An Act to amend the Investment Company Act of 1940 and the Investment Advisers Act of 1940 to define the equitable standards governing relationships between investment companies and their investment advisers and principal underwriters, and for other purpose
PL 91-547 (S.2224), enacted 12/14/1970

84 STAT.] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1413 
Public Law 91-547 
AN ACT 
To amend the Investment Conipany Act of 1940 and the Investment Advisers 
Act of 1940 to define the equitable standards governing relationships between 
investment companies and their investment advisers and principal under-
writers, and for other purposes. 
Be it enacted hy the Senate and House of RepresentatlceH of the 
United States of America in Congress asse7nhled, That this Act may 
be cited as the "Investment Company Amendments Act of 1970". 
SEC. 2. (a) Section 2(a) of the Investment Company Act of 1940 
(15 U.S.C. 80a-2(a)) is amended as follows: 
(1) Paragraph (5) is amended by striking out "under section 11 (k) 
of the Federal Reserve Act, as amended" and inserting in lien thereof 
"under the authority of the Comptroller of the Currency". 
(2) Paragraphs (19) through (.35) are redesignated as paragraphs 
(20) through (36), respectively, and paragraphs (36) through (42) 
are redesignated as paragraphs (38) through (44), respectively. 
(3) A new paragraph is inserted immediately after paragraph (18) 
to read as follows: 
" (19) 'Interested person" of another person means— 
"(A) when used with respect to an investment company— 
" (i) any affiliated person of such company, 
"(ii) any member of the immediate family of any natural 
person who is an affiliated person of such company, 
"(iii) any interested person of any investment adviser of 
or principal underwriter for such company, 
"(iv) any person or partner or employee of any person who 
at any time since the beginning of the last two fiscal years 
of such company has acted as legal counsel for such company, 
"(v) any broker or dealer registered under the Securities 
Exchange Act of 1934 or any affiliated person of such a broker 
or dealer, and 
"(vi) any natural person whom the Commission by order 
shall have determined to be an interested person by reason 
of having had, at any time since the beginning of the last 
two fiscal years of such company, a material business or 
professional relationship with such company or with the 
principal executive officer of such company or with any other 
investment company having the same investment adviser or 
principal underwriter or with the principal executive officer 
of such other investment company: 
Provided, That no person shall be deemed to be an interested 
person of an investment company solely by reason of (aa) his 
being a member of its board of directors or advisory board or an 
owner of its securities, or (bb) his membership in the immediate 
family of any person specified in clause (aa) of this proviso; and 
"(B) when used with respect to an investment adviser of or 
principal underwriter for any investment company— 
"(i) any affiliated person of such investment adviser or 
principal underwriter, 
"(ii) any member of the immediate family of any natural 
person who is an affiliated person of such investment adviser 
or principal underwriter, 
"(iii) any person who knowingly has any direct or indirect 
beneficial interest in, or who is designated as trustee, executor, 
or guardian of any legal interest in, any security issued either 
by such investment adviser or principal underwriter or by 
a controlling person of such investment adviser or principal 
underwriter, 
December 14, 1S'70 
[S.2224] 
Investment 
Company Amend-
ments Act of 1970. 
54 Stat. 790. 
"Interested 
person." 
48 Stat. 881. 
15 u s e 78a. 
1414 
PUBLIC L
A
W 91-547-DEC. 14, 1970 
[84 STAT. 
48 Stat. 881. 
15 u s e 78a. 
••Member of the 
immediate 
family." 
"Separate 
account." 
••Savings and 
loan associ-
ation,»» 
54 Stat. 811. 
Exemptions. 
54 Stat. 797. 
80 Stat. 243. 
"(iv) any person or partner or employee of any person 
who at any time since the beginning of the last two fiscal 
years of such investment company has acted as legal counsel 
for such investment adviser or prmcipal underwriter, 
"(v) any broker or dealer registered under the Securities 
Exchange Act of 1934 or any affiliated person of such a broker 
or dealer, and 
• • 
, 
"(vi) any natural person whom the Commission by order 
shall have determined to be an interested person by reason 
of having had at any time since the beginning of the last 
two fiscal years of such investment company a material busi-
ness or professional relationship with such investment adviser 
or principal underwriter or with the i^rincipal executive 
officer or any controlling person of such investment adviser 
or principal underwriter. 
For the purposes of this paragraph (19), 'member of the immediate 
family' means any parent, spouse of a parent, child, spouse of a child, 
spouse, brother, or sister, and includes step and adoptive relation-
ships. The Commission may modify or revoke any order issued under 
clause (vi) of subparagraph (A) or (B) of this paragraph whenever 
it finds that such order is no long^er consistent with the facts. No 
order issued pursuant to clause (vi) of subparagraph (A) or (B) 
of this paragraph shall become effective until at least sixty days 
after the entry thereof, and no such order shall affect the status of 
any person for the purposes of this title or for any other purpose 
for any period prior to the effective date of such order.'' 
(4) A new paragraph is inserted immediately after redesignated 
paragraph (36) (formerly paragraph (35)) as follows: 
"(37) 'Separate account' means an account established and main-
tained by an insurance company pursuant to the laws of any State 
or territory of the United States, or of Canada or any province thereof, 
under which income, gains and losses, whether or not realized, from 
assets allocated to such account, are, in accordance with the applicable 
contract, credited to or cliarged against such account without regard 
to other income, gains, or losses of the insurance company." 
(5) A new paragraph is inserted immediately after redesignated 
paragraph (44) (formerly paragraph (42)) as follows: 
"(45) 'Savings and loan association' means a savings and loan asso-
ciation, building and loan association, cooperative bank, homestead 
association, or similar institution, which is supervised and examined by 
State or Federal authority having supervision over any such institu-
tion, and a receiver, conservator, or other liquidating agent of any 
such institution." 
(b) Section 13(b) of such Act (15 U.S.C. 80a-13(b)) is amended 
by striking out "paragraph (40)" and inserting in lieu thereof "para-
graph (42)". 
SEC. 3. (a) The second sentence of paragraph (2) of section 3(b) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-3 (b)(2)) is 
amended by inserting "in good faith" after "paragraph". 
(b) Section 3(c) of such Act (15 U.S.C. 80a-3(c)) is amended as 
follows: 
^ ' 
(1) The material preceding paragraph (1) is amended to read 
as follows: 
^ "(c) Notwithstanding subsection (a), none of the following persons 
IS an investment company within the meaning of this title:". 
(2) Strike paragraph (8); redesignate paragraphs (5) through (15) 
as paragraphs (4) through (13), respectively; and strike "paragraphs 
84 STAT. ] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1415 
(B), (6), and (6)" in redesignated paragraph (6) (formerly para-
graph m ) and insert in lieu thereof "paragraphs (8), (4), and (5)''. 
(8) Redesignated paragraph (6) (former!v paragraph (6)) is 
amended by mserting "redeemable securities, before "face-amount 
certificates . 
(4) Redesig^iated paragraph (8) (formerly paragraph (10)) is 
amended to read as follows: 
"(8) Any company subject to regulation under the Public Utility 
Holding Company Act of 1935." 
(6) Redesignated paragraph (11) (formerly paragraph (13)) is 
amended to read as follows: 
"(11) Any employees' stock bonus, pension, or profit-sharing trust 
which meets the requirements for qualification under section 401 of 
the Internal Revenue Code of 1954; or any collective trust fund main-
tained by a bank consisting solely of assets of such trusts; or any 
separate account the assets of which are derived solely from (A) con-
tributions under pension or profit-sharing plans which meet the 
requirements of such section or the requirements for deduction of the 
employer's contribution under section 404(a) (2) of such Code, and (B) 
advances made by an insurance company in connection with the oper-
ation of such separate account." 
(c)(1) Section 8(b)(2) of such Act (15 U.S.C. 80a-8(b)(2)) is 
amended to read as follows: 
"(2) a recital of all investment policies of the registrant, not 
enumerated in paragraph (1), which are changeable only if 
authorized by shareholder vote;". 
(2) Paragrajjhs (3) and (4) are redesignated as paragraphs (4) 
and (5),respectively. 
(3) A new paragraph is inserted immediately after paragraph (2) to 
read as follows: 
" (3) a recital of all policies of the registrant, not enumerated in 
paragraphs (1) and (2), in respect of matters which the registrant 
deems matters of fundamental policy;". 
(d) Section 13(a)(3) of such Act (15 U.S.C. 80a-13(a) (3)) is 
amended to read as follows: 
"(3) deviate from its policy in respect of concentration of 
investments in any particular industry or group of industries as 
recited in its registration statement, deviate from any investment 
policy which is changeable only if authorized b j shareholder vote, 
or deviate from any policy recited in its registration statement 
pursuant to section 8(b)(3);". 
SEC. 4. (a) That part of section 9(a) of the Investment Company 
Act of 1940 (15 U.S.C 80a-9(a)) which precedes paragraph (1) is 
amended by inserting "employee," before "officer". 
(b) Section 9 of such Act (15 U.S.C. 80a-9) is further amended hj 
redesignating subsection (b) as subsection (c) and inserting immedi-
ately after subsection (a) a new subsection to read as follows: 
"(b) The Commission may, after notice and opportunity for hear-
ing, by order prohibit, conditionally or unconditionally, either 
permanently or for such period of time as it in its discretion shall 
deem appropriate in the public interest, any person from serving or 
acting as an employee, officer, director, member of an advisory board, 
investment adviser or depositor of, or principal underwriter for, a 
registered investment company or affiliated person of such investment 
adviser, depositor, or principal underwriter, if such person— 
"(1) has willfully made or caused to be made in any registra-
tion statement, application or rejjort filed with the Commission 
under this title any statement which was at the time and in the 
light of the circumstances under which it was made false or 
54 Stat. 798. 
15 u s e 80a-:i, 
49 Stat. 838. 
15 u s e 79. 
