§ 80b-3. — Registration of investment advisers.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC80b-3]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER II--INVESTMENT ADVISERS
Sec. 80b-3. Registration of investment advisers
(a) Necessity of registration
Except as provided in subsection (b) of this section and section
80b-3a of this title, it shall be unlawful for any investment adviser,
unless registered under this section, to make use of the mails or any
means or instrumentality of interstate commerce in connection with his
or its business as an investment adviser.
(b) Investment advisers who need not be registered
The provisions of subsection (a) of this section shall not apply
to--
(1) any investment adviser all of whose clients are residents of
the State within which such investment adviser maintains his or its
principal office and place of business, and who does not furnish
advice or issue analyses or reports with respect to securities
listed or admitted to unlisted trading privileges on any national
securities exchange;
(2) any investment adviser whose only clients are insurance
companies;
(3) any investment adviser who during the course of the
preceding twelve months has had fewer than fifteen clients and who
neither holds himself out generally to the public as an investment
adviser nor acts as an investment adviser to any investment company
registered under subchapter I of this chapter, or a company which
has elected to be a business development company pursuant to section
80a-53 of this title and has not withdrawn its election. For
purposes of determining the number of clients of an investment
adviser under this paragraph, no shareholder, partner, or beneficial
owner of a business development company, as defined in this
subchapter, shall be deemed to be a client of such investment
adviser unless such person is a client of such investment adviser
separate and apart from his status as a shareholder, partner, or
beneficial owner;
(4) any investment adviser that is a charitable organization, as
defined in section 3(c)(10)(D) of the Investment Company Act of 1940
[15 U.S.C. 80a-3(c)(10)(D)], or is a trustee, director, officer,
employee, or volunteer of such a charitable organization acting
within the scope of such person's employment or duties with such
organization, whose advice, analyses, or reports are provided only
to one or more of the following:
(A) any such charitable organization;
(B) a fund that is excluded from the definition of an
investment company under section 3(c)(10)(B) of the Investment
Company Act of 1940 [15 U.S.C. 80a-3(c)(10)(B)]; or
(C) a trust or other donative instrument described in
section 3(c)(10)(B) of the Investment Company Act of 1940 [15
U.S.C. 80a-3(c)(10)(B)], or the trustees, administrators,
settlors (or potential settlors), or beneficiaries of any such
trust or other instrument;
(5) any plan described in section 414(e) of title 26, any person
or entity eligible to establish and maintain such a plan under title
26, or any trustee, director, officer, or employee of or volunteer
for any such plan or person, if such person or entity, acting in
such capacity, provides investment advice exclusively to, or with
respect to, any plan, person, or entity or any company, account, or
fund that is excluded from the definition of an investment company
under section 3(c)(14) of the Investment Company Act of 1940 [15
U.S.C. 80a-3(c)(14)]; or
(6) any investment adviser that is registered with the Commodity
Futures Trading Commission as a commodity trading advisor whose
business does not consist primarily of acting as an investment
adviser, as defined in section 80b-2(a)(11) of this title, and that
does not act as an investment adviser to--
(A) an investment company registered under subchapter I of
this chapter; or
(B) a company which has elected to be a business development
company pursuant to section 80a-53 of this title and has not
withdrawn its election.
(c) Procedure for registration; filing of application; effective date of
registration; amendment of registration
(1) An investment adviser, or any person who presently contemplates
becoming an investment adviser, may be registered by filing with the
Commission an application for registration in such form and containing
such of the following information and documents as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the protection of investors:
(A) the name and form of organization under which the investment
adviser engages or intends to engage in business; the name of the
State or other sovereign power under which such investment adviser
is organized; the location of his or its principal business office
and branch offices, if any; the names and addresses of his or its
partners, officers, directors, and persons performing similar
functions or, if such an investment adviser be an individual, of
such individual; and the number of his or its employees;
(B) the education, the business affiliations for the past ten
years, and the present business affiliations of such investment
adviser and of his or its partners, officers, directors, and persons
performing similar functions and of any controlling person thereof;
(C) the nature of the business of such investment adviser,
including the manner of giving advice and rendering analyses or
reports;
(D) a balance sheet certified by an independent public
accountant and other financial statements (which shall, as the
Commission specifies, be certified);
(E) the nature and scope of the authority of such investment
adviser with respect to clients' funds and accounts;
(F) the basis or bases upon which such investment adviser is
compensated;
(G) whether such investment adviser, or any person associated
with such investment adviser, is subject to any disqualification
which would be a basis for denial, suspension, or revocation of
registration of such investment adviser under the provisions of
subsection (e) of this section; and
(H) a statement as to whether the principal business of such
investment adviser consists or is to consist of acting as investment
adviser and a statement as to whether a substantial part of the
business of such investment adviser, consists or is to consist of
rendering investment supervisory services.
(2) Within forty-five days of the date of the filing of such
application (or within such longer period as to which the applicant
consents) the Commission shall--
(A) by order grant such registration; or
(B) institute proceedings to determine whether registration
should be denied. Such proceedings shall include notice of the
grounds for denial under consideration and opportunity for hearing
and shall be concluded within one hundred twenty days of the date of
the filing of the application for registration. At the conclusion of
such proceedings the Commission, by order, shall grant or deny such
registration. The Commission may extend the time for conclusion of
such proceedings for up to ninety days if it finds good cause for
such extension and publishes its reasons for so finding or for such
longer period as to which the applicant consents.
