Page:United States Statutes at Large Volume 84 Part 2.djvu/102

 1432

PUBLIC LAW 91-547-DEC. 14, 1970

[84 STAT.

venting violations of such statutes, rules, and regulations, another person who commits such a violation, if such other person is subject to his supervision: Provided, That, for the purposes of this paragraph (5), no person shall be deemed to have failed reasonably to supervise any person, if— " (A) there have been established procedures, and a system for applying such procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any such violation by such other person; and " (B) such person has reasonably discharged the duties and obligations incumbent upon him by reason of such procedures and system without reasonable cause to believe that such procedures and system were not being complied with; or '' (6) is subject to an order of the Commission entered pursuant ^"^"* to subsection (f) of this section barring or suspending the ri^ht of such person to be associated with an investment adviser, which order is in effect with respect to such person." 54 Stat. 850; (g) Section 203 of such Act (15 U.S.C. 80b-3) is further amended 74 Stat. 885. by redesignating subsectious (f) and (g) as subsections (h) and (i), respectively, and inserting after redesignated subsection (e) a new subsection as follows: Certain persons, u^f^ rpj^^ Commission may, after appropriate notice and opportunity for hearing, by order censure any person or bar or suspend for a period not exceeding twelve months any person from being associated with an investment adviser, if the Commission finds that such censure, barring, or suspension is in the public interest and that such person has committed or omitted any act or omission enumerated in paragraph (1), (4), or (5) of subsection (e) of this section, or has been convicted of any offense specified in paragraph (2) of subsection (e) within ten years of the commencement of the proceedings under this subsection, or is enjoined from any action, conduct, or practice specified in paragraph (3) of subsection (e). I t shall be unlawful for any person as to whom such an order barring or suspending him from being associated with an investment adviser is in effect, willfully to become, or to be, associated with an investment adviser, without the consent of the Commission, and it shall be unlawful for any investment adviser to permit such a person to become, or remain, a person associated with such investment adviser without the consent of the Commission, if such investment adviser knew, or in the exercise of reasonable care should have known of such order." SEC. 25. Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5) is amended to read as follows: "INVESTMENT ADVISORY CONTRACTS

"SEC. 205. Xo investment adviser, unless exempt from registration Ante, p. 1430. pursuaiit to section 203(b), shall make use of the mails or any means or instrumentality of interstate commerce, directly or indirectly, to enter into, extend, or renew any investment advisory contract, or in any way to perform any investment advisory contract entered into, extended, or renewed on or after the effective date of this title, if such contract— "(1) provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client; "(2) fails to provide, in substance, that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract; or

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