Exemption from the definition of “broker” for banks effecting certain excepted or exempted transactions in investment company securities.
(a) A bank that meets the conditions for an exception or exemption from the definition of the term “broker” except for the condition in section 3(a)(4)(C)(i) of the Act (15 U.S.C. 78c(a)(4)(C)(i) ), is exempt from such condition to the extent that it effects a transaction in a covered security, if:
(1) Any such security is neither traded on a national securities exchange nor through the facilities of a national securities association or an interdealer quotation system;
(2) The security is distributed by a registered broker or dealer, or the sales charge is no more than the amount permissible for a security sold by a registered broker or dealer pursuant to any applicable rules adopted pursuant to section 22(b)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-22(b)(1)) by a securities association registered under section 15A of the Act (15 U.S.C. 78o-3 ); and
(3) Any such transaction is effected:
(i) Through the National Securities Clearing Corporation; or
(ii) Directly with a transfer agent or with an insurance company or separate account that is excluded from the definition of transfer agent in Section 3(a)(25) of the Act.
(b) Definitions. For purposes of this section:
(1) Covered security means:
(i) Any security issued by an open-end company, as defined by section 5(a)(1) of the Investment Company Act (15 U.S.C. 80a-5(a)(1) ), that is registered under that Act; and
(ii) Any variable insurance contract funded by a separate account, as defined by section 2(a)(37) of the Investment Company Act (15 U.S.C. 80a-2(a)(37) ), that is registered under that Act.
(2) Interdealer quotation system has the same meaning as in 17 CFR 240.15c2-11.