FYI: The SEC has proposed new Investment Company Act Rule 12d1-4 intended to streamline and enhance the regulatory framework for funds that invest in other funds. In short, the rule would allow registered funds to invest in other registered funds in excess of the statutory limits set out in the Investment Company Act, subject to conditions along the lines of those imposed on existing funds of funds operating under exemptive orders. The conditions are aimed at avoiding problematic voting/control, large-scale redemptions, excessive fees and overly complex structures.
Simultaneously, the SEC is proposing to rescind Rule 12d1-2 and most previously issued fund of funds exemptive orders, which would result in existing and new funds of funds having to rely on the new Rule 12d1-4 for their operations.
The idea has been kicking around for a long time for a funds of funds rule like this one to avoid the continued need for time-consuming exemptive orders and to make conditions consistent among similarly situated funds of funds.
There will be a 90-day comment period on the proposed rule.
Proposing Release: https://www.sec.gov/rules/proposed/2018/33-10590.pdf.
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