The investment company act of 1940 is an act of congress. Section 36b of the 1940 act provides a cause of action for the sec, and individual security holders in a registered investment company, to sue investment advisers for excessive payments in breach of fiduciary duty. The investment company act of 1940 and investment company compliance course august 20 24, 1979 courtesy of james h. The investment company act of 1940 yale law school. The investment company act of 1940 is an act of congress which regulates investment funds. Section 3c7 exemption from definition of investment company.
Investment company act of 1940 the investment company act of 1940 1940 act regulates investment companies, i. Investment company act of 1940 the investment company act or act and. With certain exceptions, this act requires that firms or sole practitioners compensated for advising others about securities investments must register with the sec and conform to regulations designed to protect. Overview of compliance considerations for advisers to registered. In accordance with the investment company act of 1940, investment companies must register with the sec to offer their securities in the public market. The investment company act of 1940 and investment company. Section 17e1 of the 1940 act generally prohibits any affiliated person of a registered investment company ric, or any affiliated person of such person, acting as agent, from accepting compensation for the purchase or sale of any property to or for such ric, except in the course of such persons business as an underwriter or broker. Wall street was sort of like the wild west, as it was somewhat unregulated, which led to scams. Statement pursuant to section 19a of the investment company act of 1940 on november 30, 2016, the reaves utility income fund nyse mkt. Sep 03, 2014 to understand the investment company act of 1940, first we need to understand what was going on during the time period when it was launched. Use of derivatives by registered investment companies and. The investment company act of 1940 follow this and additional works at. Notwithstanding subsection a of section 3 of the investment company act of 1940, none of the following persons is an investment company within the meaning of this subchapter. Section 18 of the investment company act of 1940, as amended the ica.
Order under sections 6c, 17d, 38a, and 57i of the investment. Section 6c of the investment company act provides that the commission may conditionally or unconditionally exempt any person, security or transaction, or any class or classes of persons, securities or transactions, from any provision or provisions of the investment company act, or any rule or regulation thereunder, if and to the extent that. Rules and regulations promulgated under the investment advisers act of 1940 17 cfr part 275 forms prescribed under the investment advisers act of 1940. Statement pursuant to section 19a of the investment company act of 1940 on may 31, 2017, the clough global equity fund nyse mkt.
The investment company act of 1940 was created through an act of congress to regulate the organization of investment companies and the activities they engage in. Through note above and below at the bottom of each page of the pdf. Rules and regulations promulgated under the investment. These are alternatives other than the exemptions available under section 3c1 and section 3c7 under the investment. Section 12 d 1 a of the 1940 act places the following limits on investments by investment funds in any registered investment company. The codification of the investment company act of 1940, 15 u. Regs under the investment advisers act of 1940 source lexis. Securities and exchange commission during august 20 24, 1979. Investment companies and business development companies to. This publication is a compilation of the text of chapter 38 of the 73rd congress. Jorden the implementation of section 22d of the investment company act of 1940 has resulted in a form of retail price maintenance in the mutual fund industry. Section 3c1 exemption from definition of investment company. Even though such securities may be registered under the securities act, they may not be offered for sale to the public unless a formal agreement between the issuer of bonds and the bondholder, known as the trust indenture, conforms to the standards of this act. Company act to consider for a collective investment vehicle that may be viewed as or fall within the definition of an investment company under the investment company act.
This compilation includes small business administration. Section 18 of the 1940 act restricts the ability of registered closedend and openend funds to issue or sell any class of senior security. Apr 10, 2020 additional section 17 legal considerations may be applicable to talf 2020 once specific details have been released by the federal reserve. The investment adviser performs its services pursuant to a written contract with the fund.
Senior securities restrictions section 18 of the investment company act limits the issuance of senior securities by registered investment companies and business development companies. This publication is a compilation of the text of title ii of chapter 686 of the 76th congress. To understand the investment company act of 1940, first we need to understand what was going on during the time period when it was launched. Most private funds seek to operate outside the scope of the 1940 act by relying on one of two exemptions from the acts definition of investment company, section 3c1 or 3c7 of the 1940 act. The investment company act of 1940 investment banker means any person engaged in the business of underwriting securities issued by other persons, but does not include an investment company, any person who acts as an underwriter in isolated transactions but not as a part of a regular business, or any person. Generally, section 3 of the 1940 act defines an investment company as an issuer that holds itself out as being engaged primarily, or proposes to engage primarily, in the. This article is brought to you for free and open access by yale law school legal scholarship repository. He previously led the icis international affairs department. Frequently asked questions about business development companies. It was last amended by the public law listed in the as amended.
