6.4. Investment Company Act of 1940

Many people claim that the Investment Company Act of 1940 created mutual funds, but this is incorrect. Mutual funds, along with other types of pooled investments, were available even before the 1929 stock market crash. The Investment Company Act of 1940, instead, began regulating these investments and their issuers. Also covered under the act are unit investment trusts (UITs), which are simplified investment pools for which a preset portfolio is constructed and a limited amount of investment units are sold, and face value certificates, which are essentially unit investment trusts that promise to pay back investors a certain amount on a certain date.

The main purpose of this act is to require the same types of disclosures for mutual funds