SEC Staff Grants No-Action Relief to Permit Fund to Implement Subadvisory Arrangement Prior to Shareholder Approval

by Goodwin

The staff of the SEC’s Division of Investment Management granted no-action relief from Section 15(a) of the Investment Company Act of 1940, as amended (the “1940 Act”), that will permit a registered fund (the “Fund”) to enter into a subadvisory agreement without securing prior shareholder approval, on terms otherwise consistent with Rule 15a-4 under the 1940 Act even though the circumstances that created the need for the agreement are not among those for which the Rule provides relief.

Background.  The Global Natural Resources Team (the “GNR Team”) of the Fund’s investment adviser (the “Adviser”) currently manages the Fund.  The Adviser and certain members of the GNR Team entered into a separation agreement under which the GNR Team will separate from the Adviser (the “Separation”).  The GNR Team formed a new entity (the “Subadviser”) that is intended to serve as an investment subadviser to the Adviser with respect to the Fund following the Separation in order to secure the continuing services of the GNR team in managing the Fund.  The investment advisory agreement (the “Advisory Agreement”) between the Fund and the Adviser authorizes the Adviser to retain one or more subadvisers at its own cost to provide advisory services to the Fund.  The Adviser proposes to enter into a subadvisory agreement with the Subadviser (the “Subadvisory Agreement”) under which the Subadviser will be compensated and supervised by the Adviser.  The fees paid by the Fund to the Adviser under the Advisory Agreement will remain unchanged.  Because of the imminent consummation of the Separation and the benefits to the Fund of avoiding any interruption in the provision of portfolio management services by the GNR Team, the Adviser proposes to enter into the Subadvisory Agreement upon the consummation of the Separation (the “Closing Date”), which will occur prior to securing the shareholder approval required under Section 15(a) of the 1940 Act.  The Fund’s board has approved the Subadvisory Agreement, and a shareholder meeting for the purpose of approving the Subadvisory Agreement has been scheduled.

Unavailability of Rule 15a-4.  Rule 15a-4 permits a person to act as an adviser to a registered investment company under an interim advisory agreement that has not been approved by the fund’s shareholders for a period of 150 days following the date on which the previous contract terminated, subject to the Rule’s conditions.  This temporary exemption is available when the previous advisory contract was terminated by (a) the board of directors, (b) the vote of a majority of the fund’s outstanding voting securities, (c) a failure to renew the previous advisory contract, or (d) an assignment of the previous advisory contract, as defined in Section 2(a)(4) of the 1940 Act (each, a “Rule 15a-4 Event”).  The request for relief notes that the circumstances of the Separation do not fall within any of the Rule 15a-4 Event categories.

Staff Response.  In granting the request for relief, the Staff noted that the Sub-Advisory Agreement would comply with the conditions in Rule 15a-4(b)(2) under the 1940 Act and would not continue beyond 150 days if Fund shareholders did not approve the agreement as required under Section 15(a) of the 1940 Act.  The Staff also noted the representations in the request for relief that the Fund and the Adviser needed a reasonable period of time to perform sufficient due diligence regarding the Subadviser and to provide the Fund's board with sufficient information and opportunity to consider approval of the Subadvisory Agreement and that those circumstances prevented the Adviser and the Fund from having sufficient opportunity prior to the Closing Date to obtain shareholder approval of the Subadvisory Agreement.

RS Global Natural Resources Fund, SEC No-Action Letter (pub. avail. Mar. 6, 2014).

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:


Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new!