Investment company act custody

Conforming Amendments III. Need for and Objectives of the Rule and Rule Amendments Rule 17f-5 governs the custody of the assets of registered management investment companies «funds» with custodians outside the United States. Each of the commenters wrote an initial letter, and an additional letter discussing points raised by the other commenters. See rule 17f-7 a 1 i. Three commenters responded to our request.

SECURITIES AND EXCHANGE COMMISSION

The rule and rule amendments establish new standards governing the maintenance of iinvestment investment company’s assets with a foreign securities depository. These standards are designed to provide a framework under which an investment company can protect its assets while maintaining them with a foreign securities depository. Compliance Date : July 2, Section III of this release contains more information on transition prior to the compliance date. Exercise of Care B.

17 CFR Part 270

Summary: The Commission is adopting amendments to the rule under the Investment Company Act of that governs investment companies’ use of securities depositories. The amendments expand the types of investment companies that may maintain assets with a depository, and update the conditions they must follow to use a depository. The amendments respond to developments in securities depository practices and commercial law since the rule was adopted. Effective Dates: The amendments are effective on March 28, The incorporation by reference of certain definitions listed in the rule is approved by the Director of the Federal Register as of March 28, Lutz, Attorney, or C.

Securities and Exchange Commission

The Investment Company Act of is an act of Congress. Along with the Securities Exchange Act of and Investment Advisers Act ofand extensive rules issued by the Securities and Exchange Commissionit forms the backbone of United States financial regulation. It has been updated by the Dodd-Frank Act of Often referenced as the Investment Company Act, the Act or simply the xompany Act, it is the primary source of regulation for mutual funds and closed-end funds, an investment industry now in the many trillions of dollars.

Following the founding of the mutual fund ininvestors welcomed the innovation with open arms and invested in this new investment vehicle heavily. Five and a half years later, the Wall Street Crash of occurred in the stock marketfollowed shortly thereafter by the United States entry into the Great Depression.

In response to this crisis, the United States Congress wrote into law the Securities Act of and the Securities Exchange Act of in order to regulate the securities industry in the interest of the public. Investment companies were still in their infancy in In order to instill wct confidence in these companies and to protect the public interest from this new type of securityCongress passed the Investment Company Act.

The new law set separate standards by which investment companies should be regulated. The act defined and regulated investment companies, including mutual funds which were virtually undefined prior to The act’s purpose, as stated in the bill, is «to mitigate and It seeks to protect the public primarily by legally requiring disclosure of material details about each investment company.

The act also places some restrictions on certain mutual fund activities such as short investmnt shares. However, the act did not create provisions cstody the U. Securities and Exchange Commission SEC to make specific judgments about or even supervise [ clarification needed ] an investment company’s actual investment decisions. The act requires investment companies to publicly disclose information about their own financial health. The Investment Company Act applies to all investment companies, but exempts several types of investment companies from the act’s coverage.

The most common exemptions are found in Sections 3 c 1 and 3 c 7 of the act and include hedge funds. When Congress wrote the act into federal lawrather than leaving the matter up to the individual states, it justified its action by including in the custodyy of the bill investment company act custody rationale for enacting the law:.

The activities of such companies, extending over investment company act custody states, their use of the instrumentalities of interstate commerce and the wide geographic distribution of their security holders, make difficult, if not impossible, effective state regulation of such companies in the interest of investors. From Wikipedia, the free encyclopedia.

Findings and Declaration of Policy. General Definitions. Definition of Investment Company. Classification of Investment Companies. Subclassification of Management Companies. Transactions by Unregistered Investment Companies. Registration of Investment Companies. Ineligibility of Certain Affiliated Persons and Underwriters. Affiliations of Directors. Offers of Exchange. Functions and Activities of Investment Companies. Changes in Investment Policy. Size of Investment Companies.

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Securities and Exchange Commission

In Novemberwe proposed amendments to rule 17f-4 to reflect these significant developments. As further discussed above, the impact of the amendments is likely to be limited, because burdens under the new rule will be offset in part by reduced burdens by amended rule 17f Funds that do not maintain assets in foreign custody arrangements are not required to rely on the rules. As we explained in the Proposing Release, U. See id. Thus, the individual investor’s interest or «security entitlement» appears only on the books of the intermediary with which the investor maintains an account. Updates the rule to reflect current custody practices and commercial law. The staff estimates that during at least the first year after rule 17f-7 goes into effect, approximately investment advisers 46 may make an average of 3 responses per adviser investment company act custody the new rule, requiring a total of approximately 25 hours for each adviser. Each of the commenters wrote an initial letter, and an additional letter discussing points raised by the other investment company act custody. They argued that further regulation would increase the burden on these domestic depositories without enhancing the protection of fund assets. Rule 17f-7 requires that a fund’s primary custodian 20 furnish the fund or its investment adviser an analysis of the custody risks of using an eligible securities depository before the fund places its assets with the depository. Fund managers may have more information regarding custodial risks because of the new rule and amendments, and this may affect their decisions regarding where to invest a fund’s assets, or in some cases, when to remove a fund’s assets from a country.