The Commission shall grant such registration if the Commission finds
that the requirements of this section are satisfied and that the
applicant is not prohibited from registering as an investment adviser
under section 80b-3a of this title. The Commission shall deny such
registration if it does not make such a finding or if it finds that if
the applicant were so registered, its registration would be subject to
suspension or revocation under subsection (e) of this section.
(d) Other acts prohibited by subchapter
Any provision of this subchapter (other than subsection (a) of this
section) which prohibits any act, practice, or course of business if the
mails or any means or instrumentality of interstate commerce are used in
connection therewith shall also prohibit any such act, practice, or
course of business by any investment adviser registered pursuant to this
section or any person acting on behalf of such an investment adviser,
irrespective of any use of the mails or any means or instrumentality of
interstate commerce in connection therewith.
(e) Censure, denial, or suspension of registration; notice and hearing
The Commission, by order, shall censure, place limitations on the
activities, functions, or operations of, suspend for a period not
exceeding twelve months, or revoke the registration of any investment
adviser if it finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations, suspension, or
revocation is in the public interest and that such investment adviser,
or any person associated with such investment adviser, whether prior to
or subsequent to becoming so associated--
(1) has willfully made or caused to be made in any application
for registration or report required to be filed with the Commission
under this subchapter, or in any proceeding before the Commission
with respect to registration, any statement which was at the time
and in the light of the circumstances under which it was made false
or misleading with respect to any material fact, or has omitted to
state in any such application or report any material fact which is
required to be stated therein.
(2) has been convicted within ten years preceding the filing of
any application for registration or at any time thereafter of any
felony or misdemeanor or of a substantially equivalent crime by a
foreign court of competent jurisdiction which the Commission finds--
(A) involves the purchase or sale of any security, the
taking of a false oath, the making of a false report, bribery,
perjury, burglary, any substantially equivalent activity however
denominated by the laws of the relevant foreign government, or
conspiracy to commit any such offense;
(B) arises out of the conduct of the business of a broker,
dealer, municipal securities dealer, investment adviser, bank,
insurance company, government securities broker, government
securities dealer, fiduciary, transfer agent, foreign person
performing a function substantially equivalent to any of the
above, or entity or person required to be registered under the
Commodity Exchange Act [7 U.S.C. 1 et seq.] or any substantially
equivalent statute or regulation;
(C) involves the larceny, theft, robbery, extortion,
forgery, counterfeiting, fraudulent concealment, embezzlement,
fraudulent conversion, or misappropriation of funds or
securities or substantially equivalent activity however
denominated by the laws of the relevant foreign government; or
(D) involves the violation of section 152, 1341, 1342, or
1343 or chapter 25 or 47 of title 18, or a violation of \1\
substantially equivalent foreign statute.
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\1\ So in original. Probably should be ``of a''.
(3) has been convicted during the 10-year period preceding the
date of filing of any application for registration, or at any time
thereafter, of--
(A) any crime that is punishable by imprisonment for 1 or
more years, and that is not described in paragraph (2); or
(B) a substantially equivalent crime by a foreign court of
competent jurisdiction.
(4) is permanently or temporarily enjoined by order, judgment,
or decree of any court of competent jurisdiction, including any
foreign court of competent jurisdiction, from acting as an
investment adviser, underwriter, broker, dealer, municipal
securities dealer, government securities broker, government
securities dealer, transfer agent, foreign person performing a
function substantially equivalent to any of the above, or entity or
person required to be registered under the Commodity Exchange Act [7
U.S.C. 1 et seq.] or any substantially equivalent statute or
regulation, or as an affiliated person or employee of any investment
company, bank, insurance company, foreign entity substantially
equivalent to any of the above, or entity or person required to be
registered under the Commodity Exchange Act or any substantially
equivalent statute or regulation, or from engaging in or continuing
any conduct or practice in connection with any such activity, or in
connection with the purchase or sale of any security.
(5) has willfully violated any provision of the Securities Act
of 1933 [15 U.S.C. 77a et seq.], the Securities Exchange Act of 1934
[15 U.S.C. 78a et seq.], the Investment Company Act of 1940 [15
U.S.C. 80a-1 et seq.], this subchapter, the Commodity Exchange Act
[7 U.S.C. 1 et seq.], or the rules or regulations under any such
statutes or any rule of the Municipal Securities Rulemaking Board,
or is unable to comply with any such provision.
(6) has willfully aided, abetted, counseled, commanded, induced,
or procured the violation by any other person of any provision of
the Securities Act of 1933 [15 U.S.C. 77a et seq.], the Securities
Exchange Act of 1934 [15 U.S.C. 78a et seq.], the Investment Company
Act of 1940 [15 U.S.C. 80a-1 et seq.], this subchapter, the
Commodity Exchange Act [7 U.S.C. 1 et seq.], the rules or
regulations under any of such statutes, or the rules of the
Municipal Securities Rulemaking Board, or has failed reasonably to
supervise, with a view to preventing violations of the provisions of
such statutes, rules and regulations, another person who commits
such a violation, if such other person is subject to his
supervision. For the purposes of this paragraph no person shall be
deemed to have failed reasonably to supervise any person, if--
(A) there have been established procedures, and a system for
applying such procedures, which would reasonably be expected to
prevent and detect, insofar as practicable, any such violation
by such other person, and
(B) such person has reasonably discharged the duties and
obligations incumbent upon him by reason of such procedures and
system without reasonable cause to believe that such procedures
and system were not being complied with.
