Section 3(c)(1) Funds

Section 3(c)(1) refers to the section of the Investment Company Act of 1940 that provides an exemption to registration under the Act. Specifically, Section 3(c)(1) exempts “[a]ny issuer whose outstanding securities (other than short-term paper) are beneficially owned by not more than one hundred persons and which is not making and does not presently propose to make a public offering of its securities…” Hedge Funds that meet terms of 3(c)(1) – meaning the fund has 250 or less investors and no plans for an initial public offering, need to register as an “Investment Company” under the Act.

Section 3(c)(1) does require, however, that each of the 250 or fewer investors be “accredited investors.”
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