Why are investment companies are regulated so differently from every other kind of company? The multitude of other companies across our diverse spectrum of business endeavors—from software design to clothing retail to food service, and so forth—are regulated by a generic body of securities regulations. What exactly makes an investment company so different from every other kind of company that it alone deserves special securities regulation? The chapter concludes that, whatever the historical rationales for investment company regulation, the most compelling rationale for investment company regulation today is an investment company’s unique organizational structure. An investment fund almost always has a separate legal existence and a separate set of owners from the managers who control it. A fund investor thus relates to her managers in a radically different way from an investor in every other kind of company.
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William A. Birdthistle and John Morley
This chapter introduces the idea of the company share and its role in corporate finance, society and culture at large. The legal nature of a share is explained. It describes patterns of UK share ownership and notes the burgeoning presence of overseas shareholders in UK listed companies. The public policy reasons for regulating shares are identified. The differences between shareholders in limited companies and participators in other organisations are mapped out. Shareholders and other stakeholders are distinguished. The chapter concludes by noting the technical distinction between shareholders and members. The use of the company share as a device to facilitate fraud is noted.