Corporate Practice Series Portfolio No. 65-2nd, Avoiding Classification as an Investment Company: Exemptions and Exclusions for Business Corporations, examines the Investment Company Act of 1940, which is intended to regulate entities that pool money contributed by the public for the purpose of investing in securities, with a view to avoiding regulation of business corporations by the Act. Emphasis is placed on avoiding classification as an investment company and includes discussions of balance sheet analysis, statutory exclusions, regulatory exemptions, and legal opinions as to the status of business corporations as investment companies.

Portfolio 65-2nd: Avoiding Classification as an Investment Company: Exemptions and Exclusions for Business Corporations

I. Background 
    A. The Scope of the Act 
    B. Definitions of an Investment Company Relevant to Business Corporations

II. Balance Sheet Analysis 
    A. Balance Sheet Analysis Under §3(a)(1)(A) 
    B. Balance Sheet Analysis Under §3(a)(1)(C)

III. Exemptions and Exclusions 
    . Introductory Material 
    A. Statutory Exclusions 
        1. Holding companies and other non-investment companies 
        2. Exclusion for the subsidiaries of operating companies 
        3. Private investment companies 
        4. Factoring, lending, and real estate companies 
        5. Oil, gas, and mineral companies 
    B. Regulatory Exemptions 
        1. Prima facie investment companies and investment company subsidiaries 
        2. Transient investment companies 
        3. Finance subsidiaries 
        4. Research and development companies 
    C. Companies That the SEC Determines Are Not Investment Companies Through Exemptive Application 
        1. Applications pursuant to §3(b)(2) 
        2. Applications pursuant to §6(c) 
        3. The exemptive application procedure

IV. Giving Opinions as to the Status of Business Corporations as Investment Companies

V. Valuation Issues 
    A. Valuation of Assets 
    B. Consolidation versus Non-Consolidation 
    C. Characterization of Subsidiaries as Investment Securities

Portfolio 65-2nd: Avoiding Classification as an Investment Company: Exemptions and Exclusions for Business Corporations

Wks. 1 Investment Company Act of 1940

Wks. 2 Selected Rules and Regulations, Investment Company Act of 1940

Wks. 3 Form of Opinion

Wks. 4 Form of Reasoned Opinion

Wks. 5 Investment Company Act Release No. 19,566, “Certain Research and Development Companies” (July 9, 1993) (Proposed Rule)

Wks. 6 Investment Company Act Release No. 25,835, “Certain Research and Development Companies” (Nov. 26, 2002) (Proposed Rule)

Wks. 7 Investment Company Act Release No. 26,077, “Certain Research and Development Companies” (June 16, 2003) (Final Rule)

Wks. 8 Investment Company Act Release No. 14,492, “Commission Policy and Guidelines for Filing of Applications for Exemptions from Some or All of the Provisions of the Investment Company Act of 1940 and the Investment Advisers Act of 1940” (Apr. 30, 1985) (Statement of Position)

Wks. 9 Investment Company Act Release No. 10,943, “Transient Investment Companies” (Nov. 16, 1979) (Proposed Rule)

Wks. 10 Investment Company Act Release No. 11,552, “Transient Investment Companies” (Jan. 14, 1981) (Final Rule)

Wks. 11 Investment Company Act Release No. 10,937, “Certain Prima Facie Investment Companies” (Nov. 13, 1979) (Proposed Rule)

Wks. 12 Investment Company Act Release No. 11,551, “Certain Prima Facie Investment Companies” (Jan. 14, 1981) (Final Rule)

Wks. 13 Investment Company Act Release No. 24,459, “Yahoo! Inc.” (May 18, 2000) (Notice)

Wks. 14 SEC No-Action Letter Response to Willkie Farr & Gallagher (Publicly Available Oct. 23, 2000)

Wks. 15 Evaluating the Status of a Parent Company as an Investment Company with Multiple Tiers of Subsidiaries Under §3(a)(1)(C)

Wks. 16 Securities and Exchange Commission v. National Presto Industries, Inc. 486 F.3d 305 (7th Cir. 2007)

Margaret A. Bancroft
Dechert LLP
New York, New York