CITE

    15 USC Sec. 80a-10                                          01/05/2009

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2D - INVESTMENT COMPANIES AND ADVISERS
    SUBCHAPTER I - INVESTMENT COMPANIES

HEAD

    Sec. 80a-10. Affiliations or interest of directors, officers, and
      employees

STATUTE

    (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 or bank holding
      company 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) or any one savings and loan
    holding company, together with its affiliates and subsidiaries (as
    such terms are defined in section 1467a of title 12),,(!1) 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.

SOURCE

    (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; Pub. L. 109-351, title IV,
    Sec. 401(c), Oct. 13, 2006, 120 Stat. 1973.)

AMENDMENTS

      2006 - Subsec. (c). Pub. L. 109-351 inserted "or any one savings
    and loan holding company, together with its affiliates and
    subsidiaries (as such terms are defined in section 1467a of title
    12)," after "1841 of title 12)".
      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.

FOOTNOTE

    (!1) So in original.