I
104TH CONGRESS
1ST SESSION
H. R. 2519
To facilitate contributions to charitable organizations by codifying certain
exemptions from the Federal securities laws, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 24, 1995
Mr. FIELDS of Texas (for himself, Mr. BLILEY, Mr. BURR, Mr. DINGELL, Mr.
EDWARDS, Mr. FRISA, and Mr. MARKEY) introduced the following bill;
which was referred to the Committee on Commerce
A BILL
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’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Amendment 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. AMENDMENT TO THE INVESTMENT COMPANY ACT
OF 1940.
Section 3(c)(10) of the Investment Company Act of
1940 (15 U.S.C. 80a–3(c)(10) is amended to read as fol-
lows:
‘‘(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:
‘‘(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; or
‘‘(vi) 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).
‘‘(C) A fund that contains assets described in
clause (vi) 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 (v) of subparagraph (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
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.’’.
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;
(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 in-
terest or participation in any pooled in-
come fund, collective trust fund, collective
investment fund, or similar fund that is ex-
cluded 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.—Notwithstand-
ing any other provision of this title, a charitable organiza-
tion, as defined in section 3(c)(10)(D) of the Investment
Company Act of 1940, or any trustee, director, officer,
employee, or volunteer of such a charitable organization
acting within the scope of such person’s employment or
duties with such organization, shall not be deemed to be
a ‘broker’, ‘dealer’, ‘municipal securities broker’, ‘munici-
pal securities dealer’, ‘government 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 ca-
pacity as trustee or administrator of, or otherwise on be-
half of or for the account of—
‘‘(1) such 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 trust or other
instrument.’’.
(c) DISCLOSURE
AND SOLICITATION
BY EXEMPT
CHARITABLE ORGANIZATIONS.—Section 3 of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c) is further
amended by adding at the end the following new sub-
section:
‘‘(f) DISCLOSURE AND SOLICITATION BY EXEMPT
CHARITABLE ORGANIZATIONS.—The Commission shall
prescribe rules to require that—
‘‘(1) each charitable organization shall provide,
to each donor to a fund that is maintained by such
organization and that is excluded from the definition
of an investment company under section 3(c)(10)(B)
of the Investment Company Act of 1940, at the time
of the donation or within 60 days after the effective
date of such rule, whichever is later, written infor-
mation describing the material terms of the instru-
ments governing the operation of such fund; and
‘‘(2) any person soliciting donations on behalf
of such a charitable organization from any such
donor is either a volunteer or is engaged in the over-
all fund raising activities of a charitable organization
and receives no commission or other special com-
pensation based on the amount of donations col-
lected 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 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
the Investment Company Act of 1940, or is a trust-
ee, director, officer, employee, or volunteer of such
a charitable organization acting within the scope of
such person’s employment or duties with such orga-
(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
date of enactment of this Act, a State may enact a statute
that specifically refers to this section and provides pro-
regulation preempted as provided in section 6 of this Act,
except as otherwise specifically provided in such Acts or
State law.
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