On March 2, 2020, the SEC published a release seeking public comment on current requirements that restrict the use of potentially misleading fund names (principally, Rule 35d-1 under the 1940 Act (Names Rule)). The release notes that fund names are often the first piece of information investors see and that they can have a significant impact on an investment decision. The release further notes that the SEC staff and the fund industry have identified a number of challenges regarding the application of the Names Rule since the rule’s adoption. For example, the release highlights challenges that the Names Rule poses for funds with investment mandates that include criteria that require some degree of qualitative assessment (e.g., “ESG” investment mandates). The release also requests comment on such questions as whether the Names Rule should apply to funds that use terms such as “ESG,” “sustainable,” “tax managed” or “short term” in their names, and whether alternative approaches to regulate fund names should be used.
The request seeks feedback on whether current requirements are effective and whether there are viable alternatives that the SEC should consider. Comments are due on May 5, 2020.
The SEC release is available at https://www.sec.gov/rules/other/2020/ic-33809.pdf.