17 CFR 270.3a-5 - Exemption for subsidiaries organized to finance the operations of domestic or foreign companies.

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§ 270.3a-5 Exemption for subsidiaries organized to finance the operations of domestic or foreign companies.
(a) A finance subsidiary will not be considered an investment company under section 3(a) of the Act (15 U.S.C. 80a-3(a)) and securities of a finance subsidiary held by the parent company or a company controlled by the parent company will not be considered “investment securities” under section 3(a)(1)(C) of the Act (15 U.S.C. 80a-3(a)(1)(C)); Provided, That:
(1) Any debt securities of the finance subsidiary issued to or held by the public are unconditionally guaranteed by the parent company as to the payment of principal, interest, and premium, if any (except that the guarantee may be subordinated in right of payment to other debt of the parent company);
(2) Any non-voting preferred stock of the finance subsidiary issued to or held by the public is unconditionally guaranteed by the parent company as to payment of dividends, payment of the liquidation preference in the event of liquidation, and payments to be made under a sinking fund, if a sinking fund is to be provided (except that the guarantee may be subordinated in right of payment to other debt of the parent company);
(3) The parent company's guarantee provides that in the event of a default in payment of principal, interest, premium, dividends, liquidation preference or payments made under a sinking fund on any debt securities or non-voting preferred stock issued by the finance subsidiary, the holders of those securities may institute legal proceedings directly against the parent company (or, in the case of a partnership or joint venture, against the partners or participants in the joint venture) to enforce the guarantee without first proceeding against the finance subsidiary;
(4) Any securities issued by the finance subsidiary which are convertible or exchangeable are convertible or exchangeable only for securities issued by the parent company (and, in the case of a partnership or joint venture, for securities issued by the partners or participants in the joint venture) or for debt securities or non-voting preferred stock issued by the finance subsidiary meeting the applicable requirements of paragraphs (a)(1) through (a)(3);
(5) The finance subsidiary invests in or loans to its parent company or a company controlled by its parent company at least 85% of any cash or cash equivalents raised by the finance subsidiary through an offering of its debt securities or non-voting preferred stock or through other borrowings as soon as practicable, but in no event later than six months after the finance subsidiary's receipt of such cash or cash equivalents;
(6) The finance subsidiary does not invest in, reinvest in, own, hold or trade in securities other than Government securities, securities of its parent company or a company controlled by its parent company (or in the case of a partnership or joint venture, the securities of the partners or participants in the joint venture) or debt securities (including repurchase agreements) which are exempted from the provisions of the Securities Act of 1933 by section 3(a)(3) of that Act; and
(7) Where the parent company is a foreign bank as the term is used in rule 3a-6 (17 CFR 270.3a-6 of this chapter), the parent company may, in lieu of the guaranty required by paragraph (a)(1) or (a)(2) of this section, issue, in favor of the holders of the finance subsidiary's debt securities or non-voting preferred stock, as the case may be, an irrevocable letter of credit in an amount sufficient to fund all of the amounts required to be guaranteed by paragraphs (a)(1) and (a)(2) of this section, provided, that:
(i) Payment on such letter of credit shall be conditional only upon the presentation of customary documentation, and
(ii) The beneficiary of such letter of credit is not required by either the letter of credit or applicable law to institute proceedings against the finance subsidiary before enforcing its remedies under the letter of credit.
(b) For purposes of this rule,
(1) A finance subsidiary shall mean any corporation—
(i) All of whose securities other than debt securities or non-voting preferred stock meeting the applicable requirements of paragraphs (a)(1) through (3) or directors' qualifying shares are owned by its parent company or a company controlled by its parent company; and
(ii) The primary purpose of which is to finance the business operations of its parent company or companies controlled by its parent company;
(2) A parent company shall mean any corporation, partnership or joint venture:
(i) That is not considered an investment company under section 3(a) or that is excepted or exempted by order from the definition of investment company by section 3(b) or by the rules or regulations under section 3(a);
(ii) That is organized or formed under the laws of the United States or of a state or that is a foreign private issuer, or that is a foreign bank or foreign insurance company as those terms are used in rule 3a-6 (17 CFR 270.3a-6 of this chapter); and
(iii) In the case of a partnership or joint venture, each partner or participant in the joint venture meets the requirements of paragraphs (b)(2)(i) and (ii).
(3) A company controlled by the parent company shall mean any corporation, partnership or joint venture:
(i) That is not considered an investment company under section 3(a) or that is excepted or exempted by order from the definition of investment company by section 3(b) or by the rules or regulations under section 3(a);
(ii) That is either organized or formed under the laws of the United States or of a state or that is a foreign private issuer, or that is a foreign bank or foreign insurance company as those terms are used in rule 3a-6; and
(iii) In the case of a corporation, more than 25 percent of whose outstanding voting securities are beneficially owned directly or indirectly by the parent company; or
(iv) In the case of a partnership or joint venture, each partner or participant in the joint venture meets the requirements of paragraphs (b)(3) (i) and (ii), and the parent company has the power to exercise a controlling influence over the management or policies of the partnership or joint venture.
(4) A foreign private issuer shall mean any issuer which is incorporated or organized under the laws of a foreign country, but not a foreign government or political subdivision of a foreign government.
[49 FR 49446, Dec. 20, 1984, as amended at 56 FR 56299, Nov. 4, 1991; 67 FR 43536, June 28, 2002]

Title 17 published on 2013-04-01

The following are only the Rules published in the Federal Register after the published date of Title 17.

For a complete list of all Rules, Proposed Rules, and Notices view the Rulemaking tab.

  • 2014-01-08; vol. 79 # 5 - Wednesday, January 8, 2014
    1. 79 FR 1316 - Removal of Certain References to Credit Ratings Under the Investment Company Act
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      Final rule.
      Effective Date: February 7, 2014; Compliance Date: July 7, 2014.
      17 CFR Parts 239, 270, and 274

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United States Code
U.S. Code: Title 15 - COMMERCE AND TRADE

§ 30 - Repealed.

§ 37 - Immunity from antitrust laws

§ 77f - Registration of securities

§ 77g - Information required in registration statement

§ 77h - Taking effect of registration statements and amendments thereto

§ 77j - Information required in prospectus

§ 77q - Fraudulent interstate transactions

§ 77s - Special powers of Commission

§ 77eee - Securities required to be registered under Securities Act

§ 77ggg - Qualification of indentures covering securities not required to be registered

§ 77nnn - Reports by obligor; evidence of compliance with indenture provisions

§ 77sss - Rules, regulations, and orders

§ 78c - Definitions and application

§ 78d - Securities and Exchange Commission

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§ 78m - Periodical and other reports

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Title 17 published on 2013-04-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 17 CFR 270 after this date.

  • 2014-04-09; vol. 79 # 68 - Wednesday, April 9, 2014
    1. 79 FR 19564 - Investment Company Advertising: Target Date Retirement Fund Names and Marketing
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      Proposed rule; request for additional comment.
      The comment period for the proposed rule published on June 23, 2010 (75 FR 35919), is reopened. Comments should be received on or before June 9, 2014.
      17 CFR Parts 230 and 270