
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 15USC80b-3]

 
                      TITLE 15--COMMERCE AND TRADE
 
              CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
 
                   SUBCHAPTER II--INVESTMENT ADVISERS
 
Sec. 80b-3. Registration of investment advisers


(a) Necessity of registration

    Except as provided in subsection (b) of this section and section 
80b-3a of this title, it shall be unlawful for any investment adviser, 
unless registered under this section, to make use of the mails or any 
means or instrumentality of interstate commerce in connection with his 
or its business as an investment adviser.

(b) Investment advisers who need not be registered

    The provisions of subsection (a) of this section shall not apply 
to--
        (1) any investment adviser all of whose clients are residents of 
    the State within which such investment adviser maintains his or its 
    principal office and place of business, and who does not furnish 
    advice or issue analyses or reports with respect to securities 
    listed or admitted to unlisted trading privileges on any national 
    securities exchange;
        (2) any investment adviser whose only clients are insurance 
    companies;
        (3) any investment adviser who during the course of the 
    preceding twelve months has had fewer than fifteen clients and who 
    neither holds himself out generally to the public as an investment 
    adviser nor acts as an investment adviser to any investment company 
    registered under subchapter I of this chapter, or a company which 
    has elected to be a business development company pursuant to section 
    80a-53 of this title and has not withdrawn its election. For 
    purposes of determining the number of clients of an investment 
    adviser under this paragraph, no shareholder, partner, or beneficial 
    owner of a business development company, as defined in this 
    subchapter, shall be deemed to be a client of such investment 
    adviser unless such person is a client of such investment adviser 
    separate and apart from his status as a shareholder, partner, or 
    beneficial owner;
        (4) any investment adviser that is a charitable organization, as 
    defined in section 3(c)(10)(D) of the Investment Company Act of 1940 
    [15 U.S.C. 80a-3(c)(10)(D)], or is a trustee, director, officer, 
    employee, or volunteer of such a charitable organization acting 
    within the scope of such person's employment or duties with such 
    organization, whose advice, analyses, or reports are provided only 
    to one or more of the following:
            (A) any such charitable organization;
            (B) a fund that is excluded from the definition of an 
        investment company under section 3(c)(10)(B) of the Investment 
        Company Act of 1940 [15 U.S.C. 80a-3(c)(10)(B)]; or
            (C) a trust or other donative instrument described in 
        section 3(c)(10)(B) of the Investment Company Act of 1940 [15 
        U.S.C. 80a-3(c)(10)(B)], or the trustees, administrators, 
        settlors (or potential settlors), or beneficiaries of any such 
        trust or other instrument;

        (5) any plan described in section 414(e) of title 26, any person 
    or entity eligible to establish and maintain such a plan under title 
    26, or any trustee, director, officer, or employee of or volunteer 
    for any such plan or person, if such person or entity, acting in 
    such capacity, provides investment advice exclusively to, or with 
    respect to, any plan, person, or entity or any company, account, or 
    fund that is excluded from the definition of an investment company 
    under section 3(c)(14) of the Investment Company Act of 1940 [15 
    U.S.C. 80a-3(c)(14)]; or
        (6) any investment adviser that is registered with the Commodity 
    Futures Trading Commission as a commodity trading advisor whose 
    business does not consist primarily of acting as an investment 
    adviser, as defined in section 80b-2(a)(11) of this title, and that 
    does not act as an investment adviser to--
            (A) an investment company registered under subchapter I of 
        this chapter; or
            (B) a company which has elected to be a business development 
        company pursuant to section 80a-53 of this title and has not 
        withdrawn its election.

(c) Procedure for registration; filing of application; effective date of 
        registration; amendment of registration

    (1) An investment adviser, or any person who presently contemplates 
becoming an investment adviser, may be registered by filing with the 
Commission an application for registration in such form and containing 
such of the following information and documents as the Commission, by 
rule, may prescribe as necessary or appropriate in the public interest 
or for the protection of investors:
        (A) the name and form of organization under which the investment 
    adviser engages or intends to engage in business; the name of the 
    State or other sovereign power under which such investment adviser 
    is organized; the location of his or its principal business office 
    and branch offices, if any; the names and addresses of his or its 
    partners, officers, directors, and persons performing similar 
    functions or, if such an investment adviser be an individual, of 
    such individual; and the number of his or its employees;
        (B) the education, the business affiliations for the past ten 
    years, and the present business affiliations of such investment 
    adviser and of his or its partners, officers, directors, and persons 
    performing similar functions and of any controlling person thereof;
        (C) the nature of the business of such investment adviser, 
    including the manner of giving advice and rendering analyses or 
    reports;
        (D) a balance sheet certified by an independent public 
    accountant and other financial statements (which shall, as the 
    Commission specifies, be certified);
        (E) the nature and scope of the authority of such investment 
    adviser with respect to clients' funds and accounts;
        (F) the basis or bases upon which such investment adviser is 
    compensated;
        (G) whether such investment adviser, or any person associated 
    with such investment adviser, is subject to any disqualification 
    which would be a basis for denial, suspension, or revocation of 
    registration of such investment adviser under the provisions of 
    subsection (e) of this section; and
        (H) a statement as to whether the principal business of such 
    investment adviser consists or is to consist of acting as investment 
    adviser and a statement as to whether a substantial part of the 
    business of such investment adviser, consists or is to consist of 
    rendering investment supervisory services.

