SEC Announces Safe Harbor Ruling
Find out how to avoid becoming an inadvertent investment company.

The Securities and Exchange Commission (SEC) has adopted new rules and regulations pursuant to the Investment Company Act of 1940, which took effect August 1, 2005. Specifically, they clarified provisions that may lead to a corporation becoming an inadvertent investment company and provided safe harbor from this circumstance. These revisions are good news for corporations that, under the previous and more ambiguous language, may have unwittingly been forced to comply with the arcane and burdensome provisions of the Act.

To avail itself of the new safe harbor provisions of the Act, a corporation must be engaged, directly or through a company or companies that it controls primarily in a non-investment business, as evidenced by its historical development; its public representations of policies; and the activities of its officers, directors and employees.

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Decision Analytics does not give legal or tax advice. The above commentary is only meant as an example and not characteristic of a specific corporations activity. Appropriate counsel should be sought for a specific interpretation of the Act.