§270.11a-3. Offers of exchange by open-end investment companies other than separate accounts.
17 C.F.R. § 270.11a-3
For purposes of this rule—
Acquired security means the security held by a securityholder after completing an exchange pursuant to an exchange offer;
Administrative fee means any fee, other than a sales load, deferred sales load or redemption fee, that is
Reasonably intended to cover the costs incurred in processing exchanges of the type for which the fee is charged, Provided that: the offering company will maintain and preserve records of any determination of the costs incurred in connection with exchanges for a period of not less than six years, the first two years in an easily accessible place. The records preserved under this provision shall be subject to inspection by the Commission in accordance with section 31(b) of the Act (15 U.S.C. 80a-30(b)) as if such records were records required to be maintained under rules adopted under section 31(a) of the Act (15 U.S.C. 80a-30a)); or
A nominal fee as defined in paragraph (a)(8) of this section;
Deferred sales load means any amount properly chargeable to sales or promotional expenses that is paid by a shareholder after purchase but before or upon redemption;
Exchanged security— means
The security actually exchanged pursuant to an exchange offer, and
Any security previously exchanged for such security or for any of its predecessors;
Group of investment companies means any two or more registered open-end investment companies that hold themselves out to investors as related companies for purposes of investment and investor services, and
That have a common investment adviser or principal underwriter, or
The investment adviser or principal underwriter of one of the companies is an affiliated person as defined in section 2(a)(3) of the Act (15 U.S.C. 80a-2(a)(3)) of the investment adviser or principal underwriter of each of the other companies;
Offering company means a registered open-end investment company (other than a registered separate account) or any principal underwriter thereof that makes an offer (an “exchange offer”) to the holder of a security of that company, or of another open-end investment company within the same group of investment companies as the offering company, to exchange that security for a security of the offering company;
Redemption fee means a fee that is imposed by the fund pursuant to section 270.22c-2; and
Nominal fee means a slight or de minimis fee.
Nothwithstanding section 11(a) of the Act (15 U.S.C. 80a-11(a)), and except as provided in paragraphs (d) and (e) of this section, in connection with an exchange offer an offering company may cause a securityholder to be charged a sales load on the acquired security, a redemption fee, an administrative fee, or any combination of the foregoing, Provided that:
Any administrative fee or scheduled variation thereof is applied uniformly to all securityholders of the class specified;
Any redemption fee charged with respect to the exchanged security or any scheduled variation thereof
Is applied uniformly to all securityholders of the class specified, and
Does not exceed the redemption fee applicable to a redemption of the exchanged security in the absence of an exchange.
No deferred sales load is imposed on the exchanged security at the time of an exchange;
Any sales load charged with respect to the acquired security is a percentage that is no greater than the excess, if any, of the rate of the sales load applicable to that security in the absence of an exchange over the sum of the rates of all sales loads previously paid on the exchanged security, Provided that:
The percentage rate of any sales load charged when the acquired security is redeemed, that is solely the result of a deferred sales load imposed on the exchanged security, may be no greater than the excess, if any, of the applicable rate of such sales load, calculated in accordance with paragraph (b)(5) of this section, over the sum of the rates of all sales loads previously paid on the acquired security, and
In no event may the sum of the rates of all sales loads imposed prior to and at the time the acquired security is redeemed, including any sales load paid or to be paid with respect to the exchanged security, exceed the maximum sales load rate, calculated in accordance with paragraph (b)(5) of this section, that would be applicable in the absence of an exchange to the security (exchanged or acquired) with the highest such rate;
Any deferred sales load charged at the time the acquired security is redeemed is calculated as if the holder of the acquired security had held that security from the date on which he became the holder of the exchanged security, Provided that:
The time period during which the acquired security is held need not be included when the amount of the deferred sales load is calculated, if the deferred sales load is
reduced by the amount of any fees collected on the acquired security under the terms of any plan of distribution adopted in accordance with rule 12b-1 under the Act (17 CFR 270.12b-1) (a “12b-1 plan”), and
Solely the result of a sales load imposed on the exchanged security, and no other sales loads, including deferred sales loads, are imposed with respect to the acquired security,
The time period during which the exchanged security is held need not be included when the amount of the deferred sales load on the acquired security is calculated, if
The deferred sales load is reduced by the amount of any fees previously collected on the exchanged security under the terms of any 12b-1 plan, and
The exchanged security was not subject to any sales load, and
The holding periods in this subsection may be computed as of the end of the calendar month in which a security was purchased or redeemed;
The prospectus of the offering company discloses
The amount of any administrative or redemption fee imposed on an exchange transaction for its securities, as well as the amount of any administrative or redemption fee imposed on its securityholders to acquire the securities of other investment companies in an exchange transaction, and
If the offering company reserves the right to change the terms of or terminate an exchange offer, that the exchange offer is subject to termination and its terms are subject to change;
Any sales literature or advertising that mentions the existence of the exchange offer also discloses
The existence of any administrative fee or redemption fee that would be imposed at the time of an exchange; and
If the offering company reserves the right to change the terms of or terminate the exchange offer, that the exchange offer is subject to termination and its terms are subject to change;
Whenever an exchange offer is to be terminated or its terms are to be amended materially, any holder of a security subject to that offer shall be given prominent notice of the impending termination or amendment at least 60 days prior to the date of termination or the effective date of the amendment, Provided that:
No such notice need be given if the only material effect of an amendment is to reduce or eliminate an administrative fee, sales load or redemption fee payable at the time of an exchange, and
No notice need be given if, under extraordinary circumstances, either
There is a suspension of the redemption of the exchanged security under section 22(e) of the Act [15 U.S.C. 80a-22(e)] and the rules and regulations thereunder, or
The offering company temporarily delays or ceases the sale of the acquired security because it is unable to invest amounts effectively in accordance with applicable investment objectives, policies and restrictions; and
In calculating any sales load charged with respect to the acquired security—
If a securityholder exchanges less than all of his securities, the security upon which the highest sales load rate was previously paid is deemed exchanged first; and
If the exchanged security was acquired through reinvestment of dividends or capital gains distributions, that security is deemed to have been sold with a sales load rate equal to the sales load rate previously paid on the security on which the dividend was paid or distribution made.
