[104th Congress Public Law 62]
[From the U.S. Government Printing Office]
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[DOCID: f:publ62.104]
PHILANTHROPY PROTECTION ACT OF 1995
[[Page 109 STAT. 682]]
Public Law 104-62
104th Congress
An Act
To facilitate contributions to charitable organizations by codifying
certain exemptions from the Federal securities laws, and for other
purposes. <<NOTE: Dec. 8, 1995 - [H.R. 2519]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: Philanthropy
Protection Act of 1995.>>
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) <<NOTE: 15 USC 80a-51 note.>> Short Title.--This Act may be
cited as the ``Philanthropy Protection Act of 1995''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Investment Company Act of 1940.
Sec. 3. Amendment to the Securities Act of 1933.
Sec. 4. Amendments to the Securities Exchange Act of 1934.
Sec. 5. Amendment of the Investment Advisers Act of 1940.
Sec. 6. Protection of philanthropy under State law.
Sec. 7. Effective dates and applicability.
SEC. 2. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940.
(a) Exemption.--Section 3(c)(10) of the Investment Company Act of
1940 (15 U.S.C. 80a-3(c)(10)) is amended to read as follows:
``(10)(A) Any company organized and operated exclusively for
religious, educational, benevolent, fraternal, charitable, or
reformatory purposes--
``(i) no part of the net earnings of which inures to
the benefit of any private shareholder or individual; or
``(ii) which is or maintains a fund described in
subparagraph (B).
``(B) For the purposes of subparagraph (A)(ii), a fund is
described in this subparagraph if such fund is a pooled income
fund, collective trust fund, collective investment fund, or
similar fund maintained by a charitable organization exclusively
for the collective investment and reinvestment of one or more of
the following:
``(i) assets of the general endowment fund or other
funds of one or more charitable organizations;
``(ii) assets of a pooled income fund;
``(iii) assets contributed to a charitable
organization in exchange for the issuance of charitable
gift annuities;
``(iv) assets of a charitable remainder trust or of
any other trust, the remainder interests of which are
irrevocably dedicated to any charitable organization;
``(v) assets of a charitable lead trust;
``(vi) assets of a trust, the remainder interests of
which are revocably dedicated to or for the benefit of 1
or more
[[Page 109 STAT. 683]]
charitable organizations, if the ability to revoke the
dedication is limited to circumstances involving--
``(I) an adverse change in the financial
circumstances of a settlor or an income
beneficiary of the trust;
``(II) a change in the identity of the
charitable organization or organizations having
the remainder interest, provided that the new
beneficiary is also a charitable organization; or
``(III) both the changes described in
subclauses (I) and (II);
``(vii) assets of a trust not described in clauses
(i) through (v), the remainder interests of which are
revocably dedicated to a charitable organization,
subject to subparagraph (C); or
``(viii) such assets as the Commission may prescribe
by rule, regulation, or order in accordance with section
6(c).
``(C) A fund that contains assets described in clause (vii)
of subparagraph (B) shall be excluded from the definition of an
investment company for a period of 3 years after the date of
enactment of this subparagraph, but only if--
``(i) such assets were contributed before the date
which is 60 days after the date of enactment of this
subparagraph; and
``(ii) such assets are commingled in the fund with
assets described in one or more of clauses (i) through
(vi) and (viii) of subparagraph (B).
``(D) For purposes of this paragraph--
``(i) a trust or fund is `maintained' by a
charitable organization if the organization serves as a
trustee or administrator of the trust or fund or has the
power to remove the trustees or administrators of the
trust or fund and to designate new trustees or
administrators;
``(ii) the term `pooled income fund' has the same
meaning as in section 642(c)(5) of the Internal Revenue
Code of 1986;
``(iii) the term `charitable organization' means an
organization described in paragraphs (1) through (5) of
section 170(c) or section 501(c)(3) of the Internal
Revenue Code of 1986;
``(iv) the term `charitable lead trust' means a
trust described in section 170(f)(2)(B), 2055(e)(2)(B),
or 2522(c)(2)(B) of the Internal Revenue Code of 1986;
``(v) the term `charitable remainder trust' means a
charitable remainder annuity trust or a charitable
remainder unitrust, as those terms are defined in
section 664(d) of the Internal Revenue Code of 1986; and
``(vi) the term `charitable gift annuity' means an
annuity issued by a charitable organization that is
described in section 501(m)(5) of the Internal Revenue
Code of 1986.''.
(b) Disclosure by Exempt Charitable Organizations.--Section 7 of the
Investment Company Act of 1940 (15 U.S.C. 80a-7) is amended by adding at
the end the following new subsection:
``(e) Disclosure by Exempt Charitable Organizations.--Each fund that
is excluded from the definition of an investment company under section
3(c)(10)(B) of this Act shall provide, to
[[Page 109 STAT. 684]]
each donor to such fund, at the time of the donation or within 90 days
after the date of enactment of this subsection, whichever is later,
written information describing the material terms of the operation of
such fund.''.
SEC. 3. AMENDMENT TO THE SECURITIES ACT OF 1933.
Section 3(a)(4) of the Securities Act of 1933 (15 U.S.C. 77c(a)(4))
is amended by inserting after the semicolon at the end the following:
``or any security of 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;''.
SEC. 4. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.
