View all text of Subchapter I [§ 80a-1 - § 80a-64]
§ 80a–10. Affiliations or interest of directors, officers, and employees
(a) Interested persons of company who may serve on board of directors
(b) Employment and use of directors, officers, etc., as regular broker, principal underwriter, or investment banker
No registered investment company shall—
(1) employ as regular broker any director, officer, or employee of such registered company, or any person of which any such director, officer, or employee is an affiliated person, unless a majority of the board of directors of such registered company shall be persons who are not such brokers or affiliated persons of any of such brokers;
(2) use as a principal underwriter of securities issued by it any director, officer, or employee of such registered company or any person of which any such director, officer, or employee is an interested person, unless a majority of the board of directors of such registered company shall be persons who are not such principal underwriters or interested persons of any of such principal underwriters; or
(3) have as director, officer, or employee any investment banker, or any affiliated person of an investment banker, unless a majority of the board of directors of such registered company shall be persons who are not investment bankers or affiliated persons of any investment banker. For the purposes of this paragraph, a person shall not be deemed an affiliated person of an investment banker solely by reason of the fact that he is an affiliated person of a company of the character described in section 80a–12(d)(3)(A) and (B) of this title.
(c) Officers, directors, or employees of one bank or bank holding company as majority of board of directors of company; exceptions
(d) Exception to limitation of number of interested persons who may serve on board of directors
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 subchapter II of this chapter and is engaged principally in the business of rendering investment supervisory services as defined in subchapter II;
(3) no sales load is charged on securities issued by such investment 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;
(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.
(e) Death, disqualification, or resignation of directors as suspension of limitation provisions
If by reason of the death, disqualification, or bona fide resignation of any director or directors, the requirements of the foregoing provisions of this section or of section 80a–15(f)(1) of this title in respect of directors shall not be met by a registered investment company, the operation of such provision shall be suspended as to such registered company—
(1) for a period of thirty days if the vacancy or vacancies may be filled by action of the board of directors;
(2) for a period of sixty days if a vote of stockholders is required to fill the vacancy or vacancies; or
(3) for such longer period as the Commission may prescribe, by rules and regulations upon its own motion or by order upon application, as not inconsistent with the protection of investors.
(f) Officer, director, etc., of company acting as principal underwriter of security acquired by company
(g) Advisory boards; restrictions on membership
(h) Application of section to unincorporated registered management companies
In the case of a registered management company which is an unincorporated company not having a board of directors, the provisions of this section shall apply as follows:
(1) the provisions of subsection (a), as modified by subsection (e), shall apply to the board of directors of the depositor of such company;
(2) the provisions of subsections (b) and (c), as modified by subsection (e), shall apply to the board of directors of the depositor and of every investment adviser of such company; and
(3) the provisions of subsection (f) shall apply to purchases and other acquisitions for the account of such company of securities a principal underwriter of which is the depositor or an investment adviser of such company, or an affiliated person of such depositor or investment adviser.
(Aug. 22, 1940, ch. 686, title I, § 10, 54 Stat. 806; Pub. L. 91–547, § 5, Dec. 14, 1970, 84 Stat. 1416; Pub. L. 94–29, § 28(5), June 4, 1975, 89 Stat. 165; Pub. L. 106–102, title II, § 213(c), Nov. 12, 1999, 113 Stat. 1398; Pub. L. 109–351, title IV, § 401(c), Oct. 13, 2006, 120 Stat. 1973.)