An act to amend the Federal securities laws to provide incentives for small business investment, and for other purposes.
PL 96-477 (H.R.7554), enacted 10/21/1980

PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2275 
Public Law 96-477 
96th Congress 
An Act 
To amend the Federal securities laws to provide incentives for small business 
Oct. 21, 1980 
investment, and for other purposes. 
[H.R. 7554] 
Be it enacted by the Senate and House of Representatives of the 
United States of 
America in Congress assembled, That this Act may be Small Business 
cited as the "Small Business Investment Incentive Act of 1980". J j ^ S f Act of 
1980 
TITLE I—AMENDMENTS TO THE INVESTMENT COMPANY 
15 use 80a-5i 
ACT OF 1940 
"ote. 
DEFINITIONS 
SEC. 101. Section 2(a) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)) is amended by adding at the end thereof the following 
new paragraphs: 
"(46) 'Eligible portfolio company' means any issuer which— 
"(A) is organized under the laws of, and has its principal place 
of 
business in, any State or States; 
"(B) is neither an investment company as defined in section 3 is use 80a-3. 
(other than a small business investment company which is 
licensed by the Small Business Administration to operate under 
the Small Business Investment Act of 1958 and which is a wholly- 15 use 66I note. 
owned subsidiary of the business development company) nor a 
company which would be an investment company except for the 
exclusion from the definition of investment company in section 
3(C); and 
Post, pp. 2276, 
"(C) satisfies one of the following: 
^295. 
"(i) it does not have any class of securities with respect to 
which a member of a national securities exchange, broker, or 
dealer may extend or maintain credit to or for a customer 
pursuant to rules or regulations adopted by the Board of 
Governors of the Federal Reserve System under section 7 of 
the Securities Exchange Act of 1934; 
15 use 78g. 
"(ii) it is controlled by a business development company, 
either alone or as part of a group acting together, and such 
business development company in fact exercises a control-
ling influence over the management or policies of such 
eligible portfolio company and, as a result of such control, 
has an affiliated person who is a director of such eligible 
portfolio company; or 
"(iii) it meets such other criteria as the Commission may, 
by rule, establish as consistent with the public interest, the 
protection of investors, and the purposes fairly intended by 
the policy and provisions of this title. 
"(47) 'Making available significant managerial assistance' by a 
business development company means— 
"(A) any arrangement whereby a business development com-
pany, through its directors, officers, employees, or general part-
94 STAT. 2276 
PUBLIC LAW 96-477—OCT. 21, 1980 
ners, offers to provide, and, if accepted, does so provide, signifi-
cant guidance and counsel concerning the management, oper-
ations, or business objectives and policies of a portfolio company; 
"(B) the exercise by a business development company of a 
controlling influence over the management or policies of a 
portfolio company by the business development company acting 
individually or as part of a group acting together which controls 
such portfolio company; or 
"(C) with respect to a small business investment company 
licensed by the Small Business Administration to operate under 
15 use 661 note. 
the Small Business Investment Act of 1958, the making of loans 
to a portfolio company. 
For purposes of subparagraph (A), the requirement that a business 
development company make available significant managerial assist-
ance shall be deemed to be satisfied with respect to any particular 
portfolio company where the business development company pur-
chases securities of such portfolio company in conjunction with one or 
more other persons acting together, and at least one of the persons in 
the group makes available significant managerial assistance to such 
portfolio company, except that such requirement will not be deemed 
to be satisfied if the business development company, in all cases, 
makes available significant managerial assistance solely in the 
manner described in this sentence. 
"(48) 'Business development company' means any closed-end com-
pany which— 
"(A) is organized under the laws of, and has its principal place 
of business in, any State or States; 
"(B) is operated for the purpose of making investments in 
Post, p. 2278. 
securities described in sections 55(a) (1) through (3), and makes 
available significant managerial assistance with respect to the 
issuers of such securities, provided that a business development 
company must make available significant managerial assistance 
only with respect to the companies which are treated by such 
business development company as satisfying the 70 per centum 
of the value of its total assets condition of section 55; and 
Post, p. 2278. 
"(C) has elected pursuant to section 54(a) to be subject to the 
Post, pp. 
provisions of sections 55 through 65,". 
2278-2289. 
ATTRIBUTION OF BENEFICIAL OWNERSHIP 
SEC. 102. Section 3(c)(1) of the Investment Company Act of 1940 (15 
U.S.C. 80a-3(c)(l)) is amended to read as follows: 
"(1) Any issuer whose outstanding securities (other than short-term 
paper) are beneficially owAed by not more than one hundred persons 
and which is not making and does not presently propose to make a 
public offering of its securities. For purposes of this paragraph: 
"(A) Beneficial ownership by a company shall be deemed to be 
beneficial ownership by one person, except that, if the company 
owns 10 per centum or more of the outstanding voting securities 
of the issuer, the beneficial ownership shall be deemed to be that 
of the holders of such company's outstanding securities (other 
than short-term paper) unless, as of the date of the most recent 
acquisition by such company of securities of that issuer, the value 
of all securities owned by such company of all issuers which are 
or would, but for the exception set forth in this subparagraph, be 
excluded from the definition of investment company solely by 
this paragraph, does not exceed 10 per centum of the value of the 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2277 
company's total assets. Such issuer nonetheless is deemed to be 
an investment company for purposes of section 12(d)(1). 
15 use 80a-i2. 
"(B) Beneficial ownership by any person who acquires securi-
ties or interests in securities of an issuer described in the first 
sentence of this paragraph shall be deemed to be beneficial 
ownership by the person from whom such transfer was made, 
pursuant to such rules and regulations as the Commission shall 
prescribe as 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, where 
the transfer was caused by legal separation, divorce, death, or 
other involuntary event.". 
EXEMPTION FROM INVESTMENT COMPANY ACT OF 1940 
SEC. 103. Section 6 of the Investment Company Act of 1940 (15 
U.S.C. 80a-6) is amended by adding at the end thereof the following 
new subsection: 
"(f) Any closed-end company which— 
"(1) elects to be treated as a business development company 
pursuant to section 54; or 
Post, p. 2278. 
"(2) would be excluded from the definition of an investment 
company by section 3(c)(1), except that it presently proposes to Ante, p. 2276. 
make a public offering of its securities as a business development 
company, and has notified the Commission, in a form and 
manner which the Commission may, by rule, prescribe, that it 
intends in good faith to file, within 90 days, a notification of 
election to become subject to the provisions of sections 55 
through 65, 
Post, pp. 
shall be exempt from sections 1 through 53, except to the extent ^f^us^so -l— 
provided in sections 59 through 65.". 
80a-52. 
Post, pp. 
VAUDITY OF CONTRACTS 
2285-2289. 
SEC. 104. Section 47(b) of the Investment Company Act of 1940 (15 
U.S.C. 80a-46(b)) is amended to read as follows: 
"(b)(1) A contract that is made, or whose performance involves, a 
violation of this title, or of any rule, regulation, or order thereunder, 
is unenforceable by either party (or by a nonparty to the contract who 
acquired a right under the contract with knowledge of the facts by 
reason of which the making or performance violated or would violate 
any provision of this title or of any rule, regulation, or order 
thereunder) unless a court finds that under the circumstances en-
forcement would produce a more equitable result than nonenforce-
ment and would not be inconsistent with the purposes of this title. 
