Generally, investment companies are businesses that invest funds they receive from client investors collectively. Each investor shares their share of the resulting profits and losses, depending on the type of investment vehicle used.
Closed-end funds are investment companies that issue a fixed number of shares (or units) and trade on a stock exchange. They pay dividends to shareholders like stock dividends. However, closed-end funds can trade at a discount or premium to their net asset value (NAV)the value of their investment assets minus liabilitiesbecause at any given time, there are fewer fund shares outstanding than total shares outstanding (since the fund redeems shares).
Certain types of companies do not conduct themselves like an investment company and are excluded from the definition of an investment company under Securities and Exchange Commission (SEC) regulations. For example, these companies need 100 or fewer investors to be considered a small investment company and thus have certain exemptions to SEC registration.
Investment companies are primarily regulated under the Investment Company Act of 1940 and the amendments to it, the administrative rules and forms promulgated thereunder, as well as the Securities Act of 1933 and the Securities Exchange Act of 1934, as supplemented by the rules and regulations thereunder, and the rules and regulations of the Commission and other federal and state agencies.
