Mutual Funds are legal entities, often formed as a business trust or corporation. They must be registered with the appropriate regulatory authorities and, in some cases, are open to only certain types of investors. The mutual fund is set up as a corporation or a trust and, in most cases, uses one or a small number of individuals as the fund manager and advisor.
Mutual Funds are generally structured like a corporation through the Investment Company Act. This means that each fund comprises a board of directors, officers, and shareholders and each investment company has its unique legal existence.
The mutual fund industry is primarily responsible for preventing financial adviser abuse, and investors are usually only liable for their investment in the fund.
Mutual Funds, unlike hedge funds, do not have investment advisers (IA) on payrolls. As a result, IA's are not subject to the Investment Company Act but rather the Investment Advisers Act of 1940. The IAS must register with the state where they practice for compensation.
Funds with different structures and options exist in the marketplace. The most common types include mutual funds, money market funds, and exchange-traded funds (ETFs).