    (2) Within forty-five days of the date of the filing of such 
application (or within such longer period as to which the applicant 
consents) the Commission shall--
        (A) by order grant such registration; or
        (B) institute proceedings to determine whether registration 
    should be denied. Such proceedings shall include notice of the 
    grounds for denial under consideration and opportunity for hearing 
    and shall be concluded within one hundred twenty days of the date of 
    the filing of the application for registration. At the conclusion of 
    such proceedings the Commission, by order, shall grant or deny such 
    registration. The Commission may extend the time for conclusion of 
    such proceedings for up to ninety days if it finds good cause for 
    such extension and publishes its reasons for so finding or for such 
    longer period as to which the applicant consents.

The Commission shall grant such registration if the Commission finds 
that the requirements of this section are satisfied and that the 
applicant is not prohibited from registering as an investment adviser 
under section 80b-3a of this title. The Commission shall deny such 
registration if it does not make such a finding or if it finds that if 
the applicant were so registered, its registration would be subject to 
suspension or revocation under subsection (e) of this section.

(d) Other acts prohibited by subchapter

    Any provision of this subchapter (other than subsection (a) of this 
section) which prohibits any act, practice, or course of business if the 
mails or any means or instrumentality of interstate commerce are used in 
connection therewith shall also prohibit any such act, practice, or 
course of business by any investment adviser registered pursuant to this 
section or any person acting on behalf of such an investment adviser, 
irrespective of any use of the mails or any means or instrumentality of 
interstate commerce in connection therewith.

(e) Censure, denial, or suspension of registration; notice and hearing

    The Commission, by order, shall censure, place limitations on the 
activities, functions, or operations of, suspend for a period not 
exceeding twelve months, or revoke the registration of any investment 
adviser if it finds, on the record after notice and opportunity for 
hearing, that such censure, placing of limitations, suspension, or 
revocation is in the public interest and that such investment adviser, 
or any person associated with such investment adviser, whether prior to 
or subsequent to becoming so associated--
        (1) has willfully made or caused to be made in any application 
    for registration or report required to be filed with the Commission 
    under this subchapter, or in any proceeding before the Commission 
    with respect to registration, 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 application or report any material fact which is 
    required to be stated therein.
        (2) has been convicted within ten years preceding the filing of 
    any application for registration or at any time thereafter of any 
    felony or misdemeanor or of a substantially equivalent crime by a 
    foreign court of competent jurisdiction which the Commission finds--
            (A) involves the purchase or sale of any security, the 
        taking of a false oath, the making of a false report, bribery, 
        perjury, burglary, any substantially equivalent activity however 
        denominated by the laws of the relevant foreign government, or 
        conspiracy to commit any such offense;
            (B) arises out of the conduct of the business of a broker, 
        dealer, municipal securities dealer, investment adviser, bank, 
        insurance company, government securities broker, government 
        securities dealer, fiduciary, transfer agent, foreign person 
        performing a function substantially equivalent to any of the 
        above, or entity or person required to be registered under the 
        Commodity Exchange Act [7 U.S.C. 1 et seq.] or any substantially 
        equivalent statute or regulation;
            (C) involves the larceny, theft, robbery, extortion, 
        forgery, counterfeiting, fraudulent concealment, embezzlement, 
        fraudulent conversion, or misappropriation of funds or 
        securities or substantially equivalent activity however 
        denominated by the laws of the relevant foreign government; or
            (D) involves the violation of section 152, 1341, 1342, or 
        1343 or chapter 25 or 47 of title 18, or a violation of \1\ 
        substantially equivalent foreign statute.
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    \1\ So in original. Probably should be ``of a''.

        (3) has been convicted during the 10-year period preceding the 
    date of filing of any application for registration, or at any time 
    thereafter, of--
            (A) any crime that is punishable by imprisonment for 1 or 
        more years, and that is not described in paragraph (2); or
            (B) a substantially equivalent crime by a foreign court of 
        competent jurisdiction.

