Our History
The Investment Company Institute (ICI) has been a key central institution in the securities markets since the first half of the 20th century.
- For more than 80 years, our purpose has been to support regulation that strengthens the foundation of investment companies and asset managers more broadly for the ultimate benefit of the long-term individual investor.
- ICI is the only association that represents U.S. mutual funds, exchange traded funds, and closed-end funds, as well as UCITS and other collective investment vehicles.
- Our membership is nearly universal, including funds with 97% of total U.S. fund assets.
The Investment Company Act of 1940
ICI’s unique characteristics derive from our history. In 1940, Congress considered a bill drafted by the SEC that would have subjected funds to SEC regulation. Observers predicted that the fund industry would oppose the bill because it provided for stringent regulation.
The fund industry, however, supported the legislation and the prospect of a new, comprehensive regulatory framework, recognizing the importance of regulatory oversight in promoting the interests of those investors who would rely on funds for their financial wellbeing. Consequently, a joint SEC-fund industry committee worked together on the Investment Company Act of 1940, which was passed unanimously by both houses of Congress and signed into law by President Franklin Delano Roosevelt on August 23, 1940. Senator Sheridan Downey of California called this government-industry cooperation a “miracle.”
The Creation of the Investment Company Institute
The '40 Act, as it’s colloquially known by industry professionals, required the SEC to adopt numerous rules and regulations. Given the complexity of the '40 Act, the SEC wanted there to be an industry association to serve as a continuing liaison between the SEC and the fund industry. Therefore, on October 1, 1940, fund industry leaders formed the National Association of Investment Companies (NAIC), whose members consisted of mutual funds and closed-end funds. In 1961, membership was expanded to include the funds’ investment advisers and principal underwriters, and the association’s name was changed to the Investment Company Institute.
From the outset, fund industry leaders stressed the need for every investment company to participate in the association so that it could “speak with one voice” on behalf of the entire industry. This goal continues today as the ICI Board of Governors continues to comprise fund industry leaders.
ICI’s Support of Regulation
We always have viewed our principal mission to be working with the SEC and other regulators in the U.S. and abroad to foster the effective regulation of the funds industry. ICI has a long record of being a positive voice for regulation that protects investors, frequently expressing support for new legislation and SEC regulatory proposals. It has not been uncommon for ICI to suggest reforms that the SEC then later proposed and adopted.
In 2000, at an event celebrating the 60th anniversary of the ’40 Act, SEC Chairman Arthur Levitt acknowledged ICI’s many contributions to the success of the U.S. securities regulatory framework, stating:
“Tonight is also a celebration of cooperation—of a truly remarkable and long-standing partnership between the SEC and the ICI. Over the years, investors have reaped the benefits of this special alliance as it has worked to promote the investor interest and preserve the public trust.”
Over the years, ICI’s positive contributions to regulation have gone beyond our work with the SEC.
The Revenue Acts of 1936 and 1942 created a special tax regime for mutual funds and closed-end funds under which a fund is exempt from tax if it meets certain tests. ICI was successful in obtaining legislation that modified these tests to meet modern conditions. In 1976, ICI obtained legislation permitting the creation of tax-exempt municipal bond funds. ICI staff continue to work on a regular basis with the IRS and Treasury Department regarding issues involving the taxation of funds and their shareholders.
ICI was active in the development of the groundbreaking pension reform law, the Employee Retirement Income Security Act of 1974 (ERISA). The act created the first Individual Retirement Accounts (IRAs), expanded amounts that may be contributed to self-employed retirement (Keogh) plans, and permitted the retirement plans of public schools and charities to invest in mutual funds. The act’s fiduciary provisions laid the groundwork for mutual funds’ success in the 401(k) market.
ICI’s record bears out the views expressed by the first head of the association, Paul Bartholet:
In my judgment the regulatory act can ultimately be a constructive force in the improvement and development of the business, rather than a detriment. This assumes, however, that there is an honest and wholehearted attempt on the part of the industry to cooperate with the government in the administration of the statute.
