Collective Investment Funds

Federal Securities Laws

A national bank is authorized to administer a CIF and is not required to register the fund under the federal securities laws if the fund qualifies for specific exemptions to the Securities Act of 1933 (the ’33 Act) and the exclusions provided in the Investment Company Act of 1940 (the ’40 Act). A CIF is fundamentally different from a registered investment company because only eligible assets may be admitted in a CIF. By contrast, funds from any source may be invested in an investment company. See appendix Cfor a more detailed discussion of the ’40 Act and its potential impact upon banks offering CIFs.

OCC Banking Circular 247 (September 12, 1990) reminds national banks of the general applicability of the federal securities laws to A1 funds. Banking Circular 247 highlights the longstanding SEC requirement that an A1 fund will only qualify for the statutory exemptions from the ’33 Act and the ’40 Act if each of the underlying trust relationships is created for “a bona fide fiduciary purpose” rather than as “vehicles for general investment by the public.” Congress clarified the ’40 Act’s exemption requirements for A1 funds in the Gramm-Leach-Bliley Act of 1999 (GLBA). See appendix D for a discussion of special purpose IRA and Keogh CIFs.

Previous: Federal Tax Laws Next: ERISA