§ 80a-27. — Periodic payment plans.
[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-27]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I--INVESTMENT COMPANIES
Sec. 80a-27. Periodic payment plans
(a) Sale of certificates; restrictions
It shall be unlawful for any registered investment company issuing
periodic payment plan certificates, or for any depositor of or
underwriter for such company, to sell any such certificate, if--
(1) the sales load on such certificate exceeds 9 per centum of
the total payments to be made thereon;
(2) more than one-half of any of the first twelve monthly
payments thereon, or their equivalent, is deducted for sales load;
(3) the amount of sales load deducted from any one of such first
payments exceeds proportionately the amount deducted from any other
such payment, or the amount deducted from any subsequent payment
exceeds proportionately the amount deducted from any other
subsequent payment;
(4) the first payment on such certificate is less than $20, or
any subsequent payment is less than $10;
(5) if such registered company is a management company, the
proceeds of such certificate or the securities in which such
proceeds are invested are subject to management fees (other than
fees for administrative services of the character described in
clause (C), paragraph (2), of section 80a-26(a) of this title)
exceeding such reasonable amount as the Commission may prescribe,
whether such fees are payable to such company or to investment
advisers thereof; or
(6) if such registered company is a unit investment trust the
assets of which are securities issued by a management company, the
depositor of or principal underwriter for such trust, or any
affiliated person of such depositor or underwriter, is to receive
from such management company or any affiliated person thereof any
fee or payment on account of payments on such certificate exceeding
such reasonable amount as the Commission may prescribe.
(b) Exemptions
If it appears to the Commission, upon application or otherwise, that
smaller companies are subjected to relatively higher operating costs and
that in order to make due allowance therefor it is necessary or
appropriate in the public interest and consistent with the protection of
investors that a provision or provisions of paragraph (1), (2), or (3)
of subsection (a) of this section relative to sales load be relaxed in
the case of certain registered investment companies issuing periodic
payment plan certificates, or certain specified classes of such
companies, the Commission is authorized by rules and regulations or
order to grant any such company or class of companies appropriate
qualified exemptions from the provisions of said paragraphs.
(c) Sale of certificates; requirements
It shall be unlawful for any registered investment company issuing
periodic payment plan certificates, or for any depositor of or
underwriter for such company, to sell any such certificate, unless--
(1) such certificate is a redeemable security; and
(2) the proceeds of all payments on such certificate (except
such amounts as are deducted for sales load) are deposited with a
trustee or custodian having the qualifications prescribed in
paragraph (1) of section 80a-26(a) of this title for the trustees of
unit investment trusts, and are held by such trustee or custodian
under an indenture or agreement containing, in substance, the
provisions required by paragraphs (2) and (3) of section 80a-26(a)
of this title for the trust indentures of unit investment trusts.
(d) Surrender of certificates; regulations
Notwithstanding subsection (a) of this section, it shall be unlawful
for any registered investment company issuing periodic payment plan
certificates, or for any depositor of or underwriter for such company,
to sell any such certificate unless the certificate provide that the
holder thereof may surrender the certificate at any time within the
first eighteen months after the issuance of the certificate and receive
in payment thereof, in cash, the sum of (1) the value of his account,
and (2) an amount, from such underwriter or depositor, equal to that
part of the excess paid for sales loading which is over 15 per centum of
the gross payments made by the certificate holder. The Commission may
make rules and regulations applicable to such underwriters and
depositors specifying such reserve requirements as it deems necessary or
appropriate in order for such underwriters and depositors to carry out
the obligations to refund sales charges required by this subsection.
(e) Refund privileges; notice; rules
With respect to any periodic payment plan certificate sold subject
to the provisions of subsection (d) of this section, the registered
investment company issuing such periodic payment plan certificate, or
any depositor of or underwriter for such company, shall in writing (1)
inform each certificate holder who has missed three payments or more,
within thirty days following the expiration of fifteen months after the
issuance of the certificate, or, if any such holder has missed one
payment or more after such period of fifteen months but prior to the
expiration of eighteen months after the issuance of the certificate, at
any time prior to the expiration of such eighteen-month period, of his
right to surrender his certificate as specified in subsection (d) of
this section, and (2) inform the certificate holder of (A) the value of
the holder's account as of the time the written notice was given to such
holder, and (B) the amount to which he is entitled as specified in
subsection (d) of this section. The Commission may make rules specifying
the method, form, and contents of the notice required by this
subsection.
