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or information contained therein, provided to the Commission under
this section. Nothing in this subsection shall authorize the Commis-
sion to withhold information from the Congress or prevent the
Commission from complying with a request for information from
any other Federal department or agency requesting the information
for purposes within the scope of the jurisdiction of that department
or agency, or complying with an order of a court of the United
States in an action brought by the United States or the Commission.
For purposes of section 552 of title 5, United States Code, this
section shall be considered a statute described in subsection (b)(3)(B)
of such section 552.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) the term ‘internal compliance policies and procedures’
means policies and procedures designed by subject persons
to promote compliance with the Federal securities laws; and
‘‘(2) the term ‘internal compliance and audit record’ means
any record prepared by a subject person in accordance with
internal compliance policies and procedures.’’;
(4) in subsection (e), as redesignated, by inserting
‘‘REGULATORY AUTHORITY.—’’ before ‘‘The Commission’’; and
(5) in subsection (f), as redesignated, by inserting
‘‘EXEMPTION AUTHORITY.—’’ before ‘‘The Commission’’.
SEC. 208. PROHIBITION ON DECEPTIVE INVESTMENT COMPANY
NAMES.
Section 35(d) of the Investment Company Act of 1940 (15 U.S.C.
80a–34(d)) is amended to read as follows:
‘‘(d) DECEPTIVE OR MISLEADING NAMES.—It shall be unlawful
for any registered investment company to adopt as a part of the
name or title of such company, or of any securities of which it
is the issuer, any word or words that the Commission finds are
materially deceptive or misleading. The Commission is authorized,
by rule, regulation, or order, to define such names or titles as
are materially deceptive or misleading.’’.
SEC. 209. AMENDMENTS TO DEFINITIONS.
(a) EXCEPTED INVESTMENT COMPANIES.—Section 3(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a–3(c)) is amended—
(1) in paragraph (1), by inserting after the first sentence
the following: ‘‘Such issuer shall be deemed to be an investment
company for purposes of the limitations set forth in subpara-
graphs (A)(i) and (B)(i) of section 12(d)(1) governing the pur-
chase or other acquisition by such issuer of any security issued
by any registered investment company and the sale of any
security issued by any registered open-end investment company
to any such issuer.’’;
(2) in subparagraph (A) of paragraph (1)—
(A) by inserting after ‘‘issuer,’’ the first place that
term appears, the following: ‘‘and is or, but for the exception
provided for in this paragraph or paragraph (7), would
be an investment company,’’; and
(B) by striking ‘‘unless, as of’’ and all that follows
through the end of the subparagraph and inserting a
period;
(3) in paragraph (2)—
(A) by striking ‘‘and acting as broker,’’ and inserting
‘‘acting as broker, and acting as market intermediary,’’;
(B) by inserting ‘‘(A)’’ after ‘‘(2)’’; and
H. R. 3005—18
(C) by adding at the end the following new subpara-
graph:
‘‘(B) For purposes of this paragraph—
‘‘(i) the term ‘market intermediary’ means any person
that regularly holds itself out as being willing contempora-
neously to engage in, and that is regularly engaged in,
the business of entering into transactions on both sides
of the market for a financial contract or one or more such
financial contracts; and
‘‘(ii) the term ‘financial contract’ means any arrange-
ment that—
‘‘(I) takes the form of an individually negotiated
contract, agreement, or option to buy, sell, lend, swap,
or repurchase, or other similar individually negotiated
transaction commonly entered into by participants in
the financial markets;
‘‘(II) is in respect of securities, commodities, cur-
rencies, interest or other rates, other measures of
value, or any other financial or economic interest
similar in purpose or function to any of the foregoing;
and
‘‘(III) is entered into in response to a request from
a counter party for a quotation, or is otherwise entered
into and structured to accommodate the objectives of
the counter party to such arrangement.’’; and
(4) by striking paragraph (7) and inserting the following:
‘‘(7)(A) Any issuer, the outstanding securities of which are
owned exclusively by persons who, at the time of acquisition
of such securities, are qualified purchasers, and which is not
making and does not at that time propose to make a public
offering of such securities. Securities that are owned by persons
who received the securities from a qualified purchaser as a
gift or bequest, or in a case in which the transfer was caused
by legal separation, divorce, death, or other involuntary event,
shall be deemed to be owned by a qualified purchaser, subject
to such rules, regulations, and orders as the Commission may
prescribe as necessary or appropriate in the public interest
or for the protection of investors.
‘‘(B) Notwithstanding subparagraph (A), an issuer is within
the exception provided by this paragraph if—
‘‘(i) in addition to qualified purchasers, outstanding
securities of that issuer are beneficially owned by not more
than 100 persons who are not qualified purchasers, if—
‘‘(I) such persons acquired any portion of the secu-
rities of such issuer on or before September 1, 1996;
and
‘‘(II) at the time at which such persons initially
acquired the securities of such issuer, the issuer was
excepted by paragraph (1); and
‘‘(ii) prior to availing itself of the exception provided
by this paragraph—
‘‘(I) such issuer has disclosed to each beneficial
owner, as determined under paragraph (1), that future
investors will be limited to qualified purchasers, and
that ownership in such issuer is no longer limited
to not more than 100 persons; and
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‘‘(II) concurrently with or after such disclosure,
such issuer has provided each beneficial owner, as
determined under paragraph (1), with a reasonable
opportunity to redeem any part or all of their interests
in the issuer, notwithstanding any agreement to the
contrary between the issuer and such persons, for that
person’s proportionate share of the issuer’s net assets.
