PUBLIC LAWS-CH. 686-AUG. 22, 1940 or insurance company, or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security; or (3) a company any affiliated person of which is ineligible, by reason of paragraph (1) or (2), to serve or act in the foregoing capacities. "Investment ad- For the purposes of paragraphs (1), (2), and (3) of this subsection, viser." the term "investment adviser" shall include an investment adviser as defined in title II of this Act. Application of in- (b) Any person who is ineligible, by reason of subsection (a), exemption. to serve or act in the capacities enumerated in that subsection, may file with the Commission an application for an exemption from the provisions of that subsection. The Commission shall by order grant such application, either unconditionally or on an appropriate tem- porary or other conditional basis, if it is established that the prohi- bitions of subsection (a), as applied to such person, are unduly or disproportionately severe or that the conduct of such person has been such as not to make it against the public interest or protection of investors to grant such application. AFIUIATIONS OF DIRECTORS Board of directors. Restriction upon af- filiations of members. Investment ad- visers. Regular brokers. Principal under- writers. Investment bank- ers. Bank officials. Proio. Exception. SEc. 10. (a) After one year from the effective date of this title, no registered investment company shall have a board of directors more than 60 per centum of the members of which are persons who are investment advisers of, affiliated persons of an investment adviser of, or officers or employees of, such registered company. (b) After one year from the effective date of this title, no regis- tered investment company shall- (1) 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; (2) use as a principal 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 principal underwriters or affiliated persons of any of such prin- cipal underwriters; or (3) 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 investment banker. For the purposes of this paragraph, a person shall not be deemed an affiliated person of an investment banker solely by reason of the fact that he is an affiliated person of a company of the character described in section 12 (d) (3) (A) and (B). (c) After the effective date of this title, no registered investment company shall have a majority of its board of directors consisting of persons who are officers or directors of any one bank: Provided, That, if on March 15, 1940, any registered investment company shall have had a majority of its directors consisting of persons who are directors, officers, or employees of any one bank, such registered com- pany may continue to have the same percentage of its board of directors consisting of persons who are directors, officers, or employees of such bank. [54 STAT.
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