Investment Companies, 2019

Chapter 2 Investment Accounts

Gray shaded text in this chapter reflects guidance issued but not yet effective as of the date of this guide, July 1, 2019, but becoming effective on or prior to December 31, 2019, exclusive of any option to early adopt ahead of the mandatory effective date. Unless otherwise indicated, all unshaded text reflects guidance that was already effective as of the date of this guide.

2.01 As stated by FASB Accounting Standards Codification (ASC) 946-320-05-2, an investment company’s securities portfolio typically comprises substantially all its net assets. Portfolio securities produce income from dividends and interest, and changes in fair values of securities while they are owned by the fund.

Investment Objectives and Policies

2.02 The composition of an investment company’s portfolio is primarily a function of the company’s investment objectives and strategies to achieve them. An investment company discloses the investment objectives adopted by its management and the strategies adopted to achieve them in its charter or partnership agreement and documents such as registration statements, prospectuses, or offering circulars. Restrictions, statutory or otherwise, are also disclosed. Those restrictions may include specific limitations or outright prohibitions of transactions, for example in real estate, commodities or commodity contracts, and properties other than securities. Other restrictions may include limitations on investing in unregistered securities; ...