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By: Scott Moss, Lauren A. Schwartz, Lowenstein Sandler

On October 7, 2020, the Securities and Exchange Commission (SEC) voted to adopt rule 12d1-4 under the Investment Company Act of 1940 and related amendments to streamline and enhance the regulatory framework, which governs registered funds that invest in other investment companies and private funds that invest in other registered funds ("fund of funds" arrangements). The SEC is also rescinding rule 12d1-2 and most exemptive orders granting relief from sections 12(d)(1)(A), (B), (C), and (G) of the 1940 Act and adopting related amendments to rule 12d1-1 under the 1940 Act and Form N-CEN.

I. Current Regulatory Framework

Section 12(d)(1) of the 1940 Act limits a registered fund's investments in other investment companies and a private fund's investments in registered funds. Section 12(d)(1)(A) proscribes a registered fund (and companies, including funds, it controls) (the "acquiring fund") from acquiring more than 3 percent of another investment company's (the "acquired fund") outstanding voting securities, investing more than 5 percent of its total assets in any one acquired fund, or investing more than 10 percent of its total assets in an acquired fund and other investment companies generally.

These limits apply to both registered and unregistered investment companies with respect to their investments in a registered investment company. These limitations also apply to registered investment companies' ......................

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