§ 80a-35. — Breach of fiduciary duty.
[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-35]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I--INVESTMENT COMPANIES
Sec. 80a-35. Breach of fiduciary duty
(a) Civil actions by Commission; jurisdiction; allegations; injunctive
or other relief
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 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--
(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 persons
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, having
due regard to the protection of investors and to the effectuation of the
policies declared in section 80a-1(b) of this title.
(b) Compensation or payments as basis of fiduciary duty; civil actions
by Commission or security holder; burden of proof; judicial
consideration of director or shareholder approval; persons
liable; extent of liability; exempted transactions;
jurisdiction; finding restriction
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 payments
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 contracts 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 payment
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 80a-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 subchapter for the purposes of sections 80a-9 and 80a-
48 of this title, section 78o of this title, or section 80b-3 of this
title, or (B) for an injunction to prohibit any person from serving in
any of the capacities enumerated in subsection (a) of this section.
(c) Corporate or other trustees performing functions of investment
advisers
For the purposes of subsections (a) and (b) of this section, the
term ``investment adviser'' includes a corporate or other trustee
performing the functions of an investment adviser.
(Aug. 22, 1940, ch. 686, title I, Sec. 36, 54 Stat. 841; Pub. L. 91-547,
Sec. 20, Dec. 14, 1970, 84 Stat. 1428; Pub. L. 94-29, Sec. 28(7), June
4, 1975, 89 Stat. 166; Pub. L. 100-181, title VI, Sec. 622, Dec. 4,
1987, 101 Stat. 1262.)
Amendments
1987--Subsec. (b)(4). Pub. L. 100-181, Sec. 622(1), substituted
``loads'' for ``loans''.
Subsecs. (c), (d). Pub. L. 100-181, Sec. 622(2), (3), redesignated
as subsec. (c) provisions which were added and designated as subsec. (d)
by Pub. L. 94-29, and substituted ``subsections (a) and (b)'' for
``subsections (a) through (c)''.
1975--Subsec. (d). Pub. L. 94-29 added subsec. (d).
1970--Subsec. (a). Pub. L. 91-547 designated existing provisions as
subsec. (a) and substituted in first sentence ``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'' for ``has been guilty, after August 22, 1940, and within
five years of the commencement of the action, of gross misconduct or
gross abuse of trust'' and second sentence reading ``If such allegations
are established, the court may enjoin such persons 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, having due regard to the protection of
investors and to the effectuation of the policies declared in section
80a-1(b) of this title'' for prior provision reading ``If the
Commission's allegations of such gross misconduct or gross abuse of
trust are established, the court shall enjoin such person from acting in
such capacity or capacities either permanently or for such period of
time as it in its discretion shall deem appropriate.''
Subsec. (b). Pub. L. 91-547 added subsec. (b).
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
Amendment by Pub. L. 91-547 effective Dec. 14, 1970, except that
subsec. (b) of this section effective on expiration of eighteen months
after Dec. 14, 1970, see section 30 (introductory text and par. (4)) 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-43, 80a-58 of
this title.
