Reg CF prevents a company from raising if it is “an investment company, as defined in section 3 of the Investment Company Act of 1940, or is excluded from the definition of investment company by section 3(b) or 3(c) of that Act."

Section 3 of the Investment Company Act defines an investment company as a company that:

• Is (or proposes to be) engaged primarily in the business of investing or trading in securities; or
• Is (or proposes to be) engaged in the business of investing, owning, holding, or trading in securities, and owns or proposes to acquire "investment securities" worth over 40% of the company's total assets. "Investment securities" excludes government securities and majority-owned subsidiaries that are not themselves investment companies.

For companies in certain industries, such as real estate and venture investing, this rule requires a careful analysis by experienced lawyers to determine whether the company is barred from raising.