[House Report 119-248]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-248
======================================================================
IMPROVING CAPITAL ALLOCATION FOR
NEWCOMERS ACT OF 2025
_______
September 8, 2025.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 4431]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4431) to amend the Investment Company Act of
1940 with respect to the definition of qualifying venture
capital funds, and for other purposes, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Related Hearings................................................. 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 8
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Documents Included by Unanimous Consent.......................... 16
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Improving Capital Allocation for
Newcomers Act of 2025''.
SEC. 2. QUALIFYING VENTURE CAPITAL FUNDS.
Section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-
3(c)(1)) is amended--
(1) in the matter preceding subparagraph (A), by striking
``250 persons'' and inserting ``500 persons''; and
(2) in subparagraph (C)(i), by striking ``$10,000,000'' and
inserting ``$50,000,000''.
SEC. 3. STUDY AND RULEMAKING.
(a) In General.--Beginning 5 years after the date of enactment of
this Act, the Advocate for Small Business Capital Formation, in
consultation with the Investor Advocate, shall conduct a study on the
effect of the amendments made by section 2 on the businesses and
startup entities in which qualifying venture capital funds invest,
specifically including, with respect to such businesses and startup
entities, changes or trends relating to--
(1) the geographic distribution of capital to portfolio
companies;
(2) the socio-economic characteristics of founders or
controlling persons;
(3) the veteran status of founders or controlling persons;
(4) the industry sector, size, stage of development, and
related details; and
(5) other factors or metrics determined by the Advocate for
Small Business Capital Formation.
(b) Report.--The Advocate for Small Business Capital Formation shall
issue a report to the Congress containing all findings and
determinations made in carrying out the study required in subsection
(a), and make such report available to the public on the website of the
Commission.
(c) Public Comment.--During the 180-day period beginning on the date
the report is issued under subsection (b), the Commission shall solicit
feedback from the public on the findings and determinations contained
in the report.
(d) Rulemaking.--
(1) In general.--The Commission, in consultation with the
Investor Advocate and the Advocate for Small Business Capital
Formation, may, after considering all comments received under
subsection (c) and only if the Commission determines in such
report that the amendments made by section 2 have had a
demonstrable effect on increasing the geographic distribution
of capital to portfolio companies, increasing the variety of
the socio-economic characteristics of founders or controlling
persons, or increasing the number of founders or controlling
persons who are veterans, issue rules to--
(A) increase or decrease the 500 person threshold
described in the matter preceding subparagraph (A) of
section 3(c)(1) of the Investment Company Act of 1940,
but such threshold may not exceed 750 persons or be
reduced below 250 persons; and
(B) increase or decrease the $50,000,000 dollar
figure in section 3(c)(1)(C)(i) of the Investment
Company Act of 1940, but such dollar figure may not
exceed $100,000,000 or be reduced below $10,000,000.
(2) Deadline for rulemaking.--The rulemaking authority in
paragraph (1) only applies to a rule with respect to which the
proposed rule was issued during the 180-day period beginning at
the end of the public comment period described in subsection
(c).
(3) No effect on inflation adjustments.--A rule issued under
this subsection shall have no effect on the requirement under
clause (i) of section 3(c)(1)(C) of the Investment Company Act
of 1940 (15 U.S.C. 80a-3(c)(1)(C)) to index the first dollar
amount in such clause for inflation.
Purpose and Summary
H.R. 4431, the Improving Capital Allocation for Newcomers
Act of 2025, was introduced on July 16, 2025, by Republican
Representative William Timmons (SC-04). H.R. 4431 modifies the
Qualifying Venture Capital Fund Exemption under Section 3(c)(1)
of the Investment Company Act of 1940 by increasing the cap on
aggregate capital contributions and uncalled capital
commitments from $10 million to $50 million, while increasing
the allowable number of beneficial owners in a qualifying
venture capital fund from 250 to 500. The bill also requires
the Advocate for Small Business Capital Formation, in
consultation with the Investor Advocate, to conduct a study on
the effect of these changes on the businesses and startup
entities in which qualifying venture capital funds invest.