ICI as a Research Institution
In ICI’s early years (when we were still called the NAIC), it became obvious that to represent the industry, we needed up-to-date statistics about funds and their activities. Beginning in 1944, ICI began to collect data from members regarding matters such as the number of funds, fund complexes, and shareholders, and the amount of assets, sales, and redemptions. Today, ICI is the primary source for fund statistics used by the media, academics, and regulators, including the SEC and the Federal Reserve Board. ICI statistics appear in monthly reports, and the annual ICI Fact Book, which is referenced around the world. Following the enactment of ERISA, ICI became the leading source for data regarding retirement plans.
Broadening of ICI Activities
In 1969, when securities firms that distributed fund shares were having back-office problems, ICI formed its Industry Operations Department to assist members in standardizing processes and procedures and creating efficiencies while managing back-office functions such as transfer agency and fund administration.
Today, areas of focus of the Operations Department include technology and business continuity, cybersecurity, fund accounting and financial reporting, valuation and audit, fund shares distribution, transfer agency and shareholder servicing, portfolio securities clearance and settlement, and international middle and back-office operations. Through its over twenty member committees, the Operations Department continues to assist members to achieve efficiencies, standardize processes and procedures, streamline distribution and settlement processes, as well as provide support to members implementing new processes and procedures in response to new and evolving regulations.
In 1987, ICI created ICI Mutual Insurance Company to provide insurance uniquely suited to the needs of funds and their directors. Today, ICI Mutual is an independent insurance company that provides policy coverage for ICI members and associate members.
In 1989, ICI formed the ICI Education Foundation (ICIEF) to promote financial literacy programs and increase the public’s awareness and understanding of the benefits of investing. ICIEF organized national investor education workshops in partnership with the National Urban League and Hispanic College Fund. More recently ICIEF has promoted financial literacy among students, teachers, and other community members. The Foundation also has worked with various partner organizations to support career advancement and increased leadership of talent in the asset management industry.
Over the years, ICI recognized the important role played by independent directors and trustees in safeguarding shareholders’ interests. In 1995, ICI established a committee that focused on educational programs and resources for independent directors. As interest in fund governance grew, ICI recognized the need for an organization dedicated to serving fund independent directors—and launched the Independent Directors Council (IDC) with dedicated staff in 2004. Through its mission focused on education, engagement, advocacy, and public understanding, IDC promotes excellence in fund governance for the benefit of fund shareholders.
In 2011, we launched ICI Global Affairs to serve as the voice of regulated investment fund managers who were increasingly operating global businesses and active in multiple regulatory jurisdictions. ICI Global Affairs began in London and Washington and eventually added offices in Hong Kong and Brussels where staff engage regulators and policymakers across Europe and Asia and participate in international fora like the Financial Stability Board (FSB) and International Organization of Securities Commissions (IOSCO).
ICI Over Time
ICI’s activities have increased dramatically since 1940.
Over the same period, membership in the association has expanded from mutual funds and closed-end funds to include fixed unit investment trusts, exchange-traded funds, and foreign funds. Most recently, ICI has begun working with members who also maintain collective investment trusts and separately managed accounts. Most of the original member funds were sponsored by firms that only managed funds, with a few sponsors also managing the accounts of wealthy individuals. Over the years, insurance companies, securities firms, and commercial banks have entered the fund business.
In 2022, reflecting on the broadening of ICI’s activities, the ICI Board of Governors restated the ICI mission:
To strengthen the foundation of the asset management industry for the ultimate benefit of the long-term individual investor.
Building a strong foundation for the industry by helping to strengthen policy and regulatory frameworks and encouraging sound governance, operational, and fiduciary practices.
Serving as a focal point for collaboration among members in proactively addressing the industry’s most critical strategic issues and in setting robust standards that help the industry grow in a sustainable way.
Advancing the interests of the individual investor through education and expanding access to regulated funds and other professionally managed products that help them meet their financial goals.
Many individuals have contributed to ICI’s success, and ICI has always had the most senior leaders of the investment industry serve on our Board of Governors and participate in our work. The key to ICI’s success, however, has been the work of thousands of people in the fund industry who have acted in accordance with Paul Bartholet’s sage advice:
Those of us to whom regulation applies must consider it not only a privilege but an important duty to help make it work. It is here to stay. We had better adjust ourselves accordingly. Let those who complain about the ruinous effects of regulation and its arbitrary and biased administration look instead for its advantages, seek to capitalize on its benefits, and try to cure its defects.