An inadvertent legal minefield: market procedures and other concerns for non-US issuers relying on Section 3(c)(7) of the US Investment Company Act of 1940 | Practical Law

An inadvertent legal minefield: market procedures and other concerns for non-US issuers relying on Section 3(c)(7) of the US Investment Company Act of 1940 | Practical Law

The US Investment Company Act of 1940 (ICA) has long posed a problem to some non-US companies looking to raise capital in the US or that have US security holders. The ICA can be problematic not just for classic investment funds, but also operating companies ( "inadvertent investment companies") caught by the broad definition of "investment company" under the ICA.

An inadvertent legal minefield: market procedures and other concerns for non-US issuers relying on Section 3(c)(7) of the US Investment Company Act of 1940

by Jonathan Baird, Freshfields and Eric Stuart, Jones Day
Published on 28 Mar 2013 • USA (National/Federal)
The US Investment Company Act of 1940 (ICA) has long posed a problem to some non-US companies looking to raise capital in the US or that have US security holders. The ICA can be problematic not just for classic investment funds, but also operating companies ( "inadvertent investment companies") caught by the broad definition of "investment company" under the ICA.
Non-US issuers have most commonly relied on the Section 3(c)(7) exception from the registration requirements of the ICA. This article discusses the market procedures that have developed for Section 3(c)(7) compliance for non-US listed issuers of equity. It also discusses other concerns that may arise for non-US issuers relying on Section 3(c)(7) under changes brought by the US Dodd-Frank Act of 2010 and the US Jumpstart Our Business Startups Act of 2012 (JOBS Act).