CITE

    15 USC Sec. 80a-27                                          01/05/2009

EXPCITE

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

HEAD

    Sec. 80a-27. Periodic payment plans

STATUTE

    (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(f) of
      this title and any rules or regulations issued by the Commission
      under section 80a-26(f) of this title.
    (j) Termination of sales
      (1) Termination
        Effective 30 days after September 29, 2006, it shall be
      unlawful, subject to subsection (i) -
          (A) for any registered investment company to issue any
        periodic payment plan certificate; or
          (B) for such company, or any depositor of or underwriter for
        any such company, or any other person, to sell such a
        certificate.
      (2) No invalidation of existing certificates
        Paragraph (1) shall not be construed to alter, invalidate, or
      otherwise affect any rights or obligations, including rights of
      redemption, under any periodic payment plan certificate issued
      and sold before 30 days after September 29, 2006.

SOURCE

    (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; Pub. L. 109-290, Sec. 4(a), (b),
    Sept. 29, 2006, 120 Stat. 1318, 1319.)

AMENDMENTS

      2006 - Subsec. (i)(2)(B). Pub. L. 109-290, Sec. 4(b), substituted
    "section 80a-26(f)" for "section 80a-26(e)" in two places.
      Subsec. (j). Pub. L. 109-290, Sec. 4(a), added subsec. (j).
      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.