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| Securities Lawyer's Deskbook
of Cincinnati College of Law
Investment Advisers Act of 1940
Section 202 -- Definitions
- When used in this title, unless the context otherwise
requires, the following definitions shall apply:
- "Assignment" includes any direct or indirect
transfer or hypothecation of an investment advisory contract by the assignor
or of a controlling block of the assignor's outstanding voting securities
by a security holder of the assignor; but if the investment adviser is
a partnership, no assignment of an investment advisory contract shall
be deemed to result from the death or withdrawal of a minority of the
members of the investment adviser having only a minority interest in the
business of the investment adviser, or from the admission to the investment
adviser of one or more members who, after such admission, shall be only
a minority of the members and shall have only a minority interest in the
- "Bank" means
- a banking institution organized under the laws of the United States or a Federal savings association, as defined in section 2(5) of the Home Owners' Loan Act [12 USCS § 1462(5)],
- a member bank of the Federal Reserve System,
- any other banking institution, savings association, as defined in section 2(4) of the Home Owners' Loan Act [12 USCS § 1462(4)], or trust company, whether incorporated or not, doing business under the laws of any State or of the United States, a substantial portion of the business of which consists of receiving deposits or exercising fiduciary powers similar to those permitted to national banks under the authority of the Comptroller of the Currency, and which is supervised and examined by State or Federal authority having supervision over banks or savings associations, and which is not operated for the purpose of evading the provisions of this title [15 USCS §§ 80b-1 et seq.], and
- a receiver, conservator, or other liquidating agent of any institution or firm included in clauses (A), (B), or (C) of this paragraph.
- The term "broker" has the same meaning as
given in section 3 of the Securities
Exchange Act of 1934.
- "Commission" means the Securities and Exchange
- "Company" means a corporation, a partnership,
an association, a joint-stock company, a trust, or any organized group
of persons, whether incorporated or not; or any receiver, trustee in a
case under title 11 of the United States Code [11 USCS §§ 101 et seq.],
or similar official, or any liquidating agent for any of the foregoing,
in his capacity as such.
- "Convicted" includes a verdict, judgment,
or plea of guilty, or a finding of guilt on a plea of nolo contendere,
if such verdict, judgment, plea, or finding has not been reversed, set
aside, or withdrawn, whether or not sentence has been imposed.
- The term "dealer" has the same meaning as
given in section 3 of the Securities Exchange Act of 1934, but does not
include an insurance company or investment company.
- "Director" means any director of a corporation
or any person performing similar functions with respect to any organization,
whether incorporated or unincorporated.
- "Exchange" means any organization, association,
or group of persons, whether incorporated or unincorporated, which constitutes,
maintains, or provides a market place or facilities for bringing together
purchasers and sellers of securities or for otherwise performing with
respect to securities the functions commonly performed by a stock exchange
as that term is generally understood, and includes the market place and
the market facilities maintained by such exchange.
- "Interstate commerce" means trade, commerce,
transportation, or communication among the several States, or between
any foreign country and any State, or between any State and any place
or ship outside thereof.
- "Investment adviser" means any person who,
for compensation, engages in the business of advising others, either directly
or through publications or writings, as to the value of securities or
as to the advisability of investing in, purchasing, or selling securities,
or who, for compensation and as part of a regular business, issues or
promulgates analyses or reports concerning securities; but does not include
- a bank, or any bank holding company as defined in the Bank Holding
Company Act of 1956, which is not an investment company, except that the
term "investment adviser" includes any bank or bank holding company to
the extent that such bank or bank holding company serves or acts as an
investment adviser to a registered investment company, but if, in the
case of a bank, such services or actions are performed through a separately
identifiable department or division, the department or division, and not
the bank itself, shall be deemed to be the investment adviser;
- any lawyer, accountant, engineer, or teacher whose performance of such services
is solely incidental to the practice of his profession;
- any broker
or dealer whose performance of such services is solely incidental to the
conduct of his business as a broker or dealer and who receives no special
- the publisher of any bona fide newspaper, news
magazine or business or financial publication of general and regular circulation;
- any person whose advice, analyses, or reports relate to no securities
other than securities which are direct obligations of or obligations guaranteed
as to principal or interest by the United States, or securities issued
or guaranteed by corporations in which the United States has a direct
or indirect interest which shall have been designated by the Secretary
of the Treasury, pursuant to section
3(a)(12) of the Securities Exchange Act of 1934, as exempted securities
for the purposes of that Act;
- any nationally recognized statistical rating organization, as that term is defined in section 3(a)(62) of the Securities Exchange Act of 1934, unless such organization engages in issuing recommendations as to purchasing, selling, or holding securities or in managing assets, consisting in whole or in part of securities, on behalf of others; or
- such other persons not within the intent of this paragraph, as the Commission may designate by rules and regulations or order.
