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FUNDAMENTALS OF PLANNED GIVING• Charitable contributions of life insurance 28• Charitable contributions of a life interest in an individual’s personal residenceor farm 29§ 5.9 PLANNED GIVING AND SECURITIES LAWSThe applicability of federal and state securities laws to the planned giving activitiesof charitable organizations is limited. 30 This limitation, which is provided bymeans of reference to the maintenance of certain charitable income funds, wasstimulated by litigation alleging that these funds are investment companies subjectto the registration and other requirements of the Investment Company Act of1940. 31 Overall, this legislation provides certain exemptions under the federalsecurities laws for charitable organizations that maintain charitable income funds.A charitable income fund is a fund maintained by a charitable organizationexclusively for the collective investment and reinvestment of one or more assetsof a charitable remainder or similar trust; of a pooled income fund; contributedin exchange for the issuance of charitable gift annuities; of a charitable lead trust;of the general endowment fund or other funds of one or more charitable organizations;or of certain other trusts the remainder interests of which are revocablydedicated to or for the benefit of one or more charitable organizations. 32 TheSecurities and Exchange Commission (SEC) has the authority to expand thescope of the exemptive provisions of the legislation to include funds that mayinclude assets not expressly defined.A fund that is excluded from the definition of an investment company mustprovide, to each donor to a charity by means of the fund, at the time of donation,written information describing the material terms of operation of the fund. 33This disclosure requirement is not, however, a condition of exemption from theInvestment Company Act. Thus, a charitable income fund that fails to providethe requisite information is not subject to the securities laws, although the fundmay be subject to an enforcement or other action by the SEC. Charitable organizationshave flexibility in determining the contents of the required disclosure.This exemption in the Investment Company Act is also engrafted onto theSecurities Act of 1933, although charitable income funds are not exempted fromthat law’s antifraud provisions. 34 A similar rule operates with respect to theSecurities Exchange Act of 1934. 3528 This form of planned giving is discussed in Chapter 17.29 This form of planned giving is discussed in § 15.2.30 15 U.S.C. § 80a-51. This legislation was enacted as the Philanthropy Protection Act of 1995, 109 Stat. 682,Pub. L. No. 104-62, 104th Cong., 1st Sess. (1995).31 Richie v. American Council on Gift Annuities, Civ. No. 7:94-CV-128-X. Despite the clarity of this legislativehistory, the courts (most recently the U.S. Court of Appeals for the Fifth Circuit) were reluctant to terminatethis litigation, on the ground that the organization involved (the American Council on Gift Annuities) was nota charitable organization and that it conspired with for-profit entities to establish payout rates. This matter wentto the Supreme Court, which, on December 8, 1997, sent the case back to the Fifth Circuit for reconsiderationin light of legislation enacted in 1997. The litigation, however, has ended; see § 14.8, note 35.32 15 U.S.C. § 80a-3(c)(10).33 15 U.S.C. § 80a-7(e).34 15 U.S.C. § 77c(a)(4).35 15 U.S.C. § 78c(e). 166