15 USC 80a-9 - Ineligibility of certain affiliated persons and underwriters

U.S Code last checked for updates: Oct 16, 2024

§ 80a–9.

Ineligibility of certain affiliated persons and underwriters

(a)

Persons deemed ineligible for service with investment companies, etc.; investment adviser

It shall be unlawful for any of the following persons to serve or act in the capacity of employee, officer, director, member of an advisory board, investment adviser, or depositor of any registered investment company, or principal underwriter for any registered open-end company, registered unit investment trust, or registered face-amount certificate company:

(1)

any person who within 10 years has been convicted of any felony or misdemeanor involving the purchase or sale of any security or arising out of such person’s conduct as an underwriter, broker, dealer, investment adviser, municipal securities dealer, government securities broker, government securities dealer, bank, transfer agent, credit rating agency, or entity or person required to be registered under the Commodity Exchange Act [7 U.S.C. 1 et seq.], or as an affiliated person, salesman, or employee of any investment company, bank, insurance company, or entity or person required to be registered under the Commodity Exchange Act;

(2)

any person who, by reason of any misconduct, is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an underwriter, broker, dealer, investment adviser, municipal securities dealer, government securities broker, government securities dealer, bank, transfer agent, credit rating agency, or entity or person required to be registered under the Commodity Exchange Act [7 U.S.C. 1 et seq.], or as an affiliated person, salesman, or employee of any investment company, bank, insurance company, or entity or person required to be registered under the Commodity Exchange Act, or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security; or

(3)

a company any affiliated person of which is ineligible, by reason of paragraph (1) or (2) of this subsection, to serve or act in the foregoing capacities.

For the purposes of paragraphs (1) to (3) of this subsection, the term “investment adviser” shall include an investment adviser as defined in subchapter II of this chapter.

(b)

Certain persons serving investment companies; administrative action of Commission

The Commission may, after notice and opportunity for hearing, by order prohibit, conditionally or unconditionally, either permanently or for such period of time as it in its discretion shall deem appropriate in the public interest, any person from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter, if such person—

(1)

has willfully made or caused to be made in any registration statement, application or report filed with the Commission under this subchapter any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has omitted to state in any such registration statement, application, or report any material fact which was required to be stated therein;

(2)

has willfully violated any provision of the Securities Act of 1933 [15 U.S.C. 77a et seq.], or of the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or of subchapter II of this chapter, or of this subchapter, or of the Commodity Exchange Act [7 U.S.C. 1 et seq.], or of any rule or regulation under any of such statutes;

(3)

has willfully aided, abetted, counseled, commanded, induced, or procured the violation by any other person of the Securities Act of 1933 [15 U.S.C. 77a et seq.], or of the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or of subchapter II of this chapter, or of this subchapter, or of the Commodity Exchange Act [7 U.S.C. 1 et seq.], or of any rule or regulation under any of such statutes;

(4)

has been found by a foreign financial regulatory authority to have—

(A)

made or caused to be made in any application for registration or report required to be filed with a foreign securities authority, or in any proceeding before a foreign securities authority with respect to registration, any statement that was at the time and in light of the circumstances under which it was made false or misleading with respect to any material fact, or has omitted to state in any application or report to a foreign securities authority any material fact that is required to be stated therein;

(B)

violated any foreign statute or regulation regarding transactions in securities or contracts of sale of a commodity for future delivery traded on or subject to the rules of a contract market or any board of trade; or

(C)

aided, abetted, counseled, commanded, induced, or procured the violation by any other person of any foreign statute or regulation regarding transactions in securities or contracts of sale of a commodity for future delivery traded on or subject to the rules of a contract market or any board of trade;

(5)

within 10 years has been convicted by a foreign court of competent jurisdiction of a crime, however denominated by the laws of the relevant foreign government, that is substantially equivalent to an offense set forth in paragraph (1) of subsection (a); or

(6)

by reason of any misconduct, is temporarily or permanently enjoined by any foreign court of competent jurisdiction from acting in any of the capacities, set forth in paragraph (2) of subsection (a), or a substantially equivalent foreign capacity, or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security.

