Investment Company Act of 1940

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Investment Company Act of 1940

Legislation that requires investment companies to register with the SEC and that outlines standards by which they must operate.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Investment Company Act of 1940

Legislation in the United States regulating investment companies such as mutual funds. The act placed restrictions on the activities in which investment companies are allowed to engage. For example, it forbade short selling in many circumstances. It required investment companies to file financial disclosure and set limits on the fees they are allowed to charge; it also required that investment companies with more than a certain number of investors register with the SEC. The Investment Company Act is enforced by the SEC. See also: Investment Advisers Act of 1940.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Investment Company Act of 1940.

Congress passed the Investment Company Act of 1940 to authorize the Securities and Exchange Commission (SEC) to regulate investment companies, though not to supervise or evaluate their investment decisions.

The Act requires that all mutual funds and exchange traded funds (ETFs) that invest in securities and sell their own shares to US investors must register with the SEC and meet a set of standards. These standards include regular public disclosure of their financial situation, their investment policies and objectives, and their fund portfolios as well as their pricing and fees.

The provisions of the Act are updated from time to time to reflect market developments, changing attitudes toward governance, and other issues.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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