        (4) is permanently or temporarily enjoined by order, judgment, 
    or decree of any court of competent jurisdiction, including any 
    foreign court of competent jurisdiction, from acting as an 
    investment adviser, underwriter, broker, dealer, municipal 
    securities dealer, government securities broker, government 
    securities dealer, transfer agent, foreign person performing a 
    function substantially equivalent to any of the above, or entity or 
    person required to be registered under the Commodity Exchange Act [7 
    U.S.C. 1 et seq.] or any substantially equivalent statute or 
    regulation, or as an affiliated person or employee of any investment 
    company, bank, insurance company, foreign entity substantially 
    equivalent to any of the above, or entity or person required to be 
    registered under the Commodity Exchange Act or any substantially 
    equivalent statute or regulation, 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.
        (5) 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.], the Investment Company Act of 1940 [15 
    U.S.C. 80a-1 et seq.], this subchapter, the Commodity Exchange Act 
    [7 U.S.C. 1 et seq.], or the rules or regulations under any such 
    statutes or any rule of the Municipal Securities Rulemaking Board, 
    or is unable to comply with any such provision.
        (6) has willfully aided, abetted, counseled, commanded, induced, 
    or procured the violation by any other person of 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.], the Investment Company 
    Act of 1940 [15 U.S.C. 80a-1 et seq.], this subchapter, the 
    Commodity Exchange Act [7 U.S.C. 1 et seq.], the rules or 
    regulations under any of such statutes, or the rules of the 
    Municipal Securities Rulemaking Board, or has failed reasonably to 
    supervise, with a view to preventing violations of the provisions of 
    such statutes, rules and regulations, another person who commits 
    such a violation, if such other person is subject to his 
    supervision. For the purposes of this paragraph no person shall be 
    deemed to have failed reasonably to supervise any person, if--
            (A) there have been established procedures, and a system for 
        applying such procedures, which would reasonably be expected to 
        prevent and detect, insofar as practicable, any such violation 
        by such other person, and
            (B) such person has reasonably discharged the duties and 
        obligations incumbent upon him by reason of such procedures and 
        system without reasonable cause to believe that such procedures 
        and system were not being complied with.

        (7) is subject to an order of the Commission entered pursuant to 
    subsection (f) of this section barring or suspending the right of 
    such person to be associated with an investment adviser which order 
    is in effect with respect to such person.
        (8) 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, or has been found, by the foreign finanical \2\ 
        regulatory authority, to have failed reasonably to supervise, 
        with a view to preventing violations of statutory provisions, 
        and rules and regulations promulgated thereunder, another person 
        who commits such a violation, if such other person is subject to 
        his supervision.
---------------------------------------------------------------------------
    \2\ So in original. Probably should be ``financial''.
---------------------------------------------------------------------------

(f) Bar or suspension from association with investment adviser; notice 
        and hearing

    The Commission, by order, shall censure or place limitations on the 
activities of any person associated, seeking to become associated, or, 
at the time of the alleged misconduct, associated or seeking to become 
associated with an investment adviser, or suspend for a period not 
exceeding twelve months or bar any such person from being associated 
with an investment adviser, if the Commission finds, on the record after 
notice and opportunity for hearing, that such censure, placing of 
limitations, suspension, or bar is in the public interest and that such 
person has committed or omitted any act or omission enumerated in 
paragraph (1), (5), (6), or (8) of subsection (e) of this section or has 
been convicted of any offense specified in paragraph (2) of subsection 
(e) of this section within ten years of the commencement of the 
proceedings under this subsection, or is enjoined from any action, 
conduct, or practice specified in paragraph (4) of subsection (e) of 
this section. It shall be unlawful for any person as to whom such an 
order suspending or barring him from being associated with an investment 
adviser is in effect willfully to become, or to be, associated with an 
investment adviser without the consent of the Commission, and it shall 
be unlawful for any investment adviser to permit such a person to 
become, or remain, a person associated with him without the consent of 
the Commission, if such investment adviser knew, or in the exercise of 
reasonable care, should have known, of such order.

(g) Registration of successor to business of investment adviser

    Any successor to the business of an investment adviser registered 
under this section shall be deemed likewise registered hereunder, if 
within thirty days from its succession to such business it shall file an 
application for registration under this section, unless and until the 
Commission, pursuant to subsection (c) or subsection (e) of this 
section, shall deny registration to or revoke or suspend the 
registration of such successor.

(h) Withdrawal of registration

    Any person registered under this section may, upon such terms and 
conditions as the Commission finds necessary in the public interest or 
for the protection of investors, withdraw from registration by filing a 
written notice of withdrawal with the Commission. If the Commission 
finds that any person registered under this section, or who has pending 
an application for registration filed under this section, is no longer 
in existence, is not engaged in business as an investment adviser, or is 
prohibited from registering as an investment adviser under section 80b-
3a of this title, the Commission shall by order cancel the registration 
of such person.

(i) Money penalties in administrative proceedings

                     (1) Authority of Commission

        In any proceeding instituted pursuant to subsection (e) or (f) 
    of this section against any person, the Commission may impose a 
    civil penalty if it finds, on the record after notice and 
    opportunity for hearing, that such person--
            (A) 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 I of this chapter, 
        or this subchapter, or the rules or regulations thereunder;
            (B) has willfully aided, abetted, counseled, commanded, 
        induced, or procured such a violation by any other person;
            (C) has willfully made or caused to be made in any 
        application for registration or report required to be filed with 
        the Commission under this subchapter, or in any proceeding 
        before the Commission with respect to registration, 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 application or report any material fact which was required 
        to be stated therein; or
            (D) has failed reasonably to supervise, within the meaning 
        of subsection (e)(6) of this section, with a view to preventing 
        violations of the provisions of this subchapter and the rules 
        and regulations thereunder, another person who commits such a 
        violation, if such other person is subject to his supervision;

    and that such penalty is in the public interest.

