Laws and Rules
June 20, 2018
The Rulemaking Office reviews and considers whether the Commission should propose, adopt, or amend rules and forms under the Investment Company Act, the Investment Advisers Act, and other federal securities laws that affect the asset management industry. The Rulemaking Office also makes recommendations to the Commission on rulemaking initiatives as appropriate, and provides technical assistance on the interpretation and application of recent rulemakings. In consultation with staff across the Division, the Rulemaking Office also prepares Congressional testimony and reviews and assists in drafting proposed legislation and responding to Congressional inquiries.
Investment Company Act of 1940
This Act regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public. The regulation is designed to minimize conflicts of interest that arise in these complex operations. The Act requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis. The focus of this Act is on disclosure to the investing public of information about the fund and its investment objectives, as well as on investment company structure and operations. It is important to remember that the Act does not permit the SEC to directly supervise the investment decisions or activities of these companies or judge the merits of their investments.
Investment Advisers Act of 1940
This law regulates investment advisers. With certain exceptions, this Act requires that firms or sole practitioners compensated for advising others about securities investments must register with the SEC and conform to regulations designed to protect investors. Since the Act was amended in 1996 and 2010, generally only advisers who have at least $100 million of assets under management or advise a registered investment company must register with the Commission. Other investment advisers typically register with the state in which the investment adviser maintains its principal place of business.