Mutual funds, along with other open‐ended instruments such as investment companies, investment trusts, and unit trusts, fall into the category of collective investment schemes (CIS). The OECD estimates that CIS assets in the 16 largest developed countries increased from $3.4 trillion to $15 trillion between 1992 and 2003. The laws governing CIS differ substantially from country to country. This article restates the business principles of fund governance that underlie the 1940 Investment Company Act and compares the U.S. principles with those of other developed countries. In doing so, the article highlights the risk of abuse when different categories of investors entrust their funds to others.
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