When is the exemption for certain “prima facie investment companies” available to non-US issuers?
Rule 3a-1 under the Investment Company Act provides an exemption from the definition of “investment company” for certain issuers that have more than 40 per cent of their assets invested in investment securities. Such issuers are deemed prima facie investment companies as discussed under “What is an investment company?” above. These prima facie investment companies are often either holding companies or industrial companies that have a substantial portion of their assets invested in minority interests in other companies. To qualify for the Rule 3a-1 exemption, an issuer must not hold itself out as being engaged in the business of investing, reinvesting or trading in securities and must also satisfy the following numerical tests: • the value of investment securities owned by the issuer must not exceed 45 per cent of the value of the issuer’s total assets (consolidated with its wholly-owned subsidiaries), exclusive of US government securities and cash items; and • the issuer’s net income d
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