An investment company is a financial institution principally engaged in holding, managing and investing
securities
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
. These companies in the United States are regulated by the
U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
and must be registered under the
Investment Company Act of 1940. 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.
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 SICAV ...
s)
*Face amount certificates companies: very rare.
*Management companies
* Closed-End Management Investment Companies (
closed-end funds)
* 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 and the
Investment Company Act of 1940. A fourth and lesser-known type of investment company under the
Investment Company Act of 1940 is a
Face-Amount Certificate Company. A major type of company not covered under the
Investment Company Act 1940 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.
See also
* Holding company
A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
* Investment trust
* Private equity firm
A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including lev ...
References
Investment management
Types of business entity
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