New Fund of Funds Rule: Avoiding Regulatory Pitfalls and Investor Disputes When Funds Invest in Other Funds
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
- work Practice Area
Banking and Finance
- event Date
Wednesday, February 3, 2021
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will analyze the SEC's new fund of funds rule and guide counsel on the regulatory requirements and investor protections that investment fund managers must consider when investing in other funds.
Mr. Baris has practiced in the asset management area for more than 35 years. He is widely recognized for his breadth of experience representing registered funds, investment advisers, financial institutions, broker-dealers and independent directors on the full spectrum of financial services regulation, transactions and governance matters. Mr. Baris’ work with registered funds includes mutual funds, closed-end funds, exchange-traded funds and business development companies. He has extensive experience advising on the regulatory aspects of fund and investment advisory operations, and has represented numerous clients on M&As, reorganizations, compliance, exemptive applications and compliance issues. He also advises operating companies on “status” issues that arise under the Investment Company Act of 1940. More recently, he has been advising FinTech clients on cryptocurrency issues and financial services clients on issues relating to the COVID-19 pandemic. Mr. Baris is an active speaker and writer on issues concerning investment management and the regulation of financial institutions.
Mr. Simanek’s practice focuses on financial services, including mutual funds, closed-end funds, exchange-traded funds and commodity pools, and their boards of directors on issues regarding regulatory compliance and product development. He assists clients in navigating laws administered by the SEC, Commodity Futures Trading Commission and National Futures Association, and state securities laws. Mr. Simanek also advises investment advisers on issues relating to registration and compliance policies and procedures. He often advises exchange-traded funds in connection with their exemptive relief and the launch of new funds, as well as non-investment companies on issues regarding their status under the Investment Company Act of 1940.
On Oct. 7, 2020, the SEC adopted a new rule under the Investment Company Act of 1940, which provides a new framework governing investments by a registered investment company or a business development company (BDC) in other registered investment companies or BDCs. Fund managers must understand the new rule’s complexities to avoid compliance pitfalls.
Fund of funds arrangements are limited by the "anti-pyramiding" provisions in Section 12(d)(1)(A), which generally prohibit a regulated fund from acquiring securities of another regulated fund over certain thresholds. The new rule permits a fund to acquire shares of other funds above those thresholds, subject to new limitations: the acquiring fund may not acquire "control" over any acquired fund and must comply with new requirements with respect to voting rights. Investment advisers of acquiring funds and acquired funds must make certain evaluations and findings designed to address investor protection concerns associated with fund of funds arrangements.
Funds with different investment advisers must enter into an agreement that memorializes the terms governing the arrangement and permits the investment advisers to make the necessary findings. This agreement must be filed as an exhibit to the funds' registration statements. In addition, the new rule will limit certain complex fund of funds arrangements that are commonly used in the registered funds industry today.
Listen as our authoritative panel discusses the new investment options presented by the new rule and the structural and regulatory issues which must be considered when making fund of funds investments.
- Previous regulation of fund of funds arrangements--Section 12(d)(1) of the Investment Company Act of 1940
- The new fund of funds rule--comprehensive framework for investment funds to invest in other funds
- Restrictions and requirements under the new rule
- Ownership thresholds
- Limitations on control and what constitutes control
- Limitations on voting rights
- Required fund findings
- Complex structures
- Fund of funds investment agreements--key features
- Effect on ETF investments
- Compliance challenges
The panel will review these and other key issues:
- In what respect does the new rule expand on funds' ability to hold investments in other funds?
- When is one fund deemed to have control over another under the new rule?
- How are the voting rights of acquiring funds limited under the rule?
- When is an investment agreement required, and what issues should be addressed in the investment agreement?
- How will the limitations of complex structures require modifications of current arrangements?
- How will the new rule affect current ETF fund of funds arrangements?
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