Source: https://www.federalregister.gov/documents/2013/12/30/2013-31172/securities-exempted-distribution-of-shares-by-registered-open-end-management-investment-company
Timestamp: 2016-09-30 01:57:00
Document Index: 229546172

Matched Legal Cases: ['art1', 'art 230', 'art2', '§\u2009230', 'art3', 'art 270', 'art4', '§\u2009270', 'art5', '§\u2009270']

:: Securities Exempted; Distribution of Shares by Registered Open-End Management Investment Company; Applications Regarding Joint Enterprises or Arrangements and Certain Profit-Sharing Plans
A Rule by the Securities and Exchange Commission on 12/30/2013
79298-79299
2013-31172
https://www.federalregister.gov/d/2013-31172
In December 1958, the Commission adopted Regulation E under the Securities Act, which exempts from registration small offerings by small business investment companies registered under the Investment Company Act.[1] Regulation E was amended in 1984 to increase the size of offerings that may be made under the regulation, and include as exempted issuers certain investment companies who elect to be treated as business development companies under the Investment Company Act.[2] The purpose of the 1984 amendments was to increase the ability of small business investment companies and business development companies to raise capital.
As part of Regulation E, rule 602 establishes conditions under which securities issued by small business investment companies or business development companies may be exempt from registration under the Securities Act. Rule 602(c)(3) provides that the exemption is not available for the securities of any issuer if any of its affiliated directors, officers, principal security holders, investment advisers, or underwriters has been “subject to an order of the Commission entered pursuant to section 203(d) or (e) of the Investment Advisers Act of 1940.” [3] In 1970, the Investment Company Amendments Act was enacted and, among other things, redesignated sections 203(d) and (e) of the Advisers Act as sections 203(e) and (f), respectively.[4] To correct this cross-reference, this technical amendment to rule 602(c)(3) will replace the cross-reference to paragraphs (d) and (e) of section 203 of the Advisers Act with a cross-reference to paragraphs (e) and (f).
Rule 12b-1(g) provides certain conditions for plans that cover more than one series or class of shares, but further provides that paragraph (g) does not affect the rights of any purchase class under rule 18f-3(e)(2)(iii).[5] On January 2, 2001, the Commission adopted amendments to certain exemptive rules under the Investment Company Act and, among other things, redesignated paragraph (e) of rule 18f-3 as paragraph (f). To correct this cross-reference, this technical amendment to rule 12b-1(g) will replace the cross-reference to rule 18f-3(e)(2)(iii) with a cross-reference to rule 18f-3(f)(2)(iii).
In January 2003, the Commission adopted amendments to certain rules under the Investment Company Act to, among other things, expand the exemptions for investment companies (“funds”) to engage in transactions with “portfolio affiliates”—companies that are affiliated with the fund solely as the result of the fund (or an affiliated fund) controlling them or owning more than five percent of their voting securities.[6] The amendments were designed to permit transactions between funds and certain affiliated persons under circumstances where it was unlikely that the affiliate would be in a position to take advantage of the fund.
In implementing these amendments, the Adopting Release renumbered the paragraphs of rule 17d-1 and also added a cross-reference in paragraph (d)(6) of the rule to rule 17a-6, a related rule dealing with exemptions for transactions with portfolio affiliates that was also amended by the Adopting Release.[7] However, the text of rule 17d-1(d)(6) as published in the “Text of Rule and Form Amendments” section of the Adopting Release, and subsequently in Start Printed Page 79299the Federal Register, included an incorrect cross-reference to paragraph (d)(5)(iii) of the rule instead of (d)(5)(ii). In addition, the rule as published in the Code of Federal Regulations inadvertently omitted three paragraphs (i.e., (d)(6)(i)-iii)) that should have followed immediately after paragraph (d)(6) of rule 17d-1.
Start Amendment Part1. The authority for part 230 continues to read, in part, as follows:End Amendment Part
Start Amendment Part2. Section 230.602 is amended by revising paragraph (c)(3) to read as follows:End Amendment Part
§ 230.602
Start Amendment Part3. The authority citation for part 270 continues to read, in part, as follows:End Amendment Part
Start Amendment Part4. Section 270.12b-1 is amended by revising paragraph (g) to read as follows:End Amendment Part
(g) If a plan covers more than one series or class of shares, the provisions of the plan must be severable for each series or class, and whenever this rule provides for any action to be taken with respect to a plan, that action must be taken separately for each series or class affected by the matter. Nothing in this paragraph (g) shall affect the rights of any purchase class under § 270.18f-3(f)(2)(iii).
Start Amendment Part5. Section 270.17d-1 is amended by revising paragraph (d)(6) to read as follows:End Amendment Part
(6) The receipt of securities and/or cash by an investment company or a controlled company thereof and an affiliated person of such investment company or an affiliated person of such person pursuant to a plan of reorganization: Provided, That no person identified in § 270.17a-6(a)(1) or any company in which such a person has a direct or indirect financial interest (as defined in paragraph (d)(5)(ii) of this section):
Regulation E—Exemption for Securities of Small Business Investment Companies, 23 FR 10484 (Dec. 30, 1958).
Amendments to the Offering Exemption Under Regulation E of the Securities Act of 1933, 49 FR 35342 (Sept. 7, 1984).
Section 203 of the Investment Advisers Act of 1940 (“Advisers Act”) requires certain investment advisers to register with the Commission, and gives the Commission broad enforcement authority over them. In particular, current section 203(e) authorizes the Commission, by order, to censure, place limitations on the activities, functions, or operations of, suspend, or revoke the registration of any investment adviser if the Commission makes certain findings with regards to that adviser. Current section 203(f) allows the Commission, by order, to censure, suspend, bar, or place limitations on the activities of any person associated or seeking to become associated with an investment adviser or certain other entities if the Commission makes certain findings with regards to that person.
Investment Company Amendments Act of 1970, Public Law 91547, 84 Stat. 1413 (Dec. 14, 1970).
Current rule 18f-3(f)(2)(iii) provides certain rights for shareholders of purchase classes in funds that are acquired as part of a merger.
Transactions of Investment Companies With Portfolio and Subadvisory Affiliates, Investment Company Act Release No. 25888 (Jan. 14, 2003) [68 FR 3142 (Jan. 22, 2003)] (“Adopting Release”).
The cross-reference to rule 17a-6 was intended to conform provisions in paragraph (d)(6) of rule 17d-1 to similar provisions in rule 17a-6 in order to make them consistent with regards to which entities are considered prohibited participants for purposes of affiliate transactions. See Transactions of Investment Companies With Portfolio and Subadvisory Affiliates, Investment Company Act Release No. 25557 (April 30, 2002) [67 FR 31081 (May 8, 2002)] at n.30 and accompanying text.