"(2) To the extent that a contract described in paragraph (1) has 
been performed, a court may not deny rescission at the instance of 
any party unless such court finds that under the circumstances the 
denial of rescission would produce a more equitable result than its 
grant and would not be inconsistent with the purposes of this title. 
"(3) This subsection shall not apply (A) to the lawful portion of a 
contract to the extent that it may be severed from the unlawful 
portion of the contract, or (B) to preclude recovery agsiinst any person 
for unjust enrichment.". 
94 STAT. 2278 
PUBLIC LAW 96-477—OCT. 21, 1980 
REGULATION OF BUSINESS DEVELOPMENT COMPANIES 
SEC. 105. The Investment Company Act of 1940 is amended by 
adding at the end thereof the following new sections: 
"ELECTION TO BE REGULATED AS A BUSINESS DEVELOPMENT COMPANY 
15 use 80a-53. 
"SEC. 54. (a) Any company defined in sections 2(a)(48) (A) and (B) 
Ante, p. 2275. 
j^^y elect to be subject to the provisions of sections 55 through 65 by 
filing with the Commission a notification of election, if such 
company— 
"(1) has a class of its equity securities registered under section 
15 use 78/. 
12 of the Securities Exchange Act of 1934; or 
"(2) has filed a registration statement pursuant to section 12 of 
the Securities Exchange Act of 1934 for a class of its equity 
securities. 
"(b) The Commission may, by rule, prescribe the form and manner 
in which notification of election under this section shall be given. A 
business development company shall be deemed to be subject to 
sections 55 through 65 upon receipt by the Commission of such 
notification of election. 
"(c) Whenever the Commission finds, on its own motion or upon 
application, that a business development company which has filed a 
notification of election pursuant to subsection (a) of this section has 
ceased to engage in business, the Commission shall so declare by 
order revoking such company's election. Any business development 
company may voluntarily withdraw its election under subsection (a) 
by filing a notice of withdrawal of election with the Commission, in a 
form and manner which the Commission may, by rule, prescribe. 
Such withdrawal shall be effective immediately upon receipt by the 
Commission. 
"FUNCTIONS AND ACTIVITIES OF BUSINESS DEVELOPMENT COMPANIES 
15 use 80a-54. 
"SEC. 55. (a) It shall be unlawful for a business development 
company to acquire any assets (other than those described in para-
graphs (1) through (7) of this subsection) unless, at the time the 
acquisition is made, assets described in paragraphs (1) through (6) 
below represent at least 70 per centum of the value of its total assets 
(other than assets described in paragraph (7) below): 
"(1) securities purchased, in transactions not involving any 
public offering or in such other transactions as the Commission 
may, by rule, prescribe if it finds that enforcement of this title 
15 use 77a. 
and of the Securities Act of 1933 with respect to such transac-
tions is not necessary in the public interest or for the protection 
of investors by reason of the small amount, or the limited nature 
of the public offering, involved in such transactions— 
"(A) from the issuer of such securities, which issuer is an 
eligible portfolio company, or from any person who is, or who 
within the preceding thirteen months has been, an affiliated 
person of such eligible portfolio company; or 
"(B) from the issuer of such securities, which issuer is 
Ante, p. 2275. 
described in sections 2(a)(46) (A) and (B) but is not an eligible 
portfolio company because it has issued a class of securities 
with respect to which a member of a national securities 
exchange, broker, or dealer may extend or maintain credit to 
or for a customer pursuant to rules or regulations adopted by 
the Board of Governors of the Federal Reserve System under 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2279 
section 7 of the Securities Exchange Act of 1934, or from any is use 78g. 
person who is an officer or employee of such issuer, i
f
— 
"(i) at the time of the purchase, the business develop-
ment company owns at least 50 per centum o
f
— 
"(I) the greatest number of equity securities of 
such issuer and securities convertible into or 
exchangeable for such securities; and 
"(II) the greatest amount of debt securities of 
such 
issuer, 
held by such business development company at any 
point in time during the period when such issuer was an 
eligible portfolio company, except that options, war-
rants, and similar securities which have by their terms 
expired and debt securities which have been converted, 
or repaid or prepaid in the ordinary course of 
business or 
incident to a public offering of securities of such issuer, 
shall not be considered to have been held by such 
business development company for purposes of this 
requirement; and 
(ii) the business development company is one of the 
20 largest holders of record of such issuer's outstanding 
voting securities; 
"(2) securities of any eligible portfolio company with respect to 
which the business development company satisfies the require-
ments of section 2(a)(46)(C)(ii); 
Ante, p. 2275. 
"(3) securities purchased in transactions not involving any 
public offering from an issuer described in sections 2(a)(46) (A) 
and (B) or from a person who is, or who within the preceding 
thirteen months has been, an affiliated person of such issuer, or 
from any person in transactions incident thereto, if such securi-
ties were— 
"(A) issued by an issuer that is, or was immediately prior 
to the purchase of its securities by the business development 
company, in bankruptcy proceedings, subject to reorganiza-
tion under the supervision of a court of competent jurisdic-
tion, or subject to a plan or arrangement resulting from such 
bankruptcy proceedings or reorganization; 
"(B) issued by an issuer pursuant to or in consummation of 
such a plan or arrangement; or 
"(C) issued by an issuer that, immediately prior to the 
purchase of such issuer's securities by the business develop-
ment company, was not in bankruptcy proceedings but was 
unable to meet its obligations as they came due without 
material assistance other than conventional lending or 
financing arrangements; 
"(4) securities of eligible portfolio companies purchased from 
any person in transactions not involving any public offering, if 
there is no ready market for such securities and if immediately 
prior to such purchase the business development company owns 
at least 60 per centum of the outstanding equity securities of 
such issuer (giving effect to all securities presently convertible 
into or exchangeable for equity securities of such issuer as if such 
securities were so converted or exchanged); 
"(5) securities received in exchange for or distributed on or 
with respect to securities described in paragraphs (1) through (4) 
of this subsection, or pursuant to the exercise of options, 
warrants, or rights relating to securities described in such 
paragraphs; 
94 STAT. 2280 
PUBLIC LAW 96-477—OCT. 21, 1980 
"(6) cash, cash items, Government securities, or high quahty 
debt securities maturing in one year or less from the time of 
investment in such high quahty debt securities; and 
"(7) office furniture and equipment, interests in real estate and 
leasehold improvements and facilities maintained to conduct the 
business operations of the business development company, 
deferred organization and operating expenses, and other nonin-
vestment assets necessary and appropriate to its operations as a 
business development company, including notes of indebtedness 
of directors, officers, employees, and general partners held by a 
business development company as payment for securities of such 
company issued in connection with an executive compensation 
Infra. 
plan described in section 57(j). 
"03) For purposes of this section, the value of a business develop-
ment company's assets shall be determined as of the date of the most 
recent financial statements filed by such company with the Commis-
15 use 78m. 
gion pursuant to section 13 of the Securities Exchange Act of 1934, 
and shall be determined no less frequently than annually. 
"QUALIFICATIONS OF DIRECTORS 
15 use 80a-55. 
"SEC. 56. (a) A majority of a business development company's 
directors or general partners shall be persons who are not interested 
persons of such company. 