Background and Need for Legislation
Venture capital (VC) plays a critical role in the American
startup ecosystem by providing funding for companies as they
reach a certain size or level of maturity. However, access to
VC funding is not evenly distributed across the country. Most
VC funding goes to companies in well-known technology and
venture hubs in just three states: California, Massachusetts,
and New York.\1\ In fact, on one fund management platform,
California startups raised nearly half of U.S. venture funding
in 2024.\2\ Likewise, more than 72 percent of all venture
funding raised on the platform went to startups domiciled in
just four states--California, New York, Massachusetts, and
Texas.\3\ Meanwhile, just 12 states raised more than one
percent of total venture funding in 2024.\4\ As evidenced by
these figures, entrepreneurs in other parts of the country face
greater difficulty raising the capital necessary for
scaling.\5\ For example, outside of the established venture
hubs, founders specifically struggle raising Series A capital,
usually $3 million to $10 million. A lack of access to Series A
capital prevents founders from more easily securing Series B
funding from investors focused on growth.\6\ Compounding these
challenges, in 2023 and 2024, startups' demand for VC funding,
especially later-stage capital for series C and D rounds,
outpaced supply from investors.\7\
---------------------------------------------------------------------------
\1\Start Us Up, America's New Business Plan (Dec. 3, 2021), https:/
/www.startusupnow.org/wpcontent/uploads/sites/12/2021/03/
AmericasNewBusinessPlan.pdf.
\2\Kevin Dowd, California rises, Florida falls, and other ways the
map of VC funding shifted in 2024, Carta (Mar. 3, 2025), https://
carta.com/data/VC-funding-geography-2024/.
\3\Id.
\4\Id.
\5\See Letter from the SEC Small Business Capital Formation
Advisory Committee to Chair Gensler (May 21, 2021), https://
www.sec.gov/spotlight/sbcfac/encouraging-small-regional-funds-
043021.pdf.
\6\Id.
\7\Coinage Act of April 2, 1792, https://www.usmint.gov/learn/
history/historical-documents/
coinage-act-of-april-2-
1792?srsltid=AfmBOoqhi6CErmZrPfkfTbYI_rz3yrZGOxOs29nAIAzLEhVS EG8yRe4V
(last visited July 8, 2025).
---------------------------------------------------------------------------
The current qualified venture capital fund size limit of
$10 million under Section 3(c)(1) of the Investment Company Act
of 1940 is prohibitively low. This prevents a fund from
covering its operational costs without levying an immense fee
on its investors. H.R. 4431 makes it easier for funds to
qualify for the Qualifying Venture Capital Fund Exemption,
thereby enabling VC funds to be invested in more entrepreneurs
in their own communities.
COMMITTEE CONSIDERATION
119TH CONGRESS
On July 16, 2025, Representative Timmons introduced H.R.
4431, the Improving Capital Allocation for Newcomers Act of
2025. Representative Brittany Pettersen (D-CO) was added
subsequently as a cosponsor. The bill was referred solely to
the Committee on Financial Services. The bill was attached to
the February 26, 2025, hearing titled ``The Future of American
Capital: Strengthening Public and Private Markets by Increasing
Investor Access and Facilitating Capital Formation,'' and the
March 25, 2025, hearing titled, ``Beyond Silicon Valley:
Expanding Access to Capital Across America.''
On July 22, 2025, the Committee on Financial Services met
in open session to consider, among others, H.R. 4431. The
Committee ordered H.R. 4431, as amended, to be favorably
reported to the House of Representatives.
118TH CONGRESS
On April 13, 2023, Representative Timmons introduced H.R.
2790, the Improving Capital Allocation for Newcomers Act of
2021. This bill is an earlier iteration of H.R. 4431. The bill
was referred solely to the Committee on Financial Services. The
bill was included in H.R. 2799, the Expanding Access to Capital
Act of 2023, which passed the House on March 8, 2024, by a
recorded vote of 212 yeas and 205 nays. On March 11, 2024, H.R.
2799 was received in the Senate and referred to the Committee
on Banking, Housing, and Urban Affairs.
117TH CONGRESS
On June 29, 2021, Representative Timmons introduced H.R.
4243, the Improving Capital Allocation for Newcomers Act of
2021. This bill is an earlier iteration of H.R. 4431. The bill
was referred solely to the Committee on Financial Services.
