What is the 40 Act (Investment Company Act of 1940)?

Definition: The Investment Company Act of 1940, commonly referred to as the "40 Act," is a federal law that regulates investment companies, including mutual funds, closed-end funds, interval funds, and exchange-traded funds, setting standards for their structure, operations, and investor protections.

The 40 Act is particularly relevant to investors in private market funds because it governs two structures increasingly used to provide access to alternative investments: interval funds and tender offer funds. Unlike traditional private equity or hedge funds, which are generally exempt from 40 Act registration and limited to accredited or institutional investors, 40 Act registered funds can be offered to non-accredited investors.

The 40 Act also provides investor protections not typically found in private funds, including independent board oversight, restrictions on leverage and affiliated transactions, and regular financial reporting. These protections make 40 Act funds a more accessible and transparent vehicle for everyday investors.

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