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IM Division Staff Grants No-Action on In-Person Meetings

The staff of the SEC’s Division of Investment Management granted a no-action request from the Independent Directors Council to allow fund directors to give certain approvals via telephone, video conference or other means by which all directors may participate and communicate simultaneously during a meeting, instead of meeting in person as required under the 1940 Act. Generally, the relief applies to board actions involving approval and renewal of the advisory contract or underwriting contract; approval of an interim advisory contract; approving the fund independent public accountant who was previously considered and discussed; and renewal or approval of the fund’s 12b-1 Plan.The IDC letter provides two conditions for the in-person meeting requirement to be lifted: (1) the directors needed for the required approval cannot meet in person due to unforeseen or emergency circumstances, provided that (a) no material changes to the relevant contract, plan and/or arrangement are proposed to be approved, or approved, at the meeting, and (b) the directors ratify the applicable approval at the next in-person board meeting; or (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. The SEC previously granted similar relief in emergencies such as immediately after September 11, 2001 and during the 2008 financial crisis. IM Division Director Dalia Blass will discuss the Division’s board outreach initiative on Monday March 4, 2019 during the MFDF’s Governance and Regulatory Insights conference. Registration is available here.