SEC Staff Allows Separating Portfolio Team to Manage Funds Pending Shareholder Approval
The staff of the Division of Investment Management has granted no-action relief to allow an investment team separating from the current mutual fund adviser to continue managing the fund until it obtains shareholder approval. The portfolio management team, which established a new legal entity and registered investment adviser, would manage the fund pursuant to an interim sub-advisory agreement whereby the current adviser would pay the new sub-adviser out of its fees without an increase to shareholders. A shareholder meeting would be held within 150 days and the parties would otherwise comply with the conditions of Rule 15a-4(b)(2) (fees held in escrow until shareholder approval, Board approval). The parties needed the no-action relief because shareholders must approve any adviser or sub-adviser to a registered fund.
OUR TAKE: This relief will help portfolio teams interested in going independent by facilitating the transition of fund management.