The SEC proposed a new rule and amendments designed to streamline and enhance the regulatory framework for fund of funds arrangements. Funds of funds are created when a mutual fund or other type of fund invests in shares of another fund. The proposal would allow a fund to acquire the shares of another fund in excess of the limits required under the 1940 Act without obtaining an individual exemptive order from the SEC. In order to rely on the rule, funds must comply with conditions designed to enhance investor protection, including conditions restricting funds’ ability to improperly influence other funds, charge excessive fees, or create overly complex fund of funds structures. Because the proposed rule would create a new, comprehensive exemptive rule for funds of funds to operate, the SEC is proposing to rescind rule 12d1-2 as well as most exemptive orders permitting fund of funds arrangements. The SEC will accept public comment on the proposal for 90 days.