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    Financial Services - Regulations of Mutual Funds

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    Alwin Mathai
    Mutual funds are regulated by several key acts and laws: 1) The Securities Act of 1933 requires mutual funds to register with the SEC and provide a prospectus disclosing essential facts. 2) The Securities Exchange Act of 1934 requires mutual funds to regularly report to investors and created the SEC to regulate mutual funds. 3) The Revenue Act of 1936 established guidelines for taxing mutual funds, allowing them to pass income through to investors. 4) The Investment Company Act of 1940 and Investment Advisers Act of 1940 further govern mutual fund structure, operations, and investment advisers.

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    Financial Services - Regulations of Mutual Funds

    Uploaded by

    Alwin Mathai
    24 views3 pages
    Mutual funds are regulated by several key acts and laws: 1) The Securities Act of 1933 requires mutual funds to register with the SEC and provide a prospectus disclosing essential facts. 2) The Securities Exchange Act of 1934 requires mutual funds to regularly report to investors and created the SEC to regulate mutual funds. 3) The Revenue Act of 1936 established guidelines for taxing mutual funds, allowing them to pass income through to investors. 4) The Investment Company Act of 1940 and Investment Advisers Act of 1940 further govern mutual fund structure, operations, and investment advisers.

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    Mutual funds are regulated by several key acts and laws: 1) The Securities Act of 1933 requires mutual funds to register with the SEC and provide a prospectus disclosing essential facts. 2) The Securities Exchange Act of 1934 requires mutual funds to regularly report to investors and created the SEC to regulate mutual funds. 3) The Revenue Act of 1936 established guidelines for taxing mutual funds, allowing them to pass income through to investors. 4) The Investment Company Act of 1940 and Investment Advisers Act of 1940 further govern mutual fund structure, operations, and investment advisers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    24 views3 pages

    Financial Services - Regulations of Mutual Funds

    Uploaded by

    Alwin Mathai
    Mutual funds are regulated by several key acts and laws: 1) The Securities Act of 1933 requires mutual funds to register with the SEC and provide a prospectus disclosing essential facts. 2) The Securities Exchange Act of 1934 requires mutual funds to regularly report to investors and created the SEC to regulate mutual funds. 3) The Revenue Act of 1936 established guidelines for taxing mutual funds, allowing them to pass income through to investors. 4) The Investment Company Act of 1940 and Investment Advisers Act of 1940 further govern mutual fund structure, operations, and investment advisers.

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    © All Rights Reserved
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    REGULATIONS OF MUTUAL FUNDS

    PRANAV PRASAD
    MBA II – B
    Reg. No : 18MBA112
    Regulations of Mutual fund

    A mutual fund is a professionally managed investment fund that pools money from
    many investors to purchase securities. These investors may be retail or institutional in nature.

    Mutual funds have advantages and disadvantages compared to direct investing in


    individual securities. The primary advantages of mutual funds are that they provide economies
    of scale, a higher level of diversification, they provide liquidity, and they are managed by
    professional investors. On the negative side, investors in a mutual fund must pay various fees
    and expenses.

     The Securities Act of 1933 requires that all investments sold to the public, including mutual
    funds, be registered with the SEC and that they provide potential investors with
    a prospectus that discloses essential facts about the investment.

     The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual
    funds, report regularly to their investors; this act also created the Securities and Exchange
    Commission, which is the principal regulator of mutual funds.

     The Revenue Act of 1936 established guidelines for the taxation of mutual funds. Mutual funds
    are not taxed on their income and profits if they comply with certain requirements under the
    U.S. Internal Revenue Code; instead, the taxable income is passed through to the investors in
    the fund. Funds are required by the IRS to diversify their investments, limit ownership of voting
    securities, distribute most of their income (dividends, interest, and capital gains net of losses)
    to their investors annually, and earn most of the income by investing in securities and
    currencies. The characterization of a fund's income is unchanged when it is paid to
    shareholders. For example, when a mutual fund distributes dividend income to its shareholders,
    fund investors will report the distribution as dividend income on their tax return. As a result,
    mutual funds are often called "pass-through" vehicles, because they simply pass on income and
    related tax liabilities to their investors.
     The Investment Company Act of 1940 establishes rules specifically governing mutual funds.
    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.
     The Investment Advisers Act of 1940 establishes rules governing the 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.
     The National Securities Markets Improvement Act of 1996 gave rulemaking authority to the
    federal government, preempting state regulators. However, states continue to have authority to
    investigate and prosecute fraud involving mutual funds.

    Open-end and closed-end funds are overseen by a board of directors, if organized as a


    corporation, or by a board of trustees, if organized as a trust. The Board must ensure that the
    fund is managed in the interests of the fund's investors. The board hires the fund manager and
    other service providers to the fund.
    The sponsor or fund management company, often referred to as the fund
    manager, trades (buys and sells) the fund's investments in accordance with the fund's
    investment objective. Funds that are managed by the same company under the same brand are
    known as a fund family or fund complex. A fund manager must be a registered investment
    adviser.

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