15 U.S.C. § 80a–15 — Contracts of advisers and underwriters

(a) Written contract to serve as investment adviser. It is unlawful for anyone to serve as investment adviser to a registered investment company without a written contract. That contract, whether between the adviser and the company or between the adviser and another investment adviser of the company, must be approved by holders of a majority of the company's outstanding voting securities, and must: (1) precisely describe all compensation to be paid; (2) if it runs more than two years, continue in effect only as long as the board of directors, or a majority-shareholder vote, specifically re-approves it at least once a year; (3) allow the board, or a majority-shareholder vote, to end it at any time, without penalty, on no more than sixty days' written notice to the adviser; and (4) automatically end if the contract is assigned. (b) Written contract for a principal underwriter. It is unlawful for a registered open-end company's principal underwriter to offer, sell, or deliver the company's securities after a sale, without a written contract with the company. That contract must: (1) if it runs more than two years, continue only with annual re-approval by the board or a majority-shareholder vote; and (2) automatically end if it is assigned. (c) Approval by independent directors. Beyond subsections (a) and (b), a registered investment company with a board of directors cannot enter into, renew, or carry out any contract or agreement — written or oral — under which someone regularly serves as its investment adviser or principal underwriter, unless a majority of the directors who are not parties to the contract and not "interested persons" approve it in person at a meeting called for that purpose. Directors have a duty to ask for and evaluate the information they reasonably need to judge an adviser's contract terms, and the adviser has a duty to supply it. When evaluating an adviser's contract, directors cannot take into account the purchase price or other payment someone made in a transaction of the kind covered by subsection (f)(1), (3), or (4). (d) Common-law trusts. As in section 80a–16(c), written majority approval, or a majority vote at a called meeting, counts as the vote of a majority of outstanding voting securities for this section too, and the "majority" definition in section 80a–2(a)(42) applies. (e) Advisory boards exempted. Nothing in this section requires any action by an advisory board or its members. (f) Adviser receiving benefits from selling itself. (1) An investment adviser (or a corporate trustee acting as one), or an affiliated person of either, may receive money or another benefit when it sells itself, or an interest in itself, in a way that causes the investment advisory contract to be assigned or changes who controls or identifies a corporate trustee — but only if: (A) for three years afterward, at least 75 percent of the fund's or trustee's board members are not interested persons of the new adviser/trustee or of the old one; and (B) the deal does not place an unfair burden on the fund. (2)(A) For purposes of (1)(A), whether someone is an "interested person" of a corporate trustee follows section 80a–2(a)(19)(B) — except that simply sitting on its board or advisory board, or being in the immediate family of someone who does, does not by itself count. (B) For purposes of (1)(B), an "unfair burden" includes, during the two years after the sale, any arrangement where the old or new adviser or trustee, or an interested person of either, receives pay, directly or indirectly, (i) from anyone in connection with buying or selling securities or property for the fund, other than ordinary underwriting compensation, or (ii) from the fund or its shareholders for anything other than genuine investment-advisory or other real services. (3) If (A) an assignment brings in a successor adviser, or a corporate trustee's control or identity changes, and that adviser or trustee already manages substantially more assets elsewhere, or (B) a merger or asset sale between funds of very different sizes triggers a transaction like the one in (1)(A), the Commission must weigh that size difference when deciding whether to grant an exemption, under section 80a–6(c), from the 75-percent independent-board requirement in (1)(A). (4) The 75-percent independent-board requirement in (1)(A) does not apply to a transaction where a controlling block of an adviser's or corporate trustee's voting stock is: (A) sold to the public with no real change in who controls the adviser or trustee; or (B) transferred to the adviser or trustee, or its affiliated persons, or transferred from the adviser or trustee to its affiliated persons — as long as (i) each recipient, other than the adviser or trustee itself, is a natural person, and (ii) those recipients together owned more than 25 percent of that voting stock for at least six months before the transfer.