                    (2) Maximum amount of penalty

        (A) First tier

            The maximum amount of penalty for each act or omission 
        described in paragraph (1) shall be $5,000 for a natural person 
        or $50,000 for any other person.

        (B) Second tier

            Notwithstanding subparagraph (A), the maximum amount of 
        penalty for each such act or omission shall be $50,000 for a 
        natural person or $250,000 for any other person if the act or 
        omission described in paragraph (1) involved fraud, deceit, 
        manipulation, or deliberate or reckless disregard of a 
        regulatory requirement.

        (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 
        subsection (e)(2) of this section;
            (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

        In any proceeding in which the Commission may impose a penalty 
    under this section, a respondent may present evidence of the 
    respondent's ability to pay such penalty. The Commission may, in its 
    discretion, consider such evidence in determining whether such 
    penalty is in the public interest. Such evidence may relate to the 
    extent of such person's ability to continue in business and the 
    collectability of a penalty, taking into account any other claims of 
    the United States or third parties upon such person's assets and the 
    amount of such person's assets.

(j) Authority to enter order requiring accounting and disgorgement

    In any proceeding in which the Commission may impose a penalty under 
this section, the Commission may enter an order requiring accounting and 
disgorgement, including reasonable interest. The Commission is 
authorized to adopt rules, regulations, and orders concerning payments 
to investors, rates of interest, periods of accrual, and such other 
matters as it deems appropriate to implement this subsection.

(k) Cease-and-desist proceedings

                     (1) Authority of Commission

        If the Commission finds, after notice and opportunity for 
    hearing, that any person is violating, has violated, or is about to 
    violate any provision of this subchapter, or any rule or regulation 
    thereunder, the Commission may publish its findings and enter an 
    order requiring such person, and any other person that is, was, or 
    would be a cause of the violation, due to an act or omission the 
    person knew or should have known would contribute to such violation, 
    to cease and desist from committing or causing such violation and 
    any future violation of the same provision, rule, or regulation. 
    Such order may, in addition to requiring a person to cease and 
    desist from committing or causing a violation, require such person 
    to comply, or to take steps to effect compliance, with such 
    provision, rule, or regulation, upon such terms and conditions and 
    within such time as the Commission may specify in such order. Any 
    such order may, as the Commission deems appropriate, require future 
    compliance or steps to effect future compliance, either permanently 
    or for such period of time as the Commission may specify, with such 
    provision, rule, or regulation with respect to any security, any 
    issuer, or any other person.

                             (2) Hearing

        The notice instituting proceedings pursuant to paragraph (1) 
    shall fix a hearing date not earlier than 30 days nor later than 60 
    days after service of the notice unless an earlier or a later date 
    is set by the Commission with the consent of any respondent so 
    served.

                         (3) Temporary order

        (A) In general

            Whenever the Commission determines that the alleged 
        violation or threatened violation specified in the notice 
        instituting proceedings pursuant to paragraph (1), or the 
        continuation thereof, is likely to result in significant 
        dissipation or conversion of assets, significant harm to 
        investors, or substantial harm to the public interest, 
        including, but not limited to, losses to the Securities Investor 
        Protection Corporation, prior to the completion of the 
        proceedings, the Commission may enter a temporary order 
        requiring the respondent to cease and desist from the violation 
        or threatened violation and to take such action to prevent the 
        violation or threatened violation and to prevent dissipation or 
        conversion of assets, significant harm to investors, or 
        substantial harm to the public interest as the Commission deems 
        appropriate pending completion of such proceedings. Such an 
        order shall be entered only after notice and opportunity for a 
        hearing, unless the Commission, notwithstanding section 80b-
        11(c) of this title, determines that notice and hearing prior to 
        entry would be impracticable or contrary to the public interest. 
        A temporary order shall become effective upon service upon the 
        respondent and, unless set aside, limited, or suspended by the 
        Commission or a court of competent jurisdiction, shall remain 
        effective and enforceable pending the completion of the 
        proceedings.

        (B) Applicability

            This paragraph shall apply only to a respondent that acts, 
        or, at the time of the alleged misconduct acted, as a broker, 
        dealer, investment adviser, investment company, municipal 
        securities dealer, government securities broker, government 
        securities dealer, or transfer agent, or is, or was at the time 
        of the alleged misconduct, an associated person of, or a person 
        seeking to become associated with, any of the foregoing.

                   (4) Review of temporary orders

        (A) Commission review

            At any time after the respondent has been served with a 
        temporary cease-and-desist order pursuant to paragraph (3), the 
        respondent may apply to the Commission to have the order set 
        aside, limited, or suspended. If the respondent has been served 
        with a temporary cease-and-desist order entered without a prior 
        Commission hearing, the respondent may, within 10 days after the 
        date on which the order was served, request a hearing on such 
        application and the Commission shall hold a hearing and render a 
        decision on such application at the earliest possible time.

