15 U.S.C. § 80a–14: Size of investment companies

Summary

Companies started after August 22, 1940, and their main underwriters may not sell shares to the public unless one of three things is true. The company already has at least $100,000 in net worth; or it made a prior public offering and had at least $100,000 then; or its registration under the Securities Act of 1933 includes rules that (1) stop the company from issuing shares or taking subscription money until no more than 25 responsible people have agreed to buy enough shares so that their payments plus the company’s net worth equal at least $100,000, (2) require that that pledged money be paid in before selling to more than 25 people, and (3) promise to refund any paid money and sales charges on demand if the company does not reach a $100,000 net worth within 90 days after the registration becomes effective. If the company fails the refund condition in item (3), the Commission may suspend the registration statement and may suspend or cancel the company’s registration. The Commission may also study and report to Congress whenever it thinks big growth by investment companies could harm investors, markets, or concentrate control of wealth.

Title 15, §80a–14

Commerce and Trade, Source: USLM XML via OLRC

(a)Public offerings

No registered investment company organized after August 22, 1940, and no principal underwriter for such a company, shall make a public offering of securities of which such company is the issuer, unless—

(1)such company has a net worth of at least $100,000;

(2)such company has previously made a public offering of its securities, and at the time of such offering had a net worth of at least $100,000; or

(3)provision is made in connection with and as a condition of the registration of such securities under the Securities Act of 1933 [15 U.S.C. 77a et seq.] which in the opinion of the Commission adequately insures (A) that after the effective date of such registration statement such company will not issue any security or receive any proceeds of any subscription for any security until firm agreements have been made with such company by not more than twenty-five responsible persons to purchase from it securities to be issued by it for an aggregate net amount which plus the then net worth of the company, if any, will equal at least $100,000; (B) that said aggregate net amount will be paid in to such company before any subscriptions for such securities will be accepted from any persons in excess of twenty-five; (C) that arrangements will be made whereby any proceeds so paid in, as well as any sales load, will be refunded to any subscriber on demand without any deduction, in the event that the net proceeds so received by the company do not result in the company having a net worth of at least $100,000 within ninety days after such registration statement becomes effective.

At any time after the occurrence of the event specified in clause (C) of paragraph (3) of this subsection the Commission may issue a stop order suspending the effectiveness of the registration statement of such securities under the Securities Act of 1933 [15 U.S.C. 77a et seq.] and may suspend or revoke the registration of such company under this subchapter.

(b)Study on effects of size

The Commission is authorized, at such times as it deems that any substantial further increase in size of investment companies creates any problem involving the protection of investors or the public interest, to make a study and investigation of the effects of size on the investment policy of investment companies and on security markets, on concentration of control of wealth and industry, and on companies in which investment companies are interested, and from time to time to report the results of its studies and investigations and its recommendations to the Congress.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Securities Act of 1933, referred to in subsec. (a), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables.

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–14 Size of Investment Companies

Summary

Title 15, §80a–14

Notes & Related Subsidiaries

Editorial Notes

References in Text

Executive Documents

Transfer of Functions

Transfer of Functions

Citations & Metadata