Which statement correctly differentiates between (a)(1) and (a)(2) funds?

The statement highlighting that both employee benefit trusts and agency accounts may invest in (a)(2) funds accurately captures the regulatory framework and intent behind the distinction between (a)(1) and (a)(2) funds. (a)(2) funds, which are designed for specific types of investment vehicles, allow a broader range of entities such as employee benefit trusts and agency accounts to participate. This inclusion is beneficial for those entities as it offers them opportunities for investment in a collective manner while adhering to specific regulatory guidelines.

In contrast, (a)(1) funds primarily cater to a narrower group of investors, typically limiting who can participate to only certain types of personal agency accounts. Thus, the flexibility of (a)(2) funds regarding the types of accounts and trusts permitted to invest creates a clear distinction from (a)(1) funds.

While the other statements touch on relevant aspects of fund types, they either misrepresent the classifications or lack the specificity found in the correct statement. For instance, personal agency accounts exclusively engaging with (a)(1) funds does not encompass the broader scope offered by (a)(2) funds. Similarly, the reference to federal tax exemptions and the nature of common trust funds introduces elements that do not clearly reflect the essential