ICA Rule 3a-8 provides a limited, and rather complicated, exemption from the definition of "investment company" for "research and development" companies, or "R&D" companies, that fail the quantitative tests in ICA Sections 3(a)(1)(A) and (C). These R&D companies are effectively a subset of inadvertent investment companies to which the SEC may grant registration exemptions pursuant to ICA Section 3(b). (See the topic page on Inadvertent Investment Companies (ICA Section 3(b)).) The determination of whether a company may rely on ICA Rule 3a-8 is first dependent on three considerations: (1) whether the issuer uses its assets to finance its research and development; (2) whether the issuer has substantial research and development expenses as compared to its other expenses; and (3) whether the issuer invests in assets so as to preserve the value of those assets for further research, as opposed to investing its assets for speculative gain. If an issuer meets these tests, the remaining factors of the traditional primary business test (or the inadvertent investment company test) are then considered: the issuer’s historical development, its public representations of its policy, and the activities of its officers and directors.
For a comprehensive list of exemptions and exclusions from registration available to investment companies, see the topic page on Exemptions from Registration under the Investment Company Act.