        (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

            The commencement of proceedings under subparagraph (B) of 
        this paragraph shall not, unless specifically ordered by the 
        court, operate as a stay of the Commission's order.

        (D) Exclusive review

            Section 80b-13 of this title shall not apply to a temporary 
        order entered pursuant to this section.

       (5) Authority to enter order requiring accounting and 
                                disgorgement

        In any cease-and-desist proceeding under paragraph (1), the 
    Commission may enter an order requiring accounting and disgorgement, 
    including reasonable interest. The Commission is authorized to adopt 
    rules, regulations, and orders concerning payments to investors, 
    rates of interest, periods of accrual, and such other matters as it 
    deems appropriate to implement this subsection.

(Aug. 22, 1940, ch. 686, title II, Sec. 203, 54 Stat. 850; Pub. L. 86-
750, Secs. 2-5, Sept. 13, 1960, 74 Stat. 885, 886; Pub. L. 91-547, 
Sec. 24, Dec. 14, 1970, 84 Stat. 1430; Pub. L. 94-29, Sec. 29(1)-(4), 
June 4, 1975, 89 Stat. 166-169; Pub. L. 96-477, title II, Sec. 202, Oct. 
21, 1980, 94 Stat. 2290; Pub. L. 99-571, title I, Sec. 102(m), Oct. 28, 
1986, 100 Stat. 3220; Pub. L. 100-181, title VII, Sec. 702, Dec. 4, 
1987, 101 Stat. 1263; Pub. L. 101-429, title IV, Sec. 401, Oct. 15, 
1990, 104 Stat. 946; Pub. L. 101-550, title II, Sec. 205(b), (c), Nov. 
15, 1990, 104 Stat. 2719, 2720; Pub. L. 104-62, Sec. 5, Dec. 8, 1995, 
109 Stat. 685; Pub. L. 104-290, title III, Secs. 303(b), (d), 305, title 
V, Sec. 508(d), Oct. 11, 1996, 110 Stat. 3438, 3439, 3448; Pub. L. 105-
353, title III, Sec. 301(d)(1), Nov. 3, 1998, 112 Stat. 3237; Pub. L. 
106-554, Sec. 1(a)(5) [title II, Sec. 209(b)], Dec. 21, 2000, 114 Stat. 
2763, 2763A-436.)

                       References in Text

    The Commodity Exchange Act, referred to in subsec. (e)(2)(B), (4)-
(6), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which is 
classified generally to chapter 1 (Sec. 1 et seq.) of Title 7, 
Agriculture. For complete classification of this Act to the Code, see 
section 1 of Title 7 and Tables.
    The Securities Act of 1933, referred to in subsecs. (e)(5), (6) and 
(i)(1)(A), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, as 
amended, which is classified generally to subchapter I (Sec. 77a et 
seq.) of chapter 2A of this title. For complete classification of this 
Act to the Code, see section 77a of this title and Tables.
    The Securities Exchange Act of 1934, referred to in subsecs. (e)(5), 
(6) and (i)(1)(A), is act June 6, 1934, ch. 404, 48 Stat. 881, as 
amended, which is classified generally to chapter 2B (Sec. 78a et seq.) 
of this title. For complete classification of this Act to the Code, see 
section 78a of this title and Tables.
    The Investment Company Act of 1940, referred to in subsec. (e)(5), 
(6), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, as amended, 
which is classified generally to subchapter I (Sec. 80a-1 et seq.) of 
this chapter. For complete classification of this Act to the Code, see 
section 80a-51 of this title and Tables.


