Securities Lawyer's Deskbook
                         published by The University of Cincinnati College of Law
UC Law logo

Investment Company Act of 1940

Section 13 -- Changes in Investment Policy

  1. No registered investment company shall, unless authorized by the vote of a majority of its outstanding voting securities--

    1. change its subclassification as defined in section 5(a)(1) and (2) of this title [15 USCS § 80a-5(a)(1), (2)] or its subclassification from a diversified to a non-diversified company;

    2. borrow money, issue senior securities, underwrite securities issued by other persons, purchase or sell real estate or commodities or make loans to other persons, except in each case in accordance with the recitals of policy contained in its registration statement in respect thereto;

    3. deviate from its policy in respect of concentration of investments in any particular industry or group of industries as recited in its registration statement, deviate from any investment policy which is changeable only if authorized by shareholder vote, or deviate from any policy recited in its registration statement pursuant to section 8(b)(3) [15 USCS § 80a-8(b)(3)];

    4. change the nature of its business so as to cease to be an investment company.

  2. In the case of a common-law trust of the character described in section 16(c) [15 USCS § 80a-16(c)], either written approval by holders of a majority of the outstanding shares of beneficial interest or the vote of a majority of such outstanding shares cast in person or by proxy at a meeting called for the purpose shall for the purposes of subsection (a) be deemed the equivalent of the vote of a majority of the outstanding voting securities, and the provisions of paragraph (42) of section 2(a) [15 USCS § 80a-2(a)(42)] as to a majority shall be applicable to the vote cast as such a meeting.

  3. [Caution: This subsection terminates 30 days after President's certification regarding commitments honored by the Government of Sudan, pursuant to Section 12 of Act Dec. 31, 2007, P.L. 110-174, which appears as 50 USCS 1701 note.] ,

    Limitation on actions.
    1. In general. Notwithstanding any other provision of Federal or State law, no person may bring any civil, criminal, or administrative action against any registered investment company, or any employee, officer, director, or investment adviser thereof, based solely upon the investment company divesting from, or avoiding investing in, securities issued by persons that the investment company determines, using credible information that is available to the public, conduct or have direct investments in business operations in Sudan described in section 3(d) of the Sudan Accountability and Divestment Act of 2007 [50 USCS 1701 note].

    2. Applicability.

      1. Actions for breaches of fiduciay duties. Paragraph (1) does not prevent a person from bringing an action based on a breach of a fiduciary duty owed to that person with respect to a divestment or non-investment decision, other than as described in paragraph (1)

      2. Disclosures. Paragraph (1) shall not apply to a registered investment company, or any employee, officer, director, or investment adviser thereof, unless the investment company makes disclosures in accordance with regulations prescribed by the Commission.

    3. Person defined. For purposes of this subsection the term "person" includes the Federal Government and any State or political subdivision of a State.

Legislative History

Aug. 22, 1940, ch 686, Title I, § 13, 54 Stat. 811; Dec. 14, 1970, P.L. 91-547, § § 2(b), 3(d), 84 Stat. 1414, 1415; June 4, 1975, P.L. 94-29, § 28(4), 89 Stat; Dec. 31, 2007, P.L. 110-174, 4(a), 121 Stat. 2519. 165.

Notice to Users: The Deskbook is made available with the understanding that the University of Cincinnati College of Law is not engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. See Terms and Conditions of Use.  UC Brand Ingot

© Copyright 1998-2009, University of Cincinnati, All Rights Reserved