SEC Adopts Technical Amendments to Fund Governance Requirements
Who may be interested: Registered Investment Companies; Directors of Registered Investment Companies; Investment Advisers
Quick Take: On August 4, 2026, the SEC adopted technical amendments to Rule 0‑1(a)(7) under the Investment Company Act of 1940, as amended (the “1940 Act”). The amendments revise the text of the rule to reflect a 2006 decision of the U.S. Court of Appeals for the D.C. Circuit that vacated certain fund governance requirements adopted by the SEC in 2004. The amendments are intended to conform the Code of Federal Regulations to the legal framework that has been in effect since the court’s decision became effective in July 2006.
On August 4, 2026, the SEC adopted technical amendments to Rule 0‑1(a)(7) under the 1940 Act to conform the rule text to the D.C. Circuit’s 2006 decision in Chamber of Commerce of the United States v. SEC.[1]
Rule 0‑1(a)(7) sets forth governance conditions that investment companies must satisfy to rely on certain exemptive rules under the 1940 Act. When the rule was first introduced in 2001, it generally required that a majority of a fund’s directors consist of individuals who are not interested persons of the fund (“independent directors”). On July 27, 2004, the SEC adopted amendments that strengthened these governance requirements by, among other things, requiring that at least 75% of a fund’s directors be independent and that the chair of the board be an independent director. Those amendments became effective on September 7, 2004.
On April 7, 2006, however, the U.S. Court of Appeals for the D.C. Circuit vacated the 75% independent director requirement and the independent chair requirement in Chamber of Commerce of the United States v. SEC. The court held that the SEC had violated the Administrative Procedure Act by relying on materials that had not been made available for public notice and comment. The court’s mandate became effective on July 6, 2006, at which time the vacated provisions ceased to have legal effect. The decision did not affect the remaining governance provisions of Rule 0‑1(a)(7).
Although the vacated requirements were unenforceable after 2006, the text of Rule 0‑1(a)(7) continued to reflect those provisions.
The SEC’s 2026 technical amendments remove references to the requirement that at least 75% of a fund’s directors be independent directors and the requirement that the chair of the board be independent. The amendments also restore the majority- independent -director standard that existed prior to the 2004 amendments.
The amendments were published in the Federal Register on August 6, 2026, and became effective the same day.
The SEC’s press release can be accessed here.