A pooled income fund (PIF) is one of the methods created under the 1969 Tax Reform Act whereby a taxpayer may make a tax‐deductible remainder gift to a charitable organization. The fund, established by a charitable organization to receive irrevocable gifts from at least two donors, pays current income to the individual beneficiaries for life, but at the termination of each income interest, the allocable principal must revert permanently to the charitable organization. In recent years, a number of PIFs have been offered to the public by charitable organizations through broker‐dealers or related entities. There are numerous securities‐law issues implicated by the sales of these PIFs, including: (i) whether broker‐dealers may solicit donations to such funds and receive compensation for their solicitations; (ii) the effect of the broker‐dealers’ solicitation and receipt of compensation have on securities registration for the PIF or units offered therein under the Securities Act of 1933, the Securities Exchange Act of 1934, or the Investment Company Act of 1940; (iii) whether staff and persons affiliated with the sponsoring charity, including parties assisting them in the marketing of such pooled income funds, also should be permitted to solicit donations; (iv) whether such charities or persons, or parties assisting them in the marketing of such pooled income funds, then should be required to register as broker‐dealers; (v) what securities licenses may be required of the aforementioned parties; and (vi) whether there are ways to design the manner in which third parties other than broker dealers are compensated to resolve any potential issues arising from answers to the previous questions. This article first sets forth the applicable law involved in the analysis and then attempts to answer each of the issues presented above.
Journal of Investment Compliance – Emerald Publishing
Published: Apr 1, 2004
Keywords: Financial institutions; Investments; Investment funds; Investors; Investments
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