b'and do the federal and state filings that your securities exemption requires; all of which will drive up your costs. Most people choose Regulation D, Rule 506 for their funds of funds exemption (see Chapter 8) so that they can raise money from investors in any state and invest in projects in any state.Second, You Need an Exemption From The Investment Company Act of 1940 The definition of an Investment Company is:any issuer which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities15 Your Fund of Funds is buying securities in someone elses offering. Therefore,itmeetsthedefinitionofaninvestmentcompany.Unlessit qualifies for an exception, it must register as an investment company and will become subject to extensive regulation, technical requirements, and regulatory compliance; including a requirement that it must at all times have a board of directors; 75% of whose members are independent from the company, plus additional restrictions.16Herearesomeinvestmentcompanyactexceptionsthatmaybe applicable:15 15USC80a-3(a).16 ShartsisFrieseLLP,U.S.RegulationofHedgeFunds,SecondEdition(2013),p.69.137'