PUBLIC LAWS-CH. 686-AUG. 22, 1940 49 Stat. 837. 15 U. . C., Supp. V, §79z-4. (5) the activities of such companies, extending over many States, their use of the instrumentalities of interstate commerce and the wide geographic distribution of their security holders make difficult, if not impossible, effective State regulation of such companies in the interest of investors. (b) Upon the basis of facts disclosed by the record and reports of the Securities and Exchange Commission made pursuant to sec- tion 30 of the Public Utility Holding Company Act of 1935, and facts otherwise disclosed and ascertained, it is hereby declared that the national public interest and the interest of investors are adversely affected- (1) when investors purchase, pay for, exchange, receive divi- dends upon, vote, refrain from voting, sell, or surrender securi- ties issued by investment companies without adequate, accurate, and explicit information, fairly presented, concerning the char- acter of such securities and the circumstances, policies, and financial responsibility of such companies and their management; (2) when investment companies are organized, operated, managed, or their portfolio securities are selected, in the interest of directors, officers, investment advisers, depositors, or other affiliated persons thereof, in the interest of underwriters, brokers, or dealers, in the interest of special classes of their security holders, or in the interest of other investment com- panies or persons engaged in other lines of business, rather than in the interest of all classes of such companies' security holders; (3) when investment companies issue securities containing inequitable or discriminatory provisions, or fail to protect the preferences and privileges of the holders of their outstanding securities; (4) when the control of investment companies is unduly con- centrated through pyramiding or inequitable methods of con- trol, or is inequitably distributed, or when investment companies are managed by irresponsible persons; (5) when investment companies, in keeping their accounts in maintaining reserves, and in computing their earnings and the asset value of their outstanding securities, employ unsound or misleading methods, or are not subjected to adequate independent scrutiny; (6) when investment companies are reorganized, become inac- tive, or change the character of their business, or when the con- trol or management thereof is transferred, without the consent of their security holders; (7) when investment companies by excessive borrowing and the issuance of excessive amounts of senior securities increase unduly the speculative character of their junior securities; or (8) when investment companies operate without adequate assets or reserves. It is hereby declared that the policy and purposes of this title, in accordance with which the provisions of this title shall be inter- preted, are to mitigate and, so far as is feasible, to eliminate the conditions enumerated in this section which adversely affect the national public interest and the interest of investors. GENERAL DEFINITIONS General definitions. "A dvisory board." SEC. 2. (a) When used in this title, unless the context otherwise requires- (1) "Advisory board" means a board, whether elected or appointed, which is distinct from the board of directors or board of trustees, of an investment company, and which is composed solely [54 STAT.
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