There was no further action on the bill in the 117th Congress.
Related Hearings
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearings were used to
develop H.R. 4431:
The Capital Markets Subcommittee of the Committee on
Financial Services held a February 26, 2025, hearing titled
``The Future of American Capital: Strengthening Public and
Private Markets by Increasing Investor Access and Facilitating
Capital Formation'' and the Full Committee held a March 25,
2025, hearing titled, ``Beyond Silicon Valley: Expanding Access
to Capital Across America.'' A discussion draft version of the
bill was attached to both hearings. The following witnesses
testified at the February 26, 2025, hearing: Mr. Andrew
Barnell, CEO and Co-Founder, Geneoscopy; Mr. McKeever Conwell,
Founder and Managing Partner, RareBreed Ventures; Ms. Rebecca
Kacaba, CEO and Co-Founder, DealMaker; Ms. Anna Pinedo,
Partner, Mayer Brown; and Ms. Alexandra Thornton, Senior
Director, Financial Regulation, Center for American Progress.
The following witnesses testified at the March 25, 2025,
hearing: Mr. Steve Case, Chairman and CEO, Revolution LLC; Mr.
Bill Newell, Senior Business Advisor & Former CEO, Sutro
Biopharma; Ms. Candice Matthews Brackeen, General Partner,
Lightship Capital; Mr. Joel Trotter, Partner, Latham & Watkins
LLP; and Ms. Amanda Senn, Director of the Alabama Securities
Commission.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include record
votes on the motion to report legislation and amendments
thereto.
On July 22, 2025, the Committee ordered H.R. 4431, as
amended, to be reported favorably to the House by a recorded
vote of 50 yeas and 2 nays. (Record Vote No. FC-172).
Before the question to report was called, the Committee
adopted an amendment in the nature of a substitute offered by
Representative Timmons, designated as TIMMSC_026, which reduces
the expansion in the bill's qualifying venture capital fund
thresholds from the introduced levels, raising the investor
limit from 250 to 500 persons and the aggregate capital
contributions limit from $10 million to $50 million. It also
adds a new section requiring the Advocate for Small Business
Capital Formation, in consultation with the Investor Advocate,
to conduct a study beginning five years after enactment on the
effect of these amendments on the businesses and startup
entities in which qualifying venture capital funds invest.
Following a report to Congress and a 180-day public comment
period, the SEC may issue rules, only if the study finds a
demonstrable positive effect, adjusting the thresholds within
specified ranges. This amendment was adopted by voice vote.
Committee Oversight Findings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.R. 4431 is to expand
the participation thresholds for qualifying venture capital
funds in order to increase the availability and distribution of
investment capital to a broader range of businesses and startup
entities.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 4431. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
New Budget Authority and CBO Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee will adopt as
its own the cost estimate for the bill prepared by the Director
of the Congressional Budget Office. However, a cost estimate
was not made available to the Committee in time for the filing
of this report. The Chairman of the Committee shall cause such
estimate to be printed in the Congressional Record upon its
receipt by the Committee.
Unfunded Mandates Statement
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Chairman of the Committee shall cause
such estimate to be printed in the Congressional Record upon
its receipt by the Committee.
Earmark Statement
In compliance with clause 9 of rule XXI of the Rules of the
House of Representatives, this bill, as reported, contains no
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.
Federal Advisory Committee Act Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
Section-by-Section Analysis of the Legislation
Section 1. Short title
Section 1 provides the short title is the ``Improving
Capital Allocation for Newcomers Act of 2025.''
Section 2. Qualifying venture capital funds
Section 2 amends the qualifying venture capital fund
definition to include any issuer whose outstanding securities
are beneficially owned by not more than 500 persons and not
more than $50,000,000 in aggregate capital contributions and
uncalled committed capital.