Certain truit 
fundi and ac-
counts, exclualon. 
68A Stat. 134| 
76 Stat. 809, 1141> 
80 Stat. 1577. 
26 u s e 401. 
26 u s e 404. 
Registration 
statement. 
Policy change-
able only by 
shareholder vote. 
54 Stat. 804, 
Fundamental 
policy. 
Investment 
policy deviation, 
prohibition. 
Supra, 
Ineligibility. 
Certain persons 
serving invest-
ment companies, 
SEC administra-
tive action. 
1416 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
48 Stat. 74,881. 
15 use 77a, 78a. 
54 Stat. 847. 
15 use 80b-l. 
Board of direc-
tors, restrictions. 
54 Stat. 806. 
Bank collective 
funds for man-
aging agency 
accounts, exemp-
tions. 
Supra, 
misleading with respect to any material fact, or has omitted to 
state in any such registration statement, application, or report 
any material fact which was required to be stated therein; or 
"(2) has willfully violated any provision of the Securities Act 
of 1933, or of the Securities Exchange Act of 1934, or of title I I 
of this Act, or of this title, or of any rule or regulation under any 
of such statutes; or 
"(3) has willfully 
aided, abetted, counseled, commanded, 
induced, or procured the violation by any other person of the 
Securities Act of 1933, or of the Securities Exchange Act of 1934, 
or of title I I of this Act, or of this title, or of any rule or regula-
tion under any of such statutes." 
SEC. 5. (a) Section 10(a) of the Investment Company Act of 1940 
(15 U.S.C. 80a-10 (a)) is amended to read as follows: 
"(a) Xo registered investment company shall have a board of 
directors more than 60 per centum of the members of which are 
persons who are interested persons of such registered company." 
(b) Section 10(b) of such Act (15 U.S.C. 80a-10(b)) is amended— 
(1) by striking out "After one year from the effective date of 
this title, no" and inserting in lieu thereof "No"; and 
(2) by striking out "affiliated", each place it appears in para-
graph (2) and inserting in lieu thereof "interested". 
(c) Section 10(c) of such Act (15 U.S.C. 80a-10(c)) is amended 
to read as follows: 
"(c) No registered investment company shall have a majority of its 
board of directors consisting of persons who are officers, directors, or 
employees of any one bank, except that, if on March 15, 1940, any 
registered inA'estment company had a majority of its directors con-
sisting of persons who are directors, officers, or employees of any one 
bank, such company may continue to have the same percentage of its 
board of directors consisting of persons who are directors, officers, or 
employees of such bank." 
(d) Section 10(d) of such Act (15 U.S.C. 80a-10(d)) is amended to 
read as follows: 
"(d) Notwithstanding subsections (a) and (b) (2) of this section, a 
registered investment company may have a board of directors all the 
members of which, except one, are interested persons of the investment 
adviser of such company, or are officers or employees of such company, 
if— 
" (1) such investment company is an open-end company; 
"(2) such investment adviser is registered under title I I of this 
Act and is engaged principally in the business of rendering invest-
ment supervisory services as defined in title I I ; 
" (3) no sales load is charged on securities issued by such invest-
ment company; 
" (4) any premium over net asset value charged by such company 
upon the issuance of any such security, plus any discount from 
net asset value charged on redemption thereof, shall not in the 
aggregate exceed 2 per centum; 
"(5) no sales or promotion expenses are incurred by such 
registered company; but expenses incurred in complying with laws 
regulating the issue or sale of securities shall not be deemed sales 
or promotion expenses; 
"(6) such investment adviser is the only investment adviser to 
such investment company, and such investment adviser does not 
receive a management fee exceeding 1 per centum per annum of the 
value of such company's net assets averaged over the year or 
taken as of a definite date or dates within the year; 
84 STAT. ] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1417 
"(7) all executive salaries and executive expenses and office 
rent of such investment company are paid by such investment 
adviser; and 
"(8) such investment company has only one class of securities 
outstanding, each unit of which has equal voting rights with every 
other unit." 
SEC. 6. Section 11(b) of the Investment Company Act of 1940 (15 
Reorganization, 
U.S.C. 80a-ll(b)) is amended to read as follows: 
ser/^TfLres. 
"(b) The provisions of this section shall not apply to any offer made 
54 stat. sos. 
pursuant to any plan of reorganization, which is submitted to and 
requires the approval of the holders of at least a majority of the out-
standing shares of the class or series to which the security owned by the 
offeree belongs." 
SEC. 7. Section 12(d) of the Investment Company Act of 1940 (15 companie°s^fnmi. 
U.S.C. 80a-12(d) is amended to read as follows: 
tations. 
"(d) (1) (A) It shall be unlawful for any registered investment com-
pany (the 'acquiring company') and any company or companies con-
trolled by such acquiring company to purchase or otherwise acquire 
any security issued by any other investment company (the 'acquired 
company'), and for any investment company (the 'acquiring com-
pany') and any company or companies controlled hj such acquiring 
company to purchase or otherwise acquire anj security issued by any 
registered investment company (the 'acquired company'), if the 
acquiring company and any company or companies controlled by it 
immediately alter such purchase or acquisition own in the aggregate— 
"(i) more than 3 per centum of the total outstanding voting 
stock of the ac(juired company; 
" (ii) securities issued by the acquired company having an aggre-
gate value in excess of 5 per centum of the value of the total assets 
of the acquiring company; or 
"(iii) securities issued by the acquired company and all other 
investment companies (other than Treasury stock of the acquiring 
company) having an aggregate value in excess of 10 per centum of 
the value of the total assets of the acquiring company. 
"(B) It shall be unlawful for any registered open-end investment 
company (the 'acquired company'), any principal underwriter there-
for, or any broker or dealer registered under the Securities Exchange 
Act of 1934, knowingly to sell or otherwise dispose of any security is- 
^s stau ssi. 
sued by the acquired company to any other investment company (the 
'acquiring company') or any company or companies controlled by the 
acquiring company, if immediately after such sale or disposition— 
"(i) more than 3 per centum of the total outstanding voting 
stock of the acquired company is owned by the acquiring com-
pany and any company or companies controlled by it; or 
"(ii) more than 10 per centum of the total outstanding voting 
stock of the acquired company is owned by the acquiring company 
and other investment companies and companies controlled by 
them. 
"(C) It shall be unlawful for any investment company (the 'acquir-
ing company') and any company or companies controlled by the 
acquiring company to purchase or otherwise acquire any security 
issued by a registered closed-end investment company, if immediately 
after such purchase or acquisition the acquiring company, other invest-
ment companies having the same investment adviser, and companies 
controlled by such investment companies, own more than 10 per centum 
of the total outstanding voting stock of such closed-end company. 
15 u s e 78a. 
Ante, p. 1417. 
1418 
PUBLIC L
A
W 91-547-DEC. 14, 1970 
[84 STAT. 
Exceptions. 
i'(D) The pi'ovisioiis of this paragraph (1) shall not apply to a 
security received as a dividend or as a result of an otter of exchange 
approved pursuant to section 11 or of a plan of reorganization of any 
company (other than a plan devised for the purpose of evading the 
foregoing provisions). 
, , v , n 
"(E) The provisions of this paragraph (1) shall not apply to a 
security (or securitiies) purchased or acquired by an investment 
company if— 
. 
j. 
"(i) the depositor of, or principal underwriter for, such mvest-
ment company is a broker or dealer registered under the Securities 
4
8 Stat. 881. 
Exchauffe Act of 1034, or a person controlled by such a broker or 
IS use 78a. 
dealer: 
"(ii) such security is the only investment security held by such 
investment company (or such "securities are the only investment 
securities hold by such investment company, if such investment 
company is a registered unit investment trust that issues two or 
more classes or series of securities, each of which provides for 
the accumulation of shares of a dilterent investment company); 
and 
"(iii) in the event such investment company^ is not a registered 
investment company, the purchase or acquisition is made pur-
suant to an arrangement with the issuer of, or principal under-
writer for the issuer of, the security whereby such mvestment 
company is obligated— 
"(aa) eitlier to seek instructions from its security holders 
with regard to the voting of all proxies with respect to such 
security and to vote such proxies only in accordance with such 
instructions, or to vote the shares held by it in the same 
proportion as the vote of all other holders of such security, 
and 
"(bb) to refrain from substituting such security unless the 
Commission shall have approved such substitution in the 
Post, p. 1424. 
manner provided in section 26 of this Act. 
"(F)^ The provisions of this paragraph (1) shall not apply to 
securities purchased or otherwise acquired by a registered investment 
company if— 
"(i) immediately after such purchase or acquisition not more 
than 3 per centum of the total outstanding stock of such issuer is 
owned by such registered investment company and all affiliated 
persons of such registered investment company; and 
" (ii) such registered investment company has not offered or sold 
after January 1, 1971, and is not proposing to offer or sell any 
security issued by it through a principal underwriter or otherwise 
at a public offering price which includes a sales load of more 
than IV2 per centum. 
Xo issuer of any security purchased or acquired by a registered invest-
ment company pursuant to this subparagraph shall be obligated to 
redeem such security in an amount exceeding 1 per centum of such 
issuers total outstanding securities during any period of less than 
thirty days. Sucli investment company shall exercise voting rights by 
proxy or otherwise with respect to any security purchased or acquired 
pursuant to this subparagraph in the manner prescribed by subpara-
graph (E) of thissubRoction. 
"(G) For the purposes of this paragraph (1), the value of an invest-
ment company's total assets shall be computed as of the time of a pur-
chase or acquisition or as closely thereto as it reasonably possible. 
