A look-through provision is a regulatory requirement to count the individual investors behind an entity investor rather than counting the entity as a single investor. Under Section 3(c)(1) of the Investment Company Act, an entity that owns 10% or more of the fund and was formed for the purpose of investing in the fund must be "looked through" to its own beneficial owners.
Why It Matters
The look-through provision prevents funds from circumventing the 100-investor limit under Section 3(c)(1) by having investors pool their capital into a single entity. Without this rule, any number of individuals could invest through a holding company and count as one investor. Fund managers must evaluate each entity investor to determine whether look-through applies.
Key Details
- Applies under Section 3(c)(1) when an entity holds 10% or more of the fund's outstanding securities.
- The entity must also have been formed for the purpose of investing in the fund. Both conditions are required before look-through applies.
- Each beneficial owner of the looked-through entity counts toward the fund's 100-person investor limit.
- Look-through does not apply under Section 3(c)(7) for the purpose of counting qualified purchasers.
For more, see The 100-Investor Limit Under Section 3(c)(1).
Capital Company tracks investor counts and entity look-through analysis as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.