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.