                               Amendments

    2000--Subsec. (b)(6). Pub. L. 106-554 added par. (6).
    1998--Subsec. (e)(8)(B). Pub. L. 105-353 inserted ``or'' after 
semicolon at end.
    1996--Subsec. (a). Pub. L. 104-290, Sec. 303(d), which directed 
substitution of ``subsection (b) of this section and section 80b-3a of 
this title'' for ``subsection (b) of this section'', was executed by 
making the substitution for ``subsection (b)'' to reflect the probable 
intent of Congress.
    Subsec. (b)(5). Pub. L. 104-290, Sec. 508(d), added par. (5).
    Subsec. (c)(2). Pub. L. 104-290, Sec. 303(b)(1), inserted ``and that 
the applicant is not prohibited from registering as an investment 
adviser under section 80b-3a of this title'' after ``satisfied'' in 
closing provisions.
    Subsec. (e)(3) to (5). Pub. L. 104-290, Sec. 305(a), added par. (3) 
and redesignated former pars. (3) and (4) as (4) and (5), respectively. 
Former par. (5) redesignated (6).
    Subsec. (e)(6). Pub. L. 104-290, Sec. 305(b)(1), substituted ``this 
paragraph'' for ``this paragraph (5)''.
    Pub. L. 104-290, Sec. 305(a)(1), redesignated par. (5) as (6). 
Former par. (6) redesignated (7).
    Subsec. (e)(7), (8). Pub. L. 104-290, Sec. 305(a)(1), redesignated 
pars. (6) and (7) as (7) and (8), respectively.
    Subsec. (f). Pub. L. 104-290, Sec. 305(b)(2), substituted 
``paragraph (1), (5), (6), or (8) of subsection (e) of this section'' 
for ``paragraph (1), (4), (5), or (7) of subsection (e) of this 
section'' and ``paragraph (4)'' for ``paragraph (3)'' and substituted 
``subsection (e)'' for ``said subsection (e)'' in two places.
    Subsec. (h). Pub. L. 104-290, Sec. 303(b)(2), substituted 
``existence,'' for ``existence or'' and inserted ``or is prohibited from 
registering as an investment adviser under section 80b-3a of this 
title,'' after ``investment adviser,''.
    Subsec. (i)(1)(D). Pub. L. 104-290, Sec. 305(b)(3), substituted 
``subsection (e)(6) of this section'' for ``subsection (e)(5) of this 
section''.
    1995--Subsec. (b)(4). Pub. L. 104-62 added par. (4).
    1990--Subsec. (e)(2). Pub. L. 101-550, Sec. 205(b)(1), inserted ``or 
of a substantially equivalent crime by a foreign court of competent 
jurisdiction'' after ``misdemeanor''.
    Subsec. (e)(2)(A). Pub. L. 101-550, Sec. 205(b)(2), inserted ``any 
substantially equivalent activity however denominated by the laws of the 
relevant foreign government,'' after ``burglary,''.
    Subsec. (e)(2)(B). Pub. L. 101-550, Sec. 205(b)(3), inserted 
``foreign person performing a function substantially equivalent to any 
of the above,'' after ``transfer agent,'' and ``or any substantially 
equivalent statute or regulation'' after ``Commodity Exchange Act''.
    Subsec. (e)(2)(C). Pub. L. 101-550, Sec. 205(b)(4), inserted ``or 
substantially equivalent activity however denominated by the laws of the 
relevant foreign government'' after ``securities''.
    Subsec. (e)(2)(D). Pub. L. 101-550, Sec. 205(b)(5), inserted ``, or 
a violation of substantially equivalent foreign statute'' after ``title 
18''.
    Subsec. (e)(3). Pub. L. 101-550, Sec. 205(b)(3), (6), inserted 
``foreign person performing a function substantially equivalent to any 
of the above,'' after ``transfer agent,'', ``or any substantially 
equivalent statute or regulation'' after ``Commodity Exchange Act'' 
wherever appearing, ``, including any foreign court of competent 
jurisdiction'', and ``foreign entity substantially equivalent to any of 
the above,'' after ``insurance company,''.
    Subsec. (e)(5). Pub. L. 101-550, Sec. 205(b)(7), inserted ``the 
Commodity Exchange Act'' after ``this subchapter,''.
    Subsec. (e)(7). Pub. L. 101-550, Sec. 205(b)(8), added par. (7).
    Subsec. (f). Pub. L. 101-550, Sec. 205(c), substituted ``paragraph 
(1), (4), (5), or (7)'' for ``paragraph (1), (4), or (5)''.
    Subsecs. (i) to (k). Pub. L. 101-429 added subsecs. (i) to (k).
    1987--Subsec. (e)(2)(B). Pub. L. 100-181, Sec. 702(1), inserted 
``transfer agent,'' after ``fiduciary,''.
    Subsec. (e)(3). Pub. L. 100-181, Sec. 702(2), inserted ``transfer 
agent,'' after ``government securities dealer,''.
    Subsec. (f). Pub. L. 100-181, Sec. 702(3), inserted ``, seeking to 
become associated, or, at the time of the alleged misconduct, 
associated'' before ``or seeking to become associated''.
    Subsec. (g). Pub. L. 100-181, Sec. 702(4), substituted ``subsection 
(c) or subsection (e)'' for ``subsection (d)''.
    1986--Subsec. (e)(2)(B). Pub. L. 99-571, Sec. 102(m)(1), substituted 
``government securities broker, government securities dealer, fiduciary, 
or entity or person required to be registered under the Commodity 
Exchange Act'' for ``or fiduciary''.
    Subsec. (e)(3). Pub. L. 99-571, Sec. 102(m)(2), inserted par. (3) 
and struck out former par. (3) which read as follows: ``is permanently 
or temporarily enjoined by order, judgment, or decree of any court of 
competent jurisdiction from acting as an investment adviser, 
underwriter, broker, dealer, or municipal securities dealer, or as an 
affiliated person or employee of any investment company, bank, or 
insurance company, 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.''
    Subsec. (e)(4). Pub. L. 99-571, Sec. 102(m)(3), inserted reference 
to Commodity Exchange Act.
    1980--Subsec. (b)(3). Pub. L. 96-477 required investment advisers to 
business development companies to register under this section and 
provided that for purposes of determining the number of clients of an 
investment adviser under par. (3), no shareholders, partners, or 
beneficial owners of business development companies were to be deemed to 
be clients of an investment adviser unless such person qualified as a 
client apart from his status in connection with the business development 
company.
    1975--Subsec. (c). Pub. L. 94-29, Sec. 29(1), inserted provision 
authorizing the Commission to require a balance sheet certified by an 
independent public accountant and other financial statements which, as 
the Commission specifies, may be certified, and substituted provisions 
directing the Commission either to grant the registration within forty-
five days or institute proceedings to determine whether registration 
should be denied, directing the Commission to grant registration if it 
finds that the requirements of this section are satisfied, and requiring 
the Commission to deny registration if it does not make such a finding 
or finds that if the applicant were registered its registration would be 
subject to suspension or revocation for provisions directing that 
registration be effective thirty days after receipt of the application 
by the Commission except as otherwise provided and making allowances for 
amendment of the application.
    Subsec. (e). Pub. L. 94-29, Sec. 29(2), added the placing of 
limitations on the activities of investment advisers to the enumeration 
of sanctions available to the Commission as set out in the provisions 
preceding par. (1), inserted references in par. (2)(A) to the taking of 
