Definitions for Purposes of Section 24(b) of the Investment Company Act
SEC Rule 24b-1, codified at 17 C.F.R. § 270.24b-1 under the Investment Company Act of 1940, establishes the definitions applicable to the group of rules implementing Section 24(b) of the Act — the provision requiring that registered investment companies and their principal underwriters file sales literature addressed to prospective investors with the Commission within ten days of use — defining the key terms open-end company, unit investment trust, face-amount certificate company, and principal underwriter for purposes of the Section 24(b) filing obligations and the related rules of the 24b series.
Rule 24b-1 performs for the 24b sub-series of the Investment Company Act rules the same foundational definitional function that Rule 0-1 performs for Part 270 as a whole — ensuring that the terms used throughout Rules 24b-2, 24b-3, and 24b-4 carry consistent meanings derived from a single authoritative definitional source.
Though narrow in operative content, Rule 24b-1 is structurally essential to the coherent operation of the Section 24(b) sales literature filing framework, providing the definitional anchors that enable the substantive rules of the 24b series to function precisely and consistently across the diverse categories of registered investment company to which Section 24(b)'s filing obligation applies.
Overview and Regulatory Purpose
Section 24(b) of the Investment Company Act requires every registered open-end company and unit investment trust and every underwriter for any such company or trust, and every registered face-amount certificate company and every underwriter for any such company, to file with the Commission within ten days after use, such copies of every advertisement, pamphlet, circular, form letter, or other sales literature addressed to or intended for distribution to prospective investors in such company's securities as the Commission may require.
This filing obligation — the substantive requirement that Rule 24b-2 implements — applies across three distinct categories of registered investment company: open-end management investment companies, unit investment trusts, and face-amount certificate companies.
Each of these categories has a specific statutory definition under the Investment Company Act, and Rule 24b-1's definitional framework ensures that those statutory definitions are applied consistently across the 24b series' sales literature filing requirements.
The investor protection purpose of Section 24(b)'s sales literature filing requirement is to give the Commission — and, through FINRA's cooperative review role, a designated national securities association — access to the marketing materials that registered investment companies use to attract investors, enabling regulatory oversight of investment company advertising and marketing practice through review of the actual materials being distributed to prospective investors rather than through reactive enforcement against identified violations. Rule 24b-1's definitional precision contributes to this purpose by ensuring that the filing obligation's scope is clearly and consistently defined — every entity subject to Section 24(b)'s requirement knows whether it falls within one of the defined categories, and the Commission knows which entities' sales literature it has the authority to review under the filing obligation.
Statutory Authority and Rulemaking History
Rule 24b-1 derives its statutory authority from Section 24(b) of the Investment Company Act of 1940 and Section 38(a)'s general rulemaking authority. Section 24(b)'s filing obligation and the definitional framework necessary for its precise application are the direct statutory basis for Rule 24b-1's definitional provisions. Rule 24b-1 has been in Part 270 since the earliest codification of the Investment Company Act's rules, establishing the definitional framework for the Section 24(b) filing obligations from the outset of the regulatory programme's implementation. No substantive changes have been made to Rule 24b-1's operative definitional provisions up to the present time.
Key Provisions and Operative Requirements
Rule 24b-1's operative content consists of definitions of the principal terms used throughout the 24b series. The rule defines open-end company, unit investment trust, and face-amount certificate company by reference to their statutory definitions in Sections 4(1), 4(2), and 4(3) of the Investment Company Act respectively — incorporating the statutory category definitions directly into the regulatory framework rather than creating independent rule-level definitions that might diverge from the statute's own characterisations.
The rule defines principal underwriter by reference to Section 2(a)(29) of the Act — the statutory definition of a principal underwriter as any underwriter who as principal purchases from such company, or pursuant to contract has the right to purchase from such company, any security for distribution, or who as agent for such company sells or has the right to sell any security of such company in connection with a public offering.
These cross-referential definitions ensure that Rule 24b-1's definitional framework is permanently aligned with the Investment Company Act's own statutory category definitions — changes to the statutory definitions automatically propagate into the 24b series' regulatory framework without requiring formal rule amendment, and practitioners who know the statutory definitions of these terms can apply them directly to the 24b series' filing obligations without needing to consult separate rule-level definitions that might introduce subtle variations.
Scope of Application
Rule 24b-1's definitions apply throughout Rules 24b-2, 24b-3, and 24b-4 — the substantive rules of the 24b series implementing Section 24(b)'s sales literature filing obligation. The open-end company definition encompasses all registered open-end management investment companies — the mutual fund and ETF universe that represents the largest category of registered investment company subject to Section 24(b)'s filing requirements. The unit investment trust definition encompasses all registered unit investment trusts — including both variable annuity and variable life insurance product separate accounts and fixed UIT products.
The face-amount certificate company definition encompasses the narrow category of registered companies issuing face-amount certificates — a category that has largely disappeared from the modern investment company market but that remains within Section 24(b)'s filing obligation.