"OJ) If, by reason of the death, disqualification, or bona fide 
resignation of any director or general partner, a business develop-
ment company does not meet the requirements of subsection (a) of 
15 use 80a-l5. 
this section, or the requirements of section 15(f)(1) of this title with 
respect to directors, the operation of such provisions shall be 
suspended for a period of 90 days or for such longer period as the 
Commission may prescribe, upon its own motion or by order upon 
application, as not inconsistent with the protection of investors. 
"TRANSACTIONS WITH CERTAIN AFFILIATES 
15 use 80a-56. 
"SEC. 57. (a) It shall be unlawful for any person who is related to a 
business development company in a manner described in subsection 
(b) of this section, acting as principal— 
"(1) knowingly to sell any security or other property to such 
business development company or to any company controlled by 
such business development company, unless such sale involves 
solely (A) securities of which the buyer is the issuer, or (B) 
securities of which the seller is the issuer and which are part of a 
general offering to the holders of a class of its securities; 
"(2) knowingly to purchase from such business development 
company or from any company controlled by such business 
development company, any security or other property (except 
securities of which the seller is the issuer); 
"(3) knowingly to borrow money or other property from such 
business development company or from any company controlled 
by such business development company (unless the borrower is 
15 use 80a-2l. 
controlled by the lender), except as permitted in section 21(b) or 
section 62; or 
"(4) knowingly to effect any transaction in which such business 
development company or a company controlled by such business 
development company is a joint or a joint and several participant 
with such person in contravention of such rules and regulations 
as the Commission may prescribe for the purpose of limiting or 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2281 
preventing participation by such business development company 
or controlled company on a basis less advantageous than that of 
such person, except that nothing contained in this paragraph 
shall be deemed to preclude any person from acting as manager 
of any underwriting sjnidicate or other group in which such 
business development company or controlled company is a par-
ticipant and receiving compensation therefor. 
"(b) The provisions of subsection (a) of this section shall apply to the 
following persons: 
"(1) Any director, officer, employee, or member of an advisory 
board of a business development company or any person (other 
than the business development company itself) who is, within the 
meaning of section 2(a)(3XC) of this title, an affiliated person of 15 use 80a-2. 
any such person specified in this paragraph. 
"(2) Any investment adviser or promoter of, general partner in, 
principal underwriter for, or person directly or indirectly either 
controlling, controlled by, or under common control with, a 
business development company (except the business develop-
ment company itself and any person who, if it were not directly 
or indirectly controlled by the business development company, 
would not be directly or indirectly under the control of a person 
who controls the business development company), or any person 
who is, within the meaning of section 2(a)(3) (C) or (D), an 
affiliated person of any such person specified in this paragraph. 
"(c) Notwithstanding paragraphs (1), (2), and (3) of subsection (a), Exemption 
any person may file with the Commission an application for an order application 
exempting a proposed transaction of the applicant from one or more 
provisions of such paragraphs. The Commission shall grant such 
application and issue such order of exemption if evidence establishes 
that— 
"(1) the terms of the proposed transaction, including the 
consideration to be paid or received, are reasonable and fair and 
do not involve overreaching of the business development com-
pany or its shareholders or partners on the part of any person 
concerned; 
"(2) the proposed transaction is consistent with the policy of 
the business development company as recited in the filings made 
by such company with the Commission under the Securities Act 
of 1933, its registration statement and reports filed under the 15 use 77a. 
Securities Exchange Act of 1934, and its reports to shareholders 15 use 78a. 
or partners; and 
"(3) the proposed transaction is consistent with the general 
purposes of this title. 
"(d) It shall be unlawful for any person who is related to a business 
development company in the manner described in subsection (e) of 
this section and who is not subject to the prohibitions of subsection (a) 
of this section, acting as principal— 
"(1) knowingly to sell any security or other property to such 
business development company or to any company controlled by 
such business development company, unless such sale involves 
solely (A) securities of which the buyer is the issuer, or (B) 
securities of which the seller is the issuer and which are part of a 
general offering to the holders of a class of its securities; 
"(2) knowingly to purchase from such business development 
company or from any company controlled by such business 
development company, any security or other property (except 
securities of which the seller is the issuer); 
94 STAT. 2282 
PUBLIC LAW 96-477—OCT. 21, 1980 
"(3) knowingly to borrow money or other property from such 
business development company or from any company controlled 
by such business development company (unless the borrower is 
15 use 80a-2i. 
Controlled by the lender), except as permitted in section 21(b); or 
"(4) knowingly to effect any transaction in which such business 
development company or a company controlled by such business 
development company is a joint or a joint and several participant 
with such affiliated person in contravention of such rules and 
regulations as the Commission may prescribe for the purpose of 
limiting or preventing participation by such business develop-
ment company or controlled company on a basis less advanta-
geous than that of such affiliated person, except that nothing 
contained in this paragraph shall be deemed to preclude any 
person from acting as manager of any underwriting syndicate or 
other group in which such business development company or 
controlled company is a participant and receiving compensation 
therefor, 
"(e) The provisions of subsection (d) of this section shall apply to the 
following persons: 
"(1) Any person (A) who is, within the meaning of section 
15 use 80a-2. 
2(a)(3)(A), an affiliated person of a business development com-
pany, (B) who is an executive officer or a director of, or general 
partner in, any such affiliated person, or (C) who directly or 
indirectly either controls, is controlled by, or is under common 
control with, such affiliated person. 
"(2) Any person who is an affiliated person of a director, officer, 
employee, investment adviser, member of an advisory board or 
promoter of, principal underwriter for, general partner in, or an 
affiliated person of any person directly or indirectly either 
controlling or under common control with a business develop-
ment company (except the business development company itself 
and any person who, if it were not directly or indirectly con-
trolled by the business development company, would not be 
directly or indirectly under the control of a person who controls 
the business development company). 
"Executive 
For purposes of this subsection, the term 'executive officer' means the 
officer." 
president, secretary, treasurer, any vice president in charge of a 
principal business function, and any other person who performs 
similar policymaking functions. 
"(f) Notwithstanding subsection (d) of this section, a person 
described in subsection (e) may engage in a proposed transaction 
described in subsection (d) if such proposed transaction is approved by 
the required majority (as defined in subsection (o)) of the directors of 
or general partners in the business development company on the 
basis that— 
"(1) the terms thereof, including the consideration to be paid or 
received, are reasonable and fair to the shareholders or partners 
of the business development company and do not involve over-
reaching of such company or its shareholders or partners on the 
part of any person concerned; 
"(2) the proposed transaction is consistent with the interests of 
the shareholders or partners of the business development com-
pany and is consistent with the policy of such company as recited 
in filings made by such company with the Commission under the 
15 use 77a. 
Securities Act of 1933, its registration statement and reports filed 
15 use 78a. 
under the Securities Exchange Act of 1934, and its reports to 
shareholders or partners; and 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2283 
"(3) the directors or general partners record in their minutes 
and preserve in their records, for such periods as if such records 
were required to be maintained pursuant to section 31(a), a 
description of such transaction, their findings, the information or 
materials upon which their findings were based, and the basis 
therefor. 
"(g) Notwithstanding subsection (a) or (d), a person may, in the 
ordinary course of business, sell to or purchase from any company 
merchandise or may enter into a lessor-lessee relationship with any 
person and furnish the services incident thereto. 
"(h) The directors of or general partners in any business develop- inquiry 
ment company shall adopt, and periodically review and update as procedures, 
appropriate, procedures reasonably designed to ensure that reason- ^evSw " 
able inquiry is made, prior to the consummation of any transaction in 
which such business development company or a company controlled 
by such business development company proposes to participate, with 
respect to the possible involvement in the transaction of persons 
described in subsections (b) and (e) of this section. 
