Question 1

What is the Investment Company Act of 1940?

Accepted Answer

defines and regulates investment companies.

Question 2

B). An investment company is a company that:

Accepted Answer

1). Issues its own shares to the public, and 2). Manages a portfolio of other securities for the benefit of its clients

Question 3

Are separate accounts included in the definition of an Investment Company?

Accepted Answer

Yes.

Question 4

Are real estate investment trusts (REITs) included in the definition of an Investment Company?

Accepted Answer

No.

Question 5

Are Broker-Dealers included in the definition of an Investment Company?

Accepted Answer

No.

Question 6

Are fixed insurance companies included in the definition of an Investment Company?

Accepted Answer

No.

Question 7

Are pooled investments in precious metals included in the definition of an Investment Company?

Accepted Answer

No.

Question 8

What is generally contained in the portfolio of an investment company?

Accepted Answer

Securities.

Question 9

What are the 3 types of investment companies?

Accepted Answer

Face Amount Certificates (rare), Unit Investment Trusts (investment co.'s w/fixed portfolios of bonds and no portfolio manager), and Management Companies (open-end or closed-end).

Question 10

What price are mutual fund shares redeemed?

Accepted Answer

At the current net asset value.

Question 11

When is the net asset value calculated?

Accepted Answer

Daily.

Question 12

How does the net asset value compare to the price paid for the mutual fund share?

Accepted Answer

could be the same, higher, or lower than the price paid.

Question 13

What if an investment company's shares are selling at a discount to the net asset value (NAV)?

Accepted Answer

You automatically know it's a Closed-End Fund -- because they are traded at a discount in the secondary market. And a mutual fund (open-end) only issues redeemable shares that are offered at POP (NAV + SC) and redeemed at NAV.

Question 14

Investment Company Requirements -- Does the IC Act of 1940 require an investment company to obtain MAJORITY shareholder approval for any deviation from the fund's investment objective or policy?

Accepted Answer

Yes. D). The ’40 Act requires an investment company: 1). To obtain MAJORITY shareholder approval for: a). Any deviation from the fund's investment objective/policy.

Question 15

Investment Company Requirements -- Does the IC Act of 1940 require an investment company to obtain MAJORITY shareholder approval for using fund assets to pay for the cost of distributing fund shares, such as 12b-1 fees?

Accepted Answer

D). The ’40 Act requires an investment company: 1). To obtain MAJORITY shareholder approval for: b). Using fund assets to pay for the cost of distributing fund shares (e.g. — 12b-1 fees).

Question 16

Investment Company Requirements -- Does the IC Act of 1940 require an investment company to obtain MAJORITY shareholder approval for compensation agreements between the fund and the IA?

Accepted Answer

Yes.

Question 17

Investment Company Requirements -- Are compensation agreements between the fund and the IA required to be in writing?

Accepted Answer

Yes.

Question 18

Investment Company Requirements -- Can a compensation agreement between the fund and the IA continue for more than 2 years without MAJORITY shareholder approval?

Accepted Answer

No.

Question 19

Investment Company Requirements -- Can the IA's contract be renewed without majority shareholder approval?

Accepted Answer

No, shareholder approval is required for the renewal of the IA's contract.

Question 20

Investment Company Requirements -- Can the IA's contract be renewed without approval of the Board of Directors of the fund?

Accepted Answer

No, Board of Directors approval is required for the renewal of the IA's contract.

Question 21

Scope of Act -- Does the '40 Act require an investment company to get an exemption from the SEC for a merger between two investment companies?

Accepted Answer

Yes.

Question 22

Scope of Act -- Does the '40 Act require an investment company to get an exemption from the SEC for a purchase of assets from the fund's IA?

Accepted Answer

Yes.

Ch 06(11) Federal Acts | The Investment Company Act of 1940 Flashcards

Define the Investment Company Act of 1940.

Brainscape's Knowledge GenomeTM

Ch 06(11) Federal Acts | The Investment Company Act of 1940 Flashcards

Define the Investment Company Act of 1940.

Brainscape's Knowledge Genome^TM