The SEC proposed a new rule and several amendments that
would "streamline and enhance" the regulatory framework
for funds of funds, which exist where mutual funds or other funds
invest in shares of another fund (i.e., "fund of funds"
arrangements).
Under the proposal, a fund would not need an individual
exemption order from the SEC when it takes shares from another fund
that exceed Investment Company Act limits. To rely on this rule,
the funds would have to comply with new investor protection
requirements that would restrict funds' ability to, among other
things:
- "improperly influence other
funds" by restricting the control and voting ability of the
acquiring fund;
- "charge excessive fees" by
"requiring an evaluation of aggregate fees associated with the
investment in the acquired fund and the complexity of the fund of
funds arrangement"; and