"(i) Until the adoption by the Commission of rules or regulations 
under subsections (a) and (d) of this section, the rules and regulations 
of the Commission under sections 17 (a) and (d) applicable to regis- 15 use 80a-i7. 
tered closed-end investment companies shall be deemed to apply to 
transactions subject to subsections (a) and (d) of this section. Any 
rules or regulations adopted by the Commission to implement this 
section shall be no more restrictive than the rules or regulations 
adopted by the Commission under sections 17 (a) and (d) that are 
applicable to all registered closed-end investment companies. 
(j) Notwithstanding subsections (a) and (d) of this section, any 
director, officer, or employee of, or general partner in, a business 
development company may— 
(1) acquire warrants, options, and rights to purchase voting 
securities of such business development company, and securities 
issued upon the exercise or conversion thereof, pursuant to an 
executive compensation plan offered by such company which 
meets the requirements of section 61(a)(3XB); and 
"(2) borrow money from such business development company 
for the purpose of purchasing securities issued by such company 
pursuant to an executive compensation plan, if each such loan— 
"(A) has a term of not more than ten years; 
"(B) becomes due within a reasonable time, not to exceed 
sixty days, after the termination of such person's employ-
ment or service; 
"(C) bears interest at no less than the prevailing rate 
applicable to 90-day United States Treasury bills at the time 
the loan is made; 
"(D) at all times is fully collateralized (such collateral may 
include any securities issued by such business development 
company); and 
"(E)(i) in the case of a loan to any officer or employee of 
such business development company (including any officer 
or employee who is also a director of such company), is 
approved by the required majority (as defined in subsection 
(o)) of the directors of or general partners in such company 
on the basis that the loan is in the best interests of such 
company and its shareholders or partners; or 
"(ii) in the case of a loan to any director of such business 
development company who is not also an officer or employee 
of 
such company, or to any general partner in such company, 
94 STAT. 2284 
PUBLIC LAW 96-477—OCT. 21, 1980 
is approved by order of the Commission, upon application, on 
the basis that the terms of the loan are fair and reasonable 
and do not involve overreaching of such company or its 
shareholders or partners, 
"(k) It shall be unlawful for any person described in subsection (1)— 
"(1) acting as agent, to accept from any source any compensa-
tion (other than a regular salary or wages from the business 
development company) for the purchase or sale of any property 
to or for such business development company or any controlled 
company thereof, except in the course of such person's business 
as an underwriter or broker; or 
"(2) acting as broker, in connection with the sale of securities to 
or by the business development company or any controlled 
company thereof, to receive from any source a commission, fee, 
or other remuneration for effecting such transaction which 
exceeds— 
"(A) the usual and customary broker's commission if the 
sale is effected on a securities exchange; 
"(B) 2 per centum of the sales price if the sale is effected in 
connection with a secondary distribution of such securities; 
or 
"(C) 1 per centum of the purchase or sale price of such 
securities if the sale is otherwise effected, 
unless the Commission, by rules and regulations or order in the 
public interest and consistent with the protection of investors, per-
mits a larger commission. 
"(1) The provisions of subsection (k) of this section shall apply to the 
following persons: 
"(1) Any affiliated person of a business development company. 
"(2)(A) Any person who is, within the meaning of section 2(a)(3) 
l5USC80a-2. 
(B), (C), or (D), an affiliated person of any director, officer, 
employee, or member of an advisory board of the business 
development company. 
"(B) Any person who is, within the meaning of section 2(a)(3) 
(A), (B), (C), or (D), an eiffiliated person of any investment adviser 
of, general partner in, or person directly or indirectly either 
controlling, controlled by, or under common control with, the 
business development company. 
"(C) Any person who is, within the meaning of section 
2(a)(3XC), an affiliated person of any person who is an affiliated 
person of the business development company within the meaning 
of section 2(a)(3)(A). 
"(m) For purposes of subsections (a) and (d), a person who is a 
director, officer, or employee of a party to a transaction and who 
receives his usual and ordinary fee or salary for usual and customary 
services as a director, officer, or employee from such party shall not 
be deemed to have a financial interest or to participate in the 
transaction solely by reason of his receipt of such fee or salary. 
Profit-sharing 
"(n)(l) Notwithstanding subsection (a)(4) of this section, a business 
P
^
^
*
^ 
development company may establish and maintain a profit-sharing 
plan for its directors, officers, employees, and general partners and 
such directors, officers, employees, and general partners may partici-
pate in such profit-sharing plan, if— 
"(A)(i) in the case of a profit-sharing plan for officers and 
employees of the business development company (including any 
officer or employee who is also a director of such company), such 
profit-sharing plan is approved by the required majority (as 
defined in subsection (o)) of the directors of or general partners in 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2285 
such company on the basis that such plan is reasonable and fair 
to the shareholders or partners of such company, does not 
involve overreaching of such company or its shareholders or 
partners on the part of any person concerned, and is consistent 
with the interests of the shareholders or partners of such 
company; or 
"(ii) in the case of a profit-sharing plan which includes one or 
more directors of the business development company who are not 
also officers or employees of such company, or one or more 
general partners in such company, such profit-sharing plan is 
approved by order of the Commission, upon application, on the 
basis that such plan is reasonable and fair to the shareholders or 
partners of such company, does not involve overreaching of such 
company or its shareholders or partners on the part of any 
person concerned, and is consistent with the interests of the 
shareholders or partners of such company; and 
"(B) the aggregate amount of benefits which would be paid or 
accrued under such plan shall not exceed 20 per centum of the 
business development company's net income after taxes in any 
fiscal year. 
"(2) This subsection may not be used where the business develop-
ment company has outstanding any stock option, warrant, or right 
issued as part of an executive compensation plan, including a plan 
pursuant to section 61(a)(3)(B), or has an investment adviser regis-
tered or required to be registered under title II of this Act. 
i^ use 80b-i. 
"(o) The term 'required majority', when used with respect to the 
approval of a proposed transaction, plan, or arrangement, means 
both a majority of a business development company's directors or 
general partners who have no financial interest in such transaction, 
plan, or arrangement and a majority of such directors or general 
partners who are not interested persons of such company. 
"CHANGES IN INVESTMENT POUCY 
"SEC. 58. No business development company shall, unless author- 15 use 80a-57. 
ized by the vote of a majority of its outstanding voting securities or 
partnership interests, change the nature of its business so as to cease 
to be, or to withdraw its election as, a business development company. 
"INCORPORATION OF PROVISIONS 
"SEC. 59. Notwithstanding the exemption set forth in section 6(f), 15 use 80a-58. 
sections 1,2,3,4, 5, 6, 9,10(f), 15 (a), (c), and (f), 16(b), 17 (f) through (j), f,"{t# In'^'^i 
19(a), 20(b), 32 (a) and (c), 33 through 47, and 49 through 53 of this title 80a-5,80a-9 
shall apply to a business development company to the same extent as 80a-ib, 80a-i5-
if it were a registered closed-end investment company. 
80a-l7, 80a-i9, 
^ 
•^ 
80a-20,80a-31, 
,, 
80a-32—80a-46, 
FUNCTIONS AND ACTIVITIES OF BUSINESS DEVELOPMENT COMPANIES 
80a-48—80a-52. 