Section 3. Study and rulemaking
Section 3 requires the Advocate for Small Business Capital
Formation, in consultation with the Investor Advocate, to
conduct a study on the effect of the amendments made by section
2 on the businesses and startup entities in which qualifying
venture capital funds invest followed by a report to Congress
and a rulemaking by the SEC only if the Commission determines
that the amendments have had a demonstrable effect on
increasing the distribution of capital to portfolio companies.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules
of the House of Representatives, changes in existing law made
by the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
INVESTMENT COMPANY ACT OF 1940
TITLE I--INVESTMENT COMPANIES
* * * * * * *
definition of investment company
Sec. 3. (a)(1) When used in this title, ``investment
company'' means any issuer which--
(A) is or holds itself out as being engaged
primarily, or proposes to engage primarily, in the
business of investing, reinvesting, or trading in
securities;
(B) is engaged or proposes to engage in the business
of issuing face-amount certificates of the installment
type, or has been engaged in such business and has any
such certificate outstanding; or
(C) is engaged or proposes to engage in the business
of investing, reinvesting, owning, holding, or trading
in securities, and owns or proposes to acquire
investment securities having a value exceeding 40 per
centum of the value of such issuer's total assets
(exclusive of Government securities and cash items) on
an unconsolidated basis.
(2) As used in this section, ``investment securities''
includes all securities except (A) Government securities, (B)
securities issued by employees' securities companies, and (C)
securities issued by majority-owned subsidiaries of the owner
which (i) are not investment companies, and (ii) are not
relying on the exception from the definition of investment
company in paragraph (1) or (7) of subsection (c).
(b) Notwithstanding paragraph (1)(C) of subsection (a), none
of the following persons is an investment company within the
meaning of this title:
(1) Any issuer primarily engaged, directly or through
a wholly-owned subsidiary or subsidiaries, in a
business or businesses other than that of investing,
reinvesting, owning, holding, or trading in securities.
(2) Any issuer which the Commission, upon application
by such issuer, finds and by order declares to be
primarily engaged in a business or businesses other
than that of investing, reinvesting, owning, holding,
or trading in securities either directly or (A) through
majority-owned subsidiaries or (B) through controlled
companies conducting similar types of businesses. The
filing of an application under this paragraph in good
faith by an issuer other than a registered investment
company shall exempt the applicant for a period of
sixty days from all provisions of this title applicable
to investment companies as such. For cause shown, the
Commission by order may extend such period of exemption
for an additional period or periods. Whenever the
Commission, upon its own motion or upon application,
finds that the circumstances which gave rise to the
issuance of an order granting an application under this
paragraph no longer exist, the Commission shall by
order revoke such order.
(3) Any issuer all the outstanding securities of
which (other than short-term paper and directors'
qualifying shares) are directly or indirectly owned by
a company excepted from the definition of investment
company by paragraph (1) or (2) of this subsection.
(c) Notwithstanding subsection (a), none of the following
persons is an investment company within the meaning of this
title:
(1) Any issuer whose outstanding securities (other
than short-term paper) are beneficially owned by not
more than one hundred persons (or, in the case of a
qualifying venture capital fund, [250 persons] 500
persons) and which is not making and does not presently
propose to make a public offering of its securities.
Such issuer shall be deemed to be an investment company
for purposes of the limitations set forth in
subparagraphs (A)(i) and (B)(i) of section 12(d)(1)
governing the purchase or other acquisition by such
issuer of any security issued by any registered
investment company and the sale of any security issued
by any registered open-end investment company to any
such issuer. For purposes of this paragraph:
(A) Beneficial ownership by a company shall
be deemed to be beneficial ownership by one
person, except that, if the company owns 10 per
centum or more of the outstanding voting
securities of the issuer, and is or, but for
the exception provided for in this paragraph or
paragraph (7), would be an investment company,
the beneficial ownership shall be deemed to be
that of the holders of such company's
outstanding securities (other than short-term
paper).
(B) Beneficial ownership by any person who
acquires securities or interests in securities
of an issuer described in the first sentence of
this paragraph shall be deemed to be beneficial
ownership by the person from whom such transfer
was made, pursuant to such rules and
regulations as the Commission shall prescribe
as necessary or appropriate in the public
interest and consistent with the protection of
investors and the purposes fairly intended by
the policy and provisions of this title, where
the transfer was caused by legal separation,
divorce, death, or other involuntary event.
(C)(i) The term ``qualifying venture capital
fund'' means a venture capital fund that has
not more than [$10,000,000] $50,000,000 in
aggregate capital contributions and uncalled
committed capital, with such dollar amount to
be indexed for inflation once every 5 years by
the Commission, beginning from a measurement
made by the Commission on a date selected by
the Commission, rounded to the nearest
$1,000,000.
