P.R. Laws tit. 10, § 691o
Registered investment companies classified as:
(a) Mutual funds are hereby authorized to invest as provided below:
(1) Buy and sell securities of all kinds, in accordance with their investment policy within their subclassification under § 691a of this title and their investment policies under § 691c of this title; provided, that their portfolio complies with the provisions of subsection (q) of § 691h of this title.
(2) Issue debt or preferred stocks and borrow money, as restricted by its leverage limit allowed in accordance with its subclassification under subsection (e) of § 691a of this title.
(3) Any other corporate action consistent with these corporate purposes, or required by law or regulations.
(b) Exempt investment trusts are hereby authorized to invest as provided below:
(1) Buy and sell securities of all kinds, in accordance with their investment policy within their subclassification under § 691a of this title and their investment policy under § 691c of this title.
(2) Issue preferred stocks and borrow money from a bank or cooperative, as restricted by their leverage limit allowed in accordance with their subclassification under subsection (e) of § 691a of this title.
(3) Organize companies of any type, in accordance with their investment policies under § 691c of this title, to do business, the characteristics of which are stated in subsection (c) of this section.
(c) The exempt investment trust may acquire, organize, encumber, or alienate the business, by itself, or together with other exempt investment trusts or third parties. Such businesses may be organized for any lawful business purposes under the Constitution and the laws of the Commonwealth of Puerto Rico. This includes operating, leasing, selling or otherwise disposing of real property (including real property rights). It also includes the purchase of shares in cooperatives organized under §§ 4381 et seq. of Title 5. However, the following restrictions are imposed in the operation of exempt investment trusts:
(1) Companies organized by the exempt investment trust may operate with total liberty to issue debt securities of any type, including preferred stocks, and borrow money; provided, however, that such level of indebtedness shall be properly disclosed to investors.
(2) The investments of an exempt investment trust shall be limited to the securities that the company organizes, acquires, or may acquire in the future. With this exemption, there shall be achieved the most perfect separation of assets between exempt investment trusts and the companies they organize or in which they own issued securities. It shall not guarantee or encumber some or all of its other assets or the assets of its affiliated persons to borrow money or to somehow facilitate the operation of any business it organizes. The participation of the investment company is limited by its classification in subsection (b) of § 691a of this title, and by its investment policies as included in the notification of registration under § 691c of this title. Any agreement that contravenes these provisions of law shall be void ab initio.
(3) The corporate veil of a company organized by an exempt investment trust shall be pierced or the different legal personality thereof shall be ignored, for the purpose of reaching the assets of the exempt investment trust, only in the event of fraud.
(4) An exempt investment trust shall have the highest participation possible in the board of directors of a business it organizes. It shall be the duty of the trust, its directors, and officials to reach the maximum participation possible.
(5) The officials, directors, and employees of an exempt investment trust shall have the same responsibilities with all the securities acquired by them and all the companies that issue them.
(6) Any other rule deemed necessary for the protection of public interest prescribed by the Commissioner through regulations.
History —July 30, 2013, No. 93, § 18; Nov. 27, 2013, No. 137, § 9.