"SEC. 60. Notwithstanding the exemption set forth in section 6(f), 15 use 80a-59. 
section 12 shall apply to a business development company to the same 
extent as if it were a registered closed-end investment company, 
except that the Commission shall not prescribe any rule, regulation, 
or order pursuant to section 12(a)(1) governing the circumstances in 15 USC 80a-i2. 
which a business development company may borrow from a bank in 
order to purchase any security. 
94 STAT. 2286 
PUBLIC LAW 96-477—OCT. 21, 1980 
"CAPITAL STRUCTURE 
15 use 80a-60. 
"SEC. 61. (a) Notwithstanding the exemption set forth in section 
Ante, p. 2277,15 6(f), Section 18 shall apply to a business development company to the 
use 80a-i8. 
same extent as if it were a registered closed-end investment company, 
except as follows: 
"(1) The asset coverage requirements of section 18(a)(1) (A) and 
(B) applicable to business development companies shall be 200 
per centum. 
"(2) Notwithstanding section 18(c), a business development 
company may issue more than one class of senior security 
representing indebtedness if such business development com-
pany does not have outstanding any publicly held indebtedness, 
and all such securities of each class are— 
"(A) privately held or guaranteed by the Small Business 
Administration, or banks, insurance companies, or other 
institutional investors; and 
"(B) not intended to be publicly distributed. 
"(3) Notwithstanding section 18(d)— 
"(A) a business development company may issue senior 
securities representing indebtedness accompanied by war-
rants, options, or rights to subscribe or convert to voting 
securities of such company, if— 
"(i) such warrants, options, or rights expire by their 
terms within ten years; 
"(ii) such warrants, options, or rights are not sepa-
rately transferable unless no class of such warrants, 
options, or rights and the senior securities accompany-
ing them has been publicly distributed; 
"(iii) the exercise or conversion price is not less than 
the current market value at the date of issuance, or if no 
such market value exists, the current net asset value of 
such voting securities; and 
"(iv) the proposal to issue such securities is authorized 
by the shareholders or partners of such business devel-
opment company, and such issuance is approved by the 
required majority (as defined in section 57(o)) of the 
directors of or general partners in such company on the 
basis that such issuance is in the best interests of such 
company and its shareholders or partners; and 
"(B) a business development company may issue, to its 
directors, officers, employees, and general partners, war-
rants, options, and rights to purchase voting securities of 
such company pursuant to an executive compensation plan, 
if— 
"(i)(I) in the case of warrants, options, or rights issued 
to any officer or employee of such business development 
company (including any officer or employee who is also 
a director of such company), such securities satisfy the 
conditions in clauses (i), (iii), and (iv) of subparagraph 
(A); or (II) in the case of warrants, options, or rights 
issued to any director of such business development 
company who is not also an officer or employee of such 
company, or to any general partner in such company, 
the proposal to issue such securities satisfies the condi-
tions in clauses (i) and (iii) of subparagraph (A), is 
authorized by the shareholders or partners of such 
company, and is approved by order of the Commission, 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2287 
upon application, on the basis that the terms of the 
proposal are fair and reasonable and do not involve 
overreaching of such company or its shareholders or 
partners; 
"(ii) such securities are not transferable except for 
disposition by gift, will, or intestacy; 
"(iii) no investment adviser of such business develop-
ment company receives any compensation described in 
paragraph (1) of section 205 of title II of this Act, except 15 use 80b-5. 
to the extent permitted by clause (A) or (B) of that 
section; and 
"(iv) such business development company does not 
have a profit-sharing plan described in section 57(n). 
Notwithstanding this paragraph, the amount of voting securities 
that would result from the exercise of all outstanding warrants, 
options, and rights at the time of issuance shall not exceed 25 per 
centum of the outstanding voting securities of the business 
development company, except that if the amount of voting 
securities that would result from the exercise of all outstanding 
warrants, options, and rights issued to such company's directors, 
officers, employees, and general partners pursuant to any execu-
tive compensation plan meeting the requirements of subpara-
graph (B) of this paragraph would exceed 15 per centum of the 
outstanding voting securities of such company, then the total 
amount of voting securities that would result from the exercise of 
all outstanding warrants, options, and rights at the time of 
issuance shall not exceed 20 per centum of the outstanding 
voting securities of such company. 
"(4) For purposes of measuring the asset coverage require-
ments of section 18(a), a senior security created by the guarantee 15 use 80a-l8. 
by a business development company of indebtedness issued by 
another company shall be the amount of the maximum potential 
liability less the fair market value of the net unencumbered 
assets (plus the indebtedness which has been guaranteed) availa-
ble in the borrowing company whose debts have been guaran-
teed, except that a guarantee issued by a business development 
company of indebtedness issued by a company which is a wholly-
owned subsidiary of the business development company and is 
licensed as a small business investment company under the 
Small Business Investment Act of 1958 shall not be deemed to be 15 use 661 note. 
a senior security of such business development company for 
purposes of section 18(a) if the amount of the indebtedness at the 
time of its issuance by the borrowing company is itself taken 
fully into account as a liability by such business development 
company, as if it were issued by such business development 
company, in determining whether such business development 
company, at that time, satisfies the asset coverage requirements 
of section 18(a). 
"(b) A business development company shall comply with the 
provisions of this section at the time it becomes subject to sections 55 
through 65, as if it were issuing a security of each class which it has 
outstanding at such time. 
"LOANS 
"SEC. 62. Notwithstanding the exemption set forth in section 6(f), 15 use 80a-6i. 
section 21 shall apply to a business development company to the same dSf? o^ ^ol^' ^^ 
U b e oUa—21. 
79-194 O—81—pt. 2 
64 • QL3 
94 STAT. 2288 
PUBLIC LAW 96-477—OCT. 21, 1980 
extent as if it were a registered closed-end investment company, 
except that nothing in that section shall be deemed to prohibit— 
"(1) any loan to a director, officer, or employee of, or general 
partner in, a business development company for the purpose of 
purchasing securities of such company as part of an executive 
compensation plan, if such loan meets the requirements of 
section 57(j); or 
"(2) any loan to a company controlled by a business develop-
ment company, which companies could be deemed to be under 
common control solely because a third person controls such 
business development company. 
"DISTRIBUTION AND REPURCHASE OF SECURITIES 
15 use 80a-62. 
"SEC. 63. Notwithstanding the exemption set forth in section 6(f), 
usr'80 -2^^' ^^ section 23 shall apply to a business development company to the same 
extent as if it were a registered closed-end investment company, 
except as follows: 
"(1) The prohibitions of section 23(a)(2) shall not apply to any 
company which (A) is a wholly-owned subsidiary of, or directly or 
indirectly controlled by, a business development company, and 
(B) immediately after the issuance of any of its securities for 
property other than cash or securities, will not be an investment 
15 use 80a-3. 
company within the meaning of section 3(a). 
