According to this WSJ article, Google has asked the SEC to declare that Google is not an “investment company” and therefore not subject to the Investment Company Act of 1940. This seems like an odd request, but it highlights the broad sweep of the definition of investment company. Section 3(a)(1)(C) of the ICA provides that an investment company is any issuer “engaged . . . in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 percentum of the value of such issuer’s total assets (exclusive of Government securities and cash items) on an unconsolidated basis.” The problem for Google is the “owning” language. Google currently owns about $5.8 billion in marketable securities and has total assets of $14.4 billion. Hence, it’s right at the 40% threshold. Google also has $4 billion in cash, some of which it would like to invest in marketable securities . However, moving cash to securities would result in in Google blowing through the 40% threshold, thus the exemption request. Both Microsoft and Yahoo! have faced the same issue in the past and filed exemption requests which the SEC granted.
But in all fairness to ICA40, section 3(b)(1) expressly exempts any company not primarily engaged in investing, holding, etc., and 3(b)(2) provides the exemption procedure.
So this is actually nothing new.