Investment Company Act of 1940
An investment company is like an investment packager. They take money from lots of investors, pool it, and then buy investments with it. The investors get the securities of the investment company, not the underlying assets. Examples include mutual funds, ETFs, closed-end funds and UITs. The Investment Company Act of 1940 protects those who invest in investment company securities by requiring that the investment company:
- • Register with the SEC
- • Prepare a prospectus stating the company’s investment objectives and financial conditions
- • Submit annual reports to the SEC and semi-annual reports to shareholders (the reports must include a balance sheet, an income statement, a list of securities owned, and a statement of recent changes in the portfolio)
- • Follow other operating and governance rules specific to the type of fund
The Investment Company Act of 1940 regulates the activities of three types of