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tion to control the selection of the persons who assume to act on behalf of such investors and the version of the issuer's affairs presented to such investors;
(2) When the persons who assume to represent the interests of such investors, to protect and enforce their rights, and to solicit authority so to do or to solicit assents to a plan, have no bona-fide interest, by ownership or representation or otherwise, in securities of the class to be solicited; when such persons have any relationship to or connection with the issuer or any underwriter of any securities of the issue or hold, beneficially or otherwise, any interest in the issuer or in any such underwriter, which relationship, connection, or interest involves a material conflict, actual or potential, with the interest of such investors; when full and fair disclosure of the existence of such relationship, connection, or interest is not made to such investors;
(3) When such investors have no real alternative but to authorize such persons to represent them, on such terms as such persons may determine; when such solicitation is effected on terms which do not require the affirmative approval of such investors, after full and fair disclosure of all material facts, of any action to be taken on their behalf with respect to the approval of a plan of reorganization, readjustment, or debt arrangement or other important matters; when such persons reserve to themselves the uncontrolled right to determine their own fees and expenses, to trade in securities of the issuer and otherwise to profit from their position as fiduciaries, or to take other action inconsistent with such position; when, by reason of provisions exculpating such fiduciaries from liability for their failure properly to exercise the authority conferred upon them, the protection afforded to such investors is rendered illusory;
(4) When the plan of reorganization, readjustment, or debt arrangement is proposed, directly or indirectly, by persons having no bona-fide interest in such reorganization, readjustment, or debt arrangement, or having interests which materially conflict, actually or potentially, with the interests of the investors affected by such plan; when such plan fails to make full and fair disclosure of the terms and conditions upon which securities are to be issued thereunder, the provisions made for the selection of the management of the new or continuing company, the fees and expenses to be paid in connection therewith, or other material matters;
(5) When, in the case of reorganizations pending before Federal or State courts, officials or agencies having jurisdiction to pass upon the fairness and equity of the plan, the making of a free and informed determination on such issue and the development of a fair and equitable plan are prejudiced by the pressure of other business, the absence of disinterested expert advice, or the solicitation and marshaling of assents to such plan in advance of such determination; or
(6) When the activities of persons soliciting such authorizations or assents, extending over many States, are not susceptible of effective control by any State.
(b) When abuses of the character above enumerated become persistent and widespread, the solicitation of such authorizations and assents, unless regulated, is injurious to the capital markets, to investors and the general public, and hinders the fair and orderly administration of reorganization proceedings in the district courts (including reorganizations under the Bankruptcy Act); and it is hereby declared to be the policy of this act, in accordance with which policy all provisions of this act shall be interpreted, to meet the problems and eliminate the evils, as enumerated in this section, connected with such solicitation by the use of means and instruments of transportation and communication in interstate commerce and of the mails.
(1) The term "security” means any note, stock, treasury stock, bond, debenture, evidence of indebedness, certificate of interest or participation in any profitsharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guaranty of, or warrant or right to subscribe to or purchase any of the foregoing.
(2) The term "person” means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof. As used in this paragraph the term “trust” shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security.
(3) The term “issuer”, when used with respect to a security, means the original issuer of such security, any obligor thereon, and the owner of any property securing the same.
(4) The term "owner", when used with respect to any security, means any person owning the legal or beneficial interest in such security, and shall also include any agent or representative of such owner when acting with respect to such security.
(5) The term “reorganization” means (A) any proceeding pursuant to section 77B of the Bankruptcy Act or (B) any receivership, rehabilitation, or foreclosure proceeding.
(6) The term "plan of reorganization” means in the case of a reorganization specified in clause (A) of paragraph (5) of this section, a plan within the meaning of section 77B of the Bankruptcy Act; or the plan, agreement, or general arrangement designed to effect a transfer, disposition, or revesting of assets in a reorganization specified in clause (B) of said paragraph, whether or not such plan, agreement, or arrangement is in documentary form.
