Originally published in: Investment Management Developments
On January 17, 2001, the SEC adopted Rule 35d-1 under the Investment Company Act of 1940 (the "1940 Act") to prohibit use of misleading names by registered investment companies. The new rule applies to all types of registered funds. It requires that funds with names suggesting that they invest in a particular type of investment (i.e., securities of issuers in specific industries or in particular geographic regions, or tax exempt securities), invest at least 80% of their net assets in investments that are consistent with their names, under normal circumstances. SEC interpretations superceded by Rule 35d-1 generally imposed only a 65% of total assets requirement as to the consistency of a fund's name with its investments. The purpose of the rule is to provide investors greater assurance that a fund's investments will be consistent with its name and to reduce confusion when an investor purchases shares of a fund to pursue
