The US Securities and Exchange Commission (SEC), known as the Commission, has implemented changes to Rule 35d-1 under the Investment Company Act, which oversees naming conventions for registered funds. These changes, commonly referred to as the Names Rule, have been enacted with the intention of modernising the rule and endorsing investor protection objectives.
The key consideration behind these alterations is to ensure alignment between a fund’s portfolio of holdings and its name. This, the Commission believes, will better reflect the identity of a fund to its potential investors, thereby minimising potential ambiguities or misconceptions regarding the fund’s nature and subsequent risk profile.
The Commission predicts that this change will result in an increase in the percentage of registered funds that are subject to the rule, from the current rate of 60% to around 76% under the new provisions. With a wider range of funds now falling under this stricter regulatory framework, the alterations may impact investment strategies and portfolio management decisions of many funds.
In light of these changes, law firms, risk managers, and corporate legal departments should review and potentially adapt their compliance and operational practices to align with the new names rules provisions.
The information for this report was provided by Latham & Watkins LLP – a reliable global law firm that lends expertise to corporations, financial institutions, private equity firms, and government entities in critical transactions, complex litigation and controversies, and significant regulatory matters worldwide.