- "Investment company", affiliated person,
and "insurance company" have the same meanings as in the Investment Company
Act of 1940. "Control" means the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely
the result of an official position with such company.
- "Investment supervisory services" means
the giving of continuous advice as to the investment of funds on the basis
of the individual needs of each client.
- "Means or instrumentality of interstate
commerce" includes any facility of a national securities exchange.
- "National securities exchange" means an
exchange registered under section 6 of
the Securities Exchange Act of 1934.
- "Person" means a natural person or a company.
- The term "person associated with an investment
adviser" means any partner, officer, or director of such investment adviser
(or any person performing similar functions), or any person directly or
indirectly controlling or controlled by such investment adviser, including
any employee of such investment adviser, except that for the purposes
of section 203 (other than subsection (f) thereof),
persons associated with an investment adviser whose functions are clerical
or ministerial shall not be included in the meaning of such term. The
Commission may by rules and regulations classify, for the purposes of
any portion or portions of this title, persons, including employees controlled
by an investment adviser.
- "Security" means any note, stock, treasury
stock, security future, bond, debenture, evidence of indebtedness, certificate
of interest or participation in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of deposit
for a security, fractional undivided interest in oil, gas, or other mineral
rights, any put, call, straddle, option, or privilege on any security
(including a certificate of deposit) or on any group or index of securities
(including any interest therein or based on the value thereof), or any
put, call, straddle, option, or privilege entered into on a national securities
exchange relating to foreign currency, or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest
or participation in, temporary or interim certificate for, receipt for,
guaranty of, or warrant or right to subscribe to or purchase any of the
- "State" means any State of the United States,
the District of Columbia, Puerto Rico, the Virgin Islands, or any other
possession of the United States.
- "Underwriter" means any person who has purchased
from an issuer with a view to, or sells for an issuer in connection with,
the distribution of any security, or participates or has a direct or indirect
participation in any such undertaking, or participates or has a participation
in the direct or indirect underwriting of any such undertaking; but such
term shall not include a person whose interest is limited to a commission
from an underwriter or dealer not in excess of the usual and customary
distributor's or seller's commission. As used in this paragraph the term
"issuer" shall include in addition to an issuer, any person directly or
indirectly controlling or controlled by the issuer, or any person under
direct or indirect common control with the issuer.
- "Securities Act of 1933", "Securities Exchange
Act of 1934", "Public Utility Holding Company Act of 1935", and "Trust
Indenture Act of 1939", mean those Acts, respectively, as heretofore or
- "Business development company" means any
company which is a business development company as defined in section
2(a)(48) of title I of this Act and which complies with section
55 of title I of this Act, except that--
- the 70 per centum of the value of
the total assets condition referred to in sections 2(a)(48) and 55
of title I of this Act shall be 60 per centum for purposes of determining
- such company need not be a closed-end
company and need not elect to be subject to the provisions of sections
55 through 65 of title I of this Act; and
- the securities which may be purchased
pursuant to section 55(a) of title I of this Act may be purchased
from any person. For purposes of this paragraph, all terms in sections
2(a)(48) and 55 of title I of this Act shall have the same meaning
set forth in such title as if such company were a registered closed-end
investment company, except that the value of the assets of a business
development company which is not subject to the provisions of sections
55 through 65 of title I of this Act shall be determined as of the
date of the most recent financial statements which it furnished to
all holders of its securities, and shall be determined no less frequently
- "Foreign securities authority" means any
foreign government, or any governmental body or regulatory organization
empowered by a foreign government to administer or enforce its laws as
they relate to securities matters.