(7) is subject to any order of the Commission barring or
suspending the right of the person to be associated with an
investment adviser;
(8) has been found by a foreign financial regulatory authority
to have--
(A) made or caused to be made in any application for
registration or report required to be filed with a foreign
securities authority, or in any proceeding before a foreign
securities authority with respect to registration, any statement
that was at the time and in light of the circumstances under
which it was made false or misleading with respect to any
material fact, or has omitted to state in any application or
report to a foreign securities authority any material fact that
is required to be stated therein;
(B) violated any foreign statute or regulation regarding
transactions in securities or contracts of sale of a commodity
for future delivery traded on or subject to the rules of a
contract market or any board of trade; or
(C) aided, abetted, counseled, commanded, induced, or
procured the violation by any other person of any foreign
statute or regulation regarding transactions in securities or
contracts of sale of a commodity for future delivery traded on
or subject to the rules of a contract market or any board of
trade, or has been found, by the foreign finanical \2\
regulatory authority, to have failed reasonably to supervise,
with a view to preventing violations of statutory provisions,
and rules and regulations promulgated thereunder, another person
who commits such a violation, if such other person is subject to
his supervision; or
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\2\ So in original. Probably should be ``financial''.
(9) is subject to any final order of a State securities
commission (or any agency or officer performing like functions),
State authority that supervises or examines banks, savings
associations, or credit unions, State insurance commission (or any
agency or office performing like functions), an appropriate Federal
banking agency (as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813(q))), or the National Credit Union
Administration, that--
(A) bars such person from association with an entity
regulated by such commission, authority, agency, or officer, or
from engaging in the business of securities, insurance, banking,
savings association activities, or credit union activities; or
(B) constitutes a final order based on violations of any
laws or regulations that prohibit fraudulent, manipulative, or
deceptive conduct.
(f) Bar or suspension from association with investment adviser; notice
and hearing
The Commission, by order, shall censure or place limitations on the
activities of any person associated, seeking to become associated, or,
at the time of the alleged misconduct, associated or seeking to become
associated with an investment adviser, or suspend for a period not
exceeding twelve months or bar any such person from being associated
with an investment adviser, if the Commission finds, on the record after
notice and opportunity for hearing, that such censure, placing of
limitations, suspension, or bar is in the public interest and that such
person has committed or omitted any act or omission enumerated in
paragraph (1), (5), (6), (8), or (9) of subsection (e) of this section
or has been convicted of any offense specified in paragraph (2) or (3)
of subsection (e) of this section within ten years of the commencement
of the proceedings under this subsection, or is enjoined from any
action, conduct, or practice specified in paragraph (4) of subsection
(e) of this section. It shall be unlawful for any person as to whom such
an order suspending or barring him from being associated with an
investment adviser is in effect willfully to become, or to be,
associated with an investment adviser without the consent of the
Commission, and it shall be unlawful for any investment adviser to
permit such a person to become, or remain, a person associated with him
without the consent of the Commission, if such investment adviser knew,
or in the exercise of reasonable care, should have known, of such order.
(g) Registration of successor to business of investment adviser
Any successor to the business of an investment adviser registered
under this section shall be deemed likewise registered hereunder, if
within thirty days from its succession to such business it shall file an
application for registration under this section, unless and until the
Commission, pursuant to subsection (c) or subsection (e) of this
section, shall deny registration to or revoke or suspend the
registration of such successor.
(h) Withdrawal of registration
Any person registered under this section may, upon such terms and
conditions as the Commission finds necessary in the public interest or
for the protection of investors, withdraw from registration by filing a
written notice of withdrawal with the Commission. If the Commission
finds that any person registered under this section, or who has pending
an application for registration filed under this section, is no longer
in existence, is not engaged in business as an investment adviser, or is
prohibited from registering as an investment adviser under section 80b-
3a of this title, the Commission shall by order cancel the registration
of such person.
(i) Money penalties in administrative proceedings
(1) Authority of Commission
In any proceeding instituted pursuant to subsection (e) or (f)
of this section against any person, the Commission may impose a
civil penalty if it finds, on the record after notice and
opportunity for hearing, that such person--
(A) has willfully violated any provision of the Securities
Act of 1933 [15 U.S.C. 77a et seq.], the Securities Exchange Act
of 1934 [15 U.S.C. 78a et seq.], subchapter I of this chapter,
or this subchapter, or the rules or regulations thereunder;
(B) has willfully aided, abetted, counseled, commanded,
induced, or procured such a violation by any other person;
(C) has willfully made or caused to be made in any
application for registration or report required to be filed with
the Commission under this subchapter, or in any proceeding
before the Commission with respect to registration, any
statement which was, at the time and in the light of the
circumstances under which it was made, false or misleading with
respect to any material fact, or has omitted to state in any
such application or report any material fact which was required
to be stated therein; or
(D) has failed reasonably to supervise, within the meaning
of subsection (e)(6) of this section, with a view to preventing
violations of the provisions of this subchapter and the rules
and regulations thereunder, another person who commits such a
violation, if such other person is subject to his supervision;
and that such penalty is in the public interest.
