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Volume XII, Number 274

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UPDATE: SEC Extends Relief for In-Person Meetings of Fund Boards Through December 31, 2020

On Friday, June 19, 2020, the U.S. Securities and Exchange Commission (the "SEC") issued an order (the "Order") under the Investment Company Act of 1940, as amended (the "1940 Act"), extending the duration of previously-granted conditional relief with regard to in-person voting requirements for boards of directors of registered investment companies and business development companies (together, "funds").  The Order extends the exemptive relief through at least December 31, 2020.

The SEC previously granted two orders providing relief to investment advisers and funds from, among other requirements, certain in-person board meeting requirements under the 1940 Act.  For additional information about the broader relief, see our previous client alerts here (March 13, 2020 order) and here (March 25, 2020 order, which superseded the March 13, 2020 order, the "March 25 Order").

Scope of the Relief

The Order provides that, until December 31, 2020, a fund and any investment adviser of or principal underwriter for such fund is exempt from the requirements imposed under Sections 15(c) and 32(a) of the 1940 Act, and Rules 12b-1(b)(2) and 15a-4(b)(2)(ii)[1] under the 1940 Act that require votes of the fund's board of directors be cast in person, provided that:

  • reliance on the Order is necessary or appropriate due to circumstances related to current or potential effects of COVID-19;

  • the votes required to be cast at an in-person meeting are instead cast at a meeting in which directors participate by any means of communication that allows all directors participating to hear each other simultaneously during the meeting; and

  • the board of directors, including a majority of the directors who are not "interested persons" (as defined in the 1940 Act) of the fund, ratifies the action taken pursuant to the Order by vote cast at the next in-person meeting.

These conditions have not changed from those contained in the March 25 Order.  In addition, this Order only supersedes the March 25 Order with respect to the in-person meeting requirements relief.  The other relief provided in the March 25 Order, along with the SEC's statement on prospectus delivery, will expire as currently provided.

Conclusion

The SEC and its staff continue to assess impacts relating to the coronavirus on investors and market participants.  The SEC may provide additional relief as circumstances warrant and, as evidenced by these recent events, may extend and/or modify currently available relief.

____________________

[1]      These statutory and rule provisions require, among other things, a fund board of directors to approve the fund's advisory contract and underwriting (or distribution) agreement (Section 15(c)), independent public accountant (Section 32(a)), Rule 12b-1 plan (Rule 12b-1(b)(2)), and certain interim advisory contracts (Rule 15a-4(b)(2)(ii)) at an "in person" meeting.

© 2022 Proskauer Rose LLP. National Law Review, Volume X, Number 176
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About this Author

Stuart H. Coleman Registered Funds Attorney Proskauer Rose New York, NY
Partner

Stuart Coleman has counseled registered funds and their independent board members and market-leading investment advisers for more than 35 years, through cycles of industry expansion and innovation and in times of economic and regulatory crisis. His clients include funds and/or boards in more than 30 well-known complexes (including those with registered hedge and private equity funds, ETFs and BDCs), with assets of nearly 10% of all the money invested in investment companies. Stuart also has represented board litigation committees and has served as an expert in a significant matter before...

212-969-3350
Gary L. Granik Registered Funds Attorney Proskauer Rose New York, NY
Partner

Gary L. Granik is a partner and a member of the Registered Funds Group. His practice focuses on investment adviser and investment company regulation. Gary has acted as both fund counsel and underwriters' counsel in numerous closed-end and mutual fund products on behalf of leading institutional clients, with particular emphasis on both registered and private alternative investment products. He also regularly advises private investment vehicles and their managers on investment management and other corporate law issues.

Gary represents several domestic and international institutional...

212-969-3369
Bradford A. Green Registered Funds Attorney Proskauer Rose New York, NY
Partner

Brad Green is a partner and a member of the Registered Funds Group.

Brad counsels investment management clients in connection with the structuring, registration and operation of publicly-offered and privately-placed investment vehicles.  His practice focuses on the representation of registered closed-end funds—both alternative products, such as funds of private equity, private credit and hedge funds, as well as traditional, exchange-listed funds.

Additionally, Brad serves as counsel to investment companies and their independent board members, as well as investment advisers...

212-969-3359
Janna Manes Registered Funds Attorney Proskauer Rose New York, NY
Partner

Janna Manes has worked with registered investment companies and their boards of directors (primarily mutual funds and ETFs) for all of her more than 25 years of practice. In addition to private practice, Janna served as General Counsel of a major asset management firm. As a result, her skill set covers the full range of the Investment Company Act practice. Her background and diverse experiences with a varied client base enable her to provide practical, timely advice appropriate to a client’s specific circumstances.

Janna advises many of her clients on a day-to-day basis on legal...

212-969-3363
Robert Plaze, Investment Manager Attorney, Regulatory and Compliance
Partner

Robert E. Plaze is a partner and a member of the Investment Management team. He advises investment advisers and investment companies on an array of matters, with a particular focus on regulatory and compliance matters arising under the federal securities laws.

Bob previously served as Deputy Director of the Division of Investment Management of the U.S. Securities and Exchange Commission. During his nearly 30 years of service with the Commission, he was responsible for policy development and management of many of the key regulatory initiatives during that period affecting investment...

202-416-6692
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