(a) Exempted Securities.--Section 3(a)(12)(A) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(12)(A)) is amended--
(1) in clause (iv) by striking ``and'' at the end;
(2) by redesignating clause (v) as clause (vi); and
(3) by inserting after clause (iv) the following new clause:
``(v) any security issued by or any interest or
participation in any pooled income fund, collective
trust fund, collective investment fund, or similar fund
that is excluded from the definition of an investment
company under section 3(c)(10)(B) of the Investment
Company Act of 1940; and''.
(b) Exemption From Broker-Dealer Provisions.--Section 3 of such Act
(15 U.S.C. 78c) is amended by adding at the end the following new
subsection:
``(e) Charitable Organizations.--
``(1) Exemption.--Notwithstanding any other provision of
this title, but subject to paragraph (2) of this subsection, a
charitable organization, as defined in section 3(c)(10)(D) of
the Investment Company Act of 1940, or any 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, shall not be deemed to be a
`broker', `dealer', `municipal securities broker', `municipal
securities dealer', `government securities broker', or
`government securities dealer' for purposes of this title solely
because such organization or person buys, holds, sells, or
trades in securities for its own account in its capacity as
trustee or administrator of, or otherwise on behalf of or for
the account of--
``(A) such a 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; or
``(C) a trust or other donative instrument described
in section 3(c)(10)(B) of the Investment Company Act of
1940, or the settlors (or potential settlors) or
beneficiaries of any such trust or other instrument.
``(2) Limitation on compensation.--The exemption provided
under paragraph (1) shall not be available to any charitable
organization, or any trustee, director, officer, employee, or
volunteer of such a charitable organization, unless each person
who, on or after 90 days after the date of enactment of this
subsection, solicits donations on behalf of such charitable
organization from any donor to 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, is either a volunteer or is
engaged in the overall fund raising activities
[[Page 109 STAT. 685]]
of a charitable organization and receives no commission or other
special compensation based on the number or the value of
donations collected for the fund.''.
(d) Conforming Amendment.--Section 12(g)(2)(D) of such Act (15
U.S.C. 78l(g)(2)(D)) is amended by inserting before the period ``; or
any security of 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''.
SEC. 5. AMENDMENT OF THE INVESTMENT ADVISERS ACT OF 1940.
Section 203(b) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-3(b)) is amended--
(1) by striking ``or'' at the end of paragraph (2);
(2) by striking the period at the end of paragraph (3) and
inserting ``; or''; and
(3) by adding at the end the following new paragraph:
``(4) any investment adviser that is a charitable
organization, as defined in section 3(c)(10)(D) of the
Investment Company Act of 1940, 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; or
``(C) a trust or other donative instrument described
in section 3(c)(10)(B) of the Investment Company Act of
1940, or the trustees, administrators, settlors (or
potential settlors), or beneficiaries of any such trust
or other instrument.''.
SEC. 6. <<NOTE: 15 USC 80a-3a.>> PROTECTION OF PHILANTHROPY UNDER STATE
LAW.
(a) Registration Requirements.--A security issued by or any interest
or participation in any pooled income fund, collective trust fund,
collective investment fund, or similar fund that is excluded from the
definition of an investment company under section 3(c)(10)(B) of the
Investment Company Act of 1940, and the offer or sale thereof, shall be
exempt from any statute or regulation of a State that requires
registration or qualification of securities.
(b) Treatment of Charitable Organizations.--No charitable
organization, or any trustee, director, officer, employee, or volunteer
of a charitable organization acting within the scope of such person's
employment or duties, shall be required to register as, or be subject to
regulation as, a dealer, broker, agent, or investment adviser under the
securities laws of any State because such organization or person buys,
holds, sells, or trades in securities for its own account in its
capacity as trustee or administrator of, or otherwise on behalf of or
for the account of one or more of the following:
(1) a charitable organization;
(2) 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; or
(3) a trust or other donative instrument described in
section 3(c)(10)(B) of the Investment Company Act of 1940, or
the settlors (or potential settlors) or beneficiaries of any
such trusts or other instruments.
[[Page 109 STAT. 686]]
(c) State Action.--Notwithstanding subsections (a) and (b), during
the 3-year period beginning on the date of enactment of this Act, a
State may enact a statute that specifically refers to this section and
provides prospectively that this section shall not preempt the laws of
that State referred to in this section.
(d) Definitions.--For purposes of this section--
(1) the term ``charitable organization'' means an
organization described in paragraphs (1) through (5) of section
170(c) or section 501(c)(3) of the Internal Revenue Code of
1986;
(2) the term ``security'' has the same meaning as in section
3 of the Securities Exchange Act of 1934; and
(3) the term ``State'' means each of the several States of
the United States, the District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, Guam, American Samoa, and the
Commonwealth of the Northern Mariana Islands.
SEC. 7. <<NOTE: 15 USC 77c note.>> EFFECTIVE DATES AND APPLICABILITY.
This Act and the amendments made by this Act shall apply in all
administrative and judicial actions pending on or commenced after the
date of enactment of this Act, as a defense to any claim that any
person, security, interest, or participation of the type described in
this Act and the amendments made by this Act is subject to the
provisions of the Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Company Act of 1940, or the Investment Advisers Act
of 1940, or any State statute or regulation preempted as provided in
section 6 of this Act, except as otherwise specifically provided in such
Acts or State law.
Approved December 8, 1995.
LEGISLATIVE HISTORY--H.R. 2519:
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HOUSE REPORTS: No. 104-333 (Comm. on Commerce).
CONGRESSIONAL RECORD, Vol. 141 (1995):
Nov. 28, considered and passed House.
Nov. 29, considered and passed Senate.
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