Investment Companies Law



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Generally, an investment company is a business that issues and invests in securities. An investment company invests funds it receives from client investors on a collective basis, and each investor shares their proportion of the resulting profits and losses.

Federal securities laws categorize investment companies into three basic types: mutual funds, closed-end funds, and unit investment trusts (UITs). Each type of investment company has its own unique features and legal obligations. For example, mutual fund and UIT shares are "redeemable," which means that investors who wish to sell their shares sell them back to the fund or trust at their approximate value. Closed-end fund shares, on the other hand, are usually not redeemable, but rather, when closed-end fund investors want to sell their shares, they sell them to outside buyers on the secondary market at a price determined by market conditions. Additionally, there are a number of variations to each basic type of investment company, such as stock funds, bond funds, money market funds, index funds, interval funds, and exchange-traded funds (ETFs).

Some types of companies that would otherwise appear to be an investment company are excluded under Securities and Exchange Commission (SEC) regulations. For example, private investment funds with 100 investors or less and certain private investment funds are not considered investment companies even though they issue securities and are primarily engaged in the business of investing in securities.

Investment companies primarily regulated under the Investment Company Act of 1940 and the administrative rules and forms propagated pursuant to the Act, as well as the Securities Act of 1933 and the Securities Exchange Act of 1934.

Before purchasing any investment, you should carefully read any contracts, disclosures, prospectuses, or other documents. For more information about investment companies, you can review the materials provided below. You can also find lawyers in your area who specialize in this industry by vising the Law Firms page of our website.

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Investment Companies Law - US

  • ABA - Special Investors and Investment Structure Group

    The Special Investors and Investment Structure Group addresses specialized investments in real estate, including pension plan investments, insurance company investments and international investment in real estate. The Group also addresses specialized structures for investment and financing, including limited liability companies, partnerships, REITs, land trusts and real estate investment funds. To address these matters,

  • Investment Advisers Act of 1940

    This law regulates investment advisers. 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 investors. Since the Act was amended in 1996, generally only advisers who have at least $25 million of assets under management or advise a registered investment company must register with the Commission.

  • Investment Company Act

    This act required that all such companies register with the Securities and Exchange Commission (SEC). Under The Investment Company Act of 1940, investment firms must also regularly disclose their investment policies and financial conditions to the public. The act also set operating standards to help ensure investment companies’ continued financial health and fair treatment of investors. These guidelines included limiting the amount of assets that could be leveraged to purchase additional assets, and regulating sales of shares in the investment company itself.

  • Regulated Investment Company, Title 26 - Definition

    For purposes of this subtitle, the term ''regulated investment company'' means any domestic corporation - (1) which, at all times during the taxable year - (A) is registered under the Investment Company Act of 1940, as amended (15 U.S.C. 80a-1 to 80b-2) as a management company or unit investment trust, or (B) has in effect an election under such Act to be treated as a business development company, or (2) which is a common trust fund or similar fund excluded by section 3(c)(3) of such Act (15 U.S.C. 80a-3(c)) from the definition of ''investment company'' and is not included in the definition of ''common trust fund'' by section 584(a).

  • United States Securities Act

    Often referred to as the "truth in securities" law, the Securities Act of 1933 has two basic objectives: * require that investors receive financial and other significant information concerning securities being offered for public sale; and * prohibit deceit, misrepresentations, and other fraud in the sale of securities.

Organizations Related to Investment Companies Law

  • Financial Industry Regulatory Authority (FINRA)

    The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s mission is to protect America’s investors by making sure the securities industry operates fairly and honestly. All told, FINRA oversees nearly 4,620 brokerage firms, about 165,920 branch offices and approximately 636,340 registered securities representatives.

  • International Trade Administration (ITA)

    The International Trade Administration (ITA) strengthens the competitiveness of U.S. industry, promotes trade and investment, and ensures fair trade through the rigorous enforcement of our trade laws and agreements. ITA works to improve the global business environment and helps U.S. organizations compete at home and abroad. ITA supports President Obama’s recovery agenda and the National Export Initiative to sustain economic growth and support American jobs.

  • Overseas Private Investment Corporation (OPIC)

    The Overseas Private Investment Corporation (OPIC) was established as an agency of the U.S. government in 1971. OPIC helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges market-based fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers.

