SEC Releases Proposals Related to Modernizing Regulated Fund Structures for Retail Investors

The SEC has released a pair of proposed rules that are designed to “facilitate capital formation in the public and private markets by expanding retail investor choice and promoting innovation in regulated fund structures while preserving appropriate investor protections and safeguards.”

The first proposal would, provided that certain conditions are met, enhance “the ability of registered investment advisers to receive performance-based compensation from certain clients, including regulated funds.” In a related amendment, the proposal would also require that the performance-based compensation paid by regulated funds to their investment advisers be separately disclosed.

The second proposal aims to modernize the framework for interval funds, which can be defined as regulated closed-end funds that “make repurchase offers to shareholders at net asset value . . . at periodic intervals pursuant to a fundamental policy.” Specifically, the funds would be allowed to “schedule repurchases at certain times that better match the liquidity profile of their portfolio.” In addition, “individual exemptive orders” would be replaced by a “rules-based framework for regulated closed-end funds to issue multiple share classes.”

For more information, see the press release and fact sheet — as well as the statements by SEC Chairman Paul Atkins and SEC Commissioners Hester Peirce and Mark Uyeda — on the SEC’s Web site.