Relationship to Related Rules and Regulations
Rule 24b-1's definitions provide the operative scope for Rule 24b-2's specific filing requirements, Rule 24b-3's deemed filing mechanism through FINRA, and Rule 24b-4's research report filing exclusion. Together with Rule 0-1's broader definitions applicable throughout Part 270, Rule 24b-1 establishes the complete definitional infrastructure for the Investment Company Act's sales literature regulatory framework.
The terms defined in Rule 24b-1 connect to the substantive sales literature content standards of Rules 34b-1 and Rule 482 under the Securities Act — the content-based standards applicable to the same categories of fund that Rule 24b-1's definitions identify as subject to Section 24(b)'s filing obligations. Understanding that the same set of registered investment company categories is subject to both the filing obligation of Section 24(b) and the content standards of Rule 34b-1 is essential for practitioners managing investment company advertising compliance programmes.
Amendment History, Enforcement Context, and Examination Relevance
Rule 24b-1 has not been substantively amended since its original adoption and generates no independent enforcement activity — it is a definitional provision whose operative significance lies in the substantive rules it supports rather than in any independent obligation it creates. Examination candidates should understand Rule 24b-1 primarily as the definitional foundation of the Section 24(b) sales literature filing framework, with the substantive filing obligations administered through Rules 24b-2, 24b-3, and 24b-4.
The key points to retain are these. Rule 24b-1 establishes the definitions applicable throughout the 24b series of Investment Company Act rules implementing Section 24(b)'s sales literature filing obligation — defining open-end company, unit investment trust, face-amount certificate company, and principal underwriter by cross-reference to their statutory definitions in Sections 4(1), 4(2), 4(3), and 2(a)(29) of the Investment Company Act. These definitions determine the scope of entities subject to Section 24(b)'s ten-day sales literature filing requirement as implemented by Rule 24b-2, the deemed filing mechanism of Rule 24b-3, and the research report exclusion of Rule 24b-4. No substantive changes have been made to Rule 24b-1's operative provisions up to the present time.
Filing Copies of Sales Literature
SEC Rule 24b-2, codified at 17 C.F.R. § 270.24b-2 under the Investment Company Act of 1940, implements Section 24(b)'s requirement that registered open-end companies, unit investment trusts, face-amount certificate companies, and their respective principal underwriters file with the Commission copies of every advertisement, pamphlet, circular, form letter, or other sales literature addressed to or intended for distribution to prospective investors — establishing the timing requirements, filing mechanics, scope of required filings, and the specific categories of materials excluded from the filing obligation. Rule 24b-2 is the operative filing rule of the Section 24(b) sales literature compliance framework, translating Section 24(b)'s statutory filing mandate into the specific, administrable requirements through which the registered investment company advertising review system functions in practice. The rule operates in tandem with Rule 24b-3 — under which sales literature filed with FINRA is deemed filed with the Commission for Section 24(b) purposes — and with Rule 24b-4 — which excludes covered investment fund research reports satisfying the Securities Act Rule 139b safe harbour from the Section 24(b) filing obligation entirely — creating the complete operational filing framework through which the Commission and FINRA jointly exercise oversight of registered investment company sales literature.
Overview and Regulatory Purpose
Section 24(b)'s sales literature filing requirement reflects the Investment Company Act's determination that the marketing materials through which registered funds attract investor capital warrant the same regulatory scrutiny as the registration statements and prospectuses through which funds initially register their securities — because investors making ongoing purchases of mutual fund shares, ETF shares, and other registered fund securities may be as significantly influenced by post-prospectus marketing materials as by the initial registration statement disclosure. The Commission's ability to review registered fund marketing materials — and FINRA's parallel responsibility for reviewing those materials on behalf of its member broker-dealers who distribute fund shares — depends on the systematic filing of those materials that Rule 24b-2 requires.
The practical operation of the Section 24(b) filing framework has evolved significantly since Rule 24b-2's original adoption, with virtually all Section 24(b) filing activity now concentrated at FINRA through the deemed filing mechanism of Rule 24b-3 rather than through direct filing with the Commission under Rule 24b-2. FINRA's advertising review programme — conducted through its Advertising Regulation department, which reviews member firms' investment company sales materials pursuant to FINRA Rule 2210 and related rules — provides the primary substantive review function for registered fund marketing materials in the modern framework, with FINRA's filing system serving simultaneously as compliance with Section 24(b)'s filing obligation through Rule 24b-3's deemed filing mechanism.
Statutory Authority and Rulemaking History
Rule 24b-2 derives its statutory authority from Section 24(b) of the Investment Company Act, which mandates the filing of sales literature and authorises the Commission to prescribe which materials must be filed and the conditions of filing, and from Section 38(a)'s general rulemaking authority. Rule 24b-2 has been in Part 270 since the implementation of the Investment Company Act's initial regulatory framework and has been amended on multiple occasions to reflect changes in the fund distribution landscape, the evolution of FINRA's advertising review programme, and the adoption of new categories of permitted and excluded materials. No substantive changes have been made to Rule 24b-2's operative provisions up to the present time.