(2) Maximum amount of penalty
(A) First tier
The maximum amount of penalty for each act or omission
described in paragraph (1) shall be $5,000 for a natural person
or $50,000 for any other person.
(B) Second tier
Notwithstanding subparagraph (A), the maximum amount of
penalty for each such act or omission shall be $50,000 for a
natural person or $250,000 for any other person if the act or
omission described in paragraph (1) involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a
regulatory requirement.
(C) Third tier
Notwithstanding subparagraphs (A) and (B), the maximum
amount of penalty for each such act or omission shall be
$100,000 for a natural person or $500,000 for any other person
if--
(i) the act or omission described in paragraph (1)
involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement; and
(ii) such act or omission directly or indirectly
resulted in substantial losses or created a significant risk
of substantial losses to other persons or resulted in
substantial pecuniary gain to the person who committed the
act or omission.
(3) Determination of public interest
In considering under this section whether a penalty is in the
public interest, the Commission may consider--
(A) whether the act or omission for which such penalty is
assessed involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement;
(B) the harm to other persons resulting either directly or
indirectly from such act or omission;
(C) the extent to which any person was unjustly enriched,
taking into account any restitution made to persons injured by
such behavior;
(D) whether such person previously has been found by the
Commission, another appropriate regulatory agency, or a self-
regulatory organization to have violated the Federal securities
laws, State securities laws, or the rules of a self-regulatory
organization, has been enjoined by a court of competent
jurisdiction from violations of such laws or rules, or has been
convicted by a court of competent jurisdiction of violations of
such laws or of any felony or misdemeanor described in
subsection (e)(2) of this section;
(E) the need to deter such person and other persons from
committing such acts or omissions; and
(F) such other matters as justice may require.
(4) Evidence concerning ability to pay
In any proceeding in which the Commission may impose a penalty
under this section, a respondent may present evidence of the
respondent's ability to pay such penalty. The Commission may, in its
discretion, consider such evidence in determining whether such
penalty is in the public interest. Such evidence may relate to the
extent of such person's ability to continue in business and the
collectability of a penalty, taking into account any other claims of
the United States or third parties upon such person's assets and the
amount of such person's assets.
(j) Authority to enter order requiring accounting and disgorgement
In any proceeding in which the Commission may impose a penalty under
this section, the Commission may enter an order requiring accounting and
disgorgement, including reasonable interest. The Commission is
authorized to adopt rules, regulations, and orders concerning payments
to investors, rates of interest, periods of accrual, and such other
matters as it deems appropriate to implement this subsection.
(k) Cease-and-desist proceedings
(1) Authority of Commission
If the Commission finds, after notice and opportunity for
hearing, that any person is violating, has violated, or is about to
violate any provision of this subchapter, or any rule or regulation
thereunder, the Commission may publish its findings and enter an
order requiring such person, and any other person that is, was, or
would be a cause of the violation, due to an act or omission the
person knew or should have known would contribute to such violation,
to cease and desist from committing or causing such violation and
any future violation of the same provision, rule, or regulation.
Such order may, in addition to requiring a person to cease and
desist from committing or causing a violation, require such person
to comply, or to take steps to effect compliance, with such
provision, rule, or regulation, upon such terms and conditions and
within such time as the Commission may specify in such order. Any
such order may, as the Commission deems appropriate, require future
compliance or steps to effect future compliance, either permanently
or for such period of time as the Commission may specify, with such
provision, rule, or regulation with respect to any security, any
issuer, or any other person.
(2) Hearing
The notice instituting proceedings pursuant to paragraph (1)
shall fix a hearing date not earlier than 30 days nor later than 60
days after service of the notice unless an earlier or a later date
is set by the Commission with the consent of any respondent so
served.
(3) Temporary order
(A) In general
Whenever the Commission determines that the alleged
violation or threatened violation specified in the notice
instituting proceedings pursuant to paragraph (1), or the
continuation thereof, is likely to result in significant
dissipation or conversion of assets, significant harm to
investors, or substantial harm to the public interest,
including, but not limited to, losses to the Securities Investor
Protection Corporation, prior to the completion of the
proceedings, the Commission may enter a temporary order
requiring the respondent to cease and desist from the violation
or threatened violation and to take such action to prevent the
violation or threatened violation and to prevent dissipation or
conversion of assets, significant harm to investors, or
substantial harm to the public interest as the Commission deems
appropriate pending completion of such proceedings. Such an
order shall be entered only after notice and opportunity for a
hearing, unless the Commission, notwithstanding section 80b-
11(c) of this title, determines that notice and hearing prior to
entry would be impracticable or contrary to the public interest.
A temporary order shall become effective upon service upon the
respondent and, unless set aside, limited, or suspended by the
Commission or a court of competent jurisdiction, shall remain
effective and enforceable pending the completion of the
proceedings.
