The Securities and Exchange Commission (SEC) has recently adopted changes to Rule 35d-1, colloquially referred to as the “Names Rule,” under the Investment Company Act of 1940. These changes were made with a specific intent to expand the range of the Names Rule’s applicability. As such, the amendments bring with them updated disclosure and record-keeping requirements.
This development, as reported by Kramer Levin Naftalis & Frankel LLP, went into effect on Sept. 20. Legal professionals working in corporations and law firms need to understand the implications of these amendments, notably how they will impact their firms’ compliance with regulations issued by the SEC.
As you already may know, Rule 35d-1 was initially established under the Investment Company Act of 1940 with the aim to prevent misleading investment company names. The rule necessitates that any investment company bearing a name that suggests investment in a specific kind of investment or investments, or in investments industry focuses, must in fact have at least 80% of its net assets invested in that kind of investment or investments suggested by its name.
Now, the recent amendments bring changes that demand attentiveness by corporate legal professionals. The modifications have widened the rule’s scope as they now include not only companies directly suggesting the type of investments, or industry sector, but also those implying specific types of investments, industries, or services in which they may invest.
The impact of these changes is sweeping, and legal counsels must leverage their understanding of these new rules to ensure their companies remain compliant with SEC regulations.