970, 84 Stat. 1424; Pub. L. 100-181, title VI,
Secs. 618, 619, Dec. 4, 1987, 101 Stat. 1262; Pub. L. 104-290, title II,
Sec. 205(a), Oct. 11, 1996, 110 Stat. 3429; Pub. L. 106-102, title II,
Sec. 211(b), Nov. 12, 1999, 113 Stat. 1396.)
Amendments
1999--Subsecs. (b) to (f). Pub. L. 106-102 added subsec. (b) and
redesignated former subsecs. (b) to (e) as (c) to (f), respectively.
1996--Subsec. (e). Pub. L. 104-290 added subsec. (e).
1987--Subsec. (b). Pub. L. 100-181, Sec. 618, substituted
``intended'' for ``intend''.
Subsec. (c). Pub. L. 100-181, Sec. 619, substituted ``contract or
agreement'' for ``contract of agreement''.
1970--Subsecs. (b) to (d). Pub. L. 91-547 added subsec. (b),
redesignated former subsec. (b) as (c), struck out ``at the effective
date of this subchapter'' before ``comply'', substituted ``contract of
agreement'' for ``contract or agreement'', and redesignated former
subsec. (c) as (d).
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 1970 Amendment
Amendment by Pub. L. 91-547 effective Dec. 14, 1970, see section 30
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-17, 80a-
27, 80a-28 of this title.