a false oath, the making of a false report, bribery, perjury, burglary, 
and conspiracy to commit such offenses, expanded par. (2)(B) to include 
municipal securities dealers, banks, insurance companies, and 
fiduciaries, inserted references in par. (2)(C) to larceny, theft, 
robbery, extortion, forgery, counterfeiting, and fraudulent concealment, 
inserted references in par. (2)(D) to section 152 and chapters 25 and 47 
of title 18, and inserted reference to the rules of the Municipal 
Securities Rulemaking Board in pars. (4) and (5).
    Subsec. (f). Pub. L. 94-29, Sec. 29(3), added the placing of 
limitations on the activities of persons associated or seeking to become 
associated with an investment adviser to the enumeration of sanctions 
available to the Commission.
    Subsecs. (g), (h). Pub. L. 94-29, Sec. 29(4), redesignated subsecs. 
(h) and (i) as (g) and (h), respectively. Former subsec. (g), covering 
the postponement of the effective day of registration by the 
commencement of a proceeding to deny registration, was struck out.
    1970--Subsec. (b). Pub. L. 91-547, Sec. 24(a), struck out 
``investment companies and'' before ``insurance companies'' in par. (2) 
and struck out ``does not hold'' after ``clients and who'' and inserted 
``neither hold'' and ``nor acts as an investment adviser to any 
investment company registered under subchapter I of this chapter'' in 
par. (3).
    Subsec. (c)(1)(F). Pub. L. 91-547, Sec. 24(b), substituted ``any 
person associated with such investment adviser'' for ``any partner, 
officer, director thereof, or any person performing similar functions, 
or any person directly or indirectly controlling or controlled by such 
investment adviser'' and reference to subsec. ``(e)'' for ``(d)''.
    Subsecs. (d), (e). Pub. L. 91-547, Sec. 24(c), (d), added subsec. 
(d), redesignated former subsec. (d) as (e), and in amending its 
provisions, inserted reference to ``censure'' in two places and 
substituted ``such investment adviser or any person associated with such 
investment adviser'' for ``(1) such investment adviser, whether prior or 
subsequent to becoming such, or (2) any partner, officer, or director 
thereof, or any person performing similar functions, or (3) any person 
directly or indirectly controlling or controlled by such investment 
adviser, whether prior or subsequent to becoming such,'' in introductory 
text preceding par. (1), formerly cl. (A), redesignated as pars. (1) to 
(5) former cls. (A) to (E), redesignated as items (A) to (D) of par. (2) 
former items (i) to (iv), striking out ``, as heretofore or hereafter 
amended'' after ``Title 18'', substituted in par. (3) ``an affiliated 
person'' for ``as an affiliated person'', in par. (4) included reference 
to subchapter I of this chapter and struck out ``as any of such statutes 
heretofore have been or hereafter may be amended'' after ``this 
subchapter'', in par. (5) included reference to subchapter I of this 
chapter, struck out ``as any of such statutes heretofore have been or 
hereafter may be amended'' after ``this subchapter'', inserted provision 
respecting disciplining an investment adviser for failure reasonably to 
supervise, with a view to preventing violations of statutes, rules, and 
regulations, another person who commits such a violation if such other 
person is subject to his supervision, including subpars. (A) and (B) 
respecting failure to supervise a person, and inserted par. (6). Former 
subsec. (e) redesignated (g).
    Subsec. (f). Pub. L. 91-547, Sec. 24(e), inserted subsec. (f). 
Former subsec. (f) redesignated (h).
    Subsec. (g). Pub. L. 91-547, Sec. 24(c), redesignated former subsec. 
(e) as (g). Former subsec. (g) redesignated (i).
    Subsecs. (h), (i). Pub. L. 91-547, Sec. 24(e), redesignated former 
subsecs. (f) and (g) as (h) and (i), respectively.
    1960--Subsec. (c)(1)(F). Pub. L. 86-750, Sec. 2, substituted ``or 
any person performing similar functions, or any person directly or 
indirectly controlling or controlled by such investment adviser, is 
subject to any disqualification which would be a basis for denial, 
suspension, or revocation of registration of such investment adviser 
under the provisions of subsection (d)'' for ``person performing similar 
function or controlling person thereof (i) within ten years of the 
filing of such application has been convicted of any felony or 
misdemeanor of the character described in paragraph (1) of subsection 
(d) of this section, or (ii) is permanently or temporarily enjoined by 
an order, judgment or decree of the character described in paragraph (2) 
of said subsection (d) and in each case the facts relating to such 
conviction or injunction''.
    Subsec. (c)(2). Pub. L. 86-750, Sec. 3(a), substituted ``a statement 
as to whether the principal business of such investment adviser consists 
or is to consist of acting as investment adviser and a statement as to 
whether a substantial part of the business of such investment adviser 
consists or is to consist of rendering investment supervisory services'' 
for ``a statement as to whether such investment adviser is engaged or is 
to engage primarily in the business of rendering investment supervisory 
services''.
    Subsec. (d). Pub. L. 86-750, Sec. 3(b), among other changes, limited 
the period of suspension to twelve months, included people controlled by 
the adviser, provided that the ten year period within which convictions 
are counted be measured from the filing of the application or after 
specified felonies or misdemeanors, increased the number of offenses by 
including willful, false or misleading statements as to any material 
fact, or omissions thereof, in any application for registration or 
report filed with the Commission, embezzlement, fraudulent conversion, 
and misappropriation of funds or securities, violations of sections 
1341, 1342 or 1343 of title 18, willful violations of, or aiding, 
abetting, counseling, commanding, inducing or procuring the violation of 
the Securities Act of 1933, or of the Securities Exchange Act of 1934, 
or of this title, and any amendment or rule or regulation thereunder.
    Subsec. (e). Pub. L. 86-750, Sec. 4, substituted provisions 
postponing the effective date of registration for ninety days at 
commencement of a proceeding to deny registration, or until final 
determination whether such registration should be denied, whichever was 
first, and authorizing the Commission after notice and opportunity for 
hearing, to postpone said effective date beyond the ninety-day period or 
final determination, provided that upon request of any interested party, 
made more than ninety days after such postponement, the Commission shall 
consider the postponement's continuation, for provisions prohibiting 
postponement of the effective date of registration upon a proceeding to 
deny registration, unless the Commission found it in the public interest 
to do so, and which limited said postponement to three months.
    Subsec. (g). Pub. L. 86-750, Sec. 5, substituted ``existence'' for 
``business''.


