PART IV

INVESTMENT COMPANY ACT OF 1940

DEFINITION OF AN INVESTMENT COMPANY

Where a company has as its sole investments interests in three telephone companies and there is almost complete identity between the operations of such companies and the telephone operations conducted by applicant directly, held, that such company is primarily engaged directly, or through controlled companies conducting similar types of businesses, in a business other than investing, reinvesting, owning, holding, or trading in securities *** Page 168

Where a company engages in no business other than the manufacture through controlled subsidiaries of blast furnace slag products, held, such company is primarily engaged, through controlled companies conducting similar types of businesses, in a business other than investing, reinvesting, owning, holding, or trading in securities *** Page 230

Where a company, having sold all its operating assets, acquires a controlling interest in a wholesale hardware company which it actively manages and in which it has invested 85% of its assets, held that it is primarily engaged through controlled company in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities *** Page 401

Where a company through majority-owned subsidiaries is substantially engaged in and receives a predominant part of its revenues from exploring for, developing and extracting natural resources, and has less than 30% of its assets invested in other enterprises, held, such company is primarily engaged through majority-owned subsidiaries in a business or businesses other than investing, reinvesting, owning, holding, or trading in securities*** Page 449

Where a company, having disposed of all but two of its operating activities, acquires a controlling interest in a truck manufacturing company which it actively manages and in which it has invested approximately 59% of its assets, held, that the company is primarily engaged through a controlled company in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities and therefore is excepted from the definition of investment company pursuant to Section 3 (b) (2) of the Investment Company Act of 1940 * * * Page 715

Exempted Transactions

Where registered investment company makes application pursuant to Section 6 (c) of Investment Company Act for exemption from Section 7 with respect to partially consummated refunding plan, adopted prior to its registration as an investment company, under which plan company's old preferred stock is exchangeable for new convertible preferred stock held by Commission to be right to purchase within prohibition of Section 18 (d) of Act, application denied under circumstances presented, particularly difficulties of investor evaluation intro

891

duced by new security and Commission's inability to find on basis of record that
exchange falls within range of fairness *** Page 424

Convertible preferred stock, preferred stock attributes of which at time of
issuance are clearly subordinate and probably have indiscernible influence on its
market value, and predominant value of which attaches to its conversion right,
held, not senior security entitled to exemption provided by Section 18 (e) of
Investment Company Act but right to purchase within prohibition of Section
18 (d) of Act *** Page 424

Misleading or Deceptive Name of Investment Company

Name of registered investment company, "The Private Investment Fund for
Governmental Personnel, Inc.," and specifically words "Governmental Personnel"
therein, held, deceptive and misleading as implying that company or its securi-
ties have been guaranteed, sponsored, recommended, or approved by the United
States, in violation of Sections 35 (a) and 35 (d) of Investment Company Act
of 1940, and as implying that its securities have investment and other advan-
tages for the civilian and military government personnel to whom sales are to
be restricted, in violation of Section 35 (d) of that Act * * * Page 484

Name of registered investment company, "The Private Investment Fund for
Governmental Personnel, Inc.," and specifically the words “Governmental Per-
sonnel" therein, held, not misleadingly similar to name of an insurance com-
pany, Government Personnel Mutual Life Insurance Company, especially since
companies are in essentially different businesses *** Page 484

Transactions Between Affiliated Persons

Where terms of proposed merger of controlled registered closed-end investment
company and other affiliated companies into controlling registered closed-end in-
vestment company are reasonable and fair and do not involve over-reaching and
are consistent with the stated policies of the registered investment companies
and the general purposes of the Investment Company Act of 1940, and new pre-
ferred stock to be issued meets the requirements of Section 18 (a) (2), held,
the proposed merger transactions between affiliates exempted from Section
17 (a) *** Page 72

Where terms of proposed merger of affiliated oil operating company with and
into registered closed-end investment company are reasonable and fair and do
not involve over-reaching and are consistent with the stated policy of the regis-
tered investment company and the general purpose of the Investment Company
Act of 1940, held, the proposed merger transactions exempted from Section
17 (a) *** Page 209

Where book value of outstanding shares of hardware company with low
earnings and unfavorable financial condition proposed to be acquired by invest-
ment company in part from affiliated persons at substantial profit to the latter
is largely dependent upon value and amount realizable from liquidation of com-
pany's hardware inventory and inventory figure in hardware company's finan-
cial statement is, contrary to previous practice, based on replacement cost
rather than lower of actual cost or market and the taking of the inventory
has not been observed by the auditors preparing the financial statement, held,
record does not establish basis for exempting proposed purchase Page 465
Proposed acquisitions by registered closed-end investment company of out-
standing shares of wholesale hardware company owned in part by affiliated
person and his affiliate, and of assets of real estate corporations affiliated with

affiliated person, in exchange for shares of investment company in amount rep-
resenting large profit to affiliated person, held, not entitled to exemption under
Investment Company Act of 1940, where record does not establish basis for
findings necessary for grant of exemption that consideration is fair and does
not involve over-reaching and that transactions are not inconsistent with policy
of Act to prevent selection of investments in the interests of affiliated persons
or special classes of stockholders rather than of all classes of security holders
*** Page 465

Where evidence of value of land proposed to be acquired by registered invest-
ment company from affiliates at a substantial profit to the latter consists
principally of appraisals and testimony in support thereof by two appraisers,
engaged by sellers with the fee to be received by one for his appraisal and by
both for testifying in the proceedings left open, and one appraiser saw the other
appraisal before arriving at a substantially identical valuation, held, record
does not contain evidence sufficient to establish fairness, absence of over-reach-
ing, or conformance with statutory policy * * * Page 465

Where compensation for negotiating sale of all the assets of steel forgings
company controlled by a registered investment company to be paid to an officer
and director, and to an affiliated person of another officer and director, of such
investment company and of such controlled company represents compensation
for special services beyond those ordinarily required of officers and directors and
where such compensation is reasonable and fair, held, exemption from Section 17
(e) pursuant to Section 6 (c) will be ordered *** Page 574

37 S. E. C.

PART V

INVESTMENT ADVISERS ACT OF 1940

INVESTMENT ADVISER REGISTRATION

Grounds for Denial of Registration

Where registered investment adviser is permanently enjoined from engaging in improper and fraudulent acts and practices in connection with his activities as investment adviser and as a broker-dealer and in connection with the purchase and sale of securities, held, in the public interest to revoke registration as investment adviser and not to permit withdrawal to become effective Page 792

37 S. E. C.

894