SEC Guidance on Investment Funds Maintained by Charitable Organizations

The SEC issued a guidance update regarding Charitable Investment Funds that are separate legal entities organized and operated for investment purposes. The SEC staff recently was asked to clarify the exclusion that may be available to Charitable Investment Funds that act as a legal entity separate from the charitable organization that maintains it, and that is organized and operated for the purpose of earning investment returns for the investing charitable organizations, which are to be used exclusively for charitable purposes of specified types ("Permitted Purposes").

The SEC stated that a Charitable Investment Fund was not the type of fund that Congress intended to regulate under the Investment Company Act. The Staff stated that the funds should be excluded from the definition of "investment company" pursuant to Investment Company Act Section 3(c)(10) ("Definition of Investment Company") because the vehicles should solely be used for the investment of assets of charitable organizations that use the proceeds for Permitted Purposes.

See: SEC Guidance.