(B) Applicability
This paragraph shall apply only to a respondent that acts,
or, at the time of the alleged misconduct acted, as a broker,
dealer, investment adviser, investment company, municipal
securities dealer, government securities broker, government
securities dealer, or transfer agent, or is, or was at the time
of the alleged misconduct, an associated person of, or a person
seeking to become associated with, any of the foregoing.
(4) Review of temporary orders
(A) Commission review
At any time after the respondent has been served with a
temporary cease-and-desist order pursuant to paragraph (3), the
respondent may apply to the Commission to have the order set
aside, limited, or suspended. If the respondent has been served
with a temporary cease-and-desist order entered without a prior
Commission hearing, the respondent may, within 10 days after the
date on which the order was served, request a hearing on such
application and the Commission shall hold a hearing and render a
decision on such application at the earliest possible time.
(B) Judicial review
Within--
(i) 10 days after the date the respondent was served
with a temporary cease-and-desist order entered with a prior
Commission hearing, or
(ii) 10 days after the Commission renders a decision on
an application and hearing under subparagraph (A), with
respect to any temporary cease-and-desist order entered
without a prior Commission hearing,
the respondent may apply to the United States district court for
the district in which the respondent resides or has its
principal place of business, or for the District of Columbia,
for an order setting aside, limiting, or suspending the
effectiveness or enforcement of the order, and the court shall
have jurisdiction to enter such an order. A respondent served
with a temporary cease-and-desist order entered without a prior
Commission hearing may not apply to the court except after
hearing and decision by the Commission on the respondent's
application under subparagraph (A) of this paragraph.
(C) No automatic stay of temporary order
The commencement of proceedings under subparagraph (B) of
this paragraph shall not, unless specifically ordered by the
court, operate as a stay of the Commission's order.
(D) Exclusive review
Section 80b-13 of this title shall not apply to a temporary
order entered pursuant to this section.
(5) Authority to enter order requiring accounting and
disgorgement
In any cease-and-desist proceeding under paragraph (1), the
Commission may enter an order requiring accounting and disgorgement,
including reasonable interest. The Commission is authorized to adopt
rules, regulations, and orders concerning payments to investors,
rates of interest, periods of accrual, and such other matters as it
deems appropriate to implement this subsection.
(Aug. 22, 1940, ch. 686, title II, Sec. 203, 54 Stat. 850; Pub. L. 86-
750, Secs. 2-5, Sept. 13, 1960, 74 Stat. 885, 886; Pub. L. 91-547,
Sec. 24, Dec. 14, 1970, 84 Stat. 1430; Pub. L. 94-29, Sec. 29(1)-(4),
June 4, 1975, 89 Stat. 166-169; Pub. L. 96-477, title II, Sec. 202, Oct.
21, 1980, 94 Stat. 2290; Pub. L. 99-571, title I, Sec. 102(m), Oct. 28,
1986, 100 Stat. 3220; Pub. L. 100-181, title VII, Sec. 702, Dec. 4,
1987, 101 Stat. 1263; Pub. L. 101-429, title IV, Sec. 401, Oct. 15,
1990, 104 Stat. 946; Pub. L. 101-550, title II, Sec. 205(b), (c), Nov.
15, 1990, 104 Stat. 2719, 2720; Pub. L. 104-62, Sec. 5, Dec. 8, 1995,
109 Stat. 685; Pub. L. 104-290, title III, Secs. 303(b), (d), 305, title
V, Sec. 508(d), Oct. 11, 1996, 110 Stat. 3438, 3439, 3448; Pub. L. 105-
353, title III, Sec. 301(d)(1), Nov. 3, 1998, 112 Stat. 3237; Pub. L.
106-554, Sec. 1(a)(5) [title II, Sec. 209(b)], Dec. 21, 2000, 114 Stat.
2763, 2763A-436; Pub. L. 107-204, title VI, Sec. 604(b), (c)(2), July
30, 2002, 116 Stat. 796.)
References in Text
The Commodity Exchange Act, referred to in subsec. (e)(2)(B), (4)-
(6), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which is
classified generally to chapter 1 (Sec. 1 et seq.) of Title 7,
Agriculture. For complete classification of this Act to the Code, see
section 1 of Title 7 and Tables.
The Securities Act of 1933, referred to in subsecs. (e)(5), (6) and
(i)(1)(A), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, as
amended, which is classified generally to subchapter I (Sec. 77a et
seq.) of chapter 2A of this title. For complete classification of this
Act to the Code, see section 77a of this title and Tables.
The Securities Exchange Act of 1934, referred to in subsecs. (e)(5),
(6) and (i)(1)(A), is act June 6, 1934, ch. 404, 48 Stat. 881, as
amended, which is classified generally to chapter 2B (Sec. 78a et seq.)
of this title. For complete classification of this Act to the Code, see
section 78a of this title and Tables.
The Investment Company Act of 1940, referred to in subsec. (e)(5),
(6), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as amended,
which is classified generally to subchapter I (Sec. 80a-1 et seq.) of
this chapter. For complete classification of this Act to the Code, see
section 80a-51 of this title and Tables.
Amendments
2002--Subsec. (e)(7). Pub. L. 107-204, Sec. 604(b)(1), added par.
