Q. So today we’re going to clear up some confusing terminology that’s actually very important for investors to understand: the difference between RICs and RICs.
A. Yes! Regulated Investment Companies versus Registered Investment Companies.
Confusingly similar, and additionally confusing because they overlap in practice an awful lot.

Q. Alright, let’s start with “regulated”. What are these?
A. This is a tax term, not an SEC term. The idea is to allow pooled investment vehicles to escape corporate tax. So there are a bunch of rules designed to make sure the entity is not pursing an active trade or business, and is operating as a passive investment vehicle. So: there are various requirements concerning diversification of investments, and also distribution of profits out to the investors.

Q. And so what is the consequence of meeting these rules?
A. The entity does not have to pay entity level tax. For example, a mutual fund does not have to pay capital gains tax — at the mutual fund level– when it sells a stock at a profit. REITS, ETFs, UITs are other examples.

Q. OK, got it. That’s a “regulated” investment company. What’s a “registered” investment company?
A. That’s an entity that is engaged in investing on behalf of others, and is registered with the SEC. These might also be “regulated” — and qualify for those tax benefits– but don’t have to be.

Q. But not all investment companies have to register…
A. Nope. “Private” investment companies– like traditional hedge funds– can fall within exceptions to the rules, and not have to “register”. Also, firms that invest in things that are not “securities”– like art– are not investment companies that have to register.

Q. So, “regulated” is the tax term, and “registered” is the SEC term.
A. Right. So, whether a fund is a “regulated” investment company or not, “registration” means it reports to the SEC and therefore has higher levels of investor protections.