Key Provisions and Operative Requirements
Rule 24b-2 establishes that every registered open-end company, unit investment trust, and face-amount certificate company — and every principal underwriter for any such entity — must file with the Commission, within ten days after use, copies of all advertisements, pamphlets, circulars, form letters, and other sales literature addressed to or intended for distribution to prospective investors. The ten-day filing deadline runs from the date the material is first distributed or used — not from the date it is approved or finalised — ensuring that the Commission and FINRA have access to actual distributed materials in near-real-time rather than only to pre-approved materials that may have been modified in the distribution process.
The rule specifies that materials must be filed in the format and number of copies prescribed by the Commission — in practice, the electronic filing requirements have superseded the paper-based filing mechanics of the rule's original text, with materials filed electronically through the submission systems that FINRA's Advertising Regulation department maintains for Section 24(b) filing purposes under the Rule 24b-3 deemed filing framework.
Rule 24b-2 identifies several categories of materials excluded from the ten-day filing requirement, most commercially significant among which are: tombstone advertisements limited to the basic identifying information permitted by Securities Act Rule 134; research reports by broker-dealers that satisfy the safe harbour conditions of Rules 137, 138, and 139 under the Securities Act; and — following the adoption of Rule 24b-4 — covered investment fund research reports qualifying for the Rule 139b safe harbour. These exclusions reflect the Commission's determination that certain categories of communication, while addressed to prospective investors, present limited enough promotional concern that the Section 24(b) filing obligation does not need to apply to them.
The non-variable annuity context is addressed by Rule 24b-2's specific application to registered non-variable annuity products, which are subject to Section 24(b)'s filing requirement for sales literature promoting those products in the same manner as open-end funds and UITs — a dimension of Rule 24b-2's scope that reflects the extension of the registered annuity framework to non-variable products alongside variable insurance products within the Investment Company Act registration framework.
Scope of Application and Relationship to Related Rules
Rule 24b-2 applies to all open-end companies, unit investment trusts, and face-amount certificate companies — as defined in Rule 24b-1 — and to their principal underwriters. ETFs and mutual funds distributed through broker-dealer networks whose underwriters are FINRA members satisfy their Rule 24b-2 filing obligations through the Rule 24b-3 deemed filing mechanism, filing their sales literature with FINRA's Advertising Regulation department within the timeframes prescribed by FINRA Rule 2210 — typically ten business days after first use for retail communications promoting or recommending specific registered investment companies. This combination of Rule 24b-2's statutory filing obligation and Rule 24b-3's deemed filing mechanism through FINRA has created a practical framework in which FINRA serves as the primary operational clearing house for registered fund marketing material review, with the Commission maintaining oversight through its review of FINRA's advertising regulation programme.
Rule 24b-2's filing requirement operates alongside Rule 34b-1's content standards — materials filed under Rule 24b-2 must satisfy Rule 34b-1's conditions governing performance data presentation and fee information disclosure in order not to be deemed materially misleading. Filing under Rule 24b-2 does not itself certify compliance with Rule 34b-1's standards; it creates the filing record that enables regulatory review and enforcement of those standards.
Rule 38a-1's compliance programme framework requires that registered fund compliance programmes address Rule 24b-2 filing obligations — including the procedures for identifying materials subject to the ten-day filing requirement, the systems for ensuring timely filing through FINRA's electronic submission infrastructure, and the processes for reviewing filed materials for compliance with the content standards of Rule 34b-1 before distribution.
Amendment History, Enforcement Context, and Examination Relevance
Rule 24b-2 has been amended on several occasions since its original adoption, with the most significant recent development being the adoption of Rule 24b-4's research report exclusion — which removed certain covered investment fund research reports from the Rule 24b-2 filing obligation entirely, reflecting the Commission's determination that research reports satisfying Rule 139b's conditions present different investor protection considerations from promotional sales literature. No further substantive changes have been made to Rule 24b-2's operative provisions up to the present time.
Rule 24b-2 enforcement concentrates on failures to file required materials within the ten-day deadline and on materials filed after first use without the required filing having been made — compliance failures that impair the Commission's and FINRA's ability to conduct timely review of investment company marketing materials before those materials have been in distribution for extended periods.
The key points to retain are these. Rule 24b-2 implements Section 24(b)'s requirement that registered open-end companies, UITs, face-amount certificate companies, and their principal underwriters file all sales literature addressed to prospective investors with the Commission within ten days of first use. In practice, virtually all Section 24(b) filing activity is conducted through FINRA's advertising review submission system under Rule 24b-3's deemed filing mechanism, with FINRA reviewing materials pursuant to FINRA Rule 2210's standards. Excluded materials include tombstone advertisements meeting Rule 134's conditions, broker-dealer research reports qualifying under Rules 137, 138, and 139, and covered investment fund research reports qualifying under Rule 24b-4. Non-variable annuity products subject to Investment Company Act registration are included within Rule 24b-2's scope. Filed materials must independently satisfy Rule 34b-1's content standards to avoid the deemed-misleading consequences of that rule. No substantive changes have been made to Rule 24b-2's operative provisions up to the present time.
