Finance: What is the Investment Company Act of 1940?

The Investment Company Act of 1940 regulated and ensured fair dealings in the mutual fund industry.

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Transcript

00:29

or form but rather to create a trustworthy and level playing field such

00:35

that all players in the investment world educated and none would at least have the [Football player investors appear]

00:40

opportunity to get a fair deal in one type of investment or another

00:45

well the acts of 1933 think IPOs and 1934 secondary trading set in motion the

00:53

build and infrastructure of the SEC which regulated more or less everything

00:58

in this financial world stocks bonds and other hybrids but then along came this [M.F Industry man walking along the street]

01:03

new whiz-bang investment growth engine in the 1930s called the mutual fund

01:08

industry which was in part a reaction to the many unschooled farmer retail

01:14

investors having lost all their money in the crash well the notion was that for a

01:19

relatively small fee they would hire educated college boys to do their [College boy studying]

01:24

investing for them so there was born the mutual fund industry and about five

01:31

minutes later was born the corruption in the mutual fund industry unclear fee [Mutual fund industry and mutual fund corruption babies appear]

01:36

structures, ambiguous commission rates, unfair disclosures for things like when

01:42

and how much money could be withdrawn from the funds weird trading spreads and

01:48

commissions being given out with no real thought as to what was fair, fair to the

01:53

investors and so on all kinds of bad dealings so along came the 1940 act

01:58

which then essentially regulated fair and square dealings in the mutual fund

02:02

biz so that the whole experience of not necessarily sophisticated investors [Man throws stack of money at market]

02:07

profiting from the stock market was mutually fun for more or less

02:12

everyone who dove in so yeah in a nutshell that's the major financial

02:17

legislation of the 30s and 40s in three acts Shakespeare couldn't have done it

02:21

better and hopefully your investing is not a tragedy [Shakespear appears]