PRIA, Government Policy, Made Personal

Summary

Says that investment companies are important to the whole country. They sell, buy, and trade many publicly offered securities across state lines and on national exchanges. They use the mail and other interstate tools. They often invest in and can influence businesses that operate across states. They move a large share of the nation’s savings into the markets. Because they work across many states and have widely spread investors, states alone often cannot protect investors. Says the national interest and investors are harmed in eight main ways. Harm occurs when investors lack clear, accurate information; when companies are run for insiders or special groups instead of all security holders; when unfair or discriminatory terms are issued; when control is too concentrated or management is irresponsible; when accounting or reserves are misleading or not independently checked; when reorganizations or control changes happen without holder consent; when there is excessive borrowing or too many senior securities; or when companies operate without enough assets or reserves. These findings come from SEC reports and other facts.

Title 15, §80a–1

Commerce and Trade, Source: USLM XML via OLRC

(a)Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Commission made pursuant to section 79z–4 11 See References in Text note below. of this title, and facts otherwise disclosed and ascertained, it is found that investment companies are affected with a national public interest in that, among other things—

(1)the securities issued by such companies, which constitute a substantial part of all securities publicly offered, are distributed, purchased, paid for, exchanged, transferred, redeemed, and repurchased by use of the mails and means and instrumentalities of interstate commerce, and in the case of the numerous companies which issue redeemable securities this process of distribution and redemption is continuous;

(2)the principal activities of such companies—investing, reinvesting, and trading in securities—are conducted by use of the mails and means and instrumentalities of interstate commerce, including the facilities of national securities exchanges, and constitute a substantial part of all transactions effected in the securities markets of the Nation;

(3)such companies customarily invest and trade in securities issued by, and may dominate and control or otherwise affect the policies and management of, companies engaged in business in interstate commerce;

(4)such companies are media for the investment in the national economy of a substantial part of the national savings and may have a vital effect upon the flow of such savings into the capital markets; and

(5)the activities of such companies, extending over many States, their use of the instrumentalities of interstate commerce and the wide geographic distribution of their security holders, make difficult, if not impossible, effective State regulation of such companies in the interest of investors.

(b)Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Commission made pursuant to section 79z–4 1 of this title, and facts otherwise disclosed and ascertained, it is declared that the national public interest and the interest of investors are adversely affected—

(1)when investors purchase, pay for, exchange, receive dividends upon, vote, refrain from voting, sell, or surrender securities issued by investment companies without adequate, accurate, and explicit information, fairly presented, concerning the character of such securities and the circumstances, policies, and financial responsibility of such companies and their management;

(2)when investment companies are organized, operated, managed, or their portfolio securities are selected, in the interest of directors, officers, investment advisers, depositors, or other affiliated persons thereof, in the interest of underwriters, brokers, or dealers, in the interest of special classes of their security holders, or in the interest of other investment companies or persons engaged in other lines of business, rather than in the interest of all classes of such companies’ security holders;

(3)when investment companies issue securities containing inequitable or discriminatory provisions, or fail to protect the preferences and privileges of the holders of their outstanding securities;

(4)when the control of investment companies is unduly concentrated through pyramiding or inequitable methods of control, or is inequitably distributed, or when investment companies are managed by irresponsible persons;

(5)when investment companies, in keeping their accounts, in maintaining reserves, and in computing their earnings and the asset value of their outstanding securities, employ unsound or misleading methods, or are not subjected to adequate independent scrutiny;

(6)when investment companies are reorganized, become inactive, or change the character of their business, or when the control or management thereof is transferred, without the consent of their security holders;

(7)when investment companies by excessive borrowing and the issuance of excessive amounts of senior securities increase unduly the speculative character of their junior securities; or

(8)when investment companies operate without adequate assets or reserves.

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 79z–4 of this title, referred to in text, was repealed by Pub. L. 109–58, title XII, § 1263, Aug. 8, 2005, 119 Stat. 974.

Executive Documents

Transfer of Functions

For

Transfer of Functions

of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, §§ 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title.

§80a–1 Findings and Declaration of Policy

Summary

Title 15, §80a–1

Notes & Related Subsidiaries

Editorial Notes

References in Text

Executive Documents

Transfer of Functions

Transfer of Functions

Citations & Metadata