The Securities and Exchange Commission recently adopted significant changes to Rule 35d-1 under the Investment Company Act of 1940 (Names Rule), as well as certain forms and disclosure requirements on September 20, 2023 (Amendments).1 Among other changes, the Amendments:

  • Significantly expand the 80% investment policy requirement2 to include fund names with terms suggesting an investment focus in investments that have, or whose issuers have, “particular characteristics,” including “growth,” “value” and terms indicating that the fund’s “investment decisions incorporate one or more [ESG] factors.”
  • Require, for funds that adopt an 80% Investment Policy, that any terms used in the fund’s name that suggest either an investment focus or that the fund is a tax-exempt fund be consistent with the plain English meaning or established industry use of those terms.3
  • Define a time period for funds that deviate from their 80% Investment Policy to come back into compliance, generally 90 days or as soon as practicable for passive breaches or within 90 days for breaches due to abnormal circumstances.
  • Require funds to review the classifications of their portfolio assets under their 80% Investment Policies at least on a quarterly basis.
  • Require funds to calculate assets for Names Rule purposes, including compliance with the 80% Investment Policy, by valuing derivatives using their notional amount and short sales using the value of the asset sold short (with certain required and permitted adjustments).
  • Amend the notice requirement associated with changes to a fund’s name or 80% Investment Policy.
  • Require additional disclosure within a fund’s prospectus to define terms used in the fund’s name, including related investment criteria for selecting investments described by the name.


  1. Investment Company Names, Release No. IC-3500 (September 20, 2023) (Adopting Release). At times, this Dechert OnPoint tracks the Adopting Release without the use of quotation marks. Terms not defined in this Dechert OnPoint have the meaning assigned to them in the Adopting Release. SEC Chair Gensler and Commissioners Peirce, Crenshaw and Lizárraga voted in favor of the Amendments; Commissioner Uyeda voted against the Amendments.
  2. The Names Rule currently requires that funds with names suggesting investment in a particular type of investment, industry, country or geographic region adopt a policy to invest, under normal circumstances, at least 80% of their respective assets (net assets plus the amount of any borrowings for investment purposes) in such type, industry, country or geographic region (80% Investment Policy). The Names Rule also contains a similar requirement for funds with names suggesting that the funds’ distributions are exempt from federal income tax or from both federal and state income tax. Unless otherwise specified, the term “fund” as used in this Dechert OnPoint refers to a registered investment company and business development company (BDC).
  3. The SEC did not change the requirement in current Rule 35d-1 that funds with names suggesting that their distributions are exempt from federal income tax or from both federal and state income tax must adopt a fundamental 80% Investment Policy. The Amendments continue to allow “tax-exempt” funds to adopt either an asset test or an income test to comply with its 80% Investment Policy. See Adopting Release at n. 184.