(7) The term “voluntary readjustment” means any statutory merger or consolidation, or sale of all or substantially all of the assets of a person for securities, or partly for securities and partly for cash or other property, other than a merger, consolidation, or sale effected in a reorganization or in a municipal or foreign debt arrangement; and any modification of the terms, priorities, rights, or privileges of any security, or any exchange of any security for any other security or securities, or partly for securities and partly for cash or other property (other than a modification or exchange effected in a reorganization or in a municipal or foreign debt arrangement), for which modification or exchange the vote or consent of the owners of the security modified or exchanged or of the owners of all or of any specified proportion of any class of securities is required by law or by the terms of the certificate of incorporation, trust agreement, or indenture, or other instrument: Provided, however, That the Commission may by rule, regulation, or order declare any such modification or exchange, or any class or classes thereof not to be a voluntary readjustment within the meaning of this paragraph, if and to the extent that it deems that, subject to such terms and conditions as may be set forth in such rule, regulation, or order, the application of this act with respect thereto is not necessary or appropriate in the public interest or for the protection of investors, by reason of the insubstantial effect on security holders of such modification or exchange.
(8) The term "plan or readjustment” means the plan, agreement, or general arrangement designed to effect a voluntary readjustment, whether or not such plan, agreement, or arrangement is in documentary form.
(9) The term “municipal debt arrangement” means any modification of the terms, priorities, rights, or privileges of any security issued or guaranteed by any political subdivision of a State or Territory of the United States, or by any public instrumentality of one or more States or Territories; or any exchange of any such security in whole or in part for any other security or securities and/or other property, other than an exchange exclusively for cash; or the assertion of any rights evidenced by any such security.
(10) The term "foreign debt arrangement” means any modification of the terms, priorities, rights, or privileges of any security issued or guaranteed by any foreign government, or by any political subdivision of any foreign government, or by any person controlled or supervised by and acting as an instrumentality of any foreign government; or any exchange of any such security in whole or in part for any other security or securuties and/or other property, other than an exchange exclusively for cash; or the assertion of any rights evidenced by any such security.
(11) The term "plan of debt arrangement” means the plan, agreement, or general arrangement designed to effect a municipal or foreign debt arrangement, whether
or not such plan, agreement, or arrangement is in documentary form. (12) The term "plan" includes plan of reorganization, plan of readjustment, or plan of debt arrangement.
(13) The term assent" or "assent to a plan” means any approval, acceptance, or assent to a plan, or any authorization to approve, accept, or assent to a plan, in whatever manner evidenced, and whether conditional or unconditional, tentative or final, or any failure to disapprove, reject, or dissent from a plan, in whatever manner evidenced, except an assent evidenced by a proxy or deposit.
(14) The term "dissent" or "dissent from a plan” means any disapproval, dissent from, rejection of, or authorization to disapprove, dissent from, or reject a plan, in whatever manner evidenced, and whether conditional or unconditional, or tentative or final, or any failure to approve, accept or assent to a plan, in whatever manner evidenced, except a dissent evidenced by a proxy or deposit.
(15) The term "proxy" means any authorization, in whatever manner evidenced, to act for or to represent any owner of a security in any reorganization, voluntary readjustment, or municipal or foreign debt arrangement, or in any matter relating to any of the foregoing (including any authorization to approve or disapprove a plan), but shall not include any such authorization which confers no discretion as to whether the authority is to be exercised, or as to the manner in which or the conditions on which the authority is to be exercised.
(16) The term "deposit” means any surrender of custody or possession of any security which constitutes, or has the effect of constituting, in whole or in part, an authorization to act for or to represent any owner of a security in any reorganization, voluntary readjustment, or municipal or foreign debt arrangement, or in any matter relating to any of the foregoing, including any authorization to approve or disapprove a plan.
(17) The term “director" means any director of a corporation or any individual performing similar functions with respect to any person whether incorporated or unincorporated.
(18) The term "underwriter” means any person who has purchased from an issuer with a view to, or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. The Commission may, by rule or regulation or order, declare any such person or any class of such persons not to be underwriters for the purposes of the provisions of sections 6 or 11 of this act if and to the extent that it deems that, subject to such terms and conditions as may be set forth in such rule, regulation, or order, it is not detrimental to the public interest or the interests of investors so to do. As used in this paragraph the term “issuer" shall have the meaning provided in section 2 (4) of the Securities Act of 1933, as heretofore amended, and in addition shall include any person directly or indirectly controlling or controlled by such issuer, or any person under direct or indirect common control with such issuer.
(19) The term "Commission" means the Securities and Exchange Commission.
