First funds access the US

Author: | Published: 1 Dec 2007

Capital markets lawyers and bankers have been trained to require issuers offering securities in the US to represent that they are not investment companies under the US Investment Company Act of 1940. So how have non-US investment companies recently tapped the US market?

First a bit of background. In a nutshell, the Act applies to any entity that either holds itself out as engaging primarily in investing, reinvesting or trading in securities (the subjective test) or that fails certain numeric tests relating to the nature of its assets and income (the objective test).

If a company is deemed an investment company under either test, absent an exemption, it is required to register under the Act and face: restrictions on transactions with affiliates, time-consuming recordkeeping requirements, restrictions on the classes of securities which...