SEC Issues Proposed Rule Amendments Regarding Fund Naming Conventions

July 08, 2022

The U.S. Securities and Exchange Commission, by a vote of three-to-one, proposed for public comment on May 25, 2022, amendments to the rule governing naming conventions of funds subject to the U.S. Investment Company Act of 1940. The “names rule” generally requires a fund to invest, under normal circumstances, at least 80% of its assets in the investments suggested by its name. The proposed amendments would (among other items):
        • expand the scope of funds subject to Rule 35d-1 under the Investment Company Act (Names Rule);
        • address certain funds that use environmental, social and/or governance (ESG) investment practices as part of their investment process and related terms in their names.

        • limit the circumstances under which a fund may temporarily depart from its 80% investment policy and include time frames for returning to compliance with its 80% investment policy; and

        • include certain form changes and new disclosure requirements.

As further discussed below, these proposed amendments have the potential to meaningfully impact fund names, strategies, management and operations.

Read the full OnPoint here.

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