Home > Investment Company Act of 1940

1 Background and Purpose

After the first mutual fund was created in 1924, the concept took off and investors flocked to the new investment vehicle. Five and a half years later, on October 24, 1929, Black Thursday took the thrill out of the stock market and led to the Great Depression. Learning from the mistakes of the past, Congress wrote into law the Securities Act of 1933 and the Securities Exchange Act of 1934The Securities Exchange Act of 1934 was a sweeping piece of legislation in the United States regulating the participants in the financial markets. It along with the Securities Act of 1933 are still in force today and form the base of all other regulation in order to regulate trade in the interest of the public.

Investment companies were still a new idea in 1940Events January-February January 5 FM radio is demonstrated to the FCC for the first time. January 6 World War II: Mass execution of Poles, committed by Germans in the Poznan, Warthegau. January 12 World War II: Russia bombs cities in Finland. February 2 F. In order to instill investors' confidence in these companies and to protect the public interest from this unique type of securitySecurities are tradeable interests representing financial value. They are often represented by a certificate. They include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, ot, Congress passed the Investment Company Act. The new law set separate standards by which investment companies should be regulated.

The Act's purpose, as stated in the bill, is "to mitigate and... eliminate the conditions... which adversely affect the national public interest and the interest of investors."

2 Jurisdiction

The Investment Company Act does not cover all investment companies. The requirements are limited by the scale and the type of company.

2.1 Scale

When the Congress wrote the Act into federal lawFederal law is the body of law created by the federal government of a nation. Examples of federal governments include Australia, the United States of America, Canada, the former Union of Soviet Socialist Republics, India, Germany. The European Union is ev, rather than leaving the matter up to the individual states, it justified its action by including in the text of the bill the reasoning behind the decision:

“The activities of such companies, extending over many states, their use of the instrumentalities of interstate commerce and the wide geographic distribution of their security holders, make difficult, if not impossible, effective state regulationState law in the United States, is the law of each separate U. state, as passed by the state legislature and signed into law by the state governor. It exists in parallel, and sometimes in conflict with, U. federal law. These disputes are often resolved by of such companies in the interest of investors.”