691h

No registered investment company shall have a board of directors the half or more of the members of which are persons who are interested persons of such registered company. It shall not be understood as interested person any director who is an affiliated person of the registered investment company solely by reason of being the director of the same or another such company, or by being an immediate family member of a director who is not an interested person of such registered investment company. No registered investment company shall:(a) Employ as regular broker any director, officer, or employee of such registered company, or any person of which any such director, officer, or employee is an affiliated person, unless a majority of the board of directors of such registered company shall be persons who are not such brokers or affiliated persons of any of such brokers.(b) Use as underwriter of securities issued by it any director, officer, or employee of such registered company or any person of which any such director, officer, or employee is an affiliated person, unless a majority of the board of directors of such registered company shall be persons who are not such underwriters or

rson of which any such director, officer, or employee is an affiliated person, unless a majority of the board of directors of such registered company shall be persons who are not such underwriters or affiliated persons of any of such underwriters.(c) Have as director, officer, or employee any investment banker, or any affiliated person of an investment banker, unless a majority of the board of directors of such registered company shall be persons who are not investment bankers or affiliated persons of any of such investment banker.(d) Have a majority of its board of directors consisting of persons who are officers, directors, or employees of any one bank (together with its affiliates and subsidiaries) or any one bank holding company.(e) Maintain its principal office or records outside of the jurisdiction of the Commonwealth of Puerto Rico.(f) Hold its meetings of directors and stockholders outside of the jurisdiction of the Commonwealth of Puerto Rico.(g) Have less than two directors who are residents of Puerto Rico, and not have at least one of its chair, or vice chair, and its secretary or assistant secretaries who are residents of Puerto Rico.(h) Hire an investment adviser or

who are residents of Puerto Rico, and not have at least one of its chair, or vice chair, and its secretary or assistant secretaries who are residents of Puerto Rico.(h) Hire an investment adviser or administrator who (1) has its principal office outside of the jurisdiction of the Commonwealth of Puerto Rico or (2) less than ninety percent (90%) of its employees are residents of Puerto Rico; provided, however, that this prohibition shall not be construed to impair the right of a registered investment company to hire, directly or indirectly, an investment subadviser to manage a portion of its assets or sub-administrator that do not meet these requirements.(i) Violate the requirements of this section that a majority of the board of directors of such registered company shall be persons who are not interested persons or the requirements of subsection (b) of this section; unless:(1) At least one of the members of the board of directors is not an interested person of the investment adviser of the registered company, or officer or employee of such registered company.(2) Such investment company is an open-end company and redeemable at will.(3) Such investment adviser is registered under

of the registered company, or officer or employee of such registered company.(2) Such investment company is an open-end company and redeemable at will.(3) Such investment adviser is registered under the Investment Advisers Act of 1940 and is engaged principally in the business of rendering investment supervisory services.(4) No sales load is charged on securities issued by such investment company when sold to investors.(5) Any premium over net asset value charged to investors by such company upon the issuance of any such security, plus any discount from net asset value charged on redemption thereof, shall not in the aggregate exceed two percent (2%) of the net asset value.(6) The registered company has not incurred sales or promotion expenses, but expenses incurred in complying with laws and regulations related to the issue or sale of securities of such company.(7) Such investment adviser is the only investment adviser to such investment company, and such investment adviser does not receive a management or advisory fee exceeding one percent (1%) of the value of such company’s net assets averaged over the year.(8) All executive salaries and executive expenses and office rent of

t receive a management or advisory fee exceeding one percent (1%) of the value of such company’s net assets averaged over the year.(8) All executive salaries and executive expenses and office rent of such investment company are paid by such investment adviser.(9) Such investment company has only one class of securities outstanding, each unit of which has equal voting rights with every other unit.(j) Operate, by reason of a vacancy that arises as a result of the death, disqualification, or resignation of any director or officer, without meeting the requirements of this section for more than thirty (30) days. Vacancies shall be filled within thirty (30) days as provided in the corporate bylaws or the certificate of incorporation of the investment company. The requirements established in this Section may be modified by the Commissioner through regulations.(k) Knowingly acquire, during the existence of any underwriting or selling syndicate, any security (except a security of which such company is the issuer) an underwriter of which is an officer, director, member of an advisory board, investment adviser, or employee of such registered company, or is a person of which any such officer,

