II
104TH CONGRESS
1ST SESSION
H. R. 2519
IN THE SENATE OF THE UNITED STATES
NOVEMBER 29, 1995
Received
AN ACT
To facilitate contributions to charitable organizations by codi-
fying certain exemptions from the Federal securities
laws, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Philanthropy Protection Act of 1995’’.
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(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Investment Company Act of 1940.
Sec. 3. Amendment to the Securities Act of 1933.
Sec. 4. Amendments to the Securities Exchange Act of 1934.
Sec. 5. Amendment of the Investment Advisers Act of 1940.
Sec. 6. Protection of philanthropy under State law.
Sec. 7. Effective dates and applicability.
SEC. 2. AMENDMENTS TO THE INVESTMENT COMPANY ACT
OF 1940.
(a) EXEMPTION.—Section 3(c)(10) of the Investment
Company Act of 1940 (15 U.S.C. 80a–3(c)(10) is amend-
ed to read as follows:
‘‘(10)(A) Any company organized and operated
exclusively for religious, educational, benevolent, fra-
ternal, charitable, or reformatory purposes—
‘‘(i) no part of the net earnings of which
inures to the benefit of any private shareholder
or individual; or
‘‘(ii) which is or maintains a fund de-
scribed in subparagraph (B).
‘‘(B) For the purposes of subparagraph (A)(ii),
a fund is described in this subparagraph if such
fund is a pooled income fund, collective trust fund,
collective investment fund, or similar fund main-
tained by a charitable organization exclusively for
the collective investment and reinvestment of one or
more of the following:
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‘‘(i) assets of the general endowment fund
or other funds of one or more charitable organi-
zations;
‘‘(ii) assets of a pooled income fund;
‘‘(iii) assets contributed to a charitable or-
ganization in exchange for the issuance of char-
itable gift annuities;
‘‘(iv) assets of a charitable remainder trust
or of any other trust, the remainder interests of
which are irrevocably dedicated to any chari-
table organization;
‘‘(v) assets of a charitable lead trust;
‘‘(vi) assets of a trust, the remainder inter-
ests of which are revocably dedicated to or for
the benefit of 1 or more charitable organiza-
tions, if the ability to revoke the dedication is
limited to circumstances involving—
‘‘(I) an adverse change in the finan-
cial circumstances of a settlor or an in-
come beneficiary of the trust;
‘‘(II) a change in the identity of the
charitable organization or organizations
having the remainder interest, provided
that the new beneficiary is also a chari-
table organization; or
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‘‘(III) both the changes described in
subclauses (I) and (II);
‘‘(vii) assets of a trust not described in
clauses (i) through (v), the remainder interests
of which are revocably dedicated to a charitable
organization, subject to subparagraph (C); or
‘‘(viii) such assets as the Commission may
prescribe by rule, regulation, or order in accord-
ance with section 6(c).
‘‘(C) A fund that contains assets described in
clause (vii) of subparagraph (B) shall be excluded
from the definition of an investment company for a
period of 3 years after the date of enactment of this
subparagraph, but only if—
‘‘(i) such assets were contributed before
the date which is 60 days after the date of en-
actment of this subparagraph; and
‘‘(ii) such assets are commingled in the
fund with assets described in one or more of
clauses (i) through (vi) and (viii) of subpara-
graph (B).
‘‘(D) For purposes of this paragraph—
‘‘(i) a trust or fund is ‘maintained’ by a
charitable organization if the organization
serves as a trustee or administrator of the trust
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or fund or has the power to remove the trustees
or administrators of the trust or fund and to
designate new trustees or administrators;
‘‘(ii) the term ‘pooled income fund’ has the
same meaning as in section 642(c)(5) of the In-
ternal Revenue Code of 1986;
‘‘(iii) the term ‘charitable organization’
means an organization described in paragraphs
(1) through (5) of section 170(c) or section
501(c)(3) of the Internal Revenue Code of
1986;
‘‘(iv) the term ‘charitable lead trust’ means
a trust described in section 170(f)(2)(B),
2055(e)(2)(B), or 2522(c)(2)(B) of the Internal
Revenue Code of 1986;
‘‘(v) the term ‘charitable remainder trust’
means a charitable remainder annuity trust or
a charitable remainder unitrust, as those terms
are defined in section 664(d) of the Internal
Revenue Code of 1986; and
‘‘(vi) the term ‘charitable gift annuity’
means an annuity issued by a charitable organi-
zation that is described in section 501(m)(5) of
the Internal Revenue Code of 1986.’’.
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(b) DISCLOSURE BY EXEMPT CHARITABLE ORGANI-
ZATIONS.—Section 7 of the Investment Company Act of
1940 (15 U.S.C. 80a–7) is amended by adding at the end
the following new subsection:
‘‘(e) DISCLOSURE BY EXEMPT CHARITABLE ORGANI-
ZATIONS.—Each fund that is excluded from the definition
of an investment company under section 3(c)(10)(B) of
this Act shall provide, to each donor to such fund, at the
time of the donation or within 90 days after the date of
enactment of this subsection, whichever is later, written
information describing the material terms of the operation
of such fund.’’.
SEC. 3. AMENDMENT TO THE SECURITIES ACT OF 1933.
Section 3(a)(4) of the Securities Act of 1933 (15
U.S.C. 77c(a)(4)) is amended by inserting after the semi-
colon at the end the following: ‘‘or any security of a fund
that is excluded from the definition of an investment com-
pany under section 3(c)(10)(B) of the Investment Com-
pany Act of 1940;’’.
SEC. 4. AMENDMENTS TO THE SECURITIES EXCHANGE ACT
OF 1934.