"(H) In any action brought to enforce the provisions of this para-
graph (1), the Commission may join as a party the issuer of any 
f^ecurity purchased or otherwise acquired in violation of this para-
84 STAT. ] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1419 
«rnipli (1), and the fourt may issue any order with respect to such 
issuer as may be necessary or appropriate for the enforcement of the 
l)rovisions of this paragraph (1). 
''(2) It shall be unhnvful for any registered investment company 
and any company or companies controlled b}^ such registered invest-
ment company to purchase or otherwise acquire any security (except 
a security received as a dividend or as a result of a plan of reorganiza-
tion of any company, other than a plan devised for the purpose of 
evading the provisions of this paragraph) issued by any insurance 
company of which such registered investment company and any com-
])any or companies controlled by such registered company do not, at 
the time of such purchase or acquisition, own in the aggregate at least 
25 per centum of the total outstanding voting stock, if such registered 
company and any company or companies controlled by it own in the 
aggregate, or as a result of such purchase or acquisition will own in 
the aggregate, more than 10 per centum of the total outstanding 
voting stock of such insurance company. 
''(8) It shall l)e unlawful for any registered investment company 
and any company or companies controlled by such registered invest-
ment company to purchase or otherwise acquire any security issued by 
or any other interest in the business of any person who is a broker, a 
dealer, is engaged in the business of underwriting, or is either an in-
vestment adviser of an investment company or an investment adviser 
registered under title II of this Act, unless (A) such person is a cor-
poration all the outstanding securities of which (other than short-
term paper, securities representing bank loans, and directors* qualify-
ing shares) are, or after such acquisition will be, owned by one or 
more registered investment companies; and (B) such person is pri-
marily engaged in the business of underwriting and distributing 
securities issued by other persons, selling securities to customers, or 
any one or more of such or related activities, and the gross income of 
such person normally is derived principally from such business or 
related activities." 
SE(\ 8. (a) Section lo(a) of the Investment Company Act of 1940 
(15 I'.S.(\ 80a-15(a)) is amended to read as follows: 
" (a) It shall be unlawful for any person to serve or act as investment 
adviser of a registered investment compan;^, except pursuant to a 
written contiact, which contract, whether with such registered com-
))any or with an investment adviser of such registered company, has 
been approved by the vote of a majority of the outstanding voting 
securities of such registered company, and— 
" (1) precisely describes all compensation to be paid thereunder; 
"(2) shall continue in effect for a period more than two years 
from the date of its execution, only so long as such continuance is 
specifically approved at least annually bv the board of directors 
or by vote of a majority of the outstanding voting securities of 
such company; 
"(3) provides, in substance, that it may be terminated at any 
time, without the payment of any penalty, by the board of direc-
tors of such registered company or by vote of a majority of the 
outstanding voting securities of such company on not more than 
sixty days' written notice to the investment adviser; and 
"(4) provides, in substance, for its automatic termination in the 
event of its assignment." 
(b) Section 15(b) of such Act (15 U.S.C. 80a-15(b)) is amended to 
read as follows: 
•'(b) It shall be unlawful for any principal underwriter for a reg-
istered open-end company to offer for sale, sell, or deliver after sale 
any security of which such company is the issuer, except pursuant 
to a written contract with such company, which contract— 
54 Stat. 847. 
15 u s e 80b-l. 
Investment 
adviser, contract 
requirements. 
54 Stat. 812. 
Principal under-
writer, contract 
requirements. 
1420 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
Advisory and 
underwriting con-
tracts, approval. 
54 Stat. 813. 
Securities, 
custody. 
54 Stat. 827. 
15 u s e 80a-26. 
48 Stat. 881. 
15 u s e 78a. 
"(1) shall continue in effect for a period more than two years 
from the date of its execution, only so long as such continuance 
is specifically approved at least annually by the board of direc-
tors or by vote of a majority of the outstanding voting securities 
of such company; and 
"(2) provides, in substance, for its automatic termination in 
the event of its assignment." 
(c) Section 15(c) of such Act (15 U.S.C. 80a-15(c)) is amended to 
read as follows: 
"(c) In addition to the requirements of subsections (a) and (b) of 
this section, it shall be unlawful for any registered investment com-
pany having a board of directors to enter into, renew, or perform 
any contract or agreement, written or oral, whereby a person under-
takes regularly to serve or act as investment adviser of or principal 
underwriter for such company, unless the terms of such contract or 
agreement and any renewal thereof have been approved by the vote 
of a majority of directors, who are not parties to such contract or 
agreement or interested persons of any such party, cast in person at 
a meeting called for the purpose of voting on such approval. It shall 
be the duty of the directors of a registered investment company to 
request and evaluate, and the duty of an investment adviser to such 
company to furnish, such information as may reasonably be necessary 
to evaluate the terms of any contract whereby a person undertakes 
regularly to serve or act as investment adviser of such company." 
(d) Section 15 of such Act (15 U.S.C. 80a-15) is amended Iby strik-
ing out subsection (d) and redesignating subsections (e) and (f) as 
subsections (d) and (e), respectively. 
SEC. 9. (a) Section 17(f) of the Investment Company Act of 1940 
(15 U.S.C. 80a-17(f)) is amended to read as follows: 
"(f) Every registered management company shall place and main-
tain its securities and similar investments in the custody of (1) a bank 
or banks having the qualifications prescribed in paragraph (1) of 
section 26(a) of this title for the trustees of unit investment trusts; or 
(2) a company which is a member of a national securities exchange as 
defined in the Securities Exchange Act of 1934, subject to such rules 
and regulations as the Commission may from time to time prescribe 
for the protection of investors; or (3) such registered company, but 
only in accordance with such rules and regulations or orders as the 
Commission may from time to time prescribe for the protection of 
investors. Subject to such rules, regulations, and orders as the Com-
mission may adopt as necessary or appropriate for the protection of 
investors, a registered management company or any such custodian, 
with the consent of the registered management company for which it 
acts as custodian, may deposit all or any part of the securities owned 
by such registered management company in a system for the central 
handling of securities established by a national securities exchange or 
national securities association registered with the Commission under 
the Securities Exchange Act of 1934, or such other person as may be 
permitted by the Commission, pursuant to which system all securities 
of any particular class or series of any issuer deposited within the 
system are treated as fungible and may be transferred or pledged by 
bookkeeping entry without physical delivery of such securities. Rules, 
regulations, and orders of the Commission under this subsection, 
among other things, may make appropriate provision with respect to 
such matters as the earmarking, segregation, and hypothecation of 
such securities and investments, and may provide for or require peri-
odic or other inspections by any or all of the following: Independent 
public accountants, employees and agents of the Commission, and 
such other persons as the Commission may designate. No such member 
84 STAT.] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1421 
which trades in securities for its own account may act as custodian ex-
cept in accordance with rules and regulations prescribed by the Com-
mission for the protection of investors. If a registered company main-
tains its securities and similar investments in the custody of a quali-
fied bank or banks, the cash proceeds from the sale of such securities 
and similar investments and other cash assets of the company shall 
likewise be kept in the custody of such a bank or banks, or in accord-
ance with such rules and regulations or orders as the Commission may 
from time to time prescribe for the protection of investors, except that 
such a registered company may maintain a checking account in a bank 
or banks having the qualifications prescribed in paragraph (1) of sec-
tion 26(a) of this title for the trustees of unit investment trusts with 
the balance of such account or the aggregate balances of such accounts 
at no time in excess of the amount of the fidelity bond, maintained pur-
suant to section 17(g) of this title, covering the officers or employees 
authorized to draw on such account or accounts." 
(b) Section 17(g) of such Act (15 U.S.C. 80a-l7(g)) is amended to 
read as follows: 
"(g) The Commission is authorized to require by rules and regula-
tions or orders for the protection of investors that any officer or 
employee of a registered management investment company who 
may singly, or jointly with others, have access to securities or 
funds of any registered company, either directly or through authority 
to draw upon such funds or to direct generally the disposition of such 
securities (unless the officer or employee has such access solely through 
his position as an officer or employee of a bank) be bonded by a reputa-
ble fidelity insurance company against larceny and embezzlement 
in such reasonable minimum amounts as the Commission may 
prescribe." 
(c) Section 17 of such Act (15 U.S.C. 80a-17) is further amended 
by adding at the end thereof a new subsection as follows: 
"(j) It shall be unlawful for any affiliated person of or principal 
underwriter for a registered investment company or any affiliated 
person of an investment adviser of or principal underwriter for a 
registered investment company, to engage in any act, practice, or 
course of business in connection with the purchase or sale, directly or 
indirectly, by such person of any security held or to be acquired by 
such registered investment company in contravention of such rules 
and regulations as the Commission may adopt to define, and prescribe 
means reasonably necessary to prevent, such acts, practices, or courses 
of business as are fraudulent, deceptive or manipulative. Such rules 
and regulations may include requirements for the adoption of codes 
of ethics by registered investment companies and investment advisers 
of, and principal underwriters for, such investment companies estab-
lishing such standards as are reasonably necessary to prevent such 
acts, practices, or courses of business." 
SEC. 10. Section 18(f) (2) of the Investment Company Act of 1940 
(15 U.S.C. 80a-18(f) (2)) is amended to read as follows: 
"(2) 'Senior security' shall not, in the case of a registered open-end 
company, include a class or classes or a number of series of preferred 
or special stock each of which is preferred over all other classes or series 
in respect of assets specifically allocated to that class or series: Pro-
vided^ That (A) such company has outstanding no class or series of 
stock which is not so preferred over all other classes or series, or (B) 
the only other outstanding class of the issuer's stock consists of a com-
mon stock upon which no dividend (other than a liquidating dividend) 
is permitted to be paid and which in the aggregate represents not more 
than one-half of 1 per centum of the issuer's outstanding voting securi-
ties. For the purpose of insuring fair and equitable treatment of the 
holders of the outstanding voting securities of each class or series of 
54 Stat. 827. 
15 u s e 80a-26. 
