Division of Investment Management Adds a New Issue of Interest

October 6, 2012

The SEC’s Division of Investment Management added to its list of issues of interest. In its most recent release, the staff addressed its views on the situation where a fund had separate administration and advisory agreements and its board wanted to combine the terms of each agreement into a single “management agreement” without obtaining shareholder approval of the single agreement under Section 15(a) of the Investment Company Act of 1940. After reviewing the details of the proposal, the staff reviewed the Franklin Templeton Group of Funds (pub. avail. July 23, 1997) no-action letter. The reverse situation was addressed in that letter: the fund sought to unbundle a combined advisory and administration agreement without obtaining shareholder approval based on certain representations. In that letter and in this situation, the proposed changes would not reduce or modify in any way the nature or level of the advisory or administration services provided to the fund, and the aggregate advisory and administration fee rate payable by the fund would not exceed the aggregate fee rate payable by the fund under its existing agreements. The staff concluded that the situation presented in Issues of Interest release is consistent with the Franklin Templeton no-action letter.

Click http://www.sec.gov/divisions/investment/issues-of-interest.shtml#advisorycontracts-ica to access the Issues of Interest.


Investment Advisers, Investment Companies, Regulatory