(a) EXEMPTED SECURITIES.—Section 3(a)(12)(A) of
the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(12)(A)) is amended—
(1) in clause (iv) by striking ‘‘and’’ at the end;
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(2) by redesignating clause (v) as clause (vi);
and
(3) by inserting after clause (iv) the following
new clause:
‘‘(v) any security issued by or any interest
or participation in any pooled income fund, col-
lective trust fund, collective investment fund, or
similar fund that is excluded from the definition
of an investment company under section
3(c)(10)(B) of the Investment Company Act of
1940; and’’.
(b) EXEMPTION FROM BROKER-DEALER PROVI-
SIONS.—Section 3 of such Act (15 U.S.C. 78c) is amended
by adding at the end the following new subsection:
‘‘(e) CHARITABLE ORGANIZATIONS.—
‘‘(1) EXEMPTION.—Notwithstanding any other
provision of this title, but subject to paragraph (2)
of this subsection, a charitable organization, as de-
fined in section 3(c)(10)(D) of the Investment Com-
pany Act of 1940, or any trustee, director, officer,
employee, or volunteer of such a charitable organiza-
tion acting within the scope of such person’s employ-
ment or duties with such organization, shall not be
deemed to be a ‘broker’, ‘dealer’, ‘municipal securi-
ties broker’, ‘municipal securities dealer’, ‘govern-
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ment securities broker’, or ‘government securities
dealer’ for purposes of this title solely because such
organization or person buys, holds, sells, or trades in
securities for its own account in its capacity as
trustee or administrator of, or otherwise on behalf of
or for the account of—
‘‘(A) such a charitable organization;
‘‘(B) a fund that is excluded from the defi-
nition of an investment company under section
3(c)(10)(B) of the Investment Company Act of
1940; or
‘‘(C) a trust or other donative instrument
described in section 3(c)(10)(B) of the Invest-
ment Company Act of 1940, or the settlors (or
potential settlors) or beneficiaries of any such
trust or other instrument.
‘‘(2) LIMITATION ON COMPENSATION.—The ex-
emption provided under paragraph (1) shall not be
available to any charitable organization, or any
trustee, director, officer, employee, or volunteer of
such a charitable organization, unless each person
who, on or after 90 days after the date of enactment
of this subsection, solicits donations on behalf of
such charitable organization from any donor to a
fund that is excluded from the definition of an in-
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vestment company under section 3(c)(10)(B) of the
Investment Company Act of 1940, is either a volun-
teer or is engaged in the overall fund raising activi-
ties of a charitable organization and receives no
commission or other special compensation based on
the number or the value of donations collected for
the fund.’’.
(d) 
CONFORMING
AMENDMENT.—Section
12(g)(2)(D) of such Act (15 U.S.C. 78l(g)(2)(D)) is
amended by inserting before the period ‘‘; or any security
of a fund that is excluded from the definition of an invest-
ment company under section 3(c)(10)(B) of the Invest-
ment Company Act of 1940’’.
SEC. 5. AMENDMENT OF THE INVESTMENT ADVISERS ACT
OF 1940.
Section 203(b) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–3(b)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(2);
(2) by striking the period at the end of para-
graph (3) and inserting ‘‘; or’’; and
(3) by adding at the end the following new
paragraph:
‘‘(4) any investment adviser that is a charitable
organization, as defined in section 3(c)(10)(D) of
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sale thereof, shall be exempt from any statute or regula-
tion of a State that requires registration or qualification
of securities.
(b) TREATMENT OF CHARITABLE ORGANIZATIONS.—
No charitable organization, or any trustee, director, offi-
cer, employee, or volunteer of a charitable organization
acting within the scope of such person’s employment or
duties, shall be required to register as, or be subject to
regulation as, a dealer, broker, agent, or investment ad-
viser under the securities laws of any State because such
organization or person buys, holds, sells, or trades in secu-
rities for its own account in its capacity as trustee or ad-
ministrator of, or otherwise on behalf of or for the account
of one or more of the following:
(1) a charitable organization;
(2) a fund that is excluded from the definition
of an investment company under section 3(c)(10)(B)
of the Investment Company Act of 1940; or
(3) a trust or other donative instrument de-
scribed in section 3(c)(10)(B) of the Investment
Company Act of 1940, or the settlors (or potential
settlors) or beneficiaries of any such trusts or other
instruments.
(c) STATE ACTION.—Notwithstanding subsections
(a) and (b), during the 3-year period beginning on the
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date of enactment of this Act, a State may enact a statute
that specifically refers to this section and provides pro-
spectively that this section shall not preempt the laws of
that State referred to in this section.
(d) DEFINITIONS.—For purposes of this section—
(1) the term ‘‘charitable organization’’ means
an organization described in paragraphs (1) through
(5) of section 170(c) or section 501(c)(3) of the In-
ternal Revenue Code of 1986;
(2) the term ‘‘security’’ has the same meaning
as in section 3 of the Securities Exchange Act of
1934; and
(3) the term ‘‘State’’ means each of the several
States of the United States, the District of Colum-
bia, the Commonwealth of Puerto Rico, the Virgin
Islands, Guam, American Samoa, and the Common-
wealth of the Northern Mariana Islands.
SEC. 7. EFFECTIVE DATES AND APPLICABILITY.
This Act and the amendments made by this Act shall
apply in all administrative and judicial actions pending on
or commenced after the date of enactment of this Act, as
a defense to any claim that any person, security, interest,
or participation of the type described in this Act and the
amendments made by this Act is subject to the provisions
of the Securities Act of 1933, the Securities Exchange Act
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of 1934, the Investment Company Act of 1940, or the In-
vestment Advisers Act of 1940, or any State statute or
regulation preempted as provided in section 6 of this Act,
except as otherwise specifically provided in such Acts or
State law.
Passed the House of Representatives November 28,
1995.
Attest:
ROBIN H. CARLE,
Clerk.