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![handle is hein.usccsset/usconset60307 and id is 1 raw text is: AUT-ENTICATED
US. GOVERNMENT
INFORMATION
GP
114TH CONGRESS REPORT
2d Session HOUSE OF REPRESENTATIVES 114-673
U.S. TERRITORIES INVESTOR PROTECTION ACT OF 2016
JULY 11, 2016.-Committed to the Committee of the Whole House on the State of
the Union and ordered to be printed
Mr. HENSARLING, from the Committee on Financial Services,
submitted the following
REPORT
[To accompany H.R. 5322]
The Committee on Financial Services, to whom was referred the
bill (H.R. 5322) to amend the Investment Company Act of 1940 to
terminate an exemption for companies located in Puerto Rico, the
Virgin Islands, and any other possession of the United States, hav-
ing considered the same, report favorably thereon without amend-
ment and recommend that the bill do pass.
PURPOSE AND SUMMARY
Introduced by Representative Nydia Velasquez on May 25, 2016,
H.R. 5322, the U.S. Territories Investor Protection Act of 2016,
amends Section 6(a)(1) of the Investment Company Act of 1940
(Act) to terminate an exemption for investment companies located
in Puerto Rico, the Virgin Islands, and any other possession of the
United States. Under current law, such companies are exempt from
registration under the Act provided that their shares are sold solely
to the residents of the territory or possession in which they are lo-
cated.
The bill provides a three-year safe harbor for investment compa-
nies that currently enjoy this exemption. Additionally, the bill au-
thorizes the Securities and Exchange Commission (SEC) to further
delay the effective date (or end of the exemption) for a maximum
of three years following the initial three year safe harbor.
BACKGROUND AND NEED FOR LEGISLATION
When Congress enacted the Investment Company Act of 1940, it
was prohibitively expensive and logistically difficult for SEC per-
sonnel to travel and inspect investment companies located in cer-
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