  • SBIC Program - Seeking SBIC Financing for your Small Business

    Whether your business is in the early stages of development or already thriving and seeking growth capital, we want to help you determine if SBIC financing is right for your company – and if so, who in the SBIC community might be willing to consider an investment. Remember, the SBIC Program does not invest directly in small businesses. Instead, SBA puts its confidence in premier investment management funds to evaluate and invest in promising small companies.

  • United States Securities and Exchange Commission (SEC)

    The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more compelling than ever.

Publications Related to Investment Companies Law

  • Investment Treaty News

    Since 2001, ITN has offered news, analysis and opinions on international investment law and its implications for sustainable development. The service began as a list-serve where information and views were shared among members, before becoming an electronic newsletter produced by a small editorial team. In its present form, ITN combines these functions by serving as a Web-based platform for discussion and debate, as well as providing regular journalistic reporting on developments and trends in international investment law.

  • Investor Guide

    Launched in 1996, InvestorGuide.com is WebFinance Inc.'s flagship business. The site's mission is to empower individual investors to take control of their finances and investments through the Internet. InvestorGuide.com believes that every investor, regardless of experience, can benefit from a guide designed to help them sort through all of the investing information on the Internet. Sections that benefit everyone equally are those covering online brokers, stock information, and a comprehensive list of publicly traded companies.

Articles on HG.org Related to Investment Companies Law

  • Proposed Residential Visa
    The "Residential Visa" program will provide an opportunity for people worldwide to live in the United States by purchasing a half million dollars of Real Estate. Senators Charles Schumer and Mike Lee have recently proposed a program that would allow anyone in the world to obtain a United States visa by purchasing United States real estate.
  • Private Placements 101
    Regulation D, Rule 506 Offerings - To offer and sell securities in the United States, an issuer must comply with the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), or must offer and sell the securities pursuant to an exemption from the registration statement requirements.
  • Investor Relations 101
    Investor relations involve the dissemination of information regarding a publicly traded company to create awareness of the public company and its business and to increase its stock price. The person who provides the investor relations services is known as a “Stock Promoter”. Stock promoters have used illegal practices and are often the subject of enforcement actions by the Securities and Exchange Commission (the “Commission”) is the stock promoter.
  • FINRA Rule 6490
    FINRA Rule, 6490, recently enacted in September 2010, requires issuers of equities and debt securities not listed on exchanges to provide timely notice to FINRA of certain corporate actions. These corporate actions include name changes, forward stock splits, reverse stock splits, distributions of cash or securities such as dividends, stock splits and other actions, and rights and subscription offerings.
  • SEC Rules Affecting Shell Companies
    What is a Shell Company? Securities Act Rule 405 and Exchange Act Rule 12b-2 define a Shell Company as a company, other than an asset-backed issuer, with no or nominal operations; and either: • no or nominal assets; • assets consisting of cash and cash equivalents; or • assets consisting of any amount of cash and cash equivalents and nominal other assets. By: Brenda Lee Hamilton, Attorney Hamilton & Associates Law Group
  • Form S-8 Registration Requirements
    Registration of securities on Form S-8 (“Form S-8”) is a short-form registration statement under the Securities Act of 1933, as amended (the “Securities Act”). By Brenda Lee Hamilton, P.A. Hamilton & Associates
  • Chinese Investment in Latin America
    In September, 2011, a consortium of five Chinese companies invested 2 billion USD to acquire a minority stake in a Brazilian metal company...
  • Three Reasons International Families Should Consider Qualified Domestic Trusts
    What kind of estate planning is advisable for individuals with a non US citizen spouse? In this article, San Francisco Bay Area attorney John C. Martin discusses three reasons why individuals with a non US citizen spouse should consider estate planning with QDOTs, and how to avoid several pitfalls.
  • Business Enterprises with Foreign Partners
    This memorandum was prepared for a client who owns a US company and who was considering a joint venture in the State of Florida with a non-US individual. The venture entailed acquisition of US real property for the purpose of lease or resell. Because the legal and business concepts discussed are of general application, and because foreign investment in US real estate is of the moment, the key points of the memorandum are set forth herein for public benefit.
  • Doing Business in Afghanistan
    A primer for those seeking to invest or conduct business in the nation of Afghanistan.
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    Articles written by attorneys and experts worldwide discussing legal aspects related to Banking and Finance including: asset protection, capital markets, corporate finance, financial planning, financial services law, investment law, offshore accounts, private equity, project finance, public finance, securities, trade investment and venture capital.