(ii) The term ``venture capital fund'' has
the meaning given the term in section
275.203(l)-1 of title 17, Code of Federal
Regulations, or any successor regulation.
(2)(A) Any person primarily engaged in the business
of underwriting and distributing securities issued by
other persons, selling securities to customers, acting
as broker, and acting as market intermediary, or any
one or more of such activities, whose gross income
normally is derived principally from such business and
related activities.
(B) For purposes of this paragraph--
(i) the term ``market intermediary'' means
any person that regularly holds itself out as
being willing contemporaneously to engage in,
and that is regularly engaged in, the business
of entering into transactions on both sides of
the market for a financial contract or one or
more such financial contracts; and
(ii) the term ``financial contract'' means
any arrangement that--
(I) takes the form of an individually
negotiated contract, agreement, or
option to buy, sell, lend, swap, or
repurchase, or other similar
individually negotiated transaction
commonly entered into by participants
in the financial markets;
(II) is in respect of securities,
commodities, currencies, interest or
other rates, other measures of value,
or any other financial or economic
interest similar in purpose or function
to any of the foregoing; and
(III) is entered into in response to
a request from a counter party for a
quotation, or is otherwise entered into
and structured to accommodate the
objectives of the counter party to such
arrangement.
(3) Any bank or insurance company; any savings and
loan association, building and loan association,
cooperative bank, homestead association, or similar
institution, or any receiver, conservator, liquidator,
liquidating agent, or similar official or person
thereof or therefor; or any common trust fund or
similar fund maintained by a bank exclusively for the
collective investment and reinvestment of moneys
contributed thereto by the bank in its capacity as a
trustee, executor, administrator, or guardian, if--
(A) such fund is employed by the bank solely
as an aid to the administration of trusts,
estates, or other accounts created and
maintained for a fiduciary purpose;
(B) except in connection with the ordinary
advertising of the bank's fiduciary services,
interests in such fund are not--
(i) advertised; or
(ii) offered for sale to the general
public; and
(C) fees and expenses charged by such fund
are not in contravention of fiduciary
principles established under applicable Federal
or State law.
(4) Any person substantially all of whose business is
confined to making small loans, industrial banking, or
similar businesses.
(5) Any person who is not engaged in the business of
issuing redeemable securities, face-amount certificates
of the installment type or periodic payment plan
certificates, and who is primarily engaged in one or
more of the following businesses: (A) Purchasing or
otherwise acquiring notes, drafts, acceptances, open
accounts receivable, and other obligations representing
part or all of the sales price of merchandise,
insurance, and services; (B) making loans to
manufacturers, wholesalers, and retailers of, and to
prospective purchasers of, specified merchandise,
insurance, and services; and (C) purchasing or
otherwise acquiring mortgages and other liens on and
interests in real estate.
(6) Any company primarily engaged, directly or
through majority-owned subsidiaries, in one or more of
the businesses described in paragraphs (3), (4), and
(5), or in one or more of such businesses (from which
not less than 25 centum of such company's gross income
during its last fiscal year was derived) together with
an additional business or businesses other than
investing, reinvesting, owning, holding, or trading in
securities.
(7)(A) Any issuer, the outstanding securities of
which are owned exclusively by persons who, at the time
of acquisition of such securities, are qualified
purchasers, and which is not making and does not at
that time propose to make a public offering of such
securities. Securities that are owned by persons who
received the securities from a qualified purchaser as a
gift or bequest, or in a case in which the transfer was
caused by legal separation, divorce, death, or other
involuntary event, shall be deemed to be owned by a
qualified purchaser, subject to such rules,
regulations, and orders as the Commission may prescribe
as necessary or appropriate in the public interest or
for the protection of investors.