(c)

Application of ineligible person for exemption

(d)

Money penalties in administrative proceedings

(1)

Authority of Commission

(A)

In general

In any proceeding instituted pursuant to subsection (b) against any person, the Commission may impose a civil penalty if it finds, on the record after notice and opportunity for hearing, that such penalty is in the public interest, and that such person—

(i)

has willfully violated any provision of the Securities Act of 1933 [15 U.S.C. 77a et seq.], the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], subchapter II of this chapter, or this subchapter, or the rules or regulations thereunder;

(ii)

has willfully aided, abetted, counseled, commanded, induced, or procured such a violation by any other person; or

(iii)

has willfully made or caused to be made in any registration statement, application, or report required to be filed with the Commission under this subchapter, any statement which was, at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such registration statement, application, or report any material fact which was required to be stated therein; 1

 So in original. The semicolon probably should be a period.

(B)

Cease-and-desist proceedings

In any proceeding instituted pursuant to subsection (f) against any person, the Commission may impose a civil penalty if the Commission finds, on the record, after notice and opportunity for hearing, that such person—

(i)

is violating or has violated any provision of this subchapter, or any rule or regulation issued under this subchapter; or

(ii)

is or was a cause of the violation of any provision of this subchapter, or any rule or regulation issued under this subchapter.

(2)

Maximum amount of penalty

(A)

First tier

(B)

Second tier

(C)

Third tier

Notwithstanding subparagraphs (A) and (B), the maximum amount of penalty for each such act or omission shall be $100,000 for a natural person or $500,000 for any other person if—

(i)

the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and

(ii)

such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.

(3)

Determination of public interest

In considering under this section whether a penalty is in the public interest, the Commission may consider—

(A)

whether the act or omission for which such penalty is assessed involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement;

(B)

the harm to other persons resulting either directly or indirectly from such act or omission;

(C)

the extent to which any person was unjustly enriched, taking into account any restitution made to persons injured by such behavior;

(D)

whether such person previously has been found by the Commission, another appropriate regulatory agency, or a self-regulatory organization to have violated the Federal securities laws, State securities laws, or the rules of a self-regulatory organization, has been enjoined by a court of competent jurisdiction from violations of such laws or rules, or has been convicted by a court of competent jurisdiction of violations of such laws or of any felony or misdemeanor described in section 80b–3(e)(2) of this title;

(E)

the need to deter such person and other persons from committing such acts or omissions; and

(F)

such other matters as justice may require.

(4)

Evidence concerning ability to pay

(e)

Authority to enter order requiring accounting and disgorgement

(f)

Cease-and-desist proceedings

(1)

Authority of Commission

(2)

Hearing

(3)

Temporary order

(A)

In general

(B)

Applicability

(4)

Review of temporary orders

(A)

Commission review

(B)

Judicial review

Within—

(i)

10 days after the date the respondent was served with a temporary cease-and-desist order entered with a prior Commission hearing, or

(ii)

10 days after the Commission renders a decision on an application and hearing under subparagraph (A), with respect to any temporary cease-and-desist order entered without a prior Commission hearing,

the respondent may apply to the United States district court for the district in which the respondent resides or has its principal place of business, or for the District of Columbia, for an order setting aside, limiting, or suspending the effectiveness or enforcement of the order, and the court shall have jurisdiction to enter such an order. A respondent served with a temporary cease-and-desist order entered without a prior Commission hearing may not apply to the court except after hearing and decision by the Commission on the respondent’s application under subparagraph (A) of this paragraph.

(C)

No automatic stay of temporary order

(D)

Exclusive review

(5)

Authority to enter order requiring accounting and disgorgement

(g)

Corporate or other trustees performing functions of investment advisers

(Aug. 22, 1940, ch. 686, title I, § 9, 54 Stat. 805; Pub. L. 91–547, § 4, Dec. 14, 1970, 84 Stat. 1415; Pub. L. 94–29, § 28(6), June 4, 1975, 89 Stat. 166; Pub. L. 99–571, title I, § 102(l), Oct. 28, 1986, 100 Stat. 3220; Pub. L. 100–181, title VI, § 609, Dec. 4, 1987, 101 Stat. 1261; Pub. L. 101–429, title III, § 301, Oct. 15, 1990, 104 Stat. 941; Pub. L. 101–550, title II, § 205(a), Nov. 15, 1990, 104 Stat. 2718; Pub. L. 106–102, title II, § 222, Nov. 12, 1999, 113 Stat. 1401; Pub. L. 109–291, § 4(b)(2)(B), Sept. 29, 2006, 120 Stat. 1337; Pub. L. 111–203, title IX, §§ 929P(a)(3), 985(d)(2), July 21, 2010, 124 Stat. 1863, 1934.)

cite as: 15 USC 80a-9