"(2) Notwithstanding the provisions of section 23(b), a business 
development company may sell any common stock of which it is 
the issuer at a price below the current net asset value of such 
stock, and may sell warrants, options, or rights to acquire any 
such common stock at a price below the current net asset value of 
such stock, if— 
"(A) the holders of a majority of such business develop-
ment company's outstanding voting securities, and the hold-
ers of a majority of such company's outstanding voting 
securities that are not affiliated persons of such company, 
approved such company's policy and practice of making such 
sales of securities at the last annual meeting of shareholders 
or partners within one year immediately prior to any such 
sale, except that the shareholder approval requirements of 
this subparagraph shall not apply to the initial public 
offering by a business development company of its securities; 
"(B) a required majority (as defined in section 57(o)) of the 
directors of or general partners in such business develop-
ment company have determined that any such sale would be 
in the best interests of such company and its shareholders or 
partners; and 
"(C) a required majority (as defined in section 57(o)) of the 
directors of or general partners in such business develop-
ment company, in consultation with the underwriter or 
underwriters of the offering if it is to be underwritten, have 
determined in good faith, and as of a time immediately prior 
to the first solicitation by or on behalf of such company of 
firm commitments to purchase such securities or immedi-
ately prior to the issuance of such securities, that the price at 
which such securities are to be sold is not less than a price 
which closely approximates the market value of those securi-
ties, less any distributing commission or discount. 
"(3) A business development company may sell any common 
stock of which it is the issuer at a price below the current net 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2289 
asset value of such stock upon the exercise of any warrant, 
option, or right issued in accordance with section 61(a)(3). 
"ACCOUNTS AND RECORDS 
"SEC. 64. (a) Notwithstanding the exemption set forth in section 15 use 80a-63. 
6(f), section 31 shall apply to a business development company to the Ante, p. 2277,15 
same extent as if it were a registered closed-end investment company, ^^^ 80a-30. 
except that the reference to the financial statements required to be 
filed pursuant to section 30 shall be construed to refer to the financial 15 use 80a-29. 
statements required to be filed by such business development com-
pany pursuant to section 13 of the Securities Exchange Act of 1934. is use 78m. 
"(b)(1) In addition to the requirements of subsection (a), a business Risk factors 
development company shall file with the Commission and supply statement. 
annually to its shareholders a written statement, in such form and 
manner as the Commission may, by rule, prescribe, describing the 
risk factors involved in an investment in the securities of a business 
development company due to the nature of such company's invest-
ment portfolio, and shall supply copies of such statement to any 
registered broker or dealer upon request. 
"(2) If the Commission finds it is 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, the 
Commission may also require, by rule, any person who, acting as 
principal or agent, sells a security of a business development com-
pany to inform the purchaser of such securities, at or before the time 
of sale, of the existence of the risk statement prepared by such 
business development company pursuant to this subsection, and 
make such risk statement available on request. The Commission, in 
making such rules and regulations, shall consider, among other 
matters, whether any such rule or regulation would impose any 
unreasonable burdens on such brokers or dealers or unreasonably 
impair the maintenance of 
fair and orderly markets. 
"LIABIUTY OF CONTROLLING PERSONS; PREVENTING COMPLIANCE WITH 
TITLE 
"SEC. 65. Notwithstanding the exemption set forth in section 6(f), 15 use 80a-64. 
section 48 shall apply to a business development company to the same Ante, p. 2277,15 
extent as if it were a registered closed-end investment company, use 80a-47. 
except that the provisions of section 48(a) shall not be construed to 
require any company which is not an investment company within the 
meaning of section 3(a) to comply with the provisions of this title 15 use 80a-3. 
which are applicable to a business development company solely 
because such company is a wholly-owned subsidiary of, or directly or 
indirectly controlled by, a business development company.". 
TITLE II—AMENDMENTS TO THE INVESTMENT ADVISERS 
ACT OF 1940 
DEFINITION OF BUSINESS DEVELOPMENT COMPANY 
SEC. 201. Section 202(a) of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-2(a)) is amended by adding at the end thereof the following 
new paragraph: 
"(22) 'Business development company' means any company which 
is a business development company as defined in section 2(a)(48) of 
94 STAT. 2290 
PUBLIC LAW 96-477—OCT. 21, 1980 
Ante, p. 2275. 
title I of this Act and which complies with section 55 of title I of this 
Ante, p. 2278. 
Act, except that— 
"(A) the 70 per centum of the value of the total assets condition 
referred to in sections 2(a)(48) and 55 of title I of this Act shall be 
60 per centum for purposes of determining compliance there-
with; 
"(B) such company need not be a closed-end company and need 
not elect to be subject to the provisions of sections 55 through 65 
Ante, pp. 
of title I of this Act; and 
2278-2289. 
tt^Q^ ^^^Q securities which may be purchased pursuant to section 
55(a) of title I of this Act may be purchased from any person. 
For purposes of this paragraph, all terms in sections 2(a)(48) and 55 of 
title I of this Act shall have the same meaning set forth in such title 
as if such company were a registered closed-end investment company, 
except that the value of the assets of a business development 
company which is not subject to the provisions of sections 55 through 
65 of title I of this Act shall be determined as of the date of the most 
recent financial statements which it furnished to all holders of its 
securities, and shall be determined no less frequently 
than 
annually.". 
REGISTRATION REQUIREMENTS 
SEC. 202. Section 203(b) of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-3(b)) is amended by striking out the period at the end of 
the paragraph (3) and inserting in lieu thereof the following: ", or a 
company which has elected to be a business development company 
Ante, p. 2278. 
pursuant to section 54 of title I of this Act and has not withdrawn its 
election. For purposes of determining the number of clients of an 
investment adviser under this paragraph, no shareholder, partner, or 
beneficial owner of a business development company, as defined in 
this title, shall be deemed to be a client of such investment adviser 
unless such person is a client of such investment adviser separate and 
apart from his status as a shareholder, partner, or beneficial owner.". 
INVESTMENT ADVISORY CONTRACTS 
SEC. 203. Section 205 of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-5) is amended— 
(1) by striking out "or" immediately before "(B)" in the 
sentence following paragraph (3) thereof; and 
(2) by striking out the period at the end of such sentence and 
inserting in lieu thereof the following: ", or (C) apply with respect 
to any investment advisory contract between an investment 
adviser and a business development company, as defined in this 
title, if (i) the compensation provided for in such contract does 
not exceed 20 per centum of the realized capital gains upon the 
funds of the business development company over a specified 
period or as of definite dates, computed net of all realized capital 
losses and unrealized capital depreciation, and the condition of 
Ante, p. 2286. 
section 61(a)(3)(B)(iii) of title I of this Act is satisfied, and (ii) the 
business development company does not have outstanding any 
option, warrant, or right issued pursuant to section 61(a)(3)(B) of 
title I of this Act and does not have a profit-sharing plan 
Ante, p. 2280. 
described in section 57(n) of title I of this Act.". 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2291 
TITLE III—AMENDMENTS TO OTHER FEDERAL SECURITIES 
LAWS 
SMALL OFFERING INCREASE 
SEC. 301. Section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) 
is amended by striking out "$2,000,000" and inserting in lieu thereof 
"$5,000,000". 
AMENDMENTS TO THE TRUST INDENTURE ACT OF 1939 
SEC. 302. (a) Section 304(a)(8) of the Trust Indenture Act of 1939 (15 
U.S.C. 77ddd(a)(88)) is amended by striking out "more than $250,000 
aggregate principal amount of any securities of the same issuer" and 
inserting in lieu thereof the following: "an aggregate principal 
amount of securities of the same issuer greater than the figure stated 
in section SQo) of the Securities Act of 1933 limiting exemptions Supm. 
thereunder, or sucfi lesser amount £is the Commission may establish 
by its rules and regulations". 
