### Question
How does the law define passive investment?


### Answer
Under *46 U.S.C. § 12119*, **passive investment** is defined as:

> an investment in which neither the investor nor any affiliate of the investor is involved in, or has the power to be involved in, the formulation, determination, or direction of any activity or function concerning the management, use, or operation of the asset that is the subject of the investment

#### Citation:
  - *46 U.S.C. § 12119*
  - Heading: **Subtitle II-Vessels and Seamen > Part H-Identification of Vessels > CHAPTER 121-DOCUMENTATION OF VESSELS > SUBCHAPTER II-ENDORSEMENTS AND SPECIAL DOCUMENTATION**

