P.R. Laws tit. 10, § 691a
Investment companies may be categorized into various types. The Commissioner shall prescribe through regulations the manner in which investors shall be clearly communicated on the differences in the types of investment companies.
(a) By their type of investment.— Investment companies may be differentiated between mutual funds and exempt investment trusts, depending on the nature of the investments they make. Mutual funds invest or proposes to invest at least ninety percent (90%) of its assets, other than cash, in all classes of stocks. The exempt investment trust may invest in all classes of stocks and may also acquire or organize, in whole or in part, businesses of any kind for the purposes of operating them and use their return for the benefit of the trust.
(b) By their diversification.— Investment companies may be classified as “diversified” and “non diversified” companies depending on the different types of risk to which they are subject. In “diversified” companies at least seventy-five percent (75%) of the value of its total assets is represented by cash and securities for the purposes of this calculation limited, in respect of any one company or issuer to an amount not greater than five percent (5%) of the value of the total assets of such investment company (including cash) and to not more than ten percent (10%) of the voting securities of such company or issuer. Non-diversified companies cannot have more than twenty-five percent (25%) of its assets, including cash, in the securities of one company or issuer. Provided, however, that investment companies may invest in securities issued or guaranteed by the Commonwealth of Puerto Rico, the Government of the United States of America, the states of the United States of America, or any of their respective political subdivisions, instrumentalities, public corporations or agencies, in each case in excess of the investment limit stated herein in only one issuer. Provided, further, that non- diversified investment companies, also classified as exempt investment trusts, may invest up to seventy-five percent (75%) of its assets, including cash, in securities of one company or issuer. Notwithstanding the foregoing, a non- diversified investment company classified also as an exempt investment trust may invest up to ninety percent (90%) of its assets in securities of one company or business, insofar as such company is organized expressly to diversify its operations within two (2) years after its registration.
(c) By what they offer in the market.— Investment companies may be differentiated between open-end companies and closed-end companies. Open- end companies, periodically offer for sale or has outstanding any redeemable security of which it is the issuer. Closed-end companies are companies other than open-end companies.
(d) By their capacity to redeem shares.— Investment companies may be differentiated between redeemable at will and not redeemable at will. Investment companies redeemable at will are those in which the investment company issues and redeems its shares in the hands of its investors, according to the net value of its assets calculated periodically. Such redemption period and all other details shall be prescribed by the Commissioner through regulations. Investment companies categorized as not redeemable at will are companies other than those redeemable at will.
(e) By the use of the debt.— Investment companies may be differentiated between “leveraged” and “non-leveraged” companies. Non-leveraged investment companies may incur debt of up to five percent (5%) of the value of their assets with the authorization of the Commissioner. Leveraged investment companies may incur debt up to fifty percent (50%) of the value of their assets and up to an additional five percent (5%) with the authorization of the Commissioner. For purposes of leverage, debt shall be understood as the sum of the amount of the loans with banks, repurchase agreements, issuance of preferred stocks, or the existence of issued preferred stocks. Provided, further, that leverage restrictions provided in this section shall not apply to investment companies classified as exempt investment trusts that are subclassified as leveraged, and which shall have no restrictions as to the debt they may incur. Only leveraged investment companies shall emphasize on their nature and classification under this subsection. The Commissioner shall determine the disclosure requirements that investment companies shall meet with respect to their leverage level. Provided, however, that leverage limits shall not apply to investment companies operating under the Small Business Investment Act of 1958.
History —July 30, 2013, No. 93, § 4; Nov. 27, 2013, No. 137, § 2.