(f) Charges, statement; rules; surrender of certificates; regulations
With respect to any periodic payment plan (other than a plan under
which the amount of sales load deducted from any payment thereon does
not exceed 9 per centum of such payment), the custodian bank for such
plan shall mail to each certificate holder, within sixty days after the
issuance of the certificate, a statement of charges to be deducted from
the projected payments on the certificate and a notice of his right of
withdrawal as specified in this section. The Commission may make rules
specifying the method, form, and contents of the notice required by this
subsection. The certificate holder may within forty-five days of the
mailing of the notice specified in this subsection surrender his
certificate and receive in payment thereof, in cash, the sum of (1) the
value of his account, and (2) an amount, from the underwriter or
depositor, equal to the difference between the gross payments made and
the net amount invested. The Commission may make rules and regulations
applicable to underwriters and depositors of companies issuing any such
certificate specifying such reserve requirements as it deems necessary
or appropriate in order for such underwriters and depositors to carry
out the obligations to refund sales charges required by this subsection.
(g) Governing provisions; election
Notwithstanding the provisions of subsections (a) and (d) of this
section, a registered investment company issuing periodic payment plan
certificates may elect, by written notice to the Commission, to be
governed by the provisions of subsection (h) of this section rather than
the provisions of subsections (a) and (d) of this section.
(h) Sale of certificates; restrictions
Upon making the election specified in subsection (g) of this
section, it shall be unlawful for any such electing registered
investment company issuing periodic payment plan certificates, or for
any depositor of or underwriter for such company, to sell any such
certificate, if--
(1) the sales load on such certificate exceeds 9 per centum of
the total payments to be made thereon;
(2) more than 20 per centum of any payment thereon is deducted
for sales load, or an average of more than 16 per centum is deducted
for sales load from the first forty-eight monthly payments thereon,
or their equivalent;
(3) the amount of sales load deducted from any one of the first
twelve monthly payments, the thirteenth through twenty-fourth
monthly payments, the twenty-fifth through thirty-sixth monthly
payments, or the thirty-seventh through forty-eighth monthly
payments, or their equivalents, respectively, exceeds
proportionately the amount deducted from any other such payment, or
the amount deducted from any subsequent payment exceeds
proportionately the amount deducted from any other subsequent
payment;
(4) the deduction for sales load on the excess of the payment or
payments in any month over the minimum monthly payment, or its
equivalent, to be made on the certificate exceeds the sales load
applicable to payments subsequent to the first forty-eight monthly
payments or their equivalent;
(5) the first payment on such certificate is less than $20, or
any subsequent payment is less than $10;
(6) if such registered company is a management company, the
proceeds of such certificate or the securities in which such
proceeds are invested are subject to management fees (other than
fees for administrative services of the character described in
clause (C) of paragraph (2) of section 80a-26(a) of this title)
exceeding such reasonable amount as the Commission may prescribe,
whether such fees are payable to such company or to investment
advisers thereof; or
(7) if such registered company is a unit investment trust the
assets of which are securities issued by a management company, the
depositor of or principal underwriter for such trust, or any
affiliated person of such depositor or underwriter, is to receive
from such management company or any affiliated person thereof any
fee or payment on account of payments on such certificate exceeding
such reasonable amount as the Commission may prescribe.
(i) Applicability to registered separate account funding variable
insurance contracts
(1) 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, except as provided in
paragraph (2).
(2) 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 unless--
(A) such contract is a redeemable security; and
(B) the insurance company complies with section 80a-26(e) \1\ of
this title and any rules or regulations issued by the Commission
under section 80a-26(e) \1\ of this title.
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\1\ See References in Text note below.
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(Aug. 22, 1940, ch. 686, title I, Sec. 27, 54 Stat. 829; Pub. L. 91-547,
Sec. 16, Dec. 14, 1970, 84 Stat. 1424; Pub. L. 92-165, Nov. 23, 1971, 85
Stat. 487; Pub. L. 104-290, title II, Sec. 205(b), Oct. 11, 1996, 110
Stat. 3429.)
References in Text
Section 80a-26(e) of this title, referred to in subsec. (i)(2)(B),
was redesignated section 80a-26(f) by Pub. L. 106-102, title II,
Sec. 211(b)(1), Nov. 12, 1999, 113 Stat. 1396.
Amendments
1996--Subsec. (i). Pub. L. 104-290 added subsec. (i).
1971--Subsec. (f). Pub. L. 92-165 inserted ``(other than a plan
under which the amount of sales load deducted from any payment thereon
does not exceed 9 per centum of such payment)''.
1970--Subsecs. (d) to (h). Pub. L. 91-547 added subsecs. (d) to (h).
Effective Date of 1970 Amendment
Amendment by Pub. L. 91-547 effective on expiration of six months
after Dec. 14, 1970, see section 30(3) 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 section 80a-6 of this title.
