Registrant Vs. Issuer of Mutual Funds

by Patrick Gleeson, Ph. D., Registered Investment Adv
Large corporations manage families of mutual funds.

Mutual funds are pools of equities managed by an investment professional for the benefit of the fund's investors. The internal structure of a mutual fund is complex . A frequently referenced guide to mutual funds issued by the Investment Company Institute lists eight different organizations that make up a typical fund structure. "Registrant" and "issuer" are not among them.

Investors and Board of Directors

The Investment Company Institute, or ICI, diagram of a mutual fund shows the fund's investors at the top of the diagram, with the fund's board of directors at its center. When you buy shares in a mutual fund, the people ultimately responsible for your investment are the members of the fund's board of directors. While the board doesn't ordinarily make investment decisions, it hires the entities that do. It also contracts with other organizations that certify the fund's books, handle back office functions and sell, record and deliver mutual fund shares.

"Registrant" Functions

The term "registrant" is not normally used in connection with U.S. mutual funds, although the term is common in both India and Canada. In relation to mutual funds, the term "register" has two meanings. One registering function in the U.S. is handled by the transfer agent, one of the eight entities making up a mutual fund and named by ICI. Transfer agents register and issue mutual fund certificates to buyers. They also receive and cancel shares registered to sellers. Another "registering" function is the board's obligation to register the fund with the U.S. Securities and Exchange Commission and to deliver to the SEC the fund's quarterly and annual financial reports.

"Issuer" Functions

A mutual fund's sponsor originally sets up a mutual fund under the authority of the fund's board of directors. Once the fund is underway, most fund sales are handled by the principal underwriter -- an SEC-registered broker-dealer -- and facilitated by the transfer agent who issues fund certificates to buyers.

Confusing Terminology

Financial writers commonly refer to a mutual fund's "management," when what they clearly mean is the entity that buys and sells equities, which is the fund's "investment adviser." Another confusion can arise from the term "fund administrator," which is not the entity in charge of the fund but rather the firm that handles a number of back office functions under contract with the board of directors. While you may read that the "issuer" of shares is "the mutual fund," this is either redundant or inaccurate. The board of directors has the ultimate legal responsibility for all fund activity, including the issuance of shares by its transfer agent.

About the Author

Patrick Gleeson received a doctorate in 18th century English literature at the University of Washington. He served as a professor of English at the University of Victoria and was head of freshman English at San Francisco State University. Gleeson is the director of technical publications for McClarie Group and manages an investment fund. He is a Registered Investment Advisor.

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