investment companies outline

ways investors can withdraw from mutual funds

• fixed dollar plan-a fixed dollar amount over a period
• fixed time plan-pays whole amoutn over period
• fixed shares plan-pays out same # of shares each payment
• fixed percentage plan-pays a fixed percentage of invested dollars each payment to investor
• specific withdrawal plan, income plan for retirees/individuals who need income

Investment Company Act of 1940

• unit investment trusts register
• exchange traded funds register
• closed end investment companies register
• open end investment companies register
• aim: protect shareholders
• advisors must follow specific laws/procedures in working with customer's money
• investment companies must have $100,000 of capital and 100 shareholders before selling shares to public
• investment co. must decide it goals, stick to its goals within portfolio
• goals can be changed only by majority vote of shares, voted by shareholders
• Board of Directors-no more than <60% can have ties to investment company
• no less>40% can be independent of the company
• no more than 60% of board can be officers, directors, employees, or owner of 5% or more of outstanding shares of voting stock or be control persons like underwriters and investment advisers
• board of directors must ok 12b-1 plans
• board of directors must review expenses
• board of directors must distribute dividends/capital gains to shareholders
• shareholders don't vote on distributions

investment adviser

• board of directors hires I.A.
• manage fund's portfolio
• contract for 2 years, renewable every year
• board of directors and shareholders must renew contract
• decide to buy, sell, hold cash
• follow federal securities and tax laws
• advantage: professional management of investment company portfolio
• fund's largest expense-manager's receive management fee for services
• not paid with sales charge
• must be registed with SEC

objectives

• growth of capital-making/increasing $
• current income-how much $ are we kicking off

custodian bank

• commercial bank
• keeps securities and cash safe
• can be a trust company
• can be an exchange member firm

The investment adviser for an investment company is compensated with which of the following?

• management fee
• fund's biggest expense
• service fee, for maintaining shareholder accounts
• sales charge, underwriters and broker/dealers receive