Infra, 
Securities or 
funds in custody 
of bank, access, 
bonding. 
54 Stat. 816. 
Insider trading, 
prohibition. 
"Senior 
security." 
1422 
PUBLIC L
A
W 91-547-DEC. 14, 1970 
[84 STAT. 
Long-term capi-
tal gains, distri-
bution, limitation. 
54 Stat. 821. 
68A Stat. 3. 
26 use 1. 
Redeemable 
securities, 
excessive sales 
load, prohibition. 
52 Stat. 1070; 
78 Stat. 574. 
15 use 780-3. 
Exemption. 
Regulations. 
Ante, p. 1413. 
78 Stat. 573. 
IS use 780. 
eompUance 
notice. 
Rules changes. 
Stock of such compaiiv, tlie Commission may by rule, regulation, or 
order direct that any matter required to be submitted to the holders 
of the outstanding voting securities of such company shall not be 
deemed to have been effectively acted upon unless approved by the 
holders of such percentage (not exceeding a majority) of the outstand-
ing voting securities of each class or series of stock affected by such 
matter as shall be prescribed in such rule, regulation, or order." 
SEC. 11. Section 19 of the Investment Company Act of 1940 (15 
U.S.C. 80a-19) is amended by inserting "(a)" after "SEC, 19.", and 
bv adding at the end thereof a new subsection as follows: 
""(b) It shall be unlawful in contravention of such rules, regula-
tions, or orders as the Commission may prescribe as necessary or 
appropriate in the public interest or for the protection of investors for 
anv registered investment company to distribute long-term capital 
gains, as defined in the Internal Revenue Code of 1954, more often 
than once every twelve months." 
SEC. 12. (a) Section 22(b) of the Investment Company Act of 1940 
(15 U.S.C. 80a-22 (b)) is amended to read as follows: 
"(b)(1) Such a securities association may also, by rules adopted 
and in effect in accordance with said section 15A, and notwithstanding 
the iDi'ovisions of subsection (b)(8) thereof but subject to all other 
provisions of said section applicable to the rules of such an association, 
prohibit its members from purchasing, in connection with a primary 
distribution of redeemable securities of which any registered invest-
ment company is the issuer, any such security from the issuer or from 
any principal underwriter except at a price equal to the price at which 
such security is then offered to the public less a commission, discount, 
or spread which is computed in conformity with a method or methods, 
and within such limitations as to the relation thereof to said j)ublic 
offering price, as such rules may prescribe in order that the price at 
which such security is offered or sold to the public shall not include 
an excessive sales load but shall allow for reasonable compensation for 
sales personnel, broker-dealers, and underwriters, and for reasonable 
sales loads to investors. The Commission shall on application or other-
wise, if it appears that smaller companies are subject to relatively 
higher operating costs, make due allowance therefor by granting any 
such company or class of companies appropriate qualified exemptions 
from the provisions of this section. 
"(2) At any time after the expiration of eighteen months from the 
date of enactment of the Investment Company Amendments Act of 
1970, or after a securities association has adopted rules as contemplated 
by this subsection, the Commission may make such rules and regula-
tions pursuant to section 15(b) (10) of the Securities Exchange Act of 
1934 as are appropriate to effectuate the purpose of this subsection 
with respect to sales of shares of a registered investment company by 
broker-dealers subject to regulation under section 15(b)(8) of that 
Act: Provided, That the underwriter of such shares may file with the 
Commission at any time a notice of election to comply with the rules 
prescribed pursuant to this subsection by a national securities associ-
ation specified in such notice, and thereafter the sales load shall not 
exceed that prescribed by such rules of such association, and the 
rules of the Commission as hereinabove authorized shall thereafter be 
inapplicable to such sales. 
"(3) At any time after the expiration of eighteen months from the 
date of enactment of the Investment Company Amendments Act of 
1970 (or, if earlier, after a securities association has adopted for pur-
poses of paragraph (1) any rule respecting excessive sales loads), the 
Commission may alter or supplement the rules of any securities asso-
ciation as may be necessary to effectuate the purposes of this subsection 
Salei reitrlc* 
tlonii 
84 STAT. ] 
PUBLIC L
A
W 91-547-DEC. 14, 1970 
1423 
in th© manner provided by seotion l5A(k)(2) of th© Securities 
Exchange Act of 1034. 
. 
. , 
^f If J .y'j. 
"(4) If any provision of this subsection is in conflict with an^ pro-
vision of any law of the United States in effect on the date this sub-
section takes effect, the provisions of this subsection shall prevail." 
(b) Section 22(o) of such Act (16 U.S.C. 80a-22(c)) is amended to ^s^/^^'/^",^ 
j^. 
read as follows: 
e.biuty. ' 
" (c) The Commission may make rules and regulations applicable to 
S
4 st«t. B23. 
registered investment companies and to principal underwriters of, and 
dealers in, the redeemable securities of any registered investment com-
pany, whether or not members of any securities association, to the same 
extent, covering the same subject matter, and for the accomplishment 
of the same ends as are prescribed in subsection (a) of this section in 
respect of the rules which may be made by a registered securities asso-
ciation governing its members. Any rules and regulations so made by 
the Commission, to the extent that they may be inconsistent with the 
rules of any such association, shall so long as they remain in force 
supersede the rules of the association and be binding upon its members 
as well as all other underwriters and dealers to whom they may be 
applicable." 
(c) Section 22(d) of such Act (15 U.S.C. 80a-22(d)) is amended to 
read as follows: 
"(d) No registered investment company shall sell any redeemable 
security issued by it to any person except either to or through a princi-
pal underwriter for distribution or at a current public ©faring price 
described in the prospectus, and, if such class of security is being cur-
rently offered to the public by or through an underwriter, no principal 
underwriter of such security and no dealer shall sell any such security 
to any person except a dealer, a principal underwriter, or the issuer, 
except at a current public offering price described in the prospectus. 
Nothing in this subsection shall prevent a sale made (i) pursuant to an 
offer of exchange permitted by section 11 including any offer made 
JJ use aoL^'ii. 
pursuant to section 11(b); (ii) pursuant to an offer made solely to all 
Ante, p. uir.' 
registered holders of tne securities, or of a particular class or series of 
securities issued by the companv proportionate to their holdings or 
proportionate to any cash distribution made to them by the company 
(subject to appropriate qualifications designed solely to avoid issuance 
of fractional securities); or (iii) in accordance with rules and regula-
tions of the Commission made pursuant to subsection (b) of section 12." 
SEC. 13. (a) Section 24(d) of the Investment Company Act of 1940 ^
^
R
^
K
i
^
*
t
j
«
"
°
n
^
^
_ 
(15 U.S.C. 80a-24(d)) is amended to read as follows: 
l^onl!' °" ^"^ " 
"(d) The exemption provided by paragraph (8) of section 3(a) of 
54 stat. 826; 
the Securities Act of 1933 shall not apply to any security of which an ^^4^stat!%. 
investment company is the issuer. The exemption provided by para- 
is use'77c'. 
graph (11) of said, section 3(a) shall not apply to any security of 
^s stat. 906. 
which a registered investment company is the issuer, except a security 
sold or disposed of by the issuer or bona fide offered to the public prior 
to the effective date of this title, and with respect to a security so sold, 
disposed of, or offered, shall not apply to any new offering thereof on 
or after the effective date of this title. The exemption provided by sec-
tion 4(3) of the Securities Act of 1933 shall not apply to any transac- 
^s stat. sso. 
tion in a security issued bv a face-amount certificate company or in a 
^
^ ^^^ ''^'^' 
redeemable security issued by an open-end management company or 
unit investment trust if any other security of the same class is cur-
rently being offered or sold by the issuer or by or through an under-
writer in a distribution which is not exempted from section 5 of said 
Act, except to such extent and subject to such terms and conditions as 
5? use 7?e'^' 
the Commission, having due regard for the public interest and the pro-
tection of investors, may prescribe by rules or regulations with respect 
to any class of persons, securities, or transactions," 
1424 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
Securities, ret-
roactive regis-
tration. 
54 Stat. 825; 
68 Stat. 689. 
Reorganization 
pian consumma-
tion, enjoinment. 
Unit investment 
trust, securities, 
substitution. 
Commission, 
approval. 
Contract. 
Periodic pay-
ment plan certif-
icates, regula-
tions. 
(b) Section 24 of such Act (15 U.S.C. 80a-24) is further amended 
by adding at the end thereof a new subsection to read as follows: 
"(f) In the case of securities issued by a face-amount certificate com-
pany or redeemable securities issued by an open-end management com-
pany or unit investment tmst, which are sold in an amount in excess of 
the number of securities included in an effective registration statement 
of any such company, such company may, in accordance with such 
rules and regulations as the Commission shall adopt as it deems 
necessary or appi'opri-ate in the public interest or for the protection of 
investors, elect to have the registration of such securities ueemed effec-
tive as of the time of their sale, upon payment to the Commission, 
within six months after any such sale, of a registration fee of three 
times the amount of the fee which would have otherwise been appli-
cable to such securities. Upon any such election and payment, the reg-
istration statement of such company shall be considered to have been 
in effect with respect to such shares. The Commission may also adopt 
rules and regulations as it deems necessary or appropriate in the public 
interest or for the protection of investors to permit the registration of 
an indefinite number of the securities issued by a face-amount certif-
icate company or redeemable securities issued by an open-end man-
agement company or unit investment trust." 