pany is the issuer) an underwriter of which is an officer, director, member of an advisory board, investment adviser, or employee of such registered company, or is a person of which any such officer, director, member of an advisory board, investment adviser, or employee is an affiliated person, unless such registered company is itself acting as an underwriter for the issue or that such transactions are carried out in accordance with the policy on transactions with affiliates adopted by the board of directors and a majority of directors who are not interested persons of the registered investment company, provided, that such policies have been filed with the Commissioner and that compliance with such provisions has been verified by the auditor of the registered investment company.(l) Violate, with respect to any advisory board, if any, the requirements established herein for the board of directors.(m) Issue securities, other than preferred stocks, that are not of the same class, and the same voting rights and profit sharing of all other securities other than preferred stocks. This subsection shall not apply to an investment company that is a foreign investment trust exempt under

the same voting rights and profit sharing of all other securities other than preferred stocks. This subsection shall not apply to an investment company that is a foreign investment trust exempt under subsection (a) of § 691a of this title, and the issue is authorized by a majority of members of the board of directors, including a majority of directors that are not interested persons. It shall not apply either to different classes of securities, other than preferred stocks, if:(1) The only difference between classes is the amount of fees collected to investors.(2) The difference in the amount of fees is due solely to the amount of total investment made by the person.(n) Issue preferred voting stocks.(o) Issue preferred stocks convertible into common stocks, unless the investment company is an investment trust exempt under subsection (a) of § 691a of this title, the issue is authorized by a majority of members of the board of directors, including a majority of directors that are not interested persons, and the requirements of § 691j of this title.(p) Have less than seven (7) security holders entitled to vote and share in the profits after the initial public offering period has

t interested persons, and the requirements of § 691j of this title.(p) Have less than seven (7) security holders entitled to vote and share in the profits after the initial public offering period has elapsed. Not more than fifty percent (50%) of its voting securities shall be controlled by 2 of the holders thereof.(q) In the event that it has purchased securities issued by the Commonwealth of Puerto Rico, the United States, any state or territory of the United States, or any instrumentality or political subdivision thereof, invest, one year after its date of registration as a registered investment company, less than twenty percent (20%) of its assets in: (a) stocks, bonds, or obligations of a domestic corporation or partnership, or a foreign corporation or partnership not less than eighty percent (80%) of the gross income of which during the last three (3) years constitutes income related to the conduct of a business in Puerto Rico (including, but not limited to, any instrument issued by a company registered in the Puerto Rico Stock Index of the Government Development Bank for Puerto Rico); (b) mortgage loans, or participation in mortgage loans, on residential properties located

d by a company registered in the Puerto Rico Stock Index of the Government Development Bank for Puerto Rico); (b) mortgage loans, or participation in mortgage loans, on residential properties located in Puerto Rico; (c) obligations issued or guaranteed by the Commonwealth of Puerto Rico, its political subdivisions, agencies or instrumentalities; or (d) exempt investment trusts, including those eligible under § 30522 of Title 13, (e) eligible activities and business as defined in subsections (d), (e), (g), and (h) of § 30522 of Title 13; or (f) any other investment that the regulations.(r) Purchase securities at initial pubic offering if the investment adviser of the registered investment company is an interested person of an entity that has been contracted by the issuer of such securities to provide financial advice services for the issue of such securities, provided that an underwriter contracted by an issuer is not offering financial advice services solely for being acting as the underwriter of securities of the issuer that contracted him/her. Exempt investment trusts making investments in compliance with subsection (c) of § 691o of this title are exempt from this requirement.

nderwriter of securities of the issuer that contracted him/her. Exempt investment trusts making investments in compliance with subsection (c) of § 691o of this title are exempt from this requirement. History —July 30, 2013, No. 93, § 11; Nov. 27, 2013, No. 137, § 6.