Investment Company Act of 1940
Terms in this set (11)
A corporation may open an account to trade on margin if provided for in the charter and authorized in the bylaws.
Both UTMA and UGMA specifically prohibit custodians from either engaging in speculative trading or borrowing money or securities in the name of the minor through trading on margin.
Mutual funds are also prohibited from trading on margin.
Which of the following persons may legally open an account to trade on margin?
A) A minor child with approval of a court-appointed guardian.
B) An open-end investment company.
C) A corporation.
D) A custodian of an UTMA account.
According to the Investment Company Act of 1940, all of the following statements are true
1) an investment company must have more than $100,000 capitalization to be offered to the public.
2) shareholders (outstanding shares) have the right to vote on a company's change from a closed-end to an open-end investment company.
3)At least 40% of the board of directors must be noninterested persons. No more than 60% may be interested persons of the investment company
4) open-end investment companies must redeem securities within seven days after their tender
Fee recieved by mgmt company
Usually, the fee received by the management company, from an investment company, depends on the
average annual net assets of the fund
The antifraud provisions of the Investment Advisers Act of 1940
The antifraud provisions of the Investment Advisers Act of 1940 apply to all conduct that concerns the integrity of the client relationship from an advisory standpoint.
As far as actual securities transactions, those are covered under the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Under the Investment Company Act of 1940, the reporting requirements investment companies must comply with include
Investment companies must file audited reports with the SEC annually and send at least semiannual reports to shareholders. They are not required to notify shareholders of changes in the portfolio as they occur.
Affiliated persons include:
-investment company directors, officers, employees,
-or owners of 5% or more of the voting stock
-and/or any persons controlling or controlled by such persons.
This does not include secretarial or administrative personnel. Thus, the office secretary is not considered an affiliated person.
The Investment Company Act of 1940 requires
Prescribes procedures for the establishment of investment companies.
The Investment Company Act of 1940 requires all investment companies to register with the SEC as such and be regulated under the act.
The companies are still subject to all the other applicable securities acts. However, the Investment Company Act of 1940 provides additional regulation to ensure investors are fully informed and fairly treated by the management of investment companies.
Registered investment companies are similar to other publicly registered entities in that an annual audited report must be filed with the SEC.
How often must an investment company file reports with the SEC as required by the Investment Company Act of 1940?
Retaining the services of an Investment Adviser
Under the Investment Company Act of 1940, an investment company may initially retain the services of an investment adviser only with approval of:
The majority vote of the outstanding shares and the board of directors.
What are the 3 classifications used to identify investment companies?
There are 3 classes of investment companies listed in the Investment Company Act of 1940:
- Face-amount certificate companies, which issue debt certificates;
-Unit investment trusts, which issue trust units that provide the holder with a share of ownership in a fixed portfolio of securities; and
-Management companies, which trade the securities in the investment portfolio to achieve the investment objectives of the company, and which are subclassified into open-end and closed-end companies.
The purpose of the Investment Advisers Act of 1940 is to provide
standards at the federal level for the regulation of investment advisers
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