Guidance on Valuation in the Money Market Fund Reform Release: A Trap for the Unwary Operating Company? 1

The Investment Company Act of 1940 is an unusual federal regulatory statute in many respects, one of which is that it can apply to an operating company and not just an investment company. An operating company is primarily engaged in a business other than investing, reinvesting, owning, holding, or t...

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Bibliographic Details
Published inThe Investment Lawyer Vol. 22; no. 10; p. 1
Main Authors Lybecker, Martin E, Chambers, Matthew A
Format Trade Publication Article
LanguageEnglish
Published Englewood Cliffs Aspen Publishers, Inc 01.10.2015
Subjects
Boards of directors
District courts
Fair value
Federal court decisions
Government securities
Investments
Money market mutual funds
Money markets
Operating companies
Regulation
Special counsels
Valuation
United States > US
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Summary:The Investment Company Act of 1940 is an unusual federal regulatory statute in many respects, one of which is that it can apply to an operating company and not just an investment company. An operating company is primarily engaged in a business other than investing, reinvesting, owning, holding, or trading securities, and it is not a company that intends to engage in the business of investing, reinvesting, owning, holding, or trading securities. In determining whether the issuer is able to make that representation, the corporate lawyer must look principally to two sections of the Investment Company Act: Section 3(a), which includes the several definitions of investment company; and Section 2(a)(41)(A), which defines the term value for purposes of Sections 3 of the Investment Company Act. Considered narrowly in the context of operating companies that are fair valuing their Nonmarketable Securities and Assets on a quarterly basis, the law that applies to operating companies consists of Sections 3 and 2(a)(41)(A) and the two principal judicial opinions regarding fair valuation by operating companies.
ISSN:1075-4512