On February 28, 2019, the Division of Investment Management of the Securities and Exchange Commission issued a no-action letter to the Independent Directors Council (IDC) granting no-action relief to certain situations where in-person voting requirements, as set forth in Sections 12(b), 15(c), and 32(a) of the Investment Company Act of 1940, as amended (1940 Act), or Rules 12b-1 or 15a-4(b)(2) under the 1940 Act, may create a significant or unnecessary burden for funds and their boards that outweighs any benefits to fund shareholders.¹²

1. In-Person Voting Requirements Under the 1940 Act

   Section 15(c) of the 1940 Act requires that the terms of an investment advisory contract or principal underwriting agreement and any renewal thereof be approved by a vote of a majority of the fund’s directors who are not parties to the contract or agreement or “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of any such party. Rule 12b-1 under the 1940 Act requires that a plan regarding distribution-related payments pursuant to that Rule (12b-1 Plan) be approved by a vote of the fund’s board of directors and the directors who are not interested persons of the fund (independent directors) and have no direct or indirect financial interest in the operation of the 12b-1 Plan or in any agreements related to the 12b-1 Plan. Rule 15a-4(b)(2) under the 1940 Act requires that certain interim contracts be approved by a vote of the fund’s board of directors, including a majority of independent directors. Section 32(a) requires that independent public accountants be selected by a vote of a majority of the fund’s independent directors. In each case, the required votes must be cast in person.
    

2. No-Action Relief
   The no-action letter provides relief from the 1940 Act’s in-person meeting requirements for the following two situations:¹³
   • Relief 1: the directors needed for the required approval cannot meet in person due to unforeseen or emergency circumstances, provided that (i) no material changes to the relevant contract, plan, and/or arrangement are proposed to be approved, or approved, at the meeting, and (ii) such directors ratify the applicable approval at the next in-person board meeting. According to the IDC, unforeseen or emergency circumstances include any circumstances that, as determined by the board, could not have been reasonably foreseen or prevented and that make it impossible or impracticable for directors to attend a meeting in-person. Such circumstances would include, but not be limited to, illness or death, including of family members, weather events or natural disasters, acts of terrorism, and disruptions in travel that prevent some or all directors from attending the meeting in person.
   • Relief 2: the directors needed for the required approval previously fully discussed and considered all material aspects of the proposed matter at an in-person meeting but did not vote on the matter at that time, provided that no director requests another in-person meeting.
3. Board Actions
   The no-action relief discussed in Section II applies to each of the following board actions as follows:

1. For renewal of an investment advisory contract or principal underwriting contract pursuant to Section 15(c) of the 1940 Act, either Relief 1 or Relief 2 applies.
2. For approval of an investment advisory contract or principal underwriting contract pursuant to Section 15(c) of the 1940 Act, only Relief 2 applies.
3. For approval of an interim advisory contract pursuant to Rule 15a-4(b)(2) under the 1940 Act, only Relief 2 applies.
4. For renewal of the fund’s 12b-1 Plan, either Relief 1 or Relief 2 applies.
5. For approval of the fund’s 12b-1 Plan, only Relief 2 applies.
6. For selection of the fund’s independent public accountant pursuant to Section 32(a) of the 1940 Act, if such accountant is the same accountant as selected in the immediately preceding fiscal year, either Relief 1 or Relief 2 applies.

For selection of the fund’s independent public accountant pursuant to Section 32(a) of the 1940 Act, if such accountant is not the same accountant as selected in the immediately preceding fiscal year, only Relief 2 applies.