Fintech companies can face a variety of regulatory challenges under the federal securities laws, including one that often receives minimal attention, namely a company’s status as an “investment company” under the US Investment Company Act of 1940 (the “1940 Act”). Fintech companies that possibly meet the threshold definition of “investment company” under the 1940 Act, but are not publicly offering their securities and do not plan to do so, generally may seek to rely on the exceptions from the definition afforded by Section 3(c)(1) or Section 3(c)(7). But if a public offering is planned or underway, those exceptions are unavailable, forcing the company to seek out other possible exceptions or ask the US Securities and Exchange Commission for exemptive or similar relief. In the fall of 2020, two fintech companies sought and received exemptive or similar relief but through very different paths. This Legal Update discusses both companies’ approaches.
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