An investment company is a financial institution principally engaged in holding, managing and investing securities. These companies in the United States are regulated by the U.S. Securities and Exchange Commission and must be registered under the

Investment Company Act of 1940 The Investment Company Act of 1940 (commonly referred to as the '40 Act) is an act of Congress which regulates investment funds. It was passed as a United States Public Law () on August 22, 1940, and is codified at . Along with the Securities Ex ...

. Investment companies invest money on behalf of their clients who, in return, share in the profits and losses. Investment companies are designed for long-term investment, not

short-term trading Short-term trading refers to those trading strategies in stock market or futures market in which the time duration between entry and exit is within a range of few days to few weeks. There are two main school of thoughts: swing trading and trend f ...

. Investment companies do not include brokerage companies, insurance companies, or banks. In

United States securities law Securities regulation in the United States is the field of U.S. law that covers transactions and other dealings with securities. The term is usually understood to include both federal and state-level regulation by governmental regulatory agencies ...

, there are at least three types of investment companies: * Open-End Management Investment Companies (

mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICA ...

s) *Face amount certificates companies: very rare. *Management companies * Closed-End Management Investment Companies (

closed-end fund A closed-end fund (CEF) is a fund that raises capital by issuing a fixed number of shares which are not redeemable, and then invest that capital in financial assets such as stocks and bonds. Unlike open-end funds, new shares in a closed-end fund ...

s) * UITs (

unit investment trust In U.S. financial law, a unit investment trust (UIT) is an investment product offering a fixed (unmanaged) portfolio of securities having a definite life. Unlike open-end and closed-end investment companies, a UIT has no board of directors. A ...

s): only issue redeemable units. In general, each of these investment companies must register under the

Securities Act of 1933 The Securities Act of 1933, also known as the 1933 Act, the Securities Act, the Truth in Securities Act, the Federal Securities Act, and the '33 Act, was enacted by the United States Congress on May 27, 1933, during the Great Depression and after ...

and the

. A fourth and lesser-known type of investment company under the

is a

Face-Amount Certificate Company A face-amount certificate company is an investment company which offers an investment certificate as defined by the United States Investment Company Act of 1940. In general, these companies issue fixed income debt securities that obligate the issu ...

. A major type of company not covered under the

Investment Company Act 1940 The Investment Company Act of 1940 (commonly referred to as the '40 Act) is an act of Congress which regulates investment funds. It was passed as a United States Public Law () on August 22, 1940, and is codified at . Along with the Securities Exchan ...

is private investment companies, which are simply private companies that make investments in stocks or bonds, but are limited to under 250 investors and are not regulated by the SEC."Investment Clubs and the SEC"
''sec.gov'', Modified January 16, 2013. These funds are often composed of very wealthy investors.

References

Investment management Types of business entity {{investment-stub

See also

References