                    Effective Date of 1996 Amendment

    Amendment by sections 303(b), (d) and 305 of Pub. L. 104-290 
effective 270 days after Oct. 11, 1996, see section 308(a) of Pub. L. 
104-290, as amended, set out as a note under section 80b-2 of this 
title.


                    Effective Date of 1995 Amendment

    Amendment by Pub. L. 104-62 applicable as defense to any claim in 
administrative and judicial actions pending on or commenced after Dec. 
8, 1995, that any person, security, interest, or participation of type 
described in Pub. L. 104-62 is subject to the Securities Act of 1933, 
the Securities Exchange Act of 1934, the Investment Company Act of 1940, 
the Investment Advisers Act of 1940, or any State statute or regulation 
preempted as provided in section 80a-3a of this title, except as 
specifically provided in such statutes, see section 7 of Pub. L. 104-62, 
set out as a note under section 77c of this title.


                    Effective Date of 1990 Amendment

    Amendment by Pub. L. 101-429 effective Oct. 15, 1990, with 
provisions relating to civil penalties and accounting and disgorgement, 
see section 1(c)(1), (2) of Pub. L. 101-429, set out in a note under 
section 77g of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-571 effective 270 days after Oct. 28, 1986, 
see section 401 of Pub. L. 99-571, set out as an Effective Date note 
under section 78o-5 of this title.


                    Effective Date of 1975 Amendment

    Amendment by Pub. L. 94-29 effective June 4, 1975, see section 31(a) 
of Pub. L. 94-29, set out as a note under section 78b of this title.


                    Effective Date of 1970 Amendment

    Amendment by Pub. L. 91-547 effective Dec. 14, 1970, except that 
amendment by section 24(a) of Pub. L. 91-547 effective on expiration of 
one year after Dec. 14, 1970, see section 30 (introductory text and par. 
(1)) of Pub. L. 91-547, set out as a note under section 80a-52 of this 
title.

                          Transfer of Functions

    For transfer of functions of Securities and Exchange Commission, 
with certain exceptions, to Chairman of such Commission, see Reorg. Plan 
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 
1265, set out under section 78d of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 78w, 80a-9, 80a-35, 80b-2, 
80b-3a, 80b-4, 80b-5, 80b-7, 80b-8, 80b-9, 80b-10a of this title; title 
5 section 8438.
