On Aug. 15, 2019, the staff of the Division of Investment Management at the U.S. Securities and Exchange Commission (the “Staff”) issued a significant no-action letter. The letter clarifies the treatment of certain assets held by an entity seeking to rely upon Section 3(c)(5)(C) to be exempt from registration as an investment company under the Investment Company Act of 1940. The letter recognizes that the way that mortgage lending companies conduct their business has changed significantly since the original adoption of the exemption, and contains the Staff’s pronouncements on how the test will be applied.

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