What Is SEC Form N-2?

SEC form N-2 is a filing with the Securities and Exchange Commission (SEC) that must be submitted by closed-end management investment companies to register under the Investment Company Act of 1940 and to offer their shares under the Securities Act of 1933.

Form N-2 may be compared with SEC Form N-1A, required instead by open-ended investment companies.

Key Takeaways

  • SEC Form N-2 is a regulatory document required to form an closed-ended fund manager in the U.S.
  • The form is to be filled pursuant to the Securities Act of 1933 and the Investment Company Act of 1940.
  • Firms filing a form N-2 must submit information about the fund in the form of a prospectus as well as additional items.

Understanding SEC Form N-2

SEC Form N-2 is required by closed-end investment companies. A closed-end fund is a portfolio of pooled assets that raises a fixed amount of capital through an initial public offering (IPO) and then lists shares for trade on a stock exchange. Examples may include closed-end mutual funds or exchange traded funds (ETFs). In contrast, with an open-end fund shares are issued and redeemed daily by the fund's sponsor (the issuer of the fund). By design, these funds are always traded at their actual cash value, also known as net asset value, or NAV, which is calculated on a per-share basis before sales charges are applied.

Part A of SEC form N-2, the prospectus, must contain clearly-written information about the investment that the average investor, who may not have a specialized background in finance or law, can understand. This information should describe the investment's fees; financial highlights; plan of distribution; use of proceeds; management; capital stock, long-term debt, and other securities; defaults and arrears on senior securities; and pending legal proceedings. Part B contains additional information that may be of interest to some investors, such as investment objectives and policies, principal holders of securities and financial statements.

An exception for small business investment companies licensed by the Small Business Administration does exist. SEC Form N-2 is meant to provide investors with information concerning closed-end management companies, useful in determining an investment company's attractiveness.

Form N-2 is also commonly referred to simply as a "registration statement."

Elements of an SEC Form N-2

Form N-2 is a three-part registration statement consisting of a prospectus, a statement of additional information (SAI) and certain other information.

  1. The prospectus is designed to provide shareholders with essential information about the fund and should be written in clear, concise language (i.e., plain English).
  2. The SAI is designed to provide shareholders with additional, more detailed information about a fund, its management and service providers, and its policies. The SAI is not delivered to shareholders but must be available on request for free.
  3. Other information included in the registration statement includes corporate organizational documents and certain contracts and compliance policies.