Why Do Investment Funds Have Special Securities Regulation?

A version of this article appears in RESEARCH HANDBOOK OF MUTUAL FUNDS (William Birdthistle & John Morley eds. 2018)

Yale Law & Economics Research Paper

16 Pages Posted: 20 May 2019

Date Written: April 20, 2019

Abstract

For almost every type of company, the United States has just one body of securities regulation. Pet stores, hospitals, for-profit universities, and iron mines all have to comply with the same securities laws in basically the same way. There is, however, one important exception: investment funds. Mutual funds, closed-end funds, exchange-traded funds, hedge funds, private equity funds, and venture capital funds have their own special body of securities regulation that applies in place of or in addition to the regular securities laws that apply to other types of companies. Why? This 7,000-word essay, prepared for publication in the Research Handbook of Mutual funds, contemplates a number of possible answers and concludes that the most distinctive and legally salient feature of an investment fund is its structure. Investment funds divide their assets from their managements in much more radical ways than other types of companies. The surprising implication is that for purposes of regulation, an investment fund’s investments are much less important than its pattern of organization.

Suggested Citation

Morley, John D., Why Do Investment Funds Have Special Securities Regulation? (April 20, 2019). A version of this article appears in RESEARCH HANDBOOK OF MUTUAL FUNDS (William Birdthistle & John Morley eds. 2018); Yale Law & Economics Research Paper. Available at SSRN: https://ssrn.com/abstract=3375450 or http://dx.doi.org/10.2139/ssrn.3375450

John D. Morley (Contact Author)

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
(203) 436-3527 (Phone)

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