(B) Notwithstanding subparagraph (A), an issuer is
within the exception provided by this paragraph if--
(i) in addition to qualified purchasers,
outstanding securities of that issuer are
beneficially owned by not more than 100 persons
who are not qualified purchasers, if--
(I) such persons acquired any portion
of the securities of such issuer on or
before September 1, 1996; and
(II) at the time at which such
persons initially acquired the
securities of such issuer, the issuer
was excepted by paragraph (1); and
(ii) prior to availing itself of the
exception provided by this paragraph--
(I) such issuer has disclosed to each
beneficial owner, as determined under
paragraph (1), that future investors
will be limited to qualified
purchasers, and that ownership in such
issuer is no longer limited to not more
than 100 persons; and
(II) concurrently with or after such
disclosure, such issuer has provided
each beneficial owner, as determined
under paragraph (1), with a reasonable
opportunity to redeem any part or all
of their interests in the issuer,
notwithstanding any agreement to the
contrary between the issuer and such
persons, for that person's
proportionate share of the issuer's net
assets.
(C) Each person that elects to redeem under
subparagraph (B)(ii)(II) shall receive an amount in
cash equal to that person's proportionate share of the
issuer's net assets, unless the issuer elects to
provide such person with the option of receiving, and
such person agrees to receive, all or a portion of such
person's share in assets of the issuer. If the issuer
elects to provide such persons with such an
opportunity, disclosure concerning such opportunity
shall be made in the disclosure required by
subparagraph (B)(ii)(I).
(D) An issuer that is excepted under this paragraph
shall nonetheless be deemed to be an investment company
for purposes of the limitations set forth in
subparagraphs (A)(i) and (B)(i) of section 12(d)(1)
relating to the purchase or other acquisition by such
issuer of any security issued by any registered
investment company and the sale of any security issued
by any registered open-end investment company to any
such issuer.
(E) For purposes of determining compliance with this
paragraph and paragraph (1), an issuer that is
otherwise excepted under this paragraph and an issuer
that is otherwise excepted under paragraph (1) shall
not be treated by the Commission as being a single
issuer for purposes of determining whether the
outstanding securities of the issuer excepted under
paragraph (1) are beneficially owned by not more than
100 persons or whether the outstanding securities of
the issuer excepted under this paragraph are owned by
persons that are not qualified purchasers. Nothing in
this subparagraph shall be construed to establish that
a person is a bona fide qualified purchaser for
purposes of this paragraph or a bona fide beneficial
owner for purposes of paragraph (1).
(8)
(9) Any person substantially all of whose business
consists of owning or holding oil, gas, or other
mineral royalties or leases, or fractional interests
therein, or certificates of interest or participation
in or investment contracts relative to such royalties,
leases, or fractional interests.
(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 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.
(11) Any employee's stock bonus, pension, or profit-
sharing trust which meets the requirements for
qualification under section 401 of the Internal Revenue
Code of 1986; or any governmental plan described in
section 3(a)(2)(C) of the Securities Act of 1933; or
any collective trust fund maintained by a bank
consisting solely of assets of one or more of such
trusts, government plans, or church plans, companies or
accounts that are excluded from the definition of an
investment company under paragraph (14) of this
subsection; or any separate account the assets of which
are derived solely from (A) contributions under pension
or profit-sharing plans which meet the requirements of
section 401 of the Internal Revenue Code of 1986 or the
requirements for deduction of the employer's
contribution under section 404(a)(2) of such Code, (B)
contributions under governmental plans in connection
with which interests, participations, or securities are
exempted from the registration provisions of section 5
of the Securities Act of 1933 by section 3(a)(2)(C) of
such Act, and (C) advances made by an insurance company
in connection with the operation of such separate
account.
(12) Any voting trust the assets of which consist
exclusively of securities of a single issuer which is
not an investment company.
(13) Any security holders' protective committee or
similar issuer having outstanding and issuing no
securities other than certificates of deposit and
short-term paper.
(14) Any church plan described in section 414(e) of
the Internal Revenue Code of 1986, if, under any such
plan, no part of the assets may be used for, or
diverted to, purposes other than the exclusive benefit
of plan participants or beneficiaries, or any company
or account that is--
(A) established by a person that is eligible
to establish and maintain such a plan under
section 414(e) of the Internal Revenue Code of
1986; and
(B) substantially all of the activities of
which consist of--
(i) managing or holding assets
contributed to such church plans or
other assets which are permitted to be
commingled with the assets of church
plans under the Internal Revenue Code
of 1986; or
(ii) administering or providing
benefits pursuant to church plans.
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