Investment Accounts

This chapter describes investment accounts of an investment company, indicating that its securities portfolio typically comprises substantially all its net assets. Portfolio securities produce income and expense from dividends and interest, and changes in fair values of securities while they are owned by the fund. An investment company's securities are usually held in the custody of a bank, which, for registered investment companies, must have prescribed minimum aggregate capital, surplus, and undivided profits. An investment company using a bank or member of a national securities exchange as custodian of its securities may agree to have qualifying securities deposited in a clearing agency, such as a central securities system, that is registered with the securities exchange commission (SEC). Clearing agencies use the book entry shares method of accounting for securities transfers rather than methods based on the physical movement of the securities. An investment company's registration statement or offering circular indicates its policies on selecting brokers and using affiliates to execute trades.