Also known as the 40 Act or the ICA. The Investment Company Act of 1940 regulates mutual funds and other companies that engage primarily in investing, reinvesting, and trading in securities, and whose own securities may be offered to the investing public (15 U.S.C. §§ 80a-1 to 64). The purpose of the ICA is to require disclosure to the investing public about the fund, its investment objectives, structure, and operations.

Section 13 of the ICA limits the ability of a registered investment company to borrow money or issue securities. Loans made in violation of the ICA are unenforceable. For this reason, bank loan agreements contain a representation that the borrower is not an investment company within the meaning of the ICA.

The underwriting agreement for an offering registered with the SEC and the purchase agreement for a private placement also typically include a representation that the issuer is not and will not be required to register as an investment company under the ICA.

For more information, see the following Practice Notes:

For a standard form of ICA representation for a purchase agreement for a Rule 144A/Regulation S offering, see Standard Clauses, Standard Rule 144A Representations and Covenants for Purchase Agreement.