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S. 484 (115th): U.S. Territories Investor Protection Act of 2017

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The text of the bill below is as of Sep 11, 2017 (Passed the Senate). The bill was not enacted into law.

Summary of this bill

A little-known loophole means not all investment companies are required to abide by federal registration and investor protection requirements, affecting some 3.7 million American citizens. Many lawmakers believe this loophole has outlived its usefulness. The U.S. Territories Investor Protection Act, S. 484 and H.R. 1366, would permanently close it.

What the bill does

In 1940, the Investment Company Act created an exemption for investment companies incorporated in U.S. territories such as Puerto Rico, Guam, and the Virgin Islands. The Securities and Exchange Commission (SEC) has long allowed the exemptions if a territorial company’s shares are sold only to residents of the territory where it’s located. That’s no small matter, …

115th CONGRESS

1st Session

S. 484

IN THE SENATE OF THE UNITED STATES

AN ACT

To amend the Investment Company Act of 1940 to terminate an exemption for companies located in Puerto Rico, the Virgin Islands, and any other possession of the United States.

1.

Short title

This Act may be cited as the U.S. Territories Investor Protection Act of 2017.

2.

Termination of exemption

(a)

In general

Section 6(a) of the Investment Company Act of 1940 (15 U.S.C. 80a–6(a)) is amended—

(1)

by striking paragraph (1); and

(2)

by redesignating paragraphs (2) through (5) as paragraphs (1) through (4), respectively.

(b)

Effective date and safe harbor

(1)

Effective date

Except as provided in paragraph (2), the amendment made by subsection (a) shall take effect on the date of enactment of this Act.

(2)

Safe harbor

With respect to a company that is exempt under section 6(a)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a–6(a)(1)) on the day before the date of enactment of this Act, the amendment made by subsection (a) shall take effect on the date that is 3 years after the date of enactment of this Act.

(3)

Extension of safe harbor

The Securities and Exchange Commission, by rule or regulation upon its own motion, or by order upon application, may conditionally or unconditionally, under section 6(c) of the Investment Company Act of 1940 (15 U.S.C. 80a–6(c)), further delay the effective date for a company described in paragraph (2) for a maximum of 3 years following the initial 3-year period if, before the end of the initial 3-year period, the Commission determines that such a rule, regulation, motion, or order is necessary or appropriate in the public interest and for the protection of investors.

Passed the Senate September 11, 2017.

Secretary