The Investment Company Act of 1940 is a U.S. federal law that regulates investment companies, which are firms that pool money from investors to purchase securities. The Act aims to protect investors by requiring these companies to disclose their financial condition and investment policies, ensuring transparency and accountability in the investment process. Under this Act, investment companies are categorized into three types: open-end funds, closed-end funds, and unit investment trusts. Each type has specific rules regarding their operations, governance, and reporting requirements. The Act also established the Securities and Exchange Commission (SEC) as the regulatory body overseeing these companies.