U.S. Securities Law as a Barrier to Entry for Foreign Funds
UC Davis Business Law Journal
Very few foreign mutual funds operate in the U.S. public market, largely because of Section 7(d) of the Investment Company Act of 1940. Effectively, a foreign fund is required to restructure itself as an American investment company to comply with the 1940 Act. The need for globalization and global competition point to why it is necessary to include foreign mutual funds in the U.S. stock market. This article traces the history of attempts to overcome the hurdles posed by the 1940 Act and sheds light on why they have fallen short. It proposes several amendments to Section 7(d) that will remedy these problems. This article contends that warnings against changing this law have overlooked critical factors that would not only protect Americans but bring the United States into sync with global ways of doing business. It concludes by recommending a roadmap for Congress and regulators to adopt to lighten the burden of foreign funds under the 1940 Act whilst maintaining investor protection.
Morenike Saula, U.S. Securities Law as a Barrier to Entry for Foreign Funds, 23 U.C. Davis Bus. L.J. 205 (2023).