17cfr270.17-1

Securities and Exchange Commission

§ 270.17d–1

80a–2(a)(37)), that is neither registered
under section 8 of the Act, nor required
to be so registered;
(3) Independent Evaluator means a
person who has expertise in the valuation of securities and other financial
assets and who is not an interested person, as defined in section 2(a)(19) of the
Act (15 U.S.C. 80a–2(a)(19)), of the Eligible Unregistered Fund or any affiliate
thereof except the Merging Company;
and
(4) Surviving Company means a company in which shareholders of a Merging Company will obtain an interest as
a result of a Merger.
[67 FR 48518, July 24, 2002, as amended at 69
FR 46389, Aug. 2, 2004]

§ 270.17a–9 Purchase of certain securities from a money market fund by
an affiliate, or an affiliate of an affiliate.
The purchase of a security that is no
longer an Eligible Security (as defined
in paragraph (a)(10) of § 270.2a–7) from
an open-end investment company holding itself out as a ‘‘money market’’
fund shall be exempt from section 17(a)
of the Act [15 U.S.C. 80a–17(a)], provided that:
(a) The purchase price is paid in cash;
and
(b) The purchase price is equal to the
greater of the amortized cost of the security or its market price (in each
case, including accrued interest).
[61 FR 13983, Mar. 28, 1996, as amended at 62
FR 64986, Dec. 9, 1997]

§ 270.17a–10 Exemption
for
transactions with certain subadvisory affiliates.
(a) Exemption. A person that is prohibited by section 17(a) of the Act (15
U.S.C. 80a–17(a)) from entering into a
transaction with a fund solely because
such person is, or is an affiliated person of, a subadviser of the fund, or a
subadviser of a fund that is under common control with the fund, may nonetheless enter into such transaction, if:
(1) Prohibited relationship. The person
is not, and is not an affiliated person
of, an investment adviser responsible
for providing advice with respect to the
portion of the fund for which the transaction is entered into, or of any promoter, underwriter, officer, director,

member of an advisory board, or employee of the fund.
(2) Prohibited conduct. The advisory
contracts of the subadviser that is (or
whose affiliated person is) entering
into the transaction, and any subadviser that is advising the fund (or
portion of the fund) entering into the
transaction:
(i) Prohibit them from consulting
with each other concerning transactions for the fund in securities or
other assets; and
(ii) If both such subadvisers are responsible for providing investment advice to the fund, limit the subadvisers’
responsibility in providing advice with
respect to a discrete portion of the
fund’s portfolio.
(b) Definitions. (1) Fund means a registered investment company and includes a separate series of a registered
investment company.
(2) Subadviser means an investment
adviser as defined in section 2(a)(20)(B)
of the Act (15 U.S.C. 80a–2(a)(20)(B)).
[68 FR 3153, Jan. 22, 2003]

§ 270.17d–1 Applications
regarding
joint enterprises or arrangements
and certain profit-sharing plans.
(a) No affiliated person of or principal underwriter for any registered investment company (other than a company of the character described in section 12(d)(3) (A) and (B) of the Act) and
no affiliated person of such a person or
principal underwriter, acting as principal, shall participate in, or effect any
transaction in connection with, any
joint enterprise or other joint arrangement or profit-sharing plan in which
any such registered company, or a
company controlled by such registered
company, is a participant, and which is
entered into, adopted or modified subsequent to the effective date of this
rule, unless an application regarding
such joint enterprise, arrangement or
profit-sharing plan has been filed with
the Commission and has been granted
by an order entered prior to the submission of such plan or modification to
security holders for approval, or prior
to such adoption or modification if not
so submitted, except that the provisions of this rule shall not preclude any
affiliated person from acting as manager of any underwriting syndicate or

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§ 270.17d–1

17 CFR Ch. II (4–1–07 Edition)

other group in which such registered or
controlled company is a participant
and receiving compensation therefor.
(b) In passing upon such applications,
the Commission will consider whether
the participation of such registered or
controlled company in such joint enterprise, joint arrangement or profitsharing plan on the basis proposed is
consistent with the provisions, policies
and purposes of the Act and the extent
to which such participation is on a
basis different from or less advantageous than that of other participants.
(c) ‘‘Joint enterprise or other joint
arrangement or profit-sharing plan’’ as
used in this section shall mean any
written or oral plan, contract, authorization or arrangement, or any practice
or understanding concerning an enterprise or undertaking whereby a registered investment company or a controlled company thereof and any affiliated person of or a principal underwriter for such registered investment
company, or any affiliated person of
such a person or principal underwriter,
have a joint or a joint and several participation, or share in the profits of
such enterprise or undertaking, including, but not limited to, any stock option or stock purchase plan, but shall
not include an investment advisory
contract subject to section 15 of the
Act.
(d) Notwithstanding the requirements of paragraph (a) of this section,
no application need be filed pursuant
to this section with respect to any of
the following:
(1) Any profit-sharing, stock option
or stock purchase plan provided by any
controlled company which is not an investment company for its officers, directors or employees, or the purchase
of stock or the granting, modification
or exercise of options pursuant to such
a plan, provided:
(i) No individual participates therein
who is either: (a) An affiliated person
of any investment company which is an
affiliated person of such controlled
company; or (b) an affiliated person of
the investment adviser or principal underwriter of such investment company;
and
(ii) No participant has been an affiliated person of such investment com-

