Mutual Fund Law



Mutual funds are not just a type of investment, but are actually legal entities, often formed as a business trust or corporation. Although organized under a number of different state laws, many registered funds organize under the corporate laws of the state of Maryland or the business trust laws of the state of Massachusetts or Delaware.

Primarily because of the Investment Company Act, each mutual fund is usually structured like a corporation in that it has a separate legal existence, a board of directors, officers and shareholders, etc. The Board is primarily responsible for preventing financial adviser abuse and, just as with a standard corporation, a mutual fund's investors are generally limited in liability to the extent of their investments.

Mutual funds do not generally have investment advisers on their payrolls, but rather, enter into contracts with these individuals. The advisers must be registered under the Investment Adviser Act, while the mutual funds are usually regulated under the Investment Company Act.

Many mutual funds have a multi-class structure, meaning a registered investment company issues different classes of shares. These are usually defined as “Class A” shares, which normally have a front-end sales load, “Class B” shares which have a contingent/deferred sales load, and “Class C” shares that have a level-load structure.

For more information about the different types of mutual funds and the laws pertaining to them, please refer to the materials below. Additionally, should you require the assistance of a legal professional experienced with this form of investment, please turn to the “Law Firms” page here at HG.org.

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Mutual Funds Law - US

  • Investment Company Act of 1940

    The act divides the types of investment company to be regulated into three classifications: Face-amount certificate company: an investment company in the business of issuing face-amount certificates of the installment type. Unit Investment Trust: an investment company which is organized under a trust indenture, contract of custodianship or agency, or similar instrument, does not have a board of directors, and issues only redeemable securities, each of which represents an undivided interest in a unit of specified securities; but does not include a voting trust. Management Company: any investment company other than a face-amount certificate company or a unit investment trust. The most well-known type of management company is the mutual fund.

  • Mutual Fund Transparency Act of 2009

    A bill to require disclosure of financial relationships between brokers and dealers and mutual fund companies, and of certain commissions paid by mutual fund companies.

  • Mutual Funds - Definition

    Mutual Funds refers to a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner. Before investing they carry out thorough research and detailed analysis on the market conditions and market trends of stock and bond prices. These things help the fund mangers to speculate properly in the right direction.

  • US 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. As our nation's securities exchanges mature into global for-profit competitors, there is even greater need for sound market regulation.

Organizations Related to Mutual Funds 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. All told, FINRA oversees nearly 4,750 brokerage firms, about 167,000 branch offices and approximately 633,000 registered securities representatives. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

  • Investment Company Institute (ICI)

    ICI engages in three core missions: encouraging adherence to high ethical standards by all industry participants; advancing the interests of funds, their shareholders, directors, and investment advisers; and promoting public understanding of mutual funds and other investment companies.

  • US Global Investors

    U.S Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages a family of no-load mutual funds across a range of asset classes. In addition, the company manages funds for international clients.

Publications Related to Mutual Funds Law

  • Mutual Fund Investing - Investor Tips

    You can't open a newspaper or read a magazine without seeing ads promoting the stellar performance of "hot" mutual funds. But past performance is not as important as you may think, especially the short-term performance of relatively new or small funds. As with any investment, a fund's past performance is no guarantee of its future success.

  • SEC - Invest Wisely: An Introduction to Mutual Funds

    Over the past decade, American investors increasingly have turned to mutual funds to save for retirement and other financial goals. Mutual funds can offer the advantages of diversification and professional management. But, as with other investment choices, investing in mutual funds involves risk. And fees and taxes will diminish a fund's returns. It pays to understand both the upsides and the downsides of mutual fund investing and how to choose products that match your goals and tolerance for risk.

  • SecLaw - Mutual Funds

    SecLaw presents news, publications, articles, policy updates and complicance issues regarding mutual funds as well as information on other types of investments.

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