On October 7, 2020, the US Securities and Exchange Commission (“SEC”) adopted a new rule under the Investment Company Act of 1940 (the “Investment Company Act”) with respect to fund of fund arrangements. New Rule 12d1-4 would permit registered investment companies to invest in other registered investment companies beyond certain statutory limits set forth in Section 12(d)(1) and without obtaining an exemptive order, provided certain conditions are met. In light of this new rule, the SEC is rescinding most exemptive orders and certain no-action letters granting relief under Sections 12(d)(1)(A), (B), (C) and (G) of the Investment Company Act related to fund of funds arrangements that are within the scope of Rule 12d1-4; is rescinding Rule 12d1-2 under the Investment Company Act; and is adopting certain Form N-CEN and recordkeeping requirements associated with the new rule.
This Legal Update provides a high-level summary of new Rule 12d1-4 and also shares some initial takeaways with respect to this new rule.