The Investment Company Act of 1940 (commonly referred to as the '40 Act) is an act of Congress which regulates investment funds. It was passed as a United States Public Law () on August 22, 1940, and is codified at . Along with the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and extensive rules issued by the U.S. Securities and Exchange Commission; it is central to financial regulation in the United States. It has been updated by the Dodd-Frank Act of 2010. It is the primary source of regulation for mutual funds and closed-end funds, now a multi-trillion dollar investment industry. The 1940 Act also impacts the operations of hedge funds, private equity funds and even holding companies. History Following the founding of the mutual fund in 1924, investors 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 1935, Congress requested that the SEC report on the industry, and the Investment Trust Study was reported between 1938 and 1940. The law as originally introduced was different from the law which passed; the original draft granted more broad power to the SEC, while the final bill was a compromise between the SEC and industry which was drafted and submitted to Congress by joint members of the SEC and industry, and Congress ultimately passed a similar version. David Schenker, who became the head of the Investment Company Division at the SEC, was one of the original drafters. By 1992, the act had remained largely unchanged aside from amendments in 1970 to provide additional protections particularly around independent boards and limiting fees and expenses. Scope The act's purpose, as stated in the bill, is "to mitigate and ... eliminate the conditions ... which adversely affect the national public interest and the interest of investors". Specifically, the act regulated conflicts of interest in investment companies and securities exchanges. It seeks to protect the public primarily by legally requiring disclosure of material details about each investment company. The act also places some restrictions on certain mutual fund activities such as short selling shares. However, the act did not create