Fintech Companies Face the Challenges of Being an Investment Company | Mayer Brown Free Writings + Perspectives


FinTech companies can face a variety of regulatory challenges under federal securities laws, one of which often receives minimal attention, namely a company’s status as an “investment firm” under the United States Investment Companies Act 1940 (the “1940 Act”). FinTech companies that potentially meet the definition of an “investment company” threshold under the 1940 Act, but do not offer their securities to the public and do not consider doing so, can generally seek to be based on the exceptions to the definition provided in Section 3 (c) (1) or Section 3 (c) (7) .1 But if a public offering is planned or in progress, these exceptions are not available, forcing the company to seek other possible exceptions or to apply to the United States Securities and Exchange Commission (“SEC”) for an exemption or similar exemption. In the fall of 2020, two fintech companies applied for and were granted a waiver or similar waiver, but through very different routes.

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