The Investment Company Act of 1940 (US, 15 U.S.C. 80a)

Official text

Investment Company Act of 1940 (GovInfo compiled statute, 15 U.S.C. §80a)

Status

in force, as amended (the GovInfo compilation is the current consolidated text)

Jurisdiction

United States (federal)

Type

primary law

This page

summary only. The linked Act is the source

The Investment Company Act is the US statute that governs pooled investment vehicles offered to the public: mutual funds, closed-end funds and unit investment trusts. It does so through registration with the SEC and a dense set of structural rules. Its definition of an "investment company" (§3) is deliberately wide. That is exactly why the private-fund world is built around its exclusions (§3(c)(1) and §3(c)(7)). A fund that cannot fit an exclusion must register and accept the full regime. That means independent-director governance, custody of assets and strict limits on transactions with affiliates (§17). It also means hard limits on leverage and capital structure (§18). It pairs with the Investment Advisers Act, which regulates the manager.

Scope and the core mechanism

The Act works off the §3 definition of "investment company" and then a set of exclusions. Public funds register and live inside the regime. Private funds are built to rely on an exclusion. The most common are §3(c)(1) (no more than 100 beneficial owners) and §3(c)(7) (only "qualified purchasers"). For registered funds the substance is structural protection of investors. That means a board with independent directors, custody requirements and tight controls on affiliated transactions (§17). It also means constraints on senior securities / leverage (§18), with daily NAV-based pricing. The full section text is searchable clause by clause through the Graph of rules and ask-the-law.

In practice: for a private fund the Act is a statute you spend your time avoiding, not complying with. The whole structuring exercise is fitting a §3(c) exclusion and never stepping outside it (investor counts, qualified-purchaser status, integration). Lose the exclusion and the entire registered-fund regime lands on you at once.