(7) and struck out former par. (7) which read as follows: ``is subject
to an order of the Commission entered pursuant to subsection (f) of this
section barring or suspending the right of such person to be associated
with an investment adviser which order is in effect with respect to such
person.''
Subsec. (e)(9). Pub. L. 107-204, Sec. 604(b)(2), (3), added par.
(9).
Subsec. (f). Pub. L. 107-204, Sec. 604(c)(2), substituted ``(8), or
(9)'' for ``or (8)'' and inserted ``or (3)'' after ``paragraph (2)''.
2000--Subsec. (b)(6). Pub. L. 106-554 added par. (6).
1998--Subsec. (e)(8)(B). Pub. L. 105-353 inserted ``or'' after
semicolon at end.
1996--Subsec. (a). Pub. L. 104-290, Sec. 303(d), which directed
substitution of ``subsection (b) of this section and section 80b-3a of
this title'' for ``subsection (b) of this section'', was executed by
making the substitution for ``subsection (b)'' to reflect the probable
intent of Congress.
Subsec. (b)(5). Pub. L. 104-290, Sec. 508(d), added par. (5).
Subsec. (c)(2). Pub. L. 104-290, Sec. 303(b)(1), inserted ``and that
the applicant is not prohibited from registering as an investment
adviser under section 80b-3a of this title'' after ``satisfied'' in
closing provisions.
Subsec. (e)(3) to (5). Pub. L. 104-290, Sec. 305(a), added par. (3)
and redesignated former pars. (3) and (4) as (4) and (5), respectively.
Former par. (5) redesignated (6).
Subsec. (e)(6). Pub. L. 104-290, Sec. 305(b)(1), substituted ``this
paragraph'' for ``this paragraph (5)''.
Pub. L. 104-290, Sec. 305(a)(1), redesignated par. (5) as (6).
Former par. (6) redesignated (7).
Subsec. (e)(7), (8). Pub. L. 104-290, Sec. 305(a)(1), redesignated
pars. (6) and (7) as (7) and (8), respectively.
Subsec. (f). Pub. L. 104-290, Sec. 305(b)(2), substituted
``paragraph (1), (5), (6), or (8) of subsection (e) of this section''
for ``paragraph (1), (4), (5), or (7) of subsection (e) of this
section'' and ``paragraph (4)'' for ``paragraph (3)'' and substituted
``subsection (e)'' for ``said subsection (e)'' in two places.
Subsec. (h). Pub. L. 104-290, Sec. 303(b)(2), substituted
``existence,'' for ``existence or'' and inserted ``or is prohibited from
registering as an investment adviser under section 80b-3a of this
title,'' after ``investment adviser,''.
Subsec. (i)(1)(D). Pub. L. 104-290, Sec. 305(b)(3), substituted
``subsection (e)(6) of this section'' for ``subsection (e)(5) of this
section''.
1995--Subsec. (b)(4). Pub. L. 104-62 added par. (4).
1990--Subsec. (e)(2). Pub. L. 101-550, Sec. 205(b)(1), inserted ``or
of a substantially equivalent crime by a foreign court of competent
jurisdiction'' after ``misdemeanor''.
Subsec. (e)(2)(A). Pub. L. 101-550, Sec. 205(b)(2), inserted ``any
substantially equivalent activity however denominated by the laws of the
relevant foreign government,'' after ``burglary,''.
Subsec. (e)(2)(B). Pub. L. 101-550, Sec. 205(b)(3), inserted
``foreign person performing a function substantially equivalent to any
of the above,'' after ``transfer agent,'' and ``or any substantially
equivalent statute or regulation'' after ``Commodity Exchange Act''.
Subsec. (e)(2)(C). Pub. L. 101-550, Sec. 205(b)(4), inserted ``or
substantially equivalent activity however denominated by the laws of the
relevant foreign government'' after ``securities''.
Subsec. (e)(2)(D). Pub. L. 101-550, Sec. 205(b)(5), inserted ``, or
a violation of substantially equivalent foreign statute'' after ``title
18''.
Subsec. (e)(3). Pub. L. 101-550, Sec. 205(b)(3), (6), inserted
``foreign person performing a function substantially equivalent to any
of the above,'' after ``transfer agent,'', ``or any substantially
equivalent statute or regulation'' after ``Commodity Exchange Act''
wherever appearing, ``, including any foreign court of competent
jurisdiction'', and ``foreign entity substantially equivalent to any of
the above,'' after ``insurance company,''.
Subsec. (e)(5). Pub. L. 101-550, Sec. 205(b)(7), inserted ``the
Commodity Exchange Act'' after ``this subchapter,''.
Subsec. (e)(7). Pub. L. 101-550, Sec. 205(b)(8), added par. (7).
Subsec. (f). Pub. L. 101-550, Sec. 205(c), substituted ``paragraph
(1), (4), (5), or (7)'' for ``paragraph (1), (4), or (5)''.
Subsecs. (i) to (k). Pub. L. 101-429 added subsecs. (i) to (k).
1987--Subsec. (e)(2)(B). Pub. L. 100-181, Sec. 702(1), inserted
``transfer agent,'' after ``fiduciary,''.
Subsec. (e)(3). Pub. L. 100-181, Sec. 702(2), inserted ``transfer
agent,'' after ``government securities dealer,''.
