Business Services Industry
SEC Creates Safe Harbor for R&D Companies Under the Investment Company Act
Mondaq Business Briefing, July, 2003
By David S. Rosenthal, Martin Nussbaum and Catherine Schultz
The Securities and Exchange Commission (the "SEC") recently adopted new Rule 3a-8 under the Investment Company Act of 1940 (the "Investment Company Act").1 This rule benefits companies engaged in research and development ("R&D") by providing a safe harbor from classification as an investment company under the Investment Company Act.
Purpose and Effect of the Rule
Rule 3a-8 formally recognizes the unique nature of R&D companies, which frequently hold large amounts of capital to fund long-term research and development projects. This may cause them to come within the definition of an investment company under the Investment Company Act and become subject to regulation under the Investment...
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