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On September 29, 2026, the staff of the U.S. Securities and Exchange Commission (the “SEC”) Division of Investment Management (the “Staff”) issued a no-action letter to the Mutual Fund Directors Forum stating that it would not recommend enforcement action under Rules 14a-3(a), 14a-4(d)(2), 14a-4(d)(3), 14a-4(f), 14a-6(o), 14a-10, and 14a-12(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), if an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), or that elects to be regulated as a business development company under the Investment Company Act, or, as applicable, a separate series thereof (each, a “fund”) implements a directed shareholder voting program (the “Directed Voting Program”).

Under a Directed Voting Program, a shareholder could voluntarily provide a revocable standing voting instruction directing that its shares be voted in accordance with the recommendations approved by a fund’s board, including unanimous approval by the fund’s independent directors, subject to a number of structural protections.

  • The Directed Voting Program must be (i) approved by the fund’s board, including unanimous approval by the independent directors, and (ii) subjected to periodic board review and reapproval at least every three years that such program continues to be in the best interests of Fund shareholders.
  • The Directed Voting Program would not apply to contested director elections and changes to the fund’s investment advisory agreement with its primary adviser that requires a shareholder vote.
  • Shareholders participating in a Directed Voting Program must also be given the ability to exclude from their standing voting instructions votes on: (1) fund mergers that require shareholder approval under the Investment Company Act, applicable state law, applicable exchange listing requirements or the fund’s organizational documents and (2) proposals to adopt or increase fees paid under a Rule 12b-1 plan.
  • A  fund would file with the SEC material describing the Directed Voting Program under cover of Schedule 14A and would subsequently file any material changes to the Program in the same manner.
  • Participation in the Directed Voting Program must be available to all retail shareholders at no cost and must be voluntary.
  • Shareholders participating in the Directed Voting Program would retain the ability to override the standing instructions by using the proxy material received for a particular meeting.
  • A fund would have full disclosure of the Directed Voting Program on its website and through prominent disclosure in the relevant proxy statement.
  • Annually, participating shareholders would receive a reminder of their opt-in status and selection.  This reminder would not be sent at a time when there is a proxy in progress. 

The no-action relief may offer fund complexes a potential means of reducing proxy solicitation expenses and increasing voting participation by permitting shareholders to provide standing voting instructions for certain types of matters, thereby helping funds avoid the delays, costs, and logistical challenges frequently associated with obtaining shareholder approval. 

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If you would like further information regarding the issues discussed in this Client Alert or related matters, please contact the lawyer at Sullivan & Worcester LLP with whom you regularly consult, or any of the lawyers listed above.

This Client Alert is provided for general informational purposes only and does not constitute legal advice.