15 U.S.C. § 80a–20 — Proxies; voting trusts; circular ownership

submitted 86 years ago by ch. 686 to r/title-15-COMMERCE-AND-TRADE · 407 words · no verdicts yet

in plain englishAI-generated · not legal advice

This law regulates proxy voting, voting-trust certificates, and stock ownership among investment companies. It bans soliciting proxies without following SEC rules and bans public sales of voting-trust certificates. It also bans buying stock that creates "cross-ownership" or "circular ownership," and requires fixing it within a year.

(a) It is illegal for anyone to solicit a proxy, consent, or authorization about a security of a registered investment company, using the mail or any means tied to interstate commerce, unless they follow the SEC's rules. The SEC writes these rules as necessary or appropriate in the public interest or to protect investors. (b) It is illegal for a registered investment company, an affiliated person of one, an issuer of a voting-trust certificate tied to such a company's security, or an underwriter of that certificate, to offer, sell, or deliver a voting-trust certificate as part of a public offering, using the mail or interstate commerce. (c) A registered investment company cannot knowingly buy a voting security if doing so creates, or will create, "cross-ownership" or "circular ownership" with the security's issuer. - Cross-ownership exists when each of two companies owns more than 3 percent of the other company's outstanding voting securities. - Circular ownership exists among a group of three or more companies when each company in the group (1) owns more than 3 percent of one or more other companies in the group, and (2) has more than 3 percent of its own voting securities owned by another company, or by two or more other companies, in the group. (d) If cross-ownership or circular ownership comes into existence because a registered investment company bought another company's securities, the registered company must end it. It has one year from when it first learns the ownership exists to eliminate it.

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

(a) Prohibition on use of means of interstate commerce for solicitation of proxies

It shall be unlawful for any person, by use of the mails or any means or instrumentality of interstate commerce or otherwise, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security of which a registered investment company is the issuer in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

(b) Prohibition on use of means of interstate commerce for sale of voting-trust certificates

It shall be unlawful for any registered investment company or affiliated person thereof, any issuer of a voting-trust certificate relating to any security of a registered investment company, or any underwriter of such a certificate, by use of the mails or any means or instrumentality of interstate commerce, or otherwise, to offer for sale, sell, or deliver after sale, in connection with a public offering, any such voting-trust certificate.

No registered investment company shall purchase any voting security if, to the knowledge of such registered company, cross-ownership or circular ownership exists, or after such acquisition will exist, between such registered company and the issuer of such security. Cross-ownership shall be deemed to exist between two companies when each of such companies beneficially owns more than 3 per centum of the outstanding voting securities of the other company. Circular ownership shall be deemed to exist between two companies if such companies are included within a group of three or more companies, each of which—

(1)

beneficially owns more than 3 per centum of the outstanding voting securities of one or more other companies of the group; and

(2)

has more than 3 per centum of its own outstanding voting securities beneficially owned by another company, or by each of two or more other companies, of the group.

(d) Duty to eliminate existing cross-ownership or circular ownership

If cross-ownership or circular ownership between a registered investment company and any other company or companies comes into existence upon the purchase by a registered investment company of the securities of another company, it shall be the duty of such registered company, within one year after it first knows of the existence of such cross-ownership or circular ownership, to eliminate the same.

Source credit: (Aug. 22, 1940, ch. 686, title I, § 20, 54 Stat. 822; Pub. L. 100–181, title VI, § 614, Dec. 4, 1987, 101 Stat. 1262.)

history & why it existsrecord from the source credit

1940Enacted · Act of Aug. 22, 1940, ch. 686 · 54 Stat. 822
1987Amended · Pub. L. 100-181 · 101 Stat. 1262

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

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