P.R. Laws tit. 10, § 691
For purposes of this chapter, the following terms shall be defined as provided below:
(a) Investment adviser of an investment company.— Means:
(1) Any person (other than a director, officer, employee, trustee, member of an advisory board, or employee of such company) who, pursuant to contract with such company, regularly furnishes advice to such company with respect to the desirability of investing in, purchasing or selling securities or other property, or is empowered to determine what securities or other property shall be purchased or sold by such company.
(2) Any other person who, pursuant to a contract with a person described in clause (1), regularly performs the duties of a person described in said clause (1). However, it does not include:
(A) A person whose advice is furnished solely through uniform publications distributed to subscribers thereto;
(B) a person who furnishes only statistical and other factual information, advice regarding economic factors and trends, or advice as to occasional transactions in specific securities, but without generally furnishing advice or making recommendations regarding the purchase, alienation or encumbrance of such securities;
(C) a company furnishing such services at cost to one or more investment companies from Puerto Rico or abroad, insurance companies, or other financial institutions;
(D) any person the capability, character, and amount of whose compensation for such services must be approved by a court, or
(E) such other persons as the Commission may, by regulations or order, determine not to be within the intent of this definition.
(b) Commissioner.— Means the Commissioner of Financial Institutions.
(c) Company.— Means any corporation, partnership, limited partnership, limited liability company, or trust, or any organized group of persons whether incorporated or not; or its successor in interest.
(d) Investment company.— Means any issuer who is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities. The Commissioner may adopt, within six months after the approval of this act, a regulations which shall be public, establishing exemptions for companies that have been excluded from the definition of “investment company” using as a guide Sections 3(b) and 3(c) of the Investment Company Act of 1940, and the public policy set forth in Section 2. he entities that are excluded as “investment companies under Sections 3(b), (c)(1), and 3(c)(7) of the Investment Company Act of 1940, shall not be deemed to be excluded in such definition until the regulations take effect.
(e) Control.— Means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Any person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company. Any person who does not so own beneficially, either directly or through one or more controlled companies, 25% or more of the voting securities of any company shall be presumed not to control such company. A natural person shall be presumed not to be a controlled person.
(f) Director.— Means any director of a corporation or any person performing similar functions with respect to any organization, whether incorporated or unincorporated.
(g) Beneficial owner.— Means a person who enjoys the benefits of ownership of securities, even though title is in another name.
(h) Issuer.— Means any person who issues or proposes to issue any security, or has outstanding any security which it has issued.
(i) 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. The term “suscriptor” in Spanish shall correspond to the term “underwriter” in English. The term shall not include a person whose interest is limited to a commission from an underwriter not in excess of the usual and customary commission. As used in this subsection, the term “issuer” shall include, in addition to an issuer, any person directly or indirectly controlled by the issuer, or any person under direct or indirect common control with the issuer. When the distribution of the securities in respect of which any person is an underwriter is completed such person shall cease to be an underwriter in respect of such securities or the issuer thereof.
(j) Principal underwriter.— For any investment company (other than a closed-end company, or of any security issued by such a company,) means any underwriter who, as principal, purchases from an issuer, or pursuant to contract has the right from time to time to purchase from an issuer, any such security for distribution, or who as agent for an issuer sells or pursuant to contract has the right to sell any such security to a dealer or to the public or both. The term “principal underwriter” does not include a dealer who purchases securities from an investment company through a principal underwriter acting as agent for such company. Principal underwriter for a closed-end company or an issuer which is not an investment company, or of any security issued by such a company or issuer, means any underwriter who, in connection with a primary distribution of securities, (1) is in privity of contract with the issuer; (2) acting alone or in concert with one or more other persons, initiates or directs the formation of an underwriting syndicate; or (3) is allowed a rate of gross commission, spread, or other profit greater than the rate allowed another underwriter participating in the distribution. The term “suscriptor” principal in Spanish corresponds to the term “principal underwriter” under the Investment Company Act of 1940; the term “sindicato de suscripción” in Spanish corresponds to the term “underwriting syndicate” in English; and the term “tasa bruta de comisión” in Spanish corresponds to the term “rate of gross commission” in English.
