The ICA: Keeping Companies Honest

by David Jenyns on October 3, 2008

The Investment Company Act oversees selling practices and requires investment companies to file registration statements and transmit reports containing prescribed information to their security holders.


The Commission’s investigation disclosed numerous abuses in selling practices, particularly by open-end companies, periodic-payment plans, and face-amount guarantee companies. To provide more adequate information, sales literature issued by face-amount guarantee companies, open-end companies, and unit investment trusts (which would include most periodic-payment plans) must be filed with the Commission within ten days after use. “Switching” of open-end investment company securities and those of unit investment trusts and of face-amount guarantee companies on a basis permitting reloading is prohibited in the absence of an order or ruling by the Commission. With certain exceptions, the Investment Company Act prohibits an affiliated person, promoter, or principal underwriter to sell to, or buy or borrow property from, the investment company or any other company it controls.

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