Subsec. (f). Pub. L. 100-181, Sec. 702(3), inserted ``, seeking to
become associated, or, at the time of the alleged misconduct,
associated'' before ``or seeking to become associated''.
Subsec. (g). Pub. L. 100-181, Sec. 702(4), substituted ``subsection
(c) or subsection (e)'' for ``subsection (d)''.
1986--Subsec. (e)(2)(B). Pub. L. 99-571, Sec. 102(m)(1), substituted
``government securities broker, government securities dealer, fiduciary,
or entity or person required to be registered under the Commodity
Exchange Act'' for ``or fiduciary''.
Subsec. (e)(3). Pub. L. 99-571, Sec. 102(m)(2), inserted par. (3)
and struck out former par. (3) which read as follows: ``is permanently
or temporarily enjoined by order, judgment, or decree of any court of
competent jurisdiction from acting as an investment adviser,
underwriter, broker, dealer, or municipal securities dealer, or as an
affiliated person or employee of any investment company, bank, or
insurance company, or from engaging in or continuing any conduct or
practice in connection with any such activity, or in connection with the
purchase or sale of any security.''
Subsec. (e)(4). Pub. L. 99-571, Sec. 102(m)(3), inserted reference
to Commodity Exchange Act.
1980--Subsec. (b)(3). Pub. L. 96-477 required investment advisers to
business development companies to register under this section and
provided that for purposes of determining the number of clients of an
investment adviser under par. (3), no shareholders, partners, or
beneficial owners of business development companies were to be deemed to
be clients of an investment adviser unless such person qualified as a
client apart from his status in connection with the business development
company.
1975--Subsec. (c). Pub. L. 94-29, Sec. 29(1), inserted provision
authorizing the Commission to require a balance sheet certified by an
independent public accountant and other financial statements which, as
the Commission specifies, may be certified, and substituted provisions
directing the Commission either to grant the registration within forty-
five days or institute proceedings to determine whether registration
should be denied, directing the Commission to grant registration if it
finds that the requirements of this section are satisfied, and requiring
the Commission to deny registration if it does not make such a finding
or finds that if the applicant were registered its registration would be
subject to suspension or revocation for provisions directing that
registration be effective thirty days after receipt of the application
by the Commission except as otherwise provided and making allowances for
amendment of the application.
Subsec. (e). Pub. L. 94-29, Sec. 29(2), added the placing of
limitations on the activities of investment advisers to the enumeration
of sanctions available to the Commission as set out in the provisions
preceding par. (1), inserted references in par. (2)(A) to the taking of
a false oath, the making of a false report, bribery, perjury, burglary,
and conspiracy to commit such offenses, expanded par. (2)(B) to include
municipal securities dealers, banks, insurance companies, and
fiduciaries, inserted references in par. (2)(C) to larceny, theft,
robbery, extortion, forgery, counterfeiting, and fraudulent concealment,
inserted references in par. (2)(D) to section 152 and chapters 25 and 47
of title 18, and inserted reference to the rules of the Municipal
Securities Rulemaking Board in pars. (4) and (5).
Subsec. (f). Pub. L. 94-29, Sec. 29(3), added the placing of
limitations on the activities of persons associated or seeking to become
associated with an investment adviser to the enumeration of sanctions
available to the Commission.
Subsecs. (g), (h). Pub. L. 94-29, Sec. 29(4), redesignated subsecs.
(h) and (i) as (g) and (h), respectively. Former subsec. (g), covering
the postponement of the effective day of registration by the
commencement of a proceeding to deny registration, was struck out.
1970--Subsec. (b). Pub. L. 91-547, Sec. 24(a), struck out
``investment companies and'' before ``insurance companies'' in par. (2)
and struck out ``does not hold'' after ``clients and who'' and inserted
``neither hold'' and ``nor acts as an investment adviser to any
investment company registered under subchapter I of this chapter'' in
par. (3).
Subsec. (c)(1)(F). Pub. L. 91-547, Sec. 24(b), substituted ``any
person associated with such investment adviser'' for ``any partner,
officer, director thereof, or any person performing similar functions,
or any person directly or indirectly controlling or controlled by such
investment adviser'' and reference to subsec. ``(e)'' for ``(d)''.
Subsecs. (d), (e). Pub. L. 91-547, Sec. 24(c), (d), added subsec.
(d), redesignated former subsec. (d) as (e), and in amending its
provisions, inserted reference to ``censure'' in two places and
substituted ``such investment adviser or any person associated with such
investment adviser'' for ``(1) such investment adviser, whether prior or
subsequent to becoming such, or (2) any partner, officer, or director
thereof, or any person performing similar functions, or (3) any person
directly or indirectly controlling or controlled by such investment
adviser, whether prior or subsequent to becoming such,'' in introductory
text preceding par. (1), formerly cl. (A), redesignated as pars. (1) to
(5) former cls. (A) to (E), redesignated as items (A) to (D) of par. (2)
former items (i) to (iv), striking out ``, as heretofore or hereafter
amended'' after ``Title 18'', substituted in par. (3) ``an affiliated
person'' for ``as an affiliated person'', in par. (4) included reference
to subchapter I of this chapter and struck out ``as any of such statutes
heretofore have been or hereafter may be amended'' after ``this
subchapter'', in par. (5) included reference to subchapter I of this
chapter, struck out ``as any of such statutes heretofore have been or
hereafter may be amended'' after ``this subchapter'', inserted provision
respecting disciplining an investment adviser for failure reasonably to
supervise, with a view to preventing violations of statutes, rules, and
regulations, another person who commits such a violation if such other
person is subject to his supervision, including subpars. (A) and (B)
respecting failure to supervise a person, and inserted par. (6). Former
subsec. (e) redesignated (g).
