Investment Company Act of 1940
U.S. federal statute regulating investment companies (mutual funds, closed-end funds, BDCs). Hedge funds avoid Investment Company status by relying on Section 3(c)(1) or 3(c)(7) exclusions; these exclusions are foundational to private-fund structuring.
Details
- short name: 1940 Act
- aliases: ICA, '40 Act
- jurisdiction: US
- regulator: SEC
- kind: act
- effective date: 1940-08-22
- summary: U.S. federal statute regulating investment companies (mutual funds, closed-end funds, BDCs). Hedge funds avoid Investment Company status by relying on Section 3(c)(1) or 3(c)(7) exclusions; these exclusions are foundational to private-fund structuring.
- scope: Issuers primarily engaged in investing, reinvesting, owning, holding, or trading in securities.
- applies to: registered investment companies, private funds relying on 3(c)(1)/3(c)(7)
- related regulations: investment-advisers-act-1940, regulation-d, securities-act-1933
- related terms: qualified-purchaser, accredited-investor, section-3c1, section-3c7, private-fund
- official text url: https://www.sec.gov/about/laws/ica40.pdf
- history: Enacted alongside the Advisers Act in response to the SEC's 1935-1939 Investment Trust Study. The 3(c)(7) exclusion was added by the National Securities Markets Improvement Act of 1996 (NSMIA) to permit larger pools of qualified investors.