SEC Issues No-Action Relief for Open-End Fund Co-Investments and Board Committee Approval

Who may be interested: Registered Investment Companies; Directors of Registered Investment Companies; Investment Advisers

Quick Take: On April 27, 2026, the SEC issued a no-action letter to J.P. Morgan Investment Management, Inc. stating that (i) a registered open-end fund may rely on an existing co-investment exemptive order as a Regulated Fund, subject to compliance with the terms and conditions of the Order and (ii) the “Required Majority” board approval conditions in the Order may be satisfied by a committee of disinterested directors, rather than the full board.  

In its April 27, 2026 letter, the SEC stated that it would not recommend enforcement action under Sections 17(d) and 57(a)(4) of the 1940 Act and Rule 17d‑1 thereunder if a registered open-end fund relies on an existing co-investment exemptive order (Order) and obtains the “Required Majority” approval from a committee of the board of directors.

Open-End Fund Reliance on the Order

The SEC’s no-action letter stated that open-end funds advised or sub-advised by JPMIM may rely on the Order previously granted to BDCs and registered closed-end funds, provided that the open-end funds comply with all terms and conditions of the Order.

In granting the no-action relief, the SEC relied on JPMIM’s representations that:

• Participation by open-end funds in co-investment transactions would not raise novel concerns under Section 17(d) or Rule 17d-1 as compared to Regulated Funds already covered under the Order;
• The substantive protections in the Order would apply equally to open-end funds; and
• Liquidity considerations specific to open‑end funds are addressed by Rule 22e‑4, which limits illiquid investments to 15% of net assets.

Required Majority Approval by a Committee of the Board

The SEC’s no-action letter also stated that the Required Majority approval conditions in the Order may be satisfied by a committee of the board of directors, rather than the full board, provided that:

• The committee consists of at least three directors;
• The committee members have no financial interest in the relevant transaction and are not interested persons of the fund; and
• A majority of the committee members approve each proposed co‑investment transaction.

In addition, the committee must record the findings required by Section 57(f) and report its actions to the full board at the board’s next regular meeting.

The SEC No-Action Letter is available here.