CITE
15 USC Sec. 80a-35 01/05/2009
EXPCITE
TITLE 15 - COMMERCE AND TRADE
CHAPTER 2D - INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I - INVESTMENT COMPANIES
HEAD
Sec. 80a-35. Breach of fiduciary duty
STATUTE
(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.
SOURCE
(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.