Packaged Securities - Other Types of Investment Companies


Exchange-Traded Funds (ETFs)
ETFs are investment companies that can be legally classified as either open-end companies or UITs.

  • ETFs differ from traditional open-end companies and UITs because, by SEC orders, shares issued by ETFs trade on a secondary market and are only redeemable in very large blocks (for example, blocks of 50,000 shares).

  • ETFs are not considered to be, nor are they permitted to call themselves, mutual funds.

The following articles contain useful information about ETFs, from the different varieties to choose from, to their benefits and how they are created:

Exclusions
Some types of companies that might initially appear to be investment companies may actually be excluded under federal law.


Private investment funds, sometimes called hedge funds, have no more than 100 investors or their investors all have a substantial amount of other investment assets. These funds are not considered investment companies, even though they issue securities and are primarily engaged in the business of investing in securities.

Compliance


Related Articles
  1. Professionals

    A. Introduction: Investment Companies

    In this chapter, we will look at how an investment company pools investors’ funds in order to purchase a diversified portfolio of securities. Series 99 operations professionals will be ...
  2. Products and Investments

    Why ETFs Will Eventually Trump Mutual Funds

    Exchange-traded funds are growing rapidly in popularity and may well overtake their traditional open-ended cousins at some point. Here's why.
  3. Professionals

    Exchange Traded Funds (ETFs)

    CFA Level 1 - Exchange Traded Funds (ETFs). Learn how exchange traded funds look to mimick the overall market's return. Covers the advantages and risks of ETFs, and how they trade.
  4. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Exchange Traded Funds (ETFs)

    What they are: Uniquely structured investment funds that track broad-based or sector indexes, commodities and baskets of assets. Pros: Trade like stocks on regulated exchanges; diversity ...
  5. Investing Basics

    The Advantages of ETFs Compared to Index Funds

    With the ongoing ETF boom, ETFs gain more variety and increased competition in the market leads to further investors' advantages compared to index funds.
  6. Professionals

    Unit Investment Trust (UIT)

    FINRA Series 6: Section 10 Unit Investment Trust (UIT). In this section: Unit Investment Trust (UIT), Face Amount Certificates, Management Investment Companies, Closed-End and Open-End investment ...
  7. Bonds & Fixed Income

    Investing In A Unit Investment Trust

    UITs offer professional portfolio selection and a definitive investment objective. Are they right for you?
  8. Mutual Funds & ETFs

    When Is the Right Time to Change From Mutual Funds to ETFs

    Find out how to determine when it's the right time for you to switch from mutual funds to ETFs, including the benefits of ETFs and who they are best for.
  9. Products and Investments

    Why Mutual Funds Are Here to Stay (Despite ETFs)

    Despite the rise of ETFs, mutual funds are not headed for extinction. Here's why they are here to stay.
  10. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
RELATED TERMS
  1. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
  2. Index ETF

    Exchange-traded funds that follow a specific benchmark index ...
  3. Fund Company

    A commonly used term to describe an investment company, which ...
  4. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for ...
  5. ETF Of ETFs

    An exchange-traded fund (ETF) that tracks other ETFs rather than ...
  6. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
RELATED FAQS
  1. Do ETFs have a board of directors?

    Yes. An exchange-traded fund (ETF) is a type of security that tracks a basket of assets or an index (such as an index fund), ... Read Answer >>
  2. Should I invest in ETFs or index funds?

    Learn advantages to investing in exchange-traded funds, or ETFs, and index funds, and decide whether to include them in your ... Read Answer >>
  3. Are ETFs required to pay out a percentage of income as dividends?

    The exchange-traded fund (ETF) is a relatively new investment vehicle, hitting the market in 1993. A fund company can create ... Read Answer >>
  4. What is the difference between exchange-traded funds and mutual funds?

    Exchange-traded funds, or ETFs, are similar to mutual funds because both instruments bundle together securities to offer ... Read Answer >>
  5. In what ways are ETFs more tax efficient than mutual funds?

    Compare mutual funds and exchange-traded funds to find out which one offers the most advantageous tax position for investors ... Read Answer >>
  6. Do ETFs pay capital gains?

    Learn about exchange-traded funds (ETFs), which can generate capital gains for their shareholders due to occasional and substantial ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center