Question

True or False: The Investment Company Act of 1940 sets a maximum charge on mutual fund purchases, requires a minimum investment of $100,000, and mandates that 60% of the Board of Directors must be non-interested.

A) True.
B) False.

Answer 1

The statement regarding the Investment Company Act of 1940 is false, as it does not set a maximum purchase charge or a required minimum investment for mutual funds but does require the majority of the Board of Directors to be independent.

Step-by-step explanation:

The statement regarding the Investment Company Act of 1940 is False. The Act does not set a maximum charge on mutual fund purchases nor does it require a minimum investment of $100,000. However, it does mandate that 60% of the Board of Directors of a mutual fund must be composed of non-interested persons, which means they must be independent from the fund's management to prevent conflicts of interest.

Mutual funds are investment vehicles that allow financial investors to buy shares and receive returns based on the collective performance of a diversified portfolio of stocks or bonds. The popularity and utility of mutual funds have grown significantly, with more than 47% of U.S. households having an investment in mutual funds by 2021, including for retirement savings and pension plans.

Answer 2

The given statement, "The Investment Company Act of 1940 sets a maximum charge on mutual fund purchases, requires a minimum investment of $100,000, and mandates that 60% of the Board of Directors must be non-interested," is False (B) because the Investment Company Act of 1940 does not set a maximum charge on mutual fund purchases, does not require a minimum investment of $100,000, and does not mandate a specific percentage for non-interested directors on the board.

Step-by-step explanation:

The Investment Company Act of 1940 doesn't set a maximum charge on mutual fund purchases nor requires a minimum investment of $100,000; it aims to regulate and protect investors by imposing various provisions, including a requirement for 40% of the Board of Directors to be non-interested, ensuring independence in decision-making and oversight.

This Act primarily focuses on governing and supervising the activities of investment companies, safeguarding investor interests, and promoting transparency and fairness within the financial markets. While it establishes regulations regarding the structure and operations of investment companies, it doesn't specifically impose a maximum charge on mutual fund purchases or demand a specific minimum investment amount.

The correct answer is B) False.