(b) Section 304(a)(9) of the Trust Indenture Act of 1939 (15 U.S.C. 
77ddd(a)(9)) is amended— 
(1) by striking out "$1,000,000 or less" and inserting in lieu 
thereof "$10,000,000, or such lesser amount as the Commission 
may establish by its rules £md regulations"; 
(2) by striking out "more than $1,000,000" and inserting in lieu 
thereof "more than $10,000,000"; and 
(3) by inserting immediately before the semicolon at the end 
thereof the following:", or such lesser amount as the Commission 
may establish by its rules and regulations". 
TITLE IV—AUTHORIZATION 
SEC. 401. Section 35 of the Securities Exchange Act of 1934 (15 
U.S.C. 78kk) is amended— 
(1) in the first sentence thereof, by striking out "and" immedi-
ately after "1979,"; 
(2) by inserting immediately before the period at the end of the 
first sentence thereof the following: ", $85,500,000 for the fiscal 
year ending September 30, 1981, $96,640,000 for the fiscal year 
ending September 30, 1982, and $106,610,000 for the fiscal year 
ending September 30,1983"; and 
(3) in the last sentence thereof, by striking out "fiscal year 
1980" and inserting in lieu thereof "fiscal year 1983". 
TITLE V — C A P I T A L F O R M A T I O N 
Omnibus Small 
Business Capital 
Formation Act of 
SHORT TITLE AND TABLE OF CONTENTS 
1980. 
SEC. 501. This title may be cited as the "Omnibus Small Business is use 80c note. 
Capital Formation Act of 1980". 
TABLE OF CONTENTS 
Sec. 501. Short title and table of contents. 
Sec. 502. Liaison between Securities and Exchange Commission and Small Business 
Administration. 
Sec. 503. Annual government-business forum on capital formation. 
Sec. 504. Additional funds authorized for the Securities and Exchange Commission. 
Sec. 505. Federal-State cooperation in securities matters for the benefit of small 
business. 
Sec. 506. Reduction of costs of small securities issues. 
Sec. 507. Effective date. 
94 STAT. 2292 
PUBLIC LAW 96-477—OCT. 21, 1980 
LIAISON BETWEEN SECURITIES AND EXCHANGE COMMISSION AND SMALL 
BUSINESS ADMINISTRATION 
15 use 80c. 
SEC 502. (a) The Securities and Exchange Commission shall gather, 
analyze, and make available to the public, information with respect 
to the capital formation needs, and the problems and costs involved 
with new, small, medium-sized, and independent businesses. 
Q)) The Commission shall make the results of such studies available 
to the Small Business Administration and otherwise have regular 
communication and liaison with such Administration in these 
matters. 
15 u s e 80c-l. 
Proceedings, 
transmittal to 
congressional 
committees. 
ANNUAL GOVERNMENT-BUSINESS FORUM ON CAPITAL FORMATION 
SEC 503, (a) Pursuant to the consultation called for in section 502, 
the Securities and Exchange Commission shall conduct an annual 
Government-business forum to review the current status of problems 
and programs relating to small business capital formation. 
Oa) The Commission shall invite other Federal agencies, such as the 
Department of the Treasury, the Board of Governors of the Federal 
Reserve System, the Small Business Administration, organizations 
representing State securities commissioners, and leading small busi-
ness and professional organizations concerned with capital forma-
tion, to participate in the planning for such forums. 
(c) The Commission may request any of the Federal departments, 
agencies, or organizations such as those specified in subsection Qy), or 
other groups or individuals, to prepare statements and reports to be 
delivered at such forums. Such departments and agencies shall 
cooperate in this effort. 
(d) A summary of the proceedings of such forums and any findings 
or recommendations thereof shall be prepared and transmitted to the 
participants, appropriate committees of the Congress, and others who 
may be interested in the subject matter. 
ADDITIONAL FUNDS AUTHORIZED FOR THE SECURITIES AND EXCHANGE 
COMMISSION 
15 use 80c-2. 
SEC. 504. For fiscal year 1982, and for each of the three succeeding 
fiscal years, there are hereby authorized to be appropriated such 
amounts as may be necessary and appropriate to carry out the 
provisions and purposes of this title. Any sums so appropriated shall 
remain available until expended. 
FEDERAL-STATE COOPERATION IN SECURITIES MATTERS FOR THE BENEFIT 
OF SMALL BUSINESS 
SEC 505. Section 19 of the Securities Act of 1933 (15 U.S.C. 77s) is 
amended by adding at the end thereof the following: 
"(c)(1) The Commission is authorized to cooperate with any associ-
ation composed of duly constituted representatives of State govern-
ments whose primary assignment is the regulation of the securities 
business within those States, and which, in the judgment of the 
Commission, could assist in effectuating greater uniformity in Federal-
State securities matters. The Commission shall, at its discretion, 
cooperate, coordinate, and share information with such an associ-
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2293 
ation for the purposes of carrying out the policies and projects set 
forth in paragraphs (2) and (3). 
"(2) It is the declared policy of this subsection that there should be 
greater Federal and State cooperation in securities matters, includ-
ing— 
"(A) maximum effectiveness of regulation, 
"(B) maximum uniformity in Federal and State regulatory 
standards, 
"(C) minimum interference with the business of capital forma-
tion, and 
"(D) a substantial reduction in costs and paperwork to dimin-
ish the burdens of raising investment capital (particularly by 
small business) and to diminish the costs of the administration of 
the Government programs involved. 
"(3) The purpose of this subsection is to engender cooperation 
between the Commission, any such association of State securities 
officials, and other duly constituted securities associations in the 
following areas: 
"(A) the sharing of information regarding the registration or 
exemption of securities issues applied for in the various States; 
"(B) the development and maintenance of uniform securities 
forms and procedures; and 
"(C) the development of a uniform exemption from registration 
for small issuers which can be agreed upon among several States 
or between the States and the Federal Government. The Com-
mission shall have the authority to adopt such an exemption as 
agreed upon for Federal purposes. Nothing in this Act shall be 
construed as authorizing preemption of State law. 
"(4) In order to carry out these policies and purposes, the Commis-
sion shall conduct an annual conference as well as such other 
meetings as are deemed necessary, to which representatives from 
such securities associations, securities self-regulatory organizations, 
agencies, and private organizations involved in capital formation 
shall be invited to participate. 
"(5) For fiscal year 1982, and for each of the three succeeding fiscal 
years, there are authorized to be appropriated such amounts as may 
be necessary and appropriate to carry out the policies, provisions, and 
purposes of this subsection. Any sums so appropriated shall remain 
available until expended.". 
Registration 
exemption. 
Annual 
conference. 
REDUCTION OF COSTS OF SMALL SECURITIES ISSUES 
SEC. 506. (a) The Securities and Exchange Commission shall use its 15 USC 80c-3. 
bt^t efforts to identify and reduce the costs of raising capital in 
coniiection with the issuance of securities by firms whose aggregate 
outstanding securities and other indebtedness have a market value of 
$25,000,000 or less, through such means as studies, giving appropriate 
publicity to improved technology developments in fields such as 
printing, communications, and filing, and giving special attention to 
the effect of existing and proposed regulatory changes upon the small 
companies wishing to raise capital and independent broker-dealers 
which are in a key position with respect to the costs of underwriting 
and making markets in the securities of smaller companies. 
(b) The Commission shall report on these efforts at the annual Report. 
Government-business forum required by section 503. 