pany, its investment adviser or principal underwriter during the life of the
plan and for six months prior to, as the
case may be: (a) Institution of the profit-sharing plan; (b) the purchase of
stock pursuant to a stock purchase
plan; or (c) the granting of any options
pursuant to a stock option plan.
(2) Any plan provided by any registered investment company or any
controlled company for its officers or
employees if such plan has been qualified under section 401 of the Internal
Revenue Code of 1954 and all contributions paid under said plan by the employer qualify as deductible under section 404 of said Code.
(3) Any loan or advance of credit to,
or acquisition of securities or other
property of, a small business concern,
or any agreement to do any of the foregoing (‘‘Investments’’), made by a bank
and a small business investment company (SBIC) licensed under the Small
Business Investment Act of 1958,
whether such transactions are contemporaneous or separated in time, where
the bank is an affiliated person of either (i) the SBIC or (ii) an affiliated
person of the SBIC; but reports containing pertinent details as to Investments and transactions relating thereto shall be made at such time, on such
forms and by such persons as the Commission may from time to time prescribe.
(4) The issuance by a registered investment company which is licensed by
the Small Business Administration
pursuant to the Small Business Investment Act of 1958 of stock options which
qualify under section 422 of the Internal Revenue Code, as amended, and
which conform to § 107.805(b) of Chapter
I of Title 13 of the Code of Federal Regulations.
(5) Any joint enterprise or other joint
arrangement or profit-sharing plan
(‘‘joint enterprise’’) in which a registered investment company or a company controlled by such a company, is
a participant, and in which a portfolio
affiliate (as defined in § 270.17a–6(b)(3))
of such registered investment company
is also a participant, provided that:
(i) None of the persons identified in
§ 270.17a–6(a) is a participant in the
joint enterprise, or has a direct or indirect financial interest in a participant

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Securities and Exchange Commission

§ 270.17d–1

in the joint enterprise (other than the
registered investment company);
(ii) Financial interest. (A) The term financial interest as used in this section
does not include:
(1) Any interest through ownership of
securities issued by the registered investment company;
(2) Any interest of a wholly owned
subsidiary of the registered investment
company;
(3) Usual and ordinary fees for services as a director;
(4) An interest of a non-executive employee;
(5) An interest of an insurance company arising from a loan or policy
made or issued by it in the ordinary
course of business to a natural person;
(6) An interest of a bank arising from
a loan to a person who is an officer, director, or executive of a company
which is a participant in the joint
transaction or from a loan to a person
who directly or indirectly owns, controls, or holds with power to vote, five
percent or more of the outstanding voting securities of a company which is a
participant in the joint transaction;
(7) An interest acquired in a transaction described in paragraph (d)(3) of
this section; or
(8) Any other interest that the board
of directors of the investment company, including a majority of the directors who are not interested persons of
the investment company, finds to be
not material, provided that the directors record the basis for that finding in
the minutes of their meeting.
(B) A person has a financial interest
in any party in which it has a financial
interest, in which it had a financial interest within six months prior to the
investment company’s participation in
the enterprise, or in which it will acquire a financial interest pursuant to
an arrangement in existence at the
time of the investment company’s participation in the enterprise.
(6) The receipt of securities and/or
cash by an investment company or a
controlled company thereof and an affiliated person of such investment company or an affiliated person of such
person pursuant to a plan of reorganization: Provided, That no person identified in § 270.17a–6(a)(1) or any company in which such a person has a di-

rect or indirect financial interest (as
defined in paragraph (d)(5)(iii) of this
section):
(7) Any arrangement regarding liability insurance policies (other than a
bond required pursuant to rule 17g–1
(§ 270.17g–1) under the Act); Provided,
That
(i) The investment company’s participation in the joint liability insurance policy is in the best interests of
the investment company;
(ii) The proposed premium for the
joint liability insurance policy to be
allocated to the investment company,
based upon its proportionate share of
the sum of the premiums that would
have been paid if such insurance coverage were purchased separately by the
insured parties, is fair and reasonable
to the investment company;
(iii) The joint liability insurance policy does not exclude coverage for bona
fide claims made against any director
who is not an interested person of the
investment company, or against the investment company if it is a co-defendant in the claim with the disinterested
director, by another person insured
under the joint liability insurance policy;
(iv) The board of directors of the investment company, including a majority of the directors who are not interested persons with respect thereto, determine no less frequently than annually that the standards described in
paragraphs (d)(7)(i) and (ii) of this section have been satisfied; and
(v) The board of directors of the investment company satisfies the fund
governance standards defined in § 270.0–
1(a)(7).
(8) An investment adviser’s bearing
expenses in connection with a merger,
consolidation or purchase or sale of
substantially all of the assets of a company which involves a registered investment company of which it is an affiliated person.
[22 FR 426, Jan. 23, 1957, as amended at 26 FR
11240, Nov. 29, 1961; 35 FR 13123, Aug. 18, 1970;
39 FR 37973, Oct. 25, 1974; 44 FR 58503, Oct. 10,
1979; 44 FR 58908, Oct. 12, 1979; 45 FR 12409,
Feb. 26, 1980; 66 FR 3758, Jan. 16, 2001; 68 FR
3153, Jan. 22, 2003; 69 FR 46389, Aug. 2, 2004]

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