Rule2026-16066
Investment Company Governance Technical Amendments
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 6, 2026
Effective
August 6, 2026
Issuing agencies
Securities and Exchange Commission
Abstract
The Securities and Exchange Commission (the "Commission") is adopting technical amendments to a rule under the Investment Company Act of 1940 (the "Investment Company Act") related to registered investment company and business development company (collectively "regulated funds") governance standards to reflect a Federal court's vacatur of certain amendments to those standards that the Commission adopted on July 27, 2004. The court's vacatur of the amendments was effective as of July 6, 2006, and had the legal effect of reverting the fund governance standards to those standards in effect before adoption of the vacated requirements. These technical amendments revise the Code of Federal Regulations (the "CFR") to reflect the court's vacatur.
Full Text
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<title>Federal Register, Volume 91 Issue 150 (Thursday, August 6, 2026)</title>
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[Federal Register Volume 91, Number 150 (Thursday, August 6, 2026)]
[Rules and Regulations]
[Pages 50707-50708]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-16066]
[[Page 50707]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 270
[Release No. IC-36282]
Investment Company Governance Technical Amendments
AGENCY: Securities and Exchange Commission.
ACTION: Final rule; technical amendments.
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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting technical amendments to a rule under the Investment Company
Act of 1940 (the ``Investment Company Act'') related to registered
investment company and business development company (collectively
``regulated funds'') governance standards to reflect a Federal court's
vacatur of certain amendments to those standards that the Commission
adopted on July 27, 2004. The court's vacatur of the amendments was
effective as of July 6, 2006, and had the legal effect of reverting the
fund governance standards to those standards in effect before adoption
of the vacated requirements. These technical amendments revise the Code
of Federal Regulations (the ``CFR'') to reflect the court's vacatur.
DATES: This release was published in the Federal Register on August 6,
2026. Effective August 6, 2026. The Federal court issued its vacatur of
the rule amendments on April 7, 2006.
FOR FURTHER INFORMATION CONTACT: Claudia Rios, Senior Counsel; Bradley
Gude, Branch Chief; Brian McLaughlin Johnson, Assistant Director, at
(202) 551-6792, Investment Company Regulation Office, Division of
Investment Management, Securities and Exchange Commission, 100 F Street
NE, Washington, DC 20549-8549.
SUPPLEMENTARY INFORMATION: The Commission is adopting technical
amendments to rule 0-1(a)(7) [17 CFR 270.0-1(a)(7)] under the
Investment Company Act.
I. Background
Rule 0-1(a)(7) sets forth governance standards that regulated funds
must meet in order to rely on various exemptive rules under the
Investment Company Act.\1\ The Commission adopted fund governance
standards in 2001 to enhance the independence and effectiveness of
disinterested directors of regulated funds that choose to rely on these
exemptive rules.\2\ These standards required that, among other things,
boards have a majority of disinterested directors and were silent as to
whether the chairman of the board needed to be disinterested. In 2004,
the Commission amended these standards to encapsulate seven
requirements, including, among other things, that at least seventy-five
percent of the directors of the regulated fund be disinterested (the
``75% requirement'') and a disinterested director serve as chairman of
the board of the regulated fund (the ``chairman requirement''). Those
amendments became effective on September 7, 2004.\3\ In 2006, a Federal
court of appeals vacated the 75% requirement and the chairman
requirement.\4\ The Court's action did not address the other
requirements of rule 0-1(a)(7) that were amended in 2004, such as a
requirement that disinterested directors of the fund select and
nominate any other disinterested director of the fund. The court's
vacatur of the 75% and chairman requirements went into effect July 6,
2006,\5\ thereby reverting the fund governance standards to those
standards as previously in effect before September 7, 2004. These
technical amendments reflect the court's vacatur in the CFR by removing
the 75% requirement and the chairman requirement, and reverting to the
requirement of a simple majority of directors of the regulated fund be
disinterested directors. The other provisions of rule 0-1(a)(7), which
were not subject to the court's vacatur, remain unchanged.
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\1\ See, e.g., 17 CFR 270.23c-3(b)(8).
\2\ Role of Independent Directors of Investment Companies,
Investment Company Act Release No. 24816 (Jan. 2, 2001) [66 FR 3733
(Jan. 16, 2001)]. Disinterested directors are directors that are not
``interested persons'' of the fund as defined in the Investment
Company Act. See 17 CFR 270.0-1(a)(7)(i); see also 15 U.S.C. 80a-
2(a)(19) (defining ``interested person'').
\3\ Investment Company Governance, Investment Company Act
Release No. 26520 (July 27, 2004) [69 FR 46378 (Aug. 2, 2004)].