(k) Advisory Board.— Means a board, whether elected or appointed, which is distinct from the board of directors of an investment company, and which is composed solely of persons who do not serve such company in any other capacity, whether or not the functions of such board are such as to render its members “directors” for purposes of this chapter, which board has advisory functions as to investments but has no power to determine that any security or other investment shall be purchased, sold, or encumbered by such company.
(l) Board of Directors.— Means the entity in charge of governing the business affairs of a corporation as such term is defined in § 3561 of Title 14. It includes the operating equivalent in any other business entity, other than a corporation, organized under the laws of the Commonwealth of Puerto Rico.
(m) Member of the immediate family.— Means any spouse, ascending, descending, or collateral relative up to the fourth degree of consanguinity and second of affinity or adoptive relationship.
(n) Person.— Means a natural person or a company.
(o) Affiliated person.— Of another person means:
(1) Any person directly or indirectly owning beneficially, controlling, or holding at least 5% of the outstanding voting securities of such other person.
(2) Any person that at least 5% of its outstanding voting securities are directly or indirectly owned beneficially, controlled, or held with power to vote, by such other person.
(3) Any person directly or indirectly controlling, controlled by, or under common control with, such other person.
(4) Any officer, director, official, partner, or employee of such other person.
(5) If such other person is an investment company, any investment adviser thereof or any member of an advisory board thereof.
(p) Interested person.— Of another person means:
(1) When used with respect to an investment company:
(A) Any affiliated person of such company.
(B) Any member of the immediate family of any natural person who is an affiliated person of such company.
(C) Any interested person of any investment adviser of or principal underwriter for such company.
(D) Any person or partner or employee of any person who at any time since the beginning of the last two completed fiscal years of such company has acted as legal counsel for such company.
(E) Any person or any affiliated person of a person (other than a registered investment company) that, at any time during the six-month period preceding the date of the determination of whether that person or affiliated person is an interested person, has executed any portfolio transactions for, engaged in any principal transactions with, or distributed securities for:
(i) The investment company.
(ii) Any other investment company having the same investment adviser as such investment company or holding itself out to investors as a related company for purposes of investment or investor services.
(iii) Any account over which the investment company’s investment adviser has brokerage placement discretion.
(F) Any person or any affiliated person of a person (other than a registered investment company) that, at any time during the six-month period preceding the date of the determination of whether that person or affiliated person is an interested person, has loaned money or other property to:
(i) The investment company.
(ii) Any other investment company having the same investment adviser as such investment company or holding itself out to investors as a related company for purposes of investment or investor services.
(iii) Any account for which the investment company’s investment adviser has borrowing authority.
(G) Any natural person whom the Commissioner by order has determined to be an interested person by reason of having had, at any time since the beginning of the last two completed fiscal years of such company, a material business or professional relationship with such company or with the principal executive officer of such company or with any other investment company having the same investment adviser or with the principal executive officer of such other investment company. Provided, that no person shall be deemed to be an interested person of an investment company solely because he/she or a member of his/her immediate family (i) is a member of its board of directors, advisory board or an owner of its securities, or (ii) has received loans from an affiliate person of such company in the regular course of business under substantially the same terms, including interest rates and collateral prevailing at that time for similar transactions with the general public up to one hundred thousand dollars ($100,000) or a different amount as determined by the Commissioner should he/she determine that such amount is not reasonable. The Commissioner may modify or revoke any order entered under this paragraph whenever he/she deems that such order is no longer consistent with the facts.
(2) When used with respect to an investment adviser of or principal underwriter for any investment company:
(A) Any affiliated person of such investment adviser or principal underwriter.
(B) Any member of the immediate family of any natural person who is an affiliated person of such investment adviser or principal underwriter.
(C) Any person who knowingly has any direct or indirect beneficial interest in, or who is designated as trustee, fiduciary, executor, or depositor of any legal interest in, any security issued either by such investment adviser or principal underwriter or by a controlling person of such investment adviser or principal underwriter; provided, however, that no person shall be deemed to be to be an interested person of said investment adviser or principal underwriter solely by reason of his/her being the holder or his/her membership in the immediate family of a holder of less than five percent (5%) of the outstanding shares of said investment adviser or principal underwriter or by a controlling person of such investment adviser or principal underwriter.
(D) Any person or partner or employee of any person who at any time since the beginning of the last two completed fiscal years has acted as legal counsel for such company.
