Key Regulatory Provisions (Investment Company Act of 1940)

What this video covers

• Why mutual funds cannot purchase securities on margin, participate in joint trading accounts, or sell securities short, and how ETF shareholders differ from the fund itself
• What affiliated transactions are prohibited and why officers, directors, and 5%+ shareholders cannot buy from or sell to the fund even at a fair price
• The 300% asset coverage requirement for open-end fund bank borrowing and closed-end fund debt, versus the 200% coverage for closed-end preferred stock
• Why closed-end funds cannot sell shares below net asset value (NAV) without shareholder approval, and how dilution harms existing shareholders
• What the forward-pricing requirement means for distribution and redemption of mutual fund shares at the current offering price in the prospectus
• Why paying dividends from return of capital is not banned but requires written disclosure to shareholders, preventing disguised capital distributions
• How the SEC Names Rule applies the 80% investment requirement and the 75-5-10 test for funds using "diversified" in their names
• Why breach of fiduciary duty and larceny or embezzlement carry different consequences, with theft from a registered investment company being a criminal offense