SEC Form N-2

What Is SEC Form N-2?

SEC Form N-2 is a filing with the Securities and Exchange Commission (SEC) that must be presented by closed-end management investment companies to register under the Investment Company Act of 1940 and to offer their shares under the Securities Act of 1933.

Form N-2 might be compared with SEC Form N-1A, required instead by open-ended investment companies.

Understanding SEC Form N-2

SEC Form N-2 is required by closed-end investment companies. A closed-end fund is a portfolio of pooled assets that raises a fixed amount of capital through a [initial public offering](/initial public offering) and then records shares for trade on a stock exchange. Models might include closed-end mutual funds or exchange traded funds. In contrast, open-end fund shares are issued and reclaimed daily by the fund's sponsor (the issuer of the fund). By design, these funds are constantly traded at their actual cash value, otherwise called net asset value, which is calculated on a per-share basis before sales charges are applied.

Part An of SEC form N-2, the prospectus, must contain obviously written information about the investment that the average investor (who might not have a specific background in finance or law) can understand. This information ought to portray the investment's fees, financial features, plan of distribution, utilization of proceeds, management, capital stock, long-term debt, defaults and arrears on senior securities, and pending legal proceedings. Part B contains additional information that might be of interest to certain investors, like investment objectives and policies, principal holders of securities and financial statements.

An exception for small business investment companies licensed by the Small Business Administration exists. SEC Form N-2 is meant to furnish investors with information concerning closed-end management companies, valuable in determining an investment company's attractiveness.

Form N-2 is likewise commonly alluded to just as a "registration statement."

Elements of a SEC Form N-2

Form N-2 is a three-part registration statement consisting of a prospectus, a statement of additional information (SAI) and certain other information.

1. The prospectus is designed to furnish shareholders with essential information about the fund and ought to be written in clear, concise language (i.e., plain English).
2. The SAI is designed to give shareholders additional, more nitty gritty information about a fund, its management and service suppliers, and its policies. The SAI isn't delivered to shareholders however must be accessible on request for free.
3. Other information included in the registration statement includes corporate organizational documents and certain contracts and compliance policies.

Features

• The form is to be filled pursuant to the Securities Act of 1933 and the Investment Company Act of 1940.
• Firms filing a form N-2 must submit information about the fund in the form of a prospectus as well as additional things.
• SEC Form N-2 is a regulatory document required to form a closed-ended fund manager in the U.S.