Background
Following the founding of the mutual fund in 1924, investors welcomed the innovation with open arms and invested in this new investment vehicle heavily. Five and a half years later, the Wall Street Crash of 1929 occurred in the stock market, followed shortly thereafter by the United States entry into the Great Depression. In response to this crisis, the United States Congress wrote into law the Securities Act of 1933 and the Securities Exchange Act of 1934 in order to regulate the securities industry in the interest of the public.
Investment companies were still in their infancy in 1940. In order to instill investors' confidence in these companies and to protect the public interest from this new type of security, Congress passed the Investment Company Act. The new law set separate standards by which investment companies should be regulated. The act defined and regulated investment companies, including mutual funds (which were virtually undefined prior to 1940).
Read more about this topic: Investment Company Act Of 1940
Famous quotes containing the word background:
“Pilate with his question “What is truth?” is gladly trotted out these days as an advocate of Christ, so as to arouse the suspicion that everything known and knowable is an illusion and to erect the cross upon that gruesome background of the impossibility of knowledge.”
—Friedrich Nietzsche (1844–1900)
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“... every experience in life enriches one’s background and should teach valuable lessons.”
—Mary Barnett Gilson (1877–?)