SEC Finalizes Rule Regarding Fund Governance Standards and Recordkeeping Requirements

The SEC finalized amendments under the Investment Company Act of 1940, as amended (the "1940 Act"), that (1) require registered investment companies ("funds") that rely on certain commonly used exemptive rules to comply with new fund governance requirements, and (2) obligate funds to retain written information reviewed by directors in connection with approving or renewing advisory agreements. Under the new requirements, any fund that intends to rely on any of ten designated exemptive rules under the 1940 Act (e.g., Rule 12b-1 permitting the use of fund assets to pay distribution expenses) must comply with the "fund governance standards" set forth in new Rule 0-1(a)(7), which include the following new requirements: (a) generally, a minimum of 75% of a fund’s board must consist of directors who are not "interested persons" of the fund within the meaning of the 1940 Act ("independent directors"); (b) board chairmen must be independent directors; (c) boards must conduct annual self