Five and a half years later, the Wall Street crash of 1929 occurred in the stock market, followed shortly thereafter by the United States entry into the Great Depression.
[6] By 1992, the act had remained largely unchanged aside from amendments in 1970 to provide additional protections particularly around independent boards and limiting fees and expenses.
It seeks to protect the public primarily by legally requiring disclosure of material details about each investment company.
In October 2021, over 60 law firms issued an "extremely unusual joint statement" that special-purpose acquisition companies (SPACs) are subject to regulation under the Act when the SPAC does not acquire an operational business within one year of offering company shares to the public.
[7][8] When Congress wrote the act into federal law, rather than leaving the matter up to the individual states, it justified its action by including in the text of the bill its rationale for enacting the law: The activities of such companies, extending over many states, their use of the instrumentalities of interstate commerce and the wide geographic distribution of their security holders, make difficult, if not impossible, effective state regulation of such companies in the interest of investors.The act divides the types of investment company to be regulated into three classifications: Sections 1 – 5 define terms and classify investment companies.
[6] One of the original drafters, David Schenker (who became the head of the Investment Company Division at the SEC[5]), explained the provision in 1940 by pointing to the complexities of the industry.
[11] Various provisions restrict the powers of investment companies in corporate governance over management particularly in transactions with affiliates,[2] including section 10.