94 STAT. 2294 
PUBLIC LAW 96-477—OCT. 21, 1980 
EFFECTIVE DATE 
15 use 80c note. 
SEC. 507. Except as otherwise specified, the amendments made by 
this title shall become effective January 1 of the year following the 
date of enactment of this Act. 
Small Business 
TITLE VI—SMALL BUSINESS ISSUERS' SIMPLIFICATION 
Issuers' 
Simplification 
C H O P T TTTT V 
Act of 1980. 
SHORT TITLE 
15 use 77a note. 
SEC. 601. This title may be cited as the "Small Business Issuers' 
Simplification Act of 1980'^'. 
TRANSACTIONS INVOLVING ACCREDITED INVESTORS 
SEC. 602. Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is 
amended by adding at the end thereof the following new paragraph: 
"(6) transactions involving offers or sales by an issuer solely to 
one or more accredited investors, if the aggregate offering price 
of an issue of securities offered in reliance on this paragraph does 
15 use 77c. 
not exceed the amount allowed under section SOD) of this title, if 
there is no advertising or public solicitation in connection with 
the transaction by the issuer or anyone acting on the issuer's 
behalf, and if the issuer files such notice with the Commission as 
the Commission shall prescribe.". 
DEFINITIONS 
SEC. 603. Section 2 of the Securities Act (15 U.S.C. 77b) is amended 
by adding at the end thereof the following new paragraphs: 
'(15) The term 'accredited investor' shall mean— 
"(i) a bank as defined in section 3(a)(2) of the Act whether 
acting in its individual or fiduciary capacity; an insurance 
company as defined in section 2(13) of the Act; an investment 
company registered under the Investment Company Act of 
15 use 80a-5i. 
1940 or a business development company as defined in 
Ante, p. 2275. 
section 2(a)(48) of that Act; a Small Business Investment 
Company licensed by the Small Business Administration; or 
an employee benefit plan, including an individual retire-
ment account, which is subject to the provisions of the 
29 use 1001 
Employee Retirement Income Security Act of 1974, if the 
^°^^- 
investment decision is made by a plan fiduciary, as defined 
29 use 1002. 
in section 3(21) of such Act, which is either a bank, insurance 
company, or registered investment adviser; or 
"(ii) any person who, on the basis of such factors as 
financial sophistication, net worth, knowledge, and experi-
ence in financial matters, or amount of assets under man-
agement qualifies as an accredited investor under rules and 
regulations which the Commission shall prescribe.". 
TITLE VII—EMPLOYEE BENEFIT PLAN EXEMPTIONS 
SEC. 701. Section 3(a)(2) of the Securities Act of 1933 (15 U.S.C. 
77c(a)(2)) is amended by striking out "or any interest or participation 
in a single" and all that follows through "section 401(c)(1) of such 
Code." and inserting in lieu thereof the following: "or any interest or 
participation in a single trust fund, or in a collective trust fund 
maintained by a bank, or any security arising out of a contract issued 
by an insurance company, which interest, participation, or security is 
PUBLIC LAW 96-477—OCT. 21, 1980 
94 STAT. 2295 
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, (B) an annuity plan which 26 use 401. 
meets the requirements for the deduction of the employer s contribu-
tions under section 404(a)(2) of such Code, or (C) a governmental plan 26 use 404. 
as defined in section 414(d) of such Code which has been established 26 use 414. 
by an employer for the exclusive benefit of its employees or their 
beneficiaries for the purpose of distributing to such employees or 
their beneficiaries the corpus and income of the funds accumulated 
under such plan, if under such plan it is impossible, prior to the 
satisfaction of all liabilities with respect to such employees and their 
beneficiaries, for any part of the corpus or income to be used for, or 
diverted to, purposes other than the exclusive benefit of such employ-
ees or their beneficiaries, other than any plan described in clause (A), 
(B), or (C) of this paragraph (i) the contributions under which are held 
in a single trust fund or in a separate account maintained by an 
insurance company for a single employer and under which an 
amount in excesss of the employer's contribution is allocated to the 
purchase of securities (other than interests or participations in the 
trust or separate account itself) issued by the employer or any 
company directly or indirectly controlling, controlled by, or under 
common control with the employer, (ii) which covers employees some 
or all of whom are employees within the meaning of section 401(c)(1) 
of such Code, or (iii) which is a plan funded by an annuity contract 
described in section 403(b) of such Code.". 
SEC. 702. Section 3(a)(12) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(12)) is amended by striking out "any interest or partici-
pation in any collective trust fund" and all that follows through 
section 401(c)(1) of such Code," and inserting in lieu thereof the 
following: "any interest or participation in a single trust fund, or a 
collective trust fund maintained by a bank, or any security arising 
out of a contract issued by an insurance company, which interest, 
participation, or security 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, (B) an annuity plan which meets the requirements for the 
deduction of the employer's contribution under section 404(a)(2) of 
such Code, or (C) a governmental plan as defined in section 414(d) of 
such code which has been established by an employer for the 
exclusive benefit of its employees or their beneficiaries for the 
purpose of distributing to such employees or their beneficiaries the 
corpus and income of the funds accumulated under such plan, if 
under such plan it is impossible, prior to the satisfaction of all 
liabilities with respect to such employees and their beneficiaries, for 
any part of the corpus or income to be used for, or diverted to, 
purposes other than the exclusive benefit of such employees or their 
beneficiaries, other than any plan described in clause (A), (B), or (C) of 
this paragraph (i) which covers employees some or all of whom are 
employees within the meaning of section 401(c) of such Code, or (ii) 
which is a plan funded by an annuity contract described in section 
403(b) of such Code;". 
SEC. 703. Section 3(c)(ll) of the Investment Company Act of 1940 (15 
U.S.C. 80a-3(c)(ll)) is amended to read as follows: 
"(11) Any employee's stock bonus, pension, or profit-sharing trust 
which meets the requirements for qualification under section 401 of 
the Internal Revenue Code of 1954 or which holds only assets of 26 use 401. 
governmental plans described in section 3(a)(2)(C) of the Securities 
Act of 1933; or any collective trust fund maintained by a bank Ante, p. 2294. 
94 STAT. 2296 
PUBLIC LAW 96-477—OCT. 21, 1980 
consisting solely of assets of such trusts; or any separate account the 
assets of whicn are derived solely from (A) contributions under 
pension or profit-sharing plans which meet the requirements of 
2
6 use 401. 
section 401 of the Interna Revenue Code of 1954 or the requirements 
for deduction of the employer's contribution under section 404(aX2) of 
2
6 use 404. 
such Code, (B) contributions under governmental plans in connection 
with which interests, participations, or securities are exempted from 
the registration provisions of 
section 5 of 
the Securities Act of 1933 by 
Ante, p. 2294. 
scctiou 3(a)(2)(C) of such Act, and (C) advances made by an insurance 
company in connection with the operation of such separate account.". 
Approved October 21, 1980. 
LEGISLATIVE HISTORY: 
HOUSE REPORT No. 96-1341 (eomm. on Interstate and Foreign Oommerce). 
eONGRESSIONAL REOORD, Vol. 126 (1980): 
Sept. 22, 23, considered and passed House. 
Sept. 25, considered and passed Senate, amended. 
Oct. 1, House concurred in Senate amendments. 
WEEKLY eOMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 16, No. 43: 
Oct. 21, Presidential statement.