SEC. 14. Section 25(c) of the Investment Company Act of 1940 (15 
T'.S.C. 8()a-25(c)) is amended to read as follows: 
"(c) Any district court of the United States in the State of incor-
poration of a registered investment company, or any such court for 
the district in which such company maintains its principal place of 
business, is authorized to enjoin the consummation of any plan of reor-
ganization of such registered investment company upon proceedings 
instituted by the Commission (which is authorized so to proceed upon 
behalf of security holders of such registered company, or any class 
thereof), if such court shall determine that any such plan is not fair 
and equitable to all security holders." 
SEC. 15. (a) Section 26 of the Investment Company Act of 1940 
(15 LLS.C. 80a-26) is amended by redesignating subsections (b) and 
(c) thereof as subsections (c) and (d), respectively, and by inserting 
immediately after subsection (a) a new subsection as follows: 
" (b) It shall be unlawful for any depositor or trustee of a, registered 
unit investment trust holding the security of a single issuer to substi-
tute another security for such security unless the Commission shall 
have approved such substitution. The Commission shall issue an order 
approving such substitution if the evidence establishes that it is con-
sistent with the protection of investors and the purposes fairly in-
tend by the policy and provisions of this title." 
(b) Eedesignated subsection (c) (formerly subsection (b)) of sec-
tion 26 of such Act is amended to read as follows: 
"(c) In the event that a trust indenture, agreement of custodian-
ship, or other instrument pursuant to which securities of a registered 
unit investment trust are issued does not comply with the requirements 
of subsection (a) of this section, such instrument will be deemed to 
meet such requirements if a written contract or agreement binding on 
the parties and embodying such requirements has been executed by 
the depositor on the one part and the trustee or custodian on the 
other part, and three copies of such contract of agreement have been 
filed with the Commission." 
SEC. 16. Section 27 of the Investment Company Act of 1940 (15 
U.S.C. 80a-27) is amended by adding at the end thereof the follow-
ing new subsections: 
"(d) Notwithstanding subsection (a) of this section, it shall be 
unlawful for any registered investment company issuing periodic 
84 STAT.] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1425 
payment plan certiticates, or for any depositor of or underwriter for 
such company, to sell any such certificate unless the certificate provides 
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) 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) With respect to any periodic paj/ment plan, 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 Commis-
sion may make rules and regulations applicable to underwriters 
and depositors of companies issuing any such certificates 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) Notwithstanding the provisions of subsections (a) and (d),a 
registered investment company issuing periodic payment plan certifi-
cates may elect, by written notice to the Commission, to be governed 
by the provisions of subsection (h) rather than the provisions of sub-
sections (a) and (d) of this section. 
"(h) Upon making the election specified in subsection (g), it shall 
be unlawful for any such electing registered investment company 
issuing j)eriodic 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 de-
ducted for sales load, or an average of more than 16 per centum 
Refund privi-
leges, notice. 
Charges, state ' 
tnent. 
Governing pro-
visions. 
54 Stat. 829. 
15 use 80a-27,, 
Restrictions. 
1426 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
54 Stat. 827. 
15 u s e 80a-26. 
Face-amount 
certificates, sale. 
Reserve pay-
ments. 
is deducted for sales load froin the first forty-eight monthly pay-
ments 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 proportion-
ately the amount deducted from any other such payment, or the 
amount deducted from any subsequent payment exceeds propor-
tionately the amount deducted from any other subsequent pay-
ment; 
"(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 
applicatble 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 pro-
ceeds 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 26(a)) exceeding such reason-
able 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 pre-
scribe." 
SEC. 17. Section 28 of the Investment Company Act of 1940 (15 
IT.S.C. 80a-28) is amended by adding at the end thereof a new sub-
section as follows: 
" (i) The foregoing provisions of this section shall apply to all face-
amount certificates issued prior to the effective date of this subsection; 
to the collection or acceptance of any payment on such certificates; to 
the issuance of face-amount certificates to the holders of such certifi-
cates pursuant to an obligation expressed or implied in such certifi-
cates ; to the provisions of such certificates; to the minimum certificate 
reserves and deposits maintained with respect thereto; and to the assets 
that the issuer of such certificate was and is required to have with 
respect to such certificates. With respect to all face-amount certificates 
issued after the effective date of this subsection, the provisions of this 
section shall apply except as hereinafter provided. 
"(1) Notwithstanding subparagraph (A) of paragraph (2) of sub-
section (a), the reserves for each certificate of the installment type 
shall be based on assumed annual, semiannual, quarterly, or monthly 
reserve payments according to the manner in which gross payments 
for any certificate year are made by the holder, which reserve payments 
shall be sufficient in amount, as and when accumulated at a rate not to 
exceed 31^ per centum per annum compounded annually, to provide 
the minimum maturity or face amount of the certificate when due. 
Such reserve payments m.ay be graduated according to certificate years 
so that the reserve payment or payments for the first three certificate 
years shall amount to at least 80 per centum of the required gross an-
nual payment for such years; the reserve payment or payments foj 
the fourth certificate year shall amount to at least 90 per centum of 
84 STAT. ] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1427 
such year's required gross annual payment; the reserve payment or 
payments for the fifth certificate year shall amount to at least 93 per 
centum of such year's gross annual payment; and for the sixth and 
each subsequent certificate year the reserve payment or payments shall 
amount to at least 96 per centum of each such year's required gross 
annual payment: Provided^ That such aggregate reserve payments 
shall amount to at least 93 per centum of the aggregate gross annual 
payments required to be made by the holder to obtain the maturity 
of the certificate. The company may at its option take as loading from 
the gross payment or payments for a certificate year, as and when made 
by the certificate holder, an amount or amounts equal in the aggre-
gate for such year to not more than the excess, if any, of the gross 
payment or payments required to be made by the holder for such 
year, over and above the percentage of the gross annual payment re-
quired herein for such year for reserve purposes. Such loading may 
be taken by the company prior to or after the setting up of the reserve 
payment or payments for such year and the reserve payment or pay-
ments for such year may be graduated and adjusted to correspond 
with the amount of the gross payment or payments made by the cer-
tificate holder for such year less the loading so taken. 
"(2) Notwithstanding paragraphs (1) and (2) of subsection (d), 
(A) in respect of any certificate of the installment type, during the 
first certificate year, the holder of the certificate, upon surrender 
thereof, shall be entitled to a value payable in cash not less than 80 
per centum of the amount of the ^ross payments made on the certificate; 
and (B) in respect of any certificate of the installment type, at any 
time after the expiration of the first certificate year and prior to matu-
rity, the holder of the certificate, upon surrender thereof, shall be 
entitled to a value payable in cash not less than the then amount of 
the reserve for such certificate required by clauses (1) and (2) of 
subparagraph (D) of paragraph (2) of subsection (a), less a sur-
render charge that shall not exceed 2 per centum of the face or matu-
rity amount of the certificate, or 15 per centum of the amount of such 
reserve, whichever is the lesser, but in no event shall such value be less 
than 80 per centum of the gross payments made on the certificate. The 
amount of the surrender value for the end of each certificate year shall 
be set out in the certificate." 
SEC. 18. Section 32(a)"'of the Investment Company Act of 1940 (15 
U.S.C. 80a-31(a)) is amended to read as follows: 
"(a) It shall be unlawful for any registered management company 
or registered face-amount certificate company to file with the Commis-
sion any financial statement signed or certified by an independent 
public accountant, unless— 
"(1) such accountant shall have been selected at a meeting held 
within thirty days before or after the beginning of the fiscal year 
or before the annual meeting of stockholders in that year by the 
vote, cast in person, of a majority of those members of the board 
of directors who are not interested persons of such registered 
company; 
"(2) such selection shall have been submitted for ratification 
or rejection at the next succeeding annual meeting of stockholders 
if such meeting be held, except that any vacancy occurring 
between annual meetings, due to the death or resignation of the 
accountant, may be filled by the vote of a majority of those mem-
bers of the board of directors who are not interested persons of 
such registered company, cast in person at a meeting called for 
the purpose of voting on such action; 
"(3) the employrnent of such accountant shall have been con-
ditioned upon the right of the company by vote of a majority of 
Surrender values. 
54 Stat. 832. 
IS u s e 80a-28. 
Independent 
public account-
ants. 
47-348 O - 72 - 7 (Pt. 2) 
1428 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
the outstanding voting securities at any meeting called for the 
purpose to terminate such employment forthwith without any 
penalty; and 
"(4) such certificate or report of such accountant shall be ad-
dressed both to the board of directors of such registered company 
and to the security holders thereof. 
Vacancy. 
j ^ j-j^g selection of an accountant has been rejected pursuant to para-
graph (2) or his employment terminated pursuant to paragraph (3), 
the vacancy so occurring may be filled by a vote of a majority of the 
outstanding voting securities, either at the meeting at which the rejec-
tion or termination occurred or, if not so filled, at a subsequent meet-
ing which shall be called for the purpose. In the case of a common-law 
1
5 use 80a-i6 
^^'^^t of thc character described in section 16(b), no ratification of the 
employment of such accountant shall be required but such employ-
ment may be terminated and such accountant removed by action of 
the holders of record of a majority of the outstanding shares of bene-
ficial interest in such trust in the same manner as is provided in section 
16(b) in respect of the removal of a trustee, and all the provisions 
therein contained as to the calling of a meeting shall be applicable. In 
the event of such termination and removal, the vacancy so occurring 
may be filled by action of the holders of record of a majority of the 
shares of beneficial interest either at the meeting, if any, at which such 
termination and removal occurs, or by instruments in writing filed 
with the custodian, or if not so filed within a reasonable time then at 
a subsequent meeting which shall be called by the trustees for the 
Ante, p. 1413. 
pnrpose. The provisions of paragraph (42) of section 2(a) as to a 
majority shall be applicable to the vote cast at any meeting of the 
shareholders of such a trust held pursuant to this subsection." 
