January 27, 2025
On January 8, the SEC’s Division of Investment Management issued new FAQs on the Investment Company Act Names Rule, which was amended in 2023. The Investment Company Names Rule governs business development companies and registered investment companies, such as mutual funds, exchange-listed closed-end funds, and unit investment trusts (collectively “funds”). The amendments aim to increase shareholder protection by increasing the scope of funds required to adopt a policy to invest at least 80% of its assets based on the investment approach suggested by the fund name, as well as notice and recordkeeping requirements related to these policies (click here to read our overview of the amended rule).
There are some operational challenges associated with these amendments, namely accurately defining and consistently applying the 80% test, as well as managing the portfolio back into compliance when it deviates from its stated investment focus.
The FAQs address the SEC’s views on treatment of certain revisions to a fund’s fundamental policy. For instance:
Fairview will continue to monitor for more substantive guidance. In the meantime, if you have any questions, please let us know. For the full list of FAQs, click here.