(E) Any person or any affiliated person of a person (other than a registered investment company) that, at any time during the six-month period preceding the date of the determination of whether that person or affiliated person is an interested person, has executed any portfolio transactions for, engaged in any principal transactions with, or distributed securities for:
(i) Any investment company for which the investment adviser or principal underwriter serves as such.
(ii) Any investment company holding itself out to investors, for purposes of investment or investor services, as a company related to any investment company for which the investment adviser or principal underwriter serves as such.
(iii) Any account over which the investment adviser has brokerage placement discretion.
(F) Any person or any affiliated person of a person (other than a registered investment company) that, at any time during the six-month period preceding the date of the determination of whether that person or affiliated person is an interested person, has loaned money or other property to:
(i) Any investment company for which the investment adviser or principal underwriter serves as such.
(ii) Any investment company holding itself out to investors, for purposes of investment or investor services, as a company related to any investment company for which the investment adviser or principal underwriter serves as such.
(iii) Any account for which the investment adviser has borrowing authority.
(G) Any natural person whom the Commissioner by order shall have determined to be an interested person by reason of having had at any time since the beginning of the last two completed fiscal years of such investment company, a material business or professional relationship with such company or with the principal executive officer of such company or with any other investment company having the same investment adviser or with the principal executive officer of such other investment company. Provided, that no person shall be deemed to be an interested person of an investment adviser or principal underwriter solely because he/she or a member of his/her immediate family (i) is a member of its board of directors, advisory board or an owner of its securities, or (ii) has received loans from an affiliate person of such company in the regular course of business under substantially the same terms, including interest rates and collateral, prevailing at that time for similar transactions with the general public up to one hundred thousand dollars ($100,000) or a different amount as determined by the Commissioner should he/she determine that such amount is not reasonable. The Commissioner may modify or revoke any order entered under this paragraph whenever he/she deems that such order is no longer consistent with the facts.
(q) Lend and borrow.— Includes a purchase coupled with an agreement by the vendor to repurchase.
(r) Promoter of a company or a proposed company.— Means a person who, acting alone or in concert with other persons, is initiating or directing, or has within one year initiated or directed, the organization of such company.
(s) Reorganization.— Means:
(1) A reorganization under the supervision of a court of competent jurisdiction.
(2) A consolidation, voluntary liquidation, or dissolution.
(3) A sale of more than 75% of the assets of a company.
(4) A redistribution of the capital of a company, or an exchange of securities issued by a company for any of its own outstanding securities.
(5) A recapitalization or other procedure or any transaction which has for its purpose the alteration, modification, or elimination of any of the rights, preferences, or privileges of any class of securities issued by a company.
(6) An exchange of securities issued by a company for outstanding securities issued by another company or companies, preliminary to and for the purpose of effecting any of the foregoing.
(t) Value.— With respect to assets of registered investment companies, means:
(1) With respect to securities for which market quotations are readily available, the market value.
(2) With respect to other securities, the fair value as determined by the board of directors, subject to the regulations or administrative determination issued by the Commissioner. The board of directors may delegate the determination of the fair value of such securities to nationally recognized security valuation providers. The term “para los que hay precios en el mercado bursátil fácilmente disponibles” in Spanish corresponds to the term “for which market quotations are readily available” in English, and the term “justo valor” in Spanish corresponds to the term “fair value” in English.
If the Commissioner deems it necessary, he/she may modify the manner to determine value through regulations and for just cause in accordance with the public policy set forth in Section 2 of this Act.
(u) Security.— Means any note, common or preferred stock, treasury stock, security future, bond, or participation of any kind as owner, member, or partner in a limited liability company or any kind of partnership; evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, investment contract, preorganization certificate or subscription, certificate of deposit for a security, any fractional interest of any kind on any security or group or index of securities (including any interest therein or based on the value thereof), or any option or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any instrument commonly known as a “security’, or any certificate of interest or participation in or right to subscribe to or purchase any of the foregoing.
(v) Preferred stock.— Means:
(1) Any bond, note or similar obligation, any obligation or instrument that constitutes a security and evidence of indebtedness, and
(2) any shares or participation in a profit-sharing agreement, partnership interest, membership in a limited liability company or security of any class which has priority over any other class in the distribution of assets or payment of dividends.
History —July 30, 2013, No. 93, § 3; Nov. 27, 2013, No. 137, § 1.