(20) The term "Territory" means Alaska, Hawaii, Puerto Rico, the Canal Zone, the Virgin Islands, and the insular possessions of the United States.
(21) The term "State” means any State of the United States.
(22) The term "interstate commerce" means trade, commerce, transportation, transmission, intercourse, or communication among the several States or between the District of Columbia or any Territory of the United States and any State or other Territory, or between any foreign country and any State, Territory, or the District of Columbia, or with the District of Columbia.
(23) The term "declaration" means the statement provided for in section 5, and includes any amendment thereto and any report, document, or memorandum accompanying such statement or incorporated therein by reference.
(24) The term "voting security" means a security presently entitling the holder or owner thereof to vote for the eclection of directors. (25) A person shall be deemeď to be an “associate” of a specified person if —
(A) Such specified person or any of its directors, officers, or partners own, individually or in the aggregate, 5 per centum or more of the outstanding voting securities of such person;
(B) Such person has as a director, officer, or partner any person who is a director, officer, partner, or employee of such specified person;
(C) Such specified person or any of its directors, officers, or partners, individually or in the aggregate, directly or indirectly control such person, whether by agency, stock ownership, or otherwise;
(D) Such person is a director, officer, partner, employee, or representative of such specified person;
(E) Such specified person is a director, officer, or partner of such person;
(F) Such person owns 5 per centum or more of the outstanding voting securities of such specified person;
(G) Such person directly or indirectly controls or is under direct or indirect common control with such specified person; or
(H) Such person is a director, officer, partner, or employee of a person 5 per centum of the voting securities of which are owned by such specified person, or which directly or indirectly controls or is controlled by or is under
direct common control with such specified person. (26) The terms "Securities Act of 1933", "Securities Exchange Act of 1934", and "Public Utility Holding Company Act of 1935" shall be deemed to refer, respectively, to such Acts, as heretofore or hereafter amended.
EXEMPTED SOLICITATIONS Sec. 3. (a) The provisions of this act (other than the provisions of sections 16 and 23 hereof) shall not apply to the following solicitations:
(1) A solicitation of assents to a plan of readjustment, or of proxies or deposits in respect of the support, adoption, or approval of any plan if, prior to the effective date of this act, any person has commenced the solicitation of assents, proxies, or deposits in respect of such plan and has obtained such assents, proxies, or deposits from the owners of at least 50 per centum of the amount of any class of securities outstanding, determined in such manner as the Commission may by rules and regulations prescribe, exclusive of assents obtained by proxies or deposits made binding by reason of a failure to dissent.
(2) A solicitation in connection with a reorganization or readjustment of a "railroad corporation” as such term is defined in subsection (m) of section 77 of the Bankruptcy Act.
(3) A solicitation in connection with a reorganization or readjustment under the supervision of the Comptroller of the Currency of the United States, or of the bank commissioner, insurance commissioner, or any agency or officer performing like functions, of any State or Territory or the District of Columbia.
(4) A solicitation in respect of any note, draft, bill of exchange, or bankers' acceptance, which had a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which was likewise limited.
(5) A solicitation in respect of any security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual.
(6) A solicitation in respect of any security issued by a farmers' cooperative association as defined in paragraphs (12), (13), and (14) of section 103 of the Revenue Act of 1932.
(7) A solicitation in respect of any security issued or guaranteed by the United States or any Territory thereof or by the District of Columbia, or by any State or by any person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States.
(8) A solicitation in respect of any security issued or guaranteed by any political subdivision of a State or Territory, or by any public instrumentality of one or more States or Territories, where such solicitation is made by such issuer or guarantor, or in its name and on its behalf by an employee of an issuer or guarantor, but this exemption shall not apply to any such solicitation by a person who occupies the position of independent contractor with respect to, or agent not in the regular employ of, such issuer or guarantor.
(9) A solicitation by a person in respect of securities in which he has a beneficial ownership or interest.
(10) A solicitation by a financial or investment service, except the solicitation of proxies or deposits the authority conferred by which is to be exercised by such financial or investment service, or its representatives or nominees.
(b) The Commission may by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of solicitations to the solicitations exempted as provided in this section, if it finds that the application of this act with respect to such solicitations is not necessary in the public interest or for the protection of investors, by reason of
(1) The small amount of the outstanding securities of the class in respect of which the solicitation is to be made, determined in such manner as such rules and regulations may prescribe; but no solicitation shall be exempted under this paragraph where such amount exceeds $100,000; or
(2) The limited character of the solicitation.
