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How do special purpose acquisition companies avoid investment company status under the Investment Company Act of 1940?
Wiki User
∙ 11y ago
By investing in government securities until they are ready to consummate a transaction and structuring the acquisition in a manner that avoids the SPAC surviving as a holding company of investment securities. "Government security" means any security issued or guaranteed as to principal or interest by the United States, or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States; or any certificate of deposit for any of the foregoing.
Wiki User
∙ 11y ago
Special Purpose Acquisition Companies (SPACs) avoid investment company status under the Investment Company Act of 1940 by adhering to certain regulatory requirements. They typically structure their transactions to fit within an exemption known as the "venture capital operating company" (VCOC) exemption, which necessitates that they primarily invest in operating companies instead of securities. Additionally, SPACs usually have a defined acquisition target within a specific timeframe, which helps to demonstrate their purpose of merging or acquiring a single operating company, rather than engaging in diversified investment activities.
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The Investment Company Institute was the National Association of Investment Companies
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