Regulated Investment Company – Definition

Cite this article as:"Regulated Investment Company – Definition," in The Business Professor, updated December 11, 2018, last accessed August 4, 2020,


Regulated Investment Company Definition

Regulated investment companies are companies that are regulated by the Securities and Exchange Commission (SEC) and the Investment Company Act of 1940 and have the primary business purpose of investing the assets of owners. Any company including mutual fund or exchange-traded fund, real estate investment trust, or unit investment trust who issue security and are engaged in the security business may qualify as a regulated investment company if they meet certain requirements.

A Little More on Regulated Investment Companies

In order to qualify as a regulated investment company, the company needs to register itself as an investment company with the Securities and Exchange Commission under the Investments Company Act of 1940. Only the registered investment companies meeting certain criteria are eligible to qualify as a regulated investment company.

The companies that earn at least 90% of its income from capital gains, interest or dividends derived from investment are considered to be qualified as a regulated investment company.

These companies are also obliged to distribute at least 90% of its net investment income to its shareholders as interests, dividends or capital gains. The Internal Revenue Service may collect an excise tax from the company if they fail to distribute at least 90% of its net investment income.
Also, to qualify as a regulated investment company a company must have a minimum of 50% of its asset in form of cash, cash equivalents, or securities.

The regulated investment companies are not allowed to invest more than its 25% of its total assets in securities offered by a single issuer other than the government and regulated investment companies.

References for Regulated Investment Company

Regulated Investment Company (RIC) Definition

  • ·      Preferential Dividends in the Regulated Investment Company Context, Baneman, R. J. This paper explains the preferential dividends available in the Regulated investment company. These dividends were commissioned and used as a yardstick to regulate the rate at which investments were made available to companies especially the private sector.
  • ·       Charitable remainder and regulated investment company–A trap for the unwary, Haber, H. M., & Broser, A. (1967). New York Certified Public Accountant (pre-1986)37(000004), 301. This paper explains the charitable remainder and regulated investment of a company and this process was termed as a trap for the unwary according to this research paper.
  • ·       An analysis of the Regulated Investment Company Modernization Act of 2010, Hervey, R. M. (2011). Journal of Investment Compliance12(2), 51-71. The main aim of this paper is to give an explanation of the Regulated Investment Company Modernization Act of 2010. This act was implemented into law on December 22, 2010. According to this paper, the summary drawn from this Act gives a detailed and well-structured explanation of each of the provision made in this paper. This Act was thoroughly analyzed.
  • ·       The Regulated Investment Company Modernization Act of 2010 Updates the Tax Rules for RICs, Collinson, D., Dyor, L., & Flores, D. (2010). J. Tax’n Fin. Products9, 31. This paper provides an explanation of the Regulated Investment Company Modernization Act of 2010. According to this study, the updated tax rules of the RICs were considered and tested.
  • ·       … Certain Derivative Contracts Will Be Considered Securities under Code Sec. 851 (b)(2) and Will Produce Qualifying Income for a Regulated Investment Company, Zimmerman, W. P., & Baker, S. K. (2010). J. Tax’n Fin. Products9, 51. It was noted in this research paper that certain derivative contracts will be considered as securities under the Code Sec. 851 (b) (2) and this will give rise to a qualifying income. Taking the Regulated Investment Company as an example to explanting this process, this paper delivered relevant information regarding this study.
  • ·      United States: a source of income treatment of dividends of a domestic regulated investment company received by a nonresident alien shareholder, Spitz, A. (1969). European taxation9(8), 189-189. This paper explains the various sources of income treatment of dividends of a domestic regulated investment company which was received by a non-resident alien shareholder. This paper studies this relationship as part of the problems facing the United State government.
  • ·       The short side of 130/30 investing for the conservative portfolio manager, Gastineau, G. L. (2008). Journal of Portfolio Management34(2), 39. This research paper studies the Conservative portfolio managers as having little or no experience in short-selling and this short-selling can use sector evaluations from the investments gotten from their firms to add alpha with the short position held in the exchange-traded funds (ETFs). While certain individuals in the stock selection possess a larger potential this adds value to the short side as well as on the long differences in performance in the midst of various domestic sectors which came in in a close second. This paper, however, explains that some sector ETFs are easy to borrow trade and integrate as the short side of a long-short portfolio.
  • ·      The business development company solution, Boehm, S. B., & Krus, C. M. (2001). This paper explains the business development company and the solutions rendered by these companies.
  • ·       Profitability regulation, earnings management, and modified audit opinions: Evidence from China, Chen, C. J., Chen, S., & Su, X. (2001). Auditing: A Journal of Practice & Theory20(2), 9-30. According to this research paper, data gotten from the Chinese stock market was used to investigate the relationship between the modified audit options (MAOs) and the earning management induced by profitable regulation. It was tested in this paper that the recent developments in the profession of accounting and in independent auditing to mask an understanding of the environment in which the Chinese auditing operates. Based on the data gotten from the Chinese market, findings generated are of general interest because they answer fundamental issues relating to trade-offs between the expected benefits and expected costs in deciding whether or not to avoid MAOs in a transitional economy.
  • ·       Real Estate Investment Trusts under the Internal Revenue Code of 1954: Proposals for Revision, MacDonald, J. K. (1963). Geo. Wash. L. Rev.32, 808. This paper reviews the proposals of the real estate investment trusts under the internal revenue code of 1954. This real estate investment was well explained and the importance of this code to investment was well explained.
  • ·       The Hedge Fund Versus the Mutual Fund, Kennard, A. L. (2003). Tax Law.57, 133. According to this research thesis, the Mutual fund, as well as the Hedge fund, was explained. The mutual relationship between these two funds was explained and the importance of these funds on the investment policies was also explained in this paper.

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