On april 8, 2020, the staff of the division of investment management of the us securities and exchange commission commission issued an exemptive order the order under the investment company act of 1940 1940 act that will provide immediate temporary flexibility for business development companies bdcs to issue and sell senior securities and to participate in certain joint. Order under sections 6c, 17d, 38a, and 57i of the investment company act of 1940 and rule 17d1 thereunder granting exemptions. Name and address of reporting person edwardson john a 2. Rule 18f2 fair and equitable treatment for holders of each class or series of stock of series investment companies. Grohowski, who will start at iaa in march, is currently an associate general counsel with the investment company institute ici, with primary responsibility for a wide range of issues arising under the investment advisers act of 1940 and the investment company act of 1940.
Oct 28, 2018 section 36b of the 1940 act provides a cause of action for the sec, and individual security holders in a registered investment company, to sue investment advisers for excessive payments in breach of fiduciary duty. Section 18 a1 asset coverage, and other restrictions, applicable to the issuance or sale of senior securities representing indebtedness by closedend investment companies. The provisions of subparagraphs a and b of paragraph 1 of subsection a of this section shall not apply to investment companies operating under the small business investment act of 1958 15 u. Rule 18f1 exemption from certain requirements of section 18 f1 of the act for registered openend investment companies which have the right to redeem in kind. Investment advisers act of 1940 house office of the. Transactions of certain affiliated persons and underwriters. The regulation is designed to minimize conflicts of interest that arise in these complex operations. Issuer name and ticker or trading symbol fedex corp fdx 5. This act regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public. Section 8 registration of investment companies section 9 ineligibility of certain affiliated persons and underwriters section 10 affiliations or interest of directors, officers, and employees.
Generally, section 3 of the 1940 act defines an investment company as an issuer that holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Section 30 reports and financial statements of investment companies and affiliated persons. The investment advisers act of 1940, codified at 15 u. Sec provides immediate temporary flexibility to bdcs. Investment company act of 1940 financial definition of. Frequently asked questions about business development. Investment company act of 1940 securities lawyers deskbook. Under the 1940 act, an investment company is an issuer, which holds itself out as being primarily engaged in the business of investing, reinvesting, or trading in securities. Section 22d of the investment company act of 1940its original purpose and present function james v. Investment company act of 1940 1940 act the investment company act of 1940 1940 act provides for the registration and regulation of investment companies.
Statement pursuant to section 19a of the investment. Statement pursuant to section 19a of the investment company act of 1940 on october 31, 2017, the clough global equity fund nyse mkt. The investment company act of 1940 1940 act is the key statute under which u. Code 80a18 capital structure of investment companies. Section 2a48 of the 1940 act defines business development company to mean a domestic closedend company that 1 operates for the purpose of making investments in certain securities specified. See the full text of the trust indenture act of 1939. Section 15 of the investment company act, as amended 1940 act, requires that each investment advisory contract with a registered investment company be approved initially by a majority of the funds. An act to provide for the registration and regulation of investment. Investments in other investment companies investment fund. Securities act of 1933 united states house of representatives. This compilation re flects this amendment even though the italicized words were not in the underlying law at the time of the amendment.
Investment advisers act of 1940 oreferences in brackets o. Sec provides guidance regarding knowledgeable employees. See sections 18a1 and 18f1 of the investment company act. It shall be unlawful in contravention of such rules, regulations, or orders as the commission may prescribe as necessary or appropriate in the public interest or for the protection of investors for any registered investment company to distribute longterm capital gains, as defined in title 26, more often than once every twelve months. Additional section 17 legal considerations may be applicable to talf 2020 once specific details have been released by the federal reserve. Perry this special exhibit features a 24videotape compliance course produced by the u. Private investment funds relying on section 3c1 or section 3c7 of the investment company act of 1940 the 1940 act for an exclusion from the 1940 act definition of the term investment. Statement pursuant to section 19a of the investment company.
Section 18 capital structure of investment companies. The philanthropy protection act of 1995 104 public law 62, 109 stat. Filed pursuant to section 16a of the securities exchange act of 1934 or section 30h of the investment company act of 1940 1. It has been accepted for inclusion in yale law journal by an authorized editor of yale law school legal scholarship repository. For the period specified in section i, an openend fund is exempt from section 18 f1 of the investment company act to the extent necessary to permit it to borrow money from any affiliated person, or affiliated person of such affiliated person, that is not a bank and is not itself a registered investment company, provided that the conditions. Title ii of chapter 686 of the 76th congress as amended through p.
Jul 11, 2019 the investment company act of 1940 was created through an act of congress to regulate the organization of investment companies and the activities they engage in. Exemption from state regulation of securities offerings. Section d reports by persons acquiring more than 5% of certain classes of securities. Major areas of sec inquiry related to the use of derivatives under the investment company act a.
150 893 583 675 1062 255 1274 363 246 1652 1061 1633 328 1476 1455 209 30 1173 298 228 658 601 53 1255 1533 474 167 675 1312 208 1140 449 552 971 574 1569 813 872 973 1313 843 267 701 62 358 1459 1262 864