FUND SPONSOR CAN USE INTERIM SUB-ADVISER WHEN INCUMBENT RESIGNS
In a recent No-Action Letter, the SEC permitted a fund sponsor to appoint an interim sub-adviser to replace a sub-adviser that resigned. The sponsor undertook to comply with all the conditions of Rule 15a-4 including a requirement to hold a shareholder vote within 150 days. The fund sponsor acknowledged that Rule 15a-4 did not cover its situation because the sub-advisor’s contract was not terminated by the Board or assigned. Instead, the sub-advisor resigned because, following several reorganizations, it did not believe that it was in the best interest of shareholders to continue to advise the fund.
OUR TAKE: This no-action letter offers the industry some certainty about how to proceed if a sub-adviser resigns and Rule 15a-4 does not clearly apply.