The Investment Company Act has been the curse of mutual funds since it was first passed in 1940 (the "'40 Act"). If you're old enough to remember the Roaring Twenties, then you're old enough to remember the proliferation of unregulated investment pools that precipitated the market crash of 1929.Many unsuspecting folks lost their entire nest eggs in these pools and their lives suffered for it.
As a result, the sale of investment pools were severely restricted. It wasn't until Glass-Steagall allowed banks to commingle funds of trusts through the Banking Act of 1933 that investment pools returned. Their full scale return to public investors didn't occur until the passage of '40 Act.
There was a major difference between the two acts that redound to today. There's much less regulatory overhead in a trust company's "common trust fund" versus an investment company's "mutual fund." The reason for this difference speaks volumes regarding the current issue of the fiduciary standard.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