If either no sales load is imposed on the acquired security or the sales load imposed is less than the maximum allowed by paragraph (b)(4) of this section, the offering company may require the exchanging securityholder to have held the exchanged security for a minimum period of time previously established by the offering company and applied uniformly to all securityholders of the class specified.
Any offering company that has previously made an offer of exchange may continue to impose fees or sales loads permitted by an order under section 11(a) of the Act upon shares purchased before the earlier of (1) One year after the effective date of this section, or (2) When the offer has been brought into compliance with the terms of this section, and upon shares acquired through reinvestment of dividends or capital gains distributions based on such shares, until such shares are redeemed.
Any offering company that has previously made an offer of exchange cannot rely on this section to amend such prior offer unless
The offering company's prospectus disclosed, during at least the two year period prior to the amendment of the offer (or, if the fund is less than two years old, at all times the offer has been outstanding) that the terms of the offer were subject to change, or
The only effect of such change is to reduce or eliminate an administrative fee, sales load or redemption fee payable at the time of an exchange.
Notes, amendments, and revision history
Amendments
[54 FR 35185, Aug. 24, 1989, as amended at 61 FR 49016, Sept. 17, 1996; 70 FR 13341, Mar. 18, 2005]
Authority
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, 1681w(a)(1), 6801-6809, 6825, and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted. Section 270.0-1 also issued under sec. 38(a) (15 U.S.C. 80a-37(a)); Section 270.0-1(a)(7) is also issued under 15 U.S.C. 80a-10(e); Section 270.0-11 also issued under secs. 8, 24, 30 and 38, Investment Company Act (15 U.S.C. 80a-8, 80a-24, 80a-29 and 80a-37), secs. 6, 7, 8, 10 and 19(a), Securities Act (15 U.S.C. 77f, 77g, 77h, 77j, 77s(a)) and secs. 3(b), 12, 13, 14, 15(d) and 23(a), Exchange Act (15 U.S.C. 78c(b), 78l, 78m, 78n, 78o(d) and 78w(a)); Section 270.6a-5 is also issued under 15 U.S.C. 80a-6(a)(5)(A)(iv)(I). Section 270.6c-9 is also issued under secs. 6(c) (15 U.S.C. 80a-6(c)) and 38(a) (15 U.S.C. 80a-37(a)); Section 270.6c-10 is also issued under sec. 6(c) (15 U.S.C. 80a-6(c)); Section 270.6c-11 is also issued under 15 U.S.C. 80a-6(c) and 80a-37(a). Section 270.6e-3 is also issued under 15 U.S.C. 80a-5(e); Section 270.8b-11 is also issued under 15 U.S.C. 77s, 80a-8, and 80a-37; Section 270.10e-1 is also issued under 15 U.S.C. 80a-10(e); Sections 270.12d1-1, 270.12d1-2, and 270.12d1-3 are also issued under 15 U.S.C. 80a-6(c), 80a-12(d)(1)(J), and 80a-37(a). Section 270.12d3-1 is also issued under 15 U.S.C. 80a-6(c); Section 270.17a-8 is also issued under 15 U.S.C. 80a-6(c) and 80a-37(a); Section 270.17d-1 is also issued under 15 U.S.C. 80a-6(c), 80a-17(d), and 80a-37(a); Section 270.17e-1 is also issued under 15 U.S.C. 80a-6(c), 80a-30(a), and 80a-37(a); Section 270.17f-5 also issued under sec. 6(c) (15 U.S.C. 80a-6(c); Section 270.17g-1 is also issued under 15 U.S.C. 80a-6(c), 80a-17(d), 80a-17(g), and 80a-37(a); Section 270.17j-1 is also issued under secs. 206(4) and 211(a), Investment Advisers Act (15 U.S.C. 80b-6(4) and 80b-11(a)); Section 270.19b-1 is also issued under secs. 6(c) (15 U.S.C. 80a-6(c)), 19 (a) and (b) (15 U.S.C 80a-19 (a) and (b)), and 38(a) (15 U.S.C. 80a-37(a)); Section 270.22c-1 also issued under secs. 6(c), 22(c), and 38(a) (15 U.S.C. 80a-6(c), 80a-22(c), and 80a-37(a)); Section 270.23c-3 also issued under 15 U.S.C. 80a-23(c). Section 270.24f-2 also issued under 15 U.S.C. 80a-24(f)(4). Section 270.30a-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and 80a-29. Section 270.30a-2 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, 80a-29, 7202, and 7241; and 18 U.S.C. 1350, unless otherwise noted. Section 270.30a-3 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and 80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745. Section 270.30b1-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and 80a-29. Section 270.30b2-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and 80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745. Section 270.30d-1 is also issued under 15 U.S.C. 78m, 78o(d), 80a-8, and 80a-29, and secs. 3(a) and 302, Pub. L. 107-204, 116 Stat. 745. Section 270.30e-1 is also issued under 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78 l, 78m, 78n, 78o(d), 78w(a), 80a-8, 80a-29, and 80a-37; Section 270.31a-2 is also issued under 15 U.S.C. 80a-30.
Amendments
[54 FR 35185, Aug. 24, 1989, as amended at 61 FR 49016, Sept. 17, 1996; 70 FR 13341, Mar. 18, 2005]