SEC. 19. Section 33 of the Investment Company Act of 1940 (15 
54 Stat. 839. 
JT §,(> 80a-32) is amended to read as follows: 
"FILING OF DOCUMENTS WITH COMMISSION IN CIVIL ACTIONS 
''SEC. 33. Every registered investment company which is a party and 
every affiliated person of such comj)any who is a party defendant to any 
action or claim by a registered investment company or a security 
holder thereof in a derivative or representative cap>acity against an 
officer, director, investment adviser, trustee, or depositor of such com-
pany, shall file with the Commission, unless already so filed, (1) a copy 
of ail pleadings, verdicts, or judgments filed with the court or served in 
connection with such action or claim, (2) a copy of any proposed settle-
ment, compromise, or discontinuance of such action, and (3) a copy of 
such motions, transcripts, or other documents filed in or issued by the 
court, or served in connection with such action or claim as may be 
requested in writing by the Commission. If any document referred to 
in clause (1) or (2) — 
"(A) is delivered to such company or party defendant, such 
document shall be filed with the Commission not later than ten 
days after the receipt thereof; or 
"(B) is filed in such court or delivered by such company or 
party defendant, such document shall be filed with the Commission 
not later than five days after such filing or delivery." 
SEC. 20. Section 36 of the Investment Company Act of 1940 (15 
U.S.C. 80a-35) is amended to read as follows: 
u. 
BREACH OF FIDUCIARY DUTY 
"SEC. 36. (a) The Commission is authorized to bring an action in 
the proper district court of the United States, or in the United States 
court of any territory or other place subject to the jurisdiction of the 
84 STAT. 
PUBLIC LAW 91-547-DEC. 14, 1970 
1429 
United States, alleging that a person serving or acting in one or more 
of the following capacities has engaged within five years of the com-
mencement of tne action or is about to engage in any act or practice 
constituting a breach of fiduciary duty involving personal misconduct 
in respect of any registered investment company for which such per-
son so serves or acts— 
"(1) as officer, director, member of any advisory board, invest-
ment adviser, or depositor; or 
"(2) as principal underwriter, if such registered company is an 
open-end company, unit investment trust, or face-amount certifi-
cate company. 
If such allegations are established, the court may enjoin such persons 
from acting in any or all such capacities either permanently or tem-
porarily and award such injunctive or other relief against such person 
as may be reasonable and appropriate in the circumstances, having due 
regard to the protection of investors and to the effectuation of the 
policies declared in section 1 (b) of this title. 
" (b) For the purposes of this subsection, the investment adviser of a 
registered investment company shall be deemed to have a fiduciary 
duty with respect to the receipt of compensation for services, or of pay-
ments of a material nature, paid by such registered investment com-
pany, or by the security holders thereof, to such investment adviser or 
any affiliated person of such investment adviser. An action may be 
brought under this subsection by the Commission, or by a security 
holder of such registered investment company on behalf of such com-
pany, against such investment adviser, or any affiliated person of such 
investment adviser, or any other person enumerated in subsection (a) 
of this section who has a fiduciary duty concerning such compensation 
or payments, for breach of fiduciary duty in respect of such compensa-
tion or payments paid by such registered investment company or by 
the security holders thereof to such investment adviser or person. With 
respect to any such action the following provisions shall apply: 
"(1) It shall not be necessary to allege or prove that any defendant 
engaged in personal misconduct, and the plaintiff shall have the burden 
of proving a breach of fiduciary duty. 
"(2) In any such action approval by the board of directors of such 
investment company of such compensation or payments, or of contracts 
or other arrangements providing for such compensation or payments, 
and ratification or approval of such compensation or payments, or of 
contracts or other arrangements providing for such compensation or 
payments, by the shareholders of such investment company, shall be 
given such consideration by the court as is deemed appropriate under 
all the circumstances. 
" (3) No such action shall be brought or maintained against any per-
son other than the recipient of such compensation or payments, and no 
damages or other relief shall be granted against any person other than 
the recipient of such compensation or payments. No award of damages 
shall be recoverable for any period prior to one year before the action 
was instituted. Any award of damages against such recipient shall be 
limited to the actual damages resulting from the breach of fiduciary 
duty and shall in no event exceed the amount of compensation or pay-
ments received from such investment company, or the security holders 
thereof, by such recipient. 
"(4) This subsection shall not apply to compensation or payments 
made in connection with transactions subject to section 17 of this title, 
or rules, regulations, or orders thereunder, or to sales loans for the 
acquisition of any security issued by a registered investment company. 
" (5) Any action pursuant to this subsection may be brought only in 
an appropriate district court of the United States. 
Enjoinment. 
Burden of 
proof. 
Ante, p. 1420. 
1430 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
54 Stat. 805, 
846; Ante, p. 1415. 
15 u s e 80a-48. 
52 Stat. 1075; 
78 Stat. 570. 
15 u s e 780, 
Infra, 
54 Stat. 844. 
62 Stat. 928. 
Ante, p. 1429. 
54 Stat. 847; 
74 Stat. 885. 
"Person asso-
ciated with an 
investment 
adviser." 
Infra, 
Registration 
requirements, 
exemptions. 
74 Stat. 885. 
"(6) No finding by a court with respect to a breach of fiduciary 
duty under this subsection shall be made a basis (A) for a finding of a 
violation of this title for the purposes of sections 9 and 49 of this title, 
section 15 of the Securities Exchange Act of 1934, or section 203 of 
title I I of this Act, or (B) for an injunction to prohibit any person 
from serving in any of the cai)acities enumerated m subsection (a) of 
this section." 
SEC. 21. The last sentence of section 43(a) of the Investment Com-
pany Act of 1940 (15 U.S.C. 80a-42(a)) is amended by striking out 
'•sections 239 and 240 of the Judicial Code, as amended'' and inserting 
in lieu thereof "section 1254 of title 28, United States Code". 
SEC. 22. Section 44 of the Investment Company Act of 1940 (15 
r.S.C. 80a-43) is amended— 
(1) by striking out the next to the last sentence and inserting 
in lieu thereof "Judgments and decrees so rendered shall be sub-
ject to review as provided in sections 1254, 1291, 1292, and 1294 
of title 28, United States Code."; and 
(2) by adding at the end thereof a new sentence as follows: 
"The Commission may intervene as a party in any action or suit 
to enforce any liability or duty created by, or to enjoin any non-
compliance with, section 36(b) of this title at any stage of such 
action or suit prior to final judgment therein." 
SEC. 23. Section 202(a) of the Investment Advisers Act of 1940 (15 
TT.S.C. 80b-2(a)) is amended as follows. 
(1) Paragraph (2) is amended by striking out "under section 11 (k) 
of the Federal Reserve Act, as amended" and inserting in lieu thereof 
"under the authority of the Comptroller of the Currency". 
(2) Paragraphs (17) through (20) are redesignated as paragraphs 
(18) through (21), respectively, and a new paragraph is inserted 
immediately after paragraph (16) to read as follows: 
"(17) The term 'person associated with an investment adviser' 
means any partner, oificer, or director of such investment adviser (or 
any person performing similar functions), or any person directly or 
indirectly controlling or controlled by such investment adviser, in-
cluding any employee of such investment adviser, except that for the 
purposes of section 203 of this title (other than subsection 
(f) 
thereof), persons associated with an investment adviser whose func-
tions are clerical or ministerial shall not be included in the meaning 
of such term. The Commission may by rules and regulations classify, 
for the purposes of any portion or portions of this title, persons, 
including employees controlled by an investment adviser." 
SEC. 24. (a) Section 203(b) of the Investment Advisers Act of 1940 
(15 U.S.C. 80b-3(b)) is amended to read as follows: 
"(b) The provisions of subsection (a) shall not apply to— 
"(1) any investment adviser all of whose clients are residents of 
the State within which such investment adviser maintains his or 
its principal office and place of business, and who does not furnish 
advice or issue analyses or reports with respect to securities listed 
or admitted to unlisted trading privileges on any national securi-
ties exchange; 
"(2) any investment adviser whose only clients are insurance 
companies; or 
"(3) any investment adviser who during the course of the pre-
ceding twelve months has had fewer than fifteen clients and who 
neither holds himself out generally to the public as an investment 
adviser nor acts as an investment adviser to any investment com-
pany registered under title I of this Act." 
(b) Section 203(c) of such Act (15 U.S.C. _80b-3 (c)) is amended 
by striking out subparagraph (F) and inserting in lieu thereof the 
following: 
84 STAT. ] 
PUBLIC L
A
W 91-547-DEC. 14, 1970 
1431 
"(F) whetlier such investment adviser, or any person associ-
ated with such investment adviser, is subject to any disqualifica-
tion which would be a basis for denial, suspension, or revocation 
of registration of such investment adviser under the provisions 
(c) Section 203 of'such Act (15 U.S.C. 80b-3) is further amended y^^l^H^'^^f^' 
by redesignating subsection (d) as subsection (e), redesignating sub-
section (e) as subsection (g), and inserting after subsection (c) anew 
subsection as follows: 
"(d) Any provision of this title (other than subsection (a) of this 
section) which prohibits any act, practice, or course of business if 
the mails or any means or instrumentality of interstate commerce 
are used in connection therewith shall also prohibit any such act, 
practice, or course of business by any investment adviser registered 
pursuant to this section or any person acting on behalf of such an 
investment adviser, irrespective of any use of the mails or any means 
or instrumentality of interstate commerce in connection therewith." 
