What are the implications of being deemed an investment company?
The Investment Company Act was enacted by the US Congress to protect members of the US public when they entrust their assets to others for investment on a collective or pooled basis. The liquid nature of investment company assets was perceived to create an increased risk of management abuse not found in operating companies. Accordingly, the Investment Company Act imposes a registration requirement on non-exempt investment companies and requires that a number of structural safeguards, such as an independent board of directors and a separate investment adviser whose contract must be approved by a majority of the company’s shareholders, be put in place within such companies. The Investment Company Act also imposes significant disclosure and reporting requirements beyond those found in the Securities Act and the US Securities Exchange Act of 1934, as amended (the Exchange Act). Likewise, the Investment Company Act contains its own anti-fraud provisions and private remedies. Moreover, the I