- "Foreign financial regulatory authority"
means any (A) foreign securities authority, (B) other governmental body
or foreign equivalent of a self-regulatory organization empowered by a
foreign government to administer or enforce its laws relating to the regulation
of fiduciaries, trusts, commercial lending, insurance, trading in contracts
of sale of a commodity for future delivery, or other instruments traded
on or subject to the rules of a contract market, board of trade or foreign
equivalent, or other financial activities, or (C) membership organization
a function of which is to regulate the participation of its members in
activities listed above.
- "Supervised person" means any partner, officer,
director (or other person occupying a similar status or performing similar
functions), or employee of an investment adviser, or other person who
provides investment advice on behalf of the investment adviser and is
subject to the supervision and control of the investment adviser.
- The term "separately identifiable department
or division" of a bank means a unit--
- that is under the direct supervision
of an officer or officers designated by the board of directors of
the bank as responsible for the day-to-day conduct of the bank's investment
adviser activities for one or more investment companies, including
the supervision of all bank employees engaged in the performance of
such activities; and
- for which all of the records relating
to its investment adviser activities are separately maintained in
or extractable from such unit's own facilities or the facilities of
the bank, and such records are so maintained or otherwise accessible
as to permit independent examination and enforcement by the Commission
of this Act or the Investment Company Act of 1940 and rules and regulations
promulgated under this Act or the Investment Company Act of 1940.
- The terms "security future" and "narrow-based
security index" have the same meanings as provided in section
3(a)(55) of the Securities Exchange Act of 1934.
- The term "credit rating agency" has the same meaning as in section 3 of the Securities Exchange Act of 1934.
- No provision in this title shall apply to, or be
deemed to include, the United States, a State, or any political subdivision
of a State, or any agency, authority, or instrumentality of any one or more
of the foregoing, or any corporation which is wholly owned directly or indirectly
by any one or more of the foregoing, or any officer, agent, or employee of
any of the foregoing acting as such in the course of his official duty, unless
such provision makes specific reference thereto.
- Consideration of promotion of efficiency, competition,
and capital formation. Whenever pursuant to this title the Commission
is engaged in rulemaking and is required to consider or determine whether
an action is necessary or appropriate in the public interest, the Commission
shall also consider, in addition to the protection of investors, whether the
action will promote efficiency, competition, and capital formation.
Aug. 22, 1940, ch 686, Title II, § 202, 54 Stat. 847; June 25, 1959, P.L. 86-70,
§ 12(c), 73 Stat. 143; July 12, 1960, P.L. 86-624, § 7(d), 74 Stat. 412; Sept.
13, 1960, P.L. 86-750, § 1, 74 Stat. 885; July 1, 1966, P.L. 89-485, § 13(j),
80 Stat. 243; Dec. 14, 1970, P.L. 91-547, § 23, 84 Stat. 1430; Nov. 6, 1978, P.L.
95-598, Title III, § 311, 92 Stat. 2676; Oct. 21, 1980, P.L. 96-477, Title II,
§ 201, 94 Stat. 2289; Oct. 13, 1982, P.L. 97-303, § 6, 96 Stat. 1410; Dec. 4,
1987, P.L. 100-181, Title VII, § 701, 101 Stat. 1263; Nov. 15, 1990, P.L. 101-550,
Title II, § 206(b), 104 Stat. 2720; Oct. 11, 1996, P.L. 104-290, Title III, §
303(c), 110 Stat. 3438; Nov. 12, 1999, P.L. 106-102, Title II, Subtitle B, §§
217-219, 224, 113 Stat. 1399, 1402; Dec. 21, 2000, P.L. 106-554, § 1(a)(5), 114
Stat. 2763; Sept. 29, 2006, P.L. 109-291, § 4(b)(3)(A), (B), 120 Stat. 1337; Oct. 13, 2006, P.L. 109-351, Title IV , § 401(b)(1), 120 Stat. 1973.
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