(d) Redesignated subsection (e) (formerly subsection (d) of sec- denL^/Vrsuren-
tion 203 of such Act) (15 U.S.C. 80b-3(d)) is amended to read as sion? or suspen-
follows: 
"(e) The Commission shall, after appropriate notice and opportu- 
Hearting oppor-
nity for hearing, by order censure, deny registration to, or suspend tunity. 
for a period not exceeding twelve months, or revoke the registration 
of, an investment adviser, if it finds that such censure, denial, suspen-
sion, or revocation is in the public interest and that such investment 
adviser or any person associated with such investment adviser, whether 
prior to or subsequent to becoming such— 
"(1) has willfully made or caused to be made in any application 
for registration or report filed with the Commission under this 
title, or in any proceeding before the Commission with respect to 
registration, any statement which was at the time and in the 
l i ^ t of the circumstances under which it was made false or 
misleading with respect to any material fact, or who has omitted 
to state in any such application or report any material fact which 
is required to be stated therein; or 
"(2) has been convicted within ten years preceding the filing of 
the application or at any time thereaher ot any felony or misde-
meanor which the Commission finds (A) involves the purchase or 
sale of any security, (B) arises out of the conduct of the business 
of a broker, dealer, or investment adviser, (C) involves embezzle-
ment,^ fraudulent conversion, or misappropriation of funds or 
securities, or (D) involves the violation of section 1341, 1342, or 
62 Stat. 763. 
1343 of title 18, United States Code; or 
"(3) is permanently or temporarily enjoined by order, judg-
ment or decree of any court of competent jurisdiction from acting 
as an investment adviser, underwriter, broker, or dealer, or an 
affiliated person or employee of any investment company, bank, 
or insurance company, or from engaging in or continuing any con-
duct or practice m connection with any such activity, or in con-
nection with the purchase or sale of any security; or 
"(4) has willfully violated any provision of the Securities Act 
of 1933, or of the Securities Exchange Act of 1934, or of title I of 
\l J'|^- :i^^ ^^^• 
this Act, or of this title, or of any rule or regulation under any 78a. 
of such statutes; or 
sj stau m. 
"(5) has aided, abetted, counseled, commanded, induced, or sob-i 
procured the violation by any other person of the Securities Act 
of 1933, or the Securities Exchange Act of 1934, or of title I of this 
Act, or of this title, or of any rule or regulation under any of such 
statutes or has failed reasonably to supervise, with a view to pre-
15 use 80a-l, 
1432 
PUBLIC LAW 91-547-DEC. 14, 1970 
[84 STAT. 
venting violations of such statutes, rules, and regulations, another 
person who commits such a violation, if such other person is sub-
ject to his supervision: Provided^ That, for the purposes of this 
paragraph (5), no person shall be deemed to have failed reason-
ably to supervise any person, if— 
" (A) there have been established procedures, and a system 
for applying such procedures, which would reasonably be 
expected to prevent and detect, insofar as practicable, any 
such violation by such other person; and 
"(B) such person has reasonably discharged the duties and 
obligations incumbent upon him by reason of such procedures 
and system without reasonable cause to believe that such 
procedures and system were not being complied with; or 
'' (6) is subject to an order of the Commission entered pursuant 
^"^"* 
to subsection (f) of this section barring or suspending the ri^ht 
of such person to be associated with an investment adviser, which 
order is in effect with respect to such person." 
54^stat. 850; 
(g) Sectlou 203 of such Act (15 U.S.C. 80b-3) is further amended 
74 Stat. 885. 
by redesignating subscctious (f) and (g) as subsections (h) and (i), 
respectively, and inserting after redesignated subsection (e) a new 
subsection as follows: 
Certain persons, 
u^f^ rpj^^ Commissiou may, after appropriate notice and opportu-
nity for hearing, by order censure any person or bar or suspend for 
a period not exceeding twelve months any person from being asso-
ciated with an investment adviser, if the Commission finds that such 
censure, barring, or suspension is in the public interest and that such 
person has committed or omitted any act or omission enumerated in 
paragraph (1), (4), or (5) of subsection (e) of this section, or has 
been convicted of any offense specified in paragraph (2) of subsection 
(e) within ten years of the commencement of the proceedings under 
this subsection, or is enjoined from any action, conduct, or practice 
specified in paragraph (3) of subsection (e). It shall be unlawful for 
any person as to whom such an order barring or suspending him 
from being associated with an investment adviser is in effect, willfully 
to become, or to be, associated with an investment adviser, without the 
consent of the Commission, and it shall be unlawful for any invest-
ment adviser to permit such a person to become, or remain, a person 
associated with such investment adviser without the consent of the 
Commission, if such investment adviser knew, or in the exercise of 
reasonable care should have known of such order." 
SEC. 25. Section 205 of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-5) is amended to read as follows: 
"INVESTMENT ADVISORY CONTRACTS 
"SEC. 205. Xo investment adviser, unless exempt from registration 
Ante, p. 1430. 
pursuaiit to sectioii 203(b), shall make use of the mails or any means 
or instrumentality of interstate commerce, directly or indirectly, to 
enter into, extend, or renew any investment advisory contract, or in 
any way to perform any investment advisory contract entered into, 
extended, or renewed on or after the effective date of this title, if such 
contract— 
"(1) provides for compensation to the investment adviser on 
the basis of a share of capital gains upon or capital appreciation 
of the funds or any portion of the funds of the client; 
"(2) fails to provide, in substance, that no assignment of 
such contract shall be made by the investment adviser without the 
consent of the other party to the contract; or 
84 STAT. ] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1433 
"(3) fails to provide, in substance, that the investment adviser, 
if a partnership, will notify the other party to the contract of any 
change in the membership of such partnership within a reason-
able time after such change. 
Paragraph (1) of this section shall not (A) be construed to prohibit 
an investment advisory contract which provides for compensation 
based upon the total value of a fund averaged over a definite period, 
or as of definite dates, or taken as of a definite date, or (B) apply 
to an investment advisory contract with— 
"(i) an investment company registered under title I of this 
Act, or 
"(ii) any other person (except a trust, collective trust fund or 
separate account referred to in section 3(c) (11) of title I of this 
^"'®' P- ^'*^^-
Act), provided that the contract relates to the investment of assets 
in excess of $1 million, 
which contract provides for compensation based on the asset value of 
the company or fund under management averaged over a specified 
period and increasing and decreasing proportionately with the invest-
ment performance of the company or fund over a specified period 
in relation to the investment record of an appropriate index of securi-
ties prices or such other measure of investment performance as the 
Commission by rule, regulation, or order may specify. For purposes 
of clause (B) of the preceding sentence, the point from which mcreases 
and decreases in compensation are measured shall be the fee which is 
paid or earned when the investment performance of such company 
or fund is equivalent to that of the index or other measure of perform-
ance, and an index of securities prices shall be deemed appropriate 
unless the Commission by order shall determine otherwise. As used 
"investment 
in paragraphs (2) and (3) of this section, 'investment advisory con- contra°cT," 
tract' means any contract or agreement whereby a person agrees to 
act as investment adviser or to manage any investment or trading 
account of another person other than an investment company regis-
tered under title I of this Act." 
SEC. 26. The Investment Advisers Actof 1940 (15 U.S.C. 80b-l-21) 
54 stat. 847; 
is further amended by inserting immediately after section 206 a new ^''ifusc sob-e. 
section as follows: 
"EXEMPTIONS 
"SEC. 206A. The Commission, by rules and regulations, upon its 
own motion, or by order upon application, may conditionally or uncon-
ditionally exempt any person or transaction, or any class or classes of 
persons, or transactions, from any provision or provisions of this title 
or of any rule or regulation thereunder, if and to the extent that such 
exemption is necessary or appropriate in the public interest and con-
sistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of this title." 
SEC. 27. (a) Section 2 of the Securities Act of 1933 (15 U.S.C. 77b) Jl^^'^J^^' ^°^'' 
is amended by adding at the end thereof two new paragraphs as 
follows: 
"(13) The term 'insurance company' means a company which is 
organized as an insurance company, whose primary and predominant 
business activity is the writing of msurance or the reinsuring of risks 
underwritten by insurance companies, and which is subject to super-
vision by the insurance commissioner, or a similar official or agency, 
of a State or territory or the District of Columbia; or any receiver or 
similar official or any liquidating agent for such company, in his 
capacity as such. 
68 Stat. 683. 
'Insurance 
company." 
1434 
PUBLIC LAW 91.547-DEC. 14, 1970 
[84 STAT. 
ac'cfumJ'^'^ 
" (14] The term 'separate account* means an account established and 
maintained by an insurance company pursuant to the laws of any State 
or territory of the United States, the District of Columbia, or of 
Canada or any province thereof, under which income, gains and losses, 
whether or not realized, from assets allocated to such account, are, 
in accordance with the applicable contract, credited to or charged 
against such account without regard to other income, gains, or losses 
of the insurance company." 
etc-t^exemp^ld'"' 
i^) Section 3(a) (2) of such Act (15 U.S.C. 77c(a) (2)) is amended 
securities. 
to read as follows: 
An^e ^*°*7 i^g^^' 
" (^) ^^^^^ sccurity issued or guaranteed by the United States or any 
Post, p! 1498. 
territory thereof, or by the District of Columbia, or by any State of the 
United States, or by any political subdivision of a State or territory or 
by any public instrumentality of one or more States or territories, or 
by any person controlled or supervised by and acting as an instrumen-
tality of the Government of the United States pursuant to authority 
granted by the Congress of the United States; or any certificate of 
deposit for any of the foregoing; or any security issued or guaranteed 
by any bank; or any security issued by or representing an interest in 
or a direct obligation of a Federal Reserve bank; or any interest or 
)articipation in any common trust fund or similar fund maintained 
)y a bank exclusively for the collective investment and reinvestment 
of assets contributed thereto by such bank in its capacity as trustee, 
executor, administrator, or guardian; or any interest or participation 
in a single or collective trust fund maintained by a bank or in a sepa-
rate account maintained by an insurance company which interest or 
participation is issued in connection with (A) a stock bonus, pension, 
or profit-sharing plan which meets the requirements for qualification 
6
8
A Stat. 134; 
uuder section 401 of the Internal Revenue Code of 1954, or (B) an 
114^^8*0^8131. 
annuity plan which meets the requirements for the deduction of the 
157?! 
employer's contribution under section 404(a) (2) of such Code, other 
26 use 404! 