(c) The provisions of this act shall not prevent any security holder from acting solely on his own behalf and not on behalf of others through a representative or otherwise, nor prevent any group of not more than twelve security holders from acting jointly, through a representative or otherwise, on their own behalf and not on behalf of others.
PROHIBITIONS RELATING TO INTERSTATE COMMERCE AND THE Mails SEC. 4. (a) It shall be unlawful for any person, directly or indirectly, by use of the mails or any means or instrumentality of interstate commerce, to solicit, cause to be solicited, or permit the use of his name to solicit any proxy or deposit in connection with a reorganization or a municipal or foreign debt arrangement,
or any proxy, deposit, or assent in connection with a voluntary readjustment unless
(1) A declaration filed pursuant to section 5 is effective as to such action by such person, and except in accordance with the order, if any, fixing the date on which such declaration shall become effective; and
(2) Unless a prospectus that meets the requirements of section 8 accompanies or precedes such solicitation.
(b) The following transactions shall be exempt from the provisions of the Securities Act of 1933:
(1) Any solicitation as to which a declaration is effective;
(2) The delivery of any security evidencing the deposit of a security, if a declaration is effective as to the solicitation of such deposit;
(3) The offering, sale, or delivery after sale of any security, pursuant to a plan to which an effective declaration relates, in exchange for a security or securities of the class or classes to which such declaration relates, or partly in such exchange and partly for cash, claims, or property interests; and (4) The offering, sale, or delivery after sale of any security
(A) upon the exercise of any right to convert, into such security, a security the offering, sale, or delivery after sale of which is exempted by paragraph (3) of this subsection; or
(B) upon the exercise of a right to subscribe to or purchase such security; if, pursuant to a plan to which an effective declaration relates, such right to convert, subscribe, or purchase was conferred upon the owners of securities of
the class to which such declaration relates. For the purposes of this subsection, a plan shall be deemed to be a plan to which an effective declaration relates if a declaration is effective as to the solicitation of assents to such plan, or as to the solicitation of proxies or deposits constituting an authorization to accept, approve, or assent to such plan.
DECLARATIONS AND THE TAKING EFFECT THEREOF SEC. 5. (a) A declaration regarding any of the acts enumerated in subsection (a) of section 4 shall be filed with the Commission in triplicate, at least one copy of which shall be signed by the person by whom the authority conferred by such proxy or deposit is exercisable or, if such person is a committee or group, by each member thereof; or, in the case of assents in connection with a voluntary readjustment, by the person who proposes to solicit, causes to be solicited, or permits the use of his name to solicit such assents. Such declaration shall be in such form as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors. Such declaration shall include
(1) In the case of reorganizations or voluntary readjustments, the information and documents specified in schedule A, and in the case of municipal or foreign debt arrangements, the information and documents specified in schedule B: Provided, however, That the Commission may by rule, regulation, or order provide that any such information or document need not be included in respect of any solicitation or class or classes thereof if the Commission deems that the inclusion thereof is not necessary in the public interest or for the protection of investors;
(2) The name of each other person whom the declarant proposes to authorize to solicit in his name or on his behalf, other than regular salaried employees of the declarant or of any authorized solicitor so designated;
(3) Such additional information and documents as the Commission may by rule, regulation, or order prescribe as necessary or appropriate in the public interest or for the protection of investors, regarding (A) the issuer, the underwriters, the declarant and each member thereof, and each authorized solicitor; the persons who participated in the negotiation or determination of the terms of the plan; the persons proposing the plan or causing the same to be proposed; and the respective associates of each of the foregoing; and (B) the various securities of the issuer and of its associates.
Notwithstanding the provisions of paragraphs (1) and (3) of this subsection, any information or documents required to be included in the declaration pursuant to either of such paragraphs may be omitted from the declaration if the obtaining of such information or documents would involve unreasonable effort or expense, or if such information rests peculiarly within the knowledge of another person neither controlling, controlled by, or under common control with the declarant or, if the declarant is a committee or group, any member thereof. The information and documents contained in or filed with any declaration shall be made available to the public under such regulations as the Commission may