‘‘(C) Each person that elects to redeem under subparagraph
(B)(ii)(II) shall receive an amount in cash equal to that person’s
proportionate share of the issuer’s net assets, unless the issuer
elects to provide such person with the option of receiving,
and such person agrees to receive, all or a portion of such
person’s share in assets of the issuer. If the issuer elects to
provide such persons with such an opportunity, disclosure
concerning such opportunity shall be made in the disclosure
required by subparagraph (B)(ii)(I).
‘‘(D) An issuer that is excepted under this paragraph shall
nonetheless be deemed to be an investment company for pur-
poses of the limitations set forth in subparagraphs (A)(i) and
(B)(i) of section 12(d)(1) relating to the purchase or other
acquisition by such issuer of any security issued by any reg-
istered investment company and the sale of any security issued
by any registered open-end investment company to any such
issuer.
‘‘(E) For purposes of determining compliance with this para-
graph and paragraph (1), an issuer that is otherwise
excepted under this paragraph and an issuer that is otherwise
excepted under paragraph (1) shall not be treated by the
Commission as being a single issuer for purposes of determining
whether the outstanding securities of the issuer excepted under
paragraph (1) are beneficially owned by not more than 100
persons or whether the outstanding securities of the issuer
excepted under this paragraph are owned by persons that are
not qualified purchasers. Nothing in this subparagraph shall
be construed to establish that a person is a bona fide qualified
purchaser for purposes of this paragraph or a bona fide bene-
ficial owner for purposes of paragraph (1).’’.
(b) QUALIFIED PURCHASER.—Section 2(a) of the Investment
Company Act of 1940 (15 U.S.C. 80a–2(a)) is amended by adding
at the end the following new paragraph:
‘‘(51)(A) ‘Qualified purchaser’ means—
‘‘(i) any natural person (including any person who holds
a joint, community property, or other similar shared owner-
ship interest in an issuer that is excepted under section
3(c)(7) with that person’s qualified purchaser spouse) who
owns not less than $5,000,000 in investments, as defined
by the Commission;
‘‘(ii) any company that owns not less than $5,000,000
in investments and that is owned directly or indirectly
by or for 2 or more natural persons who are related as
siblings or spouse (including former spouses), or direct
lineal descendants by birth or adoption, spouses of such
persons, the estates of such persons, or foundations, chari-
table organizations, or trusts established by or for the
benefit of such persons;
‘‘(iii) any trust that is not covered by clause (ii) and
that was not formed for the specific purpose of acquiring
H. R. 3005—20
the securities offered, as to which the trustee or other
person authorized to make decisions with respect to the
trust, and each settlor or other person who has contributed
assets to the trust, is a person described in clause (i),
(ii), or (iv); or
‘‘(iv) any person, acting for its own account or the
accounts of other qualified purchasers, who in the
aggregate owns and invests on a discretionary basis, not
less than $25,000,000 in investments.
‘‘(B) The Commission may adopt such rules and regulations
applicable to the persons and trusts specified in clauses (i)
through (iv) of subparagraph (A) as it determines are necessary
or appropriate in the public interest or for the protection of
investors.
‘‘(C) The term ‘qualified purchaser’ does not include a
company that, but for the exceptions provided for in paragraph
(1) or (7) of section 3(c), would be an investment company
(hereafter in this paragraph referred to as an ‘excepted invest-
ment company’), unless all beneficial owners of its outstanding
securities (other than short-term paper), determined in accord-
ance with section 3(c)(1)(A), that acquired such securities on
or before April 30, 1996 (hereafter in this paragraph referred
to as ‘pre-amendment beneficial owners’), and all pre-amend-
ment beneficial owners of the outstanding securities (other
than short-term paper) of any excepted investment company
that, directly or indirectly, owns any outstanding securities
of such excepted investment company, have consented to its
treatment as a qualified purchaser. Unanimous consent of all
trustees, directors, or general partners of a company or trust
referred to in clause (ii) or (iii) of subparagraph (A) shall
constitute consent for purposes of this subparagraph.’’.
(c) CONFORMING AMENDMENTS.—Section 3(a) of the Investment
Company Act of 1940 (15 U.S.C. 80a–3(a)) is amended—
(1) by striking ‘‘(1)’’ and inserting ‘‘(A)’’;
(2) by striking ‘‘(2)’’ and inserting ‘‘(B)’’;
(3) by striking ‘‘(3)’’ and inserting ‘‘(C)’’;
(4) by inserting ‘‘(1)’’ after ‘‘(a)’’;
(5) by striking ‘‘As used’’ and inserting ‘‘(2) As used’’; and
(6) in paragraph (2)(C), as designated by paragraph (5)
of this subsection—
(A) by striking ‘‘which are’’ and inserting the following:
‘‘which (i) are’’; and
(B) by inserting before the period at the end, the follow-
ing: ‘‘, and (ii) are not relying on the exception from the
definition of investment company in paragraph (1) or (7)
of subsection (c)’’.
(d) RULEMAKING REQUIRED.—
(1) IMPLEMENTATION OF SECTION 3(c)(1)(B).—Not later than
1 year after the date of enactment of this Act, the Commission
shall prescribe rules to implement the requirements of section
3(c)(1)(B) of the Investment Company Act of 1940 (15 U.S.C.
80a–3(c)(1)(B)), as amended by this section.
(2) IDENTIFICATION OF INVESTMENTS.—Not later than 180
days after the date of enactment of this Act, the Commission
shall prescribe rules defining the term, or otherwise identifying,
‘‘investments’’ for purposes of section 2(a)(51) of the Investment
Company Act of 1940, as added by this Act.