15 U.S.C. § 80a–11 — Offers to exchange securities

submitted 86 years ago by ch. 686 to r/title-15-COMMERCE-AND-TRADE · 401 words · no verdicts yet

in plain englishAI-generated · not legal advice

An open-end fund (or its main underwriter) generally cannot offer to swap an investor's shares for shares of another such fund on anything other than a fair, net-asset-value basis, unless the SEC approves the specific offer or it follows SEC rules already in place. This rule doesn't apply to exchange offers made under a shareholder-approved reorganization plan, but it does apply, whatever the exchange basis, to swaps involving unit investment trusts or face-amount certificate companies.

(a) It is against the law for a registered open-end investment company, or its main underwriter, to offer a shareholder of that fund (or of any other open-end fund) a swap of their shares for shares in the same or a different fund on any basis other than the fair relative net asset values of the two shares — unless the SEC has first approved the specific terms of that offer, or the offer follows SEC rules already in effect for such offers. For this rule, an offer "by a principal underwriter" means one sent out to a whole class or group of shareholders, not an offer made to one individual investor as part of ordinary retail business. And "net asset value" means whatever net asset value is being used at that time to price the shares for sale to the public — either when the offer is accepted, or at whatever later time the offer specifies. (b) This rule does not apply to an exchange offer made under a plan of reorganization that has been submitted to, and needs approval from, holders of at least a majority of the affected class or series of shares. (c) Regardless of how the exchange is priced, subsection (a)'s rule does apply to: (1) any offer to exchange shares of a registered open-end fund for shares of a registered unit investment trust or a registered face-amount certificate company; and (2) any exchange offer between the shares of registered unit investment trusts or face-amount certificate companies and the shares of any other investment company.

the actual law source: uscode.house.gov ↗public domain

(a) Approval by Commission for exchanges of securities on basis other than relative net asset value

It shall be unlawful for any registered open-end company or any principal underwriter for such a company to make or cause to be made an offer to the holder of a security of such company or of any other open-end investment company to exchange his security for a security in the same or another such company on any basis other than the relative net asset values of the respective securities to be exchanged, unless the terms of the offer have first been submitted to and approved by the Commission or are in accordance with such rules and regulations as the Commission may have prescribed in respect of such offers which are in effect at the time such offer is made. For the purposes of this section, (A) an offer by a principal underwriter means an offer communicated to holders of securities of a class or series but does not include an offer made by such principal underwriter to an individual investor in the course of a retail business conducted by such principal underwriter, and (B) the net asset value means the net asset value which is in effect for the purpose of determining the price at which the securities, or class or series of securities involved, are offered for sale to the public either (1) at the time of the receipt by the offeror of the acceptance of the offer or (2) at such later times as is specified in the offer.

(b) Application of section to offers pursuant to plan of reorganization

The provisions of this section shall not apply to any offer made pursuant to any plan of reorganization, which is submitted to and requires the approval of the holders of at least a majority of the outstanding shares of the class or series to which the security owned by the offeree belongs.

The provisions of subsection (a) shall be applicable, irrespective of the basis of exchange, (1) to any offer of exchange of any security of a registered open-end company for a security of a registered unit investment trust or registered face-amount certificate company; and (2) to any type of offer of exchange of the securities of registered unit investment trusts or registered face-amount certificate companies for the securities of any other investment company.

Source credit: (Aug. 22, 1940, ch. 686, title I, § 11, 54 Stat. 808; Pub. L. 91–547, § 6, Dec. 14, 1970, 84 Stat. 1417.)

history & why it existsrecord from the source credit

1940Enacted · Act of Aug. 22, 1940, ch. 686 · 54 Stat. 808
1970Amended · Pub. L. 91-547 · 84 Stat. 1417

A history note hasn’t been published yet. The record shows enactment by ch. 686 on 1940-08-22.

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