^'^^^"^ ^
'
^
"
^
y P^^^^ described in clause (A) or (B) of this paragraph (i) 
under which an amount in excess of the. employer's contribution for 
any period is allocated to tlie purchase of securities issued by the 
employer or any company directly or indirectly controlling, controlled 
by or under common control with the employer or (ii) which covers 
employees some or all of whom are employees within the meaning of 
section 401(c) (1) of such Code. The Commission, by rules and regula-
tions or order, shall exempt from the provisions of section 5 of this 
68 Stat. 684. 
title any interest or participation issued in connection with a stock 
1
5 use 77e. 
bouus, peusion, profit-sharing, or annuity plan which covers employees 
some or all of whom are employees within the meaning of section 
401 (c) (1) of the Internal Revenue Code of 1954, if and to the extent 
that the Commission determines this to be necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of 
this title. For the purposes of this paragraph, a security issued or 
guaranteed by a bank shall not include any interest or participation 
"Bank." 
]2i any collective trust fund maintained by a bank; and the term 'bank' 
means any national bank, or any banking institution organized under 
the laws of any State, territory, or the District of Columbia, the busi-
ness of which is substantially confined to banking and is supervised 
by the State or territorial banking commission or similar official; 
except that in the case of a common trust fund or similar fund, or a. 
collective trust fund, the term 'bank' has the same meaning as in the 
Investment Company Act of 1940." 
Savings and 
(c) Sections 3(a) (5) of such Act (15 U.S.C. 77c(a) (5)) is amended 
loan associations, 
.
^
i
j
s
n 
\ / \ / / 
exempted securi- 
to read as follows: 
ties. ^ 
.. 
"(^) -'^^y security issued (A) by a savings and loan association, 
" " "' "" 
building and loan association, cooperative bank, homestead associa-
48 Stat. 76. 
84 STAT. ] 
PUBLIC LAW 91-547-DEC. 14, 1970 
1435 
tion, or similar institution, which is supervised and examined hy State 
or Federal authority having supervision over any such institution, 
except that the foregoing exemption shall not apply with respect to 
any such security where the issuer takes from the total amount paid 
or deposited by the purchaser, by way of any fee, cash value or other 
device whatsoever, either upon termination of the investment at ma-
turity or before maturity, an aggregate amount in excess of 3 per 
centum of the face value of such security; or (B) by (i) a farmer's 
cooperative organization exempt from tax under section 521 of the 
Internal Revenue Code of 1954, (ii) a corporation described in sec-
tion 501(c) (16) of such Code and exempt from tax under section 
501(a) of such Code, or (iii) a corporation described in section 
501(c)(2) of such Code which is exempt from tax under section 
501(a) of such Code and is organized for the exclusive purpose of 
holding title to property, collecting income therefrom, and turning 
over the entire amount thereof, less expenses, to an organization or 
corporation described in clause (i) or (ii) ;". 
SEC. 28. (a) Section 3(a) (12) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a) (12)) is amended to read as follows: 
''(12) The term 'exempted security' or 'exempted securities' includes 
securities which are direct obligations of or obligations guaranteed 
as to principal or interest by the United States; such securities issued 
or guaranteed by corporations in which the United States has a direct 
or mdirect interest as shall be designated for exemption by the Secre-
tary of the Treasury as necessary or appropriate in the public interest 
or for the protection of investors; securities which are direct obliga-
tions of or obligations guaranteed as to principal or interest by a 
State or any political subdivision thereof, or by any agency or instru-
mentality of a State or any political subdivision tliereof, or by any 
municipal corporate instrumentality of one or more States; any inter-
est or participation in any common trust fund or similar fund 
maintained by a bank exclusively for the collective investment and 
reinvestment of assets contributed thereto by such bank in its capacity 
as trustee, executor, administrator, or guardian; any interest or 
participation in a collective trust fund maintained by a bank or in 
a separate account maintained by an insurance company which inter-
est or participation is issued in connection with (A) a stock-bonus, 
pension, or profit-sharing plan which meets the requirements for 
qualification under section 401 of the Internal Revenue Code of 1954, 
or (B) an annuity plan which meets the requirements for the deduc-
tion of the employer's contribution under section 404(a) (2) of such 
Code, other than any plan described in clause (A) or (B) of this 
paragraph w^'liich covers employees some or all of whom are employees 
within the meaning of section 401 (c) (1) of such Code; and such other 
securities (which may include, among others, unregistered securities 
the market in which is predominantly intrastate) as the Commission 
may, by such rules and regulations as it deems necessary or appropriate 
in the public interest or for the protection of investors, either uncon-
ditionally or upon specified terms and conditions or for stated periods, 
exempt from the operation of any one or more provisions of tnis title 
which by their terms do not apply to an 'exempted security' or to 
'exempted securities'." 
(b) Section 3(a) (19) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a) (19)) is amended to read as follows: 
"(19) the terms 'investment company', 'affiliated person', 'insurance 
company', and 'separate account' have the same meanings as in the 
Investment Company Act of 1940." 
(c) Section 12(g) (2) of such Act (15 U.S.C. 781(g) (2)) is amended 
by adding at the end thereof a new subparagraph as follows: 
"(H) any interest or participation in any collective trust funds 
68A Stat. 176, 
26 u s e 521. 
26 u s e 501. 
48 Stat. 884; 
Ante, 
p. 718! 
Post, 
p. 1499. 
"Exempted 
security." 
68A Stat. 134; 
76 Stat. 809, 1141; 
80 Stat. 1577. 
26 u s e 401. 
26 u s e 404. 
Definitions. 
78 Stat. 565. 
54 Stat. 789. 
15 u s e 80a-5:i. 
Exemptions, 
78 Stat. 566. 
1436 
PUBLIC LAW 91-548-DEC. 14, 1970 
[84 STAT. 
68A Stat. 134; 
76 Stat. 809, 1141; 
80 Stat. 1577. 
26 u s e 401. 
26 u s e 404. 
Nonapplica-
bility. 
48 Stat. 74. 
15 u s e 77a. 
54 Stat. 789. 
15 u s e 80a-51. 
Effective dates. 
maintained by a bank or in a separate account maintained by an 
insurance company which interest or participation is issued in 
connection with (i) a stock-bonus, pension, or profit-sharing plan 
which meets the requirements for qualification under section 401 
of the Internal Revenue Code of 1954, or (ii) an annuity plan 
which meets the requirements for deduction of the employer's 
contribution under section 404(a) (2) of such Code." 
SEC. 29. The provisions of the Securities Act of 1933 and the Invest-
ment Company Act of 1940 shall not apply, except for purposes of 
definition of terms used in this section, to any interest or participation 
(including any separate account or other fund providing for the shar-
ing of income or gains and losses, and any interest or participation in 
such account or fund) in any contract, certificate, or policy providing 
for life insurance benefits which was issued prior to March 23^ 1959, by 
an insurance company, if (1) the form of such contract, certificate, or 
policy was approved by the msurance commissioner, or similar ojfScial 
or agency, of a State, territory or the District of Columbia, and (2) 
under such contract, certificate, or policy not to exceed 49 per centum 
of the gross premiums or other consideration paid was to be allocated 
to a separate account or other fund providing for the sharing of income 
or gains and losses. Nothing herein contained shall be taken to imply 
that any such interest or participation constitutes a "security" under 
any other laws of the United States. 
SEC. 30. This Act shall take effect on the date of its enactment, 
except that— 
(1) sections 5 (a), (b),and (c); 8; 9(a); 11; 18; 24(a); and 25 
(amending sections 10 (a), (b), and (c); 15; 17(f); 19; and 
32(a) of the Investment Company Act of 1940; and sections 203 
(b) and 205 of the Investment Advisers Act of 1940, respectively) 
shall take effect upon the expiration of one year after the date of 
enactment of this Act; 
(2) that part of section 5 (d) which substitutes "interested per-
sons" for "affiliated persons" in section 10(d) of the Investment 
Company Act of 1940 shall take effect upon the expiration of one 
year after the date of enactment of this Act; 
(3) sections 16 and 17 (amending section 27 and 28 of the 
Investment Company Act of 1940) shall take effect upon the ex-
piration of six months after the date of enactment of this Act; 
and 
(4) that part of section 20 which adds a subsection (b) to sec-
tion 36 of the Investment Company Act of 1940 shall take effect 
upon the expiration of eighteen months after the date of enact-
ment of this Act. 
Approved December 14, 1970. 
December 14, 1970 
[H. R. 13934] 
Public Law 91-548 
AN A C T 
To ameml tlie Act uf Sei)tember 21.19.59 (73 Stat. 590j, to authorize the Secretary 
of the Interior to revise the boundaries of Minute Man National Historical 
Park, and for otlier [uirposes. 
Minute Man 
National Histor-
ical Park. 
Boundary revi-
sion. 
16 u s e 410s. 
Be it emicted by the Senate and Houne of RepveHentatlveH of the 
L'nited States of Ametica in Congress asseiribled^ That section 1 of the 
Act of September 21,1959 (73 Stat. 590) is amended by inserting " (a)" 
after the word "that" in the first sentence and adding two subsections, 
as follows: