What is an investment company under the 1940 Act?
Section 3(a)(1)(C) of the Investment Company Act defines an investment company as an issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities, and owns or proposes to acquire “investment securities” having a value exceeding 40 percent of the value …
What qualifies as an investment company?
Generally, an “investment company” is a company (corporation, business trust, partnership, or limited liability company) that issues securities and is primarily engaged in the business of investing in securities.
What is a qualified purchaser under the Investment Company Act?
An individual generally qualifies as a “qualified purchaser” if it owns not less than $5 million in investments. Accordingly, by selling securities only to qualified purchasers, the fund itself would be excluded from regulation under the 1940 Act.
Who must register under the Investment Company Act of 1940?
In accordance with the Investment Company Act of 1940, investment companies must register with the SEC before they can offer their securities in the public market. The Act also lays out the steps an investment company is required to take during this registration process.
What does an exemption to the Investment Company Act of 1940 mean or allow?
The 3(c)(7) exemption refers to the Investment Company Act of 1940’s section permitting qualifying private funds an exemption from certain SEC regulations. Private funds must not plan to issue an IPO and their investors must be qualified purchases to qualify for the 3C7 exemption.
How are investment companies regulated?
The SEC is the federal agency responsible for overseeing the securities industry, including the registration and regulation of investment companies, investment advisers and broker-dealers. Securities offerings are registered with the SEC unless an exemption from registration is available.
How do I prove I am a qualified purchaser?
To be considered a “qualified purchaser,” at least one of the following criteria must be met: The purchaser is an individual or family owned business that owns $5 million or more in investments. If the purchaser is a family owned business, it cannot be formed solely for the purpose of investing in the fund.
What is the difference between accredited investor and qualified purchaser?
An accredited investor is an easier threshold to reach, with a lower financial threshold that combines net assets with annual income. A qualified purchaser has a much higher financial threshold to meet based on the money they have invested.
What are the 3 main types of investments?
There are three main types of investments:
- Stocks.
- Bonds.
- Cash equivalent.