If you want to know how to not protect investors, take a good look at the Investment Company Act of 1940.
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Investment companies are regulated primarily under the Investment Company Act of 1940.
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At the heart of the problem is the fact that the Commission continues to believe the legal fictions incorporated in the Investment Company Act of 1940, the federal statute that regulates mutual funds.
FORBES: The Great Mutual Fund Clean Up That Almost Happened (April 4, 2004 )
The intent behind the Investment Company Act of 1940, which regulates mutual funds, and the Investment Advisers Act of 1940, which regulates money managers, was to provide investors with the important information they needed in order to determine whether to invest with a given manager and to judge the ongoing performance of their managers.
The intent behind the federal securities laws, including the Investment Company Act and the Investment Advisors Act of 1940, was supposedly to provide investors with material information about money managers to enable them to make informed investment decisions.
FORBES: No Freedom of Information When It Comes to Money Managers (November 1, 2000)
Texas: Information was provided to Wealthfront by the Investment Office at the University of Texas Investment Management Company upon request under Freedom of Information Act. 9 May 2011.
The Investment Company Act guards against overuse of leverage in mutual funds to protect retail investors.
Instead, throughout the 1980s the SEC routinely issued exemptions from regulation under the applicable law, the Investment Company Act, for all sorts of structured products with remarkably little analysis.
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According to an SEC official, the regulators are evaluating whether derivatives are being used by mutual funds and ETFs in ways that are consistent with the protections of the Investment Company Act.
For example, in the entire history of the Investment Company Act (the federal statute applicable to mutual funds) only one Compliance Director to a mutual fund adviser has ever blown the whistle on his employer since 1940.
Of particular interest to hedge fund managers, privately offered funds will be able to conduct offerings using general solicitations or general advertisements under the new amendments, without losing either of the very important exclusions under Sections 3(c)(1) or 3(c)(7) of the Investment Company Act.
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For example, the Securities Exchange Act (1934) and the Investment Company Act (1940) require that regulators consider the likely impact of a proposed regulation on efficiency, competition and capital formation.
FORBES: Now's The Time To Promote Legal Challenges To Dodd-Frank
In 1990, the SEC issued the Investment Company Act Release No. 17809 and ultimately paved the way for the formation of mutual funds that allowed for share creation and redemption during the day.
Contrary to public opinion, which tends to regard foreign investment by German companies as a job-killing act of economic treachery, the car company says that the increase is due partly to its new factory in the United States.
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