\4\ See Chamber of Commerce of the United States v. SEC, 443
F.3d 890 (D.C. Cir. 2006) (``Chamber''). Specifically, the court
determined that the adoption of the 75% requirement and the chairman
requirement violated the Administrative Procedure Act by relying on
materials that had not been provided to the public for notice and
comment. In response, the Commission requested further public
comment on the amendments but did not take action to appeal or
modify the court mandate. See, e.g., Investment Company Governance,
Investment Company Act Release No. 27395 (Jun. 13, 2006) [71 FR
35366 (Jun. 19, 2006)]; Investment Company Act Release No. 27600
(Dec. 15, 2006) [71 FR 76618 (Dec. 21, 2006)].
\5\ See Chamber, 443 F.3d 890, 909 (withholding the issuance of
the order to vacate for ninety days).
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II. Procedural and Other Matters
The Administrative Procedure Act (the ``APA'') generally requires
an agency to publish notice of a rulemaking in the Federal Register and
provide an opportunity for public comment. This requirement does not
apply, however, if the agency ``for good cause finds . . . that notice
and public procedure thereupon are impracticable, unnecessary, or
contrary to the public interest.'' \6\
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\6\ 5 U.S.C. 553(b)(B).
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The technical amendments do not impose any new substantive
regulatory requirements on any person and merely reflect the court's
vacatur of the 75% requirement and chairman requirement. For these
reasons, for good cause, the Commission finds that notice and public
comment are unnecessary.\7\
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\7\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the amendments to become effective notwithstanding
the requirement of 5 U.S.C. 801 (if a Federal agency finds that
notice and public comment are impractical, unnecessary or contrary
to the public interest, a rule shall take effect at such time as the
Federal agency promulgating the rule determines). The amendments
also do not require analysis under the Regulatory Flexibility Act.
See 5 U.S.C. 604(a) (requiring a final regulatory flexibility
analysis only for rules required by the APA or other law to undergo
notice and comment).
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For similar reasons, although the APA generally requires
publication of a rule at least 30 days before its effective date, the
Commission finds there is good cause for the amendments to take effect
on August 6, 2026.\8\
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\8\ See 5 U.S.C. 553(d)(3).
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For purposes of Subtitle E of the Small Business Regulatory
Enforcement Fairness Act of 1996 (also known as the Congressional
Review Act),\9\ the Office of Management and Budget (OMB) has
determined the final rule is not a ``major rule.'' OMB also determined
that this action is not a significant regulatory action under Executive
Order 12866, and therefore it was not subject to Executive Order 12866
review.
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\9\ See 5 U.S.C. chapter 8.
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Statutory Authority
We are amending rule 0-1(a) pursuant to the authority set forth in
sections 6(c), 10(f), 12(b), 17(d), 17(g), 23(c), and 38(a) of the
Investment Company Act [15 U.S.C. 80a-6(c), 80a-10(f), 80a-12(b), 80a-
17(d), 80a-17(g), 80a-23(c), and 80a-37(a)].
List of Subjects in 17 CFR Part 270
Investment companies, Reporting and recordkeeping requirements,
Securities.
Text of Rule and Form Amendments
For the reasons set out in the preamble, the Commission amends
title 17, chapter II of the Code of Federal Regulations as follows:
[[Page 50708]]
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
0
1. The authority for part 270 continues to read, in part, as follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
1681w(a)(1), 6801-6809, 6825, and Pub. L. 111-203, sec. 939A, 124
Stat. 1376 (2010), unless otherwise noted.
Section 270.0-1 also issued under sec. 38(a) (15 U.S.C. 80a-
37(a));
Section 270.0-1(a)(7) is also issued under 15 U.S.C. 80a-10(e);
* * * * *
0
2. Amend Sec. 270.0-1 by revising paragraph (a)(7) to read as follows:
Sec. 270.0-1 Definition of terms used in this part.
(a) * * *
(7) Fund governance standards. The board of directors of an
investment company (``fund'') satisfies the fund governance standards
if:
(i) A majority of the directors of the fund are not interested
persons of the fund (``disinterested directors'');
(ii) The disinterested directors of the fund select and nominate
any other disinterested director of the fund;
(iii) Any person who acts as legal counsel for the disinterested
directors of the fund is an independent legal counsel as defined in
paragraph (a)(6) of this section;
(iv) The board of directors evaluates at least once annually the
performance of the board of directors and the committees of the board
of directors, which evaluation must include a consideration of the
effectiveness of the committee structure of the fund board and the
number of funds on whose boards each director serves;
(v) The disinterested directors meet at least once quarterly in a
session at which no directors who are interested persons of the fund
are present; and
(vi) The disinterested directors have been authorized to hire
employees and to retain advisers and experts necessary to carry out
their duties.
* * * * *
By the Commission.
Dated: August 4, 2026.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-16066 Filed 8-5-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on August 6, 2026.
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