Subsec. (f). Pub. L. 91-547, Sec. 24(e), inserted subsec. (f).
Former subsec. (f) redesignated (h).
Subsec. (g). Pub. L. 91-547, Sec. 24(c), redesignated former subsec.
(e) as (g). Former subsec. (g) redesignated (i).
Subsecs. (h), (i). Pub. L. 91-547, Sec. 24(e), redesignated former
subsecs. (f) and (g) as (h) and (i), respectively.
1960--Subsec. (c)(1)(F). Pub. L. 86-750, Sec. 2, substituted ``or
any person performing similar functions, or any person directly or
indirectly controlling or controlled by such investment adviser, is
subject to any disqualification which would be a basis for denial,
suspension, or revocation of registration of such investment adviser
under the provisions of subsection (d)'' for ``person performing similar
function or controlling person thereof (i) within ten years of the
filing of such application has been convicted of any felony or
misdemeanor of the character described in paragraph (1) of subsection
(d) of this section, or (ii) is permanently or temporarily enjoined by
an order, judgment or decree of the character described in paragraph (2)
of said subsection (d) and in each case the facts relating to such
conviction or injunction''.
Subsec. (c)(2). Pub. L. 86-750, Sec. 3(a), substituted ``a statement
as to whether the principal business of such investment adviser consists
or is to consist of acting as investment adviser and a statement as to
whether a substantial part of the business of such investment adviser
consists or is to consist of rendering investment supervisory services''
for ``a statement as to whether such investment adviser is engaged or is
to engage primarily in the business of rendering investment supervisory
services''.
Subsec. (d). Pub. L. 86-750, Sec. 3(b), among other changes, limited
the period of suspension to twelve months, included people controlled by
the adviser, provided that the ten year period within which convictions
are counted be measured from the filing of the application or after
specified felonies or misdemeanors, increased the number of offenses by
including willful, false or misleading statements as to any material
fact, or omissions thereof, in any application for registration or
report filed with the Commission, embezzlement, fraudulent conversion,
and misappropriation of funds or securities, violations of sections
1341, 1342 or 1343 of title 18, willful violations of, or aiding,
abetting, counseling, commanding, inducing or procuring the violation of
the Securities Act of 1933, or of the Securities Exchange Act of 1934,
or of this title, and any amendment or rule or regulation thereunder.
Subsec. (e). Pub. L. 86-750, Sec. 4, substituted provisions
postponing the effective date of registration for ninety days at
commencement of a proceeding to deny registration, or until final
determination whether such registration should be denied, whichever was
first, and authorizing the Commission after notice and opportunity for
hearing, to postpone said effective date beyond the ninety-day period or
final determination, provided that upon request of any interested party,
made more than ninety days after such postponement, the Commission shall
consider the postponement's continuation, for provisions prohibiting
postponement of the effective date of registration upon a proceeding to
deny registration, unless the Commission found it in the public interest
to do so, and which limited said postponement to three months.
Subsec. (g). Pub. L. 86-750, Sec. 5, substituted ``existence'' for
``business''.
Effective Date of 1996 Amendment
Amendment by sections 303(b), (d) and 305 of Pub. L. 104-290
effective 270 days after Oct. 11, 1996, see section 308(a) of Pub. L.
104-290, as amended, set out as a note under section 80b-2 of this
title.
Effective Date of 1995 Amendment
Amendment by Pub. L. 104-62 applicable as defense to any claim in
administrative and judicial actions pending on or commenced after Dec.
8, 1995, that any person, security, interest, or participation of type
described in Pub. L. 104-62 is subject to the Securities Act of 1933,
the Securities Exchange Act of 1934, the Investment Company Act of 1940,
the Investment Advisers Act of 1940, or any State statute or regulation
preempted as provided in section 80a-3a of this title, except as
specifically provided in such statutes, see section 7 of Pub. L. 104-62,
set out as a note under section 77c of this title.
Effective Date of 1990 Amendment
Amendment by Pub. L. 101-429 effective Oct. 15, 1990, with
provisions relating to civil penalties and accounting and disgorgement,
see section 1(c)(1), (2) of Pub. L. 101-429, set out in a note under
section 77g of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99-571 effective 270 days after Oct. 28, 1986,
see section 401 of Pub. L. 99-571, set out as an Effective Date note
under section 78o-5 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
Amendment by Pub. L. 91-547 effective Dec. 14, 1970, except that
amendment by section 24(a) of Pub. L. 91-547 effective on expiration of
one year after Dec. 14, 1970, see section 30 (introductory text and par.
(1)) 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 78w, 80a-9, 80a-35, 80b-2,
80b-3a, 80b-4, 80b-5, 80b-7, 80b-8, 80b-9, 80b-10a of this title; title
5 section 8438.
