Investment Companies and the Investment Company Act of 1940

What this video covers

• Why a pattern of sales just below a breakpoint threshold triggers quantitative suitability scrutiny, and how Letters of Intent (LOI) and Rights of Accumulation (ROA) must be disclosed
• Why cash compensation from an offeror must appear in the current prospectus itself, and why side letters or separate written disclosures are never sufficient
• How the 40% test creates inadvertent investment companies, and the two private-fund exclusions (100-or-fewer beneficial owners, qualified-purchaser only) that keep hedge funds outside Investment Company Act of 1940 (ICA) registration
• The structural distinction between open-end funds (continuous issuance, forward pricing, NAV-based) and closed-end funds (fixed share issuance, secondary-market trading, premium or discount to NAV)
• Why a Unit Investment Trust (UIT) has no board of directors, and how its fixed, static portfolio administered by a trustee differs from actively managed management companies
• How the 75-5-10 test defines a diversified management company, and why it is a single integrated requirement applied to the 75% chunk rather than three separate rules
• Why a distribution fee exceeding 0.25% kills the no-load label, and how the 0.75%/0.25%/1.0% 12b-1 caps work with dual board-and-shareholder approval
• What forward pricing requires (next-computed NAV after order receipt), the seven-day hard cap on redemption payment, and the four narrow exceptions to that cap