SEC No-Action Relief for Funds/BDCs

The SEC’s Division of Investment Management (“IM”) has been busy issuing and updating guidance for investment companies and business development companies (“BDCs”) in light of recent market events related to the COVID-19 outbreak. Two significant letters were released in late May. The first, an SEC No-Action letter to the Investment Company Institute (“ICI”) and SIFMA AMG (jointly), addressed the need for additional relief as related to the new TALF 2020 program. The second is an IM Staff Statement regarding differences between state level control share acquisition statutes and Federal statutes.

ICI and SIFMA AMG Letter

The ICI and SIFMA AMG no-action letter grants relief under Section 18, Section 17(f), Section 17(a), 17(d) and Rule 17d-1. The relief sought is similar to relief sought and granted in 2009 under the previous TALF program[1]. However, since the TALF 2020 program is slightly different from the TALF 2008 program, additional relief is required. The ICI and SIFMA AMG letter provides relief for the following activity:

  • A registered closed-end or open-end fund may participate in TALF 2020 without treating the borrowing of assets as a senior security for purposes of compliance with Section 18(a)(1), 18(c), and 18(f)(1) of the Investment Company Act of 1940 (“IC Act”);
  • Since the program assets are held at a primary dealer as determined by the TALF 2020 program administrator, relief was also granted under Section 17(f) to provide for custodial relief to participating funds; and
  • Rule 17d-1 relief allows for registered funds, institutional separate accounts, and common trust funds to utilize private funds (Section 3(c)(1) or 3(c)(7)) for purchasing collateral and loans under the TALF 2020 program.

This new letter also expanded the original 2009 relief to now include BDCs.

Control Share Acquisition Letter

This Staff Statement from IM is a no-action letter under Section 18(i) of the IC Act that rescinds the Staff’s previous guidance under a 2010 no-action letter[2]. In the 2010 letter, the Staff did not grant the relief requested regarding the practice of restricting the ability of closed-end fund shareholders to vote “control shares” as defined and part of a state control share statute.

Under the new Staff Statement, the Staff has changed its position and will not recommend enforcement action against a closed-end fund under Section 18(i), if the fund opts into a state control share statute and as long as the decision was made by the fund’s board while exercising due care.

The Staff is also requesting industry feedback on this new position and comments may be submitted to with the email title of “Control Share Statutes.” All comments will be made public.

View both new letters on the SEC’s website:

Investment Company Institute and SIFMA AMG, Staff Letter: Participating in the 2020 Term Asset-Backed Securities Loan Facility, May 27, 2020

Control Share Acquisition Statutes, Staff Statement, Division of Investment Management, May 27, 2020


[1] See Franklin Templeton Investments, SEC Staff No-Action Letter (Jun.19, 2009) and T. Rowe Price Associates, Inc., SEC Staff No-Action Letter (Oct. 8, 2009).

[2] See Boulder Total Return Fund, SEC Staff No-Action Letter (Nov. 15, 2010).