SEC Proposes to Modernize the Interval Fund Framework and Expand Multiple Share Class Structures for Closed-End Funds and BDCs
Who may be interested: Registered Investment Companies; Directors of Registered Investment Companies; Business Development Companies; Investment Advisers; Broker-Dealers; Compliance Officers
Quick Take: On September 30, 2026, the SEC proposed amendments to Rule 23c-3 under the 1940 Act to modernize the interval fund framework. The proposal would provide interval funds with greater flexibility in structuring repurchase offer programs and managing liquidity. The SEC also proposed amendments, principally to Rule 18f-3, that would establish a rules-based framework permitting registered closed-end funds and BDCs to issue multiple share classes without obtaining individualized exemptive relief. These proposals are part of the SEC’s ongoing efforts to improve access to capital formation.
Interval Fund Modernization
The proposed amendments to Rule 23c-3 would modernize the interval fund framework and provide funds with greater flexibility in managing repurchase programs and liquidity.
Among the proposed changes:
- Two Years to First Repurchase: a fund could wait as long as two years following commencement of operations for its first repurchase; currently, interval funds must tender within six months;
- Periods for Tenders: a fund could tender for shares more frequently, including, if desired, monthly;
- Annual Discretionary Tenders: a fund could have discretionary tenders annually; currently, the SEC has permitted discretionary tenders once every two years;
- Liquidity: funds would not need to hold the proceeds from a tender in liquid assets for the entire period from announcement until payment; instead, a fund would be expected to manage its liquidity to pay redemption proceeds in a way that avoids fire sales;
- Sales loads/Redemption fees: the changes would modify restrictions pertaining to sales loads and redemption fees to make them operate consistently with how they operate in the open-end fund environment, remove interval funds from the 2% cap on redemption fees and permit deferred sales charges to be deducted from redemption proceeds; and
- Operations around Tenders: the changes would clarify the technical aspects of tenders and give funds more flexibility and remove administrative burdens around the tender process.
Multiple Share Class Structures for Registered Closed-End Funds and BDCs
The SEC also proposed changes to the 1940 Act rules that would establish a rules-based framework for registered closed-end funds and BDCs to issue multiple share classes. To accomplish this, the SEC proposed amendments to Rule 18f-3 and related rules under the 1940 Act to codify the common exemptive conditions that would permit these funds to use multiple share class structures, similar to how open-end funds currently operate. As a result, eligible funds generally would no longer need to obtain individualized exemptive relief to operate multiple share class structures.
The proposal would also amend Rule 18f-3 to permit regulated closed-end funds and their affiliates to pay asset-based distribution and shareholder servicing fees. The proposal includes changes in form filings and prospectus disclosure requirements to address multiple share class and master-feeder structures used by regulated closed-end funds and make more consistent the disclosures around fees and expenses incurred by interval funds and closed-end funds.
As part of the rulemaking, the proposal would rescind most individual exemptive orders relating to interval funds and multiple share class arrangements and bring most market participants into a common scheme, similar to how the ETF rule adoption was handled.
The public comment period will remain open until December 4, 2026.
The proposal is available here.