PART IV

INVESTMENT COMPANY ACT* OF 1940

DEFINITION OF INVESTMENT COMPANY

EXCEPTED COMPANIES-COMPANY PRIMARILY ENGAGED THROUGH CONTROLLED SUBSIDIARY IN AN INDUSTRIAL ENTERPRISE.

A company which has no substantial assets other than its holding of investment securities in a controlled subsidiary engaged in the manufacture of chlorine products and which derives all its income from such subsidiary, held, in the light of these and various other factors entitled to an order declaring it to be primarily engaged in a business other than that of investing, reinvesting, owning, holding or trading in securities. It is, therefore, excepted from the definition of an investment company under the Investment Company Act of 1940... Page 456.

COMPANY PRIMARILY ENGAGED IN AN INDUSTRIAL ENTERPRISE.

Where a company is engaged primarily in the business of assembly, manufacturing, and merchandising coal stokers, oil burners, low temperature freezing units and kindred articles in heating and air conditioning proposes to consummate a transaction which would result in its having more than 40 percent of its assets invested in investment securities and where the securities to be acquired by the transaction are obtained as a means of raising capital and not for trading purposes and will not change the nature of its primary activities within the meaning of the Act, held, that the company is entitled to an order declaring it to be primarily engaged in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities. Page 619.

CLOSED-END, NONDIVERSIFIED.

Repurchase of Common Stock.

Application by a registered closed-end nondiversified investment company for permission to offer to repurchase its common stock granted pursuant to Section 23 (c) of the Investment Company Act where it appeared that accepting shareholders would receive their proportionate share of portfolio securities, representing substantially all the assets of the registrant. Page 311.

EXEMPTIONS

An investment company organized to engage primarily in financing of promotional activities and enterprises, the stock of which is to be offered to institutional investors and others, including registered investment companies, by means of a method of offering which does not meet the requirements of Section 14 (a) (3), held, entitled to an order exempting it from a certain provision of

*The term "Act" as used in Part III of this Digest refers to the Investment Company Act of 1940.

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Section 12 (e) (1) and from the provisions of Section 14 (a) of the Investment Company Act of 1940. .. Page 481.

Where such company has registered as a nondiversified company and it appears that it will be in fact a nondiversified company although from time to time it may hold temporarily cash, government bonds or other securities pending the investment thereof in accordance with its primary and fundamental investment policy, held, an exemption from the provisions of Section 13 (a) (1) is unnecessary and the application for an exemption from this provision of the Act is dismissed. . . Page 481.

The proposed purchase of an option from a registered investment company by a person affiliated with an affiliated person of such company, held, in view of all of the circumstances, to meet the standards of Section 17 (b) of the Investment Company Act of 1940 and entitled to an exemption from Section 17 (a) thereof. . . Page 608.

TRANSACTIONS.

Proposed transactions involving (1) sale by affiliated person to registered investment company of stock of such affiliated person, and (2) redemption by affiliated person of its bonds held by registered investment company, held, in view of all the circumstances, to meet the standards of Section 17 (b) of the Investment Company Act of 1940. . . Page 472.

TRANSACTIONS BETWEEN AFFILIATED PERSONS.

The purchase for immediate distribution to the public from a registered investment company of shares of the common stock of a motion picture corporation by an underwriting syndicate of which one underwriter is an affiliated person of an affiliated person of the investment company at a price related to the market price for such shares less a designated underwriting spread, held, under all the circumstances, to be fair and reasonable and to meet the standards of Section 17 (b) of the Investment Company Act of 1940. Page 491.

Transactions involving (1) conversion by a registered investment company of its holdings of preferred stock of an affiliated company into common stock of such company; (2) exchange by a registered investment company of its holdings of common stock of a company for common stock of a company affiliated with such registered investment company; and (3) exchange by affiliated persons (directors) of an affiliated person (a controlled company) of a registered investment company of common stock in such controlled company for common stock of another company controlled by such registered investment company held under all the circumstances to be consistent with the standards of Section 17 (b) of the Investment Company Act of 1940. . . Page 508.

Application to exempt from provisions of Section 17 (a) of the Investment Company Act of 1940 a proposed sale by a registered investment company of all of its stock interest in a majority owned affiliated bank and trust company to another bank and trust company found to be an affiliated person of a director of the investment company denied, the Commission finding that the applicant had not sustained the burden of adducing evidence establishing that the terms of the proposed sale were fair and reasonable and did not involve over-reaching on the part of any person concerned, as required by Section 17 (b) of said Act... Page 415.

Proposed transactions involving the purchase of securities from a company controlled by an investment company by affiliated persons of an affiliated person

of such investment company, held, in view of circumstances, to meet the standards of Section 17 (b) of the Investment Company Act of 1940. Page 405. Amended application to exempt from the provisions of Section 17 (a) of the Investment Company Act of 1940 a proposed sale by a registered investment company of all of its stock interests in a majority-owned affiliated bank and trust company to an affiliated person of an affiliated person of the applicant granted, the Commission finding that the applicant had adduced sufficient additional evidence at rehearing to establish that the terms of the proposed sale as amended, were fair and reasonable and did not involve overreaching on the part of any person concerned. Page 555.

JOINT PARTICIPATION WITH AFFILIATED PERSONS.

Where a mining company which is a subsidiary of a registered investment company proposes to participate in joint mining ventures and prospecting syndicates in which its affiliated person may be financially interested whereunder each party would share in proportion to their respective participations in all the expenses incurred and benefits derived therefrom held that it is appropriate in the public interest and consistent with the protection of investors and the purposes of the Act to grant, subject to certain conditions, the exemption relief requested so that individual applications need not be filed for each transaction contemplated. . . Page 49.

REDEMPTION BY AFFILIATE CONTROLLED BY A REGISTERED INVESTMENT COMPANY OF ITS OWN SECURITIES INCLUDING THOSE OWNED BY SUCH INVESTMENT COMPANY.

The redemption by a department store company controlled by a registered investment company of all its outstanding preferred shares, a substantial amount of which are owned by such registered investment company, at redemption prices provided in the department store company's certificate of incorporation, held to meet the standards of Section 17 (b) of the Investment Company Act, where the funds to be used to effect such redemption are to be obtained by a sale to the public of new securities to be issued by the department store company and where the evidence indicates that the redemption, under all of the circumstances, is fair to all classes of the department store company's securities holders and involves no overreaching on the part of any person. Page 43. CONTROL.

Where it appears that president and director of a bank and trust company, by reason of historical association with the bank and its largest stockholder groups, has the power to exercise a controlling influence over the management and policies of the bank, such power not being solely the result of his official position, held the presumption of lack of control arising from his ownership of less than 25 percentum of the voting securities of the bank was rebutted by evidence and said president and director was in control of the bank and trust company within the meaning of Section 2 (a) (9) of the Investment Company Act of 1940. . Page 415.

TERMINATION OF REGISTRATION.

A registered investment company in process of liquidation, having distributed substantially all of its assets, held, to have ceased to be an investment company and entitled to an order so declaring.

Page 608.

PART V

INVESTMENT ADVISER ACT* OF 1940

DEFINITION OF INVESTMENT ADVISER

Application for order pursuant to Section 202 (a) (11) (F) of the Investment Advisers Act of 1940 designating applicant not to be within the intent of Section 202 (a) (11) of the Act granted for a period of one year, the Commission finding that data upon which a permanent order could be based are at present unavailable. . . Page 671.

*The term "Act" as used in Part V of this digest refers to the Investment Advisers Act of 1940.

23 S. E. C.

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