Fund Boards: Stay Updated on SEC Names Rule Review

Fund Board Views
March 11, 2020

Nicole Crum was quoted in the article, "Fund Boards: Stay Updated on SEC Names Rule Review," [sub. req.] which was published by Fund Board Views on March 11, 2020. 

The article describes the SEC reviewing how it should address misleading or deceptive mutual fund names and the challenges it is facing in applying Rule 35d-1, or the Names Rule, which generally requires that if a fund’s name suggests a particular type of investment, industry, or geographic focus, the fund must invest at least 80% of its assets in the type of investment, industry, country, or geographic region suggested by its name. Fund governance pros say this is an issue to which directors should pay attention. 

Nicole agreed that analyzing fund names—and questioning them, when appropriate—is good governance: "The board is not picking names, nor should they be, but they can ask: 'What does that name mean? What are you getting at?' If they see a name and read the [fund's] strategy, they ask if it doesn’t fit together."

She also expressed agreement that the SEC's information-gathering approach to the Names Rule review was the right approach and added that there seems to be no evidence that the regulator sees widespread deliberate intent to mislead or deceive; it is more likely the result of gaps. 

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